<PAGE>
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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 JUNE 30, 1998
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 executive offices) (Zip Code)
(949) 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 /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
------------------------
<TABLE>
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE 70,678,057 SHARES
(Class) (Outstanding on August 7, 1998)
</TABLE>
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<PAGE>
OAKLEY, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of December 31, 1997
and June 30, 1998 (unaudited).............................................. 3
Consolidated Statements of Income for the three- and six-month periods
ended June 30, 1997 and 1998 (unaudited).................................... 4
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1997 and 1998 (unaudited).................................... 5
Notes to Consolidated Financial Statements.................................... 6-8
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................... 9-13
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk........... 13-14
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings.................................................... 15-18
ITEM 2 - Changes in Securities and Use of Proceeds............................ 18
ITEM 3 - Defaults Upon Senior Securities...................................... 18
ITEM 4 - Submission of Matters to a Vote of Security Holders.................. 18
ITEM 5 - Other Information.................................................... 18
ITEM 6 - Exhibits and Reports on Form 8-K..................................... 19
Signatures.................................................................... 20
Exhibits...................................................................... 21
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
OAKLEY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
December 31,1997 June 30, 1998
---------------- ----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,657 $ 630
---------------- ----------------
Accounts receivable, less allowance for
doubtful accounts of $551 (1997), $469 (1998) 24,015 35,815
Inventories (Note 2) 26,200 32,384
Other receivables 2,427 2,943
Deferred income taxes 4,829 4,829
Prepaid expenses 2,978 2,371
---------------- ----------------
Total current assets 63,106 78,972
Property and equipment, net 104,230 112,541
Deposits 1,519 810
Other assets 12,436 19,424
---------------- ----------------
TOTAL ASSETS $ 181,291 $ 211,747
---------------- ----------------
---------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 3) $ 2,800 $ 1,900
Accounts payable 6,762 16,406
Accrued expenses and other current liabilities 8,666 10,901
Income taxes payable 1,671 8,510
Current maturities of long-term debt (Note 3) 1,519 1,519
---------------- ----------------
Total current liabilities 21,418 39,236
Deferred income taxes 2,030 2,030
Long-term debt, net of current maturities (Note 3) 20,882 20,122
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; 70,659,086 (1997) and
70,670,623 (1998) issued and outstanding 707 707
Additional paid-in capital 55,170 55,378
Retained earnings 82,238 94,713
Foreign currency translation adjustment (1,154) (439)
---------------- ----------------
Total shareholders' equity 136,961 150,359
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 181,291 $ 211,747
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
OAKLEY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 55,150 $ 70,030 $ 89,553 $ 111,030
Cost of goods sold 19,095 24,569 33,842 40,751
--------- --------- --------- ---------
Gross profit 36,055 45,461 55,711 70,279
Operating expenses:
Research and development 992 1,313 1,543 2,512
Selling 13,235 17,257 25,245 30,756
Shipping and warehousing 1,426 1,846 2,679 3,246
General and administrative 5,539 6,423 10,546 12,637
--------- --------- --------- ---------
Total operating expenses 21,192 26,839 40,013 49,151
Operating income 14,863 18,622 15,698 21,128
Interest (income) expense, net 500 499 442 877
--------- --------- --------- ---------
Income before provision for income taxes 14,363 18,123 15,256 20,251
Provision for income taxes 5,515 6,959 5,858 7,776
--------- --------- --------- ---------
Net income $ 8,848 $ 11,164 $ 9,398 $ 12,475
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic net income per common share $ 0.13 $ 0.16 $ 0.13 $ 0.18
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic weighted average common shares 70,658 70,671 70,658 70,671
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted net income per common share $ 0.13 $ 0.16 $ 0.13 $ 0.18
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted weighted average common shares 70,709 71,161 70,688 70,916
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
OAKLEY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,398 $ 12,475
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,935 7,514
Deferred compensation 30 75
Loss (gain) on disposition of equipment 67 (610)
Changes in assets and liabilities, net of effects
of business acquisitions:
Accounts receivable (5,756) (11,970)
Inventories 2,839 (6,185)
Other receivables (519) (443)
Prepaid expenses and other 1,659 602
Accounts payable 3,129 9,651
Accrued expenses and other current liabilities (2,349) 2,046
Income taxes payable 5,769 6,834
--------- ---------
Net cash provided by operating activities
20,202 19,989
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits (1,355) 696
Acquisitions of property and equipment (28,526) (15,575)
Proceeds from sale of property and equipment 179 809
Other assets (1,108) (7,566)
--------- ---------
Net cash used in investing activities
(30,810) (21,636)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 40,000 -
Repayments of bank borrowings (28,000) (1,660)
Net proceeds from issuance of common shares 19 133
Repurchase of common shares (3,193) -
--------- ---------
Net cash provided by (used in) financing activities 8,826 (1,527)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (383) 1,147
NET DECREASE
IN CASH AND CASH EQUIVALENTS (2,165) (2,027)
CASH AND CASH EQUIVALENTS, beginning of period 8,063 2,657
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 5,898 $ 630
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
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, 1997 and
June 30, 1998, the statements of income for the three- and six-month periods
ended June 30, 1997 and 1998 and the statements of cash flows for the six- month
periods ended June 30, 1997 and 1998. The results of operations for the three-
and six-month periods ended June 30, 1998 are not necessarily indicative of the
results of operations for the entire fiscal year ending December 31, 1998.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1998
----------------- --------------
<S> <C> <C>
Raw Materials $11,814,000 $12,806,000
Finished Goods 14,386,000 19,578,000
----------- -----------
$26,200,000 $32,384,000
----------- -----------
----------- -----------
</TABLE>
NOTE 3 - FINANCING ARRANGEMENTS
LINE OF CREDIT - The Company has a $30.0 million unsecured line of credit with a
bank syndicate which bears interest at either the bank's prime lending rate
(8.5% at June 30, 1998) or LIBOR plus 1.00% (6.66% at June 30, 1998), as defined
in the credit agreement, and matures June 1999. At June 30, 1998, the Company
had $1.9 million outstanding under the credit agreement. The credit agreement
contains various restrictive covenants including the maintenance of certain
financial ratios. At June 30, 1998, the Company was in compliance with all
restrictive covenants and financial ratios.
The Company is currently negotiating an increase in its line of credit from
$30.0 million to $50.0 million and expects the increase to be completed in
August 1998.
LONG-TERM DEBT - In August 1997, the Company obtained a term loan collateralized
by the Company's corporate facility. The term loan requires quarterly principal
payments of approximately $380,000 ($1,519,000 annually), plus interest based
upon LIBOR plus 1.15% (6.83% at June 30, 1998) for five years. The then
outstanding balance payable is due in September 2002. At June 30, 1998, the
outstanding balance under the term loan was $21.6 million.
NOTE 4 - LITIGATION
During December 1996, three putative class action lawsuits (the "California
Securities Actions") were filed in the California Superior Court for the County
of Orange (the "Superior Court") against the Company and three of its officers
and directors alleging material misstatements and omissions in certain of the
Company's public statements, SEC filings and reports of 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 of (the "Secondary Offering"). 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.
6
<PAGE>
Pursuant to a court order sustaining demurrers to certain claims and to
plaintiffs' dismissal without prejudice of certain other claims, the only claim
remaining in the Superior Court in the California Securities Actions is a claim
for purported violations of the antifraud provision of the California
Corporation Code with respect to two of the Company's officers and directors.
On April 1, 1998, the Superior Court entered a judgment (the "Judgment") in the
California Securities Actions in favor of the Company, one of the Company's
officers and directors and the firms who served as underwriters of the Secondary
Offering. On April 15, 1998, plaintiffs filed a notice of appeal from the
Judgment in the Superior Court, which concerns plaintiffs' cause of action for
purported violations of the antifraud provisions of the California Corporations
Code. In March 1997, the Company was named as a nominal defendant in a putative
derivative action (the "California Derivative Action") filed in the Superior
Court against two of the Company's officers and directors based on substantially
the same allegations as those in the California Securities Actions. The
derivative plaintiff seeks to recover damages and other relief on behalf of the
Company. On February 4, 1998, the court entered a final order of dismissal of
the putative derivative action. On April 8, 1998, the derivative plaintiff
filed a notice of appeal in the Superior Court. During October, November and
December 1997, five putative class action lawsuits (the "Federal Securities
Actions") were filed in the United States District Court for the Central
District of California, Southern Division against the Company, three of its
officers and directors and firms that served as underwriters of the Secondary
Offering, alleging material misstatements and omissions in certain of the
Company's public statements, the reports of third-party analysts and/or certain
of the Company's SEC filings. The plaintiffs in the Federal Securities Actions
seek unspecified damages and other relief. On July 10, 1998, the Company and
the other defendants filed motions to dismiss the Federal Securities Actions.
