OPTION PURCHASE AGREEMENT EXHIBIT 10.41
By and Between
ERIC MEYER
DECKERS OUTDOOR CORPORATION
SIMPLE SHOES, INC.
and
PHILLIPSBURG, LTD.
Table of Contents
Page
1. Purchase of Meyer Option 1
2. Effective Date 1
3. Purchase Price 1
4. Payment of Purchase Price 1
5. Meyer's Representations and Warranties 2
6. Companies' Representations and Warranties 3
7. Resignation by Meyer 3
8. Consulting Agreement 3
9. Repayment of Meyer Loan 4
10. Covenant Not to Compete 4
11. Conditions of Closing 4
12. Use of Meyer's Name and Endorsements 4
13. Complete and Full General Release of All Claims 4
14. Arbitration and Attorneys' Fees 5
15. Successors 5
16. Injunctive Relief 5
17. Entire Agreement 5
18. Notices 5
19. No Third Party Beneficiaries 5
20. Captions 6
21. Severability 6
22. Counterparts 6
23. Advice of Counsel 6
24. Simple Footwear 6
Exhibits
Exhibit A - Non-Competition Provisions
Exhibit B - License Agreement
OPTION PURCHASE AGREEMENT
THIS OPTION PURCHASE AGREEMENT (the "Agreement") is made and
entered into on the date hereinafter set forth by and between ERIC MEYER
("Meyer"), DECKERS OUTDOOR CORPORATION ("Deckers") and SIMPLE SHOES,
INC. ("Simple") and PHILLIPSBURG, LTD. ("Phillipsburg") (Deckers, Simple
and Phillipsburg are collectively, the "Companies").
WHEREAS:
A. The parties hereto are parties to that certain agreement
dated December 14, 1992 entitled "Investment and Shareholders Agreement"
(the "Original Agreement"), which was amended by a First Amendment to
Investment and Shareholders Agreement dated June 30, 1993 (the "First
Amendment"), and was subsequently amended by a Second Amendment to
Investment and Shareholders Agreement dated January 1, 1994 (the "Second
Amendment"). The Second Amendment contains a stock option in favor of
Meyer to acquire up to ten percent (10%) of the shares of Simple (the
"Meyer Option"). The Original Agreement and the First Amendment and the
Second Amendment will hereinafter be collectively referred to as the
"Meyer Agreement";
B. Deckers wishes to purchase from Meyer, and Meyer wishes to
sell to Deckers, the Meyer Option;
C. Phillipsburg is a wholly-owned Hong Kong based subsidiary of
Simple which is used to source Simple products; and
D. The parties hereto also wish to terminate and cancel the
Meyer Agreement upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and promises,
warranties and representations herein contained, it is agreed as
follows:
1. Purchase of Meyer Option. The Meyer Option is hereby
purchased from Meyer by Deckers as provided below (the "Purchase"), and
the Meyer Agreement is hereby cancelled and superseded by the terms of
this Agreement.
2. Effective Date. The effective date of the Purchase
will be as of January 1, 1996 (the "Effective Date").
3. Purchase Price. The purchase price (the "Purchase
Price") will be TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000),
less the sum of THREE HUNDRED THOUSAND DOLLARS ($300,000), which is the
Meyer Option exercise price (the "Exercise Price").
4. Payment of Purchase Price. The Purchase Price will be
paid in two (2) installments, without interest, as follows:
(a) ONE MILLION TWO HUNDRED FIFTY THOUSAND
DOLLARS ($1,250,000) upon the completion of all of the conditions set
forth below and subject to the reduction and set-off for the loan
described in Paragraph 9. hereof, less ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000) for one-half (1/2) of the Exercise Price; and
(b) ONE MILLION TWO HUNDRED FIFTY THOUSAND
DOLLARS ($1,250,000), less ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000)
for one-half (1/2) of the Exercise Price on January 1, 1997.
Should any portion of the Purchase Price be unpaid when due,
and remain unpaid for a period of five (5) business days, then the
entire balance will be immediately due and payable, and interest will
accrue from the date of the default until payment thereof at the highest
rate permitted by law not exceeding ten percent (10%) per annum. Until
the Purchase Price is paid in full, Deckers grants to Meyer a security
interest in the Meyer Option to secure the payment of the Purchase Price
(the "Meyer Security Interest"), which will be automatically
subordinated to any security interest of any financial institution
which has provided financing to Deckers. Meyer will execute any
subordination agreements required by Deckers' lender(s) within ten (10)
days of a written request by Deckers, and should he fail to do so, he
irrevocably appoints Deckers as his attorney-in-fact to execute such
subordination agreement(s).
Meyer will be responsible for the payment of all income
taxes which will be due by him related to these payments, plus the
consulting payments in Paragraph 7. below, and Meyer will indemnify and
hold harmless the Companies from and against any and all liabilities,
losses, claims, causes of actions, penalties, interest and attorneys'
fees and costs incurred in connection with any income tax penalties or
interest due by Meyer. The Companies will be responsible for the
payment of their own income taxes and will indemnify and hold harmless
Meyer from and against any and all liabilities, losses, claims, causes
of action, penalties, interest and attorneys' fees and costs incurred in
connection with any income tax penalties or interest due by the
Companies.
