Exhibit 10.3
Application for
confidential treatment for a portion of this document has been
submitted to the Securities and Exchange Commission pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934.
This document omits the information subject to the confidentiality
request. Omissions are designated by the symbol
“**”. A complete version of this document has
been filed separately with the Securities and Exchange
Commission.
TERMINATION AGREEMENT
THIS TERMINATION
AGREEMENT (the “Termination Agreement”) is
dated as of March 13, 2008, but to be effective as of
March 31, 2008 (the “Effective Date”), by and
between Heeling Sports Limited , a Texas limited partnership
(the “Company”), The Territory Distribution GmbH
, a German Company (the “Distributor”) and Achim
Lippoth , a German individual and the sole owner of the
Distributor (the “Owner”). The Company,
Distributor and Owner are sometimes collectively referred to herein
as the “Parties” and individually as a
“Party.”
WHEREAS,
the Company and the
Distributor entered into that certain Distributor Agreement, dated
as of March 8, 2007 (the “Distributor Agreement”);
and
WHEREAS,
the Parties
desire to terminate the
Distributor Agreement and to evidence their agreement to certain
other matters as set forth herein.
NOW, THEREFORE,
in
consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:
1.
Defined Terms . Capitalized terms used but not defined
herein and defined in the Distributor Agreement shall have the
meanings ascribed to such terms in the Distributor
Agreement.
2.
Termination .
(a)
Subject to Section 2(b),
the Distributor Agreement
shall terminate in all respects on the
Effective Date and thereafter have no further force and
effect.
(b)
Notwithstanding
Section 2(a), the Parties agree
that the covenants and obligations set forth in Sections 3(f),
3(m), 3(n), 3(s), 3(t), 3(u), 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14
of the Distributor Agreement shall survive the termination of the
Distributor Agreement.
3.
Product/Inventory Re-Purchase and
Payment . Upon the Effective Date, the Company shall
purchase from Distributor, and Distributor shall sell, assign,
transfer, convey, to the Company, free and clear of any and
all liens, claims and encumbrances, all of Distributor’s
unsold Products as of the Effective Date, as confirmed via
inventory within five business days prior to the Effective Date,
and such other inventory and other incidental assets of Distributor
related to the distribution operations as described on
Exhibit A attached hereto (collectively, the
“Purchase Items”). The Company will arrange for
transportation of the Purchase Items. The Company shall
not
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assume any
liabilities of Distributor and Distributor shall indemnify, defend
and hold Company harmless from and against any such
liabilities.
(a)
The Company shall pay Distributor in
full by April 30, 2008. Payment shall be by means of a
check or a wire transfer of immediately available funds to a bank
account of Distributor, specified in writing to the Company.
The Parties agree that the Company shall pay the historical price
(e.g., the booked landed cost) for the Purchase Items, as set forth
on Exhibit A.
(b)
Distributor will make the Purchase
Items available for pickup by the Company and will hold such
Purchase Items separate and apart from all other Distributor
property. Company will pick up the Purchase Items on or
before April 30, 2008.
4.
Re-Purchase of Distributor’s Unshipped
Orders . On the Effective Date, the Company shall
purchase the valid, executable unshipped orders on
Distributor’s order book as of the Effective Date (the
“Unshipped Orders”). The Company shall pay
Distributor the net wholesale margin on the Unshipped Orders on or
before the last day of the month following the month the Company
receives the original payment for the Unshipped Orders.
(a)
Except for the order contemplated in
Section 4(b), the Company’s payments for Unshipped
Orders will be for all valid orders scheduled for shipment on or
before June 30, 2008. If as of the Effective Date the
Distributor has Unshipped Orders and has inventory on order for
those Unshipped Orders that arrives after June 30, 2008, the
Company will ship those orders to the customer and pay the
Distributor the net wholesale margin for those orders on or before
the last day of the month following the month the Company receives
the original payment for such Unshipped Orders.