The hearing on the motions to dismiss the Federal Securities Actions is
scheduled for September 28, 1998. Although it is too soon to predict the
outcome of the California Securities Actions, the California Derivative Action
or the Federal Securities Actions 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.
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 significant effect on the
accompanying consolidated financial statements.
NOTE 5 - CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". This statement requires
that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings include foreign currency translation adjustments. Annual
financial statements for prior periods will be restated, as required. The
Company's total comprehensive income is as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------------------
1997 1998
------------- -------------
<S> <C> <C>
Net income $ 9,398,000 $ 12,475,000
Foreign currency translation (loss)/gain (383,000) 1,147,000
------------- -------------
Total comprehensive income $ 9,015,000 $ 13,622,000
------------- -------------
------------- -------------
</TABLE>
7
<PAGE>
NOTE 6 - RECENT ACCOUNTING DEVELOPMENTS
In 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was issued and is effective for the year ending December 31, 1998.
The Company is reviewing the impact of the statement on its year end financial
statements.
NOTE 7 - EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of common
shares outstanding during the reporting period. Earnings per share assuming
dilution is computed using the weighted average number of common shares
outstanding and the dilutive effect of potential common shares outstanding. For
the three months ended June 30, 1998 and 1997, the diluted weighted average
common shares outstanding includes 490,000 and 51,000, respectively, of dilutive
stock options. For the six months ended June 30, 1998 and 1997, the diluted
weighted average common shares outstanding includes 245,000 and 30,000,
respectively, of dilutive stock options.
8
<PAGE>
ITEM 2.
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 JUNE 30, 1998 AND 1997
NET SALES
Net sales increased to $70.0 million for the three months ended June 30, 1998
from $55.2 million for the three months ended June 30, 1997, an increase of
$14.8 million, or 26.8%. This increase was primarily the result of strong sales
of FIVES and sales of new products, the RACING JACKET introduced in January
1998, MARS introduced in March 1998 and the MINUTE and A WIRE introduced in May
1998. The Company's domestic sales increased 28.8% to $45.2 million from $35.1
million in the comparable 1997 period, principally as a result of a 64.5%
increase in net sales to the Company's largest customer, Sunglass Hut. The
significant increase in net sales to Sunglass Hut is attributable to a large
reduction in 1997 in Sunglass Hut purchases related to their 1997 inventory
realignment initiative, in addition to an increase in the overall sales rates.
The Company's international sales increased 23.9% to $24.9 million in 1998 from
$20.1 million in 1997, principally as a result of increased sales in all major
markets except Southeast Asia and the Middle East. Southeast Asia sales
represented 1.2% of net sales for the three months ended June 30, 1998.
International net sales in the 1998 period were negatively affected by the
strength of the dollar compared to the functional currency of direct operations
in continental Europe and Japan.
GROSS PROFIT
Gross profit increased to $45.5 million for the three months ended June 30, 1998
from $36.1 million for the three months ended June 30, 1997, an increase of $9.4
million, or 26.0%. As a percentage of net sales, gross profit decreased to
64.9% in 1998 from 65.4% in 1997. Gross profit as a percentage of net sales
declined due to an increase in inventory reserves, higher sales discounts and
initial footwear production costs, partially offset by overhead absorption
benefits from a 24.8% increase in sunglass unit volume, increased X METAL
production, a 5.4% increase in the average selling price and a favorable shift
in product mix.
OPERATING EXPENSES
Operating expenses increased to $26.8 million for the three months ended June
30, 1998 from $21.2 million for the three months ended June 30, 1997, an
increase of $5.6 million. Research and development expenses were $1.3
million, or 1.9% of net sales, in the 1998 period as compared to $1.0
million, or 1.8% of net sales, in the 1997 period, an increase of $0.3
million. Selling expenses increased $4.1 million to $17.3 million, or 24.6%
of net sales, for the three months ended June 30, 1998 from $13.2 million, or
24.0% of net sales, in the 1997 period as a result of increases in variable
expenses such as commissions, greater advertising and marketing expenses,
increased personnel expenses and increased depreciation. As a percentage of
net sales, shipping expenses remained at 2.6% for the three months ended June
30, 1998 as in the comparable 1997 period. General and administrative
expenses for the three months ended June 30, 1998 were $6.4 million, or 9.2%
of net sales, compared to $5.5 million, or 10.0% of net sales, in the same
period in 1997. This increase in general and administrative expenses was a
result of increased personnel costs and related expenses, including an
increase of $0.4 million in the Company's vacation benefits expense, and
higher depreciation and amortization costs associated with additional capital
equipment and business acquisitions, partially offset by a $0.6 million gain
on the disposal of certain assets.
9
<PAGE>
OPERATING INCOME
The Company's operating income increased to $18.6 million for the three months
ended June 30, 1998 from $14.9 million for the three months ended June 30, 1997,
an increase of $3.7 million, or 24.8%, over the same period in the previous
year. As a percentage of net sales, operating income decreased to 26.6% for the
three months ended June 30, 1998 from 26.9% for the three months ended June 30,
1997. This decrease in operating income as a percent of net sales was primarily
attributable to the start up costs associated with the Company's footwear
introduction. Excluding these costs, the Company's operating income would have
been 27.8% as a percentage of net sales, an increase of 0.9% over the comparable
1997 period.
INTEREST EXPENSE, NET
The Company had net interest expense of $0.5 million in both the 1998 and 1997
periods.
NET INCOME
The Company's net income increased to $11.2 million for the three months ended
June 30, 1998 from $8.8 million for the three months ended June 30, 1997, an
increase of $2.4 million, or 27.3%, over the comparable 1997 quarter.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
NET SALES
Net sales increased to $111.0 million for the six months ended June 30, 1998
from $89.6 million for the six months ended June 30, 1997, an increase of $21.4
million, or 23.9%. This increase was the result of strong sales of FIVES,
increased ROMEO sales and initial sales from the new RACING JACKET introduced in
January 1998, MARS introduced in March 1998 and the MINUTE and A WIRE introduced
in May 1998. The Company's domestic sales increased 31.5% to $69.3 million from
$52.7 million in the comparable 1997 period, principally as a result of an 82.4%
increase in net sales to the Company's largest customer, Sunglass Hut. The
significant increase in net sales to Sunglass Hut is attributable to a large
reduction in 1997 in Sunglass Hut purchases related to their 1997 inventory
realignment initiative, in addition to an increase in overall sales rates. The
Company's international sales increased 13.0% to $41.7 million in 1998 from
$36.9 million in 1997, principally as a result of increased sales in all major
markets except Southeast Asia and the Middle East. Southeast Asia sales
represented 1.2% of net sales for the six months ended June 30, 1998.
International net sales in the 1998 period were negatively affected by the
strength of the dollar compared to the functional currency of direct operations
in continental Europe and Japan.
GROSS PROFIT
Gross profit increased to $70.3 million for the six months ended June 30, 1998
from $55.7 million for the six months ended June 30, 1997, an increase of $14.6
million, or 26.2%. As a percentage of net sales, gross profit increased to
63.3% in 1998 from 62.2% in 1997. Gross profit as a percentage of net sales was
positively affected by increased X METAL production, a 21.3% increase in
sunglass unit volume sales, a 3.9% increase in the average selling price and a
favorable shift in product mix to higher margin items. These positive factors
were partially offset by an increase in inventory reserves, higher sales
discounts and initial footwear production costs.
OPERATING EXPENSES
Operating expenses increased to $49.2 million for the six months ended June 30,
1998 from $40.0 million for the six months ended June 30, 1997, an increase of
$9.2 million. Research and development costs increased $1.0 million to $2.5
million for the six months ended June 30, 1998. 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 to the 1997 period, research and
development expenses increased $0.1 million to $2.5 million, or 2.3% of net
sales, in 1998 from $2.4
10
<PAGE>
million, or 2.7% of net sales, in the 1997 period. Selling expenses were
$30.8 million, or 27.7% of net sales, in 1998 as compared to $25.2 million,
or 28.2% of net sales, in 1997, an increase of $5.6 million, or 22.2%. This
increase is a result of greater personnel expenses and variable expenses such
as commissions, higher sports marketing expenses and increased depreciation.
