EXHIBIT 10.4
TIME SHARING AGREEMENT
This Time Sharing Agreement ("Agreement") is effective as of January 30, 2006,
("Effective Date") by and between Oakley, Inc., a Washington corporation with
its principal offices located at One Icon, ββββββββ βββββ�, ββββββββββ βββββ�
("Oakley") and X, LLC, a Washington limited liability company with a mailing
address at ββ βββ� ββββ, βββββββββ�, ββββββββββ βββββ� ("X, LLC") (each a "Party"
and collectively the "Parties").
β�. ββββββ and X, LLC desire to enter into this Agreement to provide for the
lease by Oakley of an aircraft with flight crew, to X, LLC on an as-needed,
as-available basis and on a time-sharing basis pursuant to Federal Aviation
Regulation Part 91.501(b)(6) and (c)(1); and
β�. ββββββ and X, LLC desire that X, LLC will not be charged for such flights and
that no amount will be collected by Oakley, other than the amounts permitted in
Federal Aviation Regulation Part 91.501(d), as more fully set forth in this
Agreement;
NOW THEREFORE, in consideration of the mutual provisions contained herein, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 AIRCRAFT. The term "Aircraft" means that certain 2005 Bombardier
BD-700-1A10 aircraft, with a serial number of 9162, registered as N2T and
operated by Oakley under its Operational Control, and all engines and equipment,
avionics, accessories and furnishings, documentation and other items which are
from time to time incorporated or installed in or attached thereto.
1.2 FAR. The term "FAR" means the Federal Aviation Regulations.
1.3 FLIGHT CHARGE. The term "Flight Charge" means the aggregate of (Y) up
to 200 percent of the cost of fuel, oil, lubricants, and other additives used
for a Time Sharing Flight based on the actual Flight Hours for such flight; and
(Z) the following actual expenses, if applicable to a Time Sharing Flight: (i)
travel expenses of the crew, including food, lodging, and ground transportation;
(ii) hangar and tie-down costs away from the Aircraft's base of operation; (iii)
insurance obtained for the specific Time Sharing Flight; (iv) landing fees,
airport taxes, and similar assessments, including, but not limited to, Internal
Revenue Code Section 4261 and related excise taxes; (v) customs, foreign permit,
and similar fees directly related to the Time Sharing Flight; (vi) in flight
food and beverages; (vii) passenger ground transportation; and (viii) flight
planning and weather contract services for the specific Time Sharing Flight.
1.4 FLIGHT CREW. The term "Flight Crew" means employees of or other
persons under the control of Oakley which shall consist of a properly rated and
qualified captain and a properly rated and qualified first officer.
1.5 FLIGHT HOURS. The term "Flight Hours" means actual flight time as
depicted in the aircraft flight logs for actual time that the aircraft is aloft
(takeoff to landing) expressed in one-tenth of an hour increments.
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1.6 HOME BASE. The term "Home Base" means ββββ βββββ�-Orange County
Airport, Santa Ana, California.
1.7 LEASE AGREEMENT. The term "Lease Agreement" means that certain
Aircraft Lease between Oakley and N2T dated December 18, 2003, as amended, with
respect to the Aircraft.
1.8 N2T. The term "N2T" means N2T, Inc. a Washington corporation and
lessor of the Aircraft to Oakley.
1.9 OPERATIONAL CONTROL. The term "Operational Control" means being the
legal operator, holding sole authority over initiating, conducting, or
terminating a flight, and having command and control of the Flight Crew.
1.10 TIME SHARING FLIGHT. The term "Time Sharing Flight" means a specific
flight conducted by Oakley and involving the carriage of officials, employees or
guests of X, LLC pursuant to this Agreement as permitted under FAR Part
91.501(b)(6) and (c)(1).
