RECIPROCAL EXCLUSIVE DEALING
AGREEMENT
This Agreement is
made effective on the 12 th day of March, 2005 between GENTEX OPTICS, INC.
(“Gentex”), a Delaware corporation, with an office at
324 Main Street, Simpson, PA 18407, ESSILOR INTERNATIONAL COMPAGNIE
GENERALE D’OPTIQUE, S.A. (“Essilor”), a limited
entity known as a Societé Anonyme, with its commercial seat at
147 rue de Paris, Charenton, Cedex 94227 France, both on the one
hand, and OAKLEY, INC. (“Oakley”), a Washington
corporation with principal offices at One Icon, Foothill Ranch, CA
92610, on the other hand.
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A.
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Gentex is an indirect, wholly-owned
subsidiary of Essilor.
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B.
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Gentex manufactures eyewear lenses
and has previously sold lenses to Oakley and desires to continue to
be the sole supplier to Oakley and its “Affiliates” (as
hereinafter defined) of all their requirements for the Products (as
hereinafter defined) that are the subject of this
Agreement.
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C.
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Oakley has previously purchased
substantially all its Decentered Lenses from Gentex, and during the
“Term” (as hereinafter defined) of this Agreement (and
any extension or renewal thereof, as hereinafter provided), Oakley
desires to purchase and to have its Affiliates purchase all of
their respective requirements of the Products, except as otherwise
provided herein.
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D.
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Subject to certain exceptions,
Gentex is willing to cease selling the Products to any other
“Entity” (as hereinafter defined).
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THE PARTIES
HEREBY AGREE AS FOLLOWS:
1.
Definitions used in this Agreement
(a) “Affiliate”
of an “Entity” (as hereinafter defined) means any
Entity which directly or indirectly controls, is controlled by, or
is under common control with such Entity.
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(b)“Bailment
Agreement” means the separate Agreement between the parties
that governs their respective rights and obligations with respect
to Vendor Managed Inventory (VMI) held at Oakley.
(c) “Contract
Year” means the period commencing with the “Effective
Date” hereof (April 1, 2005) and continuing for
12 months, and each of the four immediately following twelve
month periods.
(d) “Decentered
Lenses” means *
(e) “Effective
Date” means April 1, 2005.
(f) “Entity”
means any individual, proprietorship, partnership, corporation or
other entity whether or not of limited liability
(g) “Force
Majeure” means an occurrence beyond the reasonable control of
a Person, including, without limitation, fire, strike, directives
of any governmental authority, civil or military war, insurrection,
riot, embargoes, shortages, delays in transportation, or inability
to obtain necessary labor, materials, or manufacturing
facilities.
(i) “Minimum
Purchases” means *. In the event of early Termination of this
Agreement during a Contract Year or Renewal Year, the Minimum
Purchases for such Contract Year or Renewal Year, as the case may
be, shall be prorated.
(j) “Optical
Standards” means those standards as set forth in
schedule-hereto specifying the minimum optical standards of the
products to be supplied by Gentex under this Agreement.
(k) “Period
of Exclusivity” means the period commencing on the Effective
Date and ending on the earlier of the end of the Term or the
effective date of termination, in all events subject to earlier
termination as provided in this Agreement.
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*
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Material
omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
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(l) “Plano”
means non-glass, non-powered lenses and lens blanks which are or
are intended to be made into non-corrective, non-ophthalmic,
non-powered, non-glass lenses.
(m) “Polarized
Decentered Lenses” means Decentered Lenses that have a
polarizing function.
(n) “Products”
means the lenses listed on Schedule A hereto.
(o) “Purchaser”
means Oakley and any Affiliate of Oakley that purchases The
Products from Gentex or any Affiliate of Gentex.
(p) “Renewal
Year” means the 12 month period immediately following
the end of the fifth Contract Year, and each 12 month period
thereafter, commencing on the day following the end of the fourth
Contract Year and each one year anniversary thereof, until this
Agreement is terminated, as hereinafter provided.
(q) “Seller”
means Gentex or any Affiliate of Gentex that sells Product to a
Purchaser.
(r) “Shields”
means Plano in single or twin lens form which is used or is
designed to be used as a one-piece eye shield.
(s) “Stocking
Level” means that level of inventory requested by Oakley to
be delivered to Oakley into VMI.
(t) “Technology”
means technology or technical information in the possession of
Gentex or Essilor or their Affiliates not available from a
“Third Person” (as hereinafter defined) which is used
principally in the manufacture of The Products, but does not
include Hard Coat, photochromic or other coatings, applications or
processes (other than profiling or orienting the Lens) which are
undertaken upon or made or applied to lenses after they have been
molded.
(u) “Toric”
means lenses which are curved about each of two substantially
perpendicular axes, each with a different radius.
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(v) “Unit”
means a pair (two) of The Products or a single
Shield.
(w) “VMI”
means Vendor Managed Inventory that will be held at Oakley’s
warehouse, subject to the provisions of the Bailment
Agreement.