As a percentage of net sales, shipping expenses decreased to 2.9% for the six
months ended June 30, 1998 from 3.0% in the comparable 1997 period. General
and administrative expenses increased $2.1 million to $12.6 million, or 11.4%
of net sales, in the 1998 period from $10.5 million, or 11.7% of net sales,
in the 1997 period. This increase is primarily due to increased personnel
costs and related expenses, including an increase of $0.4 million in the
Company's vacation benefit expense, increased tax and license expense and
greater depreciation and amortization expenses associated with additional
capital equipment and business acquisitions, offset by income in the 1998
period of $0.6 million on the disposal of certain assets. For the six months
ended June 30, 1997, general and administrative expenses included $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
$0.2 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 increased to $21.1 million for the six months
ended June 30, 1998 from $15.7 million for the six months ended June 30,
1997, an increase of $5.4 million. As a percentage of net sales, operating
income increased to 19.0% for the six months ended June 30, 1998 from 17.5%
for the six months ended June 30, 1997. This increase was the result of the
Company's increase in net sales and gross profit margin and slight decrease
in operating expenses as a percentage of net sales. Additionally, the
Company incurred expenses in the 1998 period associated with the start-up of
its new footwear line. As a percentage of net sales, the Company's operating
income excluding footwear start-up costs would have been 20.0% in the 1998
period.
INTEREST EXPENSE, NET
The Company had net interest expense of $0.9 million for the six months ended
June 30, 1998, as compared with net interest expense of $0.4 million for the
comparable 1997 period. Net interest expense for the 1997 period excludes $0.5
million of interest costs which were capitalized in the period as part of the
construction of its new facility.
NET INCOME
The Company's net income increased to $12.5 million for the six months ended
June 30, 1998 from $9.4 million for the six months ended June 30, 1997, an
increase of 33.0%.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations almost entirely with cash
flow generated from operations and borrowings from its credit facilities. Cash
provided by operating activities totaled $20.0 million for the six months ended
June 30, 1998 and $20.2 million for the comparable period of 1997. At June 30,
1998, working capital was $39.7 million. Working capital may vary from time to
time as a result of seasonality, new product introductions 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
June 30, 1998, the Company had an outstanding balance of $1.9 million under such
facility. The Company is currently negotiating an increase in its line of
credit from $30.0 million to $50.0 million and expects the increase to be
completed in August 1998. In August 1997, the Company obtained a term loan
collateralized by the Company's new headquarters. The term loan requires
quarterly principal payments of approximately $380,000 plus interest based on
LIBOR plus 1.15% (6.83% at June 30, 1998) for five years. The then outstanding
balance payable is due in September 2002. At June 30, 1998, the outstanding
balance on the term loan was $21.6 million.
11
<PAGE>
Capital expenditures for the six months ended June 30, 1998 totaled $15.6
million. These expenditures were primarily attributable to the expansion of
the Company's information technology capabilities, facility improvements,
product displays, and footwear production equipment. Other assets increased
to $7.6 million for the six months ended June 30, 1998, primarily due to the
acquisition of an international distributor and certain patented technology.
As of June 30, 1998, the Company had commitments of approximately $5.2
million for future capital purchases.
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.
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, gross and 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, new product introductions and the
Company's international expansion have partially mitigated the impact of
seasonality.
BACKLOG
Historically, the Company has generally shipped domestic orders (other than
preseason orders for ski goggles and apparel and orders from certain sunglass
specialty chains) within one day of receipt and international orders within two
weeks of receipt. At June 30, 1998, the Company had a backlog of $18.0 million,
including backorders (merchandise remaining unshipped beyond its scheduled
shipping date) of $3.3 million as of such date. In September 1997, the Company
implemented changes in its replenishment system with Sunglass Hut, which
affected its reported backlog. Under the new system, in an effort to more
closely match inventory replenishment with Sunglass Hut's sales, certain
high-volume Oakley products are shipped to Sunglass Hut weekly, based on the
previous week's retail sales. As a result, Sunglass Hut no longer places future
shipment orders for these products except in anticipation of major seasonal
sales increases. These changes reduced the Company's reported backlog at
September 30, 1997 and have continued to do so in subsequent periods. These
system enhancements are the result of the joint efforts of the two companies to
achieve the long-term benefits of lower overall inventory levels, while
increasing inventory turns and sales at retail.
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.
YEAR 2000
The Company has established a Year 2000 Project team that is currently reviewing
the internal and external readiness of its computer systems, business practices,
suppliers and customers for handling Year 2000 issues. These issues involve
systems that are date sensitive and may not be able to distinguish 20th century
dates from 21st century dates resulting in miscalculations and software
failures. The Company has developed plans to address internal system
modifications required to minimize the potential problems by December 31, 1999.
Currently in the initial phase, the Company is in the process of identifying all
hardware and software systems within the Company. Included in this group are
systems used in the information technology group as well as non-information
technology systems, such as production equipment that is date sensitive.
Additionally, the Company
12
<PAGE>
is in the process of contacting all of its key external business partners to
determine their extent and plans for Year 2000 compliance.
Based on analysis completed to date, management believes its current staff will
be sufficient to address the Year 2000 issues and that the staff time required
to address these issues should not have an adverse effect on other projects.
Also, the Company recognizes the need for a contingency plan for continued
operations in the case of business interruption and intends to formulate such a
plan in the near future. While the costs related to the Year 2000 issue are not
known at this time, management believes such costs will not have a material
effect on its results of operations or financial condition. However, there can
be no assurance that there will not be a delay in, or increased costs associated
with, the implementation of the necessary systems and changes to address the
year 2000 issues, and the Company's inability to implement such systems and
changes could have an adverse effect on future results of operations. In
addition, the failure of certain of the Company's significant customers or
vendors to appropriately address the year 2000 issue in a timely manner could
have a material adverse effect on the Company.
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 (including the Company's
athletic footwear and watch line); the ability to source raw materials at prices
favorable to the Company; the ability to develop and introduce innovative
products; 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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company and its foreign subsidiaries may enter into derivative financial
instruments, including foreign currency forward exchange contracts, to manage
foreign exchange risk on foreign currency transactions and do not use the
contracts for trading purposes. These financial instruments are used to protect
the Company from the risk that the eventual net cash inflows from the foreign
currency transactions will be adversely affected by changes in exchange rates.
Gains and losses related to hedges of firmly committed transactions are deferred
and recognized when the hedged transaction occurs. Gains and losses resulting
from foreign currency contracts which are not hedges of firmly committed
transactions are recorded each period to the consolidated statement of income.
13
<PAGE>
A summary of exchange contracts is as follows:
<TABLE>
<CAPTION>
June 30, 1998
--------------------------------------------
U.S. Dollar Fair
Equivalent Maturity Value
------------- ------------ ------------
<S> <C> <C> <C>
Forward Contracts:
British Pounds 1,650,000 Oct. 1998 1,681,651
British Pounds 750,000 Jan. 1999 766,447
Option Contracts:
Canadian dollars 2,252,560 Sep. 1998 2,245,356
Canadian dollars 1,979,522 Dec. 1998 1,973,192
Japanese Yen 1,575,758 Sep. 1998 1,499,640
Japanese Yen 1,424,242 Dec. 1998 1,355,443
Japanese Yen 1,424,242 Mar. 1999 1,355,443
French Francs 3,000,000 Sep. 1998 3,051,201
French Francs 2,400,000 Dec. 1998 2,440,961
German Marks 1,800,000 Sep. 1998 1,830,128
German Marks 1,300,000 Dec. 1998 1,321,759
------------- ------------
$ 19,556,324 $ 19,521,221
------------- ------------
------------- ------------
</TABLE>
The Company is exposed to credit losses in the event of nonperformance by
counterparties to its forward exchange contracts but has no off-balance sheet
credit risk of accounting loss. The Company anticipates, however, that the
counterparties will be able to fully satisfy their obligations under the
contracts. The Company does not obtain collateral or other security to support
the forward exchange contracts subject to credit risk but monitors the credit
standing of the counterparties. As of June 30, 1998, each of the contracts was
recorded at fair market value and the resulting gains and losses were recorded
to the consolidated statements of income.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
THE CALIFORNIA SECURITIES ACTIONS
The Company and certain of its officers and directors 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 "Superior 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);
HERSCHEL HARMAN V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB AND JIM
JANNARD, Case No. 773053 (filed December 17, 1996); 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).
By order dated January 30, 1997, the Superior Court ordered that the California
Securities Actions be assigned to the Superior 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 Actions.
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 five 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 that they were
asserting a claim for indemnification under such provisions 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
Actions. Counsel for Merrill Lynch and Alex. Brown subsequently indicated that
this claim for indemnification also applies to attorneys' fees and expenses
incurred in defending the Federal Securities Actions (described below).
