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EXHIBIT 10.42
INTELLECTUAL PROPERTY
OPTION AGREEMENT
BY AND BETWEEN
MARK THATCHER,
AN INDIVIDUAL
AND
DECKERS OUTDOOR CORPORATION,
A DELAWARE CORPORATION
Information contained in sections 2.6(a), 2.6(b) and 2.6(c) of this agreement
has been omitted pursuant to a request for confidential treatment and has been
filed separately with the Securities and Exchange Commission.
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TABLE OF CONTENTS
PAGE
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RECITALS 1
ARTICLE 1 DEFINITIONS 1
ARTICLE 2
RIGHT TO PURCHASE 2
2.1 Licensee's Exclusive Right to Purchase 2
2.2 Licensee's Offer Notice 2
2.3 Failure of Licensee to Complete Purchase 2
2.4 Right of Licensor to Purchase 2
(a) Licensor's Purchase of Licensee's Interest 2
2.5 Licensee's Exclusive Right to "Lock-up"Negotiations with Licensor 2
2.6 Purchase Price and Terms 2
(a) Purchase Price of Licensed Intellectual Property During First
Exclusive Option Period 3
(b) Purchase Price of Licensed Intellectual Property During Second
Exclusive Option Period 3
(c) Purchase Price of Licensee's Interest 3
(d) Audit and Verification 3
(e) No Terms 3
2.7 Obligations of Licensor and Licensee 3
(a) Obligations of Licensor 3
(b) Obligations of Licensee 4
2.8 Closing 4
2.9 Termination 4
2.10 Noncompetition by Licensor 4
2.11 Existing Licensing Arrangements 5
2.12 Employment Agreements 5
ARTICLE 3
OTHER PROVISIONS 5
3.1 Severability 5
3.2 Non-waiver 5
3.3 Permission Needed to Assign or Sublicense 5
3.4 Form of Notice to Parties 5
3.5 Notice of Actions Being Brought 6
3.6 Precedence 6
3.7 Survival of Obligations 6
3.8 Integration 6
3.9 Arbitration 7
3.10 Jurisdiction 7
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3.11 Applicable Law 7
3.12 Headings 7
3.13 Remedies Cumulative 7
3.14 Independent Contractor Status 7
3.15 Rights of Licensor's Successors in Interest 7
3.16 Construction 8
3.17 Limitation on Rights of Others 8
3.18 Limitations on Special Damages 8
3.19 Counterparts 8
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT B
EMPLOYMENT AGREEMENT WITH MARK THATCHER
EXHIBIT C
EMPLOYMENT AGREEMENT WITH JOHN KALINICH
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INTELLECTUAL PROPERTY OPTION AGREEMENT
This Intellectual Property Option Agreement (the "Agreement") is made
this 7th day of June, 1999, by and between Mark Thatcher, an individual,
residing at 1245 Cochran Avenue, Flagstaff, Arizona 86001 ("Licensor") and
Deckers Outdoor Corporation, a Delaware corporation with its principal place of
business located at 495-A South Fairview Ave., Goleta, California 93117
("Licensee") with reference to the following facts:
RECITALS
A. Concurrently with the entry into this Agreement, Licensor and
Licensee have entered into that certain Teva License Agreement (the "License
Agreement"), which provides Licensee with a license to use certain Licensed
Intellectual Property (as that term is defined in the License Agreement) owned
by Licensor in connection with the manufacture and sale of footwear under the
Teva(R) brand name.
B. Pursuant to the provisions of the License Agreement, Licensor has
retained all ownership rights in the Licensed Intellectual Property.
C. In connection with its entry into the License Agreement, Licensee
desires to obtain, and Licensor is willing to grant to Licensee on the terms
provided herein, an option to purchase the Licensed Intellectual Property.
NOW, THEREFORE, for and in consideration of the above set forth
recitals, and the mutual covenants hereinafter provided and other good and
valuable consideration, Licensor and Licensee agree as follows:
ARTICLE 1
DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall have
the meanings ascribed to them in the License Agreement.
1.1 "EBITDA" shall mean earnings before interest, taxes, depreciation
and amortization as determined in accordance with generally accepted accounting
practices applied on a consistent basis.
