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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1997
or
( )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: 1-13848
OAKLEY, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 95-3194947
---------- ----------
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
ONE ICON
FOOTHILL RANCH, CALIFORNIA 92610
-------------------------- -----
(Address of principal (Zip Code)
executive offices)
(714) 951-0991
--------------
(Registrant's telephone number, including area code)
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 No X
______ _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, PAR VALUE $.01 PER SHARE 70,656,012 SHARES
- -------------------------------------- -----------------
(Class) (Outstanding on May 8, 1997)
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OAKLEY, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and March 31, 1997 (unaudited)....................................... 3
Consolidated Statements of Income for the three-month periods
ended March 31, 1996 and 1997 (unaudited)............................. 4
Consolidated Statements of Cash Flows for the three-month periods
ended March 31, 1996 and 1997 (unaudited)............................. 5
Notes to Consolidated Financial Statements.............................. 6-7
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 8-10
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings.............................................. 11-12
ITEM 2 - Changes in Securities.......................................... 12
ITEM 3 - Defaults Upon Senior Securities................................ 12
ITEM 4 - Submission of Matters to a Vote of Security Holders............ 12
ITEM 5 - Other Information.............................................. 12
ITEM 6 - Exhibits and Reports on Form 8-K............................... 13-15
Signatures............................................................. 16
Exhibits............................................................... 17
2
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OAKLEY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
December 31,1996 March 31, 1997
---------------- --------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,063 $ 2,382
Accounts receivable, less allowance for
doubtful accounts of $590 (1996), $592 (1997) 21,084 22,362
Inventories (Note 2) 29,553 28,773
Other receivables 1,465 2,761
Deferred income taxes 5,643 5,643
Prepaid expenses 5,822 4,511
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Total current assets 71,630 66,432
Property and equipment, net 72,942 88,893
Deposits 2,193 2,504
Other assets 11,480 10,058
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TOTAL ASSETS $ 158,245 $ 167,887
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 3) $ 18,000 $ 6,000
Accounts payable 7,997 8,999
Accrued expenses and other current liabilities 9,526 7,756
Income taxes payable - 519
Current maturities of long-term debt - 4,000
----------- -----------
Total current liabilities 35,523 27,274
Deferred income taxes 1,285 1,285
Long-term debt, net of current maturities (Note 3) - 21,000
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01 per share: 20,000,000
shares authorized; no shares issued - -
Common stock, par value $.01 per share: 200,000,000
shares authorized; 70,960,012 (1996) and
70,656,012 (1997) issued and outstanding 710 707
Additional paid-in capital 58,218 55,049
Retained earnings 62,634 63,184
Foreign currency translation adjustment (125) (612)
----------- -----------
Total shareholders' equity 121,437 118,328
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 158,245 $ 167,887
----------- -----------
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</TABLE>
3
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OAKLEY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
------------------------
1996 1997
--------- ---------
Net sales $ 48,706 $ 34,403
Cost of goods sold 14,642 14,747
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Gross profit 34,064 19,656
Operating expenses:
Research and development 949 551
Selling 10,091 12,010
Shipping and warehousing 1,423 1,253
General and administrative 3,948 5,007
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Total operating expenses 16,411 18,821
Operating income 17,653 835
Interest income, net (189) (58)
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Income before provision for income taxes 17,842 893
Provision for income taxes 6,869 343
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Net income $ 10,973 $ 550
--------- ---------
--------- ---------
Net income per common share $ 0.15 $ 0.01
--------- ---------
--------- ---------
Weighted average shares 71,832 70,669
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements.
4
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OAKLEY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,973 $ 550
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,876 2,984
Deferred compensation 2 21
(Gain) loss on disposition of equipment (98) 19
Deferred income taxes, net 28 -
Changes in assets and liabilities, net of effects of
business acquisitions:
Accounts receivable (5,487) (1,278)
Inventories (2,060) 780
Other receivables (1,166) (1,296)
Prepaid expenses and other (288) 1,311
Accounts payable 1,448 1,002
Accrued expenses and other current liabilities 243 (1,770)
Income taxes payable 6,684 519
--------- --------
Net cash provided by operating activities 12,155 2,842
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 1,675 (311)
Acquisitions of property and equipment (6,696) (18,888)
Proceeds from sale of property and equipment 193 106
Other assets (3) 1,250
--------- --------
Net cash used in investing activities (4,831) (17,843)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings - 41,000
Repayments of bank borrowings - (28,000)
Repayments of S distribution notes (263) -
Repurchase of common shares - (3,193)
--------- --------
Net cash (used in) provided by financing activities (263) 9,807
EFFECT OF EXCHANGE RATE CHANGES ON CASH 58 (487)
NET INCREASE/(DECREASE)
IN CASH AND CASH EQUIVALENTS 7,119 (5,681)
CASH AND CASH EQUIVALENTS, beginning of period 9,760 8,063
--------- --------
CASH AND CASH EQUIVALENTS, end of period $ 16,879 $ 2,382
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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OAKLEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Oakley, Inc. and its
wholly-owned subsidiaries (the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles ("GAAP") for complete financial
statements.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement of the balance sheets as of December 31, 1996 and
March 31, 1997 and the statements of income and cash flows for the three month
periods ended March 31, 1996 and 1997. The results of operations for the three
month period ended March 31, 1997 are not necessarily indicative of the results
of operations for the entire fiscal year ending December 31, 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following:
December 31, 1996 March 31, 1997
----------------- --------------
Raw Materials $ 16,039,000 $ 18,389,000
Finished Goods 13,514,000 10,384,000
----------------- --------------
$ 29,553,000 $ 28,773,000
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----------------- --------------
NOTE 3 - FINANCING ARRANGEMENTS
The Company has a $30.0 million line of credit with a bank syndicate. At March
31, 1997, there were $6.0 million in borrowings outstanding under the
agreement.
In March 1997, the Company entered into a $25.0 million bridge financing with a
commercial bank which matures on July 18, 1997. Prior to maturity, the Company
intends to refinance the bridge loan with a long-term note secured by the
Company's corporate and manufacturing facility located in Foothill Ranch,
California. Accordingly, a portion of the debt has been classified as long-term
in the accompanying balance sheet.
NOTE 4 - LITIGATION
During December 1996, three class action lawsuits were filed in the California
Superior Court for the County of Orange against the Company and three of its
officers alleging material misstatements and omissions in certain of the
Company's public statements, Securities and Exchange Commission filings and
reports to third-party analysts. The plaintiffs seek unspecified damages and
other relief. In addition, one of the lawsuits also asserted claims against
firms who served as underwriters of the June 6, 1996 offering of the Company's
common stock by certain of its shareholders. Pursuant to certain provisions of
the underwriting agreement between the Company and the firms, the Company agreed
to indemnify the firms against certain liabilities, including liabilities under
the Securities Act.
In March 1997, the Company was named as a nominal defendant in a putative
derivative action against two of the Company's officers based on substantially
the same allegations as those in the class actions. The derivative plaintiff
seeks to recover unspecified damages and other relief on behalf of the Company.
Although it is too soon to predict the outcome of the cases with any certainty,
based on its current understanding of the facts, the Company believes that the
plaintiffs' claims are without merit and intends to vigorously defend the
actions.
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In addition, the Company is currently involved in litigation incidental to the
Company's business. In the opinion of management, the ultimate resolution of
such litigation, in the aggregate, will not have a material adverse effect on
the accompanying financial statements.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings per Share" (SFAS128) which is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. The Company has applied this statement to the 1996 and
1997 first quarter results and determined that the adoption of this statement
would not have had a material impact on the earnings per share calculations for
these periods.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes the operations of Oakley, Inc. and
subsidiaries for each of the periods discussed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET SALES
Net sales decreased to $34.4 million for the three months ended March 31, 1997
from $48.7 million for the three months ended March 31, 1996, a decrease of
$14.3 million, or 29.4%. This decrease was the result of substantially lower
sales in all of the Company's existing styles of sunglasses, including WIRES,
EYE JACKETS, M FRAMES, ZEROS, TRENCHCOATS and its original line of FROGSKINS
which was replaced by a new line of FROGSKINS in December 1996. These decreases
were partially offset by sales from the introduction of new sunglasses,
including sports-specific M FRAMES and ZEROS in March 1996, STRAIGHT JACKETS in
May 1996, SQUARE WIRES in June 1996, PRO M FRAMES in October 1996 and a new line
of FROGSKINS in December 1996. The Company's domestic sales declined 42.3% to
$17.6 million from $30.5 million in the comparable 1996 period. The Company's
international sales declined 7.7% to $16.8 million in 1997 from $18.2 million in
1996, principally as a result of decreased orders from one of its Japanese
distributors as the Company transitions to a direct operation, a devaluation in
the functional currency of its direct operation in continental Europe and
modestly lower sales to its Australian distributor. Net sales for the three
months ended March 31, 1997 reflect a 74.4% decrease in net sales over the prior
period from the Company's largest customer, Sunglass Hut. As a result of the
level of Oakley inventory at Sunglass Hut, combined with substantially reduced
store openings by Sunglass Hut compared to the prior period, the Company expects
net sales to Sunglass Hut for the full year 1997 to be significantly below the
net sales compared to 1996.
GROSS PROFIT
Gross profit decreased to $19.7 million for the three months ended March 31,
1997 from $34.1 million for the three months ended March 31, 1996, a decrease of
$14.4 million, or 42.2%. As a percentage of net sales, gross profit decreased
to 57.3% in 1997 from 70.0% in 1996. Gross profit as a percentage of net sales
was negatively affected by both fixed manufacturing costs spread over lower
sales volumes and a corresponding reduction in production levels, a higher
percentage of sales in lower margin goggles and clothing, a devaluation in the
functional currency of the Company's direct operation in continental Europe and
production start-up costs associated with the X METAL product line. The Company
expects gross profit as a percentage of net sales to continue to be affected by
certain of the factors discussed above through at least the second quarter of
1997.
OPERATING EXPENSES
Operating expenses increased to $18.8 million for the three months ended March
31, 1997 from $16.4 million for the three months ended March 31, 1996, an
increase of $2.4 million. Research and development costs decreased $0.4 million
to $0.6 million. The 1997 period included a $0.9 million reduction related to
the forfeiture of the Chairman and President's 1996 bonus. Excluding this
non-recurring adjustment, research and development expenses increased $0.5
million to $1.4 million in the 1997 period, or 4.1% of net sales, from $1.0
million, or 2.1% of net sales, in the 1996 period due to increased personnel
and design activities. Selling expenses increased $1.9 million to $12.0 million
in 1997, or 34.9% of net sales, from $10.1 million, or 20.7% of net sales, in
1996 as a result of higher advertising, promotional and sports marketing
expenses and an increase in the reserve for warranty costs, partially offset by,
as a percentage of net sales, lower commissions. As a percentage
8
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of net sales, shipping expenses increased to 3.6% in 1997 from 2.9% in 1996 as a
result of higher costs in the Company's European subsidiary. General and
administrative expenses increased $1.1 million to $5.0 million, or 14.5% of net
sales, in 1997 from $3.9 million, or 8.0% of net sales, in 1996 primarily due to
increased personnel and added infrastructure and increased depreciation and
amortization. For the three months ended March 31, 1997, general and
administrative expenses included income of $0.8 million paid to the Company by
Arnet Optic to settle litigation, $0.7 million of relocation costs associated
with the new facility and professional fees of $0.1 million related to lawsuits
filed by shareholders against the Company and three of its officers (see Note 4
to the consolidated financial statements).
OPERATING INCOME
The Company's operating income declined to $0.8 million for the three months
ended March 31, 1997 from $17.7 million for the three months ended March 31,
1996, a decrease of $16.9 million. This decrease was the result of the
Company's decrease in net sales and gross profit margin and an increase in
operating expenses as a percentage of net sales.
INTEREST EXPENSE, NET
The Company had interest income of $58,000 in the 1997 period and capitalized
all of its interest costs in the period as part of the construction of its new
facility, as compared with interest expense of $3,000 and interest income of
$0.2 million for the comparable 1996 period.
NET INCOME
The Company's net income decreased to $0.6 million for the three months ended
March 31, 1997 from $11.0 million for the three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations almost entirely with cash
flow generated from operations. Cash provided by operating activities totaled
$2.8 million for the three months ended March 31, 1997 and $12.2 million for the
comparable period of 1996. During the quarter ended March 31, 1997, the Company
repurchased 304,000 shares of its common stock for $3.2 million. At March 31,
1997, working capital was $39.2 million. Working capital may vary from time to
time as a result of seasonality, new product introductions, capital
expenditures, including purchases of equipment and changes in inventory levels.
In January 1997, the Company amended its unsecured line of credit to increase
its borrowing limits from $18.0 million to $30.0 million. At March 31, 1997,
there were $6.0 million in borrowings outstanding under such facility. To
supplement the Company's current line of credit, in March 1997, the Company
secured a $25.0 million bridge loan which matures on July 18, 1997. The Company
intends to refinance the bridge financing with a 15-year note secured by the
Company's corporate and manufacturing facility located in Foothill Ranch,
California. The Company believes that existing capital, anticipated cash flow
from operations and current and anticipated credit facilities will be sufficient
to meet operating needs and capital expenditures for the foreseeable future.
Capital expenditures (other than those relating to the Company's new facility)
for the three months ended March 31, 1997 totaled $4.6 million. In March 1997,
the Company relocated to its new headquarters and manufacturing facility in
Foothill Ranch, California. The Company estimates that the total cost to
construct and equip such facility will be approximately $48.5 million, of which
$28.6 million had been expended through the end of 1996 and $14.3 million was
incurred during the quarter ended March 31, 1997. The Company expects capital
expenditures for 1997 to total approximately $21.0 million, excluding those
expenditures relating to the Company's new facility.
9
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SEASONALITY
Historically, the Company's sales, in the aggregate, generally have been higher
in the period from March to September, the period during which sunglass use is
typically highest. As a result, operating margins are typically lower in the
first and fourth quarters as fixed operating costs are spread over generally
lower sales volume. In anticipation of seasonal increases in demand, the
Company typically builds inventories in the fourth quarter and first quarter
when net sales have historically been lower. In addition, the Company's
shipments of goggles, which generate gross margins at significantly lower levels
than sunglasses, are lowest in the second quarter. This seasonal trend
contributes to the Company's gross margin in the second quarter, which
historically has been the highest of the year. Although the Company's business
generally follows this seasonal trend, the Company expects the gross margin to
be negatively impacted by certain manufacturing inefficiencies through at least
the second quarter of 1997.
BACKLOG
Historically, the Company has generally shipped domestic orders (other than
preseason orders for ski goggles and orders from certain sunglass specialty
chains) within one day of receipt and international orders within two weeks of
receipt. At March 31, 1997, the Company had a backlog of $8.4 million,
including backorders (merchandise remaining unshipped beyond its scheduled
shipping date) of $0.2 million as of such date.
INFLATION
The Company does not believe inflation has had a material impact on the Company
in the past, although there can be no assurance that this will be the case in
the future.
FOREIGN CURRENCY
The Company's principal European subsidiary sells in various European countries
and collects at future dates in the customers' local currencies and purchases
inventory in currencies other than French francs. Accordingly, the Company is
exposed to transaction gains and losses that could result from changes in
foreign currency exchange rates. When considered appropriate, management may
purchase financial instruments, primarily forward exchange contracts, to reduce
its exposure to these exchange rate fluctuations. For the quarter ended March
31, 1997, the U.S. Dollar strengthened compared to the French franc, increasing
the exchange rate from approximately 5.1 francs per Dollar to approximately 5.6
francs per Dollar.
FORWARD-LOOKING STATEMENTS
When used in this document, the words "believes", "anticipates", "expects" and
similar expressions are intended to identify in certain circumstances
forward-looking statements. Such statements are subject to a number of risks
and uncertainties that could cause actual results to differ materially from
those projected, including risks related to the dependence on sales to
Sunglass Hut; the acceptance in the marketplace of new products; the ability
to source raw materials at prices favorable to the Company; currency
fluctuations; and other risks outlined in the Company's previously filed
public documents, copies of which may be obtained without cost from the
Company. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such statements. The Company also undertakes no
obligation to update these forward-looking statements.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company and certain of its officers have been named as defendants in three
putative class action lawsuits (the "California Securities Actions") filed in
December 1996 in the California Superior Court for the County of Orange (the
"Court"). The cases are captioned:
YOSEF S. ROSENSHEIN V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB AND JIM
JANNARD, Case No. 773051 (filed December 17, 1996) (the "ROSENSHEIN
Action");
HERSCHEL HARMAN V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB AND JIM
JANNARD, Case No. 773053 (filed December 17, 1996) (the "HARMAN Action");
and
ERIC SHER, HAROLD BARON AND DAVID O. ECKERT V. OAKLEY, INC., MIKE PARNELL,
LINK NEWCOMB, JIM JANNARD, MERRILL LYNCH & CO. AND ALEX BROWN & SONS, INC.,
Case No. 773366 (filed December 24, 1996) (the "SHER Action," and
collectively with the Rosenshein and Harman Actions, the "California
Securities Actions").
By order dated January 30, 1997, the Court ordered that the California
Securities Actions be assigned to the Court's Complex Litigation Panel, where
they have since been consolidated. On April 18, 1997, the plaintiffs filed a
consolidated amended complaint in the California Securities Action. The
plaintiffs seek to represent a class of persons who purchased the Company's
common stock between March 22, 1996 and December 5, 1996.
The complaint in the California Securities Actions alleges claims for
violations of the antifraud provisions of the California Corporations Code,
unfair business practices and false advertising in violation of certain
provisions of the California Business and Professions Code, fraud and negligent
misrepresentation. The plaintiffs' claims are based on alleged material
misstatements and omissions in certain of the Company's public statements,
Securities and Exchange Commission filings and in the reports of third-party
analysts regarding the Company's retail distribution practices, market
conditions, new product developments and extensions of existing product lines,
business with Sunglass Hut and earnings prospects. The plaintiffs seek
unspecified damages and other relief against the Company and the other
defendants.
The plaintiffs in the California Securities Actions have also asserted claims
against Merrill Lynch & Co. ("Merrill Lynch") and Alex, Brown and Sons, Inc.
("Alex Brown"), which served as the U.S. Representatives of the U.S.
Underwriters of the June 6, 1996 offering of four million shares of common stock
of the Company by certain of its shareholders (the "Secondary Offering"). By
letter dated February 7, 1997, counsel for Merrill Lynch and Alex Brown gave the
Company notice pursuant to the indemnification provisions of the U.S. Purchase
Agreement dated June 6, 1996, for the Secondary Offering and requested that the
Company reimburse Merrill Lynch and Alex Brown on a current basis for their
attorneys' fees and expenses incurred in defending the California Securities
Action.
The Company and the other defendants have not yet filed a response to the
California Securities Actions. The plaintiffs in each of the California
Securities Actions have served document requests on the Company and others.
The Company has been named as a nominal defendant in a putative derivative
lawsuit against certain of its officers filed in March 1997 in the Court. The
case is captioned BLACKMAN V. JAMES JANNARD,
11
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MIKE PARNELL AND DOES 1 THROUGH 100, Case No. 777098 (filed March 27, 1997) (the
"California Derivative Action").
In the California Derivative Action, the plaintiff, purporting to sue on behalf
of the Company, alleges claims for breach of fiduciary duty, constructive fraud,
unjust enrichment and violations of the insider trading provisions of the
California Corporations Code. Like the California Securities Actions, the
plaintiff's claims in the California Derivative Action are, among other things,
based upon alleged material misstatements and omissions in certain of the
Company's public statements and Securities and Exchange Commission filings
regarding the Company, its operation and future prospects. The plaintiff seeks
to recover damages and other relief on behalf of the Company. The Company and
the other defendants have not yet filed a response to the California Derivative
Action. Although it is too soon to predict the outcome of the case with any
certainty, based on its current knowledge of the facts, the Company believes
that the plaintiffs' claims are without merit and intends to vigorously defend
the actions.
In addition, the Company is a party to various claims, complaints and other
legal actions that have arisen in the normal course of business from time to
time. The Company believes the outcome of these pending legal proceedings, in
the aggregate, will not have a material adverse effect on the operations or
financial position of the Company.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security-Holders
None
ITEM 5. Other Information
None
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
3.1 (1) Articles of Incorporation of the Company
3.2 (1) Bylaws of the Company
3.3 (5) Amendment No. 1 to the Articles of Incorporation as filed with
the Secretary of State of the State of Washington on September
26, 1996
10.1 (1) Credit Agreement (the Credit Agreement), dated June 20, 1995,
between Oakley, Inc., Wells Fargo Bank, National Association, and
the Lenders named therein
10.2 (1) Collateral Account Agreement, dated June 20, 1995, between
Oakley, Inc. and Wells Fargo Bank, National Association, as agent
for the Lenders party to the Credit Agreement
10.3 (1) Security Agreement, dated June 20, 1995, between Oakley, Inc. and
Wells Fargo Bank, National Association, as agent for the Lenders
party to the Credit Agreement
10.4 (1) Security Agreement and Chattel Mortgage, dated June 20, 1995,
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agent for the Lenders party to the Credit Agreement
10.5 (1) Trademark Collateral Security Agreement, dated June 20, 1995,
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agent for the Lenders party to the Credit Agreement
10.6 (1) Patent Collateral Security Agreement, dated June 20, 1995,
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agent for the Lenders party to the Credit Agreement
10.7 (1) Subordination Agreement, dated June 20, 1995, between Oakley,
Inc., Buffalo Works, Inc., James H. Jannard and Mike D. Parnell
10.8 (2) Credit Agreement (the Amended and Restated Credit Agreement),
dated August 15, 1995, between Oakley, Inc., Wells Fargo Bank,
National Association, as agent and the Lenders named therein
10.9 (2) Collateral Account Agreement, dated August 15, 1995, between
Oakley, Inc. and Wells Fargo Bank, National Association, as agent
for the Lenders party to the Amended and Restated Credit
Agreement
10.10 (2) Guaranty, dated August 15, 1995, by the Guarantors named therein
and Wells Fargo Bank, National Association, as agent for the
Lenders party to the Amended and Restated Credit Agreement
10.11 (2) Shareholder Pledge Agreement (original and English translation),
dated August 15, 1995 between Oakley, Inc. and Wells Fargo Bank,
National Association, as agent for the Lenders party to the
Amended and Restated Credit Agreement
10.12 (2) Subordination Agreement, dated August 15, 1995 between the
Initial Subordinated Creditors named therein and Wells Fargo
Bank, National Association, as agent for the Lenders party to the
Amended and Restated Credit Agreement
10.13 (2) Promissory Note, dated August 8, 1995 between Oakley, Inc. and
James H. Jannard
10.14 (2) Promissory Note, dated August 8, 1995 between Oakley, Inc. and M
and M. Parnell Revocable Trust
10.15 (3) Termination and Release Agreement, dated as of August 15, 1995
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agents for the Lenders party to the Credit Agreement
10.17 (5) Second Amendment to Amended and Restated Credit Agreement dated
as of October 10, 1996 by and among Oakley, Inc. Wells Fargo
Bank, National Association, as agent and the Lenders named
therein
10.18 (5) Third Amendment to Amended and Restated Credit Agreement dated as
of November 25, 1996 by and among Oakley, Inc., Wells Fargo Bank,
National
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Association, as agent and the Lenders named therein
10.19 (5) Counterpart Subordination Agreement executed by Oakley (U.K.)