The Company and the other defendants filed demurrers to the California
Securities Actions and also filed a motion to stay proceedings in the California
Securities Actions pending the resolution of the Federal Securities Actions
(described below).
15
<PAGE>
On November 14, 1997, the Superior Court (1) sustained the demurrers without
leave to amend with respect to the Company and defendants Link Newcomb, Merrill
Lynch and Alex. Brown on plaintiffs' cause of action for purported violations of
the antifraud provisions of the California Corporations Code; (2) overruled the
demurrer with respect to the Company and defendants Mike Parnell, Link Newcomb
and Jim Jannard, but sustained the demurrer with leave to amend with respect to
defendants Merrill Lynch and Alex. Brown, on plaintiffs' cause of action for
fraud and negligent misrepresentation; and (3) sustained the demurrers with
leave to amend with respect to the Company and each of the other defendants on
plaintiffs' cause of action for unfair business practices and false advertising
in violation of certain provisions of the California Business and Professions
Code. Subsequently, plaintiffs dismissed without prejudice their causes of
action for fraud and negligent misrepresentation and unfair business practices
and false advertising. The only claim remaining in the Superior Court is
plaintiffs' cause of action for purported violations of the antifraud provisions
of the California Corporations Code with respect to defendants Mike Parnell and
Jim Jannard. On April 1, 1998, the Superior Court entered a judgment (the
"Judgment") in favor of the Company and defendants Link Newcomb, Merrill Lynch
and Alex. Brown. On April 15, 1998, plaintiffs filed a notice of appeal from
the Judgment in the Superior Court, which concerns plaintiffs' cause of action
for purported violations of the antifraud provisions of the California
Corporations Code with respect to the Company and defendants Link Newcomb,
Merrill Lynch and Alex. Brown.
On January 22, 1998, the Superior Court denied the motion to stay proceedings in
the California Securities Actions pending the resolution of the Federal
Securities Actions described below. The plaintiffs in the California Securities
Actions have served document requests on the Company and others, and documents
have been produced.
THE FEDERAL SECURITIES ACTIONS
The Company and certain of its officers and directors have been named as
defendants in five putative class action lawsuits (the "Federal Securities
Actions") filed in October, November and December 1997 in the United States
District Court for the Central District of California, Southern Division (the
"District Court"). The cases are captioned:
KENSINGTON CAPITAL MANAGEMENT V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB,
JIM JANNARD, MERRILL LYNCH & CO. AND ALEX. BROWN & SONS INCORPORATED, No.
SACV 97-808 GLT (EEx) (filed October 10, 1997) (the "KENSINGTON CAPITAL
MANAGEMENT Action");
FRANK LISTER, JAMES J. SCOTELLA, RAYMOND E. NEVEAU, JAMES S. LEWINSKI, JACK
ROSENSON AND LEE SPERLING V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB, JIM
JANNARD, MERRILL LYNCH & CO. AND ALEX. BROWN & SONS INCORPORATED, No. SACV
97-809 LHM (EEx) (filed October 10, 1997) (the "LISTER Action");
STUART CHAIT AND MARILYN SCHWARTZ V. OAKLEY, INC., MIKE PARNELL, LINK
NEWCOMB, JIM JANNARD, MERRILL LYNCH & CO. AND ALEX. BROWN & SONS,
INCORPORATED, No. SACV 97-829 AHS (EEx) (filed October 20, 1997) (the
"CHAIT Action");
VAL FICHERA V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB, JIM JANNARD,
MERRILL LYNCH & CO. AND ALEX. BROWN AND SONS INCORPORATED, No. SACV 97-928
GLT (EEx) (filed November 17, 1997 (the "FICHERA Action"); and
YOSEF J. ROSENSHEIN AND HERSHEL HARMAN V. OAKLEY, INC., MIKE PARNELL, LINK
NEWCOMB, JIM JANNARD, MERRILL LYNCH & CO. AND ALEX. BROWN & SONS
INCORPORATED, No. SACV 97-993 AHS (EEx) (filed December 5, 1997 (the
"ROSENSHEIN Federal Action").
The plaintiffs in the KENSINGTON CAPITAL MANAGEMENT and the FICHERA Actions seek
to represent a class of persons who purchased the Company's common stock in the
Secondary Offering and allege
16
<PAGE>
claims for violations of sections 11, 12(a)(2) and 15 of the Securities Act of
1933. The plaintiffs' claims are based on alleged material misstatements and
omissions in the prospectus issued and registration statement filed in
connection with the Secondary Offering regarding the Company's retail
distribution practices, market conditions, new product developments and
extensions of existing product lines, business with Sunglass Hut and quality
control standards. The plaintiffs seek unspecified damages and other relief
against the Company and the other defendants. Plaintiffs in the KENSINGTON
CAPITAL MANAGEMENT Action filed a motion to consolidate that action with the
FICHERA Action, and plaintiffs in the KENSINGTON CAPITAL MANAGEMENT and the
FICHERA Actions filed competing motions to be appointed lead plaintiffs for the
purported plaintiff class and for the selection of lead counsel to the purported
plaintiff class. Plaintiff's motion in the FICHERA Action was later withdrawn.
The plaintiffs in the LISTER and CHAIT Actions and the ROSENSHEIN Federal Action
seek to represent a class of persons who purchased the Company's common stock
between March 22, 1996 and December 5, 1996, including in the Secondary
Offering, and allege claims for violations of sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. 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, earnings
prospects and quality control standards. The plaintiffs seek unspecified
damages and other relief against the Company and the other defendants.
Plaintiffs in the LISTER and CHAIT Actions filed a motion to consolidate the
LISTER and CHAIT Actions and the ROSENSHEIN Federal Action, to appoint certain
persons as lead plaintiffs for the purported plaintiff class and for the
selection of lead counsel to the purported plaintiff class.
On January 26, 1998, the District Court granted the plaintiffs' motions for
appointment of lead plaintiffs and for the selection of lead counsel to the
purported plaintiff classes. The District Court further ordered that all of the
Federal Securities Actions be consolidated for pretrial purposes. On April 3,
1998, plaintiffs filed consolidated amended complaints in the Federal Securities
Actions.
On July 10, 1998, the Company and defendants Mike Parnell, Link Newcomb and Jim
Jannard filed motions to dismiss the Federal Securities Actions. Merrill Lynch
and Alex. Brown also filed motions to dismiss the Federal Securities Actions.
The hearing on the motions to dismiss the Federal Securities Actions is
scheduled for September 28, 1998. To date, no discovery has been taken in the
Federal Securities Actions.
THE CALIFORNIA DERIVATIVE ACTION
The Company has been named as a nominal defendant in a putative derivative
lawsuit against certain of its directors and officers filed in March 1997 in the
Superior Court. The case is captioned BLACKMAN V. JAMES JANNARD, 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 defendants
filed a demurrer to the original complaint in the California Derivative Action,
and the plaintiff subsequently filed an amended complaint. The defendants filed
a demurrer to the amended complaint in the California Derivative Action, and the
Superior Court sustained the demurrer with leave to amend in
17
<PAGE>
September 1997. The plaintiff subsequently filed a second amended complaint in
the California Derivative Action. The defendants then filed a demurrer to the
second amended complaint in the California Derivative Action and the Superior
Court sustained the demurrer without leave to amend on December 19, 1997. On
February 4, 1998, the Superior Court entered a final order of dismissal of the
California Derivative Action. On April 8, 1998, the plaintiff in the California
Derivative Action filed a notice of appeal in the Superior Court.
Although it is too soon to predict the outcome of any of the litigations
described above with any certainty, based on its current knowledge of the facts,
the Company believes that the plaintiffs' claims are without merit and intends
to defend the actions vigorously.
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 and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security-Holders
(a) The Registrant's Annual Meeting of Shareholders was held on June 19, 1998.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934. There was no solicitation in
opposition to the management's nominees as listed in the proxy statement to
elect seven Directors. All such nominees were elected.
(c) The matters voted at the meeting and the results were as follows:
(1) To elect seven Directors to serve as such until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Director #1 - Jim Jannard 60,416,209 364,314 0
Director #2 - Mike Parnell 60,423,369 357,154 0
Director #3 - Link Newcomb 60,422,969 357,554 0
Director #4 - Irene Miller 60,703,769 76,754 0
Director #5 - Orin Smith 60,703,369 77,154 0
Director #6 - Michael Jordan 60,423,369 357,154 0
Director #7 - William Schmidt 60,703,769 76,754 0
</TABLE>
(2) To ratify the selection of Deloitte & Touche LLP to serve as
independent auditors of the Company for the fiscal year ending
December 31, 1998.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
60,655,599 62,002 62,922
</TABLE>
ITEM 5. Other Information
None
18
<PAGE>
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 (2) Amendment No. 1 to the Articles of Incorporation as filed
with the Secretary of State of the State of Washington on
September 26, 1996
10.67 Amended and Restated Consultant Agreement, dated May 12,
1998, between Jim Jannard and Oakley, Inc.
