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STOCK AGREEMENT
Stock Agreement (this "Agreement") dated as of May 6, 1998 by and among:
I. SALTON/MAXIM HOUSEWARES, INC. ("Salton" or the "Company"), a
Delaware corporation,
II. WINDMERE-DURABLE HOLDINGS, INC. ("Windmere"), a Florida
corporation, and
III. the following additional parties who have executed this
Agreement ("Salton Executive Related Parties") only for
purposes of Sections 2.03, 4, 7, 8.02, 10.03, 11.03 and
Article 12 hereof: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇, Duquesne Financial Corporation and Dominator Investors
Group.
WITNESSETH:
A. Pursuant to a Stockholder Agreement dated July 11, 1996 (the
"Stockholder Agreement") between Salton and Windmere, the Board of Directors of
Salton consists of four directors designated by Windmere (the "Windmere
Directors") and four directors not designated by Windmere (the "Other
Directors").
B. The Board of Directors of Salton has appointed a special committee
of the Board of Directors consisting of two outside Directors, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Committee"), for the purpose of reviewing for the benefit
of the stockholders of Salton other than Windmere the terms of this Agreement.
C. The parties desire to enter into this Agreement and, subject to the
determination on or prior to May 18, 1998 by (i) the Committee that this
Agreement and the transactions contemplated hereby are in the best interests of
Salton and its stockholders (other than Windmere) and (ii) the Windmere Board of
Directors that this Agreement and the transactions contemplated hereby are in
the best interests of Windmere and its stockholders, to consummate the
transactions contemplated hereby.
THEREFORE, Salton, Windmere and the Salton Executive Related
Parties agree as follows:
1. SALTON OPTION.
1.01 SALTON OPTION. Subject to the terms and conditions set forth
below, Windmere hereby grants to Salton an irrevocable option (the
"Salton Option") to purchase:
(i) all, but not less than all, of the 6,535,072 outstanding
shares of common stock of Salton, par value $.01 per share (each
referred to as a "Share"), owned by Windmere ("Windmere Salton Shares")
at a purchase price of $12.00 per Share in cash; and
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(ii) an option owned by Windmere to purchase up to 485,000
Shares (the "Windmere Prior Option") for an aggregate purchase price
equal to the product of (x) 485,000 (less the number of Shares
previously acquired by Windmere upon any exercise of the Windmere Prior
Option prior to the Salton Option Closing (as defined below))
multiplied by (y) $7.17.
In addition to the aggregate cash amount required to purchase from Windmere: (x)
all of the Windmere Salton Shares and (y) the Windmere Prior Option owned by
Windmere, at the Salton Option Closing Salton shall also deliver to Windmere a
$15,000,000 promissory note executed by Salton payable to the order of Windmere
containing the terms and conditions and in the form attached hereto as EXHIBIT A
(the "Salton Note"). In order to exercise the Salton Option, both the Windmere
Salton Shares and the Windmere Prior Option must be purchased.
The aggregate amount owing under subsection 1.01 (i) and (ii) above plus the
Salton Note to be delivered to Windmere at the Salton Option Closing is
sometimes referred to herein as the "Total Windmere Purchase Consideration."
1.02 EXERCISE OF SALTON OPTION. The Salton Option may be exercised by
Salton at any time on or prior to 5:00 P.M., Central Daylight Savings
Time, on June 30, 1998 ("Salton Outside Exercise Date"). Salton shall
exercise the Salton Option by giving a written notice ("Salton Exercise
Notice") to Windmere on or prior to the Salton Outside Exercise Date
electing to exercise the Salton Option. The Salton Exercise Notice
shall be accompanied by:
(i) a letter addressed to Windmere from the Committee: (x)
stating that it has duly approved (by resolution) the exercise of the
Salton Option and (y) estimating the date on which the closing of the
Salton Option (the "Salton Option Closing") will occur; provided,
however, that such estimate shall not affect the right of Salton to
close the exercise of the Salton Option in accordance with the terms
and conditions of this Agreement at any time on or before the Salton
Outside Expiration Date (as defined below);
(ii) one of the following as set forth below:
A. a letter from a nationally recognized investment
banking firm to the effect that, based on its experience, its
knowledge of the public and institutional investment market,
its review of the Company's business and financial condition,
and prior discussions with potential investors, it is highly
confident that it can arrange for a funding to the Company
that will provide sufficient funds to permit Salton to pay
Windmere the cash portion of the Total Windmere Purchase
Consideration prior to the Salton Outside Expiration Date;
such letter may contain customary conditions with respect to
providing the funding, including the
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absence of bankruptcy or other material adverse events to
Salton's business and financial condition; or
B. a letter from an investment banking firm to the
effect that, based on its experience, its knowledge of the
institutional investment market, its review of the Company's
business and financial condition, and prior discussions with
potential investors, it is highly confident that it can
arrange for a funding to the Company that will provide
sufficient funds to permit Salton to pay Windmere the cash
portion of the Total Windmere Purchase Consideration prior to
the Salton Outside Expiration Date; such letter may contain
customary conditions with respect to providing the funding,
including the absence of bankruptcy or other material adverse
events to Salton's business and financial condition; provided,
however, that: (i) such letter shall identify the source or
sources of the funding; (ii) such sources shall be of a type,
including as examples, but not limited to, insurance
companies, pension funds or investment partnerships, that a
reasonable investor would determine are capable of supplying
the funding required; and (iii) such investment banking firm
shall supply with its letter, non-binding commitment letters
or letters of intent from such funding sources to the effect
that they expect to provide such funding, subject to customary
conditions with respect to providing the funding, including
documentation, due diligence and the absence of bankruptcy or
other material adverse events to Salton's business and
financial condition; or
C. a letter from an institutional lender or
institutional investor stating that it is confident that it
can arrange for and provide the funds necessary for the
payment to Windmere of the Windmere Purchase Price prior to
the Salton Outside Expiration Date; such letter may contain
customary conditions with respect to providing the funding,
including documentation, due diligence and the absence of
bankruptcy or other material adverse events to Salton's
business and financial condition.
(iii) if the alternative letters to be provided by the
Committee identified in subsection (ii) above related to the sources of
funding for the exercise of the Salton Option do not also provide,
concurrently with the payment to Windmere of the Windmere Purchase
Price, for the payment in full of the indebtedness of Salton owing to
Foothill Capital Corporation ("Foothill"), the current primary lender
to Salton which holds the Windmere Prior Note (defined below) in pledge
as collateral for Foothill's loans to Salton, then the letter from the
Committee exercising the Salton Option shall be accompanied by a letter
from Foothill to Windmere to the effect that the Windmere Prior Note
will be released for delivery to Windmere on or prior to the Salton
Option Closing upon consummation of the transactions contemplated by
the exercise of the Salton Option.
Salton shall give Windmere at least five (5) business days notice of the date
and time of the Salton Option Closing, which will be held at the Chicago offices
of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ or such other place as the parties hereto shall
agree.