(b)
With respect to an order for up to
3,000 pairs for Kauhof, the Company will pay the net wholesale
margin for shipments scheduled for after June 30, 2008 but
before December 31, 2008.
(c)
Distributor shall be responsible for
the payment of all commissions, bonuses and any other amounts
payable to or to be paid to the Distributor’s sales agents or
any other person or entity relating directly or indirectly to
unshipped orders and the sales contemplated in this
Section 4. Distributor will indemnify, defend and hold
the Company harmless from and against any such commissions, bonuses
and all other amounts payable or to be paid and any liability
arising therefrom.
5.
Covenant Not to Compete
. During the Restriction Period (defined
below), Owner and Distributor :
(a) shall not directly or indirectly engage in
any manner (including, without
limitation, as a principal, owner, agent, associate, consultant,
employee, investor, equity holder, lender, partner or board member)
in a Competing Business (as defined below) anywhere in the
Territory (as defined below); and (b) shall not enter into any
employment, consulting, advisory, lending or other business
relationship with any person, firm, entity, company or business
organization that is engaged in a Competing Business anywhere in
the Territory. Notwithstanding the foregoing sentence,
Distributor shall not be restricted from directly or indirectly
owning or acquiring an equity interest of less than five percent
(5%) of a publicly-traded entity.
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(a)
Compensation . This covenant not to compete is for the
benefit of Owner and Distributor. In consideration thereof,
the Company shall pay Distributor (or at its election, Owner)
** on the first and second anniversary of this Termination
Agreement.
(b)
Definitions of Territory, Competing
Business and Restriction Period .
(i)
“Territory” means any
country in the world.
(ii)
“Competing Business” means
using, importing, distributing, selling, or manufacturing any
product that is identical or similar to the Products that they
could be viewed as competitive with any of the Products.
(iii)
“Restriction Period” means
the period extending through the second anniversary of the
Effective Date.
(c)
Injunctive Relief
. It is hereby understood and agreed that
damages shall be an inadequate remedy in the event of a breach by
Distributor of any of said covenants and that any such breach by
Distributor will cause the Company great and irreparable injury and
damage. Accordingly, Distributor agrees that the Company
shall be entitled, without waiving any additional rights or
remedies otherwise available to the Company at law or in equity or
by statute, to injunctive and other equitable relief in the event
of a breach or intended or threatened breach by Distributor of any
of said covenants.
6.
Indemnification
. Distributor and Owner hereby agree to
jointly and severally indemnify and hold harmless the Company and
its current and former parent, subsidiary and affiliated entities,
their successors and assigns, and the current and former owners,
shareholders, members, managers, partners, directors, officers,
employees, agents, attorneys, representatives and insurers
(collectively, the “Company Parties”) from and against
any and all claims, actions liabilities, losses, damages and
expenses, including reasonable attorneys’ fees and such fees
on appeal, incurred by any of them in investigating and/or
defending against any claims, actions or liabilities for which
indemnification is provided in the Distributor Agreement, arising
out of or in connection with: (a) the sale, license,
servicing and related activities pursuant to the Distributor
Agreement with respect to the Products by Distributor; (b) the
failure of Distributor to comply with any laws, rules and/or
regulations; (c) Distributor’s attachment to the
products of any trade name, trademark or logo that is challenged as
an infringement of the proprietary rights of any third party;
(d) any warranties granted under the laws of the Territory in
excess of those warranties contained in Section 35 of the
Distributor Agreement; or (e) the failure of Distributor to
comply with each and every term of the Distributor Agreement.
As of the Effective Date, Owner and Distributor hereby release all
Company Parties from any duty, obligation or requirement to make
any indemnity payments to Owner and/or Distributor and/or any of
Distributor’s sales agents. Distributor agrees to pay
any and all such indemnity payments and shall hold the Company
Parties harmless from and against same. Distributor shall be
responsible for paying any indemnity payments pursuant to the law,
including, but not limited to, payments pursuant to Section 89
b of the German Commercial Code.
Distributor
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shall also be responsible
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