10.68 Amended and Restated Consultant Agreement, dated May 12,
1998, between Mike Parnell and Oakley, Inc.
10.69 Amended and Restated Employment Agreement, dated May 12,
1998, between Link Newcomb and Oakley, Inc.
10.70 Amended and Restated Employment Agreement, dated May 12,
1998, between Thomas George and Oakley, Inc.
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-K of Oakley, Inc. for the year ended
December 31, 1996.
The Company did not file any reports on Form 8-K during the six months ended
June 30, 1998.
19
<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/ LINK NEWCOMB August 10, 1998
- -----------------------
Link Newcomb
Chief Executive Officer
/s/ THOMAS GEORGE August 10, 1998
- -----------------------
Thomas George
Chief Financial Officer
20
<PAGE>
AMENDED AND RESTATED CONSULTANT AGREEMENT
This Consultant Agreement is entered into by and between James H. Jannard
("Jannard") and Oakley, Inc., a Washington corporation ("Oakley") on this 12th
day of May, 1998.
WHEREAS, Jannard is the founder of Oakley and owns Oakley stock of
substantial value and has been employed by Oakley for many years in the capacity
of President;
WHEREAS, the parties previously entered into an Employment Agreement that
expired on July 31, 1997 and a consultant agreement that was executed August 7,
1997;
WHEREAS, the parties desire to amend and restate the August 7, 1997
Consultant Agreement as provided herein;
WHEREAS, Jannard will continue to be an employee and act as President of
Oakley pursuant to an agreement between Oakley and Jannard;
WHEREAS, the parties desire, however, to enter into a Consulting Agreement
and set forth their mutual obligations herein.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, Jannard and Oakley have agreed and do hereby agree as follows:
1. EMPLOYMENT WITH OAKLEY. The parties agree that Jannard will continue
as an employee and President of Oakley on such terms and conditions as the
parties may mutually agree and that said employment will be terminable at will.
2. CONSULTING AGREEMENT. Upon the termination of Jannard's employment
with Oakley for any reason other than death or disability, Oakley shall have the
option, which shall be exercisable by Oakley within 30 days of the effective
date of Jannard's termination with Oakley, to enter into an amendment to this
agreement, reasonably satisfactory to Oakley and Jannard, that further defines
the consulting services which Jannard shall render to Oakley as mutually agreed
upon by Jannard and Oakley. The term of the consulting period under this
Agreement, as so amended, shall begin on the date of exercise (the "Exercise
Date") of the option by Oakley and shall continue until the later of August 1,
2002 and two years from the Exercise Date (such later date, the "Expiration
Date"). In return for said consulting services, Jannard shall be compensated at
the rate of $100,000.00 per year payable in equal bi-weekly installments or at
such other
1
<PAGE>
time or times as Jannard and Oakley shall agree. It is expressly understood
that Jannard's reporting obligations pursuant to this Consulting Agreement
shall be limited to the Chairman of the Board of Directors of Oakley or such
other person as Jannard and Oakley shall agree.
3. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
(a) DEFINITION OF "INVENTIONS". As used herein, the term
"Inventions" shall mean all designs, 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 Jannard, either alone or jointly with others, during the
period of employment or consulting with Oakley (including, without limitation,
all periods of employment with Oakley prior to the effective date) which (A)
relate to the actual or anticipated business, activities, research, or
investigations of Oakley or (B) result directly or indirectly from work
performed by Jannard for Oakley (whether or not made or conceived during normal
working hours or on the premises of Oakley), or (C) which result, to any extent,
from use of Oakley's premises or property, unless in the case of clause (C)
only, (i)Jannard has reimbursed Oakley in an amount equal to the value of the
use of such premises or property (as determined by Oakley based upon Oakley's
all-in cost, which shall include, without limitation, compensation and overhead
expense) and (ii) Oakley approved the use of its premises or property prior to
the use thereof by Jannard.
(b) WORK FOR HIRE. Jannard expressly acknowledges that all copyright
able aspects of the Inventions (as defined below) are to be considered "works
made for hire" within the meaning of the Copyright Act of 1976, as amended (the
"Act"), and that Oakley is to be the "author" within the meaning of such Act for
all purposes. All such copyright able works, as well as all copies of such
works in whatever medium fixed or embodied, shall be owned exclusively by Oakley
as of its creation, and Jannard hereby expressly disclaims any and all interest
in any of such copyright able works and waives any right of DROIT MORALE or
similar rights.
(c) ASSIGNMENT. Jannard acknowledges and agrees that
all Inventions constitute trade secrets of Oakley and shall be the sole property
of Oakley or any other entity designated by Oakley. In the event that title to
any or all of the Inventions,
2
<PAGE>
or any part or element thereof, may not, by operation of law, vest in Oakley, or
such Inventions may be found as a matter of law not to be "works made for hire"
within the meaning of the Act, Jannard hereby conveys and irrevocably assigns to
Oakley, 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 Jannard'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.
Jannard understands that Inventions do not include, and
the obligations set forth above in this Section 3(c) do not apply to, subject
matter that qualifies fully under the provisions of Section 2870 of the
California Labor Code.
(d) PROPRIETARY NOTICES; NO FILINGS; WAIVER OF MORAL RIGHTS. Jannard
acknowledges that all Inventions shall, at the sole option of Oakley, bear
Oakley's patent, copyright, trademark, trade secret, and mask work notices.
Jannard agrees not to file any patent, copyright, or trademark applications
relating to any Invention, except with prior written consent of an authorized
representative of Oakley (other than Jannard).
Jannard 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. Jannard agrees to assist Oakley, or any
party designated by Oakley, promptly on Oakley's request, whether before or
after the termination of employment, however such termination may occur, in
perfecting, registering, maintaining, and enforcing, in any jurisdiction,
Oakley's rights in the Inventions by performing all acts and executing all
documents and instruments deemed necessary or convenient by Oakley, 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 Oakley of all right, title, and
3
<PAGE>
interest in the Inventions or otherwise establishing Oakley's exclusive
ownership rights therein.
ii) Cooperating on the prosecution of patent, copyright,
trademark and mask work applications, as well as in the enforcement of
Oakley'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.
Jannard will be reimbursed for all out-of-pocket costs incurred in
connection with the foregoing, if such assistance is requested by Oakley
after the termination of Jannard's employment. In addition, to the extent
that, after the termination of employment for whatever reason, Jannard's
technical expertise shall be required in connection with the fulfillment of
the aforementioned obligations, Oakley will compensate Jannard at a
reasonable rate for the time actually spent by Jannard at Oakley's request
rendering such assistance.
(f) POWER OF ATTORNEY. Jannard hereby irrevocably appoints Oakley 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 Oakley the full benefit of the assignment provisions set forth above.
(g) DISCLOSURE OF INVENTIONS. Jannard will make full and prompt
disclosure to Oakley of all Inventions subject to assignment to Oakley, and all
information relating thereto in Jannard's possession or under his control as to
possible applications and use thereof.
4. NO VIOLATION OF THIRD-PARTY RIGHTS.
Jannard represents, warrants, and covenants that he:
(a) will not, in connection with his activities hereunder, knowingly
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 Oakley,
use, or induce Oakley to use, any
4
<PAGE>
confidential or proprietary information or documents of others; and
(d) agrees, in connection with any of his activities hereunder 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.
Jannard agrees to indemnify and save harmless Oakley from any loss, claim,
damage, cost or expense of any kind (including without limitation, reasonable
attorney fees) to which Oakley may be subjected by virtue of a breach by Jannard
of the foregoing representations, warranties, and covenants.
5. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
(a) CONFIDENTIALITY. Jannard acknowledges that in his employment as
a consultant hereunder, and during prior periods of employment with Oakley, he
has occupied and will continue to occupy a position of trust and confidence.
Jannard shall not, except as may be required 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 Jannard's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding Oakley. "Confidential Information" shall
mean information about Oakley, its subsidiaries and affiliates, and their
respective clients and customers that is not disclosed by Oakley for financial
reporting purposes and that was learned by Jannard in the course of his
employment by Oakley, 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. Jannard acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
Oakley, and that such information gives Oakley a competitive advantage. Oakley
agrees to (i) deliver or return to Oakley, at Oakley'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 Oakley or prepared by Jannard during the term of his employment by
Oakley and (B) all notebooks and other data relating to research or experiments
or other work conducted by Jannard in the scope of employment or any Inventions
made, created, authored, conceived, or reduced to practice by Jannard, either
alone or jointly with others, and (ii) make full disclosure relating to any
Inventions.