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1.03 CONDITIONS TO THE SALTON OPTION CLOSING. The obligation of each of
Windmere and Salton to consummate the transactions contemplated by the
exercise of the Salton Option is subject to the following conditions:
(i) any waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), applicable to the
sale of the Windmere Salton Shares to be purchased pursuant to the
Salton Option shall have expired or been terminated;
(ii) there shall be no preliminary or permanent injunction,
restraining order or other order by any court of competent jurisdiction
that restricts, prevents or prohibits the delivery of the Shares
pursuant to the Salton Option;
(iii) the Salton Option Closing shall have occurred on or
prior to October 30, 1998 (the "Salton Outside Expiration Date"),
provided that the conditions set forth in this subsection 1.03 (iii)
and subsection 1.03(ii) immediately above shall not be available to any
party whose failure to fulfill any obligation under this Agreement, or
whose commencement of a legal proceeding, has been the proximate cause
of the failure of the Salton Option Closing to occur on or prior to the
Salton Outside Expiration Date;
(iv) If the funds for the purchase of the Windmere Salton
Shares and the Windmere Prior Option are provided by Salton, then
Salton shall deliver to Windmere an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ &
Zukin Inc., Duff & ▇▇▇▇▇▇ (or another nationally recognized independent
firm in the business of making the analysis required by such opinion)
to the effect that, upon the completion of, and after giving effect to:
(x) the transactions contemplated by the purchase of the Windmere
Salton Shares and of the Windmere Prior Option and the issuance by
Salton of the Salton Note and (y) the financing obtained by Salton in
connection with such transactions, Salton: (i) would not be insolvent
or become insolvent as a result of such transactions; (ii) would not
have unreasonably small capital for its business; and (iii) would not
incur debts that would be beyond the ability of Salton to pay as such
debts matured;
(v) Windmere shall have received an opinion of ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for Salton, or of independent counsel to the
purchaser of the Windmere Salton Shares and the Windmere Prior Option
if Salton is not the purchaser, to the effect that the purchase of such
Shares pursuant to the Salton Option (a) has been duly authorized by
all required legal action on the part or Salton of such purchaser, as
the case may be), (b) does not contravene any law, rule, or regulation
or any order or decree binding on Salton (or such purchaser), (c) does
not conflict with or result in a breach of any material agreement or
instrument known to such counsel binding on Salton (or such purchaser),
and (d) does not require the consent or authorization of any
governmental authority which has not been obtained.
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1.04 SALTON OPTION CLOSING. At the Salton Option Closing, Windmere will
deliver to the purchaser(s): (i) a certificate or certificates
evidencing all of the Windmere Salton Shares to be purchased by the
purchaser(s) pursuant to the Salton Option, each such certificate being
duly endorsed in blank and accompanied by such stock powers and such
other documents as may be reasonably necessary to transfer record
ownership of such Shares into the name of the purchaser(s) on the stock
transfer books of Salton; and (ii) an assignment from Windmere of the
Windmere Prior Option. The purchaser(s) will purchase the Windmere
Salton Shares and the Windmere Prior Option for the Total Windmere
Purchase Consideration; payment of the cash portion of the Total
Windmere Purchase Consideration shall be made by wire transfer of
immediately available funds to an account designated by Windmere and
the Salton Note shall be executed and delivered by Salton to Windmere.
1.05 WINDMERE PRIOR NOTE OWING TO SALTON. Notwithstanding anything to
the contrary in the promissory note dated July 11, 1996 in the
principal amount of $10,847,620 issued by Windmere to Salton (the
"Windmere Prior Note"), at the Salton Option Closing, and
simultaneously with the payment of the cash portion of the Total
Windmere Purchase Consideration to Windmere, Windmere shall pay in full
the principal amount of the Windmere Prior Note, plus accrued interest
thereon to the date of payment, by wire transfer in immediately
available funds, as designated by Salton, to either an account of
Salton or an account of Foothill.
1.06 INDEMNIFICATION. All rights to indemnification existing in favor
of the present or former directors of Salton shall survive the Salton
Option Closing and shall continue in full force and effect for six
years after the Salton Option Closing, and Salton shall cause to be
maintained in effect for not less than six years after the Salton
Option Closing policies of directors' and officers' liability insurance
providing the same coverage as those maintained by Salton on the date
hereof with respect to matters existing or occurring at or prior to the
Salton Option Closing.
2. WINDMERE OPTION.
2.01 WINDMERE OPTION. Upon the earlier to occur of either: (i) Salton
failing to deliver to Windmere the Salton Exercise Notice on or prior
to the Salton Outside Exercise Date or (ii) the Salton Option Closing
failing to occur on or prior to the Salton Outside Expiration Date,
Windmere shall have 65 days to deliver to Salton a written notice (the
"Windmere Exercise Notice") electing (the "Windmere Option") to
acquire, in accordance with the terms of this Agreement, all of the
outstanding Shares of Salton which it does not own, at Windmere's
election, pursuant to either (i) a tender offer of Windmere to all
other Salton stockholders offering to acquire not less than 100% of all
of the outstanding Shares of Salton not owned by Windmere (the "Tender
Offer"), and/or (ii) a merger pursuant to which Salton would become a
wholly-owned subsidiary of Windmere or an affiliate of Windmere (the
"Merger", and together with the Tender Offer, the "Windmere
Transactions"). The Windmere Exercise Notice shall contain an
irrevocable offer from Windmere to acquire, pursuant to either one
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or both of the Windmere Transactions designated by Windmere, all Shares
of Salton not owned by Windmere at a per Share consideration of $14.27
per Share to be paid either:
(i) in cash or
(ii) that number of shares of Windmere common stock for
each Share of Salton equal to the Exchange Ratio.
The "Exchange Ratio" means the quotient (rounded to the nearest 1/100,000)
determined by dividing $14.27 by the average closing price for the Windmere
common stock (as reported on the New York Stock Exchange Inc. ("NYSE") Composite
Transactions reporting system as published in The Wall Street Journal or, if not
published therein, in another authoritative source) for the 30 trading days
ending two business days prior to the expiration of the Tender Offer or, if
there is no Tender Offer, the effective date of the Merger.
2.02 WINDMERE TRANSACTIONS AGREEMENT. Promptly after receipt of the
Windmere Exercise Notice, Windmere and Salton shall enter into an
agreement (the "Windmere Transactions Agreement") which shall provide
that:
(i) If the consideration payable by Windmere in the Windmere
Transactions is Windmere common stock, Windmere will, as promptly as
practicable and prior to consummation of the Windmere Transactions: (x)
register such stock under the Securities Act of 1933 and qualify such
stock for issuance in such states as is necessary in order to effect
the issuance of such stock to Salton stockholders and (y) list such
stock on the NYSE so that it can be, when delivered to the Salton
stockholders pursuant to the Windmere Transactions, sold immediately
without restrictions;
(ii) Each of Salton and Windmere will use its reasonable best
efforts to take all actions to close the Tender Offer and/or the Merger
as soon as possible, as permitted under Delaware law and the rules and
regulations of the Securities and Exchange Commission (the "SEC")
(without limiting the generality of the foregoing, each of Salton and
Windmere will use its reasonable best efforts to obtain any required
shareholder approvals of the Windmere Transactions as soon as
possible);
(iii) Upon the closing of the Merger, Windmere shall pay each
holder of an option to purchase Shares (whether or not then
exercisable), in consideration of the cancellation of such option, an
amount equal to the excess, if any, of $14.27 over the per Share
exercise price of such option, multiplied by the number of Shares
subject to such option, payable in the same consideration (cash or
registered Windmere common stock) paid to the other Salton stockholders
in the Merger; provided, however, that if the Windmere Transactions
include a Tender Offer, such payments shall be made no later than 60
days after the closing of the Tender Offer;
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(iv) the sole conditions to the obligation of each of Windmere
and Salton to consummate the Windmere Transactions are: (u) any waiting
period under the HSR Act applicable to the Windmere Transactions shall
have expired or been terminated; (v) all requisite shareholder
approvals shall have been obtained; (w) there shall be no preliminary
or permanent injunction or other order by any court of competent
jurisdiction restricting, preventing or prohibiting the Windmere
Transactions; (x) the Tender Offer and/or the Merger shall have been
completed within 150 days after execution of the Windmere Transactions
Agreement (the "Windmere Expiration Date"); (y) with respect to
Windmere's obligation to consummate the Windmere Transactions, no
material adverse change in the business or financial condition of
Salton shall have occurred since the date of the Windmere Transactions
Agreement; and (z) with respect to Salton's obligation to consummate
the Windmere Transactions, if the consideration payable is Windmere
common stock, no material adverse change in the business or financial
condition of Windmere shall have occurred since the date of the
Windmere Transactions Agreement; PROVIDED that the conditions set forth
in this clause 2.02(iv) shall not be available to any party whose
failure to fulfill any obligation under this Agreement or the Windmere
Transactions Agreement, or whose commencement of a legal proceeding,
has been the proximate cause of the failure of the Windmere
Transactions to occur on or prior to the Windmere Expiration Date;
(v) all rights to indemnification existing in favor of the
present or former directors, officers, employees and agents of Salton
or any of its subsidiaries shall survive the Windmere Transactions and
shall continue in full force and effect for six years after the Tender
Offer, or if there is no Tender Offer, the Merger, and Windmere shall
cause to be maintained in effect for not less than six years after the
Tender Offer, or if there is no Tender Offer, the Merger, policies of
directors' and officers' liability insurance providing the same
coverage as those maintained by Salton on the date hereof with respect
to matters existing or occurring at or prior to the consummation of the
Windmere Transactions; and
(vi) the Windmere Transactions Agreement may only be
terminated by (x) the mutual consent of Windmere or Salton or (y)
either Salton or Windmere if the conditions to the Tender Offer or the
Merger cannot be satisfied.
