Exhibit 10.36
MATERIAL IN THIS DOCUMENT
HAS BEEN OMITTED PURSUANT
TO A CONFIDENTIAL TREATMENT REQUEST
THIRD AMENDMENT
TO
LICENSED DEPARTMENT AGREEMENT
This Third Amendment To Licensed Department Agreement (the "Amendment"), is
entered into by and between X. X. Xxxxxx Corporation, Inc., a Delaware
corporation having its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx,
Xxxxx 00000-0000 (hereinafter "Penney"), and U. S. Vision, Inc., a Delaware
corporation, having its principal place of business at Xxxx Xxxx Xxxxxxxxxx
Xxxx, X. X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx (hereinafter "Operator').
WHEREAS, Penney and Operator have entered into a Licensed Department
Agreement dated February 1, 1995 (the "Agreement");
WHEREAS, Penney and Operator amended the Agreement by an Amendment
("Amendment Number 1") to Licensed Department Agreement dated December 18, 1996
and by an Amendment No. 2 ("Amendment Number 2") to License Department Agreement
dated April 13, 1998;
WHEREAS, Penney and Operator temporarily supplemented the Agreement by a
letter dated in December 1997 and that supplemental letter is no longer in
effect; and
WHEREAS, in accordance with the terms of the Agreement, the parties desire
to amend the following terms and provisions of the Agreement to reflect the
current agreement of the parties;
WHEREAS, capitalized terms not otherwise defined in this Amendment are used
as defined in the Agreement; and
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Penney and Operator hereby agree as follows:
ARTICLE I
Section 5 of the Agreement shall be deleted in its entirety and the
following Section 5 shall be substituted in its place:
5. Hours of Operation; Relocation; Opening Costs. (a) The Operator
agrees to sell the Merchandise in each Licensed Department and shall be
entitled to sell the Merchandise in the Selling Space. Except as approved
by the management of Operator and Penney, the hours of operation of the
Licensed Departments shall be as follows (the "Standard Operating Hours"):
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Sunday: 12:00 p.m. to 5:00 p.m., except as mutually agreed
by Penney and Operator or as limited by applicable
law requiring licensed staff coverage (provided
that Operator will provide Penney with written
notice of such limitation)
Monday & Tuesday: 10:00 a.m. to 7:00 p.m.
Wednesday - Friday: 10:00 a.m. to 8:00 p.m.
Saturday: 10:00 a.m. to 6:00 p.m.
Operator agrees to conspicuously post the Standard Operating Hours at the
Licensed Department locations, subject to Penney's approval in writing
(including by email) of the signage wording, design and location. Seasonal
and permanent increases to the Standard Operating Hours will not require
the approval of Penney, provided that such increases are consistent in all
Licensed Departments, but the parties must agree in writing to a reduction
in the Standard Operating Hours.
(b) In each of Penney's fiscal years during the term of this
Agreement, Operator agrees to spend at least $[CONFIDENTIAL] (or a pro rata
portion of such amount in the event the term of this Agreement includes
only a portion of such fiscal years) on opening new Licensed Departments or
in relocating or refurbishing existing Licensed Departments,. Operator
agrees that its expenditure of such funds is not conditioned on the
expenditure by Penney of funds for construction or other costs related to
the opening, relocating or refurbishing of Licensed Departments. For the
avoidance of doubt, it is understood that, notwithstanding past practice or
anything in this Agreement to the contrary, there may be instances where
Operator is responsible for all costs associated with the opening,
relocation or refurbishment of individual Licensed Departments, including,
without limitation, construction costs, paint, wallcoverings, carpet,
partitions, light fixtures, electrical wiring, plumbing work and fixtures,
and heating, ventilation and air conditioning. Operator and Penney agree to
establish an annual spending plan for new openings, relocations and
refurbishments prior to the beginning of each of Penney's fiscal years,
subject to such modifications as the parties agree upon, in writing, from
time to time during each such fiscal year.
(c) Penney may, upon not less than 60 days prior written notice to the
Operator, relocate a Licensed Department to a different space in a Store;
provided, however, that the Operator may terminate this Agreement as to an
individual Licensed Department effective as of the date specified for its
relocation by giving to Penney written notice of its election to terminate
as to that individual Licensed Department, which notice shall be
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given within 14 days from Operator's receipt of Penney's notice of
relocation.
ARTICLE II
Section 6 of the Agreement shall be amended by the addition of the
following provision at the end of the current section 6:
If Operator enters into a licensed department agreement or an arrangement
similar to this Agreement with another Chain Retailer (as defined below)
for the operation of optical departments and such arrangement provides for
more favorable terms and conditions relating to the amount and payment of
license fees, then Operator agrees to notify Penney of such terms and
conditions and agrees to promptly amend this Agreement, if Penney so
requests, to include the more favorable terms and conditions relating to
the amount and payment of license fees. For the purposes of this paragraph,
a "Chain Retailer" means a national chain of department stores or large
chain of discount stores such as Kmart, Target or Sam's Club.