1.2 "Licensee's First Exclusive Option Period" shall mean the period
beginning on January 1, 2000 through and including December 31, 2001.
1.3 "Licensee's Second Exclusive Option Period" shall mean the period
beginning on January 1, 2006 through and including December 31, 2008.
1.4 "Licensee's Interest" shall mean Licensee's entire interest in and
to the License Agreement.
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1.5 "Licensor's Exclusive Option Period" shall mean the period beginning
January 1, 2010 through and including December 31, 2011.
1.6 "Lock-up Period" shall mean the period beginning January 1, 2009
through and including December 31, 2009.
ARTICLE 2
RIGHT TO PURCHASE
2.1 Licensee's Exclusive Right to Purchase. During either the Licensee's
First Exclusive Option Period or the Licensee's Second Exclusive Option Period
and provided that Licensee has remained in compliance with all provisions of the
License Agreement at all times during the Term of the License Agreement,
Licensee shall have the right to purchase from Licensor, and Licensor shall sell
to Licensee, all, but not less than all, of the Licensed Intellectual Property,
at the purchase price and on the terms provided in Section 2.6(a) of this
Agreement.
2.2 Licensee's Offer Notice. The Licensee must first give written notice
("Licensee Notice") to the Licensor of Licensee's exercise of its option to
purchase all of the Licensed Intellectual Property prior to the conclusion of
the Licensee's Exclusive Option Period.
2.3 Failure of Licensee to Complete Purchase. Should Licensee exercise
its purchase option pursuant to this Agreement and subsequently fail to complete
such purchase within the time allotted for Closing pursuant to Section 2.8 of
this Agreement, this Agreement, in its entirety, shall automatically become null
and void, and Licensee shall have no further opportunity to purchase the
Licensed Intellectual Property.
2.4 Right of Licensor to Purchase. If Licensee does not exercise the
purchase option given pursuant to Section 2.1 of this Agreement during
Licensee's Exclusive Option Period, then during the Licensor's Exclusive Option
Period, Licensor may elect to purchase the Licensee's Interest for the purchase
price and on the terms provided in Section 2.6(b) of this Agreement.
(a) Licensor's Purchase of Licensee's Interest. At any time
during the Licensor's Exclusive Option Period, Licensor may deliver to Licensee
a written notice (the "Licensor's Notice") stating the Licensor's intention to
purchase the Licensee's Interest for the purchase price and on the terms
provided in Section 2.6(b) of this Agreement. Licensee shall then be obligated
to sell the Licensee's Interest to Licensor in accordance with this Agreement.
2.5 Licensee's Exclusive Right to "Lock-up" Negotiations with Licensor.
During the Lock-up Period, Licensee has the exclusive right to negotiate with
Licensor to purchase all of Licensor's Licensed Intellectual Property. During
the Lock-up Period, Licensor is prohibited from negotiating with any third
parties or accepting any other purchase offer.
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2.6 Purchase Price and Terms.
(a) Purchase Price of Licensed Intellectual Property During First
Exclusive Option Period. If Licensee is to purchase the Licensed Intellectual
Property during the Licensee's First Exclusive Option Period pursuant to Section
2.1, the purchase price paid for the license on the Intellectual Property shall
be (i) a cash payment in an amount which is the greater of (x) - * - of Net
Sales for all Licensed Products and other Teva products made by Licensee,
Licensor, and any third party (excluding any such sales by Licensee to Licensor
to avoid "double counting") ("Aggregated Net Sales") of the calendar year since
January 1, 2000 (except in the event that Licensee exercises its option to
purchase the Licensor's Intellectual Property during calendar year 2000, in
which event the Aggregate Net Sales for year ending December 31, 1999 shall be
used) with the highest Aggregated Net Sales or (y) - * - ; (ii) - * - shares of
the Licensee's common stock (the "Option Execution Shares"); and (iii) options
to purchase - * - shares of the Licensee's common stock (the "Options") at an
exercise price equal to the average closing price of Licensee's common stock
over the 30 day period prior to Licensee's exercise of its option to purchase
the Licensed Intellectual Property. The Options shall expire on the tenth
anniversary of the purchase of the Licensed Intellectual Property.