2.03 SALTON EXECUTIVE RELATED PARTIES TO SELL. If Windmere duly
exercises the Windmere Option hereunder, each Salton Executive Related
Party irrevocably agrees to accept and to tender his or its Shares
within 10 days following the commencement of the Tender Offer, and to
vote for the Merger (and provide an irrevocable proxy to Windmere for
such purpose). Subject to the exercise of his fiduciary duties under
applicable law, each Salton Executive Related Party that is a director
of Salton agrees to vote in favor of the Windmere Transactions in his
capacity as a Director of Salton and to recommend approval of the
Windmere Transactions to the stockholders of Salton other than
Windmere.
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3. ELIMINATION OF TIME RESTRICTION ON WINDMERE PURCHASE OF SALTON SHARES
UNDER STOCKHOLDER AGREEMENT.
3.01 STOCKHOLDER AGREEMENT. Except for the exercise of the Windmere
Option and the consummation of the Windmere Transactions in accordance
with the terms of this Agreement, the provisions of the Stockholder
Agreement shall remain in full force and effect in accordance with its
existing terms. Windmere agrees that neither it nor its affiliates (as
defined in the Stockholder Agreement) shall be entitled to purchase any
Shares pursuant to Section 2.1.3 of the Stockholder Agreement if any
Third Party offer (as referred to in the Stockholder Agreement) is made
in connection with the exercise of the Salton Option.
3.02 NO FURTHER SHARE PURCHASE. If Salton exercises and closes the
Salton Option, Windmere and Salton each agree not to, directly or
indirectly through an affiliate, purchase any shares of capital stock
of the other during the period ending on the tenth (10th) anniversary
of the date hereof.
4. TERM. This Agreement may be terminated (i) by mutual consent of
Windmere and Salton, (ii) by Salton if the Committee fails to determine
on or prior to May 18, 1998 that this Agreement and the transactions
contemplated hereby are in the best interests of Salton and its
stockholders (other than Windmere), or (iii) by Windmere if the
Windmere Board of Directors fails to determine on or prior to May 18,
1998 that this Agreement and the transactions contemplated hereby are
in the best interests of Windmere and its stockholders.
5. JOINT MARKETING AGREEMENT. The parties hereto agree that the Marketing
Cooperation Agreement dated as of July 11, 1996 by and between Salton
and Windmere is terminated effective as of the date hereof and shall
forthwith become void and have no effect. As a result of this
Agreement, there will remain no outstanding issues under the Joint
Marketing Agreement between Salton and Windmere and no claims by Salton
relating to any past conduct of any Windmere Directors in connection
with such Agreement or such Director's receipt of information from
Salton. Salton agrees that any information with respect to Salton or
its business which is furnished or communicated to Windmere or its
directors, officers, affiliates or agents by or on behalf of Salton
after the date hereof which Salton believes is confidential will be
identified as confidential information prior to being furnished or
communicated to such persons or entities.
6. WHITE-WESTINGHOUSE; K-MART AND FARBERWARE SUPPLY AGREEMENT. If the
Salton Option is exercised and closed, at Salton Option closing, Salton
and Windmere shall execute and deliver agreements with respect to
matters concerning White Consolidated Industries, Inc, K-Mart, Service
Merchandise, Inc. and Farberware, Inc. in the form of EXHIBITS B, C and
E attached hereto.
7. MUTUAL RELEASES. Simultaneously with the execution of this Agreement,
each of Salton, Windmere and the Salton Executive Related Parties have
entered into mutual releases in the
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form of EXHIBIT D attached hereto which shall become effective only
upon the consummation of the transactions contemplated by either the
Salton Option or the Windmere Option.
8. RESIGNATIONS.
8.01 WINDMERE DIRECTORS. Simultaneously with the execution of this
Agreement, each of Messrs. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
Chud, M.D. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ have executed an irrevocable resignation
of their position as a director of Salton effective only upon the
Salton Option Closing. So long as this Agreement is in effect, any
director of Salton designated by Windmere will execute such a
resignation as a condition to his or her election to the Board of
Directors of Salton.
8.02 NON-WINDMERE DIRECTORS AND SALTON EXECUTIVE OFFICERS.
Simultaneously with the execution of this Agreement, each of Messrs.
Dreimann and ▇▇▇▇▇ have executed an irrevocable resignation of their
position as directors and officers of Salton, and ▇▇▇▇▇▇▇ ▇. ▇▇▇ has
executed an irrevocable resignation as Chief Operating Officer of
Salton, effective in each case only upon the acquisition of all of the
Salton Shares owned by the Salton Executive Related Parties pursuant to
the closing of the Tender Offer, or if there is no Tender Offer, the
Merger.
9. THE COMMITTEE.
9.01 From and after the date hereof, the Committee shall (i) have all
authority granted to the Committee by the Board of Directors, and (ii)
consist of two directors who shall initially be ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇. In the event that either of such initial directors resigns,
is incapable of acting as a director or otherwise ceases to be a
director for any reason, then the other initial director shall have the
right to designate a replacement for such director. If, for any reason
at any time, no director is serving on the Committee, then the
non-Windmere designated directors on the Board of Directors of Salton
shall have the right to designate two persons to serve on the Committee
(none of whom shall be directors, officers, employees or affiliates of
Windmere). The Committee shall continue to exist and have the authority
granted to it by the Board of Directors; provided that if Salton shall
have failed to exercise the Salton Option or, if Salton has exercised
the Salton Option but shall have failed to close the Salton Option by
the Salton Outside Expiration Date, then the Committee's sole authority
shall be as provided in Section 9.02 below.
9.02 Notwithstanding anything in this Agreement to the contrary, the
affirmative vote of a majority of the members of the Committee (who
shall act as an independent committee of the Board of Directors of
Salton for this purpose) shall be required, and alone shall be
sufficient, to take action required by or of Salton to (i) amend or
terminate this Agreement or the Windmere Transactions Agreement, (ii)
exercise or waive any of Salton's rights or remedies hereunder or under
the Windmere Transactions Agreement, or (iii) extend the time
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for performance of Windmere's obligations hereunder or under the
Windmere Transactions Agreement.
