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EXHIBIT 10.22
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AGREEMENT
AGREEMENT dated as of October 16, 1996 ("Agreement") among
Farberware, Inc., Service Merchandise Company, Inc. and Windmere-Durable
Holdings, Inc.
WHEREAS:
A. In the License Agreement dated as of July 12, 1996 (the
"License Agreement") between Farberware Inc., formerly known as Far-B
Acquisition Corp. ("Licensor"), and Service Merchandise Company, Inc.
("Service"), Licensor granted Service a license to use the name "Farberware" and
certain related trademarks in connection with the sourcing, manufacture,
distribution and/or sale of certain Electric Products. The rights granted to
Service under the License Agreement are herein defined as "Electric Products
Rights"; and the Electric Products that are encompassed by the Electric Products
Rights (including, without limitation, electric fans) are herein called
"Licensed Electric Products."
B. In the Sublicense and Supply Agreement of even date
herewith ("Sublicense") between Service and Windmere-Durable Holdings, Inc.
("Windmere"), Service grants Windmere a sublicense to use the name Farberware
and related trademarks in connection with the sourcing, manufacture,
distribution and/or sale of certain Electric Products.
C. In consideration of the mutual agreements herein contained
and other good and valuable consideration given by each of the parties hereto to
each of the other parties hereto, the receipt and sufficiency of which are
hereby acknowledged, Licensor, Service and Windmere hereby agree as follows:
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1. TERMS. Capitalized terms not defined in this
Agreement shall have the meanings ascribed to them in the License Agreement; and
the rules governing the interpretation and construction of the License Agreement
shall govern the interpretation and construction of this Agreement
2. ELECTRIC PRODUCTS INVENTORY. Effective immediately,
the phrase "promptly after August 29, 1996" in the proviso to the second
sentence of Section 2.2 of the License Agreement is changed to read "promptly
after the later of September 24, 1996 or termination of the MSA, as extended
with the consent of Licensee"; and Licensor agrees that the three day period
referred to in Section 2.2. of the License Agreement for Licensee (i.e.,
Service) to accept Licensor's offer of sale to Licensee (i.e., Service) of all
unsold Electric Products inventory shall be extended for a period of thirty
calendar days from and after the end of said three day period, subject to any
sales of Electric Products included in such inventory made by Licensor prior to
acceptance by Licensee (i.e., Service) of said offer.
3. AMENDMENT OF SECTION 6.7 OF LICENSE AGREEMENT.
Effective immediately, the second sentence of Section 6.7 of the License
Agreement is hereby amended to read in its entirety as follows:
If as the result of the activities of any such third party manufacturer,
Licensor is subjected to any cost, expense, loss or penalty, Licensee
shall on demand fully compensate Licensor for any cost, expense, loss or
penalty that Licensor sustains; provided, however, that Licensee shall
have no such obligation with respect to any cost, expense, loss or
penalty sustained by Licensor as the result of the activities of any
given third party manufacturer located outside of the United States
unless: (i) at the time of such activities, or within 1095 days prior to
such activities, such third party manufacturer is, or was, a party to a
contract (whether formal or informal and whether in writing or otherwise)
with Licensee, or a sublicensee or assignee of Licensee, or an Affiliate
of Licensee or of any such sublicensee or assignee, relating to Electric
Products and (ii) the cost, expense, loss or penalty is caused by, or
arises from, activities of
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the third party manufacturer that: (x) occur during the period when such
third party manufacturer is, or was, a party to such contract or (y)
before the end of the 1095 day period next following the termination of
such contract with such third party manufacturer.
4. Amendment Of Section 13.2.4 Of License Agreement.
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Effective immediately, the first word in the final sentence of Section 13.2.4 of
the License Agreement is changed from "Licensee" to "Licensor."
5. Notice To Windmere Upon Termination of License.
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5.1 In the event of termination of the License
Agreement ("Termination") by Licensor because of a material breach of the
License Agreement by Service, Licensor shall provide Windmere with written
notice of such Termination ("Licensor's Termination Notice") sent to Windmere's
executive office not less than three (3) business days prior to the effective
date of Termination.
5.2 In the event of Termination of the License
Agreement by Service pursuant to the exercise of its election under Section 15.2
of the License Agreement to terminate on six (6) months' notice, Licensee shall
provide Windmere with written notice of such termination (the "Service
Termination Notice"), in accordance with Section 19.3 of the Sublicense, not
more than seventy-five (75), nor less than thirty (30), business days prior to
Termination, and (ii) simultaneously with the giving of the Service Termination
Notice, provide Licensor with written notice in accordance with Section 18.3 of
the License Agreement stating that the Service Termination Notice has been given
to Windmere.
5.3 Notwithstanding the provisions of the
Sublicense, Windmere agrees that Termination (as defined in this Section 5) does
not constitute a breach of the Sublicense by Service.