ARTICLE III
Section 8 of the Agreement is hereby amended to provide that the
amount that Operator shall expend on advertising shall increase from an amount
not less than [CONFIDENTIAL] to an amount not less than [CONFIDENTIAL] of Net
Sales.
ARTICLE IV
Section 20 of the Agreement is amended to provide that the term of the
license shall expire on December 1, 2007. Section 20 also may xxxxx Xxxxxx the
right to approve or disapprove of the consummation of the Kayak Transaction
(defined below) and in connection with any such right, Penney hereby consents to
the Kayak Transaction. The consent provided in this paragraph is subject to (a)
Penney not having delivered the Refusal Notice (defined below), (b) the Kayak
Transaction not changing substantially from the transaction described in the
preliminary proxy statement filed with the U. S. Securities & Exchange
Commission, and (c) consummation of the Kayak Transaction on or before October
31, 2002.
ARTICLE V
Schedule A to the Agreement is hereby amended as follows:
(a) Paragraph 2 of Schedule A to the Agreement shall be deleted in its
entirety and the following Paragraph 2 shall be substituted in its place:
2. Merchandise: (list products and/or services sold in Licensed
Department)
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Optical products and services, including the sale of contact
lenses, prescription sunglasses, optical goods and supplies and the
taking of orders for and repair of the same, and such other
merchandise as may be mutually agreed upon. The Merchandise will be
similar to merchandise carried by competitors of Operator (where
permitted by the applicable vendor and designer) and will be
competitively priced. Operator will update Merchandise product lines
each year and will provide additional Merchandise offerings as they
become available.
(b) Paragraph 5 of Schedule A to the Agreement shall be deleted in its
entirety and the following Paragraph 5 shall be substituted in its place:
5. License fees:
Percentage of cash Net Sales, excluding doctors' fees received in
cash by doctors within a Licensed Department: [CONFIDENTIAL]
Percentage of credit Net Sales, excluding doctors' fees received
by doctors within a Licensed Department: [CONFIDENTIAL]
Percentage of doctors' fees received through credit card sales by
doctors within a Licensed Department: [CONFIDENTIAL]
Percentage of Net Sales, excluding shipping, from orders for
products placed through the Optical Website shall be at a
percentage to be agreed to by the parties before any product
offerings are placed on the Optical Website for sale.
ARTICLE VI
The parties agree to the following clarification of Amendment Number 1 to
the Agreement
a. The last sentence of subsection 20(b) of the Agreement, as
amended by section 3 of Amendment Number 1, is hereby deleted in
its entirety and the following sentence is substituted in its
place:
Penney agrees to pay Operator for the costs of the fixtures
and equipment for each Licensed Department terminated by
Penney
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pursuant to this subsection 20(b), using the lesser amount
of either the actual costs of such fixtures and equipment or
a cost basis of twenty thousand dollars ($20,000) less
accumulated depreciation which shall be calculated on a
straight line ten (10) year basis.
b. A line was inadvertently dropped at the end of page 2. Therefore
the last sentence of subsection 20(c) of the Agreement, as
amended by section 3 of Amendment Number 1, is deleted in its
entirety and the following sentence is substituted in its place:
At Penney's option, this Agreement will terminate
automatically thirty (30) days after a transfer or sale of a
majority of the stock or assets of Operator unless (i) such
sale of stock is by the Operator for cash in connection with
a public stock offering registered with the U. S. Securities
& Exchange Commission, or (ii) Operator obtains the advance
written consent of Penney for such sale of stock or assets,
which consent may be withheld or granted in Penney's sole
discretion.
c. Notwithstanding the provisions of subsection 20(b) of the
Agreement, as amended by section 3 of Amendment Number 1,
Operator shall not be entitled to terminate the Agreement with
respect to more than 20 individual Licensed Departments without
cause during any Penney fiscal year and provided further that
(unless otherwise agreed in writing by Penney) the actual closing
of such 20 Licensed Departments may only occur during the last 10
days of January of each then current Penney fiscal year.
ARTICLE VII
Section 17 of the Agreement is hereby amended, effective at the closing of
the Kayak Transaction (as defined below), by deleting that section in its
entirety and substituting the following in its place:
17. Insurance. Operator warrants and represents that, at all
times, it shall maintain, at its sole expense, insurance of the following
kinds and amounts, or in the amounts required by law, whichever is greater:
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Workers Compensation Insurance:
Worker's Compensation and Employer's Liability Insurance affording
protection under the Worker's Compensation Law of the state in which work
is to be performed, or containing an all-states endorsement, and Employer's
Liability protection subject to a limit of not less than $500,000.
