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Exhibit 10.15.1
ADDENDUM TO
MANUFACTURING AND DISTRIBUTION AGREEMENT
This Addendum to the Manufacturing and Distribution Agreement
("Agreement") between Rockford Corporation ("Rockford") and Path Group Inc.
("Path Group") dated June 11, 1998, which was effective on July 1, 1998. The
effective date of this Addendum shall be 30th day of July, 1999, and shall
continue in effect through the last day of the term of the Agreement.
1. TRANSITION PERIOD. Rockford and Path Group shall cooperate in
good faith to accomplish a transition of the operation of the
accessory business from Path Group to Rockford or Rockford's
designee commencing February 1, 2001 and ending on the
termination date of the Agreement, July 31, 2001. Starting on
February 1, 2001 and through the end of the term of the
Agreement Path will notify Rockford of the quantities of
product Path intends to purchase from its vendors and Rockford
will have three working days to give written notice of
disapproval of the quantities to Path Group. In exercising its
right to approve quantities of product ordered by Path,
Rockford undertakes not to interfere with Path's obligations
to meet reasonable demand for the products as set forth in the
Agreement. Beginning 60 days before the termination date, Path
undertakes to cooperate with Rockford to facilitate a smooth
hand-over of Path's Connecting Punch inventory ordering
process including providing product and vendor details so that
Rockford can prepare for direct ordering of Connecting Punch
products for delivery after the termination date.
2. RIGHT TO ACQUIRE COMPETING BUSINESS. Each party agrees to
waive its right to prohibit the other party from acquiring and
operating competing companies subject to the limitations set
forth in Section 3 below. Rockford contends that the Agreement
does not prohibit its acquisition of Lightning Audio as a
wholly owned subsidiary, while Path Group contends that the
acquisition of Lightning Audio by Rockford constitutes a
breach of the Agreement. However, in the spirit of cooperation
and compromise and without either party conceding the position
of the other party, Path Group agrees that Rockford may
acquire Lightning Audio as a wholly owned subsidiary without
such acquisition being a breach of the Agreement or the
Addendum.
3. ROCKFORD'S RELATIONSHIP WITH LIGHTNING AUDIO. Through the end
of the term of the Agreement, Rockford shall not allow
Lightning Audio accessories to be sold by the same
manufacturers' representatives or distributors who are selling
Rockford Products, provided, however, that Rockford and
Lightning Audio may continue to do business with
manufacturers' representatives and distributors who, at the
time of the acquisition of Lightning Audio by Rockford, are
doing business with both entities. Rockford shall maintain
entirely separate sales management groups for the Lightning
Audio accessories and Rockford Products. Path Group
acknowledges that Rockford may provide "back office" services,
such as warehousing and order processing, to Lightning Audio
under contract and without violation of the Agreement. Any
sales of Lightning Audio accessories to Best Buy through the
end of the term of the Agreement shall result in Rockford
paying a (*) commission to Path Group on such sales but only
in quarters when sales of Connecting Punch Accessories in any
quarter are less than the forecast sales for that quarter as
shown on the attached Exhibit 1. To the extent Rockford's
sales of amps and speakers to Best Buy are reduced, so that a
reduction in Connecting Punch sales to Best Buy are related to
a general decline in sales rather than to cannibalisation by
Lightning Audio sales, Path Group and Rockford will meet and
negotiate in good faith an adjustment to the forecast sales
shown on the attached Exhibit 1 to reflect the general decline
in sales. The commission will be paid by the 14th day of the
quarter following the quarter of sales. Rockford shall provide
a quarterly sales report identifying the sales of each product
sold by Lightning Audio to Best Buy.
(*) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL MATERIAL HAS BEEN REDACTED
AND FILED SEPARATELY WITH THE COMMISSION.
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4. INCENTIVE PROGRAMS. Rockford shall not eliminate or reduce the
level of incentives now in place for manufacturers'
representatives, dealers, and distributors of Connecting Punch
product in a manner that is different from any changes it
makes to the level of incentives offered for other
Rockford-Fosgate car audio products.
5. MARKETING AND SALES STRATEGIES. Rockford shall not reduce its
sales targets for the Connecting Punch line during the term of
the Agreement except on a basis consistent with changes in
sales target for other Rockford products.