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6. Continuation of Rights, Etc. if License Terminated.
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Licensor agrees that, if Windmere is not in material breach of the
Sublicense at the time of Termination, and Windmere elects to become the
substitute Licensee under the License Agreement, such election to be made by
written notice given to Licensor (in accordance with Section 18.3 of the License
Agreement) within thirty (30) calendar days of receipt of either Licensor's
Termination Notice or the Service Termination Notice (the day following the
effective date of Termination or the last day for the giving of such notice by
Windmere, whichever is later, being called the "Substitution Date"), Windmere
shall thereupon receive and have, and be deemed to have received and have, as of
the Substitution Date, an exclusive license from Licensor to the same
trademarks, patents and copyrights relating to the Licensed Electric Products
granted to Service under the License Agreement on the same terms and conditions
as set forth in the License Agreement, and (subject to Sections 6.1 and 7.1 of
this Agreement) Windmere shall thereupon become and be, and be deemed to be, the
Licensee under the License Agreement, and shall become and be, and be deemed to
be, bound and obligated by all of the terms and conditions of the License
Agreement, as fully as if it were the Licensee originally named therein, subject
only to the following amendments and conditions:
6.1 Windmere shall not be entitled to receive and
have, and shall not receive and have, or be deemed to receive and have, the
exclusive license referred to in the introductory portion of this Section 6,
unless on or before the Substitution Date, Windmere shall deliver to Licensor a
duly authorized, valid and binding written undertaking by Windmere that it will
not sell (or permit any of its
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Affiliates to sell) Licensed Electric Products to Salton/Maxim Housewares, Inc.
("Salton"), or any Affiliates of Salton, or any other Affiliates of Windmere
(each of Salton, any Affiliates of Salton and any other Affiliates of Windmere
being hereinafter called a "Reseller"), unless (i) Windmere first provides
Licensor with a duly authorized, valid and binding written agreement that any
sales of Licensed Electric Products by Resellers or their Affiliates shall be
deemed to be sales of such Licensed Electric Products by Windmere and that
Windmere shall pay royalties on all sales of Licensed Electric Products made by
Resellers or their Affiliates as if the sales had been made directly by Windmere
to the customers of the Resellers or their Affiliates at the prices paid to the
Resellers or their Affiliates by their respective customers, and (ii) Windmere
shall have obtained from each Reseller a duly authorized, valid and binding
written undertaking (a) to provide Licensor and Windmere on or before the 44th
day of each calendar quarter with a statement (as to sales of Licensed Electric
Products made by such Reseller or its Affiliates) substantially equivalent in
form and content to the statement that will be required of Windmere by Section
13.2.2 of the License Agreement, as amended, and (b) to accept and observe the
same requirements with respect to the maintenance of accurate books and records,
and to afford to Licensor the same rights of inspection, as Licensee is required
to observe and to afford to Licensor under Section 13.3 of the License
Agreement, as amended.
6.2 Effective as of the Substitution Date,
Article XIII of the License Agreement shall be, and be deemed to be, amended to
read in its entirety as follows:
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ARTICLE XIII.
Royalties
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13.1 Advances.
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13.1.1 On or within three business days after the
Substitution Date, Licensee shall pay to Licensor the sum of Five Hundred
Thousand Dollars ($500,000) as an advance (an "Advance") against royalties to be
due and payable for the calendar quarter in which the Substitution Date occurs.
13.1.2 On or before the first day of each succeeding
calendar quarter during the Term, Licensee shall pay to Licensor the sum of Five
Hundred Thousand Dollars ($500,000) as an advance (each an "Advance") against
royalties to be due and payable for the calendar quarter then beginning or about
to begin.
13.2 Royalties.
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13.2.1 On or before the 44th day of each calendar
quarter starting with the calendar quarter next following the calendar quarter
in which the Substitution Date occurs and ending on the 44th day following the
end of the Term, Licensee agrees to make a Royalty Payment to Licensor that is
equal to (i) five percentum (5%) of the Net Sales of all Licensed Electric
Products sold by Licensee during the next preceding calendar quarter, less (ii)
the Advance paid by Licensee in respect of the next preceding calendar quarter.
13.2.2 Each Royalty Payment shall be accompanied by
a complete and accurate statement, signed and certified by the chief financial
officer of Licensee, showing (i) the number, description (by SKU) and Sales
Price of the Licensed Electric Products sold by Licensee during the preceding
calendar quarter, and (ii) all other information necessary to verify the
computation of the Royalty Payment.
