1
Exhibit 10.11
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (this "Agreement") entered into on
___________, __, 1996, is made effective as of the effective date of the
initial public offering of Common Stock on Registration Statement Form S-1 (the
"Effective Date") of Kani, Inc., a California corporation (the "Company"), by
and between the Company and Skechers USA, Inc. ("Skechers").
BACKGROUND
A. Skechers has agreed to contribute to the Company (i) the
master license agreement covering all products marketed and sold under the Xxxx
Xxxx brand name (the "Master License") and the sublicenses thereunder and (ii)
all of the operating assets and liabilities, but specifically excluding amounts
owed by the Company to Xxxxxx Xxxxxxxxx, relating to the ongoing footwear
business conducted by Skechers to the extent such assets are used by Skechers
solely in the connection with the sale of products under the Xxxx Xxxx brand
name, together with the rights to certain customer lists (the "Kani Operations
Assets"), in exchange for 100% of the outstanding Common Stock of the Company.
B. This Agreement is intended to accomplish and memorialize the
above contributions and to provide certain operating agreements applicable to
the relationship between Skechers and the Company concerning the existing and
ongoing business of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions hereof, the parties agree as follows:
1. Contribution.
(a) On the Effective Date, Skechers shall transfer to the
Company the Master License Agreement and the Kani Operations Assets as set
forth on Schedule A attached hereto. In consideration therefor, the Company
hereby covenants that on the Effective Date, it shall issue or cause to be
issued to Skechers 100% of its outstanding Common Stock.
(b) Xxxxxx Financial, Inc. ("Xxxxxx") extended a credit
facility to Skechers to fund the operations of Skechers (including the
operations of the Company as a division of Skechers) with an outstanding
principal amount of $_________ as of the date hereof (the "Xxxxxx Loan").
Effective as of the Effective Date, the Xxxxxx Loan will be terminated and the
following will occur: (i) Skechers and Xxxxxx will enter into a credit
facility with similar terms and conditions as the Xxxxxx Loan for an aggregate
amount of $__________ (representing ___% of the principal amount of the Xxxxxx
Loan), such amount to be secured
1
2
by the assets of Skechers and (ii) the Company and Xxxxxx will enter into a
credit facility with similar terms and conditions as the Xxxxxx Loan for an
aggregate amount of $_________ (representing ___% of the principal amount of
the Xxxxxx Loan), such amount to be secured by the assets of the Company.
2. Transfer of Stock, Operations and Assets.
(a) Effective as of the Effective Date, Skechers conveys,
assigns, transfers and delivers to the Company and the Company hereby acquires
from Skechers all of its right, title and interest in and to the Kani
Operations Assets. Skechers not shall use the following name in business:
Kani, Inc.; provided, however, nothing herein shall limit Skechers from the use
of its name or initials in any way.
(b) The contributions under subsection (a) above shall only
be effective upon, on the Effective Date, the issuance by the Company to
Skechers of all of its outstanding Common Stock.
3. Employees.
(a) Six employees of Skechers will become employees of
the Company, effective as of the Effective Date. The employees are set forth
on Schedule B attached hereto.
4. Indemnification.
(a) Skechers shall indemnify and hold harmless the Company
against and in respect of any and all damages, claims, losses, liabilities and
expenses incurred by the Company which arise out of or relate to (i) any breach
or violation of this Agreement by Skechers, (ii) any breach of any of the
representations or warranties made in this Agreement by Skechers and (iii) the
ownership and use of the Kani Operations Assets prior to the Effective Date.
(b) The Company shall indemnify and hold harmless
Skechers against and in respect of any and all damages, claims, losses,
liabilities and expenses incurred by Skechers which arise out of or relate to
(i) any breach or violation of this Agreement by the Company, (ii) any breach
of any of the representations or warranties made in this Agreement by the
Company and (iii) the ownership and use of the Kani Operations Assets on or
after the Effective Date.
5. Representations, Warranties and Covenants of Skechers.
Skechers represents, warrants, and covenants to the Company as follows:
2
3
(a) There is no material dispute, grievance, controversy
or strike pending or, to the best of the knowledge and belief of Skechers,
threatened against Skechers and related to the Kani Operations Assets.
(b) There are no actions, suits or proceedings pending,
except as may be filed but not served of which Skechers has no knowledge, or,
to the best knowledge of Skechers, threatened, against or affecting Skechers,
or any of its properties or businesses, at law or in equity, or before or by
any United States, state, local or foreign governmental department, commission,
board, bureau, agency or instrumentality, which relate to the Kani Operations
Assets. Skechers is not subject to any order, writ, injunction or decree of
any court or governmental agency or body, domestic or foreign, relating to the
operation of the Kani Operations Assets.
(c) Skechers is not as of the date hereof and, as a
result of the transactions contemplated hereby, will not be as of the Effective
Date in violation of any law, rule, regulation, ordinance, code or order of any
governmental authority relating to the ownership and use of the Kani Operations
Assets. All governmental licenses, permits, approvals, authorizations and
consents have been obtained as are required to own or lease the assets of and
conduct the business of Kani Operations Assets as currently conducted and in
order to carry out the transactions contemplated hereby.