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If Jannard would like to keep certain property, such as material relating
to professional societies or other non-confidential material, upon the
termination of employment with Oakley, he agrees to discuss such issues with
Oakley. Where such a request does not put Confidential Information of Oakley at
risk, Oakley will grant the request. In this regard, Oakley hereby grants
Jannard the right to keep his personal copy of the black "bound books", which
chronicle the financial history of Oakley.
(b) NON-COMPETITION. During the term of his employment and, if Oakley
exercises the option contained in Section 2, through the Expiration Date,
Jannard shall not directly or indirectly, without the prior written consent of
Oakley, 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 Oakley, including any entity engaged in the
design, manufacture and/or distribution of eyewear (each such competitor a
"Competitor of Oakley"); provided, however, that the "beneficial ownership" by
Jannard, 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. It is further expressly agreed that Oakley will
or would suffer irreparable injury if Jannard were to compete with Oakley or any
subsidiary or affiliate of Oakley in violation of this Agreement and that Oakley
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and Jannard further consents and stipulates to the
entry of such injunctive relief in such a court prohibiting Jannard from
competing with Oakley or any subsidiary or affiliate of Oakley in violation of
this Agreement. Jannard and Oakley acknowledge and agree that the business of
Oakley is global in nature, and that the terms of the non-competitive agreement
set forth herein shall apply on a worldwide basis.
(c) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the term of
his employment and, if Oakley exercises the option contained in Section 2,
through the Expiration Date, Jannard shall not, directly or indirectly,
influence or attempt to influence customers or suppliers of Oakley or any of its
subsidiaries or affiliates, to divert their business to any Competitor of
Oakley.
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(d) NON-SOLICITATION OF EMPLOYEES. Jannard recognizes that he
possesses and will possess confidential information about other employees of
Oakley relating to their education, experience, skills, abilities, compensation
and benefits, and inter-personal relationships with customers of Oakley.
Jannard recognizes that the information he possesses and will possess about
these other employees is not generally known, is of substantial value to Oakley
in developing its business and in securing and retaining customers, and has been
and will be acquired by him because of his business position with Oakley.
Jannard agrees that, during the term of his employment and, if Oakley exercises
the option contained in Section 2, through the Expiration Date, he will not,
directly or indirectly, solicit or recruit any employee of Oakley for the
purpose of being employed by him or by any Competitor of Oakley 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
Oakley to any other person.
(e) SURVIVAL OF PROVISIONS. The obligations contained in this
section shall survive the expiration of the consulting agreement hereunder 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 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.
6. FRINGE BENEFITS. As provided in the parties' previous Employment
Agreement, from and after the date of Jannard's termination of employment with
Oakley (including the term of the Consulting Agreement), Jannard shall be
entitled during his lifetime, to full company paid medical and health insurance
for himself and his immediate family at a level no less favorable than that in
effect for the benefit of Oakley's senior executive officers.
7. PRODUCTS. From and after the date of Jannard's termination of
employment with Oakley (including the term of the Consulting Agreement),
Jannard shall be entitled, during his lifetime, to purchase from Oakley, at
employee prices, any and all Oakley products in an annual amount of $25,000.00.
8. HISTORICAL LIBRARY. Under Jannard's direction, Oakley has developed a
library which contains the history of Oakley as a business entity. Included in
this library are discontinued advertising and other marketing materials as well
as product samples from the inception of Oakley to the present. Samples of
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current and future advertisements, other marketing materials and product samples
will be added to this library. Jannard, at his discretion, shall have the right
to retain any or all of this historical library. Jannard shall exercise this
right within a reasonable time following the termination of his employment with
Oakley, or through his agent in the event of his death or disability if either
event occurs during the period of his employment with Oakley.
9. 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 Oakley: Oakley, Inc.
One Icon
Foothill Ranch, CA 92610
ATTENTION: Secretary
Phone: (714) 951-0991
Fax: (714) 951-8326
If to Jannard: James H. Jannard
c/o Oakley, Inc.
One Icon
Foothill Ranch, CA 92610
Phone: (714) 951-0991
Fax: (714) 951-8326
Either party may change such party's address for notices by notice duly given
pursuant hereto.
10. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to Jannard's employment and compensation by Oakley.
11. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its 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 Oakley with or to any other individual or
entity, this Agreement shall, subject to the provisions hereof, be binding upon
and inure to the benefit of such successor and such successor shall discharge
and perform all of the promises, covenants, duties and obligations of Oakley
hereunder.
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12. 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.
13. 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.
14. 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.
15. INDEMNIFICATION. Oakley shall indemnify and hold Jannard harmless for
acts and omissions in his capacity as an officer, director, employee or
consultant of Oakley as provided in the separate written indemnification
agreement between Oakley and Jannard.
IN WITNESS WHEREOF, Oakley has caused this Consulting Agreement to be
executed by its duly authorized officer and Jannard has hereunto signed this
Agreement as of the date first above written.
OAKLEY, INC. JAMES H. JANNARD
- --------------------- -----------------------
BY:
ITS:
9
<PAGE>
AMENDED AND RESTATED CONSULTANT AGREEMENT
This Consultant Agreement is entered into by and between Mike D. Parnell
("Parnell") and Oakley, Inc., a Washington corporation ("Oakley") on this 12th
day of May, 1998.
WHEREAS, Parnell owns Oakley stock of substantial value and has been
employed by Oakley for many years in the capacity of Chief Executive Officer or
Vice-president;
WHEREAS, the parties previously entered into an Employment Agreement that
expired on July 31, 1997 and a consultant agreement that was executed August 1,
1997;
WHEREAS, the parties desire to amend and restate the August 7, 1997
Consultant Agreement as provided herein;
WHEREAS, Parnell will continue to be an employee and act as Vice-Chairman
of Oakley pursuant to an agreement between Oakley and Parnell;
WHEREAS, the parties desire, however, to enter into a Consulting Agreement
and set forth their mutual obligations herein.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, Parnell and Oakley have agreed and do hereby agree as follows:
1. EMPLOYMENT WITH OAKLEY. The parties agree that Parnell will continue
as an employee and Vice-Chairman of Oakley on such terms and conditions as the
parties may mutually agree and that said employment will be terminable at will.
2. CONSULTING AGREEMENT. Upon the termination of Parnell's employment
with Oakley for any reason other than death or disability, Oakley shall have the
option, which shall be exercisable by Oakley within 30 days of the effective
date of Parnell's termination with Oakley, to enter into an amendment to this
agreement, reasonably satisfactory to Oakley and Parnell, that further defines
the consulting services which Parnell shall render to Oakley as mutually agreed
upon by Parnell and Oakley. The term of the consulting period under this
Agreement, as so amended, shall begin on the date of exercise (the "Exercise
Date") of the option by Oakley and shall continue until the later of August 1,
2002 and two years from the Exercise Date (such later date, the "Expiration
Date"). In return for said consulting services, Parnell shall be compensated at
the rate of $100,000.00 per year payable in equal bi-weekly installments or at
such other
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time or times as Parnell and Oakley shall agree. It is expressly understood
that Parnell's reporting obligations pursuant to this Consulting Agreement
shall be limited to the Chairman of the Board of Directors of Oakley or such
other person as Parnell and Oakley shall agree.
3. ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS.
(a) DEFINITION OF "INVENTIONS". As used herein, the term
"Inventions" shall mean all designs, 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 Parnell, either alone or jointly with others, during the
period of employment or consulting with Oakley (including, without limitation,
all periods of employment with Oakley prior to the effective date) which (A)
relate to the actual or anticipated business, activities, research, or
investigations of Oakley or (B) result directly or indirectly from work
performed by Parnell for Oakley (whether or not made or conceived during normal
working hours or on the premises of Oakley), or (C) which result, to any extent,
from use of Oakley's premises or property, unless in the case of clause (C)
only, (i)Parnell has reimbursed Oakley in an amount equal to the value of the
use of such premises or property (as determined by Oakley based upon Oakley's
all-in cost, which shall include, without limitation, compensation and overhead
expense) and (ii) Oakley approved the use of its premises or property prior to
the use thereof by Parnell.
