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EXHIBIT 10.41
CONTINGENT PRICE AGREEMENT
THIS CONTINGENT PRICE AGREEMENT (this "Agreement") is made as of this 14th
day of May 1997, by and between GARGOYLES ACQUISITION CORPORATION II, a
Washington corporation ( "Purchaser") and wholly-owned subsidiary of Gargoyles,
Inc. ("Guarantor"), on the one hand, and THE PRIVATE EYES SUNGLASS CORPORATION,
a Massachusetts corporation ("Seller"), on the other hand.
RECITALS
A. Seller owns and operates a business that designs, distributes and
sells sunglasses and related products (the "Business") from its company
headquarters located in Norwell, Massachusetts.
B. Seller and Purchaser are parties to that certain Asset Purchase and
Sale Agreement of even date herewith (the "P&S Agreement") under which Seller
has agreed to sell substantially all the assets used in the operation of its
Business to Purchaser.
C. This Agreement is delivered in connection with the P&S Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the P&S Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
of the parties set forth herein, the parties hereto hereby agree as follows:
1. Definitions. The following capitalized terms used herein shall have
the meanings ascribed to them below:
"Equitably Adjusted" means an adjustment to Gross Margin, Net Sales
and/or the Contingent Price which may be agreed between Seller and Purchaser as
required under the circumstances.
"Force Majeure" means any failure to perform an obligation due to
causes beyond the obligor's control, including but not limited to, work
stoppages, fire, civil disobedience, embargo, war, riots, rebellions,
earthquakes, strikes, floods, water and the elements, acts of God or similar
occurrences.
"Gross Margin" means a fraction, the numerator of which is Net Sales
less cost of sales, including direct costs of the Products, cases, direct labor,
if any, and an allocation of spoilage and reserve consistent with the treatment
by
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Gargoyles, Inc. and its subsidiaries, which shall be no greater than such
spoilage and reserve maintained by Seller during its 1996 fiscal year, and the
denominator of which is Net Sales.
"Net Sales" means the actual invoice price for Products less trade
and cash discounts, sales or similar transaction taxes, if any, freight charges
if not separately invoiced, and returns and allowances.
"Products" means sunglasses, eyewear, accessories and related
products sold in connection with the operation of the Business. If as a result
of a corporate reorganization by Guarantor the product lines currently sold from
the Business, including but not limited to, the Xxxxx Xxxxx, Xxxxxxxxxx Xxxxx
and Private Eyes product lines, are transferred to Guarantor or to another one
of its subsidiaries, the products in such product lines shall be deemed to be
products sold in connection with the operation of the Business for purposes of
this Agreement.
2. Contingent Payments.
2.1 Net Sales Before September 30, 1997. If the combined Net Sales
of Product by Seller or Purchaser in the Business from October 1, 1996 through
September 30, 1997 are at least 8.8 Million Dollars and the Gross Margin for the
Product is not less than the Gross Margin for Seller's Product in Seller's
fiscal year ended September 30, 1996, then Purchaser shall pay to Seller the sum
of Five Hundred Thousand Dollars ($500,000).
2.2 Net Sales in Annual Year 1997. If the combined Net Sales of
Product by Seller and Purchaser from the Business from January 1 to December 31,
1997 are at least 9.5 Million Dollars and the Gross Margin for the Product is
not less than the Gross Margin for Seller's Product in Seller's fiscal year
ended September 30, 1996, then Purchaser shall pay to Seller the sum of Five
Hundred Thousand Dollars ($500,000).
2.3 Net Sales in Annual Year 1998. If the Net Sales of Product by
Seller and Purchaser from the Business from January 1 to December 31, 1998 are
at least 11.9 Million Dollars and the Gross Margin for the Product is not less
than the Gross Margin for Seller's product in Seller's fiscal year ended
September 30, 1996, then Purchaser shall pay to Seller the sum of Five Hundred
Thousand Dollars ($500,000).