2.
Exclusive Dealing in The Products . Subject to the remaining
provisions of this Agreement, during the Period of
Exclusivity.
(a) Oakley
and its Affiliates will purchase from Gentex, and Gentex will use
commercially reasonable best efforts to sell and supply to Oakley
and its Affiliates, all the requirements of Oakley and its
Affiliates for the Products. It being understood that the
requirements of Oakley and its Affiliates for the subject Lenses is
determined solely by Oakley but that Oakley and its Affiliates will
not purchase the subject Lenses from anyone besides Gentex and its
Affiliates, except as expressly permitted by other provisions of
this Agreement;
(b) Gentex
will not sell or otherwise supply any other Entity with the
Products, except as expressly permitted by other provisions of this
Agreement.
(c) Oakley
will not purchase the Products from any Entity other than Gentex or
its Affiliates, except as provided herein and in 4(b). However,
Oakley has the right to manufacture decentered lenses contingent on
meeting the defined minimum Purchases. If Oakley fails to meet the
minimum Purchases in any given year, the parties will enter into
negotiations as subject to section 5(b).
3.
Conditions to Oakley Obligation to Purchase From Gentex
Only
(a) The
obligation of Oakley and its Affiliates to purchase all of their
respective requirements of the subject Lenses from Gentex, or from
any Affiliate of Gentex on a temporary bases, is conditioned upon
Gentex supplying the Products to Oakley and its Affiliates
(i) of a quality consistent with the specifications and the
quality standards as set forth in Schedule B, attached hereto,
and as revised from time to time pursuant to the Mutual Agreement
of the parties and (ii) Gentex supplying the Products in the
quantities specified within the delivery schedule specified
provided that sufficient time is given by Oakley to Gentex
consistent with the past practice between Oakley and Gentex and
pursuant to the Bailment Agreement between the parties.
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(b) As
a condition to the obligations of Gentex in Subsection 3(a) hereof:
Oakley will provide Gentex with a written three month rolling
forecast which will include Oakley’s best estimate of its
requirements for the subsequent three months. Said forecast will be
provided to Gentex in writing by the 15 th of
each month. The forecast will include an estimate of Oakley’s
monthly requirements by geometry and color.
(c) Oakley
will periodically provide Gentex with a requested Stocking Level to
be maintained in VMI.
(d) Gentex
will use commercially reasonable best efforts to provide Products
to maintain the current Stocking Level requested by
Oakley.
(e) The
prices for the products shall be as identified on Schedule A
attached hereto as revised pursuant to the terms of this Agreement
and/or the mutual agreement of the parties.
4.
Purchases from Affiliates and Third Parties
(a) If,
for any reason, Gentex is, from time to time, unable to satisfy the
provisions of Subsection 3(a), despite commercially reasonable best
efforts to do so, then Gentex will promptly notify Oakley and may
designate one or more Affiliates of Gentex to supply Products to
Oakley and its Affiliates, but only for so long as Gentex is unable
to supply Oakley and its Affiliates therewith in accordance with
Section 3 hereof.
(b) If
Gentex and Gentex’s Affiliates are unable to satisfy
Subsection 3(a) with respect to any Product, for a period of not
less than 60 days (“Grace Period”), the Oakley may
thereafter notify Gentex to that effect. Such notice will specify
in what respects Gentex continues to fail to satisfy Subsection
3(a) hereof at the end of the Grace Period, including identifying
the provision or provisions thereof which have not been complied
with by Gentex, and the facts on which Oakley has based such
determination. The parties will discuss in good faith
Oakley’s contentions and concerns. Gentex will have the
period specified in such notice from Oakley (“Cure
Period”) (but not less than 180 days as same may be
extended in writing on the basis of the discussions between the
parties) within which to again comply with the provisions of
Subsection 3(a) cited by Oakley. If Gentex (or its Affiliates) are
still unable to comply with Section 3(a) at the expiration of the
Cure Period, Oakley by notice to Gentex may terminate this
Agreement at any time thereafter. In no event will damages be
payable by Gentex to Oakley as a result of such termination and
failure to satisfy Subsection 3(a) if Gentex has used its
commercially reasonable best efforts.
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(c) From
the commencement of the Cure period with respect to a particular
type of Product, through the expiration of the thirtieth
(30) day after the date on which Gentex is able to satisfy
Subsection 3(a) with respect to such Product, Oakley and its
Affiliates may purchase such Product type from any Entity other
than Gentex and its Affiliates or may manufacture its own Product
of that type for its own use. The number of Units purchased by
Oakley and/or its Affiliates from others or manufactured by Oakley
and/or its Affiliates pursuant to this Subsection, will be deducted
from the Minimum Purchases required during the Contract Year and/or
Renewal Year in which such Products were so manufactured or so
purchased from others.
(a) In
each Contract Year during the Term, Oakley and its Affiliates agree
to purchase the minimum purchases from Gentex and its Affiliates of
the Products.