10. REPRESENTATIONS AND WARRANTIES.
10.01 REPRESENTATIONS AND WARRANTIES OF EACH OF SALTON AND WINDMERE.
Each of Salton and Windmere hereby represents and warrants to the other
parties hereto that it has the corporate power and authority to
execute, deliver and perform this Agreement; such execution, delivery
and performance have been duly authorized by all necessary corporate
action on its part; and this Agreement has been duly executed and
delivered by it and constitutes the valid and binding agreement of it,
enforceable against it in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
10.02 WINDMERE. Windmere hereby represents and warrants to Salton that
it is the owner (both beneficially and of record) of 6,535,072 Shares.
Except for such Shares and the Windmere Prior Option, Windmere is not
the record or beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of, and does not have any other rights
of any nature to acquire, any additional shares of capital stock of
Salton. Windmere owns all of the Windmere Salton Shares and the
Windmere Prior Option free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements,
limitations on Windmere's voting rights, charges and other encumbrances
of any nature whatsoever. Upon the exercise of the Salton Option and
the delivery to the purchaser(s) by Windmere of a certificate or
certificates evidencing the delivered Windmere Salton Shares and an
assignment relating to the Windmere Prior Option, the purchaser(s) will
receive good, valid and marketable title to such Shares and the
Windmere Prior Option, free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements,
limitations on purchaser(s) voting rights, charges and other
encumbrances of any nature whatsoever.
10.03 SALTON EXECUTIVE RELATED PARTIES. The Salton Executive Related
Parties hereby represent and warrant to Windmere that they are the
beneficial owners of an aggregate of 1,111,974 Shares at the date
hereof free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever
(except for the rights of American National Bank and Trust Company
("ANB") as a secured party holding such Shares in pledge). Upon any
tender or surrender of the Salton Executive Related Parties' Shares to
Windmere pursuant to the Windmere Transactions, Windmere will receive
good, valid and marketable title to such Shares, free and clear of all
security interests, liens, claims, pledges, options, rights of first
refusal, agreements, charges or other encumbrances of any nature
whatsoever.
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11. COVENANTS.
11.01. WINDMERE. Windmere hereby covenants and agrees that Windmere
shall take all actions, and forbear from all actions, in each case,
necessary in order that all of Windmere's representations and
warranties are true and correct and Windmere fulfills all of its
obligations hereunder.
11.02. SALTON. Salton hereby covenants and agrees that Salton shall
take all actions, and forbear from all actions, in each case, necessary
in order that all of Salton's representations and warranties are true
and correct and Salton fulfills all of its obligations hereunder.
11.03 SALTON EXECUTIVE RELATED PARTIES. Each of the Salton Executive
Related Parties hereby covenants and agrees that he or it shall take
all other actions, and forebear from all actions, in each case
necessary in order that all of such person's representations are true
and correct and such person fulfills all of his or its obligations
hereunder.
12. MISCELLANEOUS.
12.01. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed by the applicable party hereto in
accordance with the specific terms of this Agreement or were otherwise
breached. Each of the parties hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement by the other and
to enforce specifically the terms and provisions hereof in addition to
any other remedy to which such party is entitled at law or in equity,
and each party waives the posting of any bond or security in connection
with any proceeding related thereto.
12.02 EXPENSES. Except as may otherwise be provided herein, no party
hereto shall be responsible for the payment of any other party's
expenses incurred in connection with this Agreement.
12.03 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and
his or its respective successors and permitted assigns, and it is not
the intention of the parties to confer third party beneficiary rights
upon any other person or entity.
12.04 AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written
agreement executed by each of Windmere and the Committee, on behalf of
Salton.
12.05 ASSIGNMENT. Salton may assign its rights to purchase the Windmere
Salton Shares and the Windmere Prior Option hereunder but Salton and
the Salton Executive Related
-11-
12
Parties shall remain directly liable to Windmere for the performance of
their respective obligations hereunder.
12.06 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and delivered as provided for in the
Stockholder Agreement.
12.07 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware,
without regard to the conflict of law principles thereof. All actions
and proceedings arising out of or relating to this Agreement shall be
heard and determined in any state or Federal court sitting in Delaware.
Each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby,
(ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action
relating to this Agreement or the transactions contemplated hereby in
any court other than a Federal court sitting in the State of Delaware
or a Delaware state court and (iv) waives any right to trial by jury
with respect to any claim or proceeding related to or arising out of
this Agreement or any of the transactions contemplated hereby.
12.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
This Agreement shall become effective when one counterpart signature
page has been signed by each party hereto and delivered to each of the
other parties.
12.09 EFFECT OF HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.10 FURTHER ASSURANCES. Each of the parties hereto agrees to execute
and deliver all such further documents, certificates and instruments,
and take all such further reasonable action as may be necessary or
reasonably appropriate, in order to consummate the transactions
contemplated hereby.
12.11 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of Salton and Windmere agrees to use its reasonable best
efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable best
efforts to obtain all necessary waivers, consents and approvals and to
effect all necessary registrations and filings. Without limiting the
generality of the foregoing, (i) each of Salton and Windmere agrees
that upon delivery of the Salton Exercise Notice or the Windmere
Exercise Notice, as the case may be, it will use its reasonable best
efforts to promptly file notifications under
-12-
13
the HSR Act and to respond to any inquiries from governmental
authorities in connection with the HSR Act; (ii) each of Salton and
Windmere agrees to use its reasonable best efforts to remove any
injunctions or other impediments or delays, legal or otherwise, to the
transactions contemplated by this Agreement; (iii) Windmere agrees that
it will vote all Windmere Salton Shares it beneficially owns and cause
the Windmere designated Directors, subject to the exercise of their
fiduciary duties under applicable law, to vote as Directors in favor of
any transaction or other action involving the Salton Option or the
Windmere Option and against any action that would reasonably be
expected to impede, interfere with or delay the transactions
contemplated by this Agreement; and (iv) Salton agrees that it will
vote all Windmere shares it beneficially owns in favor of the Windmere
Transactions (and cause a Schedule 14D-9 Solicitation/Recommendation
Statement, if required, to be filed with the SEC which Statement shall,
subject to the exercise of their fiduciary duties as directors, contain
the recommendation of the Committee that Salton stockholders tender
their Shares to Windmere in connection with such transaction) and will
vote against any action that would reasonably be expected to impede,
interfere with or delay the transactions contemplated by this
Agreement.
-13-
14
IN WITNESS WHEREOF, the undersigned, being duly authorized, have set
forth their signatures.
WINDMERE-DURABLE HOLDINGS, INC. SALTON/MAXIM HOUSEWARES, INC.