(d) Skechers has full power to own or lease the Kani
Operations Assets, as now owned or leased, to own or lease the assets of and
carry out the business of the Company, to enter into this Agreement and to
carry out their respective obligations hereunder. The execution and delivery
of this Agreement, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary action required on the part
of Skechers. When executed by the parties hereto, this Agreement will
constitute the valid and legally binding obligation of Skechers, enforceable
against Skechers in accordance with its terms, except as such enforceability
may be limited by insolvency, reorganization, moratorium or other similar laws
of general application relating to or affecting the enforcement of creditors'
rights and by general equitable principles.
(e) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate, or
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, any of the terms, conditions or provisions of any
agreement, lease or other instrument or obligation to which Skechers is a party
or by which it is bound or violate any law, regulation, interpretation order,
writ, injunction or decree applicable to Skechers or any of its properties or
assets.
(f) Upon consummation of the transactions contemplated by
this Agreement, the Company will have good and marketable title in and to the
Kani Operations Assets free and clear of all liens, charges or encumbrances,
except (i) liens for taxes not yet
3
4
due, (ii) mechanics' and similar liens, (iii) liens in the ordinary course of
business not material in nature, and (iv) unknown liens which, if discovered,
shall be satisfied prior to the Effective Date.
6. Notice. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including
telegraphic or facsimile communications) and shall be mailed (return receipt
requested), telegraphed, sent by facsimile or delivered to each party at the
address set forth as follows, or at such other address as either party may
designate by notice to the other, and any such notice, request, demand or other
communication shall be effective upon receipt.
If to Skechers: Skechers USA, Inc.
000 Xxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
Chief Executive Officer
If to the Company: Kani, Inc.
000 Xxxxxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx Xxxxx, XX 00000
Telephone: (310)
Facsimile: (310)
Attention:
7. Miscellaneous. Any provision of this Agreement which is
prohibited or unenforceable in any applicable jurisdiction shall, as to such
jurisdiction, not be in effect to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction. No amendment or waiver of any provision of this Agreement,
nor consent to any departure by either party therefrom, shall in any event be
effective unless the same shall be in writing and signed by an authorized
representative of the other party and any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given. All rights and remedies of the parties hereunder shall, except as
otherwise specifically provided herein, be cumulative and non-exclusive of any
rights or remedies which either may have under any other agreement or
instrument, by operation of law, or otherwise. This Agreement shall become
effective when it is executed by all parties and thereafter shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, except that the Company shall not have the right to assign its
rights, obligations or interests hereunder without the prior written consent of
Skechers. This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts made and performed
in said State.
4
5
8. Attorneys' Fees. In the event of any dispute arising out of
or in connection with this Agreement, and any documents executed pursuant
hereto, the prevailing party, in addition to any other amounts which it may be
entitled to, shall be entitled to recover from the other party reasonable
attorneys' fees and court costs as shall be awarded in the resolution of such
dispute.
9. Reference Provision.
(a) Each controversy, dispute or claim between the
parties arising out of or relating to this Agreement, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or claim
exists), will be settled by a reference proceeding in Los Angeles County,
California, in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and the parties waive
their rights to initiate any legal proceedings against each other in any court
or jurisdiction other than the Superior court of Los Angeles County (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Los Angeles County Superior Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one preemptory challenge pursuant to CCP 170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the Claim Date and (b) try any and all issues of law or fact and
report a statement of decision upon them, if possible, within ninety (90) days
of the Claim Date. Any decision rendered by the referee will be final, binding
and conclusive and judgment shall entered pursuant to CCP 644 in any court in
the State of California having jurisdiction. Any party may apply for a
reference at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of
a party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and, request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties.
5
6
(b) Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to
the course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter, except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues
in accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable orders
that will be binding upon the parties. The referee shall issue a single
judgment at the close of the reference proceeding which shall dispose of all of
the claims of the parties that are the subject of the reference. The parties
hereto expressly reserve the right to contest or appeal from the final judgment
or any appealable order or appealable judgment entered by the referee. The
parties hereto expressly reserve the right to findings of fact, conclusions of
law, a written statement of decision, and the right to move for a new trial or
a different judgment, which new trial, if granted, is also to be a reference
proceeding under this provision.
(d) In the event that the enabling legislation which
provides for appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be determined by
the reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Los
Angeles County Superior Court, in accordance with the California Arbitration
Act, Sections 1280 through 1294.2 of the CCP as amended from time to time. The
limitations with respect to discovery as set forth hereinabove shall apply to
any such arbitration proceeding.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
which taken together shall constitute one and the same instrument.
6
7
IN WITNESS WHEREOF, this Agreement is executed on behalf of the
parties by duly authorized representatives as of the date first above written.
KANI, INC.
a California corporation
By:_______________________________
Name: Xxxxx Xxxxxxxx
Title: Chief Financial Officer
SKECHERS USA, INC.
a California corporation
By:_______________________________
Name: Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer
7
8
SCHEDULE A
See attached.
8
9
SCHEDULE B
See attached.
9