Ltd. to the Subordination Agreement, dated as of August 15, 1995
between the Initial Subordinated Creditors and Wells Fargo Bank,
National Association, as Agent under the Credit Agreement
10.20 (3) First Amendment to Amended and Restated Credit Agreement dated
November 22, 1995 by and among Oakley, Inc., Wells Fargo Bank,
National Association, as agent and the Lenders named therein
10.21 (2) Agreement, dated July 17, 1995, between Oakley, Inc. and Michael
Jordan
10.22 (1) Lease, dated September 15, 1988, between OO Partnership and
Oakley, Inc.
10.23 (3) First Amendment to Lease dated December 31, 1995, by and between
Oakley, Inc., and OO Partnership
10.24 (1) Agreement, dated July 31, 1995, between OO Partnership and
Oakley, Inc.
10.25 (1) Lease, dated March 5, 1990, between Weyerhauser Mortgage Company
and Oakley, Inc., as amended
10.26 (1) Sublease, dated August 17, 1992, between Western Digital
Corporation and Oakley, Inc., as amended
10.27 (1) Purchase Agreement and Escrow Instructions, dated December 9,
1994, between Oakley, Inc. and Foothill Ranch Development
Corporation
10.28 (3) Oakley, Inc. 1995 Stock Incentive Plan
10.29 (3) Oakley, Inc. Amended and Restated 1995 Stock Incentive Plan
10.30 (3) Oakley, Inc. Executive Officer Performance Bonus Plan
10.31 (1) Employment Agreement, dated as of August 1, 1995, between Oakley,
Inc. and Jim Jannard
10.32 (1) Employment Agreement, dated as of August 1, 1995, between Oakley,
Inc. and Mike Parnell
10.33 (5) Amendment No. 1 dated as of May 23, 1996 to Employment Agreement
dated as of August 1, 1995, between Oakley, Inc. and Mike Parnell
10.34 (5) Amendment No. 1 dated as of July 22, 1996 to Employment Agreement
dated as of August 1, 1995, between Oakley, Inc. and Jim Jannard
10.35 (1) Employment Agreement, dated as of April 1, 1995, between Oakley,
Inc. and Link Newcomb
10.36 (3) Indemnification Agreement, dated August 1, 1995, between Oakley,
Inc. and Jim Jannard
10.37 (1) Schedule of indemnification agreements between Oakley, Inc. and
each of its directors and executive officers
10.38 (1) Standard Form of Agreement between Owner and Project Manager,
dated December 30, 1994, between Oakley, Inc. and Snyder Langston
10.39 (1) Lease Agreement, dated January 26, 1995, between Oakley Europe,
sarl and Investipierre 7 (In French with English translation)
10.40 (3) Aircraft Lease Agreement, dated August 10, 1995, between Oakley,
Inc. and X, Inc.
10.41 (3) Aircraft Lease Agreement, dated August 10, 1995, between Oakley,
Inc. and Time Tool Incorporated
10.42 (1) Registration Rights Agreement, dated August 1, 1995, between
Oakley, Inc., Jim Jannard and the M. and M. Parnell Revocable
Trust
10.43 (3) Indemnification Agreement, dated August 9, 1995, between Oakley,
Inc., Jim Jannard and the M. and M. Parnell Revocable Trust
10.44 (4) Indemnification Agreement, dated June 6, 1996, between Oakley,
Inc., Jim Jannard and the M. and M. Parnell Revocable Trust
10.45 Fifth Amendment to Amended and Restated Credit Agreement dated as
of March 31, 1997 by and among Oakley, Inc., Wells Fargo Bank,
National Association, as agent and the Lenders named therein
14
<PAGE>
10.46 Sixth Amendment to Amended and Restated Credit Agreement dated as
of March 31, 1997 by and among Oakley, Inc., Wells Fargo Bank,
National Association, as agent and the Lenders named therein
10.47 Employment Agreement, dated as of January 31, 1997, between
Oakley, Inc. and Link Newcomb
10.48 Employment Agreement, dated as of January 16, 1997, between
Oakley, Inc. and Robert Bruning
10.49 Pledge Agreement, dated as of January 1997 between Oakley, Inc.
and Wells Fargo Bank, National Association, as agent and the
Lenders named therein
10.50 (6) Reciprocal Exclusive Dealing Agreement dated March 11, 1997 among
Oakley, Inc., Gentex Optics, Inc. and Essilor International
Compagnie Generale D'Optique, S.A. (portions of this document
have been omitted pursuant to a request for confidential
treatment)
10.51 Promissory Note, dated March 20, 1997 between Oakley, Inc. and
Bank of America National Trust and Savings Association
10.52 Amendment No. 2 to employment agreement, dated February 1,
1997, between Oakley, Inc. and Mike Parnell
10.53 Amendment No. 1 to employment agreement, dated February 1,
1997, between Oakley, Inc. and Link Newcomb
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule
(1) Previously filed with the Registration Statement on Form S-1 of Oakley,
Inc. (Registration No. 33-93080)
(2) Previously filed with the Form 10-Q of Oakley, Inc. for the quarter ended
September 30, 1995.
(3) Previously filed with the Form 10-K of Oakley, Inc. for the year ended
December 31, 1995.
(4) Previously filed with the Form 10-Q of Oakley, Inc. for the year ended June
30, 1996.
(5) Previously filed with the Form 10-K of Oakley, Inc. for the year ended
December 31, 1996.
(6) Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended. Such portions are indicated by *.
The Company did not file any reports on Form 8-K during the three months ended
March 31, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Oakley, Inc.
/S/ JIM JANNARD May 9, 1997
- --------------------
Jim Jannard
Chairman and President
/S/ LINK NEWCOMB May 9, 1997
- --------------------
Link Newcomb
Chief Operating Officer
(Principal Financial Officer)
/S/ DONNA GORDON May 9, 1997
- --------------------
Donna Gordon
Vice President of Finance
(Chief Accounting Officer)
16
<PAGE>
OAKLEY, INC.
FIFTH AMENDMENT AND LIMITED WAIVER
TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIFTH AMENDMENT AND LIMITED WAIVER TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "AMENDMENT") is dated as of March __, 1997 and entered into by
and among OAKLEY, INC., a Washington corporation ("COMPANY"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "LENDER" and collectively as "LENDERS") and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("WELLS FARGO"), as agent for Lenders (in such capacity,
"AGENT"), and is made with reference to that certain Amended and Restated Credit
Agreement dated as of August 15, 1995, as amended by the First Amendment to
Amended and Restated Credit Agreement, dated as of November 22, 1995, by and
among Company, Lenders and Agent, the Second Amendment to Amended and Restated
Credit Agreement, dated as of October 10, 1996, by and among Company, Lenders
and Agent, the Third Amendment to Amended and Restated Credit Agreement, dated
as of November 25, 1996, by and among Company, Lenders and Agent, and the Fourth
Amendment to Amended and Restated Credit Agreement, dated as of January 29, 1997
(as amended, the "CREDIT AGREEMENT"), by and among Company, Lenders and Agent.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
Company has requested that Requisite Lenders amend subsections 7.1 and 7.2A
of the Credit Agreement to permit Company to incur Indebtedness (the "BRIDGE
LOAN") under that certain Bridge Loan Agreement attached hereto as Exhibit A,
and to permit Company to incur Indebtedness (the "REAL ESTATE LOAN") as
described in the letter from the Company addressed to Mike Sullivan, dated
March 11, 1997 attached hereto as Exhibit B, each of which is or will be
incurred in connection with the financing of the Company's new corporate
headquarters.
Company has requested that Requisite Lenders waive the provisions of
subsections 7.1 and 8.3 to the extent necessary such that any incurrence of
any Indebtedness prior to the date hereof under the Bridge Loan does not
constitute a breach or an Event of Default under the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
<PAGE>
SECTION MODIFICATIONS TO THE CREDIT AGREEMENT
1.1 AMENDMENT TO SUBSECTION 7.1: INDEBTEDNESS.
Subsection 7.1 of the Credit Agreement is hereby amended by
deleting the word "and" appearing after clause (vii). Subsection 7.1 of the
Credit Agreement is amended further by deleting the period (.) appearing at
the end of clause (viii) and substituting the following therefor:
";
(ix) Company may become and remain liable with respect to
Indebtedness incurred to finance the new corporate headquarters of the
Company pursuant to that certain Bridge Loan Agreement (the "BRIDGE
LOAN") in an aggregate principal amount not exceeding $25,000,000;
provided, that all the proceeds of such Bridge Loan shall first be
applied to prepay all or a portion of the Company's outstanding Loans
hereunder; provided further, that such Bridge Loan shall mature upon
the earlier of (a) 120 days after initial funding or (b) repayment of
any and all amounts outstanding under the Bridge Loan with proceeds of
the Real Estate Loan permitted under subsection 7.1(x) hereof; and
(x) Company may become and remain liable with respect to
Indebtedness secured by the new corporate headquarters of the Company
pursuant to that certain real estate facility described in the letter
from the Company addressed to Mike Sullivan, dated March 11, 1997 (the
"REAL ESTATE LOAN"), in an aggregate principal amount not exceeding
$25,000,000; provided, that the proceeds of such Real Estate Loan shall
first be applied to repay any and all amounts outstanding under the
Bridge Loan."
1.2 AMENDMENT TO SUBSECTION 7.2A: LIENS AND RELATED MATTERS.
Subsection 7.2A of the Credit Agreement is hereby amended by
deleting the word "and" appearing after clause (vii). Subsection 7.2 of the
Credit Agreement is amended further by deleting the period (.) appearing at
the end of clause (viii) and substituting the following therefor:
"; and
(ix) Liens arising pursuant to the Real Estate Loan permitted
under subsection 7.1(x); provided, that any such Liens attach only to
the real property, improvements and fixtures attached to such
improvements which comprise the Company's new corporate headquarters."
1.3 LIMITED WAIVER OF SUBSECTIONS 7.1 AND 8.3; BREACH OF CERTAIN COVENANTS.
To the extent Company has incurred Indebtedness under the Bridge Loan prior to
the date hereof, Requisite Lenders hereby waive the provisions of subsections
7.1 and 8.3
<PAGE>
of the Credit Agreement to the extent necessary such that the incurrance of
such Indebtedness does not constitute a breach of subsection 7.1 or an Event
of Default under subsection 8.3; provided that nothing in this subsection 1.3
shall be deemed to amend or waive subsections 7.1 (as modified by subsection
1.1 of this Amendment) or 8.3, or to amend or waive the application of
subsections 7.1 or 8.3 of the Credit Agreement to the Company or its
Subsidiaries after giving effect to the Bridge Loan other than to permit the
Company to incur Indebtedness under the Bridge Loan.
SECTION CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIFTH
AMENDMENT EFFECTIVE DATE"):
A. Company shall deliver to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where appropriate, for
each Lender and its counsel) a counterpart of this Amendment executed by a
duly authorized officer of Company and each Credit Support Party (defined
below).
B. On or before the Fifth Amendment Effective Date,
Agent, on behalf of Lenders, shall have received a counterpart of this
Amendment executed by a duly authorized officer of each of Requisite Lenders.
SECTION COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents
and warrants to each Lender that the following statements are true, correct
and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment, the Bridge Loan
and the Real Estate Loan, and to carry out the transactions contemplated by,
and perform its obligations under, the Credit Agreement as amended by this
Amendment (the "AMENDED AGREEMENT"), the Bridge Loan and the Real Estate Loan.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery
of this Amendment, the Bridge Loan and the Real Estate Loan, and the
performance of the Amended Agreement, the Bridge Loan and the Real Estate Loan
have been duly authorized by all necessary corporate action on the part of
Company.
C. NO CONFLICT. The execution and delivery by Company of
this Amendment, the Bridge Loan and the Real Estate Loan, and the performance
by Company of the Amended Agreement, the Bridge Loan and the Real Estate Loan
do not and will not (i) violate the Certificate or Articles of Incorporation
or Bylaws of Company or any of its Subsidiaries, (ii) violate any provision of
any law or any governmental rule or regulation applicable to Company or any of
its Subsidiaries or any order, judgment or
<PAGE>
decree of any court or other agency of government binding on Company or any of
its Subsidiaries, which violation could reasonably be expected to have a
Material Adverse Effect, (iii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries in a manner that
could reasonably be expected to have a Material Adverse Effect, (iv) result in
or require the creation or imposition of any Lien upon any of the properties
or assets of Company or any of its Subsidiaries (other than any Liens created
under (x) any of the Loan Documents in favor of Agent on behalf of Lenders or
(y) the Real Estate Loan as permitted under subsection 7.2A (ix) of the Amended
Agreement), or (v) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of
its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Company of this Amendment and the performance by Company of the Amended
Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by Company and are the legally
valid and binding obligations of Company, enforceable against Company in
accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability.
F. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment (other than the events or transactions
contemplated under subsection 1.3 hereof) that would constitute an Event of
Default or a Potential Event of Default.
SECTION ACKNOWLEDGEMENT AND CONSENT
Repeat Incorporated, an Arizona corporation ("REPEAT"), and
Barter Optical, Inc., a Washington corporation ("BARTER"), are parties to the
Guaranty, pursuant to which Repeat and Barter have guarantied the Obligations
of Company under the Credit Agreement. Repeat and Barter are collectively
referred to herein as the "CREDIT SUPPORT PARTIES".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to
this Amendment. Each Credit Support Party hereby confirms that the Guaranty
will continue to guaranty to the fullest extent possible the payment and
performance of all "Guarantied Obligations" (as such term is defined in the
Guaranty), including without limitation the payment and performance of all
such "Guarantied Obligations", in respect of the Obligations of
<PAGE>
Company now or hereafter existing under or in respect of the Amended
Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that the
Guaranty shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall not be
impaired or limited by the execution or effectiveness of this Amendment. Each
Credit Support Party represents and warrants that all representations and
warranties contained in the Amended Agreement and the Guaranty to which it is
a party or otherwise bound are true, correct and complete in all material
respects on and as of the Fifth Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to
the Credit Agreement.
SECTION MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the Fifth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended or waived by this
Amendment, the Credit Agreement and the other Loan Documents shall
remain in full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of Agent or any Lender under, the Credit Agreement or any of the other
Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by
<PAGE>
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
OAKLEY, INC., as the Borrower
By:
-------------------------
Title:
-------------------------
WELLS FARGO BANK, NATIONAL
ASSOCIATION, Individually and as Agent
By:
-------------------------
Title:
-------------------------
UNION BANK OF CALIFORNIA, N.A.,
(formerly named Union Bank) as a Lender
By:
-------------------------
Title:
-------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By:
-------------------------
Title:
-------------------------
ACKNOWLEDGMENT AND CONSENT
BARTER OPTICAL, INC., as a Credit Support Party
By:
-------------------------
Title:
-------------------------
REPEAT INCORPORATED, as a Credit Support Party
By:
-------------------------
Title:
-------------------------
<PAGE>
OAKLEY, INC.
SIXTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
This SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "AMENDMENT") is dated as of March __, 1997 and entered into by and
among OAKLEY, INC., a Washington corporation ("COMPANY"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred
to herein as a "LENDER" and collectively as "LENDERS") and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("WELLS FARGO"), as agent for Lenders (in such capacity,
"AGENT"), and is made with reference to that certain Amended and Restated
Credit Agreement dated as of August 15, 1995, as amended by the First
Amendment to Amended and Restated Credit Agreement, dated as of November 22,
1995, by and among Company, Lenders and Agent, the Second Amendment to
Amended and Restated Credit Agreement, dated as of October 10, 1996, by and
among Company, Lenders and Agent, the Third Amendment to Amended and Restated
Credit Agreement, dated as of November 25, 1996, by and among Company,
Lenders and Agent, the Fourth Amendment to Amended and Restated Credit
Agreement, dated as of January 29, 1997, by and among Company, Lenders and
Agent, and the Fifth Amendment and Limited Waiver of Amended and Restated
Credit Agreement, dated as of March __, 1997 (as amended, the "CREDIT
AGREEMENT"), by and among Company and Requisite Lenders. Capitalized terms
used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.
RECITALS
Company has requested that Requisite Lenders amend subsection
7.7 of the Credit Agreement to permit Company to acquire all or substantially
all of the assets of One Xcel, Inc., a manufacturer and distributor of
protective shields for football, hockey and other related sport headgear.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto
agree as follows:
Section MODIFICATIONS TO THE CREDIT AGREEMENT
1.1 AMENDMENT TO SUBSECTION 7.7: RESTRICTIONS ON FUNDAMENTAL CHANGES;
ASSET SALES AND ACQUISITIONS.
Subsection 7.7 of the Credit Agreement is hereby amended by
deleting the word "and" appearing after clause (vi). Subsection 7.7 of the
Credit Agreement is
<PAGE>
amended further by deleting the period (.) appearing at the end of clause
(vii) and substituting the following therefor:
"; and
(viii) Company may acquire all or substantially all of the
assets of One Xcel, Inc., a manufacturer and distributor of protective
shields for football, hockey and other related sport headgear; PROVIDED
that the aggregate purchase price for such assets shall not exceed
$3,200,000."
2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SIXTH
AMENDMENT EFFECTIVE DATE"):
A. Company shall deliver to Lenders (or to Agent for Lenders
with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) a counterpart of this Amendment executed by a duly
authorized officer of Company and each Credit Support Party (defined below).
B. On or before the Sixth Amendment Effective Date, Agent, on
behalf of Lenders, shall have received a counterpart of this Amendment
executed by a duly authorized officer of each of Requisite Lenders.
Section COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, Company represents
and warrants to each Lender that the following statements are true, correct
and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its obligations under, the
Credit Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company.
C. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate the Certificate or Articles of Incorporation or Bylaws
of Company or any of its Subsidiaries, (ii) violate any provision of any law
or any governmental rule or regulation applicable to Company or any of its
Subsidiaries or any order, judgment or
<PAGE>
decree of any court or other agency of government binding on Company or any
of its Subsidiaries, which violation could reasonably be expected to have a
Material Adverse Effect, (iii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries in a manner that
could reasonably be expected to have a Material Adverse Effect, (iv) result
in or require the creation or imposition of any Lien upon any of the
properties or assets of Company or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of Agent on behalf of
Lenders), or (v) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of
its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by
Company of this Amendment and the performance by Company of the Amended
Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state
or other governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment and the Amended
Agreement have been duly executed and delivered by Company and are the
legally valid and binding obligations of Company, enforceable against Company
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
F. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default.
Section ACKNOWLEDGEMENT AND CONSENT
Repeat Incorporated, an Arizona corporation ("REPEAT"), and
Barter Optical, Inc., a Washington corporation ("BARTER"), are parties to the
Guaranty, pursuant to which Repeat and Barter have guarantied the Obligations
of Company under the Credit Agreement. Repeat and Barter are collectively
referred to herein as the "CREDIT SUPPORT PARTIES".
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to
this Amendment. Each Credit Support Party hereby confirms that the Guaranty
will continue to guaranty to the fullest extent possible the payment and
performance of all "Guarantied Obligations" (as such term is defined in the
Guaranty), including without limitation the payment and performance of all
such "Guarantied Obligations", in respect of the Obligations of Company now
or hereafter existing under or in respect of the Amended Agreement and the
Notes defined therein.
<PAGE>
Each Credit Support Party acknowledges and agrees that the
Guaranty shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall not be
impaired or limited by the execution or effectiveness of this Amendment.
Each Credit Support Party represents and warrants that all representations
and warranties contained in the Amended Agreement and the Guaranty to which
it is a party or otherwise bound are true, correct and complete in all
material respects on and as of the Sixth Amendment Effective Date to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case they were true, correct and complete in all material respects on
and as of such earlier date.
Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Loan Document shall be deemed
to require the consent of such Credit Support Party to any future amendments
to the Credit Agreement.
Section MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the Sixth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment,
the Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy
of Agent or any Lender under, the Credit Agreement or any of the other
Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 10.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
<PAGE>
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
OAKLEY, INC., as the Borrower
By: _________________________
Title: ______________________
WELLS FARGO BANK, NATIONAL ASSOCIATION,
Individually and as Agent
By: _________________________
Title: ______________________
UNION BANK OF CALIFORNIA, N.A.,
(formerly named Union Bank) as a Lender
By: _________________________
Title: ______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By: _________________________
Title: ______________________
ACKNOWLEDGMENT AND CONSENT
- --------------------------
BARTER OPTICAL, INC., as a Credit Support Party
By: __________________________
Title: _______________________
REPEAT INCORPORATED, as a Credit Support Party
<PAGE>
By: __________________________
Title: _______________________
<PAGE>
EXHIBIT 10.47
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), effective this 31st day of
January, 1997 (the "Effective Date"), is entered into by and between R. Link
Newcomb ("Employee") and Oakley, Inc., a Washington corporation ("Company").
WHEREAS, Employee and the Company have previously entered into that
certain employment agreement dated April 1, 1995 (the "Old Employment
Agreement"); and
WHEREAS, Employee and the Company desire to terminate the Old
Employment Agreement and enter into a new employment agreement on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Employee and the Company have agreed and do hereby agree as follows:
1. EMPLOYMENT. The Company does hereby employ, engage and hire
Employee as Chief Operating Officer of the Company, and Employee does hereby
accept and agree to such hiring, engagement and employment. In such capacity,
Employee shall have such executive and managerial powers and duties with respect
to the Company as may be from time to time reasonably assigned to him by the
Board of Directors. Except for sick leave, reasonable vacations and excused
leaves of absence, Employee shall, throughout his period of employment, devote
substantially all his working time, attention, knowledge and skills, diligently
and to the best of his ability, to the performance of such duties in furtherance
of the business of the Company.
2. TERM OF AGREEMENT. The term ("Term") of this Agreement shall
commence on the Effective Date and shall continue for a period of three (3)
years; PROVIDED, HOWEVER, that on each anniversary of the Effective Date at
which time the remaining term of the Agreement is one year, the Term of the
Agreement shall automatically be extended for one additional year unless, not
later than three months prior to any such anniversary, either party shall have
given written notice to the other that it does not wish to extend the Term of
the Agreement.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay Employee an annual base
salary no less than at the rate of $175,000 per year, payable in equal biweekly
installments or at such other times as Employee and the Company shall agree.