By: By:
---------------------------- -------------------------------
Its: Its:
---------------------------- -------------------------------
The following parties sign this Agreement for the purposes of making
their agreements set forth in Sections 2.03, 4, 7, 8.02, 10.03, 11.03 and
Article 12 hereof:
------------------------------- -------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇
Duquesne Financial Corporation Dominator Investors Group
By: By:
---------------------------- -------------------------------
Its: Its:
---------------------------- -------------------------------
-14-
15
Exhibit A
to
Stock Agreement by and among:
I. Salton/Maxim Housewares, Inc.;
II. Windmere Durable Holdings, Inc.; and
III. Parties designated as Salton Executive
Related Parties
PURCHASE MONEY NOTE DATED AS OF
[CLOSING OF SALTON OPTION] , 1998
1. PRINCIPAL, INTEREST, MATURITY. As partial payment for the purchase
of shares of stock of Salton/Maxim Housewares, Inc., a Delaware corporation
("Salton"), owned by Windmere Durable Holdings, Inc., a Florida corporation
("Windmere"), pursuant to a Stock Agreement dated as of May 6, 1998 among
Salton, Windmere and third parties, Salton hereby promises to pay to the order
of Windmere the principal amount of Fifteen Million Dollars and no cents
($15,000,000), with simple interest at the annual rate of four percent (4%) from
the date hereof, to be paid annually on the fifteenth day of June, commencing
June 15, 1999. Any unpaid principal balance plus accrued and unpaid interest
shall be due and payable on the last day of the seventy eighth (78th) full
calendar month next following the date hereof. If: (i) accrued and unpaid
interest is not paid in full on any interest payment date ("Interest Default")
or (ii) the principal balance is not paid upon the due date, whether at the
maturity of the Note or upon acceleration as set forth in Section 3 hereof
("Principal Default"), then, in the case of an Interest Default, simple interest
on the unpaid balance of this Note shall accrue on and after the Interest
Default at the rate of eight percent (8%) per annum until the Interest Default
is cured or is waived in writing by the holder of the Note and, in the case of a
Payment Default, simple interest on the unpaid balance of this Note shall also
accrue on and after the Payment Default on the unpaid principal balance at the
rate of eight percent (8%) per annum until payment in full is made of all
accrued and unpaid interest and the unpaid principal balance. In addition, in
the case of any Interest Default or Payment Default, Salton agrees to pay all
costs of collection, including legal fees and out of pocket expenses and court
costs.
2. AFFILIATE DEFINITION; CREDIT. As used in this Note, the term
"Affiliate" of Salton or "Affiliate" of Windmere means any person or entity that
is controlled by, under the control of or under common control with a person or
entity within the meaning of Rule 405 adopted by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. Commencing as of
the date hereof, to the extent that Salton or any Affiliate of Salton purchases
products from Windmere, its manufacturing Affiliate with offices in Hong Kong,
Durable Electrical Metal Factory, Ltd., or any other Affiliate of Windmere, an
amount equal to five percent (5%) of the total purchase price paid by Salton
shall constitute a credit, first, against accrued and unpaid interest owing on
this Note and, next, against the unpaid principal balance of this Note;
PROVIDED, HOWEVER, that such credits shall not be considered payments,
distributions or sets-offs under Section
16
3 of this Note; and FURTHER PROVIDED, that nothing contained herein shall
obligate Salton or any Salton Affiliate to buy any products from Windmere or any
Windmere Affiliate, nor obligate Windmere or any Windmere Affiliate to sell any
products to Salton or any Salton Affiliate.
3. SUBORDINATION. The principal balance, accrued and unpaid interest
and all other amounts owing under this Note are expressly made subordinate and
junior, as hereinafter set forth in this Section 3, to the prior payment in full
of all Senior Debt (as that term is hereinafter defined).
3.1. DEFINITION OF SENIOR DEBT. As used herein "Senior Debt" shall mean
all indebtedness whenever incurred by Salton for borrowed money, whether secured
or unsecured, with the exception of indebtedness owed to any Affiliate of
Salton, and trade debt. As used in this Section 3.1, the term "Affiliate" shall
not include any investor (other than a Salton Executive Related Party) who
acquires an equity interest in Salton at the closing of the Salton Option or
thereafter provided that such investor's interest represents less than fifty
percent (50%) of the voting interests in Salton or any parent company of Salton.
3.2. ACCELERATION. If: (i) Senior Debt in an aggregate amount,
including principal, accrued interest and other amounts owing on such Senior
Debt, in excess of one million dollars matures, or is otherwise due and payable
(whether by acceleration or otherwise) and remains undischarged for a period in
excess of one hundred and twenty (120) days OR (ii) Salton files a petition, as
a debtor, for relief under the United States Bankruptcy Code or an action
seeking to place Salton in involuntary bankruptcy under such Code is filed and
Salton does not oppose such action or such action is not discharged within sixty
(60) days next following the filing of such action, then, Windmere shall have
the right, on not less than five (5) days notice to Salton, to accelerate the
maturity of this Note, whereupon the remaining principal balance plus accrued
and unpaid interest shall become due immediately, subject to the terms of this
Section 3. Except as specifically set forth in this Section 3.2, Windmere shall
not have the right to accelerate this Note.
3.3 AMENDMENT OF SENIOR DEBT. The Senior Debt shall continue to be
Senior Debt and entitled to the benefits of these subordination provisions
irrespective of any amendment, modification or waiver of any term of the Senior
Debt, any extension or renewal of the Senior Debt, or the granting or release of
any collateral or security securing the repayment of the Senior Debt.
3.4 DEFAULT IN RESPECT OF SENIOR DEBT.
(a) Payment Default. In the event that Salton shall default in
the payment of any principal of, or interest on, any Senior Debt when
the same becomes due and payable, whether at maturity, at a date fixed
for prepayment, by declaration of acceleration or otherwise, then,
(i) unless and until such default shall have been
cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property or securities or by
set-off or otherwise) shall be made or agreed to be made on
account of this Note
-2-
17
or as a sinking fund for this Note, or in respect of any
redemption, retirement, purchase, prepayment or other
acquisition of this Note, and
(ii) no holder of this Note will take action to
accelerate this Note except as set forth above in Section 3.2,
or to commence, or join with any other creditor in commencing,
any bankruptcy, reorganization or insolvency proceeding with
respect to Salton, or will initiate and prosecute any other
action or proceeding (whether at law or in equity) against
Salton to recover all or any part of this Note (unless the
agent (or, if there shall be no agent for the holders of
Senior Debt at such time, the holders of the Senior Debt)
shall have agreed in writing in advance to any such action or
proceeding or prosecution, and shall have joined in, such
action or proceeding or prosecution).
(b) Other Defaults. Upon the occurrence of any other "default"
(as defined in any agreement evidencing the Senior Debt) then, unless
and until such default shall have been cured or waived in writing or
shall have ceased to exist,
(i) no direct or indirect payment (in cash, property
or securities or by set-off or otherwise) shall be made or
agreed to be made on account of this Note or as a sinking fund
for this Note, or in respect of any redemption, retirement,
purchase, prepayment or other acquisition of this Note during
the period of 180 days after the occurrence of such default,
and
(ii) no holder of this Note will take action to
accelerate this Note except as set forth in Section 3.2 or,
for a period of 180 days after the occurrence of such default,
commence, or join with any other creditors in commencing, any
bankruptcy, reorganization or insolvency proceedings with
respect to Salton, or will initiate and prosecute any other
action or proceeding (whether at law or in equity) against
Salton to recover all or any part of this Note (unless the
agent (or, if there shall be no agent for the holders of
Senior Debt at such time, the holders of the Senior Debt)
shall have agreed in writing in advance to, and shall have
joined, in such proceeding).