6. DISPOSITION OF INVENTORY AT TERMINATION OF AGREEMENT. With the
exception of end of life items referenced in the Agreement and
in this Addendum, Rockford shall purchase all of Path Group's
current inventory that is on hand on July 31, 2001, or any
earlier termination date, up to a 180 day supply of Rockford
accessory inventory items. For the purposes of determining 180
days of inventory supply, the valuation will not be determined
by line of product but shall be determined by total dollar
value up to an amount equal to one half of the cost of gross
sales made in the previous twelve month period. Rockford shall
not have any obligation to purchase inventory ordered after
February 1, 2001, without its approval under section 1.
7. PAYMENT FOR INVENTORY BY ROCKFORD. Rockford shall pay Path
Group the landed cost for Path Group's inventory repurchased
under section 6 at the end of the term of the agreement or at
any earlier termination date, excluding end of life items.
Landed costs shall be defined as cost of product from the
vendor plus shipping charges, duty and any other reasonable
handling charges. Landed costs exclude amounts payable to Path
Group affiliates in excess of the amounts that an unaffiliated
third party would charge for the same services. The term
"Inventory" shall include items stored in Path and Rockford's
warehouse facilities by Path Group. Payment in full shall be
made within 7 days of the termination date.
8. OTHER INVENTORY. Rockford shall assist Path Group in good
faith to sell inventory that it does not purchase under
paragraph 7 including any end of life items. For current end
of life items, Rockford shall assist to make sales between the
date of this Addendum and the end of the term of the
Agreement. In addition to purchasing current inventory on
hand, Rockford shall also purchase all goods ordered by Path
from suppliers that are in transit or are otherwise
non-cancelable commitments at the valuation method and on the
terms set out in section 7. Rockford shall not have any
obligations to purchase inventory ordered after February 1,
2001, unless Rockford had approved the purchase of such
inventory under section 1.
9. CAPACITORS. Path Group has previously purchased stiffening
capacitors from Lightning Audio and has re-sold them to
Rockford. Path Group consents to Rockford's purchase of
stiffening capacitors directly from Lightning Audio and resale
under the "Connecting Punch" name. In consideration of this
consent:
(A) Rockford shall pay Path Group a (*) commission on
Rockford's sales of stiffening capacitors and
Capacitor Kits purchased from Lightning Audio. This
commission will be computed and paid based on
Rockford's net invoice sales of such capacitors to
Best Buy and International Distributors. With all
other customers, including US Domestic dealers, the
commission will computed and based upon the US Dealer
Price Sheet through the termination of the Agreement.
The commission will be paid by the 14th of the month
following the month of sale. Rockford shall provide a
monthly sales report identifying the sales of
capacitors and capacitor kits.
(B) All components required to assemble capacitor kits
(excluding capacitors) will continue to be supplied
to Rockford by Path Group.
(*) CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
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(C) Rockford will purchase Path Group's current inventory
of the capacitors and Capacitor Kits as of the date
of this Addendum at landed costs. Current inventory
is inventory on Rockford's current price sheets at
the time of the purchase and includes all inventory
on hand and in transit or ordered and non-cancelable
from Path's vendors.
Payment in full shall be made within 7 days.
10. DELETING PRODUCTS FROM PRICE LIST. Mutual agreement of the
Parties shall be required before products are deleted from the
price list.
11. ADDING PRODUCTS TO PRICE LIST. In accordance with its
obligations under the current Agreement, Path Group will
consult with Rockford and secure Rockford's approval before
adding new product to the price list which Path Group
determines will enhance the Connecting Punch line. Rockford
will not unreasonably withhold its approval of new product
proposed by Path. Any new Products added after the date of
this Addendum will be exclusive under the terms of the
Agreement.
12. CONSOLIDATION OF SHIPMENTS. Rockford shall not consolidate
shipments of any Lightning Audio accessories with any
Rockford-Fosgate, Punch, or Connecting Punch branded product.
13. INJUNCTIVE RELIEF. Either party shall be entitled to xxx for
damages and/or to seek injunctive relief as a remedy for an
uncured breach of this Addendum by the other party.
14. CONTINUATION OF AGREEMENT. Except as amended in this Addendum,
the Agreement continues in full force and effect and both
parties retain their rights and obligations under the
Agreement.
15. COVENANT OF GOOD FAITH AND FAIR DEALING. The parties agree to
go forward with their performance of the Agreement and this
Addendum in good faith and agree to deal fairly with the other
Party so that each Party receives the benefits of their
bargain under these agreements.
ROCKFORD CORPORATION
By /s/ W. Xxxx Xxxxxx
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Its President and CEO
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PATH GROUP INC.
By
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Its
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