Employee's base salary may be increased as determined by the Board of Directors
of the Company in its sole discretion.
(b) BONUS. Employee shall be eligible to participate in the
<PAGE>
Company's Performance Bonus Plan. Employee's annual target bonus under the
Performance Bonus Plan shall not be less than $400,000.
(c) FRINGE BENEFITS. Employee shall be entitled to participate
in any fringe and other benefit programs adopted from time to time by the
Company for the benefit of its senior executives.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH. If Employee dies while employed by the Company, his
employment shall immediately terminate and the Company's obligation to pay
Employee's base salary and bonus shall cease as of the date of death.
Employee's beneficiaries or his estate shall receive benefits in accordance with
any Company plans then in effect.
(b) DISABILITY. If as a result of Employee's incapacity due to
physical or mental illness ("Disability"), Employee shall have been absent from
the full-time performance of his duties with the Company for six consecutive
months, the Company may, upon 30 days' notice to Employee, terminate Employee's
employment. Within ten days following such termination for Disability, the
Company shall pay Employee an amount equal to one year's base salary. Such
payment shall not affect Employee's rights under any Company disability plan in
which Employee may then be a participant.
(c) TERMINATION FOR CAUSE. The Company shall have the right to
terminate Employee's employment for Cause by giving Employee written notice of
the effective date of such termination. For purposes of this Agreement, "Cause"
shall mean fraud, misappropriation, embezzlement or other act of material
misconduct against the Company, or substantial or willful failure to perform
specific and lawful directives of the Company's Board of Directors consistent
with Employee's employment. If the Company terminates Employee's employment for
Cause, the Company shall have no further obligation under this Agreement from
and after the date of termination.
(d) VOLUNTARY TERMINATION BY EMPLOYEE. In the event that
Employee's employment with the Company is voluntarily terminated by Employee
other than for Good Reason, the Company shall have no further obligation under
this Agreement from and after the date of termination. For purposes of this
Agreement, "Good Reason" shall mean any material reduction or diminution in the
duties and responsibilities of Employee's position in the Company or a material
breach by the Company of any provision of this Agreement.
(e) OTHER TERMINATION. If Employee's employment is terminated
(i) by the Company for any reason other than Employee's death or disability or
for Cause or (ii) by Employee for Good Reason, the Company shall pay Employee
the balance due under the Term of this Agreement as if Employee had remained in
the Company's employ at an annual rate of compensation equal to his then base
salary and, at
<PAGE>
the end of each remaining fiscal year ending during the Term of this
Agreement, a bonus equal to the amount of Employee's annual target bonus
under the Performance Bonus Plan as in effect at the time of such
termination. In addition, the Company shall pay Employee his base salary
accrued through the date of termination and, with respect to any fiscal year
ended prior to the date of termination as to which no annual bonus under the
Performance Bonus Plan had yet been paid, an annual bonus determined on the
basis of the performance goals and objectives applicable to Employee for such
year.
5. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
(a) DEFINITION OF "INVENTIONS". As used herein, the term
"Inventions" shall mean all inventions, discoveries, improvements, trade
secrets, formulas, techniques, data, programs, systems, specifications,
documentation, algorithms, flow charts, logic diagrams, source codes, processes,
and other information, including works-in-progress, whether or not subject to
patent, trademark, copyright, trade secret, or mask work protection, and whether
or not reduced to practice, which are made, created, authored, conceived, or
reduced to practice by Employee, either alone or jointly with others, during the
period of employment with the Company (including, without limitation, all
periods of employment with the Company prior to the Effective Date) which (A)
relate to the actual or anticipated business, activities, research, or
investigations of the Company or (B) result from or is suggested by work
performed by Employee for the Company (whether or not made or conceived during
normal working hours or on the premises of the Company), or (C) which result, to
any extent, from use of the Company's premises or property.
(b) WORK FOR HIRE. Employee expressly acknowledges that all
copyrightable aspects of the Inventions are to be considered "works made for
hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"),
and that the Company is to be the "author" within the meaning of such Act for
all purposes. All such copyrightable works, as well as all copies of such works
in whatever medium fixed or embodied, shall be owned exclusively by the Company
as of its creation, and Employee hereby expressly disclaims any and all interest
in any of such copyrightable works and waives any right of DROIT MORALE or
similar rights.
(c) ASSIGNMENT. Employee acknowledges and agrees that all
Inventions constitute trade secrets of the Company and shall be the sole
property of the Company or any other entity designated by the Company. In the
event that title to any or all of the Inventions, or any part or element
thereof, may not, by operation of law, vest in the Company, or such Inventions
may be found as a matter of law not to be "works made for hire" within the
meaning of the Act, Employee hereby conveys and irrevocably assigns to the
Company, without further consideration, all his right, title and interest,
throughout the universe and in perpetuity, in all Inventions and all copies of
them, in whatever medium fixed or embodied, and in all written records,
graphics, diagrams, notes, or reports relating thereto in Employee's possession
or under his control, including, with respect to any of the foregoing, all
rights of copyright, patent, trademark, trade secret, mask work, and any and all
other proprietary rights therein, the right to modify and create derivative
works, the
<PAGE>
right to invoke the benefit of any priority under any international
convention, and all rights to register and renew same.
(d) PROPRIETARY NOTICES; NO FILINGS; WAIVER OF MORAL RIGHTS.
Employee acknowledges that all Inventions shall, at the sole option of the
Company, bear the Company's patent, copyright, trademark, trade secret, and mask
work notices.
Employee agrees not to file any patent, copyright, or trademark
applications relating to any Invention, except with prior written consent of an
authorized representative of the Company (other than Employee).
Employee hereby expressly disclaims any and all interest in any
Inventions and waives any right of DROIT MORALE or similar rights, such as
rights of integrity or the right to be attributed as the creator of the
Invention.
(e) FURTHER ASSURANCES. Employee agrees to assist the Company,
or any party designated by the Company, promptly on the Company's request,
whether before or after the termination of employment, however such termination
may occur, in perfecting, registering, maintaining, and enforcing, in any
jurisdiction, the Company's rights in the Inventions by performing all acts and
executing all documents and instruments deemed necessary or convenient by the
Company, including, by way of illustration and not limitation:
(i) Executing assignments, applications, and other
documents and instruments in connection with (A) obtaining patents,
copyrights, trademarks, mask works, or other proprietary protections for
the Inventions and (B) confirming the assignment to the Company of all
right, title, and interest in the Inventions or otherwise establishing the
Company's exclusive ownership rights therein.
(ii) Cooperating in the prosecution of patent, copyright,
trademark and mask work applications, as well as in the enforcement of the
Company's rights in the Inventions, including, but not limited to,
testifying in court or before any patent, copyright, trademark or mask work
registry office or any other administrative body.
Employee shall be reimbursed for all out-of-pocket costs incurred
in connection with the foregoing, if such assistance is requested by the Company
after the termination of Employee's employment. In addition, to the extent
that, after the termination of employment for whatever reason, Employee's
technical expertise shall be required in connection with the fulfillment of the
aforementioned obligations, the Company shall compensate Employee at a
reasonable rate for the time actually spent by Employee at the Company's request
rendering such assistance.
(f) POWER OF ATTORNEY. Employee hereby irrevocably appoints the
Company to be his Attorney-In-Fact to execute any document and to take any
action in
<PAGE>
his name and on his behalf and to generally use his name for the purpose of
giving to the Company the full benefit of the assignment provisions set forth
above.
(g) DISCLOSURE OF INVENTIONS. Employee shall make full and
prompt disclosure to the Company of all Inventions subject to assignment to the
Company, and all information relating thereto in Employee's possession or under
his control as to possible applications and use thereof.
6. NO VIOLATION OF THIRD-PARTY RIGHTS. Employee represents,
warrants, and covenants that he:
(a) will not, in the course of employment, infringe upon or
violate any proprietary rights of any third party (including, without
limitation, any third party confidential relationships, patents, copyrights,
mask works, trade secrets, or other proprietary rights);
(b) is not a party to any conflicting agreements with third
parties which will prevent him from fulfilling the terms of employment and the
obligations of this Agreement;
(c) does not have in his possession any confidential or
proprietary information or documents belonging to others and will not disclose
to the Company, use, or induce the Company to use, any confidential or
proprietary information or documents of others; and
(d) agrees to respect any and all valid obligations which he may
now have to prior employers or to others relating to confidential information,
inventions, or discoveries which are the property of those prior employers or
others, as the case may be.
Employee has supplied or shall promptly supply to the Company a
copy of each written agreement to which Employee is subject (other than any
agreement to which the Company is a party) which includes any obligation of
confidentiality, assignment of Inventions, or non-competition.
Employee agrees to indemnify and save harmless the Company from
any loss, claim, damage, cost or expense of any kind (including without
limitation, reasonable attorney fees) to which the Company may be subjected by
virtue of a breach by Employee of the foregoing representations, warranties, and
covenants.
7. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
(a) CONFIDENTIALITY. Employee acknowledges that in his
employment hereunder he will occupy a position of trust and confidence.
Employee shall
<PAGE>
not, except as may be required in the normal course of business to perform
his duties hereunder or as required by applicable law, without limitation in
time or until such information shall have become public other than by
Employee's unauthorized disclosure, disclose to others or use, whether
directly or indirectly, any Confidential Information regarding the Company,
its subsidiaries and affiliates. "Confidential Information" shall mean
information about the Company, its subsidiaries and affiliates, and their
respective clients and customers that is not disclosed by the Company for
financial reporting purposes and that was learned by Employee in the course
of his employment by the Company, its subsidiaries and affiliates, including
(without limitation) any proprietary knowledge, trade secrets, data,
formulae, information and client and customer lists and all papers, resumes,
and records (including computer records) of the documents containing such
Confidential Information. Employee acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the
Company, its subsidiaries and affiliates, and that such information gives the
Company a competitive advantage. The Employee agrees to (i) deliver or
return to the Company, at the Company's request at any time or upon
termination or expiration of his employment or as soon thereafter as
possible, (A) all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company, its subsidiaries and affiliates, or prepared by the
Employee during the term of his employment by the Company, its subsidiaries
and affiliates, and (B) all notebooks and other data relating to research or
experiments or other work conducted by Employee in the scope of employment or
any Inventions made, created, authored, conceived, or reduced to practice by
Employee, either alone or jointly with others, and (ii) make full disclosure
relating to any Inventions.
If Employee would like to keep certain property, such as material
relating to professional societies or other non-confidential material, upon the
termination of employment with the Company, he agrees to discuss such issues
with the Company. Where such a request does not put Confidential Information of
the Company at risk, the Company will customarily grant the request.
(b) NON-COMPETITION. During the Term of this Agreement and for
a period of two (2) years thereafter, Employee shall not, directly or
indirectly, without the prior written consent of the Company, provide
consultative services or otherwise provide services to (whether as an employee
or a consultant, with or without pay), own, manage, operate, join, control,
participate in, or be connected with (as a stockholder, partner, or otherwise),
any business, individual, partner, firm, corporation, or other entity that is
then a competitor of the Company, its subsidiaries and affiliates, including
without limitation any entity engaged in the design, manufacture and/or
distribution of eyewear (each such competitor a "Competitor of the Company");
provided, however, that the "beneficial ownership" by Employee, either
individually or as a member of a "group," as such terms are used in Rule 13d of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), of not more than five percent (5%) of the voting
stock of any publicly held corporation shall not alone constitute a violation of
this Agreement; PROVIDED, HOWEVER, that if Executive's employment is terminated
(i) by the Company without Cause, (ii) by Executive for Good Reason or (iii) by
reason of the expiration of the Term of this Agreement, the non-competition
agreement
<PAGE>
provided for in this subparagraph (b) shall terminate as of the date
of such termination of employment. Employee and the Company acknowledge and
agree that the business of the Company is global in nature, and that the terms
of the non-competition agreement set forth herein shall apply on a worldwide
basis.
(c) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
Term of this Agreement and for a period of two (2) years thereafter, Employee
shall not, directly or indirectly, influence or attempt to influence customers
or suppliers of the Company or any of its subsidiaries or affiliates, to divert
their business to any Competitor of the Company; PROVIDED, HOWEVER, that if
Executive's employment is terminated (i) by the Company without Cause, (ii) by
Executive for Good Reason or (iii) by reason of the expiration of the Term of
this Agreement, the non-solicitation agreement provided for in this subparagraph
(c) shall terminate as of the date of such termination of employment.
(d) NON-SOLICITATION OF EMPLOYEES. Employee recognizes that he
possesses and will possess confidential information about other employees of the
Company, its subsidiaries and affiliates, relating to their education,
experience, skills, abilities, compensation and benefits, and inter-personal
relationships with customers of the Company, its subsidiaries and affiliates.
Employee recognizes that the information he possesses and will possess about
these other employees is not generally known, is of substantial value to the
Company, its subsidiaries and affiliates in developing their business and in
securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company, its subsidiaries and
affiliates. Employee agrees that, during the Term of this Agreement and for a
period of two (2) years thereafter, he will not, directly or indirectly, solicit
or recruit any employee of the Company, its subsidiaries and affiliates for the
purpose of being employed by him or by any Competitor of the Company on whose
behalf he is acting as an agent, representative or employee and that he will not
convey any such confidential information or trade secrets about other employees
of the Company, its subsidiaries and affiliates to any other person.
(e) INJUNCTIVE RELIEF. It is expressly agreed that the Company
will or would suffer irreparable injury if Employee were to compete with the
Company or any subsidiary or affiliate of the Company in violation of any of the
provisions of this Section 7 and that the Company would by reason of such
competition be entitled to injunctive relief in a court of appropriate
jurisdiction, and Employee further consents and stipulates to the entry of such
injunctive relief in such a court prohibiting Employee from so competing with
the Company or any subsidiary or affiliate of the Company in violation of this
Agreement.
(f) SURVIVAL OF PROVISIONS. The obligations contained in this
Section 7 shall survive the termination or expiration of Employee's employment
with the Company and shall be fully enforceable thereafter. If it is determined
by a court of competent jurisdiction in any state that any restriction in this
Section 7 is excessive in duration or scope or is unreasonable or unenforceable
under the laws of that state, it is the intention of the parties that such
restriction may be modified or amended by the court to render it enforceable to
the maximum extent permitted by the law of that state.
<PAGE>
8. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax or first class mail,
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) days after mailing or twenty-four (24) hours
after transmission of a fax to the respective persons named below:
If to Company: Oakley, Inc.
10 Holland
Irvine, California 92718
If to Employee: R. Link Newcomb
1247 Skyline Drive
Laguna Beach, California 92651
Either party may change such party's address for notices by notice duly given
pursuant hereto.
9. INDEMNIFICATION. The Company shall indemnify and hold Employee
harmless to the maximum extent permitted under applicable law.
10. NO MITIGATION; NO OFFSET. Employee shall not be required in any
way to mitigate the amount of any payment provided for in this Agreement, and
such payments shall not be subject to offset against compensation earned as the
result of employment with another employer.
11. ATTORNEYS' FEES. In the event judicial determination is
necessary of any dispute arising as to the parties' rights and obligations
hereunder, each party shall have the right, in addition to any other available
relief, to attorneys' fees based on a determination by the court of the extent
to which each party has prevailed as to the material issues raised in
determination of the dispute.
12. ASSIGNMENT; SUCCESSORS. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; PROVIDED, that
in the event of the merger, consolidation, transfer or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall be binding upon and inure to the benefit of such
successor, and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder.
13. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under and
in accordance with the laws of the State of California.
14. WAIVER; MODIFICATION. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such
<PAGE>
term, covenant, or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder
at any one or more times be deemed a waiver or relinquishment of such right
or power at any other time or times. This Agreement shall not be modified in
any respect except by a writing executed by each party hereto.
15. SEVERABILITY. In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, only the portions of this Agreement that violate
such statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much effect
as possible to the intentions of the parties under this Agreement.
16. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. TERMINATION OF OLD EMPLOYMENT AGREEMENT. The Old Employment
Agreement is hereby terminated as of the Effective Date hereof, and Employee
shall have no rights under the Old Employment Agreement from and after the
Effective Date.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and Employee has hereunto signed this
Agreement, as of the date referred to above.
OAKLEY, INC.
_____________________________
By: ________________________
Its: ________________________
_____________________________
R. LINK NEWCOMB
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), effective this 16th day of
January, 1997 (the "Effective Date"), is entered into by and between Robert
Bruning ("Employee") and Oakley, Inc., a Washington corporation ("Company").
In consideration of the mutual agreements hereinafter set forth,
Employee and the Company have agreed and do hereby agree as follows:
EMPLOYMENT. The Company does hereby employ, engage and hire
Employee as Chief Financial Officer of the Company, and Employee does hereby
accept and agree to such hiring, engagement and employment. In such capacity,
Employee shall have such executive and managerial powers and duties with
respect to the Company as may be from time to time reasonably assigned to him
by the Board of Directors. Except for sick leave, reasonable vacations and
excused leaves of absence, Employee shall, throughout his period of employment,
devote substantially all his working time, attention, knowledge and skills,
diligently and to the best of his ability, to the performance of such duties in
furtherance of the business of the Company.
TERM OF AGREEMENT. The term ("Term") of this Agreement shall
commence on the Effective Date and shall continue for a period of two (2)
years; PROVIDED, HOWEVER, that on each anniversary of the Effective Date the
Term of the Agreement shall automatically be extended for one additional year
unless, not less than three months prior to any such anniversary, either party
shall have given written notice to the other that it does not wish to extend
the Term of the Agreement.
COMPENSATION.
BASE SALARY. The Company shall pay Employee an annual base
salary no less than at the rate of $145,000 per year, payable in equal biweekly
installments or at such other times as Employee and the Company shall agree.
Employee's base salary may be increased as determined by the Board of Directors
of the Company in its sole discretion.
BONUS. Employee shall be eligible to participate in the
Company's Performance Bonus Plan. Employee's annual target bonus under the
Performance Bonus Plan shall not be less than $60,000.
STOCK OPTION GRANT. The Board of Directors of the Company
has determined to grant Employee a stock option (the "Option") to purchase
60,000 shares of Oakley common stock, par value $.01 per share (the "Common
Stock"). The Option shall (i) be an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code to the extent permitted by
law, and a non-qualified stock option otherwise, (ii) be effective as of
Employee's hire date, December 20, 1996 (the "Date of Grant"), (iii) have a
term of 10 years from the Date of Grant, (iv) have an exercise price
<PAGE>
equal to the closing price of the Common Stock on the New York Stock Exchange
on the Date of Grant, (v) vest and become exercisable in equal 25% installments
on each of the first four anniversaries of the Date of Grant, and (vi) contain
such other terms and conditions as generally apply to option grants made to the
Company's senior executives.
FRINGE BENEFITS. Employee shall be entitled to participate
in any fringe and other benefit programs adopted from time to time by the
Company for the benefit of its senior executives. In addition, the Company
shall reimburse Employee, in an aggregate amount not to exceed $50,000, against
the following costs and expenses incurred by Employee in selling his Carlsbad
residence and moving to a new residence in Orange County (the "Reimbursement
Amount"):
(i) Standard brokers commissions incurred in selling
Employee's Carlsbad residence;
(ii) Any loss on the sale of Employee's Carlsbad
residence, as measured by the difference between the actual selling price of
the Carlsbad residence and Employee's cost basis therein; and
(iii) Employee's "hard" moving costs in moving from
Carlsbad to his new Orange County residence, excluding loan points and any
other interest-related costs, but otherwise including the normal costs of
escrow.
The Company shall also provide Employee with an income tax
"gross-up" with respect to any federal or state income tax liability incurred
by Employee resulting from any portion of the Reimbursement Amount being
included in Employee's taxable income.
TERMINATION OF EMPLOYMENT.
DEATH. If Employee dies while employed by the Company,
his employment shall immediately terminate and the Company's obligation to
pay Employee's base salary and bonus shall cease as of the date of death.
Employee's beneficiaries or his estate shall receive benefits in accordance
with any Company plans then in effect.
DISABILITY. If as a result of Employee's incapacity due to
physical or mental illness ("Disability"), Employee shall have been absent from
the full-time performance of his duties with the Company for six consecutive
months, the Company may, upon 30 days' notice to Employee, terminate Employee's
employment. Within ten days following such termination for Disability, the
Company shall pay Employee an amount equal to one year's base salary. Such
payment shall not affect Employee's rights under any Company disability plan in
which Employee may then be a participant.
TERMINATION FOR CAUSE. The Company shall have the right to
<PAGE>
terminate Employee's employment for Cause by giving Employee written notice
of the effective date of such termination. For purposes of this Agreement,
"Cause" shall mean fraud, misappropriation, embezzlement or other act of
material misconduct against the Company, or substantial or willful failure to
perform specific and lawful directives of the Company's Board of Directors
consistent with Employee's employment. If the Company terminates Employee's
employment for Cause, the Company shall have no further obligation under this
Agreement from and after the date of termination.
VOLUNTARY TERMINATION BY EMPLOYEE. In the event that
Employee's employment with the Company is voluntarily terminated by Employee
other than for Good Reason, the Company shall have no further obligation
under this Agreement from and after the date of termination. For purposes of
this Agreement, "Good Reason" shall mean any material breach by the Company
of any provision of this Agreement.
OTHER TERMINATION. If Employee's employment is
terminated (i) by the Company for any reason other than Employee's death or
disability or for Cause or (ii) by Employee for Good Reason, the Company
shall pay Employee the balance due under the Term of this Agreement as if
Employee had remained in the Company's employ at an annual rate of
compensation equal to his then base salary and, at the end of each remaining
fiscal year ending during the Term of this Agreement, a bonus equal to the
amount of Employee's annual target bonus under the Performance Bonus Plan as
in effect at the time of such termination.
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
DEFINITION OF "INVENTIONS". As used herein, the term
"Inventions" shall mean all inventions, discoveries, improvements, trade
secrets, formulas, techniques, data, programs, systems, specifications,
documentation, algorithms, flow charts, logic diagrams, source codes,
processes, and other information, including works-in-progress, whether or not
subject to patent, trademark, copyright, trade secret, or mask work protection,
and whether or not reduced to practice, which are made, created, authored,
conceived, or reduced to practice by Employee, either alone or jointly with
others, during the period of employment with the Company (including, without
limitation, all periods of employment with the Company prior to the Effective
Date) which (A) relate to the actual or anticipated business, activities,
research, or investigations of the Company or (B) result from or is suggested
by work performed by Employee for the Company (whether or not made or conceived
during normal working hours or on the premises of the Company), or (C) which
result, to any extent, from use of the Company's premises or property.