(b) WORK FOR HIRE. Parnell expressly acknowledges that all
copyrightable aspects of the Inventions (as defined below) are to be considered
"works made for hire" within the meaning of the Copyright Act of 1976, as
amended (the "Act"), and that Oakley 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 Oakley as of its creation, and Parnell 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. Parnell acknowledges and agrees that all Inventions
constitute trade secrets of Oakley and shall be the sole property of Oakley or
any other entity designated by Oakley. In the event that title to any or all of
the Inventions,
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<PAGE>
or any part or element thereof, may not, by operation of law, vest in Oakley, or
such Inventions may be found as a matter of law not to be "works made for hire"
within the meaning of the Act, Parnell hereby conveys and irrevocably assigns to
Oakley, 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 Parnell'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.
Parnell understands that Inventions do not include, and
the obligations set forth above in this Section 3(c) do not apply to, subject
matter that qualifies fully under the provisions of Section 2870 of the
California Labor Code.
(d) PROPRIETARY NOTICES; NO FILINGS; WAIVER OF MORAL RIGHTS. Parnell
acknowledges that all Inventions shall, at the sole option of Oakley, bear
Oakley's patent, copyright, trademark, trade secret, and mask work notices.
Parnell agrees not to file any patent, copyright, or trademark applications
relating to any Invention, except with prior written consent of an authorized
representative of Oakley (other than Parnell).
Parnell 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. Parnell agrees to assist Oakley, or any
party designated by Oakley, promptly on Oakley's request, whether before or
after the termination of employment, however such termination may occur, in
perfecting, registering, maintaining, and enforcing, in any jurisdiction,
Oakley's rights in the Inventions by performing all acts and executing all
documents and instruments deemed necessary or convenient by Oakley, 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 Oakley of all right, title, and
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<PAGE>
interest in the Inventions or otherwise establishing Oakley's exclusive
ownership rights therein.
ii) Cooperating on the prosecution of patent, copyright,
trademark and mask work applications, as well as in the enforcement of
Oakley'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.
Parnell will be reimbursed for all out-of-pocket costs incurred in
connection with the foregoing, if such assistance is requested by Oakley
after the termination of Parnell's employment. In addition, to the extent
that, after the termination of employment for whatever reason, Parnell's
technical expertise shall be required in connection with the fulfillment of
the aforementioned obligations, Oakley will compensate Parnell at a
reasonable rate for the time actually spent by Parnell at Oakley's request
rendering such assistance.
(f) POWER OF ATTORNEY. Parnell hereby irrevocably appoints Oakley 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 Oakley the full benefit of the assignment provisions set forth above.
(g) DISCLOSURE OF INVENTIONS. Parnell will make full and prompt
disclosure to Oakley of all Inventions subject to assignment to Oakley, and all
information relating thereto in Parnell's possession or under his control as to
possible applications and use thereof.
4. NO VIOLATION OF THIRD-PARTY RIGHTS.
Parnell represents, warrants, and covenants that he:
(a) will not, in connection with his activities hereunder, knowingly
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 Oakley,
use, or induce Oakley to use, any
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<PAGE>
confidential or proprietary information or documents of others; and
(d) agrees, in connection with any of his activities hereunder 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.
Parnell agrees to indemnify and save harmless Oakley from any loss, claim,
damage, cost or expense of any kind (including without limitation, reasonable
attorney fees) to which Oakley may be subjected by virtue of a breach by Parnell
of the foregoing representations, warranties, and covenants.
5. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
(a) CONFIDENTIALITY. Parnell acknowledges that in his employment as
a consultant hereunder, and during prior periods of employment with Oakley, he
has occupied and will continue to occupy a position of trust and confidence.
Parnell shall not, except as may be required 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 Parnell's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding Oakley. "Confidential Information" shall
mean information about Oakley, its subsidiaries and affiliates, and their
respective clients and customers that is not disclosed by Oakley for financial
reporting purposes and that was learned by Parnell in the course of his
employment by Oakley, 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. Parnell acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
Oakley, and that such information gives Oakley a competitive advantage. Oakley
agrees to (i) deliver or return to Oakley, at Oakley'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 Oakley or prepared by Parnell during the term of his employment by
Oakley and (B) all notebooks and other data relating to research or experiments
or other work conducted by Parnell in the scope of employment or any Inventions
made, created, authored, conceived, or reduced to practice by Parnell, either
alone or jointly with others, and (ii) make full disclosure relating to any
Inventions.
5
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If Parnell would like to keep certain property, such as material relating
to professional societies or other non-confidential material, upon the
termination of employment with Oakley, he agrees to discuss such issues with
Oakley. Where such a request does not put Confidential Information of Oakley at
risk, Oakley will grant the request. In this regard, Oakley hereby grants
Parnell the right to keep his personal copy of the black "bound books", which
chronicle the financial history of Oakley.
(b) NON-COMPETITION. During the term of his employment and, if Oakley
exercises the option contained in Section 2, through the Expiration Date,
Parnell shall not directly or indirectly, without the prior written consent of
Oakley, 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 Oakley, including any entity engaged in the
design, manufacture and/or distribution of eyewear (each such competitor a
"Competitor of Oakley"); provided, however, that the "beneficial ownership" by
Parnell, 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. It is further expressly agreed that Oakley will
or would suffer irreparable injury if Parnell were to compete with Oakley or any
subsidiary or affiliate of Oakley in violation of this Agreement and that Oakley
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and Parnell further consents and stipulates to the
entry of such injunctive relief in such a court prohibiting Parnell from
competing with Oakley or any subsidiary or affiliate of Oakley in violation of
this Agreement. Parnell and Oakley acknowledge and agree that the business of
Oakley is global in nature, and that the terms of the non-competitive agreement
set forth herein shall apply on a worldwide basis.
(c) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the term of
his employment and, if Oakley exercises the option contained in Section 2,
through the Expiration Date, Parnell shall not, directly or indirectly,
influence or attempt to influence customers or suppliers of Oakley or any of its
subsidiaries or affiliates, to divert their business to any Competitor of
Oakley.
(d) NON-SOLICITATION OF EMPLOYEES. Parnell recognizes that he
possesses and will possess confidential information about
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other employees of Oakley relating to their education, experience, skills,
abilities, compensation and benefits, and inter-personal relationships with
customers of Oakley. Parnell recognizes that the information he possesses and
will possess about these other employees is not generally known, is of
substantial value to Oakley in developing its business and in securing and
retaining customers, and has been and will be acquired by him because of his
business position with Oakley. Parnell agrees that, during the term of his
employment and, if Oakley exercises the option contained in Section 2, through
the Expiration Date, he will not, directly or indirectly, solicit or recruit any
employee of Oakley for the purpose of being employed by him or by any Competitor
of Oakley 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 Oakley to any other person.
(e) SURVIVAL OF PROVISIONS. The obligations contained in this
section shall survive the expiration of the consulting agreement hereunder 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 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.
6. FRINGE BENEFITS. As provided in the parties' previous Employment
Agreement, from and after the date of Parnell's termination of employment with
Oakley (including the term of the Consulting Agreement), Parnell shall be
entitled during his lifetime, to full company paid medical and health insurance
for himself and his immediate family at a level no less favorable than that in
effect for the benefit of Oakley's senior executive officers.
7. PRODUCTS. From and after the date of Parnell's termination of
employment with Oakley (including the term of the Consulting Agreement),
Parnell shall be entitled, during his lifetime, to purchase from Oakley, at
employee prices, any and all Oakley products in an annual amount of $25,000.00.
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:
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If to Oakley: Oakley, Inc.
One Icon
Foothill Ranch, CA 92610
ATTENTION: Secretary
Phone: (714) 951-0991
Fax: (714) 951-8326
If to Parnell: Mike D. Parnell
c/o Oakley, Inc.
One Icon
Foothill Ranch, CA 92610
Phone: (714) 951-0991
Fax: (714) 951-8326
Either party may change such party's address for notices by notice duly given
pursuant hereto.
9. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to Parnell's employment and compensation by Oakley.
10. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its 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 Oakley with or to any other individual or
entity, this Agreement shall, subject to the provisions hereof, be binding upon
and inure to the benefit of such successor and such successor shall discharge
and perform all of the promises, covenants, duties and obligations of Oakley
hereunder.
11. 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.
12. 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.
13. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in
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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.
14. INDEMNIFICATION. Oakley shall indemnify and hold Parnell harmless for
acts and omissions in his capacity as an officer, director, employee or
consultant of Oakley as provided in the separate written indemnification
agreement between Oakley and Parnell.
IN WITNESS WHEREOF, Oakley has caused this Consulting Agreement to be
executed by its duly authorized officer and Parnell has hereunto signed this
Agreement as of the date first above written.
OAKLEY, INC. MIKE D. PARNELL
- ------------------------ -------------------------
BY:
ITS:
9
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement"),
effective this 12th day of May, 1998, 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 January 31, 1997 (the "Effective Date"), as
amended effective February 1, 1997, and as further amended effective April 13,
1998 (the "Old Employment Agreement"); and
WHEREAS, Employee and the Company desire to amend and restate in its
entirety the Old Employment Agreement.