(b) If,
at the expiration of any Contract Year the actual purchases by
Oakley and its Affiliates exceed the Minimum Purchases for such
year, then such excess, (up to a maximum of ten percent (10%), will
be applied to reduce the Minimum Purchases required in the
immediately subsequent Contract Year. If the actual purchases by
Oakley and its Affiliates do not meet the Minimum Purchases for any
Contract Year, but said shortfall equals five percent (5%) or less
of the Minimum Purchases, then the amount of the shortfall will be
added to the Minimum Purchases for the following Contract Year. If
Oakley’s actual purchases or any Contract Year fall more than
five percent (5%) below the Minimum Purchases amount, then the
parties agree that they will enter into good faith negotiations
regarding a modification of the Purchase Prices, as defined in the
Bailment Agreement. If Oakley’s actual purchases during any
Contract Year fall more than 25% below the Minimum Purchases
amount, then Gentex may elect to terminate this Agreement by giving
Oakley no less than one year’s written notice. During this
notice period, the Parties shall negotiate in good faith to agree
upon a new Purchase Price. Failing written agreement on a new
Purchase Price, the Agreement will terminate at the end of the one
year notice period.
(a) Oakley
will have the exclusive right to purchase from Gentex as far and/or
their respective Affiliates the Products with Hard Coat applied at
no additional cost. Products ordered without Hard Coat will be
supplied at the cost as listed on Schedule A hereto with no
additional cost.
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(b) Except
as permitted by other provisions of this Agreement, Gentex will not
supply Hard Coat to any other Entity for use on Decentered Lenses
and, if it is determined that any Person is using such Hard Coat on
Decentered Lenses, then Gentex will cease selling Hard Coat to such
Entity.
(c) Neither
Oakley, nor any Affiliate thereof, will analyze or reverse engineer
any Hard Coat or New Hard Coat to learn its composition (other than
for the sole purpose of determining its compatibility with
Oakley’s coatings or processes) or how to make it or
manufacture it, nor will any Person directly or indirectly be
employed by or retained by Oakley or any Affiliate thereof for such
purpose. This obligation will continue after the expiration or
termination of the Term.
7.
Product Specifications
(a) Seller
will manufacture each Product in accordance with the applicable
Product Specifications as set forth in Schedule B attached
hereto, (Product Specification Schedule”) and all applicable
federal, state and local laws and regulations. The parties will
negotiate in good faith any modifications to the specifications or
procedures set forth in any Product specification Schedule, if
either party advises the other that such modification of such
specification is desirable to improve the efficiency or quality of
the Product or the production of that product or to lower the cost
of production thereof, or to take into account any changes in
processes, equipment or the Product itself, or the availability of
material or changes in technology.
(b) The
Parties will negotiate in good faith a Product Specification
Schedule for any new Products that Seller manufactures for
Purchaser pursuant to this Agreement.
8.
Plano Polarized Lenses
Nothing
in this Agreement shall be construed to require Oakley to purchase
Plano Polarized Lenses from Gentex. In the event, however, that
Oakley is unable to satisfy its own production requirements for
Plano Polarized Lenses, Oakley agrees to grant Essilor’s
Affiliate Company, BNL, the first opportunity to negotiate with
Oakley regarding any necessary third party purchases of Plano
Polarized Lenses.
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9.
Inspections, Rejections, Returns.
Gentex
will conduct quality inspections of all Products delivered to
Oakley by way of inspectors stationed at Oakley but remaining on
the Gentex payroll. Said inspectors will provide rejection reports
weekly to Oakley which will be forwarded to Gentex. The inspections
will be conducted upon Oakley’s receipt of Products from
Gentex but before said Products are received into the VMI system.
Upon receipt of the rejection notice, Gentex will advise Oakley as
to whether to destroy the defective Product or return it to
Gentex.
(a) Each
of Essilor and Gentex does hereby indemnify and hold harmless
Oakley and its Affiliates, and each of their respective officers,
directors, liabilities, costs, expenses (including, without
limitation, investigative and legal fees and disbursements, both
those incurred in connection with the defense of an indemnifiable
claim and those incurred in connection with the enforcement of this
provision) and damages (“Claims and Liabilities”)
arising our of, or based upon, any infringement or alleged
infringement of Third Person intellectual property rights by any
Decentered Lens or Shield sold to Oakley or to any Oakley Affiliate
by Gentex, Essilor or any Affiliate of either, but only to the
extent such infringement results or is alleged to result from the
process technology used in the design, manufacture or assembly
thereof by Gentex or such Affiliate or the Product resulting
therefrom. Notwithstanding the foregoing, there will be no such
indemnification or hold harmless hereunder, for any other reason or
(i) to the extent any such Claims and Liabilities for
infringement or alleged infringement result or are alleged to
result from technology, specifications, know-how, techniques or
processes for the Product or for its processing, manufacture or
assembly provided to Gentex or any Affiliate thereof by
Oakl
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