WORK FOR HIRE. Employee expressly acknowledges that all
copyrightable aspects of the Inventions are to be considered "works made for
hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"),
and that the Company is to be the "author" within the meaning of such Act for
all purposes. All such copyrightable works, as well as all copies of such
works in whatever medium fixed or embodied, shall be owned exclusively by the
Company as of its creation, and Employee
<PAGE>
hereby expressly disclaims any and all interest in any of such copyrightable
works and waives any right of DROIT MORALE or similar rights.
ASSIGNMENT. Employee acknowledges and agrees that all
Inventions constitute trade secrets of the Company and shall be the sole
property of the Company or any other entity designated by the Company. In
the event that title to any or all of the Inventions, or any part or element
thereof, may not, by operation of law, vest in the Company, or such
Inventions may be found as a matter of law not to be "works made for hire"
within the meaning of the Act, Employee hereby conveys and irrevocably
assigns to the Company, without further consideration, all his right, title
and interest, throughout the universe and in perpetuity, in all Inventions
and all copies of them, in whatever medium fixed or embodied, and in all
written records, graphics, diagrams, notes, or reports relating thereto in
Employee's possession or under his control, including, with respect to any of
the foregoing, all rights of copyright, patent, trademark, trade secret, mask
work, and any and all other proprietary rights therein, the right to modify
and create derivative works, the right to invoke the benefit of any priority
under any international convention, and all rights to register and renew same.
PROPRIETARY NOTICES; NO FILINGS; WAIVER OF MORAL RIGHTS.
Employee acknowledges that all Inventions shall, at the sole option of the
Company, bear the Company's patent, copyright, trademark, trade secret, and
mask work notices.
Employee agrees not to file any patent, copyright, or trademark
applications relating to any Invention, except with prior written consent of an
authorized representative of the Company (other than Employee).
Employee hereby expressly disclaims any and all interest in any
Inventions and waives any right of DROIT MORALE or similar rights, such as
rights of integrity or the right to be attributed as the creator of the
Invention.
FURTHER ASSURANCES. Employee agrees to assist the Company,
or any party designated by the Company, promptly on the Company's request,
whether before or after the termination of employment, however such termination
may occur, in perfecting, registering, maintaining, and enforcing, in any
jurisdiction, the Company's rights in the Inventions by performing all acts and
executing all documents and instruments deemed necessary or convenient by the
Company, including, by way of illustration and not limitation:
Executing assignments, applications, and other
documents and instruments in connection with (A) obtaining patents, copyrights,
trademarks, mask works, or other proprietary protections for the Inventions and
(B) confirming the assignment to the Company of all right, title, and interest
in the Inventions or otherwise establishing the Company's exclusive ownership
rights therein.
Cooperating in the prosecution of patent, copyright,
<PAGE>
trademark and mask work applications, as well as in the enforcement of the
Company's rights in the Inventions, including, but not limited to,
testifying in court or before any patent, copyright, trademark or mask work
registry office or any other administrative body.
Employee shall be reimbursed for all out-of-pocket costs
incurred in connection with the foregoing, if such assistance is requested by
the Company after the termination of Employee's employment. In addition, to
the extent that, after the termination of employment for whatever reason,
Employee's technical expertise shall be required in connection with the
fulfillment of the aforementioned obligations, the Company shall compensate
Employee at a reasonable rate for the time actually spent by Employee at the
Company's request rendering such assistance.
POWER OF ATTORNEY. Employee hereby irrevocably appoints
the Company to be his Attorney-In-Fact to execute any document and to take
any action in his name and on his behalf and to generally use his name for
the purpose of giving to the Company the full benefit of the assignment
provisions set forth above.
DISCLOSURE OF INVENTIONS. Employee shall make full and
prompt disclosure to the Company of all Inventions subject to assignment to
the Company, and all information relating thereto in Employee's possession or
under his control as to possible applications and use thereof.
NO VIOLATION OF THIRD-PARTY RIGHTS. Employee represents,
warrants, and covenants that he:
will not, in the course of employment, infringe upon or
violate any proprietary rights of any third party (including, without
limitation, any third party confidential relationships, patents, copyrights,
mask works, trade secrets, or other proprietary rights);
is not a party to any conflicting agreements with third
parties which will prevent him from fulfilling the terms of employment and
the obligations of this Agreement;
does not have in his possession any confidential or
proprietary information or documents belonging to others and will not
disclose to the Company, use, or induce the Company to use, any confidential
or proprietary information or documents of others; and
agrees to respect any and all valid obligations which he
may now have to prior employers or to others relating to confidential
information, inventions, or discoveries which are the property of those prior
employers or others, as the case may be.
Employee has supplied or shall promptly supply to the Company a
<PAGE>
copy of each written agreement to which Employee is subject (other than any
agreement to which the Company is a party) which includes any obligation of
confidentiality, assignment of Inventions, or non-competition.
Employee agrees to indemnify and save harmless the Company
from any loss, claim, damage, cost or expense of any kind (including without
limitation, reasonable attorney fees) to which the Company may be subjected
by virtue of a breach by Employee of the foregoing representations,
warranties, and covenants.
CONFIDENTIAL INFORMATION AND NON-COMPETITION.
CONFIDENTIALITY. Employee acknowledges that in his
employment hereunder he will occupy a position of trust and confidence.
Employee shall not, except as may be required in the normal course of
business to perform his duties hereunder or as required by applicable law,
without limitation in time or until such information shall have become public
other than by Employee's unauthorized disclosure, disclose to others or use,
whether directly or indirectly, any Confidential Information regarding the
Company, its subsidiaries and affiliates. "Confidential Information" shall
mean information about the Company, its subsidiaries and affiliates, and
their respective clients and customers that is not disclosed by the Company
for financial reporting purposes and that was learned by Employee in the
course of his employment by the Company, its subsidiaries and affiliates,
including (without limitation) any proprietary knowledge, trade secrets,
data, formulae, information and client and customer lists and all papers,
resumes, and records (including computer records) of the documents containing
such Confidential Information. Employee acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the
Company, its subsidiaries and affiliates, and that such information gives the
Company a competitive advantage. The Employee agrees to (i) deliver or
return to the Company, at the Company's request at any time or upon
termination or expiration of his employment or as soon thereafter as
possible, (A) all documents, computer tapes and disks, records, lists, data,
drawings, prints, notes and written information (and all copies thereof)
furnished by the Company, its subsidiaries and affiliates, or prepared by the
Employee during the term of his employment by the Company, its subsidiaries
and affiliates, and (B) all notebooks and other data relating to research or
experiments or other work conducted by Employee in the scope of employment or
any Inventions made, created, authored, conceived, or reduced to practice by
Employee, either alone or jointly with others, and (ii) make full disclosure
relating to any Inventions.
If Employee would like to keep certain property, such as
material relating to professional societies or other non-confidential
material, upon the termination of employment with the Company, he agrees to
discuss such issues with the Company. Where such a request does not put
Confidential Information of the Company at risk, the Company will customarily
grant the request.
NON-COMPETITION. During the Term of this Agreement and
for a period of two (2) years thereafter, Employee shall not, directly or
indirectly, without the prior written consent of the Company, provide
consultative services or otherwise
<PAGE>
provide services to (whether as an employee or a consultant, with or without
pay), own, manage, operate, join, control, participate in, or be connected
with (as a stockholder, partner, or otherwise), any business, individual,
partner, firm, corporation, or other entity that is then a competitor of the
Company, its subsidiaries and affiliates, including without limitation any
entity engaged in the design, manufacture and/or distribution of eyewear
(each such competitor a "Competitor of the Company"); provided, however, that
the "beneficial ownership" by Employee, either individually or as a member of
a "group," as such terms are used in Rule 13d of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), of not more than five percent (5%) of the voting stock of
any publicly held corporation shall not alone constitute a violation of this
Agreement; PROVIDED, HOWEVER, that if Executive's employment is terminated
(i) by the Company without Cause, (ii) by Executive for Good Reason or (iii)
by reason of the expiration of the Term of this Agreement, the
non-competition agreement provided for in this subparagraph (b) shall
terminate as of the date of such termination of employment. Employee and the
Company acknowledge and agree that the business of the Company is global in
nature, and that the terms of the non-competition agreement set forth herein
shall apply on a worldwide basis.
NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
Term of this Agreement and for a period of two (2) years thereafter, Employee
shall not, directly or indirectly, influence or attempt to influence
customers or suppliers of the Company or any of its subsidiaries or
affiliates, to divert their business to any Competitor of the Company;
PROVIDED, HOWEVER, that if Executive's employment is terminated (i) by the
Company without Cause, (ii) by Executive for Good Reason or (iii) by reason
of the expiration of the Term of this Agreement, the non-solicitation
agreement provided for in this subparagraph (c) shall terminate as of the
date of such termination of employment.
NON-SOLICITATION OF EMPLOYEES. Employee recognizes that
he possesses and will possess confidential information about other employees
of the Company, its subsidiaries and affiliates, relating to their education,
experience, skills, abilities, compensation and benefits, and inter-personal
relationships with customers of the Company, its subsidiaries and affiliates.
Employee recognizes that the information he possesses and will possess about
these other employees is not generally known, is of substantial value to the
Company, its subsidiaries and affiliates in developing their business and in
securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company, its subsidiaries and
affiliates. Employee agrees that, during the Term of this Agreement and for
a period of two (2) years thereafter, he will not, directly or indirectly,
solicit or recruit any employee of the Company, its subsidiaries and
affiliates for the purpose of being employed by him or by any Competitor of
the Company on whose behalf he is acting as an agent, representative or
employee and that he will not convey any such confidential information or
trade secrets about other employees of the Company, its subsidiaries and
affiliates to any other person.
INJUNCTIVE RELIEF. It is expressly agreed that the
Company will or would suffer irreparable injury if Employee were to compete
with the Company or any subsidiary or affiliate of the Company in violation
of any of the provisions of this
<PAGE>
Section 7 and that the Company would by reason of such competition be
entitled to injunctive relief in a court of appropriate jurisdiction, and
Employee further consents and stipulates to the entry of such injunctive
relief in such a court prohibiting Employee from so competing with the
Company or any subsidiary or affiliate of the Company in violation of this
Agreement.
SURVIVAL OF PROVISIONS. The obligations contained in
this Section 7 shall survive the termination or expiration of Employee's
employment with the Company and shall be fully enforceable thereafter. If it
is determined by a court of competent jurisdiction in any state that any
restriction in this Section 7 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the
intention of the parties that such restriction may be modified or amended by
the court to render it enforceable to the maximum extent permitted by the law
of that state.
NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax or first class mail,
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) days after mailing or twenty-four (24) hours
after transmission of a fax to the respective persons named below:
If to Company: Oakley, Inc.
10 Holland
Irvine, California 92718
If to Employee: Robert Bruning
3318 Avenida Obentura
Carlsbad, California 92009
Either party may change such party's address for notices by notice duly given
pursuant hereto.
INDEMNIFICATION. The Company shall indemnify and hold
Employee harmless to the maximum extent permitted under applicable law.
NO MITIGATION; NO OFFSET. Employee shall not be required in
any way to mitigate the amount of any payment provided for in this Agreement,
and such payments shall not be subject to offset against compensation earned
as the result of employment with another employer.
ATTORNEYS' FEES. In the event judicial determination is
necessary of any dispute arising as to the parties' rights and obligations
hereunder, each party shall have the right, in addition to any other
available relief, to attorneys' fees based on a determination by the court of
the extent to which each party has prevailed as to the material issues raised
in determination of the dispute.
<PAGE>
ASSIGNMENT; SUCCESSORS. This Agreement is personal in nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
PROVIDED, that in the event of the merger, consolidation, transfer or sale of
all or substantially all of the assets of the Company with or to any other
individual or entity, this Agreement shall be binding upon and inure to the
benefit of such successor, and such successor shall discharge and perform all
the promises, covenants, duties and obligations of the Company hereunder.
GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under
and in accordance with the laws of the State of California.
WAIVER; MODIFICATION. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition, nor shall any waiver
or relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed
by each party hereto.
SEVERABILITY. In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, only the portions of this Agreement that
violate such statute or public policy shall be stricken. All portions of
this Agreement that do not violate any statute or public policy shall
continue in full force and effect. Further, any court order striking any
portion of this Agreement shall modify the stricken terms as narrowly as
possible to give as much effect as possible to the intentions of the parties
under this Agreement.
COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer, and Employee has hereunto signed
this Agreement, as of the date referred to above.
OAKLEY, INC.
______________________________
By: ________________________
Its: ________________________
______________________________
ROBERT BRUNING
<PAGE>
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT ("Pledge Agreement") dated January, 1997 is made between
OAKLEY, INC. (the "Company"), and WELLS FARGO BANK NATIONAL ASSOCIATION, acting
as agent (the "Agent") for the lenders set forth in the Credit Agreement.
WHEREAS
A. The Lenders and the Company entered into a credit agreement dated
20 June 1995, as amended and restated as of 15 August 1995 and as the
same may be amended from time to time (the "Credit Agreement").
B. Pursuant to the Credit Agreement the Company has agreed to provide the
Lenders (as defined in the Credit Agreement) with a pledge of 65% of
the shares which it owns or will own in certain foreign companies. It
is a condition to the Credit Agreement that the Company shall execute
and deliver a pledge agreement shortly after acquiring any such shares.
C. On 19 November 1996, the Company, Raymond George Tilbrook and Carl
Ward entered into a Share Purchase Agreement (the "Purchase
Agreement") providing for the sale of all of the share capital (the
"Shares") of Oakley (U.K.) Limited ("Oakley UK").
D. Pursuant to the Purchase Agreement the Company became the legal and
beneficial owner of 1,000 fully paid ordinary shares of L.1 each.
E. The Company now wishes to pledge to the Lenders 65% of the Shares as
security for their obligations under the Credit Agreement.
AGREEMENT
- ---------
In consideration of the premises and in order to induce the Lenders to
enter into the third amendment to the Credit Agreement and for other
good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Agent hereby agree as follows:-
<PAGE>
1 GRANT OF SECURITY INTEREST
The Company pledges, hypothecates, assigns, transfers, sets over and
delivers unto the Agent a security interest in 65% of the Shares the
Company owns in the share capital of Oakley UK, including, without
limitation, the Shares set forth on Schedule A attached hereto, as such
schedule may from time to time be amended, altered or changed. Said
pledged Shares are hereinafter referred to as "Pledged Shares". The
Pledged Shares includes all proceeds thereof, whether tangible or
intangible, including, but not limited to, all cash, additional shares or
other property at any time, and from time to time, receivable or otherwise
distributable in respect of, in exchange for, or in substitution of, any
and all such shares, together with the proceeds thereof, including,
without limitation, any share rights, rights to subscribe, liquidation
dividends, share dividends, new securities or securities representing
split shares, or other property or distributions to which the Company is
or may hereafter become entitled to receive on account of the Pledged
Shares.
2 OBLIGATIONS SECURED
This Pledge Agreement is made, and the security interest created hereby is
granted to the Lenders, as security for payment and performance of all
liabilities and obligations of the Company to the Lenders under the Credit
Agreement.
3 REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The Company hereby represents, warrants and agrees that:
3.1 the Company is the legal and equitable owner of all of the Pledged
Shares;
3.2 the security interest intended to be created hereby constitutes a
valid perfected security interest in the Pledged Shares purported or
intended to be covered hereby upon possession of such Pledged Shares
by the Lender, free of all liens, except as created under the Credit
Agreement;
3.3 no action of, or filing with, any governmental agency, bureau or
commission is required by law to authorise the execution and delivery
of this Pledge Agreement or the pledge of the Pledged Shares or to
continue the perfected status of the security interest, or if so
required such action or filing has been made; and
3.4 the Pledged Shares represent 65% of the issued and outstanding Shares
of Oakley UK.
2
<PAGE>
4 COVENANTS WITH RESPECT TO PLEDGED SHARES
The Company agrees with the Lenders with respect to the Pledged Shares as
follows:-
4.1 The Company shall cause 65% of any additional shares issued to it by
Oakley UK whether for value paid by the Company, or otherwise, to be
forthwith delivered to the Agent as provided for in the Credit
Agreement and pledged hereunder.
4.2 So long as no Event of Default (as defined below) shall have occurred
and be continuing, the Company shall be entitled to exercise any and
all voting and/or consensual rights and powers with respect to the
Pledged Shares or any part thereof; provided, however, that the
Company shall not exercise such voting and/or consensual rights in a
manner as would violate the terms and provisions of the Credit
Agreement.
4.3 So long as no Event of Default shall have occurred and be continuing,
the Company shall be entitled to retain and use any and all cash
dividends paid on the Pledged Shares, but any and all shares and/or
liquidating dividends, other distributions in property made on or in
respect of Pledged Shares, or received in exchange for the Pledged
Shares or any part thereof as a result of any merger, consolidation,
acquisition or other exchange of assets or on the liquidation, whether
voluntary or involuntary, of the issuer of the Pledged Shares shall be
and become part of the Pledged Shares pledged hereunder and, if
received by the Company, 65% shall forthwith be delivered to the Agent
to be held subject to the terms of this Pledge Agreement.
4.4 So long as no Event of Default hereunder shall have occurred and be
continuing, the Lenders shall execute and deliver to the Company, or
cause to be executed and delivered to the Company, as appropriate, all
such proxies, powers of attorney, dividend orders and other
instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and/or consensual rights
and powers which it is entitled to exercise pursuant to Section 4.2
above and/or to receive the dividends which it is authorised to retain
pursuant to Section 4.3 above.
4.5 Upon and after the occurrence and continuance of an Event of Default
and upon written notice from the Agent, all rights of the Company to
exercise the voting and/or consensual rights and powers which the
Company is entitled to exercise pursuant to Section 4.2 hereof and/or
to receive the dividends which
3
<PAGE>
the Company is authorised to receive and retain pursuant to Section
4.3 hereof shall cease and the Company hereby agrees that it shall not
exercise or attempt to exercise in any manner whatsoever any of such
rights or powers. All such rights shall thereupon immediately vest in
the Lenders. Once such rights have vested, the Lenders shall have the
sole and exclusive right and authority to exercise such voting and/or
consensual rights and powers and/or to receive and retain all
dividends. Any and all money and other property paid over to or
received by the Agent pursuant to the provisions of this Section 4.5
shall be retained by the Agent as additional collateral herein.
4.6 The Company shall cause the following notice to be inserted on and to
remain on the Register of Members and Share Ledger of Oakley UK:-
TAKE NOTICE THAT 65% OF THE SHARES IN OAKLEY (U.K) LIMITED FROM TIME
TO TIME REGISTERED IN THE NAME OF OAKLEY, INC. ARE PLEDGED TO WELLS
FARGO BANK NATIONAL ASSOCIATION (AS AGENT FOR A GROUP OF LENDERS)
UNDER A CERTAIN PLEDGE AGREEMENT DATED JANUARY 1996 (THE "AGREEMENT").
THIS NOTICE IS INTENDED TO STOP THE TRANSFER OF THE SAID SHARES
WITHOUT PRIOR NOTICE OF THE INTERESTS OF WELLS FARGO BANK NATIONAL
ASSOCIATION (AND THE GROUP OF LENDERS) AND NOT THE PAYMENT OF ANY
DIVIDEND THEREOF OR INTEREST THEREON. OAKLEY (U.K.) LIMITED WILL NOT
REGISTER ANY TRANSFER OF ANY SECURITIES REGISTERED IN THE NAME OF
OAKLEY, INC. AND PLEDGED TO WELLS FARGO BANK NATIONAL ASSOCIATION
PURSUANT TO THE AGREEMENT WITHOUT FIRST GIVING 20 DAYS' WRITTEN NOTICE
OF RECEIPT OF EVERY SUCH TRANSFER TO WELLS FARGO BANK NATIONAL
ASSOCIATION WHOSE ADDRESS FOR SERVICE FOR THIS PURPOSE IS: ORANGE
COAST REGIONAL, COMMERCIAL BANKING OFFICIAL, 2030 MAIN STREET, SUITE
900, IRVINE, CALIFORNIA 92714 USA ATTENTION: MICHAEL SULLIVAN.
5 SECURED PARTIES APPOINTED ATTORNEYS-IN-FACT
The Company hereby constitutes and appoints the Agent the true and lawful
attorney-in-fact of the Company for the purpose of carrying out the
provisions of this Pledge Agreement and taking any action and executing any
instrument which the Agent may deem necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the Agent shall
have the right, but subject always to any mandatory requirement of
applicable law, after the occurrence of an Event of Default, and during the
continuance thereof, with full power of substitution either in the Agent's
name or in the name of the assignor, to ask for, demand, sue for, collect
and receive any and all moneys due or to become due under and by virtue of
any Pledged Shares, to endorse checks, drafts, orders and other instruments
for the payment or money payable
4
<PAGE>
to the Company, representing any interest or dividend or other distribution
payable in respect of the Pledged Shares or any part thereof or on account
thereof and to give full discharge for the same, to settle, compromise,
prosecute, or defend any action, claim or proceeding with respect thereto,
and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Agent or Lenders to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file
any claim or notice, or take any action with respect to the Pledged Shares
or any part thereof or the monies due or to become due in respect thereof
or any property covered thereby, and no action taken by the Agent or
Lenders pursuant to this Pledge Agreement or omitted to be taken with
respect to the Pledged Shares or any part thereof shall give rise to any
defense, counterclaim or offset in favour of the Company or to any claim or
action against the Agent or Lenders.
6 EVENT OF DEFAULT
Any of the following events ("Events of Default") constitute an Event of
Default:
6.1 an "Event of Default" under Section 8 of the Credit Agreement which
shall have occurred and shall be continuing; or
6.2 the failure of the Company to perform any covenant set forth in this
Pledge Agreement and the continuance of such failure for ten (10) days
after notice thereof has been delivered to the Company by the Agent or
a misrepresentation by the Company in any material respect in this
Pledge Agreement or in connection with any of the obligations; or
6.3 the Pledged Shares or any part thereof, shall be executed or levied
upon, or attached, and such action shall continue unstayed and
undischarged for ten (10) days after the date of execution, levy or
attachment; or
6.4 the Company shall sell, transfer, assign or otherwise dispose of the
Pledged Shares by operation of law or otherwise, except for sales,
transfers, assignments or disposition permitted by this Pledge
Agreement or the Credit Agreement.
7 REMEDIES UPON DEFAULT
7.1 If an Event of Default shall have occurred and be continuing, the
Agent may sell, assign, transfer, endorse and deliver the whole or,
from time to time, any
5
<PAGE>
part of the Pledged Shares at public or private sale or at any
broker's board or on any securities exchange, with respect to all or
any part of the Pledged Shares, for cash, upon credit or for other
property, for immediate or future delivery, and for such price or
prices and on such terms as the Agent in its reasonable discretion
shall deem appropriate.
7.2 Upon consummation of any such sale the Agent shall have the right to
assign, transfer, endorse and deliver to the purchaser or purchasers
thereof the Pledged Shares so sold.