5. Meyer's Representations and Warranties. Meyer hereby
represents and warrants that:
(a) He owns the entire interest in the Meyer Option
and he may convey the Meyer Option to Deckers, free and clear of any
liens or encumbrances;
(b) He is not restrained by any contracts or
agreements, or any other restrictions, from performing his obligations
hereunder, except to the extent of his agreements with the Companies.
(c) He has made his own determination, independent
of Deckers or Simple, to enter into this Agreement, and he acknowledges
that neither Deckers nor Simple have made any warranties or
representations regarding the fairness of the Purchase Price
or the future performance of Simple or Phillipsburg, and he has entered
into this Agreement with full knowledge of all facts relating to Simple
and Phillipsburg.
Meyer will indemnify and hold harmless Deckers and Simple from and
against any and all liabilities, losses, claims, causes of actions,
penalties, interest and attorneys' fees and costs incurred in connection
with the breach of these warranties.
6. Companies' Representations and Warranties. The
Companies hereby represent and warrant that:
(a) They are not restrained by any contracts or
agreements, or any other restrictions, from performing their obligations
hereunder, except to the extent of their agreements with Meyer.
(b) They have made their own determination,
independent of Meyer, to enter into this Agreement, and they acknowledge
that Meyer has not made any warranties or representations regarding the
fairness of the Purchase Price or the future performance of the
Companies, and they have entered into this Agreement with full knowledge
of all facts relating to the Companies.
The Companies will indemnify and hold harmless Meyer from and
against any and all liabilities, losses, claims, causes of actions,
penalties, interest and attorneys' fees and costs incurred in connection
with the breach of these warranties.
7. Resignation by Meyer. Effective January 1, 1996, as
part of this transaction, Meyer resigns as President and a Director of
Simple, and as President and a Director of Phillipsburg. Meyer will be
paid his accrued and unpaid bonus and vacation time and expense
reimbursement for 1995.
8. Consulting Agreement. Meyer agrees to a three (3)
year Consulting Agreement as an independent contractor with Simple, at a
fee of TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($225,000) per year
commencing January 1, 1996, payable in equal monthly installments.
These payments will be in addition to the Purchase Price. Meyer will
provide consulting services for advertising, marketing, brand image,
strategic planning, pricing and product line design, development and
extension. Meyer will be available from time to time, to the
executive staff of the Companies, whether in person, by telephone or by
telefax, and upon reasonable notice of a request. Any required
international travel will only occur upon mutual agreement. Meyer is
expected to render meaningful services for these payments and the
Consulting Agreement may be modified by either party after December 31,
1996 upon thirty (30) days' written notice to cover only consulting
services for advertising, marketing and brand image in return for a
modified fee of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000) per
year payable in equal monthly installments. Meyer may have other
business ventures, including, but not limited to, his auto parts
business which do not conflict with his obligations in this paragraph
and paragraph 10. hereof. There will be no other fringe benefits
payable to Meyer as a consultant, but Meyer will be entitled to
reimbursement of the Companies' approved expenses incurred by him
for travel, his home telefax, home/business telephone and business
cellular telephone. Notwithstanding the foregoing, the Consulting
Agreement may be terminated, with "cause," by either party hereto by
giving the other party thirty (30) days' prior written notice. As used
herein, "cause" shall mean the continued failure to perform the duties
and obligations of this Paragraph 8 and of Paragraph 10. after written
notice from the other party, a breach of a material term of this
Paragraph 8 or Paragraph 10 which is not cured within thirty (30) days
of written notice by the other party, or Meyer's death or permanent
disability. If there is any termination of the Consulting Agreement by
either party, it shall not affect the purchase by Deckers of the Meyer
Option or the royalties paid under the License Agreement described in
Paragraph 12.
9. Repayment of Meyer Loan. Meyer agrees that Deckers
may reduce and set-off against the first installment of the Purchase
Price the loan to Meyer in the principal amount of THREE HUNDRED
SEVENTY-FIVE THOUSAND DOLLARS ($375,000) which is currently due from
Meyer to Deckers, and, upon the payment thereof, Deckers agrees to
surrender any notes in its possession reflecting said loan.
10. Covenant Not to Compete. In consideration of the
foregoing, Meyer hereby agrees and does hereby ratify and confirm his
existing non-competition agreement, through December 31, 1998, which is
attached hereto as Exhibit A.
11. Conditions of Closing. The parties hereto agree that
this Agreement is conditioned upon receipt and execution of any further
documents required to implement the foregoing, but which do not negate
the parties' agreements hereunder.
12. Use of Meyer's Name and Endorsements. Meyer hereby
agrees that Simple may continue to use his name until December 31, 1998
pursuant to the License Agreement attached hereto as Exhibit B.
13. Complete and Full General Release of All Claims. Each
of the parties hereby unconditionally releases and forever discharges
the other party, their officers, directors, employees, agents and
insurers of and from any and all claims, actions, causes of action,
rights, demands, attorney's fees, wages, debts or damages of every kind
or nature whatsoever, whether known or unknown, arising out of,
resulting from or relating in any way to any acts or events occurring on
or before the date of execution of this Agreement. This release shall
not apply to the obligations set forth in this Agreement or the
attachments hereto.