3.5 INSOLVENCY. In the event of
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
which relates to Salton or its property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of Salton, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
(c) any assignment by Salton for the benefit of creditors, or
(d) any other marshalling of the assets of Salton, then and in
any such event:
-3-
18
(i) all Senior Debt shall first be paid in full, in
cash or cash equivalents, before any payment or distribution,
whether in cash, securities or other property, shall be made
to any holder of this Note on account of this Note;
(ii) any payment or distribution, whether in cash,
securities or other property (other than securities of Salton
or any other corporation provided for by a plan or
reorganization or readjustment the payment of which is
subordinated, at least to the extent of this Note as provided
in this Section 3, to the payment of all Senior Debt at the
time outstanding and to any securities issued to the holders
of Senior Debt in respect of the Senior Debt under any such
plan or reorganization or readjustment), that would otherwise
(but for this Section 3) be payable or deliverable in respect
of this Note, shall be paid or delivered directly to the
holders of Senior Debt in accordance with the priorities then
existing among such holders of Senior Debt until all Senior
Debt shall have been paid in full, in cash or cash
equivalents; and
(iii) If any holder of this Note fails to file a
claim or proof of debt in respect of such this Note in such
proceedings at least five (5) business days prior to the
latest date permitted by rule of law or court order for such
filing, then the holders of Senior Debt shall be authorized
(but not obligated) to file such claim or proof on behalf of
such holder of this Note. Each holder of the this Note agrees
that, while it shall retain the right to vote its claim and
otherwise act in any bankruptcy, insolvency or similar
proceeding related to Salton, such holder will not take any
act or vote in any way so as to contest the enforceability of
the subordination provisions set forth herein.
3.6 TURNOVER OF PAYMENTS. In the event that
(a) any payment or distribution shall be paid to or collected
or received by any holder of this Note in contravention of any of the
terms of this Section 3 and prior to the payment in full, in cash or
cash equivalents, of the Senior Debt at the time outstanding, and
(b) any holder of such Senior Debt shall have notified the
holder of this Note, within one hundred eighty (180) days of any such
payment or distribution, of the facts by reason of which such
collection or receipt so contravenes this Section 3,
then and in any such event such holder of this Note will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents to the holders of such Senior Debt and, until so
delivered the same shall be held in trust by such holder of this Note as the
property of the holders of such Senior Debt. If after any amount is delivered to
the holders of Senior Debt pursuant to this Section 3.6 and (i) the holder of
this Note shall be required by an order or judgment of a court of competent
jurisdiction to return a payment (the "Avoided Payment") received by them and so
paid over (in whole or in part) to the holders of Senior Debt, or (ii) the
outstanding
-4-
19
Senior Debt shall thereafter be paid in full, in cash or cash equivalents,
without giving effect to such delivery made pursuant to this Section 3.6, then,
in either case, the holders of Senior Debt shall return to such holder of this
Note any amount equal to the amount delivered to such holders of Senior Debt
pursuant to this Section 3.6, so long as (in the case of the immediately
preceding clause (ii) only) after the return of such amount the Senior Debt
shall remain paid in full, in cash or cash equivalents. For purposes of clause
(i) of the immediately preceding sentence, if less than all of the Avoided
Payment was paid over to the holders of Senior Debt and the holder of this Note
is able to satisfy its obligations under such order or judgment in whole or in
part from the portion of the Avoided Payment not so paid over to the holders of
the Senior Debt, the holders of Senior Debt shall not be required to return any
portion of the Avoided Payment in excess of the amount actually required by the
holder(s) of this Note to satisfy its obligations.
3.7 OBLIGATIONS NOT IMPAIRED. No right of any present or future holder
of any Senior Debt to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by (and such right shall remain in full
force and effect notwithstanding):
(a) any act or failure to act on the part of Salton
(including by way of an amendment to the provisions of this
Section 3);
(b) any extension or indulgence in respect of any
payment or prepayment of the Senior Debt or any part thereof
or in respect of any other amount payable to any holder of
Senior Debt;
(c) any amendment, modification, restatement, or
waiver of, or addition or supplement to, or deletion from, or
compromise, release, consent or other action in respect of,
any of the terms of any Senior Debt or any other agreement
which may be relating to any Senior Debt;
(d) any exercise or non-exercise by any holder of
Senior Debt of any right, power, privilege or remedy under or
in respect of any Senior Debt or this Note, or any waiver of
any such right, power, privilege or remedy or any default in
respect of any Senior Debt or this Note, or any receipt by any
holder of Senior Debt of any collateral security, or any
failure of any holder of Senior Debt to perfect a security
interest in any collateral, or any release by any holder of
Senior Debt of any security for the payment of such Senior
Debt;
(e) any merger or consolidation of Salton or any of
its subsidiaries into or with any of its subsidiaries or into
or with any entity, or any sale, lease or transfer of any or
all of the assets of Salton or any of its subsidiaries to any
other entity or person; or
(f) the absence of any notice to, or knowledge by,
any holder of this Note of the existence or occurrence of any
of the matters or events set forth in the foregoing clauses
(a) through (e).
-5-
20
Nothing contained in this Section 3 shall impair, as between Salton and any
holder of this Note, the obligation of Salton to pay to such holder the
principal thereof and interest, on the this Note, as and when the same shall
become due and payable in accordance with the terms thereof, or prevent any
holder of any this Note from exercising all rights, powers and remedies set
forth herein or allowed by applicable law, all subject to the rights of the
holders of the Senior Debt to receive cash, securities or other property
otherwise payable or deliverable to the holder of this Note as provided in this
Section 3.
3.8 PAYMENT OF SENIOR DEBT; SUBROGATION. Upon the payment in full, in
cash or cash equivalents, of all Senior Debt, the holder of this Note shall be
subrogated to all rights of any holder of Senior Debt to receive any further
payments or distributions applicable to the Senior Debt until the this Note
shall have been paid in full, and such payments or distributions received by the
holder of this Note by reason of such subrogation, of cash, securities or other
property that otherwise would be paid or distributed to the holders of Senior
Debt, shall, as between Salton and its creditors other than the holders of
Senior Debt, on the one hand, and the holder of this Note, on the other hand, be
deemed to be a payment by Salton on account of Senior Debt, and not on account
of this Note.
4. CANCELLATION OF NOTE. If the Distribution and Marketing Agreement
between Salton and K-Mart Corporation dated January 27, 1997, as it may be
amended or renewed, is cancelled by K-Mart prior to June 30, 2004, the principal
balance of this note shall be reduced as of the date of such cancellation in
accordance with the amortization schedule attached hereto as Schedule I, and,
upon such reduction, accrued interest, interest already paid, and interest
accruing after such reduction prior to the maturity of this note shall be
recalculated on the reduced principal balance. To the extent that, on account of
such reduction, interest has been overpaid, such overpayment shall be offset,
first, against the next accruing amounts of interest not yet paid, and then
against the reduced principal balance, but Windmere shall not be obligated
otherwise to return accrued interest or principal already paid.
5. APPLICABLE LAW. This Note shall be governed by and interpreted in
accordance with the laws of Delaware without regard to the conflict of laws and
principles thereof.
6. NOTICES. Any notices under this Note shall be given as required by
the Stock Agreement.
Salton/Maxim Housewares, Inc.,
a Delaware corporation
By:
-------------------------------------
Its:
------------------------------------
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21
SCHEDULE I
TERMINATION DATE PRINCIPAL BALANCE
---------------- -----------------
(Measured in Months from date of Note)
0 - 6 0
6 - 12 1,153,800
12 - 18 2,307,650
18 - 24 3,461,500
24 - 30 4,615,350
30 - 36 5,769,200
36 - 42 6,923,050
42 - 48 8,076,900
48 - 54 9,230,750
54 - 60 10,384,600
60 - 66 11,538,450
66 - 72 12,692,300
72 - 78 13,846,150
-7-
22
Exhibit B
to
Stock Agreement dated May 6, 1998
by and among
Salton/Maxim Housewares, Inc.,
a Delaware corporation ("Salton");
Windmere Durable Holdings, Inc.,
a Florida corporation ("Windmere"); and
Certain Parties Designated as
Salton Executive Related Parties
-------------------------------------------------------------------------------
Agreement dated [Closing of Salton Option],1998 ("Agreement")
between
Windmere Durable Holdings, Inc.,
a Florida corporation ("Windmere")
and
Salton/Maxim Housewares, Inc.,
a Delaware corporation ("Salton")
WHEREAS:
A. Salton, Windmere and certain parties designated as Salton
Executive Related Parties have entered into a Stock Agreement dated as of May 6,
1998, in contemplation of the execution and delivery of this Agreement.