7.3 Each such purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Company,
and the Company hereby waives (to the extent permitted by law) all
rights of redemption, stay and/or appraisal which the Company now
has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.
7.4 At any such sale, the Pledged Shares, or portion thereof to be sold,
may be sold in one lot as an entirety or in separate portions, as the
Agent may (in its sole and absolute discretion) determine.
7.5 The Agent shall not be obligated to make any sale of the Pledged
Shares if it shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Shares may have been given.
7.6 The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to adjourn from time to time by
announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the
same was so adjourned.
7.7 In case sale of all or any part of the Pledged Shares is made on
credit or for future delivery, the Pledged Shares sold may be retained
by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Shares so sold and, in case of any such failure, such
Pledged Shares may be sold again upon like notice.
7.8 At any sale made pursuant to this Pledge Agreement, the Agent may bid
for or purchase, free (to the extent permitted by law) from any right
of redemption, stay and/or appraisal which the Company now has or may
at any time in the future have under any rule of law or statute now
existing or hereafter enacted (and any such rights are hereby waived
and released to the
6
<PAGE>
extent permitted by law), any part of or all the Pledged Shares
offered for sale and may make payment on account thereof by using any
claim then due and payable to the Agent, as a credit against the
purchase price, and such secured party may, upon compliance with the
terms of sale, hold, retain and dispose of such property without
further accountability to the Company therefor.
7.9 For the purposes hereof, a written agreement to purchase all or any
part of the Pledged Shares shall be treated as a sale thereof; the
Agent shall be free to carry out such sale and the Company shall not
be entitled to the return of any Pledged Shares subject thereto,
notwithstanding the fact that, after the Agent shall have entered into
such an agreement, all Events of Default may have been paid in full or
otherwise ceased to exist as herein provided.
7.10 As an alternative to exercising the power of sale herein conferred
upon it, the Agent may proceed by suit or suits at law or in equity to
foreclose this Pledge Agreement and sell the Pledged Shares or any
portion thereof, pursuant to judgment or decree of a court or courts
having competent jurisdiction.
7.11 The Agent shall not incur any liability as a result of the sale or any
part of the Pledged Shares, at any private sale conducted in any
manner which is commercially reasonable.
8 DUTY TO PRESERVE THE PLEDGED SHARES
The Agent shall use reasonable care in the custody and preservation of any
Pledged Shares in its possession but need not take any steps to preserve
the rights of prior parties.
9 FURTHER ASSURANCES
The Company agrees that it will join with the Agent in executing and at its
own expense, file or record such notices, financing statements or other
documents as may be necessary to perfect the security interest of the
Lenders hereunder and as the Lenders or their counsel may reasonably
request, such instruments to be in form and substance satisfactory to the
Lenders and their counsel, and that it will do such further acts and things
and execute and deliver to the Lenders such additional conveyances,
assignments, agreements and instruments as the Lenders may at any time
reasonably request in connection with the administration and enforcement of
this Pledge Agreement or relative to the Pledged Shares or any part thereof
or in order to assure and confirm unto the Lenders their rights, powers and
remedies hereunder.
7
<PAGE>
10 TERMINATION
This Pledge Agreement and the security interest of the Lenders hereunder
shall terminate when all obligations of the Company to the Lenders under
the Credit Agreement have been fully paid and performed. At that time the
Lenders shall forthwith reassign and deliver to the Company against the
Company's receipt such of the Pledged Shares (if any) as shall not have
been sold or otherwise applied by the Lenders pursuant to the terms hereof
and shall still be held by it hereunder. Any such reassignment shall be
without recourse upon, or warranty by, the Lenders and at the expense of
the Company.
11 NO WAIVER
No failure on the part of the Lenders to exercise, and no delay on its part
in exercising, any right, power of remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or the further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.
12 GOVERNING LAW: AMENDMENTS
This Pledge Agreement has been executed and delivered in the State of
California and shall be construed in accordance with and governed by the
laws of said State, including the California Uniform Commercial Code. This
Pledge Agreement may not be amended or modified nor may any of the Pledged
Shares be released or the security interest granted hereby extended, except
in writing signed by the parties hereto.
13 SEVERABILITY
Any provision of this Pledge Agreement prohibited by the laws of any
jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition, or modified to conform with such laws, without
invalidating the remaining provisions of this Pledge Agreement, and any
such prohibition in any jurisdiction shall not invalidate such provision in
any other jurisdiction; any impairment or invalidity of this Pledge
Agreement under the laws of any jurisdiction as security for any portion of
the obligation of the Company to the Lenders hereunder shall not impair or
invalidate this Pledge Agreement as security for any other portion thereof.
8
<PAGE>
14 BINDING AGREEMENT; NOTICES
This Pledge Agreement, and the terms, covenants and conditions hereof,
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Company shall not
be permitted to assign this Pledge Agreement or any interest herein or in
the Pledged Shares, or any part thereof, or otherwise pledge, encumber or
grant any option with respect to the Pledged Shares, or any part thereof,
or any cash or property held by the Agent as collateral under this Pledge
Agreement. No notice to or demand on the Company shall entitle the Company
to any other or further notice or demand in the same, similar or otherwise
circumstances. Any notice shall be conclusively deemed to have been
received and shall be effective on the day on which delivered if by hand,
telecopier or telex or, if sent by registered mail, upon receipt, addressed
to the Company or the Agent, as provided for on the final (signature) page
of this Pledge Agreement.
15 HEADINGS
Section headings used herein are for convenience only and are not to affect
the construction of or to be taken into consideration in interpreting this
Pledge Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be
executed as of the day and year first above written.
Executed by and on behalf of ) OAKLEY, INC.
OAKLEY, INC ) /s/ LINK NEWCOMB
in the presence of ) -------------------------------------
Link Newcomb, Chief Operating Officer
Address: ) Attested:
10 Holland ) /s/ JANET FRANCIS
Irvine, CA 92618 ) ------------------------------------
USA ) Janet Francis
Attn: Link Newcomb, Esq. )
Executed by and on behalf of ) /s/ RICHARD F. ___________
WELLS FARGO BANK, ) ------------------------------------
NATIONAL ASSOCIATION ) Richard F. ___________, Vice President
in the presence of Jessica Owen )
/s/ JESSICA A. OWEN
Address: ) ------------------------------------
Orange Coast Regional ) Jessica A. Owen, Assistant Secretary
Commercial Banking Official )
2030 Main Street )
Suite 900 )
Irvine, California 92714 )
USA )
Attn: Mr Michael Sullivan )
9
<PAGE>
SCHEDULE A
Certificate No. No. of Shares Company's percentage
Ownership of Oakley UK
15 650 65%
10
<PAGE>
RECIPROCAL EXCLUSIVE DEALING AGREEMENT
Agreement made this 11th day of March 1997 between GENTEX OPTICS,
INC. ("Gentex"), a Delaware corporation, with an office at 324 Main Street,
Simpson, PA 18407, ESSILOR INTERNATIONAL COMPAGNIE GENERALE D'OPTIQUE, S.A.
("Essilor"), a limited liability entity known as a Societe Anonyme, with its
commercial seat at 147 rue de Paris, Charenton, Cedex 94227, France, both on
the one hand, and OAKLEY, INC. ("Oakley"), a Washington corporation with
principal offices at 10 Holland, Irvine, CA 92718, on the other hand.
INTRODUCTION
A. Gentex is an indirect, wholly-owned subsidiary of Essilor.
B. Gentex manufactures "Decentered Lenses" (as hereinafter defined),
has heretofore sold Decentered Lenses to Oakley and desires to be the sole
vendor to Oakley and its "Affiliates" (as hereinafter defined) of all their
requirements for Decentered Lenses.
C. Oakley has heretofore purchased substantially all its Decentered
Lenses from Gentex, and during the "Term" (as hereinafter defined) of this
Agreement (and any extension or renewal thereof, as hereinafter provided),
Oakley desires to purchase and to have its Affiliates purchase all of their
respective Decentered Lens requirements from Gentex, except as otherwise
provided herein.
D. Subject to certain exceptions, Gentex is willing to cease
selling Decentered Lenses to any other "Person" (as hereinafter defined).
E. In order to set forth the terms and conditions under which all
the foregoing will occur, the parties do hereby enter into this Agreement,
intending it to be a binding agreement.
1. DEFINITIONS USED IN THIS AGREEMENT.
(a) "Acknowledgment" means a written acknowledgment by
"Seller" (as hereinafter defined) of a written order for "Product" (as
hereinafter defined) given by "Purchaser" (as hereinafter defined).
(b) "Affiliate" of a "Person" (as hereinafter defined)
means any Person which directly or indirectly controls, is controlled by, or
is under common control with such Person. With respect to Essilor or Gentex,
Christian Dalloz, S.A. (a limited
<PAGE>
liability entity known as a Societe Anonyme), organized under the laws of the
Republic of France, and its direct and indirect subsidiaries (collectively,
"Dalloz"), will not be deemed an Affiliate thereof.
(c) "Contract Year" means the period commencing with the
"Effective Date" hereof (as hereinafter defined) until the first one-year
anniversary thereof, and each of the three immediately following twelve month
periods.
(d) "Decentered Lenses" means *.
(e) "Delivery Notice" means a written notice from Oakley
to Gentex requesting the delivery by a certain date of specific quantities of
specific Products (by color and geometry) included in a previously or
simultaneously given Purchase Order to the extent that Products, quantities
and delivery dates comply with the provisions of Subsection 3(b) such that
Gentex is not entitled to reject any of them pursuant to said Subsection.
(f) "Effective Date" means the date inserted at the
beginning of this Agreement.
(g) "Exclusivity Termination Notice" means a notice to
Oakley pursuant to and complying with Subsection 2(c) hereof.
(h) "Force Majeure" means an occurrence beyond the
reasonable control of a Person, including, without limitation, fire, strike,
directives of any governmental authority, civil or military, war, insurrection,
riot, embargoes, shortages, delays in transportation, or inability to obtain
necessary labor, materials, or
______________
* Material omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
manufacturing facilities.
(i) "Hard Coat" means *.
(j) "Letter of Intent" means the Letter dated August 26,
1996 from Oakley to the parties hereto and others, as amended from time to
time, relating, among other things, to the subject matter of this Agreement.
(k) "Minimum Purchases" means *. In the event of early
Termination of this Agreement during a Contract Year or Renewal Year, the
Minimum Purchases for such Contract Year or Renewal Year, as the case may be,
shall be prorated.
(l) "Period of Exclusivity" means the period commencing
on the Effective Date and ending on the earlier of the end of the Term or the
effective date of the "Exclusive Termination Notice", in all events subject
to earlier termination as provided in this Agreement.
(m) "Person" means any individual, proprietorship,
partnership, corporation or other entity whether or not of limited liability.
(n) "Plano" means non-glass, non-powered lenses and lens
blanks which are or are intended to be made into non-corrective,
non-ophthalmic, non-powered, non-glass lenses.
(o) "Polarized Decentered Lenses" means Decentered Lenses
that have a polarizing function.
(p) "Product" means any type of Decentered Lens and
Shield sold or requested to be sold by Gentex or any Affiliate thereof to
Oakley or to any Affiliate thereof during the Term.
______________
* Material omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
(q) "Purchaser" means Oakley and any Affiliate of Oakley
that purchases Decentered Lenses or Shields from Gentex or any Affiliate of
Gentex.
(r) "Purchase Contract" means the binding agreement
resulting from a Purchase Order for Product and the Acknowledgment thereof,
each complying with this Agreement.
(s) "Purchase Order" means a written order from Purchaser
for Product which order complies with the terms and provisions of this
Agreement, and is given to Gentex or any Affiliate of Gentex but which
Purchase Order shall have no validity unless and until a Delivery Notice is
simultaneously or later provided therefor. Quantities, colors and types of
Product, and delivery dates therefor, contained in the order will only be
considered subject to a Purchase Order to the extent a Delivery Notice for
such quantities, colors, types of Product and delivery dates is provided.
(t) "Renewal Year" means the twelve-month period
immediately following the end of the fourth Contract Year, and each twelve
month period thereafter, commencing on the day following the end of the
fourth Contract Year and each one year anniversary thereof, until this
Agreement is terminated, as hereinafter provided.
(u) "Seller" means Gentex or any Affiliate of Gentex that
sells Product to a Purchaser.
(v) "Shield" means Plano in single or twin lens form
which is used or is designed to be used as a one-piece eye shield.
(w) "Technology" means technology or technical
information in the possession of Gentex or Essilor or their Affiliates not
available from a "Third Person" (as hereinafter defined) which is used
principally in the manufacture of Decentered Lenses, but does not include
Hard Coat, Transition or other coatings, applications or processes (other
than profiling or orienting the Lens) which are undertaken upon or made or
applied to lenses after they have been molded.
(x) "Temporary Basis" means during the periods when
Subsection 4(a) hereof is applicable.
(y) "Term" is defined in Section 21 hereof.
(z) "Third Person" means any Person not an Affiliate of
any party hereto.
(aa) "Transitions-TM- " means a dye or other process
applied to lenses in order to make them photochromic.
<PAGE>
(bb) "Unit" means a pair (two) of Decentered Lenses or a
single Shield.
(cc) "Unit Premium" means *.
2. EXCLUSIVE DEALING IN DECENTERED LENSES. Subject to the
remaining provisions of this Agreement, during the Period of Exclusivity:
(a) Oakley and its Affiliates will purchase from Gentex
(or, on a Temporary Basis, from one or more Affiliates of Gentex, as
designated by Gentex), and Gentex will use commercially reasonable best
efforts to sell and supply to Oakley and its Affiliates, all the requirements
of Oakley and its Affiliates for Decentered Lenses (it being understood that
the requirements of Oakley and its Affiliates for Decentered Lenses is
determined solely by them but that Oakley and its Affiliates will not
purchase Decentered Lenses from anyone besides Gentex and its Affiliates,
except as expressly permitted by other provisions of this Agreement);
(b) Neither Gentex, Essilor nor any Affiliate of either
will sell or otherwise supply any Person with Decentered Lenses, except as
expressly permitted by other provisions of this Agreement;
(c) Notwithstanding Subsection (b) above, Gentex may give
notice to Oakley that neither Oakley nor any Affiliate thereof is required to
pay any Unit Premium in respect of Renewal Years following the effective date
of such notice as such date is stated therein ("Exclusivity Termination
Notice"). No Exclusivity Termination Notice can be given prior to the giving
of a "Termination Notice" (as defined in Section 21 hereof) and such
Exclusivity Termination Notice cannot be effective prior to a date which is
six months prior to the effective date of the Termination Notice. Upon the
effective date of the Exclusivity Termination Notice, the obligations of
Gentex, Essilor and their respective Affiliates under Subsection 2(b), and
the obligation of Oakley and its Affiliates to pay Unit Premiums in respect
of Product ordered by Oakley or its Affiliates after such effective date,
shall terminate. However, such Exclusivity Termination Notice will not affect
Oakley's obligations to make the Minimum Purchases in each Renewal Year
during the Term.
(d) Oakley will not manufacture any Decentered Lenses or
purchase any Decentered Lenses from any Person other than Gentex or its
Affiliates, except as provided in Subsection 2(e) and 4(b) hereof.
(e) Notwithstanding the provisions of this Agreement
(including without limitation Subsection 2(a)) to the contrary, Oakley and
its Affiliates (x) may purchase from a Person other than Gentex or its
Affiliates, and may manufacture on its own behalf, Polarized Decentered
Lenses so long as, at the time it commences such purchase or manufacture of
Polarized Decentered Lenses, Gentex has not offered to
______________
* Material omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
Oakley and its Affiliates the opportunity to purchase from Gentex or its
Affiliates Polarized Decentered Lenses of at least the same quality as, and
at no higher price (excluding promotional pricing) than any Polarized
Decentered Lenses that are then being offered to Oakley or its Affiliates
from Third Persons or at no higher price than Oakley can then manufacture
Polarized Decentered Lenses for, as the case may be, and (y) are under no
obligations to purchase Polarized Decentered Lenses from Gentex or any of its
Affiliates; PROVIDED, HOWEVER, that if Oakley or its Affiliates are already
purchasing from others or manufacturing Polarized Decentered Lenses as
permitted by Clause (x) then the provisions of clause (x) permitting such
purchase and manufacture shall no longer apply on the earliest date on which
all of the following events have occurred: (A) Gentex or its Affiliates have
offered Oakley and its Affiliates the opportunity to purchase from Gentex or
its Affiliates a Polarized Decentered Lens that is of at least the same
quality as and no higher in price (excluding promotional pricing) than any
Polarized Decentered Lenses that are then being purchased by Oakley or its
Affiliates from another Person or that are then being manufactured by Oakley
or any of its Affiliates, and (B) Oakley and its Affiliates are not subject
to any obligation to purchase Polarized Decentered Lenses from another
Person. If, at any time, clause (A) above is satisfied, then Oakley hereby
agrees not to renew, or extend the term of, any agreement that may then be in
effect between Oakley and such other Person or enter into a new agreement
with respect to the purchase of Polarized Decentered Lenses which has the
effect of impeding or preventing Oakley and/or any of its Affiliates from
purchasing Polarized Decentered Lenses exclusively from Gentex and/or its
Affiliates. Any agreement with Third Persons and Oakley for the sale of
Polarized Decentered Lenses to Oakley will be provided to Gentex, subject to
such reasonable confidentiality provisions as may be required by such Third
Person, provided, however, all sections of such Agreement affecting the price
to be charged for such Polarized Decentered Lenses shall be disclosed to
Gentex.
3. CONDITIONS TO OAKLEY OBLIGATION TO PURCHASE FROM GENTEX ONLY.
(a) The obligation of Oakley and its Affiliates to
purchase all of their respective requirements of Decentered Lenses from
Gentex, and from any Affiliate of Gentex on a Temporary Basis (and not from
anyone else), which obligation is set forth elsewhere herein, is conditioned
on Gentex supplying Decentered Lenses to Oakley and its Affiliates (A) of a
quality at least as good as those heretofore supplied by Gentex to Oakley;
(B) Gentex charging Oakley and its Affiliates prices therefor established in
substantial accordance with pricing practices of Gentex in effect over the
prior course of dealing between Gentex and Oakley (except for Unit Premiums);
(C) Gentex supplying such Lenses in the quantities specified in and within
the delivery schedule specified in the Delivery Notice forming part of a
Purchase Order, provided that sufficient lead time is given by Oakley to
Gentex therein, consistent with past practice between Oakley and Gentex and
the orders are pursuant to Delivery Notices and Purchase Orders which Gentex
is not entitled to reject pursuant to Subsection 3(b). Gentex is required to
give an Acknowledgment with respect to any portion of a
<PAGE>
Purchase Order covered by a Delivery Notice meeting the provisions(including
its provisos) of this Clause (C) within 10 days after receipt of such
Delivery Notice.
(b) As a condition to the obligations of Gentex in
Subsection 3(a) hereof:
(i) Within 10 business days following the
Effective Date, Oakley will supply to Gentex an estimate of its monthly
requirements for Decentered Lenses and Shields by geometry and color for the
period March 1, through December 31, 1997 ("Initial Estimate"). Prior to
October 15, 1997, and prior to each October 15th thereafter during the Term,
Oakley will provide Gentex with an estimate of such monthly requirements for
the ensuing calendar year (together with the Initial Estimate, "Annual
Estimates"). The Annual Estimates will be for informational purposes only.
(ii) Within 10 business days following the Effective
Date, Oakley will supply to Gentex an estimate of its monthly requirements by
geometry and color for Decentered Lenses and Shields for the three month
period commencing April 1 and ending June 30, 1997 ( "Initial Three Month
Forecast"). No later than the 15th day of each month ("Forecast Date") during
the Term, commencing April 15, 1997, Oakley will provide Gentex with a
forecast of its monthly requirements by geometry and color for Decentered
Lenses and Shields during the ensuing 3 month period, commencing with the
first day of the month next succeeding each Forecast Date ("Rolling Three
Month Forecast"); provided, however, that the requirements for each month, in
the aggregate for such month, both as to total Unit requirements and as to
aggregate Units by color may not vary by more than the Capacity Variance or
the Color Variance, as the case may be, from the requirements, if any, for
that month set forth in the immediately preceding Rolling Three Month
Forecast. Initial requirements for a month not appearing in the immediately
preceding Rolling Three Month Forecast may be set by Oakley within the
reasonable expectations of the parties.
"Capacity Variance" shall mean a variance of up to plus or minus 10%
from the total Unit requirements for each month, in the aggregate
for such month, as set forth in the most recent Rolling Three Month
Forecast unless a New Product (as hereinafter defined) is included
within such total Unit requirements in which event the permissible
variance shall be increased from plus or minus 10% to plus or minus
the sum of 10% plus the percentage derived by multiplying 10% by a
fraction, the numerator of which are the number of Units of New
Product contained in such monthly requirements and the denominator
of which is the total Unit requirements for such month set forth
therein.
"Color Variance" shall mean a variance of up to plus or minus 50%
from the requirements for Units of a particular color (in the
aggregate) forming a part of the monthly requirements as set forth
on the most recent Rolling Three Month Forecast.
<PAGE>
"New Product" shall mean any Product for which Gentex has assigned,
within six months of the date of the submission of the applicable
Rolling Three Month Forecast, a new part number by virtue of a
change in geometry and/or color and/or coatings.
(iii) Any purported delivery notice, which together
with other Delivery Notices previously accepted, in the aggregate fails to meet
all of the following criteria with respect to a particular month may be
rejected by Gentex and Gentex need not provide an Acknowledgement:
(A) The aggregate total Unit requirements for
such month does not exceed the total Unit requirements for such month as set
forth in the most recent Rolling Three Month Forecast plus 10%.
(B) The aggregate Units of a particular color
for such month does not exceed the lesser of (i) the aggregate requirements
for such color in such month as set forth in the most recent Rolling Three
Month Forecast plus 10% of such requirements, and (ii) 200% of the lowest
requirement for such color for such month set forth in any Rolling Three
Month Forecast.
(C) The purported delivery notice does not
contain an order for a color not previously manufactured for Oakley by Gentex
with a delivery date (i) less than 12 weeks from the earliest of the date of
such purported delivery notice or a Rolling Three Month Forecast or a
Purchase Order which contains such new color, or (ii) less than 12 weeks from
the date upon which such new color mix has been approved in writing by Oakley.
(D) The purported delivery notice only
includes months included in the most recent Rolling Three Month Forecast.
(E) Sufficient lead time, consistent with
past practice between Oakley and Gentex, is given between the date of such
purported delivery notice and the requested delivery date.
(F) If New Product is contained in the
purported delivery notice, sufficient lead time for delivery is provided to
enable Gentex to fabricate any new tooling required for such New Product.