2.4 Net Sales in Annual Year 1999. If the Net Sales of Product by
Seller and Purchaser from the Business from January 1 to December 31, 1999 are
at least 14.9 Million Dollars and the Gross Margin for the Product is not less
than the Gross Margin for Seller's product in Seller's fiscal year ended
September 30, 1996, then Purchaser shall pay to Seller the sum of Five Hundred
Thousand Dollars ($500,000).
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All payments to be made by Purchaser under this Section 2 shall be referred to
herein as the "Contingent Payments", and the Net Income and Gross Margin targets
described in this Section 2 shall be referred to herein as the "Goals".
3. Time and Manner of Payment. Contingent Payments shall be calculated
within forty-five (45) days after the end of any period for which Contingent
Payments may be payable. Contingent Payments shall be made by Purchaser to
Seller within 10 days of calculation of the Net Sales and Gross Margin for any
applicable period and shall be sent by wire transfer to an account to be
specified by Seller. If Purchaser fails to make Contingent Payments when due,
delinquent amounts shall bear interest at the Massachusetts statutory default
rate of interest per annum from the date of default until such default is cured.
Breach of Purchaser's obligation to make any Contingent Payments when due shall
be deemed a material breach hereunder, and Seller may submit the matter to
arbitration pursuant to the terms of Section ___ of the P&S Agreement.
4. Acceleration of Payments. Any Contingent Payments due but not yet
paid or not yet due and payable under the terms of this Agreement shall be fully
accelerated and shall be due and payable in full upon the occurrence of any of
the following events:
(a) If substantially all the assets of Purchaser are sold;
(b) If the Business of Purchaser existing as of the closing of the
P&S Agreement, including sales of Products, whether sold by Purchaser or by
Guarantor or one of its subsidiaries, is terminated; or
(c) The employment of Xxxxxxxx Xxxxx and/or Xxxxxxx X. Xxxxxx, Xx.
is terminated without cause prior to December 31, 1999.
5. Equitable Adjustment. There shall be an Equitable Adjustment upon
the occurrence of any of the following events:
(a) If the Xxxxxxxxxx Xxxxx License Agreement is terminated
without the fault of Xxxxxxx X. Xxxxxx, Xx. and/or Xxxxxxxx Xxxxx; or
(b) If Purchaser, Guarantor, or Xxxxx Xxxxx, Inc., is unable to
perform an obligation under this Agreement due to an event of Force Majeure
existing for a period in excess of thirty (30) days or periods that
cummulatively exceed thirty (30) days.
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6. Covenants of Purchaser.
6.1 Support. Purchaser will maintain operating funds at levels
that permit the operation of the Business in the normal course, and Purchaser
will provide budgetary support reasonably required to meet the Goals, including
without limitation adequate personnel, facilities and equipment.
6.2 Comply with Licenses. Purchaser will comply with the terms of
the Xxxxx Xxxxx License Agreement and the Xxxxxxxxxx Xxxxx License Agreement and
such other material agreements reasonably required to achieve the Goals.
7. Guaranty. Guarantor hereby unconditionally guarantees as a primary
obligation the full satisfaction of all obligations of Purchaser hereunder,
including, without limitation, the prompt and timely payment of any and all
amounts and any and all losses, costs, damages, claims and expenses which, by
virtue of this Agreement may become recoverable by Seller.
8. Amendment and Modification. This Agreement may be amended, modified
and supplemented or any provision waived only by written agreement, executed by
Seller and Purchaser.
9. Governing Law. This Agreement shall be governed by the internal laws
of the Commonwealth of Massachusetts as to all matters, including but not
limited to matters of validity, construction, effect and performance.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Contingent Price
Agreement as of the date first written above.
GARGOYLES ACQUISITION CORPORATION II,
a Washington corporation
/s/ XXXXXX X. XXXXXX
By______________________________________
Xxxxxx X. Xxxxxx, VP and CFO
GARGOYLES, INC.,
a Washington corporation
/s/ XXXXXX X. XXXXXX
By______________________________________
Xxxxxx X. Xxxxxx, VP and CFO
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THE PRIVATE EYES SUNGLASS CORPORATION,
a Massachusetts corporation
/s/ XXXXXXX X. XXXXXX, XX.
By______________________________________
Xxxxxxx X. Xxxxxx, Xx., President
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