ARTICLE 2
TIME SHARING
2.1 TIME SHARING ARRANGEMENT.
2.1.1 Subject to X, LLC's performance of all of its obligations
hereunder, including payment of all applicable Flight Charges, Oakley hereby
grants to X, LLC a non-exclusive, non-assignable, non-transferable, indivisible,
terminable right to use the Aircraft, on an as-needed, as-available basis only,
for Time Sharing Flights scheduled with Oakley pursuant to this Agreement.
2.1.2 For each Time Sharing Flight where the Aircraft was available
and scheduled pursuant to this Agreement, provided that at such time (i) no
event of default shall have occurred and be continuing under the Lease
Agreement; and (ii) no event of default under the Lease Agreement shall occur or
result from any such Time Sharing Flight, then Oakley shall provide the Aircraft
to X, LLC on a time-sharing basis under FAR Section 91.501(b)(6) and (c)(1) for
such Time Sharing Flight subject to Section 2.1.3 below. Accordingly, for each
such permitted Time Sharing Flight, Oakley shall lease to X, LLC and X, LLC
shall lease from Oakley, the Aircraft with Flight Crew pursuant to this
Agreement, at no charge; provided that X, LLC shall pay to Oakley the applicable
Flight Charge for such Time Sharing Flight.
2.1.3 Upon the request of X, LLC, subject to the availability of the
Aircraft as determined by Oakley in accordance with ARTICLE 3, Oakley shall make
the Aircraft available to X, LLC at the Home Base or at such other location as
acceptable to Oakley, in its sole discretion. The repositioning, ferry or dead
head flights of the Aircraft required in connection with X, LLC's flights of the
Aircraft under this Agreement, including delivery and redelivery of the Aircraft
to the Home Base, or such other location as the Parties may agree, shall be
deemed to be use of the Aircraft by X, LLC (as a Time Sharing Flight) and at X,
LLC's expense subject to the Flight Charge.
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2.2 RIGHTS RESERVED. Notwithstanding anything to the contrary herein, all
rights not specifically granted to X, LLC shall be reserved and remain always
with Oakley. This Agreement shall not be construed to confer any rights upon X,
LLC by implication, estoppel or otherwise as to the Aircraft.
2.3 LEASE ONLY. At all times during the term of this Agreement, full legal
title to the Aircraft shall remain vested in Oakley to the exclusion of X, LLC.
This Agreement and any related documents shall in no way assign or transfer any
right or interest in the Aircraft or any other property of Oakley.
2.4 LEGAL RELATIONSHIPS
2.4.1 With respect to the Aircraft, Oakley shall be deemed to have
Operational Control of the aircraft at all times during the term of this
Agreement, including but not limited to during all Time Sharing Flights.
2.4.2 Oakley does not intend to enter into, and this Agreement is not
intended to create or constitute, a joint ownership agreement, as such term is
defined in FAR Section 91.501(c)(3), or a joint venture, partnership, business
organization, association, cooperative arrangement or other relationship by and
among Oakley and X, LLC and through which any party may be held liable for the
omissions or commissions of any other party. This Agreement is intended to
create a time sharing agreement as such term is defined in FAR Section
91.501(c)(1).
2.5 SUBORDINATE TO LEASE AGREEMENT.
2.5.1 Oakley and X, LLC hereby acknowledge that this Agreement (1)
does not convey any lien or other interest in or against the Aircraft to X, LLC;
and (2) expressly (A) remains, subject and subordinate to the Lease Agreement
and the rights of N2T thereunder and in and to the Aircraft; and (B) does not
permit any further disposition of the Aircraft.
2.5.2 Oakley and X, LLC hereby acknowledge that to the extent any
provision in this Agreement is inconsistent with the provisions of the Lease
Agreement or cause Oakley to breach any of its representations, warranties or
agreements under the Lease Agreement, then the provisions in the Lease Agreement
shall control.