(b) Purchase Price of Licensed Intellectual Property During
Second Exclusive Option Period. If Licensee is to purchase the Licensed
Intellectual Property during the Licensee's Second Exclusive Option Period
pursuant to Section 2.1, the purchase price to be paid for the Licensed
Intellectual Property shall be calculated by multiplying (i ) the average of the
Aggregated Net Sales for the two calendar years since January 1, 2000 with the
highest Aggregate Net Sales by (ii) - * -.
(c) Purchase Price of Licensee's Interest. If Licensor is to
purchase the Licensee's Interest pursuant to Section 2.4, the purchase price to
be paid for the Licensee's Interest shall be calculated by multiplying (i) the
average of the EBITDA earned by Licensee under the License Agreement for the two
calendar years since January 1, 2000 with the highest EBITDA by (ii) - * - .
(d) Audit and Verification. The amounts of Net Sales or EBITDA
used for purposes of any calculation pursuant to this Article 2 shall be subject
to audit and verification by an independent certified public accounting firm
selected jointly by Licensor and Licensee, whose determination shall be
conclusive. Licensor and Licensee shall bear equally the cost of any such audit
and verification.
(e) No Terms. Unless otherwise agreed by Licensor and Licensee,
payment of the purchase price for any transfer made pursuant to this Agreement
shall be
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
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by wire transfer of immediately available funds within ninety (90) days of
notice of exercise of such right as directed by the selling party, and the
selling party shall have no obligation to provide terms or financing of the
purchase price.
2.7 Obligations of Licensor and Licensee.
(a) Obligations of Licensor. Should Licensee elect to exercise
any of its rights to purchase the Licensed Intellectual Property from Licensor
pursuant to Article 2 of this Agreement, then upon Licensee's payment of the
Purchase Price to Licensor in accordance with this Agreement, Licensor agrees
that he will execute, acknowledge and deliver any bills of sale, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Licensee, including the Assignment and Assumption
Agreement attached hereto as Exhibit A, and will take any other action
consistent with the terms of this Agreement that may reasonably be requested by
Licensee, for the purpose of selling, conveying and confirming to Licensee, or
reducing to possession, the Licensed Intellectual Property to be sold and
conveyed pursuant to the option granted by this Agreement. If requested by
Licensee, Licensor further agrees to prosecute or otherwise enforce in its own
name for the benefit of Licensee, any claims, rights or benefits that require
prosecution or enforcement in such party's name. Any prosecution or enforcement
of claims, rights or benefits under this Section 2.7 shall be solely at
Licensee's expense, unless the prosecution or enforcement is made necessary by a
breach of this Agreement by Licensor. Upon Licensee's payment of the purchase
price, the License Agreement shall immediately terminate, and neither Licensor
nor Licensee shall have any further obligations under the License Agreement.
(b) Obligations of Licensee.
(i) Should the Licensee elect to exercise its right to
purchase the Licensed Intellectual Property from Licensor during the Licensee's
First Exclusive Option Period, Licensee shall nominate and effect the election
of Licensor. In addition, Licensor shall be entitled to have one additional
person attend meetings of the Board of Directors of Licensee in an ex officio,
advisory, non-voting capacity.
(ii) Should Licensor elect to exercise his right to
purchase the Licensed Intellectual Property from Licensor pursuant to Article 2
of this Agreement, then upon Licensor's payment of the Purchase Price to
Licensee in accordance with this Agreement, the License Agreement shall
immediately terminate, and neither Licensor nor Licensee shall have any further
obligations under the License Agreement.
2.8 Closing. The closing for the purchase of the Licensed Intellectual
Property or the Licensee's Interest shall take place at a mutually acceptable
time at the principal place of business of the Licensor within ninety (90) days
after the receipt of the purchasing party's notice by the selling party.
2.9 Termination. This Agreement shall automatically terminate and all
rights contained herein shall automatically terminate if the License Agreement
is terminated for
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any reason, or if the License Agreement is not renewed at the end of the initial
term, any Renewal Term, or any Annual Period.
