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EXHIBIT 10.15.2
ADDENDUM NO 2 TO
MANUFACTURING AND DISTRIBUTION AGREEMENT
This is Addendum No 2 to the Manufacturing and Distribution Agreement
between Rockford Corporation ("Rockford") and Path Group Inc. ("Path Group")
dated June 11, 1998, which was effective on July 1, 1998 and modified by an
Addendum effective on July 30, 1999 (as modified by Addendum No 1, the
"Agreement").
The effective date of this Addendum is January 1, 2000. It is effective
through the last day of the term of the Agreement.
1. ROCKFORD'S RELATIONSHIP WITH LIGHTNING AUDIO. Rockford has
informed Path that the restrictions in Section 3 of Addendum
No 1 are interfering with sales growth of Connecting Punch
products because of the lack of co-ordination in sales efforts
between the Lightning Audio sales organisation and the
Rockford sales organisation. Accordingly, Section 3 of
Addendum No 1 is deleted in its entirety. Rockford is
authorised to combine the Rockford and Lightning Audio sales
organisations, manufacturers' representatives, and
distributors in any manner Rockford deems appropriate. The
provisions relating to minimum sales of Connecting Punch
Products to Best Buy are terminated by this amendment and
replaced by the new provisions in Section 2 of this Addendum
No. 2.
2. MINIMUM SALES GOALS AND PAYMENT. Rockford shall use its best
efforts throughout the remaining term of the Agreement to
cause sales (which shall be defined in this Addendum as "gross
shipped sales") of Connecting Punch products to grow at a rate
not less than the sales growth rate for all car audio
products.
(a) Achievement of this goal shall be measured by comparing
the growth in worldwide sales of Connecting Punch products
to the growth in total car audio industry sales worldwide
(including amplifiers, source units, speakers, and
accessories). The parties agree that they will estimate
car audio sales growth worldwide using the following
computation:
(1) car audio sales growth for the United States will be
based on market data provided by NPD Intelect Market
Research; and
(2) car audio sales growth for the rest of the world will
be assumed to be (a) 23% during the year 2000 (this
estimate is (*) of Rockford's projected sales growth
for Connecting Punch products for 2000 and is an
agreed fixed figure) and (b) the same as the United
States sales growth during 2001 based on data
provided by NPD Intelect Market Research.
Sales growth will be measured on a quarterly basis,
comparing sales for the current quarter to sales for the
comparable quarter in the prior year. This will result in
the following comparisons for the remainder of the
Agreement term: (1) 1st through 4th Quarters of 2000 each
compared to the same quarter in 1999 and (2) 1st and 2nd
Quarters of 2001 each compared to the same quarter in
2000. The required sales of Connecting Punch products will
be computed based on:
(A) actual Connecting Punch sales in the United States for
the comparable quarter of the prior year increased by
the United States market growth rate computed using (1)
above; plus
(B) actual Connecting Punch sales in the rest of the world
for the comparable quarter of the prior year increased
by the rest of the world market growth rate computed
using (2) above.
(*) Confidential Treatment Requested.
Confidential material has been redacted and filed separately with the
Commission.
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EXHIBIT 10.15.2
This total will be compared to actual aggregate Connecting
Punch sales for the quarter. The only sales goal Rockford
must meet is an aggregate and there are not subgoals for
US and rest of world sales.
(b) If sales of Connecting Punch products fail to equal or
exceed the quarterly growth goals then Rockford will pay
Path Group a royalty equal to (*) of:
(1) The shortfall in current quarter Connecting Punch
sales (compared to the base quarter increased by the
industry average sales growth through the current
quarter); reduced by
(2) Sales in excess of the required growth rate for prior
quarters.
(Example: assume current quarter sales of (*), base
quarter sales of (*), combined US and rest of world sales
such that the required growth of Connecting Punch sales
since the comparable quarter of the prior year is (*), and
that all prior quarter's sales exceeded goal by an
aggregate of (*). Then the quarter sales goal is (*), and
there is a current quarter shortfall of (*). This is
partially offset by the (*) prior excess, so a (*) royalty
is payable on the (*) shortfall. The royalty due is (*)).
(c) If sales of Connecting Punch Products fail to exceed the
actual sales of Connecting Punch products for the
comparable quarter of the prior year, then Path Group's
royalty will increase to (*) for that portion of the
shortfall that is less than the comparable quarter's
sales. (Example: use the same data as above, but assume
that current quarter sales are (*). The current quarter
shortfall is (*), offset by the (*) excess for prior
quarters, leaving a (*) shortfall subject to royalty. Of
this amount, (*) minus the (*) excess for prior quarters,
or (*), is less than actual sales for the base quarter.
Royalty due is (*) of (*) plus (*) of (*), a total of (*)
plus (*) equals (*))
(d) The royalty, if any, shall be paid by the 14th day after
the later of (1) the end of the quarter or (2) Rockford's
receipt of the Intelect data allowing computation of the
industry growth rate for the quarter. Rockford confirms
that it ordinarily receives the Intelect data within 35-40
days after a quarter ends and agrees that it shall make
the royalty payment (if any is due) by the 50th day after
the end of the quarter even if it receives the Intelect
data later than the 36th day after the end of the quarter.
Rockford shall provide, by the same date, a sales report
identifying the actual sales of Connecting Punch product
and the required sales based on the Intellect data.
Rockford will send a facsimile to Path Group confirming
the date it received the Intelect data for each quarter.
3. CONSOLIDATION OF SHIPMENTS. Section 12 of Addendum No 1,
restricting consolidation of Rockford and Lightning Audio
products, is terminated and Rockford is free to consolidate
shipments to the extent it deems necessary.
4. LIGHTNING AUDIO DISTRIBUTION IN THE UNITED KINGDOM. During the
term of the Agreement, Rockford grants to Path Group's
affiliate Car Audio Labs ("CAL") a first right of refusal to
distribute Lightning Audio products in the United Kingdom.
Before offering the Lightning Audio line to any other U.K.
distributor during the term of the Agreement, Rockford will
give CAL 15 business days notice of the proposed terms on
which Rockford will offer the distribution rights for the
United Kingdom. Rockford's offer will specify the terms of
distribution, including minimum sales, minimum required scope
of distribution and other terms. CAL must accept or reject the
proposed terms within 15 business days after Rockford gives it
notice of the terms. If CAL rejects the terms, then Rockford
may offer the distribution rights to any third party but only
on the terms offered to CAL or on terms less favorable to the
new distributor than those offered CAL.
(*) Confidential Treatment Requested.
Confidential material has been redacted and filed separately with the
Commission.
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EXHIBIT 10.15.2
5. CONTINUATION OF AGREEMENT. Except as amended in this Addendum
No 2, the Agreement continues in full force and effect and
both parties retain their rights and obligations under the
Agreement.
ROCKFORD CORPORATION
By /s/ Xxxxx X. Xxxxxxx
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Its CFO
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PATH GROUP INC.
By /s/
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Its E.V.P.
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(*) Confidential Treatment Requested.
Confidential material has been redacted and filed separately with the
Commission.