ARTICLE 3
SCHEDULING AND LOGISTICS
3.1 SCHEDULING
3.1.1 X, LLC shall advise Oakley of its request for flight time and
use of the Aircraft under this Agreement by giving Oakley advance notice by
telephone and/or facsimile. Time Sharing Flight requests must be made at least
two (2) hours prior to the scheduled take-off time of the first leg. Each Time
Sharing Flight request shall include the information that is reasonably required
by Oakley. If the Aircraft is not available, Oakley shall attempt to advise X,
LLC as soon as practicable. All requests for Time Sharing Flights, unless
accepted by Oakley, shall be deemed rejected.
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3.1.2 In addition to the proposed schedules and flight times, X, LLC
shall provide at least the following information for each proposed Time Sharing
Flight prior to the scheduled departure, as may be required by Oakley or the
Flight Crew: (a) the number of anticipated passengers; (b) the nature and extent
of luggage and/or cargo to be carried; and (c) the date and time of return
flight, if any.
3.1.3 Oakley shall have final authority over the scheduling of the
Aircraft, provided, however, that Oakley will try to accommodate X, LLC's needs
and avoid conflicts in scheduling. Oakley may cancel any scheduled Time Sharing
Flight, with no liability to X, LLC, should the Aircraft be no longer available
for the Time Sharing Flight or otherwise unable to conduct the scheduled Time
Sharing Flight. In the event of such cancellation, Oakley shall to advise X, LLC
as soon as practicable following the Aircraft becoming unavailable of unable to
conduct the scheduled Time Sharing Flight.
3.2 MAINTENANCE
3.2.1 Oakley shall be responsible for arranging and paying for all
maintenance, preventive maintenance and required or recommended inspections. X,
LLC shall have no rights or involvement with respect to any maintenance or other
operational matters concerning the Aircraft.
3.2.2 Aircraft maintenance and inspections take precedence over
Aircraft scheduling unless such maintenance or inspections can be safely
deferred in accordance with applicable laws and regulations and within the sound
discretion of Oakley and/or the Flight Crew, as the case may be. The pilot in
command shall have final and complete authority to cancel or reschedule any Time
Sharing Flight for any reason or condition which in his or her judgment would
compromise the safety of the flight.
3.3 FLIGHT CREW
3.3.1 With respect to each Time Sharing Flight, Oakley shall have and
retain Operational Control of the Aircraft as provided in the applicable FAR;
and, for federal tax purposes, shall have and retain "possession, command and
control" of the Aircraft. Oakley shall employ, pay for and provide to X, LLC a
qualified Flight Crew for each flight undertaken under this Agreement.
3.3.2 During all Time Sharing Flights, the Flight Crew alone shall be
empowered to take all steps necessary in the interest of the safety of any
aircraft under its Operational Control, including those that affect its
passengers, crew, cargo and the operation of the flight.
3.3.3 In accordance with applicable FARs, the Flight Crew will
exercise all of its duties and responsibilities in regard to the safety of each
flight conducted hereunder. The Flight Crew shall have final authority regarding
whether or not to initiate or terminate each Time Sharing Flight, select the
routing, determine the load to be carried, and otherwise decide all matters
relating to the safety of such flight.
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ARTICLE 4
FINANCIAL ARRANGEMENTS
4.1 FLIGHT CHARGES. Oakley will pay all expenses related to the operation
of the Aircraft on Time Sharing Flights when incurred, and will provide an
invoice and ββββ X, LLC as provided below. Within fifteen (15) business days
following each calendar quarter in which any Time Sharing Flights occur, Oakley
shall submit X, LLC, in writing a statement detailing the Flight Charge for the
Time Sharing Flights in the preceding quarter, broken down by permissible
category as provided under FAR Section 91.501(d), with payment due within thirty
(30) calendar days of the statement date.
4.2 PAYMENTS. X, LLC shall pay Oakley the Flight Charge for such Time
Sharing Flight within thirty (30) calendar days of the date of Oakley's
statement detailing the Flight Charges. Except as Oakley may otherwise direct in
writing, each payment of Flight Charges shall be made by X, LLC to Oakley by X,
LLC's company check or wire on or before the applicable due date.