2.10 Noncompetition by Licensor. Following a purchase of Licensed
Intellectual Property pursuant to this Agreement, during the time period during
which Licensor is an employee of Licensee and two years thereafter, Licensor
agrees not to engage in Competitive Activity or to perform the same or similar
services as rendered hereunder for any person or entity other than Licensee, and
not to take any employment or engagement in which Licensor would reasonably be
expected to call upon, use or disclose any rights hereby licensed unless, prior
to proposing to perform such services or take such employment, Licensor shall:
(a) provide written notice to Licensee identifying all parties and locations
involved; and (b) respond in writing, with particularity, to any written inquiry
by Licensee mailed within ten (10) calendar days of receipt of said written
notice regarding the presence or absence of particular features or concepts in
the proposed services or employment; and (c) deliver to Licensee a written
certification signed by Licensor that no Confidential Information shall be
disclosed or used, and that Licensor's activities shall not violate any
provision of this Agreement.
2.11 Existing Licensing Arrangements. Licensee acknowledges and agrees
that Licensor may enter into non-footwear license arrangements while this
Agreement is in effect and that the purchase of the Licensed Intellectual
Property pursuant to this Agreement shall be effected subject to licensing
arrangements Licensor has entered into as of the date of purchase pursuant to
this Agreement.
2.12 Employment Agreements. Upon purchase of the Licensed Intellectual
Property pursuant to this Agreement, Licensee shall execute five year employment
agreements with Mark Thatcher and John Kalinich in the form attached hereto as
Exhibit B and Exhibit C, respectively.
ARTICLE 3
OTHER PROVISIONS
3.1 Severability. If any provision or any portion of this Agreement
shall be construed to be illegal, invalid or unenforceable, such provision shall
be deemed stricken and deleted from this Agreement to the same extent and effect
as if never incorporated herein. All other provisions of this Agreement and
remaining portion of any provision which is not found to be illegal, invalid or
unenforceable in part shall continue in force and effect.
3.2 Non-waiver. No waiver, modification or cancellation of any term or
condition of this Agreement shall be effective unless executed in writing by the
party charged therewith. No written waiver shall excuse the performance of any
acts other than those specifically referred to herein. Licensee specifically
acknowledges and agrees that the prior forbearance in respect of any act, term
or condition shall not prevent Licensor from subsequently requiring full and
complete compliance thereafter.
3.3 Permission Needed to Assign or Sublicense. Licensee shall not assign
or
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sublicense this Agreement or any interest therein, or any part of this Agreement
without Licensor's prior written consent. However, Licensor may assign its
rights and obligations under this Agreement to any successor without the consent
of Licensee, so long as such successor agrees to be liable for any obligations,
financial or otherwise, arising from this Agreement.
3.4 Form of Notice to Parties. All notices hereunder shall be in writing
and given by registered mail, traceable overnight express mail such as Federal
Express, facsimile, cable or telex addressed to the parties at the addresses
recited in this Agreement or to such other address of which either party shall
advise the other in writing. Notices will be deemed given on the date it is
sent.
If to Licensor: Mark Thatcher
P.O. Box 968
Flagstaff, AZ 86002
Facsimile (520) 779-6004
With copies to: George H. Lyons, Esq.
Snell & Wilmer
One Arizona Center
Phoenix, AZ 85004
Facsimile (602) 382-6070
John Kalinich
Teva Sport Sandals, Inc.
P.O. Box 968
Flagstaff, Arizona 86002
Facsimile (520) 779-6004
If to Licensee: Douglas B. Otto
Decker Outdoor Corporation
495-A South Fairview Avenue
Goleta, California 93117
Facsimile (805) 967-7862
With copies to: Joseph E. Nida, Esq.
Nida & Maloney, P.C.
800 Anacapa Street
Santa Barbara, California 93101
Facsimile (805) 568-1955
3.5 Notice of Actions Being Brought. Each party agrees to notify the
other party immediately upon the commencement of any actions brought against a
party whose outcome may affect the rights of the other party granted herein or
under the License Agreements, and such other party shall have the right at its
own expense to appear and defend such actions.
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3.6 Precedence. In the event of conflict between the terms of this
Agreement and any other document, the terms of this Agreement shall govern,
unless such other document expressly purports to modify this Agreement, and is
signed by Licensor and Licensee.