Any purported delivery notice which does
not meet all of the criteria set forth above in this Subsection 3(b) will not
result in a breach of this Agreement, but to the extent any of the foregoing
criteria are not met deliveries may be subject to reasonable delays
consistent with Gentex's other planned production runs and capacity and, if
the Color Variance criteria is not met, also will be subject to
<PAGE>
delays caused in obtaining additional color resin.
(iv) If Oakley fails to submit a Delivery Notice for
or otherwise order or if Oakley wrongfully refuses to take delivery of the
requirements (less the permitted Capacity Variance) for any month as set
forth in the Initial Three Month Forecast or in the most recent Rolling Three
Month Forecast, as the case may be, then Gentex may charge Oakley reasonable
costs associated with the purchase and storage of excess materials or Product
resulting from Oakley's failure to purchase its monthly requirements for that
month. An example of how the Rolling Three Month Forecasts are intended to
work is set forth as Schedule 3(b) hereto.
(c) Seller will use commercially reasonable best efforts
to provide Products in the quantities and by the dates specified in any
Purchase Order for which it has given an Acknowledgment or for which it is
required pursuant to Subsection 3(a) hereof to give an Acknowledgment, but
its failure to do so will not be grounds for rejection of Products (except
as expressly otherwise provided herein) or constitute a breach of this
Agreement or of any Purchase Order, if such commercially reasonable best
efforts have been made. Notwithstanding the use by Seller of its commercially
reasonable best efforts, its continued failure to comply with the provisions
of Subsection 3(a) may allow Oakley to terminate this Agreement as set forth
in Section 4(b) hereof.
(d) Prices quoted and provided for in any Purchase
Contract, or in respect of Products ordered prior to the Effective Date and
delivered subsequent to the Effective Date, will initially be as provided in
the attached price list set forth on Schedule 3(d) hereto. Prices (including
for Hard Coat that has been improved) shall be adjusted from time to time
based upon changes in labor and material costs and any other relevant
factors. In addition, any reasonable cost increases (to the extent such cost
increases exceed Gentex's cost of purchasing Hard Coat or another hard
coating using the same or a substantially similar process) incurred by Gentex
in reformatting at the request of Oakley its production of Decentered Lenses
or Shields to produce Product without Hard Coat (or another hard coating
using the same or substantially similar process) may be invoiced to Oakley as
a one-time charge or paid for by increasing the price of such Products to
Oakley to reflect such cost increases. Labor and material cost changes will
be derived from the Relevant Indexes. In the event there is a disagreement
between the parties as to any proposed price increase by Gentex the proposed
price shall take effect immediately pending a final resolution of the
disputed price pursuant to Section 22. If such determination results in a
lower price Gentex shall forthwith refund the difference thus far paid by
Oakley with interest at the prime rate or "Base Rate" then charged by
Citibank, N.A. Any changes in any of the foregoing prices will not be put
into effect until at least thirty (30) days after notice thereof is given to
Oakley. "Relevant Index" for material costs shall be the U.S. price sheet
for truckload list prices of clear general purpose injection molding grade
polycarbonate and/or such other indices published by the U.S. Bureau of Labor
<PAGE>
Statistics (Department of Commerce) as the parties may agree upon. The
Relevant Index for Labor costs shall be the index or indices published by the
U.S. Bureau of Labor Statistics as the parties may agree upon. In the event
the parties fail to agree upon all Relevant Indexes to be used throughout the
Term within 30 days from the Effective Date the matter will be submitted to
mediation/arbitration pursuant to Section 22 hereof for resolution.
4. PURCHASES FROM AFFILIATES AND THIRD PERSONS.
(a) If, for any reason, Gentex is, from time to time,
unable to satisfy the provisions of Subsection 3(a), despite commercially
reasonable best efforts to do so, then Gentex will promptly notify Oakley and
may designate one or more Affiliates of Gentex to supply Products to Oakley
and its Affiliates, but only for so long as Gentex is unable to supply Oakley
and its Affiliates therewith in accordance with Section 3 hereof.
(b) If Gentex and Gentex's Affiliates are unable to
satisfy Subsection 3(a) with respect to any Product, for a period of not less
than 60 days ("Grace Period"), then Oakley may thereafter notify Gentex to
that effect. Such notice will specify in what respects Gentex continues to
fail to satisfy Subsection 3(a) hereof at the end of the Grace Period,
including identifying the provision or provisions thereof which have not been
complied with by Gentex, and the facts on which Oakley has based such
determination. The parties will discuss in good faith Oakley's contentions
and concerns. Gentex will have the period specified in such notice from
Oakley ("Cure Period") (but not less than 180 days as same may be extended in
writing on the basis of the discussions between the parties) within which to
again comply with the provisions of Subsection 3(a) cited by Oakley. If
Gentex (or its Affiliates) are still unable to comply with Section 3(a) at
the expiration of the Cure Period, Oakley by notice to Gentex may terminate
this Agreement at any time thereafter, and, subject to the provisions of
Subsection 15(b), pursue all other remedies available at law or in equity so
long as Gentex (or its Affiliates) at the time of such termination are still
unable to comply with Section 3(a), provided, however, in no event will
damages be payable by Gentex to Oakley as a result of such termination and
failure to satisfy Subsection 3(a) if Gentex has used its commercially
reasonable best efforts.
(c) From the commencement of the Cure Period with respect
to a particular type of Product, through the expiration of the thirtieth (30)
day after the date on which Gentex is able to satisfy Subsection 3(a) with
respect to such Product, Oakley and its Affiliates may purchase such Product
type from any Person other than Gentex and its Affiliates or may manufacture
its own Product of that type for its own use. The number of Units purchased
by Oakley and/or its Affiliates from others or manufactured by Oakley and/or
its Affiliates pursuant to this Subsection, will be deducted from the Minimum
Purchases required during the Contract Year and/or Renewal Year in which such
Products were so manufactured or so purchased from others.
<PAGE>
(d) If there is a Cure Period in effect, then the
Purchaser may give notice to the Seller that the Purchaser desires to cancel
any Purchase Contract (and the Delivery Notice forming a part thereof) with
respect to any Product in respect of which a Cure Period is in effect. Such
notice shall specify each individual Purchase Contract (and the Delivery
Notice forming a part thereof). So long as the Seller is in breach of any
such Purchase Contract or the Cure Period was properly commenced, then
Oakley may terminate such Purchase Contract without paying any cancellation
charges.
5. PREMIUMS.
(a) In addition to the basic price charged for
Decentered Lenses and Shields by Gentex from time to time during the Term,
during the Period of Exclusivity Oakley will pay Gentex the Unit Premium for
each Unit that is shipped on or after the Effective Date hereof and for which
a Delivery Notice has been given prior to the end of the Period of
Exclusivity. The aggregate amount of unit premiums paid by Oakley and its
Affiliates prior to the date hereof under the Letter of Intent represents an
additional one time payment for the exclusivity granted hereby and is not to
be credited against Unit Premiums or Minimum Purchases hereunder.
(b) Unit Premiums will be payable with respect to each
Unit in accordance with the terms of each invoice relating thereto given by
Gentex or, as permitted hereby, by any Affiliate thereof.
6. MINIMUM PURCHASES.
(a) In each Contract Year and in each Renewal Year, during
the Term purchases by Oakley and its Affiliates, from Gentex and its Affiliates,
of Decentered Lenses and Shields shall, in the aggregate, at least equal the
Minimum Purchases for that Contract Year or Renewal Year (as the case may be).
(b) If, at the expiration of any Contract year the actual
purchase by Oakley and its Affiliates exceed the Minimum Purchases for such
year, then such excess will be applied to reduce the Minimum Purchases
required in the Immediately subsequent Contract Year. If at the expiration
of the fourth Contract Year, the actual purchases by Oakley and its
Affiliates exceed the Minimum Purchases for such year, then such excess will
be applied to reduce the Minimum Purchases required in the first Renewal
Year. If at the expiration of the first Renewal Year, and each succeeding
Renewal Year, the actual purchase by Oakley and its Affiliates exceed the
Minimum Purchase for such Year, then such excess will be applied to reduce
the Minimum Purchases required in the subsequent Renewal Year.
(c) If Oakley and its Affiliates fail to make at least 75%
of the Minimum Purchases in any Contract Year or any Renewal Year or fail to
pay the invoice
<PAGE>
amount within 30 days after receipt of such invoice from Gentex specifying
the amount due by reason of failure to make Minimum Purchases (which amount
shall equal the deficiency between actual purchases and Minimum Purchases
adjusted as provided by Subsection 6(b) for such Contract Year or Renewal
Year, as the case may be, multiplied by the Unit Premium thereon), then
Gentex may, upon at least 10 days prior notice to Oakley, terminate the
Period of Exclusivity granted to Oakley and its Affiliates in Subsection 2(b)
hereof or terminate this Agreement, or both. The foregoing shall not be
construed as limiting the obligations of Oakley and its Affiliates under
Subsection 2(a) hereof during any Contract Year or Renewal Year or as
limiting the rights which Gentex may have at law or in equity for Oakley's
failure to make and/or pay for Minimum Purchases, provided, that, so long as
Oakley complies with the provisions of this Subsection 6(c) its failure to
make Minimum Purchases, in and of itself, will not entitle Gentex to
terminate this Agreement or the Period of Exclusivity. The foregoing shall
not preclude Gentex from terminating this Agreement if Oakley is otherwise in
breach of provisions of this Agreement entitling Gentex to so terminate.
7. LIMITATIONS ON DISCLOSURE TO DALLOZ.
(a) While the Period of Exclusivity is in effect, neither
Gentex nor Essilor will, and each will cause its Affiliates not to, provide
Dalloz with any Technology without first obtaining the agreement of Dalloz,
in form and substance reasonably satisfactory to Oakley (i) not to use such
Technology for the manufacture of Decentered Lenses; and (ii) not to provide
others with such Technology for the manufacture thereof, which agreement
shall explicitly acknowledge Oakley as a third party beneficiary of such
provision ("Dalloz Agreement"). If and when executed, Gentex will, prior to
providing Dalloz with any Technology, provide Oakley with a copy of the
Dalloz Agreement and with a general description of the type of Technology to
be provided Dalloz and its intended use.
(b) If Gentex, Essilor or any of their Affiliates
provides Technology to Dalloz without obtaining the Dalloz Agreement and
without first providing a copy to Oakley, then Oakley may terminate this
Agreement by 30 day's notice to such effect to Gentex (except as to Purchase
Contracts in effect prior to the expiration of such 30-day period).
(c) If Gentex or Essilor obtains the Dalloz Agreement and
if Dalloz is in material breach of the Dalloz Agreement then, upon
expiration of the grace period provided for in Subsection (d) below, and if,
despite the commercially reasonable best efforts of Oakley, Dalloz cannot be
enjoined from continuing such breach, Oakley may terminate this Agreement by
30 day's notice to such effect to Gentex (except as to Purchase Contracts in
effect prior to the expiration of such 30-day period).
<PAGE>
(d) Dalloz will have a 30-day grace period following
notice by Oakley of material breach of Dalloz Agreement within which to cease
manufacturing in breach of the Dalloz Agreement and an additional 90 days
thereafter to cure any other material breaches of the Dalloz Agreement which
may exist.
8. HARD COAT
(a) Upon execution of this Agreement and while the Period
of Exclusivity is in effect, Oakley will have the exclusive right to
purchase from Gentex, Essilor and/or their respective Affiliates Decentered
Lenses with Hard Coat * applied at no additional cost therefor, provided that
any Products that are not ordered with Hard Coat (or another hard coating
using the same or a substantially similar process) may be subject to an
additional charge as set forth in Subsection 3(d). Oakley and its affiliates
will have the non-exclusive right to purchase from Gentex, Essilor or their
respective affiliates, Hard Coat for other Plano applications, provided that
Gentex or Essilor on the one hand and Oakley on the other, reach an agreement
on prices therefor. Gentex and Essilor on the one hand and Oakley on the
other, will engage in good faith negotiations in order to reach such an
agreement. If, at any time during the Term, Gentex, Essilor or any of their
respective Affiliates develop a new hard coating suitable for application to
Decentered Lenses ("New Hard Coat") and Gentex, Essilor or any of their
respective Affiliates is prepared to sell same to any Third Person for use on
any Decentered Lens product of any Third Person, then Gentex or Essilor will
give notice to that affect to Oakley. Oakley will then have the
non-exclusive right to purchase Decentered Lenses and Shields with New Hard
Coat, during the Term hereof; provided that the parties hereto agree to the
terms and conditions of such purchases and sales. The parties will negotiate
in good faith with respect to such an agreement. In connection with such
good faith negotiations it is agreed that from any purchase price agreed upon
for New Hard Coat and its application to Decentered Lenses and Shields, the
Purchaser will receive a 15 U.S. cent per Unit discount. In no event,
however, during the Period of Exclusivity will Gentex, Essilor or any
Affiliate thereof apply any New Hard Coat to any Decentered Lenses produced
by Gentex, Essilor or their respective Affiliates other than for sale to
Oakley. However, Gentex, Essilor, or any Affiliate of either, may sell New
Hard Coat to Third Parties for any and all purposes, including, without
limitation, for Decentered Lenses; provided that such Decentered Lenses are
not made by Gentex, Essilor or any Affiliate of either. Oakley will have the
non-exclusive right during the Period of Exclusivity to purchase Shields from
Gentex, Essilor, or their Affiliates with Hard Coat applied and there shall
be no additional cost therefor.
(b) Except as permitted by other provisions of this
Agreement, neither Gentex, Essilor nor any Affiliate of either will supply
Hard Coat to any Person for use on Decentered Lenses and, if it determines
that any Person is using such Hard Coat on Decentered Lenses, then Gentex,
Essilor, or their Affiliates will cease selling Hard Coat to such Person.
______________
* Material omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
(c) Neither Oakley, nor any Affiliate thereof, will
analyze or reverse engineer any Hard Coat or New Hard Coat to learn its
composition (other than for the sole purpose of determining its compatibility
with Oakley's coatings or processes) or how to make it or manufacture it,
nor will any Person directly or indirectly be employed by or retained by
Oakley or any Affiliate thereof for such purpose. This obligation will
continue after the expiration or termination of the Term.
9. PRODUCT SPECIFICATIONS.
(a) Seller will manufacture each Product in accordance with
the applicable Product Specifications therefor annexed hereto as Schedule 9
("Product Specification Schedule") and all applicable federal, state and local
laws and regulations. The parties will negotiate in good faith any
modifications to the specifications or procedures set forth in any Product
Specification Schedule, if either party advises the other that such
modification of such specification is desirable to improve the efficiency or
quality of the Product or the production of that Product or to lower the cost
of production thereof, or to take into account any changes in processes,
equipment or the Product itself, or the availability of material or changes in
technology.
(b) The Parties will negotiate in good faith a Product
Specification Schedule for any additional Product that Seller manufactures
for Purchaser pursuant to this Agreement.
10. INSPECTIONS, REJECTIONS, RETURNS. The parties' obligations
with respect to inspections, rejections and returns of a Product will be as
specified in the relevant Product Specification Schedule, attached hereto or
hereafter agreed upon, provided that:
(a) Inspection, if any, by Purchaser of Products shall be
conducted within 30 days after their receipt;
(b) All claims for replacement or credit will be made
within 10 days after the later of the date the Purchaser inspects or should
have inspected same pursuant to the terms of this Agreement and in any event,
no Product will be returned for replacement or credit once Purchaser has
commenced any processing thereof or once Purchaser has commenced its
incorporation thereof into Purchaser's product or altered the Product.
(c) If the Purchaser receives a Product by common
carrier, then, prior to accepting same from the carrier, the Purchaser will
inspect the exterior of the shipment to determine whether there may have
been any in-transit damage and, if such possibility exists, it will notify
the Seller and the carrier and Purchaser will take such action as is
reasonably necessary to preserve its rights against the carrier and will
<PAGE>
seek redress from such carrier, if such damage in fact occurred.
(d) If Purchaser rejects any Product for failure to
comply with the relevant Product Specification Schedule, then Seller may
require the return of the Product F.O.B. its factory, and, after such return
will within thirty (30) days after receipt from Oakley inspect the Product to
determine whether Purchaser's rejection is justified hereunder.
11. DISCLAIMER OF IMPLIED WARRANTY.
SELLER DISCLAIMS ANY IMPLIED WARRANTY WITH RESPECT TO ANY
PRODUCT, INCLUDING, WITHOUT LIMITATION, WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
12. INDEMNIFICATION.
(a) Each of Essilor and Gentex does hereby indemnify and
hold harmless Oakley and its Affiliates, and each of their respective
officers, directors, employees, representatives and agents, from and against
any and all losses, claims, liabilities, costs, expenses (including, without
limitation, investigative and legal fees and disbursements, both those
incurred in connection with the defense of an indemnifiable claim and those
incurred in connection with the enforcement of this provision) and damages
("Claims and Liabilities") arising out of, or based upon, any infringement or
alleged infringement of Third Person intellectual property rights by any
Decentered Lens or Shield sold to Oakley or to any Oakley Affiliate by
Gentex, Essilor or any Affiliate of either, but only to the extent such
infringement results or is alleged to result from the process technology used
in the design, manufacture or assembly thereof by Gentex or such Affiliate
or the Product resulting therefrom. Notwithstanding the foregoing, there
will be no such indemnification or hold harmless hereunder, for any other
reason or (i) to the extent any such Claims and Liabilities for infringement
or alleged infringement result or are alleged to result from technology,
specifications, know-how, techniques or processes for the Product or for its
processing, manufacture or assembly provided to Gentex or any Affiliate
thereof by Oakley or by any Affiliate thereof or the Product resulting
therefrom; (ii) to the extent Oakley, any Affiliate of Oakley or any Third
Person modifies or alters such Product to cause such infringement or alleged
infringement; (iii) for Claims and Liabilities based upon the incorporation
by Oakley or any Affiliate thereof of such Product in any other product, or
such Product's joinder with or use in conjunction with any other product; or
(iv) Claims and Liabilities based upon infringement or alleged infringement
of a Third Person's design patent or trade dress rights applicable to the
cosmetic aspects of such Product, to the extent such infringement is based
upon technology, specifications, know-how, techniques or processes provided
by Oakley or by any Affiliate thereof.
(b) If there is any Claim for which Oakley indemnifies
Gentex,
<PAGE>
Essilor and their respective Affiliates pursuant to Subsection 12(c) hereof,
made by a Third Person that any Decentered Lenses or Shields sold by Gentex
or any Affiliate thereof, infringes upon such Third Person's intellectual
property rights, which Claim intellectual property counsel for Gentex or any
such Affiliate (as the case may be) opines is or appears to be valid, or if,
in any proceeding, there is a finding of infringement of a Third Person's
intellectual property right by any Decentered Lenses or Shields sold by
Gentex or any Affiliate thereof, then Gentex and its Affiliates, on 15 day's
notice to such effect given to Oakley and to any relevant Affiliate thereof,
may cease the sale and delivery of such Product to Oakley and to any of its
Affiliates, including, without limitation, as to all Purchase Orders and
Purchase Contracts for such Product that remain unfilled at the expiration of
such notice period until such time as such Claim is dismissed or adjudicated
in favor of Oakley and/or Gentex. Neither Essilor, Gentex nor any other
Affiliate thereof shall have any liability hereunder or under any Purchase
Contract for failure to deliver such Product after the expiration of such
notice period and until such dismissal or favorable adjudication. This
Agreement shall continue in effect for other Products, if any, not subject to
such Claim. The Minimum Purchase requirements shall not be adjusted, or
otherwise abated as a result of the operation of this Subsection.
Notwithstanding the provisions of this Subsection, if (i) Oakley offers to
indemnify and hold harmless Essilor, Gentex and any Affiliate of either, from
and against any such Claims and Liabilities in form and substance reasonably
satisfactory to the indemnitees, and (ii) the amount of such Claims and
Liabilities in the reasonable judgment of the indemnitees are not likely to
exceed 50% of the then tangible net worth of Oakley, upon receipt of such
indemnification Gentex will continue to manufacture such Product and sell and
deliver it to Oakley hereunder.
(c) Oakley will indemnify and hold harmless Gentex,
Essilor and their respective Affiliates, and each of their respective
officers, directors, employees, representatives and agents from and against
any and all Claims and Liabilities, arising out of or based upon, any
infringement or alleged infringement of any Third Person's intellectual
property rights by any Product to the extent any such Claims and Liabilities
result from or are alleged to result (i) from technology, specifications,
know-how, techniques or processes provided to Gentex, Essilor or any
Affiliate thereof by Oakley or by any Affiliate thereof; (ii) from any
modifications or alterations by Oakley or its Affiliates of such Product;
(iii) from the incorporation by Oakley or any Affiliate thereof of such
Product in any other product or its joinder with or use in conjunction with
any other product; or (iv) from any infringement or alleged infringement of a
Third Person's design patent or trade dress rights applicable to the cosmetic
aspects of any such Product, to the extent such infringement is based upon
technology, techniques, know-how, specifications, or processes provided by
Oakley or any of its Affiliates.
(d) Claims by Oakley and/or any Affiliate thereof
("Oakley Claims") and Claims by Gentex, Essilor or any Affiliates thereof
("Gentex Claims") collectively are referred to in the following Subsections
of this Section as "Claims" and any proceeding commenced by any Third Person
against a party hereto, in respect of
<PAGE>
which such party hereto believes it is entitled to indemnification hereunder,
is referred to in such Subsections as a "Covered Action".
(e) Upon learning of the commencement of a Covered Action
or upon the actual receipt by the party claiming a right of indemnification
(the "Indemnified Party") of a writing claiming the purported existence of
facts or circumstances and threatening the commencement of a Covered Action
or other incurrence of any Claims and Liabilities, the Indemnified Party will
promptly, but no later than fifteen (15) days (i) after learning of such
commencement; or (ii) after such receipt, give notice thereof to each party
having the indemnification obligation ("Indemnifying Party") and, with
reasonable specificity, of the facts and circumstance then known to the
Indemnified Party with respect to such Covered Action, Claims and Liabilities
PROVIDED, HOWEVER, failure to give such timely notice will not release the
Indemnifying Party of its obligations hereunder, except, and only to the
extent that, the Indemnifying Party suffers actual prejudice as a proximate
result of such failure.