4.3 TAXES
4.3.1 Excise Taxes. All Flight Charges are subject to a 7.5 percent
Federal excise taxes as imposed under Internal Revenue Code Section 4261.
Oakley's statement shall include a calculation of the excise taxes due and X,
LLC shall pay Oakley such taxes as required as part of its payment of the
applicable Flight Charges. Oakley shall pay the applicable Federal excise tax to
the Internal Revenue Service.
4.3.2 State Taxes. Some states may apply state sales and use taxes to
Flight Charges received by Oakley. Should a Time Sharing Flight be subject to a
state sales and use tax, then Oakley's statement shall include a calculation of
such taxes due and X, LLC shall pay Oakley such state sales and use taxes along
with its payment of the applicable Flight Charges. Should Oakley's statement not
include applicable state sales and use taxes, Oakley may separately at a later
date provide X, LLC with a statement for such taxes and in each instance, X, LLC
shall within thirty (30) calendar days of receipt of Oakley's statement, pay
Oakley such state sales and use taxes.
ARTICLE 5
WARRANTIES AND COVENANTS
5.1 DISCLAIMER. OAKLEY PROVIDES THE AIRCRAFT "AS-IS, WHERE-IS," ON AN "AS
AVAILABLE BASIS" ONLY PURSUANT TO THIS AGREEMENT. OAKLEY HAS NOT MADE NOR SHALL
BE DEEMED TO HAVE MADE, AND HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, CONDITION, VALUE,
DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR ANY PARTICULAR PURPOSE
OF THE AIRCRAFT OR ANY PART THEREOF, AND ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART
THEREOF.
5.2 X, LLC COVENANTS
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5.2.1 X, LLC will use the Aircraft only for and on account of, as
permitted under FAR Section 91.501(b)(6), the carriage of its officials,
employees or guests;
5.2.2 X, LLC will not use the Aircraft for the purposes of
transporting passengers or cargo in air commerce for compensation or hire, for
any illegal purposes, or for any use prohibited by any insurance maintained on
the Aircraft, or which may impair existing insurance coverage in any way; and
5.2.3 X, LLC will only use the Aircraft (i) in accordance with any
requirement of any insurance issued with respect to the Aircraft; and (ii) in
accordance with all requirements of any governmental authorities relating to the
conduct of its business, the Aircraft, and to its properties or assets,
including, but not limited to, applicable laws and regulations regarding
required security procedures, passenger screening, and any other security and
safety requirements applicable to X, LLC.
ARTICLE 6
ALLOCATION OF LIABILITIES
6.1 INURANCE.
(a) Oakley maintains or has maintained on its behalf
comprehensive aircraft and general liability insurance against aircraft bodily
injury, property damage liability, including passenger liability, with limits of
not less than Two Hundred Million Dollars ($200,000,000.00) for each occurrence.
(b) The policies of insurance carried in accordance with
subsection 6.1(a) above and any policies taken out in substitution or
replacement of any such policies (i) shall be endorsed to name X, LLC as
additional insured (but without responsibility for premiums, except as permitted
in Section 1.3 above); (ii) shall provide for thirty (30) days written notice by
such insurer of cancellation, material change, or non-renewal; (iii) shall
include a severability of interest clause providing that such policy shall
operate in the same manner as if there were a separate policy covering each
insured; (iv) shall waive any right of set-off against X, LLC, and any rights of
subrogation against X, LLC; and (v) shall be primary, not subject to any
co-insurance clause and shall be without right of contribution from any other
insurance. Oakley shall provide X, LLC with certificates of insurance
demonstrating compliance with the above provisions prior to the first Time
Sharing Flight under this Agreement.
(c) Oakley will make its best efforts to provide such additional
insurance coverage as X, LLC shall request or require, provided, however, that
the cost of such additional insurance shall be borne by X, LLC as set forth in
Section 1.3 above.