13.2.3 On or before the 28th day of March in each
calendar year during the Term, and in the calendar year following the end of the
Term, Licensee shall provide Licensor with a summary accounting (certified by
Licensee's chief financial officer) of all royalties payable in respect of the
next preceding calendar year. Subject to objection and audit, as hereinafter
provided, if such summary accounting shows that the royalties payable in respect
of the next preceding calendar year exceeded the sum of the Advances paid and
Royalty Payments made in respect of the next preceding calendar year, Licensee
shall pay to Licensor the amount of such excess. Conversely, if such summary
accounting shows that the sum of the Advances
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paid and Royalty Payments made in respect of the next preceding calendar year
exceeded the greater of (iii) the Advances paid in respect of such calendar year
and (iv) the royalties payable in respect of such calendar year, Licensor shall
refund such excess to Licensee. Licensor may accept, but shall have the right to
audit and object in writing to the substance of any summary accounting provided
pursuant to this Section 13.2.3, in which latter event the resulting dispute
shall be resolved as provided in Article XVII.
13.2.4 As used herein the term "Net Sales" means
gross sales less (i) returns of Licensed Electric Products received directly
from the customers of Licensee to whom they were sold by Licensee, (ii)
co-operative advertising allowances applicable solely and specifically to
Licensed Electric Products sold by Licensee after the Substitution Date provided
that such allowances are deducted by the customers to whom such allowances are
granted when paying the invoices on which they are granted and are actually
expended in advertising Licensed Electric Products (it being agreed (A) that the
invoices on which such advertising allowances are given shall specify the
conditions set forth in this clause (ii), but (B) that Licensee shall not itself
be required to obtain and preserve proof of compliance with such conditions),
(iii) customary payment and volume discounts (where lawful) applicable solely
and specifically to Licensed Electric Products sold by Licensee after the
Substitution Date, and (iv) un-reimbursed outbound freight allowances applicable
solely and specifically to Licensed Electric Products sold by Licensee after the
Substitution Date.
13.3 INSPECTION OF BOOKS AND RECORDS. Licensee
agrees to keep accurate books of account and records covering all transactions
relating to the sale of Licensed Electric Products. Licensor, its
representatives and agents shall have the right at all reasonable business
hours, upon reasonable notice, to examine and audit (including the right to make
extracts) the books and records and other related documents and records in order
to verify Licensed Electric Products sales of Licensee and royalties due, and
such books and records shall be maintained by Licensee for three years following
each Royalty Payment. Any inspection shall be at Licensor's expense, unless a
discrepancy to Licensor's detriment in the amount of three percent (3%) or more
is discovered, in which event Licensee shall bear all customary expenses,
including reasonable accounting, auditing and legal fees and related
disbursements and other charges.
13.4 Notwithstanding the foregoing provisions of
this Article XIII, if Licensee shall exercise the right of Licensee to terminate
the License Agreement upon six months prior written notice pursuant to Section
15.2 of the License Agreement, on the effective date of such termination (the
"Termination Effective Date"), Licensee shall pay to Licensor an amount equal to
(i) Six Million Dollars ($6,000,000) less (ii) the sum of all
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Advances paid by Licensee to Licensor (pursuant to Section 13.1) prior to the
Termination Effective Date.
6.3 Effective as of the Substitution Date,
subsections 18.4.1 through 18.4.3, inclusive, of the License Agreement, shall
be, and be deemed to be, deleted from the License Agreement, and Section 18.4 of
the License Agreement shall be amended to read in its entirety as follows:
18.4 ASSIGNMENT, ETC. This License Agreement, the license
granted to Licensee, and the duties and obligations of Licensee, are all
personal to Licensee; and Licensee agrees not to sell, assign, transfer,
mortgage, pledge, hypothecate or sublicense the license granted herein
(or any rights therein) in whole or in part, or delegate any of its
duties or obligations under this License Agreement, without the prior
written consent of the Licensor, which may be given or withheld in the
sole and absolute discretion of Licensor; provided, however, that (i)
Licensee and Salton/Maxim Housewares, Inc. ("Salton") shall have the
right to merge without the prior written consent of Licensor so long as
the surviving corporation resulting from such merger shall have a net
worth (shareholders' equity) that is at least equal to the net worth
(shareholders' equity) of Licensee immediately prior to such merger, and
(ii) Licensee shall have the right to merge with any other entity with
the prior written consent of Licensor, which shall not be unreasonably
withheld.