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 Executive 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.
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3. COMPENSATION.
(a) BASE SALARY. The Company shall pay Employee an annual base
salary no less than at the rate of $350,000 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 (or the Compensation Committee thereof) in its sole discretion.
(b) 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.
(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
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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 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
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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, unless, in the case of clause (C) only, (i) Employee has
reimbursed the Company in an amount equal to the value of the use of such
premises or property (as determined by the Company based upon the Company's
all-in cost, which shall include without limitation compensation and overhead
expense) and (ii) the Company approved the use of its premises or property prior
to the use thereof by Employee.
(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 right to invoke the benefit of any priority under any international
convention, and all rights to register and renew same. Employee understands
that Inventions do not include, and the obligations set forth above in this
Section 5(c) do
<PAGE>
not apply to, subject matter that qualifies fully under the provisions of
Section 2870 of the California Labor Code.
(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
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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.
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(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 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.
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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 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
<PAGE>
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 Employee's employment is terminated
(i) by the Company without Cause, (ii) by Employee 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.
(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
Employee's employment is terminated (i) by the Company without Cause, (ii) by
Employee 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
<PAGE>
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.
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:
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If to Company: Oakley, Inc.
One Icon
Foothill Ranch, California 92610
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.
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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 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. OLD EMPLOYMENT AGREEMENT SUPERSEDED. The Old Employment
Agreement is hereby amended, restated and superseded in its entirety as of the
date hereof.
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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.
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By:
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Its:
-------------------------
- ------------------------------
R. LINK NEWCOMB
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"),
effective as of this 12th day of May, 1998, is entered into by and between
Thomas A. George ("Employee") and Oakley, Inc., a Washington corporation
("Company").
WHEREAS, Employee and the Company have previously entered into that
certain employment agreement (the "Old Employment Agreement") dated October 6,
1997 (the "Effective Date"); and
WHEREAS, Employee and the Company desire to amend and restate in its
entirety the Old Employment Agreement.
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 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 or the President, Chief Executive Officer or Chief Operating
Officer of the Company, including without limitation responsibility for the
accounting, finance and investor relations functions of the Company. 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 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.
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3. COMPENSATION.
(a) BASE SALARY. The Company shall pay Employee an annual base
salary no less than at the rate of $195,000 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. Commencing January 1, 1998, 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
$80,000. Employee shall not be eligible to receive an annual performance bonus
with respect to the year ending December 31, 1997.
(c) STOCK OPTION GRANT. The Board of Directors of the Company
has determined to grant Employee a stock option (the "Option") to purchase
90,000 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 the Effective
Date (the "Date of Grant"), (iii) have a term of 10 years from the Date of
Grant, (iv) have an exercise price 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.
(d) RELOCATION. As a condition of his employment with the
Company, Employee agrees to relocate his principal residence from San Diego
County to Orange County, California as soon as reasonably practicable. In
accordance therewith, Employee agrees (i) to purchase a home in Orange County
(the "Orange County Residence") as soon as reasonably practicable (but in no
event later than January 31, 1998), (ii) to move his principal residence to the
Orange County Residence as soon as reasonably practicable after the date of such
purchase, and (iii) thereafter to maintain his principal residence in Orange
County throughout the remainder of the Term. In consideration thereof, and to
assist Employee in acquiring the Orange County Residence, Company agrees to
provide Employee with the following relocation benefits:
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i) DATE OF HIRE BONUS. On Employee's first day of work
at the Company, the Company shall pay Employee a one-time cash bonus in the
amount of $10,000.
ii) RELOCATION BONUS. If Employee purchases the Orange
County Residence on or before January 31, 1998 and moves his principal
residence to the Orange County Residence as soon as reasonably practicable
thereafter, then, within five (5) business days following the date Employee
begins permanent residence in the Orange County Residence, the Company
shall pay Employee an additional one-time cash bonus in the amount of
$60,000.
iii) ADVANCE. The Company agrees to provide Employee with
an advance (the "Advance") on his base salary in the amount of $50,000,
such amount to be paid to Employee within five (5) business days following
the date Employee commences employment with the Company. To offset the
Advance, Employee's base salary as set forth in Section 3(a) shall be
reduced on a pro rata basis during the two-year period following the
Effective Date, with the entire remaining amount of the Advance to be
repaid by Employee in full immediately in the event Employee's employment
with the Company is terminated under any circumstances prior to the end of
such two-year period. Employee agrees that the Company shall have the
right to offset the amount of any remaining portion of the Advance against
any severance or other payments or obligations of the Company upon or
following such termination of employment.
iv) HOUSING ALLOWANCE. During the Term, until such time
as Employee no longer reasonably requires a second residence in San Diego
County, California, the Company shall pay Employee a housing allowance in
the amount of $1,500 per month. It is expressly understood that Employee's
requirement of a San Diego residence relates solely to his desire to permit
his existing children to complete their primary education in San Diego
County, and that the housing allowance provided for herein shall terminate
at such time as none of such children is attending junior or senior high
school in San Diego County. Employee agrees to provide the Company timely
notice of any change in circumstances relating to his requirement of a San
Diego residence.
<PAGE>
(e) 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 shall cease as of the date of death. Within ten (10)
days following such death, the Company shall pay to Employee's estate an amount
equal to Employee's then current target bonus under the Performance Bonus Plan,
prorated through 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 (10) days following such termination for Disability, the
Company shall pay Employee an amount equal to one year's base salary plus an
amount equal to Employee's target bonus under the Performance Bonus Plan,
prorated through the date of such termination. 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 (i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company, or (ii) substantial or willful failure to
perform specific and lawful directives of the Board of Directors or the
President, Chief Executive Officer or Chief Operating Officer of the Company
consistent with Employee's employment or (iii) other material breach of this
Agreement by Employee. 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 Em-
<PAGE>
ployee other than for Good Reason, the Company shall have no further obligation
under this Agreement from and after the date of termination. In addition, if
such termination occurs prior to the one year anniversary of the Effective Date,
Employee shall be required to repay to the Company immediately a pro rata
portion of the hiring and relocation bonuses provided for in Sections 3(d)(i)
and (ii) above, such proration to be calculated by multiplying the amount of
such bonuses by a fraction, the numerator of which is the number of days between
the date of such termination and October 6, 1998, and the denominator of which
is 365. For purposes of this Agreement, "Good Reason" shall mean any 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
(x) his base salary for a period equal to the LESSER of twelve months or the
remaining Term of this Agreement (the "Severance Period"), in either case as if
Employee had remained in the Company's employ at an annual rate of compensation
equal to his base salary as of the date of termination, and (y) an amount equal
to the product of (A) Employee's annual target bonus under the Performance Bonus
Plan as in effect at the time of such termination and (B) a fraction, the
numerator of which is the number of full months in the Severance Period, and the
denominator of which is 12.
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 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, unless, in the case of clause (C) only, (i) Employee has
reimbursed the Company in an amount
<PAGE>
equal to the value of the use of such premises or property (as determined by the
Company based upon the Company's all-in cost, which shall include without
limitation compensation and overhead expense) and (ii) the Company approved the
use of its premises or property prior to the use thereof by Employee.
(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 right to invoke the benefit of any priority under any international
convention, and all rights to register and renew same. Employee understands
that Inventions do not include, and the obligations set forth above in this
Section 5(c) do not apply to, subject matter that qualifies fully under the
provisions of Section 2870 of the California Labor Code.
(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.
<PAGE>
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.
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
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 Employee's employment is terminated
(i) by the Company without Cause, (ii) by Employee 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.
(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
Employee's employment is terminated (i) by the Company without Cause, (ii) by
Employee 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.
<PAGE>
(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.
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
<PAGE>
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.
One Icon
Foothill Ranch, California 92610
If to Employee: Thomas A. George
1465 Village View
Encinitas, California 92024
<PAGE>
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. Except as provided in Section
3(d)(iii) hereof, 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 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.
<PAGE>
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. OLD EMPLOYMENT AGREEMENT SUPERSEDED. The Old Employment
Agreement is hereby amended, restated and superseded in its entirety as of the
date hereof.
<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: R. Link Newcomb
Its: Chief Executive Officer
------------------------------
THOMAS A. GEORGE
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
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<PP&E> 112,541
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0
0
<COMMON> 707
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<TOTAL-LIABILITY-AND-EQUITY> 211,747
<SALES> 111,030
<TOTAL-REVENUES> 111,030
<CGS> 40,751
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