6.2 LIMITATION OF LIABILITY
6.2.1 NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR ANY THIRD PARTY
FOR ANY DAMAGES IN CONNECTION WITH THE USE OR FAILURE TO USE THE AIRCRAFT OR FOR
DELAYS OR CANCELLATIONS OF TIME SHARING FLIGHTS, WHETHER ARISING IN CONTRACT,
TORT, STRICT LIABILITY OR OTHERWISE.
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6.2.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, EXCEPT AS
OTHERWISE COVERED BY THE POLICIES OF INSURANCE REQUIRED TO BE MAINTAINED UNDER
THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, WHETHER FORESEEABLE OR NOT, THAT
ARE IN ANY WAY RELATED TO THIS AGREEMENT OR THE BREACH THEREOF, THE USE OR
INABILITY TO USE THE AIRCRAFT, DELAYS OR CANCELLATIONS OF TIME SHARING FLIGHTS,
AND/OR FROM ANY OTHER CAUSE WHATSOEVER IN REGARD TO THE AIRCRAFT.
6.2.3 THESE LIMITATIONS ARE NOT INTENDED TO AND SHALL NOT BE DEEMED TO
LIMIT OR OTHERWISE AFFECT THE COVERAGES PROVIDED UNDER AND THE RECOVERIES THAT
ARE OTHERWISE AVAILABLE UNDER ANY OF THE POLICIES MAINTAINED AS REQUIRED IN THIS
AGREEMENT.
ARTICLE 7
TERM AND TERMINATION
7.1 TERM. This Agreement entered into to as of the Effective Date and will
continue for a period of one (1) year, unless terminated earlier as provided
herein. The term of this Agreement may be renewed by the Parties in writing, in
each case, for successive additional one (1) year periods, unless terminated
earlier as provided herein.
7.2 TERMINATION. This Agreement may be terminated: (a) By either Oakley or
X, LLC upon at least fifteen (15) days' prior written notice to the other Party
for any reason, with our without cause; or (b) By either Party upon written
notice if the other Party becomes insolvent or bankrupt, or is unable to meet
its obligations when they become due; or (c) Immediately and without notice (i)
if a receiver or other liquidating officer is appointed for substantially all of
the assets or business of a Party, or (ii) if a Party makes an assignment for
the benefit of creditors, or (iii) if the rights or interest of any Party under
this Agreement become an asset under any bankruptcy, insolvency or
reorganization proceeding, or (iv) upon the occurrence of an Event of Default
under the Lease Agreement, as defined therein.
7.3 SURVIVAL. The provisions of Sections 2.2, 4.2, 4.3, 5.1 and 7.3 and
all Sections under ARTICLE 1, ARTICLE 6 and ARTICLE 8 shall survive the
termination or expiration of this Agreement.
7.4 CESSATION OF USE. Upon termination or expiration of this Agreement:
(a) X, LLC shall thereafter immediately have no rights to use the Aircraft; and
(b) Both Parties shall remain liable for all of their respective obligations
hereunder that accrued prior to the date of termination.
7.5 CUMULATIVE REMEDIES. All rights and remedies conferred herein shall be
cumulative and in addition to all of the rights and remedies available to each
Party at law, equity or otherwise.
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ARTICLE 8
GENERAL PROVISIONS
8.1 RELATIONSHIP OF PARTIES. The relationship between the Parties is only
that of independent contractors notwithstanding any joint activities set forth
in this Agreement. Neither Oakley on the one hand or X, LLC on the other hand is
the agent or legal representative of the other Party with respect to the subject
matter of this Agreement, and neither Party has the right or authority to bind
the other Party in any way with respect to the subject matter of this Agreement.
This Agreement creates no relationship as partners or a joint venture, and
creates no pooling arrangement.
8.2 GOVERNING LAW AND VENUE. This Agreement shall be interpreted and
enforced under the laws of the State of California, without application of its
conflicts or choice of law rules.
8.3 ASSIGNMENT. Neither party shall have the right to assign, delegate,
transfer or otherwise encumber this Agreement or any portion thereof without the
other's prior written consent, which consent may not be unreasonably withheld.