3.7 Survival of Obligations. The provisions of this Agreement, which by
their very nature survive final acceptance under this Agreement shall remain in
full force and effect after such termination.
3.8 Integration. This Agreement represents the entire agreement between
the parties respecting the subject matter hereof and supersedes all prior
discussions, agreements and understandings of every kind and nature between
them. No modification of this Agreement will be effective unless in writing,
expressly purporting to modify this Agreement and signed by the party against
whom enforcement is sought.
3.9 Arbitration. All disputes, controversies and claims arising out of
or relating to this Agreement or concerning the respective rights or obligations
hereunder of the parties hereto except disputes, controversies and claims
relating to this Agreement shall be settled and determined by arbitration in
Phoenix, Arizona before the American Arbitration Association in accordance with
and pursuant to the then existing Arbitration Rules. The arbitrators shall have
the power to award fees and expenses to any party in any such arbitration and
the courts shall have similar power with regard to injunctive relief sought by
Licensor pursuant to Article 9 of the License Agreements. However, in any
arbitration proceeding arising under this Agreement, the arbitrators shall not
have the power to change, modify or alter any express condition, term or
provision hereof in any respect, and to that extent the scope of their authority
is expressly limited. The arbitration award shall be final and binding upon the
parties and judgment thereon may be entered in any court having jurisdiction
thereof. The service of any notice, process or motion or other document in
connection with an arbitration under this Agreement or for the enforcement of
any arbitration award hereunder may be effectuated in the manner in which
notices are to be given to a party pursuant to this Agreement.
3.10 Jurisdiction. In the event that a court action becomes necessary,
the Licensor and Licensee consent to the jurisdiction of the courts of the State
of Arizona, including all Arizona State Courts and all Federal Courts of the
State of Arizona.
3.11 Applicable Law. This Agreement will be construed in accordance with
the laws of the State of Arizona.
3.12 Headings. The headings of the Articles of this agreement are for
convenience only and shall in no way limit or affect the term or conditions of
this Agreement.
3.13 Remedies Cumulative. All remedies available under the law and/or
this Agreement for breach of this Agreement are cumulative and may be exercised
concurrently or separately, and the exercise of any remedy shall not be deemed
an election of such remedy to the exclusion of other remedies.
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3.14 Independent Contractor Status. It is expressly understood that
Licensee and Licensor are contractors independent of one another, and that
neither has the authority to bind the other to any third person or otherwise to
act in any way as the representative of the other, unless otherwise expressly
agreed to in a writing signed by both parties hereto. Licensor and Licensee
shall each maintain complete control over their respective employees and all of
their respective subcontractors and assume liability for such actions as would
occur under the terms of this Agreement.
3.15 Rights of Licensor's Successors in Interest. The rights of Licensor
and the obligations of Licensee under this Agreement shall inure to the benefit
of Licensor's nominees, successors and assigns.
3.16 Construction. This Agreement has been submitted to the scrutiny of,
and has been negotiated by, all parties hereto and their counsel, and shall be
given a fair and reasonable interpretation in accordance with the terms hereof,
without consideration or weight being given to its having been drafted by any
party hereto or its counsel.
3.17 Limitation on Rights of Others. This Agreement is entered into
between the parties for the exclusive benefit of the parties. This Agreement is
not intended for the benefit of any creditor of any party or any other person.
Except to the extent provided by applicable statute, and then only to that
extent, no third party shall have any rights under this Agreement.
3.18 Limitations on Special Damages. Except as provided herein, no party
shall be liable to any other party by reason of this Agreement or for any
damages arising out of any breach or termination of this Agreement, for any
incidental, consequential, indirect, punitive, exemplary or special damages
whether arising out of tort (including negligence), product liability, or
otherwise, and whether or not such party has been advised of the possibility of
such damage for any loss of prospective profits or incidental or special or
consequential damages.
3.19 Counterparts This Agreement may be executed in any number of
counterparts, each of which sall be deemed an original, but all of which shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above.
LICENSOR:
/s/ Mark Thatcher
--------------------------------
Mark Thatcher
LICENSEE:
DECKER OUTDOOR CORPORATION,
a Delaware corporation
/s/ Peter Benjamin
--------------------------------
By: Peter Benjamin
Its: Chief Operating Officer
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