6.4 Effective immediately, Section 18.14 of the
License Agreement is amended to read in its entirety as follows:
18.14. If Licensee shall so elect, Licensor shall lease to
Licensee for a term beginning on the thirtieth (30th) day following
Licensee's receipt of notice of termination of the MSA, and ending when
the License terminates, at an annual rental of One Dollar ($1.00) per
year, all of Licensor's right, title and interest in and to such of the
tools, dies and molds (collectively, "Tools") used by the Company solely
and exclusively for the manufacture of Electric Products for home (as
distinguished from commercial, industrial and/or institutional) use as
Licensee shall select. Such selection shall be made by written notice
given by Licensee to Licensor in accordance with Section 18.3 not later
that the thirtieth (30th) day following Licensee's receipt of notice of
termination of the MSA, provided that Licensor or its sublicensee have
had the opportunity (within the thirty day period following the receipt
of notice of termination of the MSA) to inspect the Tools. Promptly
following the giving of the written notice by Licensee specified in the
next preceding sentence, Licensee shall proceed diligently and at
Licensee's sole cost and
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expense (i) to photograph (with cameras that will produce negatives from
which can be made permanent color photographs of good quality) all of
the Tools that Licensee elects to lease, (ii) to catalogue each of such
tools, each Tool to be identified by (A) the number, if any, which is
assigned to such Tool on the books and records of the Company if such
information is made available to Licensee, (B) the product or products
that can be produced using such Tool, (C) a number corresponding with a
number on the back of the photo of such Tool and (D) the condition and
value of each such Tool, and (iii) appropriately and carefully pack the
Tools for shipment. Licensor shall cooperate with Licensee in efforts to
obtain the information required by clauses (ii)(B) and (ii)(C) of the
next preceding sentence which either the Licensor or the Company has in
its possession. No Tools shall be removed from the Bronx Facilities
unless (1) true copies of the photographs thereof and of the related
catalogue have been delivered to, and approved by, Licensor, which
approval shall not be unreasonably withheld, (2) Licensee shall have
delivered to Licensor a receipt for, and acknowledgment of the condition
and value of, the Tools, which receipt shall be reasonably satisfactory
in form and content to Licensor, and (3) Licensee shall have obtained,
at Licensee's sole cost and expense, property and casualty insurance
against the loss, destruction, damage to, or theft of, the Tools in an
amount at least equal to the aggregate value of all of the Tools that
Licensee elects to lease, which insurance shall include Licensor as a
named party insured and shall remain in full force and effect until the
Tools have been delivered to Licensor as provided in the final sentence
of this Section 18.14. The lease provided for in this Section 18.14
shall contain provisions that are common to equipment leases (including,
without limitation, provisions to save harmless the Licensor from taxes
or liability based on ownership of the Tools and for the maintenance by
Licensee of appropriate liability insurance for the benefit of Licensor)
and shall be subject to (x) the Company's right to use the Tools until
termination of the MSA and (y) the temporal parameters and other
provisions that govern the removal of Assets from the Bronx Facilities
set forth in Section 8.3 of the Asset Purchase Agreement, a copy of
which Section 8.3 has been provided to Licensee. The lease of the Tools
shall be on an "as is", "where is" basis, and it shall be Licensee's
responsibility to remove the same from the Bronx Facilities at
Licensee's sole risk and cost. Notwithstanding the next preceding two
sentences or the delivery of the photographs, catalogue and receipt
referred to in foregoing provisions of this Section 18.14, Licensee
shall not be required to remove from the Bronx Facilities, within the
time parameters specified in Section 8.3 of the Asset Purchase
Agreement, any Tools that are damaged by, or which Licensee is prevented
from removing from the Bronx Facilities by reason of interference from,
the employees of the Company; and neither Licensor nor Licensee shall
have any responsibility to the other for any Tools that are not removed
from the Bronx Facilities by reason of such damage or interference.
Licensee shall at all times maintain the Tools and shall replace those
that break or wear out. Upon termination of the lease for any reason, or
if for any reason Licensee stops marketing an Electric Product
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("discontinued product") to which any individual Tool relates, such
Tools (or, as the case may be, the individual Tool relating to a
discontinued product), or the replacements or replacement for any
thereof which shall have been destroyed or worn out, shall be delivered
to Licensor at such address as shall be specified by Licensor,
contemporaneously with or prior to such delivery.
7. Miscellaneous.
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7.1 If Termination (as defined in Section 5 of
this Agreement) shall occur, nothing in this Agreement shall relieve Service of
any liability, obligation or responsibility that is stated or intended to be
binding upon the Licensee originally named in the License Agreement following
termination of the License Agreement in accordance with Article XV thereof; and
for purposes of this Section 7.1, the term "Licensee" shall continue to include,
and at all relevant times shall be deemed to include, Service. If Windmere shall
become the Licensee pursuant to Section 6 of this Agreement, it shall not be or
become liable or obligated for any liability, obligation or default of or by
Service under the License Agreement.
7.2 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
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7.3 Except as amended by this Agreement, the
License Agreement shall remain in effect without any other change.
FARBERWARE INC.
By: /s/ Xxxxxxx Xxxxxxxx
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Its: PRESIDENT
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WINDMERE-DURABLE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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XXXXX X. XXXXXXXX
Its: SR. V.P & C.F.O.
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SERVICE MERCHANDISE COMPANY, INC.
By: /s/ Xxxx X. Xxxxxx
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Its: PRESIDENT
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