EACH PARTY HERETO ALSO KNOWINGLY WAIVES THE PROVISIONS OF
SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, WHICH READS:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Notwithstanding the above stated provisions of Section 1542
and for the purpose of implementing a full and complete release, each
party hereto expressly acknowledges that this Agreement is specifically
intended to include in its effect, without limitation, all claims which
either party hereto does not know or suspect to exist in their favor at
the time of execution hereof, and contemplates the extinguishment of any
such claims.
14. Arbitration and Attorneys' Fees. In the event of any
dispute arising out of the enforcement, terms, breach or interpretation
of this Agreement, the parties agree that, except for the breach by
Meyer of the covenant not to compete and/or the violation by the
Companies of any of the terms of the License concerning or relating to
the Licensor's Name, in which case Paragraph 16 hereof may also apply,
their sole recourse is to pursue final and binding arbitration pursuant
to the rules of the American Arbitration Association for contract
disputes before one arbitrator. The prevailing party will be entitled
to full reimbursement for expenses and attorneys fees' incurred in
connection therewith. The arbitration is to be held in Santa Barbara,
California. Both parties waive the right to trial by jury.
15. Successors. This Agreement shall be binding upon each
party and their heirs, representatives, successors, and assigns, and
shall be for the benefit of the other party and their stockholders,
predecessors, successors, assigns, agents, directors, officers,
employees, affiliated and all persons acting by, through, under or in
concert with any of them, and each of them, and to their heirs,
representatives, successors, and assigns.
16. Injunctive Relief. Each of the parties hereto
acknowledges that the remedy at law for any breach of the provisions of
this Agreement will be inadequate and, accordingly, each of them
covenants and agrees that, with respect to any such breach, the non-
breaching party, in addition to any other rights or remedies that it may
have and regardless of whether such other rights or remedies have been
previously exercised, will be entitled to such injunctive relief as may
be available.
17. Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior and simultaneous agreements,
representations, warranties, statements and understandings, whether oral
or written, with respect to the subject matter hereof.
18. Notices. All notices, demands, elections, or requests
provided for or permitted to be given pursuant to this Agreement must
be in writing. All notices, demands, elections and requests shall be
deemed to have been duly given on the date delivered personally or on
the date of receipt if sent by overnight delivery services, facsimile
transmission, or registered or certified U.S. Mail with return receipt
requested, to the addresses set forth on the signature page hereof, or
such other addresses as may be subsequently designated in writing and
delivered to the other parties hereto.
19. No Third Party Beneficiaries. Nothing contained in
this Agreement is intended to and nothing contained herein shall be
interpreted to confer on any party not a party hereto or a successor or
assign thereof the rights of a third party beneficiary. Provided,
however, that in the event of Meyer's death, any unpaid portions of the
Purchase Price and the License will be made to his wife, Cynthia, or if
she is not then alive, to his heirs.
20. Captions. All section titles or captions contained in
this Agreement or in any schedule or exhibit annexed hereto or referred
to herein are for convenience only, shall not be deemed part of this
Agreement and shall not afflict the meaning or interpretation of this
Agreement. All references herein to sections shall be deemed references
to such parts of this Agreement, unless the context shall otherwise
require.
21. Severability. If any provision of this Agreement or
the application thereof to any person or circumstances shall be held to
be invalid or unenforceable to any extent, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
22. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
23. Advice of Counsel. Meyer represents that he has
sought the advice of his independent counsel, Charles Ogle, prior to
executing this Agreement, and Meyer acknowledges that Nida & Maloney has
acted as counsel to Deckers, Simple and Phillipsburg in the preparation
of this Agreement.
24. Simple Footwear. During the term of the Consulting
Agreement and twenty (20) years thereafter, Meyer will be entitled,
without charge, to SEVEN HUNDRED DOLLARS ($700) worth of Simple
merchandise each year at wholesale if Simple products are being produced
by the Companies.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this fourth day of April, 1996.
MEYER:
/s/ ERIC MEYER
Address:
1560 Oramas Road
Santa Barbara, CA
DECKERS:
DECKERS OUTDOOR CORPORATION
By: /s/ Diana M. Wilson
Title: Chief Operating and Financial Officer
Address:
1140 Mark Avenue
Carpinteria, CA 93013
SIMPLE:
SIMPLE SHOES, INC.
By: /s/ Diana M. Wilson
Title: Chief Operating and Financial Officer
Address:
1140 Mark Avenue
Carpinteria, CA 93013
(Signatures continued on next page)
PHILLIPSBURG:
PHILLIPSBURG, LTD.
By: /s/ Diana M. Wilson
Title: Chief Operating and Financial Officer
Address:
c/o Deckers Outdoor Corporation
1140 Mark Avenue
Carpinteria, CA 93013
Consent of Joinder
of Spouse
I hereby consent to and join in the terms of Sections 1 through 4
and 13 through 23 of this Agreement.
Date: April 4, 1996
/s/ CYNTHIA MEYER