General Liability Insurance:
Commercial general liability insurance written on an occurrence basis in
amounts not less than
BODILY INJURY PROPERTY DAMAGE
------------- ---------------
$2 million per person $2 million per occurrence
$2 million annual aggregate $2 million annual aggregate
This insurance shall include (a) products and completed operations
liability coverage, (b) contractual liability coverage for the liabilities
assumed by Operator under this Agreement, including but not limited to
section 19 of this Agreement, and (c) coverage for property in the care,
custody or control of Operator.
This insurance shall (i) name Penney as an additional insured, including
without limitation, as an insured with respect to third party claims or
actions brought directly against Penney or against Penney and Operator as
co-defendants and arising out of this Agreement, (ii) be such that,
although Penney is named an insured, Penney shall nonetheless be entitled
to recovery for any loss suffered by Penney as a result of Operator's
negligence, (iii) be written as a primary policy not contributing with any
other coverage which Penney may carry, and (iv) be renewed annually, while
doing business with Penney, and for the period of five (5) years after
cessation of business with Penney.
Professional Liability Insurance:
Professional Liability Insurance covering the professional services
provided by Operator, its employees and agents, in an amount not less that
$5,000,000 per occurrence. This insurance shall be renewed annually, while
doing business with Penney, and for the period of five (5) years after
cessation of business with Penney. Independent doctors of optometry located
in or adjacent to Licensed Departments shall be required to have
professional liability insurance with limits of not less than $1,000,000 in
the aggregate.
Automobile Liability Insurance:
Liability insurance in amounts not less than:
BODILY INJURY PROPERTY DAMAGE
------------- ---------------
$1 million per person $1 million per occurrence
$2 million per occurrence
CRIME INSURANCE:
Crime insurance in an amount not less than $3 million per occurrence.
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OTHER:
All insurance policies required to be maintained under this Agreement shall
be procured from insurance companies rated at least A-VIII or better by the
then current edition of Best's Insurance Reports published by A.M. Best Co.
Operator shall provide Penney with certificates of insurance evidencing the
required coverage concurrently with the execution of this Agreement and
upon each renewal of such policies thereafter, including a clause that
obligates the insurer to give Penney at least thirty (30) days prior
written notice of any material change or cancellation of such policies.
This section shall in no way affect the indemnification, remedy or warranty
provisions set forth in this Agreement. Further, if any work provided for
or to be performed under this Agreement is subcontracted by Operator, the
subcontractor(s) shall maintain and furnish satisfactory evidence of
Worker's Compensation, Employer's Liability and such other forms and
amounts of insurance which Operator deems reasonably adequate.
ARTICLE VIII
In addition to the provisions of Amendment Number 2, the parties agree as
follows with respect to the Penney optical website located at
xxx.xxxxxxxxxxxxxxx.xxx, xxx.xxxxxxx.xxx or any other domain name containing
Trademarks of Penney or Trademark used by Operator in connection with the
advertising and sale of Merchandise under the Agreement ("Optical Website"):
a. The Merchandise listed on the Optical Website and such Optical Website
itself shall be updated by Operator at least annually.
b. All information gathered from the Optical Website shall be subject to
the provisions of section 15 of the Agreement relating to ownership,
confidentiality and use of customer names and other information
related to the operation of the Licensed Departments.
c. Prior to November 30, 2002, Operator shall adopt and abide by a
privacy policy regarding the use of information gathered from the
Optical Website and such policy shall be substantially the same as
Penney's website privacy policy or contain such other terms as are
approved by Penney.
ARTICLE IX
Except as expressly modified by this Amendment, all terms and conditions of
the Agreement, as previously amended by Amendment Number 1 and Amendment Number
2, shall remain in full force and effect.
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ARTICLE X
This Amendment shall become effective if, and only if, all of the following
conditions are satisfied on or before October 31, 2002:
a. In connection with the proposed merger of Operator with Kayak
Acquisition Corp., a corporation formed and owned by Xxxxxx X.
Xxxxxxxx III, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xx. and
Xxxxxxx X. Xxxxxxxx, which has previously been publicly announced
and as to which a preliminary proxy statement has been filed with
the US Securities & Exchange Commission ("Kayak Transaction"),
the pro forma balance sheet of Operator assuming that the
proposed transaction is completed has been delivered to Penney
including the identity of the proposed senior lender to the
Operator following the Kayak Transaction ("Pro Forma Balance
Sheet");
x. Xxxxxx has not advised Operator in writing within 10 days of
Penney's receipt of the Pro Forma Balance Sheet that the
structure is not acceptable to Penney on the grounds it is too
highly leveraged ("Refusal Notice").
c. The Kayak Transaction has been consummated.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to
Licensed Department Agreement to be executed as of the 30 day of September 2002.
U. S. VISION, INC. X. X. XXXXXX CORPORATION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx. By: /s/ Xxxxx X. Xxxxxxx
--------------------------------- ------------------------------------
Xxxxxxx X. Xxxxxxxx, Chief Name: Xxxxx X. Xxxxxxx, Vice President
Executive Officer and Chairman of Its: Director of Store Operations
the Board
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