8.4 WAIVER. The failure of a Party to enforce any of its rights hereunder
or at law shall not be deemed a waiver or a continuing waiver of any of its
rights or remedies against the other Party, unless such waiver is in writing and
signed by the Party to be charged.
8.5 SEVERABILITY. If any provision of this Agreement, or part thereof, is
declared by a court of competent jurisdiction to be invalid, void or
unenforceable, each and every other provision, or part thereof, shall
nevertheless continue in full force and effect.
8.6 ATTORNEYS' FEES. In the event a dispute arises regarding this
Agreement, the prevailing Party shall be entitled to its reasonable attorneys'
fees and expenses incurred in addition to any other relief to which it is
entitled.
8.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties regarding the subject matter hereof, and supersedes all
prior or contemporaneous understandings or agreements, whether oral or written.
This Agreement shall be modified or amended only by a writing signed by each of
X, LLC and Oakley.
8.8 FORCE MAJEURE. Neither Party shall be liable to the other for its
failure to perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable control
including, but not limited to earthquake, fire, flood, viruses, bugs, war, acts
of terror, embargo, export controls, strike, riot, inability to secure materials
and transportation facilities, or the intervention of any governmental
authority.
8.9 FURTHER ASSURANCES. Both Parties agree to execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement. Each Party shall provide the cooperation, assistance, information,
decisions and approvals required or reasonably required from time to time in
order to perform its obligations under this Agreement and will do so on a timely
basis.
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8.10 NOTICES. All notices, requests or other communications under this
Agreement shall be in writing, and shall be sent to the Parties at their
addresses listed on page 1 above, and shall be deemed to have been duly given on
the date of service if sent by facsimile (provided a hard copy is sent in one of
the manners specified below), or on the day following service if sent by
overnight air courier service with next day delivery with written confirmation
of delivery, or five (5) days after mailing if sent by first class, registered
or certified mail, return receipt requested. Each Party is required to notify
the other Party in the above manner of any change of address.
8.11 COUNTERPARTS. This Agreement may be executed in several counterparts
that together shall be originals and constitute one and the same instrument.
8.12 TRUTH IN LEASING STATEMENT UNDER FAR 91.23 WITH RESPECT TO THE
OPERATION OF THE AIRCRAFT.
(a) THE AIRCRAFT, WITHIN THE TWELVE (12) MONTH PERIOD PRECEDING
THE DATE OF THIS AGREEMENT, EXCEPT TO THE EXTENT THE AIRCRAFT IS LESS THAN
TWELVE (12) MONTHS OLD, HAS BEEN, AND SHALL BE DURING THE TERM OF THIS
AGREEMENT, INSPECTED AND MAINTAINED IN ACCORDANCE WITH FAR 91.409, AND ALL
APPLICABLE REQUIREMENTS FOR MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN
COMPLIED WITH;
(b) OAKLEY CERTIFIES AND KNOWINGLY ACKNOWLEDGES THAT WHEN IT
OPERATES ANY AIRCRAFT UNDER THIS AGREEMENT, OAKLEY SHALL BE KNOWN AS, CONSIDERED
AND IN FACT WILL BE, THE OPERATOR OF SUCH AIRCRAFT;
(c) AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND
PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA
FLIGHT STANDARDS DISTRICT OFFICE; AND
(d) THE PARTIES HERETO CERTIFY THAT A TRUE COPY OF THIS
AGREEMENT SHALL BE CARRIED ON THE AIRCRAFT AT ALL TIMES DURING ANY TIME SHARING
FLIGHT, AND SHALL BE MADE AVAILABLE FOR INSPECTION UPON REQUEST BY ANY
REPRESENTATIVE OF THE FAA.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.
OAKLEY, INC. Y, LLC
By: /s/ Cos Lykos By: /s/ βββ� βββββββ�
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Cos Lykos βββ� βββββββ�
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Name Name
Vice President Manager
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Title Title
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