(f) The Indemnifying Party will have the right to assume
the defense of any such Covered Action by giving written notice (the
"Assumption Notice") to the Indemnified Party, within 20 days after notice is
given to the Indemnifying Party pursuant to Subsection (e) above, which
Assumption Notice will state that (i) the Indemnifying Party agrees that
Indemnified Party is entitled to indemnification hereunder and that any
resulting Claim is an Oakley Claim or a Gentex Claim, as the case may be, for
which the Indemnifying Party is liable; and (ii) the Indemnifying Party
agrees to assume the defense thereof, in the name and on behalf of the
Indemnified Party, with counsel reasonably satisfactory to the Indemnified
Party and, in either event, at the sole cost and expense of the Indemnifying
Party. Such costs and expenses of the foregoing counsel (including, without
limitation fees and disbursements), if not paid by the Indemnifying Party,
but instead paid by the Indemnified Party, will be Claims. The Indemnified
Party, notwithstanding the timely delivery of an Assumption Notice, may
participate in such Covered Action through counsel separately selected and
paid for by the Indemnified Party. If no Assumption Notice is timely given,
or if, despite the timely giving of the Assumption Notice, the defendants in
any Covered Action include both the Indemnified Party and the Indemnifying
Party, and if the Indemnified Party has reasonably concluded that there may
be legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, or if there is a conflict of
interest which would prevent counsel for the Indemnifying Party from also
representing the Indemnified Party, then the Indemnified Party will have the
right to select one separate counsel to conduct the defense of such action on
its behalf, and all such costs and expenses will be paid by the Indemnifying
Party and, if paid by the Indemnified Party, will be Claims and Liabilities.
Prior to the assumption of the defense of a Covered Action by an Indemnifying
Party, the Indemnified Party may take such reasonable actions with respect to
a Covered Action as it may deem appropriate to protect against further damage
or default, including, without limitation, obtaining an extension of time to
answer the complaint or other pleading or filing an answer thereto,
<PAGE>
provided that no such action prejudices the Indemnifying Party's ability to
defend the Covered Action.
(g) In no event will (i) Oakley or any Oakley Affiliate
consent to the entry of any judgment or enter into any settlement of any
Claim and Liability under this Section 12 affecting the rights or obligations
of Gentex, Essilor or their respective Affiliates without the written consent
of Gentex, Essilor or such Affiliate (as appropriate),which consent will not
be unreasonably withheld or delayed; (ii) Gentex, Essilor or any Affiliate
thereof consent to the entry of any judgment or enter into any settlement of
any Claim and Liability under this Section 12 affecting the rights or
obligations of Oakley or its Affiliates without the written consent of
Oakley, which will not be unreasonably withheld or delayed.
(h) This Section will survive the termination or
expiration of this Agreement.
13. ADDITIONAL TERMS AND CONDITIONS TO THE SALE OF ANY PRODUCTS.
(a) Each Product sold by Seller to Purchaser will be
sold pursuant to a Purchase Order from Purchaser and an Acknowledgment
thereof by Seller, each of which is consistent with and complies with the
terms and conditions of this Agreement. Such Purchase Order and
Acknowledgment will constitute a separate, binding Purchase Contract with
respect to each Delivery Notice forming a part of such Purchase Order.
Seller will within 10 days after receipt of a Delivery Notice give an
Acknowledgment of any portion of a Purchase Order covered by such Delivery
Notice which complies with Subsections 3(a) and (b) of this Agreement.
(b) If either the Purchaser or the Seller employs a
printed form of Purchase Order or printed form of Acknowledgment, or other
documents utilized in connection with shipping or invoicing, the printed
terms and conditions thereof will not apply to the sale of any Product
ordered during the Term to the extent that any such term or condition is in
conflict with or deals with the same subject matter as a provision of this
Agreement and any changes in such printed terms and conditions made by either
party after February 28, 1997 shall be null and void as it applies to the
other party.
(c) In the absence of an Acknowledgment, shipment of a
Product ordered by a Purchaser Order will be deemed an Acknowledgment
resulting in a Purchase Contract upon the terms (other than the printed terms
except as permitted by Subsection 13(b)) set forth in the Purchase Order, to
the extent such Purchase Order complies with the terms and conditions hereof.
(d) Title will pass and the Purchaser will assume all risk
of loss of Product at the time of delivery, which will be F.O.B. Seller's
factory. Seller will
<PAGE>
arrange for, but Purchaser will pay for, freight and insurance. Unless
otherwise instructed in any Purchase Order (or the Delivery Notice forming a
part thereof) or by subsequent written communication given on a timely basis,
all shipments of Product will be made to Purchaser via ground common carrier
to Purchaser's facility in Irvine or Foothill Ranch, California, as
designated by Purchaser. By reasonable written notice, Purchaser may require
Seller to ship via a more rapid route or carrier than specified in any
Purchase Contract in order to expedite such delivery and any difference in
cost caused by such change will be paid by Purchaser.
(e) In the absence (i) of a breach thereof by the Seller
entitling Purchaser to terminate this Agreement; or (ii) of the commencement
of a Cure Period, any Purchase Contract may be canceled by the Purchaser only
upon payment of reasonable charges based upon expenses already incurred and
commitments made by Seller, which cannot reasonably be allocated to another
Purchase Contract.
(f) Unless otherwise stated, any price quoted or agreed
in any Acknowledgment does not include any applicable United States federal,
state and/or local or foreign taxes and duties and any such taxes and duties
will be the responsibility of the Purchaser. To the extent Seller is aware
that it is obligated by law to collect any tax from Purchaser, it will
separately state such tax on each invoice. Any proper tax exemption
certificate provided by Purchaser to Seller will be accepted by Seller.
(g) A Packing List will accompany each box or package
shipped which will show the order number, the item number and a description
of the Product.
(h) Seller must send to Purchaser the original Seller's
invoice. The carrier will be directed to provide the Purchaser with the Bill
of Lading or comparable shipping document at the time of delivery.
(i) Acceptance of any part of an order of Product (i)
will not bind Purchaser to accept future shipments nor (ii) constitute a
waiver of its right to return Product already accepted which does not meet
the specifications contained in the Product Specification Schedule, but only,
in the case of clause (ii), to the extent elsewhere herein or in the Product
Specification Schedule permitted.
(j) All packing and shipping charges in connection with
non-compliant Product returned by the Purchaser to Seller will be for the
account of Purchaser.
(k) Payment for Product will be net 30 days from the date
of the Seller's Invoice.
(l) If any invoice for Product or any Premium is not
timely paid, then, in addition to any other rights or remedies that Gentex
may have hereunder or at
<PAGE>
law or in equity, Oakley will pay, at the end of each calendar month,
interest thereon at the then prevailing annual base or prime rate of Chase
Manhattan Bank, N.A. (or its successor), plus 2%, until such unpaid amount is
paid. This Subsection will survive the termination of this Agreement.
(m) Seller will issue a credit to Purchaser for any
documented shortage in the Product shipped or for any Product which the
Purchaser is permitted to reject under the terms hereof or the return of
which is authorized in writing by the Seller.
14. TERMINATION.
(a) In addition to Gentex's and Essilor's right to
terminate this Agreement as may be provided in any other Section of this
Agreement, Gentex or Essilor may terminate this Agreement upon a material
breach by Oakley, or any Affiliate of Oakley, of any of Subsections 2(a),
2(d), 5(a), 5(b), 6(c), 8(c), 12(c), 12(g)(i), 13(k), 17 or 25(d), if such
breach has not been cured or waived within 60 days following notice thereof
from Gentex or Essilor to Oakley, which notice will specify, in such
reasonable detail as is then known to Gentex or Essilor (as the case may be),
the facts constituting such breach.
(b) In addition to Oakley's right to terminate this
Agreement as may be provided in any other Section of this Agreement, Oakley
may terminate this Agreement upon a material breach by Gentex, Essilor or by
any Affiliate of either, of any of Subsections 2(a), 2(b), 7(a), 12(a),
12(g)(ii), 17, 20, or 25(d), if such breach has not been cured or waived
within 60 days following notice thereof from Oakley to Gentex or Essilor, as
the case may be, which notice will specify, in such reasonable detail as is
then known to Oakley, the facts constituting such breach.
(c) This Agreement will automatically terminate, if
Oakley becomes subject to a judicially ordered reorganization or liquidation
or to a reorganization or liquidation proceeding initiated at its own request
or, if such proceeding is initiated at the request of a Third Person, then,
if such proceeding is not dismissed within 60 days following the date of its
initiation, or if Oakley files a petition for protection from creditors, for
a moratorium in payment of its obligations or to declare bankruptcy or
insolvency, or otherwise institutes any proceeding for such relief under any
federal or state bankruptcy law, moratorium law or any law of similar import
applicable to it.
(d) This Agreement will automatically terminate if Gentex
becomes subject to a judicially ordered reorganization or liquidation or to a
reorganization or liquidation proceeding initiated at its own request or, if
such proceeding is initiated at the request of another Person, then if such
proceeding is not dismissed within 60 days following the date of its
initiation, or if Gentex files a petition for protection from creditors, for
a moratorium in payment of its obligations or to declare
<PAGE>
bankruptcy or insolvency, or otherwise institutes any proceeding for such
relief under any federal or state bankruptcy law, moratorium law or any law
of similar import applicable to it.
15. CONSEQUENCES OF TERMINATION AND OF OTHER BREACHES OR
DEFAULTS. Whether or not this Agreement has been terminated, except to the
extent otherwise provided herein:
(a) If Oakley, or any Affiliate thereof, commits a
material breach of any provision of this Agreement, or of any Purchase
Contract, which has not been cured (if capable of cure) within the grace
period applicable to such breach, then Gentex and/or Essilor will have the
right to pursue all remedies available at law or in equity except that in no
event will Oakley or any Affiliate thereof be liable for consequential
damages. The parties acknowledge that the limitation as to consequential
damages (which are not available as a result of a breach of this Agreement)
shall not preclude recovery of the actual damage and loss of profits suffered
by the other party directly as a result of the breach in question, but shall
preclude damages and loss of profits suffered indirectly as a result of such
breach.
(b) if Gentex, Essilor or any Affiliate of either
commits a material breach of this Agreement, or of any Purchase Contract,
which has not been cured (if capable of cure) within the grace period
applicable to such breach, then Oakley will have the right to pursue all
remedies available to it at law or in equity except that in no event will
Gentex, Essilor or any Affiliate thereof be liable for consequential damages.
The parties acknowledge that the limitation as to consequential damages
(which are not available as a result of a breach of this Agreement) shall not
preclude recovery of the actual damage and loss of profits suffered by the
other party directly as a result of the breach in question, but shall
preclude damages and loss of profits suffered indirectly as a result of such
breach.
(c) No breach of this Agreement by any party will
constitute a breach of or a default under any other agreement between or
among the parties hereto, (including without limitation any Purchase
Contract), unless such breach or default constitutes a breach or default by
the terms of such other agreement.
(d) No termination of this Agreement will terminate any
Purchase Contract that has a delivery date within sixty days following the
effective date of termination, unless such termination occurs by reason of a
breach of or a default under that Purchase Contract.
16. CONFIDENTIALITY.
(a) Any and all information, correspondence, financial
statements, records, computer software, specifications, technical
information,
<PAGE>
know-how, patent applications, processes and information pertaining to same,
and other documents transmitted or communicated by any of Essilor, Gentex or
any Affiliate of either of them, to Oakley or any of its Affiliates, or by
Oakley or any of its Affiliates to Essilor, Gentex or any Affiliate of either
of them (i) during the negotiations of the Letter of Intent and during the
"Standstill Period" (as therein defined); or (ii) while this Agreement is in
effect, have been received and treated and will be received and treated by
each receiving party as trade secrets and confidential information
("Confidential Information"). The terms and the existence of this Agreement
(including without limitation, any Schedule hereto) and of any Purchase
Order, Acknowledgment or Purchase Contract, and the transactions contemplated
hereby and thereby, will be considered Confidential Information.
(b) Each receiving party will use at least the same means
of protecting Confidential Information it receives as is used by the
receiving party to protect its own trade secrets and confidential
information, and such Confidential Information will not be used by the
receiving party (except in connection with the transactions contemplated by
this Agreement), or disclosed by the receiving party to any Third Person, for
a period of three (3) years following the later of (a) the expiration of this
Agreement; (b) the termination of this Agreement; and (c) the fourth
anniversary of the date hereof, without the prior express written consent of
the party which first disclosed it to the receiving party, except as
otherwise provided below in this Section.
(c) The restrictions on use or disclosure of Confidential
Information contained in this Section will not extend to any item of information
which:
(i) is disclosed pursuant to a mutually-agreed upon
(A) public release; (B) announcement; or (C) other form of publicity,
concerning the transactions contemplated hereby;
(ii) is required by law or by the rules or
regulations of any securities exchange applicable to the disclosing party and
which, despite all reasonable efforts of the disclosing party, is not
afforded confidential status by law or by such securities exchange. To the
extent that any disclosure of Confidential Information is claimed to be
required, by law or by such rules and regulations, the other parties hereto
will be notified promptly and, before the disclosure is required to be made,
the party from whom disclosure is sought, if requested by any other party
hereto, will cooperate with such other party or parties to resist and avoid,
to the extent legally permissible, such disclosure;
(iii) was or becomes generally available to the
public other than as a result of a disclosure by the receiving party or its
agents in violation of this Section;
(iv) is lawfully received by the receiving party or
its agents from a Third Person, if the receiving party or its agent has no
reason to believe that the Third Person is prohibited from disclosing such
information by a legal, contractual or fiduciary obligation; or
(v) the receiving party or its agent can
demonstrate through documentary evidence, to the reasonable satisfaction of
the non-disclosing party, that the information was in its possession or known
by it before its receipt from the disclosing party.
(d) Nothing herein will prohibit the disclosure of
Confidential Information by the parties hereto to their respective agents,
representatives, advisors and to their respective key employees to the extent
reasonably necessary to perform this Agreement or any Purchase Contract or to
analyze any legal disclosure obligations; provided that such Persons are made
aware of this Section hereof and agree to be bound by its terms.
<PAGE>
(e) No party will issue any press release or other public
announcement referring to this Agreement or to any other agreement bearing
even date herewith among some or all of the parties hereto, or to the
transactions contemplated hereby, or to any Purchase Contract, except with
the prior written consent of the other parties thereto. The parties will
mutually determine whether or not to announce this Agreement, and if they
decide to do so, will coordinate the announcement of this Agreement and any
press release relating thereto as to timing, manner and content thereof.
Notwithstanding the foregoing, if either Oakley or Essilor is required to
make a press release or public statement under the securities laws of any
jurisdiction, or under the rules of any securities exchange applicable to
such party, then such party will use its best efforts to notify the other
party of that fact and discuss the contents of such proposed statement or
release with the other party and its counsel as soon as the party intending
to make such announcement determines that such public statement is to be made
or such press release is to be issued, but in any event at least 24 hours
before such public statement is made or such press release is issued, unless
it will have received advice from its outside counsel that such statement
must be made or must be issued in a lesser period of time, in which event it
will be permitted to make such public statement or press release within such
period of time.
(f) The provisions of this Section will survive the
expiration or termination of this Agreement.
17. INSURANCE. During the Term each of Gentex and Oakley will
maintain product liability insurance on behalf of itself and its Affiliates
of the kinds and in the amounts customary in their respective industries,
will provide the other with copies of such insurance documents and, at the
request of the other, will, in good faith, consider modifications to such
insurance, both as to amount and policy terms, as may be requested by the
other. In addition, Gentex will cause the carrier or carriers of its product
liability insurance to name Oakley as an insured on such policy or policies
as its interest may appear, and Oakley will cause the carrier or carriers of
its product liability insurance to name Gentex and Essilor on such policy or
policies, as its interest may appear.
18. NO BROKERS. Each of Essilor, and Gentex, on the one hand,
and Oakley, on the other hand, hereby represents and warrants to the other
that there are no broker or finder fees, commissions or other compensation
payable in connection with the transactions contemplated hereby arising out
of the actions of the party making such representation and warranty, or out
of the actions of any Affiliate thereof, and each will indemnify, defend and
hold the other harmless from and against any and all Claims and Liabilities
arising by reason of such representation being a misrepresentation or there
being a breach of such warranty. The provisions of this Section will survive
the consummation of the transactions contemplated hereby or earlier
termination of this Agreement.
<PAGE>
19. EFFECT OF FORCE MAJEURE. No party hereto will be liable
for any loss, damage or delay resulting from Force Majeure. However, any
party that believes that there will be a loss, damage or delay by reason of
Force Majeure will promptly notify the other party hereto or to the Purchase
Contract, whereupon the parties will discuss means for minimizing such loss,
damage or delay. The foregoing is not intended to preclude either party's
right to terminate this Agreement for non-performance arising out of Force
Majeure, to the extent such non-performance permits termination.
20. EFFECT OF DECLARATIONS.
(a) Gentex hereby acknowledges that the receipt by Oakley
of the Declarations attached as Appendix "A" to the Letter of Intent (and an
original of each of which is attached hereto,) served as an inducement to
Oakley's execution of this Agreement. Gentex and Essilor each hereby agrees
that, if (x) any statement in either Declaration is untrue in any material
respect, or (y) Gentex, Essilor or any of their Affiliates alleges that any
statement in either Declaration is untrue in any material respect, then
Oakley may terminate this Agreement and may pursue any other remedies
available at law or in equity; provided, however, in no event will Essilor,
Gentex or any Affiliate of either be liable for any consequential damages.
Notwithstanding the foregoing or anything herein or elsewhere contained, in
no event will Gentex, Essilor or any Affiliate of either have any liability
to Oakley nor will Oakley have the right to terminate this Agreement or to
pursue any other remedies at law or in equity, if the statement complained of
in either Declaration as untrue or which is subsequently determined to be
untrue:
(i) is contained in paragraph 1 of either
Declaration, or
(ii) is made in either Declaration on the belief or
to the knowledge of the declarant unless the declarant actually knows the
statement to be untrue in a material respect when made.
(b) Oakley acknowledges that none of Essilor, Gentex or
any Affiliate of either, or L. Peter Frieder or John K. Davis has made any
independent investigation or inquiry to ascertain or verify the correctness
of their statements described in clause (ii) above other than that L. Peter
Frieder and John K. Davis made inquiry of selected Gentex personnel.
(c) If Oakley wishes to disclose any technology or ideas
to Gentex that Gentex has not already disclosed to Oakley or implemented, and
if Gentex is willing to accept that disclosure under a mutually acceptable
confidential, non-disclosure agreement, then Gentex will provide, at Oakley's
cost and expense, technical assistance in implementing such technology or
ideas, but Oakley will own the technology or ideas, including any related
patent and patent applications.
<PAGE>
21. TERM. The Term will commence on the Effective Date and
will continue through the end of the fourth Contract Year and will be
automatically renewed thereafter from Renewal Year to Renewal Year, unless
either Oakley on the one hand or Gentex on the other, gives notice to the
other parties hereto that it desires to terminate this Agreement
("Termination Notice"). Except as otherwise expressly set forth herein with
respect to breach or nonperformance of certain provisions hereof, the
effective date of such Termination Notice must be at the end of a Contract
Year or Renewal Year, at least 24 months following the date of such notice
and no earlier than the end of the fourth Contract year.
22. DISPUTE RESOLUTION.
(a) DEFINITION OF DISPUTE.
Any dispute controversy, or claim arising out of
Sections 2(e), 3(a), 3(b), 3(c), 3(d), 4, 8, 10, 13 or 19 of this Agreement
(a "Dispute") shall be settled in accordance with paragraphs (b) through (d)
of this Section. Disputes, controversies or claims which arise out of other
provisions of this Agreement or which, after an arbitration award has
determined that a party is in breach of Subsection 3(a) or a Cure Period has
been properly declared and has expired under Subsection 4(b) without cure (if
Subsections 3(a) or 4(b) are applicable to the particular dispute), involves
the purported termination of the Agreement, or which involves the validity of
the Agreement, or the issue of whether a particular dispute, controversy or
claim is subject to paragraphs (b) through (d) of this Section, shall be
decided by a New York court in accordance with Section 23 of this Agreement
and are not "Disputes". The Dispute as to whether a Cure Period has been
properly declared and has expired pursuant to Subsection 4(b) may be brought
directly under Subsection 22(d) hereof after complying with 22(b) for at
least 10 days without first proceeding under Subsection 22(c).
(b) NEGOTIATION BY SENIOR EXECUTIVES.
The parties shall first attempt to settle any Dispute
by negotiation between senior executives of the Parties.
(c) MEDIATION.
If, within 10 days of the receipt of notice of a
Dispute by a party or parties, the Dispute is not settled through
negotiation, then any party may refer the Dispute to mediation under the
Commercial Mediation Rules of the American Arbitration Association. The
mediator shall be appointed within 10 days of the initiation of the
mediation. The mediation shall be held in New York, New York. If the
Dispute is
<PAGE>
not settled within 30 days after the appointment of the mediator, then either
party may refer the Dispute to Arbitration in accordance with paragraph (d)
of this Section.
(d) ARBITRATION.
(1) Any Dispute which has not been resolved under
paragraphs (b) and (c) of this Section shall be finally settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA") then in effect (the "Rules").
(2) The arbitration shall be held in New York, New
York, U.S.A. The language of the arbitration shall be English. There shall
be one arbitrator appointed in accordance with the Rules. The arbitrator
shall be a retired judge or a commercial litigator with at least fifteen
years of experience.
(3) Either party may, without inconsistency with
this Agreement, seek from a court any interim or provisional relief in aid of
arbitration, pending the appointment of the arbitrator.
(4) The arbitrator shall have the discretion to
order a pre-hearing exchange of information by the parties, including without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties.
All discovery must be completed 30 days prior to the hearing, which shall
take place within 90 days of the appointment of the arbitrator.
(5) The arbitral award shall be final and binding
upon the parties. Notwithstanding the provisions of Section 23 of this
Agreement, judgment upon an arbitral award may be entered in any court having
jurisdiction.
(6) This Agreement and the rights and obligations
of the Parties shall remain in full force and effect pending the award in any
arbitration proceeding hereunder.
(7) The arbitral tribunal shall be authorized in
its discretion to grant pre-award and post-award interest at commercial rates
without there being any presumption as to whether the arbitral tribunal shall
grant such interest.
(8) The arbitrator shall award to the prevailing
party, if any, all of its costs and fees, which shall include all reasonable
pre-award expenses of the arbitration, including the arbitrator's fees,
administrative fees, travel expenses, out-of-pocket expenses, court costs,
and attorneys' fees.
<PAGE>
(9) The arbitration conducted pursuant hereto shall
be confidential and shall be subject to Section 16, except as may be required
in aid of arbitration or enforcement of an arbitration award.
23. SUBMISSION TO JURISDICTION. The parties, on behalf of
themselves and each Affiliate, hereby submit to the exclusive jurisdiction of
the Federal and State courts located in the City and State of New York for
any relief in aid of arbitration, for any relief relating to arbitration, for
determination of whether a particular dispute, controversy or claim is
arbitrable (I.E. subject to Section 22(b), (c) and (d) of this Agreement), or
for resolution of any dispute, controversy or claim which is not subject to
Section 22(b), (c) and (d). Any notice or process arising out or relating to
this Section may be served on the addressees specified by the parties in
Section 24 of this Agreement within or without the State of New York by
registered or certified mail return receipt requested, by personal service,
or by any other means permitted by applicable law. Notwithstanding the
foregoing, with respect to any injunctive relief to which any party may be
entitled, such party, in addition, may seek such injunction in the
jurisdiction where the act which it seeks to enjoin is being committed or
threatened.