B. Under the Stock Agreement, Windmere and Salton have made
agreements to the effect that either Windmere will acquire 100% ownership of
Salton or Salton shall arrange for the purchase of all Salton stock owned by
Windmere.
▇. ▇▇▇▇▇▇ and Windmere have entered into certain agreements
with third parties related to the sourcing, manufacturing and marketing of
products and it is necessary for Salton and Windmere to make additional
agreements between them in order to protect and preserve certain commercial
advantages and contracts that each of them enjoys at the date hereof.
D. As used in this Agreement, the term "Affiliate" of Salton
or of Windmere means, with respect to such company, any person or entity that is
under the control of, controlled
23
by or under common control of such company within the meaning of Rule 405
adopted by the Securities and Exchange Commission under the Securities Act of
1933, as amended.
THEREFORE, Windmere and Salton agree as set forth below.
1. LETTER AGREEMENT BETWEEN SALTON AND WINDMERE DATED APRIL
30, 1997 RE K-MART. The letter agreement dated April 30, 1997 ("Salton/Windmere
K-Mart Letter Agreement") between Windmere Corporation and Salton, made pursuant
to the Purchase, Distribution and Marketing Agreement by and between Salton and
K-Mart Corporation dated January 27, 1997 ("Salton/K-Mart Agreement") is hereby
amended and restated in its entirety to read as set forth in Exhibit C to the
Stock Agreement.
2. SUBLICENSE AGREEMENT BETWEEN WINDMERE AND SERVICE
MERCHANDISE, INC.; DISTRIBUTOR AGREEMENT BETWEEN WINDMERE AND SALTON. Windmere
and Service Merchandise, Inc. ("Service") are parties to a Sublicense and Supply
Agreement dated as of October 16, 1996, as amended by an amendment dated January
30, 1998 ("Sublicense") under which Service sublicenses Windmere to use the
trademark Farberware and other marks in connection with the sourcing and sale of
certain electric products. Windmere and Salton are parties to a Distributor
Agreement dated October 17, 1996 ("Distributor Agreement") pursuant to which
Salton is the exclusive distributor of Windmere for some of the products which
Windmere is authorized to source and sell under the sublicense and Salton agrees
to buy products for sale under the Farberware marks from Windmere. Farberware,
Inc., the licensor to Service, and Windmere are parties to an agreement dated
October 16, 1996, under which Windmere has the right to replace Service as a
direct licensee of Farberware, Inc., if Farberware terminates its license to
Service. Capitalized terms used in this Section 2 not defined in this Section 2
are defined in the Sublicense.
2.01 If Salton exercises the Salton Option, Salton shall use
its best reasonable efforts to effect a transfer (the "Transfer") of Windmere's
rights and obligations under the Sublicense to Salton (or a third party
designated by Salton) on or before the closing of the exercise of the Salton
Option ("Closing").
2.02 If Salton exercises the Salton Option, then prior to the
Closing and, also, after the Closing, if Salton is unable to effect the Transfer
prior to the Closing, Salton shall continue to perform at the expense of Salton
all of the obligations of Windmere under the Sublicense and Salton shall have
all of the profit or loss resulting from Salton's performance of Windmere's
obligations under the Sublicense. Salton shall defend, indemnify and hold
harmless Windmere from any default under the Sublicense by Salton in the
performance by Salton of the obligations of Windmere under the Sublicense.
Windmere shall cooperate with Salton and execute such documents as Salton may
reasonably require from time to time in order to perform Windmere's obligations
as sublicensee under the Sublicense, and not interfere with Salton's performance
for Windmere of Windmere's obligations under the Sublicense.
-2-
24
2.03 If Salton is unable to effect the Transfer prior to the
Closing, thereafter, until the Transfer can be effected or Windmere exercises
its rights under subsection 2.04 below, Salton shall pay Windmere an amount
equal to one percent (1%) of the net world wide sales on which royalties are
owing from Windmere to Service (or to Farberware, if the License from Farberware
to Service is terminated and Windmere becomes a direct licensee of Farberware).
This amount shall be paid, by wire transfer to Windmere's bank account, not
later than the forty-fifth (45) day after the end of each calendar quarter on
the transactions occurring within said quarter.
2.04 Windmere shall have the right to terminate the
Distributor Agreement, in its sole discretion, at any time after March 31, 2000,
if Salton has not previously effected the Transfer. Upon termination of the
Distributor Agreement, the obligation of Salton to continue to make payments to
Windmere of one percent (1%) of the Net World Wide Sales on which royalties are
owing to Service (or Farberware, as the case may be) shall cease. As used
herein, "Net World Wide Sales" shall mean all sales by Salton of products under
the trademark "Farberware" less the sum of: (i) all accepted returns; and (ii)
prepaid freight. The termination by Windmere of the Distributor Agreement shall
not relieve Salton of its accrued obligations to Windmere under this Agreement
up to the date of termination as set forth herein.
2.05 During the period until the Distributor Agreement is
canceled in accordance with this Agreement, Salton and Windmere agree that the
Distributor Agreement is amended to conform to the practice of Salton and
Windmere since the creation of the Distributor Agreement that Salton is not
required to purchase all of the Products sold under the Farberware marks from
Windmere.
3. APPLICABLE LAW. This Agreement shall be interpreted under
the laws of Delaware, without regard to its conflict of laws provisions.
Salton/Maxim Housewares, Inc., Windmere Durable Holdings,Inc.
a Delaware corporation a Florida corporation
By By
---------------------------- --------------------------------
Its Its
---------------------------- --------------------------------
-3-
25
Exhibit C to the
STOCK AGREEMENT
Letter Agreement dated April 30, 1997
between
Windmere Corporation ("Windmere")
and
Salton/Maxim Housewares, Inc. ("Salton")
as amended and restated [Closing of Salton Option], 1998
WHEREAS, Windmere, with its main office in Miami Lakes, Florida, and Salton,
with its main office in Mt. Prospect, Illinois, have worked together to obtain
the benefits of significant sales of products under the White-Westinghouse brand
to K-Mart Corporation ("K-Mart"); and
WHEREAS, the distribution profits on the sales to K-Mart of the
White-Westinghouse brand of appliances will all be received and recorded on the
books of Salton (the "White-Westinghouse Profits"); and
WHEREAS, the parties wish to provide explicitly for the calculation of the
White-Westinghouse Profits, recognizing that Salton is presently warehousing
White-Westinghouse product in the United States to facilitate their sale;
NOW, THEREFORE, in consideration of Windmere's marketing cooperation efforts,
this Letter Agreement documents the obligation of Salton to pay a fee as
described herein to Windmere as compensation for its efforts on Salton's behalf
in obtaining said White-Westinghouse Profits.
1.01 FEES.
(a) Salton shall pay Windmere a fee equal to fifty percent
(50%) of said White-Westinghouse Profits (as such term is hereinafter defined)
earned by Salton on the sale of any White-Westinghouse Product to K-Mart. The
fee shall be paid, by wire transfer to Windmere's bank account, not later than
the forty-fifth (45th) day after the end of each calendar quarter on the
transactions occurring within said quarter.
