EXHIBIT 10.18.2
AMENDMENT #2 TO THE
EXCLUSIVE DISTRIBUTION AGREEMENT
THIS AMENDMENT (the "AMENDMENT") is entered into and effective as of
the 7th day of March, 2005 (the "AMENDMENT DATE"), by and between Macy's
Merchandising Group, LLC ("MMG"), a Delaware limited liability company and
successor in interest to Federated Merchandising Group ("FMG"), an
unincorporated division of Federated Department Stores, Inc., a Delaware
corporation ("FEDERATED"), and Private Brands, Inc., a California corporation
("PB").
WHEREAS, FMG and PB entered into an Exclusive Distribution Agreement on
the 1st day of April, 2003, and entered into an Amendment #1 to the Exclusive
Distribution Agreement on the 22nd day of June, 2004 (as amended, the
"DISTRIBUTION AGREEMENT");
WHEREAS, effective as of December 31, 2004, Federated assigned to MMG,
all of FMG's tangible and intangible assets relating to its domestic operations,
including the Distribution Agreement; and
WHEREAS, MMG and PB desire to amend certain terms of the Distribution
Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the receipt and sufficiency of which are hereby acknowledged
by each party, MMG and PG agree to amend the Distribution Agreement as follows:
1. All capitalized terms not defined herein shall have the
meaning given to them in the Distribution Agreement. All references in the
Distribution Agreement to FMG shall, effective from and after December 31, 2004,
refer to MMG as successor in interest.
2. Section 1.1 of the Distribution Agreement is hereby amended to
add the following definition:
o "NET SALES" means (A) for Ordered Merchandise ordered
by MMG, (i) the gross sales price of Ordered
Merchandise actually charged by MMG to the Authorized
Seller that takes the Ordered Merchandise into
inventory for sale by such Authorized Seller in its
retail stores, PLUS (ii) internal load, insurance and
freight for such Ordered Merchandise, and (B) for
Ordered Merchandise ordered directly by an Authorized
Seller, the purchase price payable by the Authorized
Seller to PB for such Ordered Merchandise.
3. Section 5.1 of the Distribution Agreement is hereby amended
and restated as of the Amendment Date to read in its entirety as follows:
"5.1 ANNUAL MINIMUM PURCHASES. In order to preserve its rights under this
Agreement, including its rights to exclusivity as set forth in Section
2.2 and its right of first refusal as set forth in Section 2.3, MMG
shall order, during each Contract Year of the Term,
Merchandise with the minimum Net Sales amount set forth below (the
"ANNUAL MINIMUM PURCHASE REQUIREMENTS"):
CONTRACT
CONTRACT CONTRACT CONTRACT CONTRACT CONTRACT YEARS 6
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 THROUGH 10
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$25 million $25 million $40 million $50 million $65 million $75 million
The Annual Minimum Purchase Requirements for each Contract Year of the
first Renewal Term shall be equal to the average of the total Net Sales
amounts of Ordered Merchandise during each of Contract Years six
through ten of the Initial Term, provided that in no event shall the
amount used in any Contract Year to calculate the Annual Minimum
Purchase Requirements for the first Renewal Term be less than $75
million. Furthermore, the Annual Minimum Purchase Requirements for each
Contract Year of the first Renewal Term shall not exceed $90 million.
Similarly, the Annual Minimum Purchase Requirements for each successive
Renewal Term shall be equal to the average of the total Net Sales
amounts of Ordered Merchandise paid for by MMG during each of Contract
Years six through ten of the previous Renewal Term, provided that in no
event shall the amount used in any Contract Year to calculate the
Annual Minimum Purchase Requirements for the successive Renewal Term be
less than $75 million. Furthermore, the Annual Minimum Purchase
Requirements for each Contract Year of the second Renewal Term shall
not exceed 120% of the amount for the last Renewal Term.
Any order placed by MMG and cancelled prior to the cancellation date
specified in the applicable purchase order shall reduce the amount
ordered by MMG for the period during which the order was placed. No
such reduction will be effected if MMG cancels an order after the
specified cancellation date.
4. Section 5.3 of the Distribution Agreement is hereby amended
and restated as of the Amendment Date to read in its entirety as follows:
"5.3 PURCHASE REQUIREMENT FOR FIRST SIX CONTRACT YEARS.
Notwithstanding SECTIONS 2.9, 5.1 and 5.2 to the contrary, MMG
hereby agrees to purchase the Annual Minimum Purchase
Requirements for Contract Years 1 through 7, and to the extent
that MMG fails to purchase the Annual Minimum Purchase
Requirements for any such Contract Year, MMG shall, in the
immediately following Contract Year, either (i) purchase the
shortfall amount pursuant to SECTION 5.2(A) or, (ii) pay PB
the amount specified pursuant to SECTION 5.2(B).
5. Concurrently with the execution and delivery of this
Amendment, PB and MMG have entered into the Trademark Sublicense Agreement
attached hereto as EXHIBIT A.