24. NOTICES. Except as otherwise provided in Section 23
hereof, all notices and other communications hereunder will be in writing and
will be given by delivery in person, verified facsimile or other standard
form of telecommunications, by overnight courier, or by registered or
certified mail, return receipt requested to the parties at their respective
addresses set forth above with copies as follows:
If to Gentex, Essilor or any Affiliate of either:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Att.: Henry A. Singer, Esq.
Facsimile No.: 212-735-8708
If to Oakley or any of its Affiliates:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Suite 3400
Los Angeles, CA 90071
Att.: Jeffrey H. Cohen, Esq.
Facsimile No.: 213-687-5600
Notice given by mail will be deemed given four business days after deposit
with the United States Postal Service and one business day after delivery
into the custody and
<PAGE>
control of an overnight courier service for next day delivery. Notice by fax
will be deemed to have been given the day following the transmittal of the
fax and notice in person will be deemed to have been given the day of
delivery.
25. MISCELLANEOUS.
(a) RIGHTS CONFINED TO PARTIES. Except as expressly
permitted elsewhere herein or as provided by law, nothing expressed or
implied herein is intended to or will be construed to confer upon or give to
any Person, other than the parties hereto, and their successors and assigns
as permitted hereunder and their respective Affiliates, any right, remedy, or
claim under or by reason of this Agreement or of any term, covenant, or
condition hereof, and, subject to the foregoing, all the terms, covenants,
conditions, promises, and agreements contained herein will be for the sole
and exclusive benefit of the parties hereto, their successors and assigns as
permitted hereunder, and their Affiliates.
(b) SURVIVAL. Except as otherwise specifically provided
herein, all rights and obligations of any party hereto to any other party
hereto, arising hereunder, or out of this Agreement, will terminate upon
termination of this Agreement, except for obligations for payment of money
which have accrued but which have not yet been paid at that time and except
for any rights and obligations that arise by reason of breach or wrongful
termination hereof, all of which will survive such termination.
(c) ENTIRE AGREEMENT. This Agreement, constitutes the
entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes any and all prior agreements between the parties
hereto with respect to the subject matter hereof, including, without
limitation; the Letter of Intent, which Letter of Intent will be deemed
terminated and of no legal effect.
(d) ASSIGNMENT. Neither this Agreement, any Purchase
Contract nor any right hereunder or thereunder (except the right to
payments), is assignable, and no obligation hereunder or thereunder is
delegable, and any such purported assignment or delegation will be null and
void and of no effect.
(e) SEVERABILITY. Any provision of this Agreement or any
Purchase Contract which is invalid or unenforceable in any jurisdiction will
not affect the validity or enforceability of any other provision in such
jurisdiction or the validity or enforceability of such provision or any other
provision in any other jurisdiction.
(f) EFFECT OF HEADINGS. Headings contained herein are
for convenience only and will not affect the construction hereof.
(g) GOVERNING LAW. THE PROVISIONS OF THIS AGREEMENT AND
ANY PURCHASE CONTRACT AND ALL THE RIGHTS AND
<PAGE>
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND WITHOUT
REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS THAT MIGHT OTHERWISE BE
APPLICABLE.
(h) WAIVER OF JURY TRIAL. THE PARTIES HERETO ON BEHALF OF
THEMSELVES AND THEIR AFFILIATES HEREBY WAIVE TRIAL BY JURY IN ANY PROCEEDING
ARISING UNDER OR OUT OF THIS AGREEMENT OR ANY PURCHASE CONTRACT.
(i) COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which will be deemed to be an original, and
all such counterparts will constitute but one instrument, when each party
hereto has executed at least one counterpart.
(j) MODIFICATION, WAIVER. Except as herein otherwise
provided, neither this Agreement nor any Purchase Contract may be modified,
amended or terminated, and no provision hereof or thereof may be waived
except by a writing executed by all the parties hereto or thereto.
(k) CUMULATIVE RIGHTS AND REMEDIES. Except as otherwise
provided herein, in the event of a breach of this Agreement by any party
hereto, which breach has not been cured within the time hereby permitted:
(i) any other party hereto whose rights hereunder
are adversely affected thereby will have all rights and remedies arising
under this Agreement and at law and in equity;
(ii) all such rights and remedies of any party
hereto will be cumulative and may be exercised simultaneously or seriatim and
no party will be required to make any election of remedies.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
GENTEX OPTICS, INC.
By:____________________________________
L. Peter Frieder, Jr., President
ESSILOR INTERNATIONAL COMPAGNIE
GENERALE D'OPTIQUE, S.A.
By:____________________________________
OAKLEY, INC.
By:______________________________________
Link Newcomb, Chief Operating Officer
<PAGE>
SCHEDULE 3(B)
Assume the Initial Three Month Forecast for April, May and June
of 1997, supplied to Gentex on or before March 15, 1997, provides for the
sale to Oakley of 100 units in each of said months comprised of 40 Units of
orange and 60 Units of violet.
Oakley will provide Gentex with a new Rolling Three Month
Forecast no later than April 15, 1997, in respect of May, June and July 1997.
In that new Rolling Three Month Forecast the requirements for May can be no
less than 90 Units in the aggregate and no more than 110 Units in the
aggregate, and, within those parameters, the requirements of Orange Units can
be no more than 60 or less than 20 and the Violet Units no more than 90 nor
less than 30, unless a New Product is involved. Assuming a New Product
constitutes 20 Units of the 100 aggregate Units, then the permissible
Capacity Variance shall be (10% + (10% x 20/100) = 12%) 12% and therefore
total Units can be no more than 112 nor less than 88 but the color
limitations will remain the same. Similarly, June's requirements can be no
less than 90 Units or more than 110 Units (as adjusted for its New Product
composition, if any). Thus, if 30% of June's requirements were New Products
the permissible Capacity Variance would be 13%. July's requirements can be as
reasonably set forth by Oakley.
Oakley will provide a new Rolling Three Month Forecast for the
months of June, July and August 1997, no later than May 15, 1997. This new
Rolling Three Month Forecast for the month of June cannot vary the aggregate
Unit requirements by more than 10% from the requirement for June set forth in
the immediately preceding Rolling Three Month Forecast given in April (as
adjusted for any New Product included in such requirement). Thus, if that
requirement were for 90 units (down from 100 Units in the Initial Three Month
Forecast), then the requirement in this latest Rolling Three Month Forecast
cannot be for less than 81 Units nor more than 99 Units in respect of June
(assuming no New Product). Similarly, the requirements for July cannot be
more than plus or minus 10% from those set forth in the immediately preceding
Rolling Three Month Forecast, given in April (as adjusted for New Product).
If, for example, in this new Rolling Three Month Forecast June requirements
included the same 30% of total requirements being New Product as the previous
rolling Three Month Forecast, the permissible Capacity Variance would again
be 13%. Thus, if June in the last Rolling Three Month Forecast was for 87
Units down from 100 Units, in this Rolling Three Month Forecast it could be
+/- 13% of 87 Units. If in this new Rolling Three Month Forecast the
composition of New Product increased to 40% then this new forecast for June
can be for 87 Units +/- 14%.
Within the permissible Capacity Variance for aggregate Unit
requirements as described above, and assuming no New Product which alters the
plus or minus 10% Capacity Variance, orange Units, as set forth above could
drop to 20 Units or be as high as 60 Units for May or June in the Rolling
Three Month Forecast delivered in April
<PAGE>
and as low as 10 Units (if the previous forecast was down from 40 orange
Units to 20) and as high as 90 Units (if the previous forecast was up from 40
orange Units to 60) for June in the Rolling Three Month Forecast delivered in
May (provided the aggregate of all Units permitted equaled or exceeded 90).
Any Delivery Notice with respect to any month for which a
requirement is listed may vary the quantities by up to 10% of the
requirements for that month, both as to aggregate requirements and as to each
color, provided the aggregate quantities by color and otherwise do not exceed
110% of the aggregate Unit requirements permissibly set forth on the most
recent Rolling Three Month Forecast. Furthermore, assume that orange Unit
requirements for June, in the March Rolling Three Month Forecast amounted to
40 Units, in the April Rolling Three Month Forecast to 60 Units and in the
May Rolling Three Month Forecast to 90 Units (in each case the maximum 50%
variance). Thus, with a permitted 10% variance for its Delivery Notice,
Oakley could order 99 orange Units for June delivery EXCEPT that Oakley is
limited to 200% of the lowest June forecast for orange Units (40 x 2) or 80
orange Units, which is the maximum it can order. This also assumes the
aggregate of all Units which may be ordered for June equals or exceeds 80
Units.
Any purported delivery notice, which together with all other
Delivery Notices, provides for aggregate quantities outside the permitted
Capacity Variance for that month, as described above and in Subsection 3(b)
of the Agreement or which is in excess of the permitted Color Variance from
the color requirements set forth in the relevant Rolling Three Month Forecast
will not result in a breach of the Agreement, but will have the consequences
specified in the Agreement.
<PAGE>
Gentex Optics, Inc.
Oakley Price List
Schedule 3(d)
<TABLE>
<CAPTION>
Product Gentex P/N OakleyP/n Description Price
- ------- ---------- --------- ----------- -----
<S> <C> <C> <C> <C>
TORIC (1) 1737-0001 80-952 Toric Clear *
1737-0102 80-981 Toric N. Gray *
1737-0104 80-983 Toric Amber *
1737-0103 80-984 Toric Rust *
1737-0008 80-985 Toric Orange *
1737-0007 80-968 Toric Violet *
1737-0108 80-987 Toric Persimmon *
1737-0110 80-958 Toric Dark Violet *
1737-0111 80-988 Toric 40% Violet *
1737-0112 80-955 Toric VR-28 *
TORIC NT1 (1) 1737-0208 81-003 Toric Orange, NHC *
1737-0212 81-003 Toric Dark Violet, NHC *
1737-0211 81-005 Toric 40% Violet, NHC *
1737-0210 81-004 Toric VR-28, NHC *
8.75 TRENCHCOATS (2) 0495-5001L 90-001 8.75 T.C. Dark Violet, Left *
0495-5001R 90-002 8.75 T.C. Dark Violet, Right *
0495-5002L 90-003 8.75 T.C. Orange, Left *
0495-5002R 90-004 8.75 T.C. Orange, Right *
0495-5005L 90-037 8.75 T.C. Vr-28, Left *
0495-5005R 90-038 8.75 T.C. Vr-28, Right *
8-BASE 76 X 1.5 (2) 0540-0021E 74-802 Orange *
0540-0022E 74-803 Dark Violet *
</TABLE>
(1) Price Per Single Shield
(2) Price Per Lens and Two Lenses Equal a Unit
* Material omitted pursuant to request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
Gentex Optics, Inc.
Oakley Price List
Schedule 3(d)
<TABLE>
<CAPTION>
Product Gentex P/N Oakley P/N Description Price
- ------- ---------- ---------- ----------- -----
<S> <C> <C> <C> <C>
CYLINDER (1) 1729-0001 80-950 Clear *
1729-0102 80-951 Neutral Gray *
1729-0103 80-952 Bronze *
1729-0104 80-953 Amber *
1729-0105 80-954 Rust *
1729-0008 80-955 Orange *
1729-0007 80-958 Violet *
1729-0008 80-957 Persimmon *
1729-0008 80-958 Dark Violet 12% *
FROGSKIN (2) 0498-0001L 80-596L Violet, Left *
0498-0001R 80-596R Violet, Right *
0498-0002L 80-597L Neutral Gray, Left *
0495-0002R 80-597R Neutral Gray, Right *
8.75 BLANKS
DECENTERED (2) 0498-3001E 80-980 Dark Violet *
0498-3002E 80-959 Orange *
0498-3004E Clear *
0498-3005E Persimmon *
0495-3008E Yellow *
</TABLE>
(1) Price Per Single Shield
(2) Price Per Lens and Two Lenses Equal a Unit
* Material omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange commission.
<PAGE>
* Schedule 9 (a total of 18 pages) has been omitted pursuant to a request for
confidential treatment and filed separately with the Securities and
Exchange Commission.
<PAGE>
* The Declarations (a total of 10 pages)have been omitted pursuant to a
request for confidential treatment and filed separately with the Securities
and Exchange Commission.
<PAGE>
PROMISSORY NOTE
$25,000,000 March 20, 1997 Irvine, California
Interest Rates Available (see attached Exhibit A):
(a) Reference Rate;
(b) LIBOR Rate plus 1.0%;
(c) Cayman Rate plus 1.0%.
Maturity Date: July 18, 1997
1. FOR VALUE RECEIVED, OAKLEY, INC., a California corporation
("Borrower"), promises to pay to the order of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION ("Bank") on July 18, 1997 (the "Maturity Date") at Bank's
South Orange County Regional Commercial Banking Office in Costa Mesa,
California, or at such other place as Bank from time to time may designate, the
principal sum of Twenty Five Million Dollars ($25,000,000) (the "Maximum Loan
Amount"), or so much of that sum as may be advanced under this promissory note
("Note"), plus interest as specified in this Note. This Note evidences a bridge
loan ("Loan") from Bank to Borrower. The Loan may be disbursed in one or more
advances between the date of this Note and April 4, 1997.
2. The principal sum outstanding from time to time under this Note
shall bear interest at the Bank's Reference Rate or at the optional interest
rates elected by the Borrower in accordance with the formulas set forth in
Exhibit A. Interest shall be calculated on the basis of a 360-day year and
actual days elapsed, which results in more interest than if a 365-day year were
used.
3. Accrued interest shall be payable on the first day of each month
in arrears, on any portion of the Loan bearing interest at the Reference Rate.
Any amount bearing interest at an optional interest rate as described in Exhibit
A may be repaid at the end of the applicable interest period which shall be no
later than the Maturity Date.
4. Borrower may prepay some or all of the principal under this Note,
on the terms and subject to the conditions set forth in Exhibit A.
<PAGE>
5. Borrower shall immediately prepay the Loan in full upon the
funding of a permanent real estate loan for the real property known as The
Oakley Technical Center located in Foothill Ranch, California.
6. From and after maturity of this Note (whether upon scheduled
maturity, by acceleration or otherwise), all sums then due and payable under
this Note, including all principal and all accrued and unpaid interest, shall
bear interest until paid in full at an annual rate (the "Default Rate") of three
percent (3%) in excess of the higher of (i) the Reference Rate or (ii) the
interest rate which would otherwise be applicable under the provisions of
Exhibit A; provided, however, that if at the time of maturity different portions
of the Loan are bearing interest at different rates in accordance with Exhibit
A, the Default Rate shall be calculated separately as provided above with
respect to each optional interest rate portion and with respect to any portion
of the Loan then bearing interest at the Reference Rate.
7. If any of the following "Events of Default" occur, any right of
Borrower to designate an interest rate other than the Reference Rate shall
terminate, and at the holder's option, exercisable in its sole discretion, all
sums of principal and interest under this Note shall become immediately due and
payable without notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor, or other notices or demands of any kind or
character:
(a) Borrower fails to perform any obligation under this Note to
pay principal or interest when due; or
(b) Any default occurs under that certain Amended and Restated
Credit Agreement dated as of August 15, 1995, as amended, among the Borrower,
the lenders listed therein and Wells Fargo Bank, National Association, as agent
(the "Credit Agreement").
8. All amounts payable under this Note are payable in lawful money
of the United States, in immediately available funds, during normal business
hours on a business day.
9. If any lawsuit, reference or arbitration is commenced which
arises out of or relates to this Note or the Loan, the prevailing party shall be
entitled to recover from each other party such sums as the court, referee or
arbitrator may adjudge to be reasonable attorneys' fees in the action, reference
or arbitration, in addition to costs and expenses otherwise allowed by law. In
all other situations, including any matter arising out of or relating to any
insolvency proceeding, Borrower agrees to pay all of Bank's costs and expenses,
including attorneys' fees, which may be incurred in enforcing or protecting
Bank's rights or interests. From the time(s) incurred until paid in full to
Bank, all such sums shall bear interest at the Default Rate.
<PAGE>
10. Whenever Borrower is obligated to pay or reimburse Bank for any
attorneys' fees, those fees shall include the allocated costs for services of
in-house counsel.
11. This Note is governed by the laws of the State of California,
without regard to the choice of law rules of that State.
12. If Bank delays in exercising or fails to exercise any of its
rights under this Note, that delay or failure shall not constitute a waiver of
any of Bank's rights, or of any breach, default or failure of condition of or
under this Note. No waiver by Bank of any of its rights, or of any such breach,
default or failure of condition shall be effective, unless the waiver is
expressly stated in a writing signed by Bank. All of Bank's remedies in
connection with this Note or under applicable law shall be cumulative, and
Bank's exercise of any one or more of those remedies shall not constitute an
election of remedies.
13. This Note inures to and binds the heirs, legal representatives,
successors and assigns of Borrower and Bank; provided, however, that Borrower
may not assign this Note or any Loan funds, or assign or delegate any of its
rights or obligations, without the prior written consent of Bank in each
instance.
14. As used in this Note, the terms "Bank," "holder" and "holder of
this Note" are interchangeable. Exhibit A is attached to this Note and are
incorporated in this Note by this reference.
15. The Borrower agrees that all proceeds of the Loan shall be used
to prepay outstandings under the Credit Agreement.
16. Borrower has caused this Note to be executed by its officers, who
were duly authorized and directed to do so by a resolution of its Board of
Directors which was duly passed and adopted by the requisite number of members
of the Board at a meeting which was duly called, noticed, and held.
OAKLEY, INC.
By:_______________________________
Title:____________________________
By:_______________________________
Title:____________________________
<PAGE>
Address:
10 Holland
Irvine, California 92718
<PAGE>
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
WHEREAS, Mike Parnell ("Executive") and Oakley, Inc., a Washington
corporation (the "Company"), have previously entered into that certain
employment agreement dated August 1, 1995, as amended May 26, 1996 (the
"Employment Agreement");
WHEREAS, the Employment Agreement provides for the payment to
Executive of a base salary, a minimum target bonus and certain other benefits;
and
WHEREAS, as of the date hereof Executive and the Company have agreed
to adjust the amount of Executive's base salary and minimum target bonus for the
balance of the term of the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Executive and the Company have agreed and do hereby agree to amend
the Employment Agreement as follows, effective as of the 1st day of February,
1997:
1. Base Salary. Section 3(a) of the Employment Agreement is hereby
amended in its entirety to read as follows:
"BASE SALARY. The Company shall pay Executive an annual base
salary at the rate of $350,000 per year or such higher amount as the
Company may from time to time determine ("Base Salary"), payable in
equal biweekly installments or at such other time or times as
Executive and the Company shall agree. Except as otherwise provided
herein, the Company's obligation to pay Executive's Base Salary
under this Agreement shall cease as of the date of termination of
Executive's employment."
2. Performance Bonus. Section 3(b) of the Employment Agreement is
hereby amended in its entirety to read as follows:
"PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Performance Bonus Plan (which is attached hereto as
Exhibit A) and to receive an annual performance bonus in accordance
with the terms thereof. Executive's minimum target bonus
<PAGE>
under the Performance Bonus Plan shall be not less than $200,000
per year."
3. Except as otherwise provided herein, the remaining terms of the
Employment Agreement shall remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto signed
this Agreement, as of the date first above written.
OAKLEY, INC.
By:
-----------------------------------
Its:
----------------------------------
--------------------------------------
MIKE PARNELL
3
<PAGE>
SPOUSAL CONSENT
The undersigned, MELISSA PARNELL, represents that she has reviewed
the attached "Amendment No. 2 to Employment Agreement" of her husband, MIKE
PARNELL, and hereby acknowledges the effect of and voluntarily consents to
such amendment as of the 1st day of February, 1997.
--------------------------------
MELISSA PARNELL
4
<PAGE>
AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT
WHEREAS, R. Link Newcomb ("Executive") and Oakley, Inc., a Washington
corporation (the "Company"), have previously entered into that certain
employment agreement dated January 31, 1997 (the "Employment Agreement");
WHEREAS, the Employment Agreement provides for the payment to
Executive of a base salary, a minimum target bonus and certain other benefits;
and
WHEREAS, as of the date hereof Executive and the Company have agreed
to adjust the amount of Executive's base salary and minimum target bonus for the
balance of the term of the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Executive and the Company have agreed and do hereby agree to amend
the Employment Agreement as follows, effective as of the 1st day of February,
1997:
1. Base Salary. Section 3(a) of the Employment Agreement is hereby
amended in its entirety to read as follows:
"Base Salary. The Company shall pay Employee an annual base
salary no less than at the rate of $300,000 per year, payable in equal
biweekly installments or at such other times as Employee and the
Company shall agree. Employee's base salary may be increased as
determined by the Board of Directors of the Company in its sole
discretion."
2. Performance Bonus. Section 3(b) of the Employment Agreement is
hereby amended in its entirety to read as follows:
"Bonus. Employee shall be eligible to participate in the
Company's Performance Bonus Plan. Employee's annual target bonus
under the Performance Bonus Plan shall not be less than $200,000."
3. Except as otherwise provided herein, the remaining terms of the
Employment Agreement shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto signed
this Agreement, as of the date first above written.
OAKLEY, INC.
By:
----------------------------------
Its:
---------------------------------
-------------------------------------
R. LINK NEWCOMB
2
<PAGE>
Exhibit 11.1
OAKLEY, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
Three Months Ended
March 31, 1997
-------------------
Common Shares and common share equivalents:
Number of shares outstanding at beginning of period 70,960
Weighted average shares issuable upon the exercise of
common stock options net of shares assumed to be
repurchased from proceeds obtained therefrom 13
Weighted average purchase of common shares (304)
-------------------
Weighted average common and common equivalent
shares at end of period 70,669
-------------------
-------------------
Net income for primary net income per share $ 550
Net income per common and common equivalent shares $ 0.01
-------------------
-------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 2,382
<SECURITIES> 0
<RECEIVABLES> 22,362
<ALLOWANCES> 592
<INVENTORY> 28,773
<CURRENT-ASSETS> 66,432
<PP&E> 88,893
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,887
<CURRENT-LIABILITIES> 27,274
<BONDS> 0
0
0
<COMMON> 707
<OTHER-SE> 117,621
<TOTAL-LIABILITY-AND-EQUITY> 167,887
<SALES> 34,403
<TOTAL-REVENUES> 34,403
<CGS> 14,747
<TOTAL-COSTS> 14,747
<OTHER-EXPENSES> 18,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (58)
<INCOME-PRETAX> 893
<INCOME-TAX> 343
<INCOME-CONTINUING> 550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 550
<EPS-PRIMARY> $0.01
<EPS-DILUTED> 0
</TABLE>