6. It is expressly agreed that the Annual Minimum Purchase
Requirement for a given Contract Year shall be reduced by the aggregate amount
of "Net Sales" (as defined in the Trademark License Agreement) in such Contract
Year with respect to which PB is paid a "Percentage Royalty" (as defined in the
Trademark License Agreement) under the Trademark License Agreement; PROVIDED,
HOWEVER, that in no event shall "Net Sales" (as defined in the
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Trademark License Agreement) of Licensed Products (as defined in the Trademark
License Agreement) sourced by a party other than PB or any of its Affiliates
reduce the Annual Minimum Purchase Requirement by more than 25% in Contract Year
3 or by more than 15% in each Contract Year thereafter. For example, if during
Contract Year 3, MMG pays PB a Percentage Royalty with respect to "Net Sales"
(as defined in the Trademark License Agreement) of $10 million under the
Trademark License Agreement, then the Annual Minimum Purchase Requirement for
Contract Year 3 under the Distribution Agreement shall be reduced to $30
million.
7. EXHIBIT C of the Distribution Agreement is hereby amended to
include the following additional authorized sellers as "Authorized Sellers"
thereunder:
o Macy's Florida Inc., Macy's Florida LLC
o Macy's Central Inc., Macy's Central LLC
o Macy's Northwest, Inc.
o and any other department stores operated by Federated
or any of its Affiliates.
8. During the Term, each of PB and MMG shall deposit into a fund
(the "MARKETING FUND") managed by MMG for each Contract Year, an amount equal to
two percent (2%) of the greater of (i) the Annual Minimum Purchase Requirement
for the applicable Contract Year, and (ii) the FOB (source of shipment) price of
all Merchandise actually purchased by MMG under the Distribution Agreement,
including purchases made pursuant to Exhibit A of this Amendment. MMG shall
receive the Marketing Fund payments and otherwise manage the Marketing Fund, and
shall use the Marketing Fund to advertise and promote the Merchandise and to
compensate one or more merchandising coordinators for the Merchandise; PROVIDED
that at least twenty-five percent (25%) of the Marketing Fund shall be used to
compensate one or more merchandising coordinators for the Merchandise. PB and
MMG shall pay into the Marketing Fund on a quarterly basis, within thirty (30)
days following the end of each Contract Quarter, based on the actual amount of
Merchandise purchases made during that Contract Quarter, except with respect to
the Contract Quarter ending January 31, where PB and MMG shall pay an amount
equal to their respective amount of total Marketing Fund payments due for the
full Contract Year less the aggregate amount of Marketing Fund payments made by
such party for the immediately preceding three Calendar Quarters.
9. Within 45 days following the end of each Contract Quarter, MMG
shall provide to PB, a written statement on a form approved for use by PB from
time to time, reciting, with respect to all items of Ordered Merchandise ordered
during the Contract Quarter, a computation of the Net Sales amount for such
Ordered Merchandise, and such other information with respect thereto as
reasonably requested by PB. PB shall have the right, upon at least fifteen (15)
days written notice and no more than once during any twelve month period, to
inspect MMG's books and records and all other documents and material in the
possession of or under the control of MMG or any of its Affiliates with respect
to the Ordered Merchandise and the calculations of Net Sales at the place or
places where such records are normally retained by MMG or any of its Affiliates.
MMG shall maintain all books and records relative to its obligations under
hereunder and keep them accessible and available to PB for inspection for at
least three (3) years after termination of this Agreement.
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10. PBI acknowledges that pursuant to a Contribution Agreement
dated as of December 31, 2004, all the tangible and intangible assets of FMG
relating to its domestic operations were contributed by Federated to MMG, a
wholly owned indirect subsidiary of Federated. MMG agrees to observe, perform,
pay, and otherwise discharge when due all of FMG's obligations and liabilities
arising under or with respect to the Distribution Agreement. PBI hereby consents
to the transfer and assignment of the Distribution Agreement to MMG and ratifies
the transfer resulting from the Contribution Agreement effective as of December
31, 2004.
11. Except as expressly set forth herein, all of the terms and
conditions of the Distribution Agreement shall remain in full force and effect.
All references in the Distribution Agreement to "Agreement" shall mean and be a
reference to such document as and to the extent it is amended and supplemented
by this Amendment, including all exhibits, schedules and other agreements
entered into and/or delivered in connection with this Amendment.
12. This Amendment may be executed in any number of counterparts,
each of which is an original and all of which taken together constitute one
instrument. Any Party may execute this Amendment by executing any such
counterpart. This Amendment will be governed by and construed in accordance with
the laws of the State of New York without regard to its conflict of laws
principles.
IN WITNESS WHEREOF, the parties hereto have executed this Exclusive
Distribution Agreement or caused the same to be executed by a duly authorized
person as of the date set forth above.
MACY'S MERCHANDISING GROUP, LLC, PRIVATE BRANDS, INC.,
a Delaware limited liability company a California corporation
By: /S/ XXXXX XXXXXXX By: /S/ XXXXX XXXX
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Name: XXXXX XXXXXXX Name: XXXXX XXXX
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Title: SVP - CFO Title: PRESIDENT & CEO
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