(b) Not later than the 25th day of each calendar month, Salton
shall provide to Windmere a report of Sales (as such term is defined below)
during the prior month, together with a calculation of said White-Westinghouse
Profits, all in such detail as may reasonably be requested by Windmere (each a
"Salton Report").
(c) White-Westinghouse Profits earned by Salton on the sale of
White-Westinghouse Products shall be determined by subtracting from Sales (x)
the Cost of Sales on First Party Sales (as such terms are defined below) of the
related products and (y) the Direct Expenses on First Party Sales and Third
Party Sales (as such terms are defined below) relating thereto.
26
(i) For the purposes of this Agreement, "Sales" shall
mean the amount invoiced by Salton to K-Mart for the White-Westinghouse Products
net of accepted returns and excluding all freight charges ("First Party Sales");
provided, however, in those cases in which K-Mart elects, pursuant to Section
7.1.2 of the K-Mart Agreement, to purchase K-Mart Products from "Third Party
Manufacturers" on behalf of Salton, Sales shall be deemed to be equal to the
difference between the Salton Payment and the TPM Payment (as each of such terms
are defined in Section 7.1.3 of the K-Mart Agreement).
(ii) For the purposes of this Agreement, Cost of
Sales shall mean the FOB point of shipment invoice amount from the applicable
vendor, plus, to the extent applicable, freight charges and duties.
(iii) For the purposes of this Agreement: (A) Direct
Expenses on First Party Sales shall be the total of: (x) three and one half
percent (3.5%) of Sales plus (y) the sum of: (1) royalties owing on such Sales
plus the minimum royalty owing, if any, regardless of Sales and (2) Detroit
office selling expenses, PROVIDED, HOWEVER, that if 75% or more of Salton's
First Party Sales are FOB Hong Kong, said three-and-one half percent (3.5%)
figure shall be reduced to two percent (2%); and (B) Direct Expenses on Third
Party Sales shall consist only of royalties owing on such sales.
1.02 RIGHT OF AUDIT. Windmere shall have the right, upon reasonable notice and
at reasonable times, within six (6) months following its receipt of any Salton
Report to have a review of the books and records of Salton with respect to the
payments to be made for the period covered by such Salton Report, to confirm the
accuracy of the Salton Report, PROVIDED, HOWEVER, that such right of review
shall not be exercisable more than two times per calendar year and provided
further that if such review reveals an underpayment of more than 3.0% of the
amount to which Windmere is entitled hereunder, then Windmere may have such
review as often as it may reasonably deem necessary. Costs and expenses of such
examinations shall be paid solely by Windmere; PROVIDED, HOWEVER, that if an
examination reveals an underpayment to Windmere of more than 3.0% of the amount
to which Windmere is entitled hereunder, then the reasonable costs and expenses
of such examination shall be paid by Salton upon receiving an invoice therefor,
with supporting documentation attached. It is specifically agreed that Windmere
may conduct such an examination only through a firm of nationally recognized
independent accountants not regularly retained by Salton or Windmere or their
respective affiliates and mutually agreed on by Windmere and Salton. If Salton
and Windmere cannot agree upon a firm of nationally recognized independent
accountants, the firm shall be Price Waterhouse & Co., or any successor to Price
Waterhouse & Co. If Price Waterhouse & Co. shall be acquired by, merge into or
otherwise cease to be independent of a firm that is regularly retained by Salton
or Windmere, then, unless Windmere and Salton mutually agree upon a successor
independent firm, at the written request of either Windmere or Salton made to
the other, another national recognized firm that is not regularly retained by
Salton or Windmere shall be selected by the head of the Miami, Florida office of
the American Arbitration Association. Such independent accountants shall: (i)
confirm the First Party Sales and Third Party Sales and the Cost of Sales and
(ii) shall have access to the books and records of Salton, but shall be
obligated to keep
-2-
27
confidential from Windmere and its affiliates and all third parties, the
names of Salton's manufacturing sources, the terms of purchase, unit prices and
all other details available to such independent accountants concerning the Cost
of Sales. The determination of such independent accounting firm shall be binding
on both Windmere and Salton.
1.03 NON-COMPETE. Neither Windmere nor any Affiliate of Windmere, including but
not limited to Durable Electrical Metal Factory, Ltd., and any partnership or
joint venture to which Windmere is a party shall compete with Salton in selling
White-Westinghouse Trademarked Products to K-Mart covered by the Salton/K-Mart
Agreement. Any such competition shall be a breach of the Salton/Windmere K-Mart
Letter Agreement which shall entitle Salton to terminate the Salton/Windmere
K-Mart Letter Agreement by notice to Windmere.
1.04 TERM. The provisions of this Agreement with regard to sales to K-Mart shall
not be cancelable during the term of that existing contract between Salton and
K-Mart, including any extensions or modifications thereof. The term of the
provisions of this Agreement with regard to sales to K-Mart shall coincide with
the contract term as specified in said contract between Salton and K-Mart.
1.05 JURISDICTION. This Agreement shall be interpreted under the laws of the
State of Delaware, without regard to its conflict of laws provisions.
Windmere Corporation Salton/Maxim Housewares, Inc.
By: By:
------------------------------ ----------------------------
-3-
28
Exhibit D to the Stock Agreement
MUTUAL RELEASES
THESE MUTUAL RELEASES are hereby entered into by and among the
following Parties of the First Part: (1) Windmere-Durable Holdings, Inc.
("Windmere"), a Florida corporation, (2) ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, (3) ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇, (4) ▇▇. ▇▇▇▇▇▇▇▇ Chud and (5) Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; and the following
Parties of the Second Part: (1) Salton-Maxim Housewares, Inc. ("Salton"), a
Delaware corporation; (2) Messrs. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇. ▇▇▇ ("Management"); (3) Mr. ▇▇▇▇▇ ▇▇▇▇▇▇; (4) ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; (5)
Dominator Investors Group, a Hong Kong corporation; and (6) Duquesne Financial
Corporation, an Illinois corporation.
WHEREAS, on the date hereof, Salton and Windmere have entered into a
stock agreement which provides certain options for the purchase of outstanding
shares of Salton common stock ("Stock Agreement"); and
WHEREAS, in connection with the consummation of the transactions
contemplated by the Stock Agreement, the parties hereto desire to resolve all
disputes and contentions between the Parties of the First Part, on the one hand,
and the Parties of the Second Part, on the other hand, concerning the business
and operations of Windmere and Salton, the interpretation and implementation of
agreements and understandings between them, and the conduct of Windmere and
Salton affiliates, directors, offices and agents, including the Windmere
designees serving on the Board of Directors of Salton (the "Windmere Designees")
and the non-Windmere designees serving on the Board of Directors of Salton (the
"Salton Designees");
WHEREAS, each of the parties denies all liability as to each of the
matters and contentions advanced in the disputes, and asserts that its/his/her
conduct, and the conduct of its/his/her affiliates, directors, officers and
agents was in all respects and at all times proper, in good faith and in
accordance with all applicable legal standards, and states that these Mutual
Releases are being entered into to resolve matters in dispute;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained, and other good and valuable consideration, receipt
of which is hereby acknowledged by each of the parties hereto, it is understood
and agreed as follows:
1. Subject to the condition set forth in Paragraph 3 hereof, each of the
Parties of the First Part, on behalf of itself and its predecessors,
successors, and assigns, hereby and forever releases and discharges
each of the Parties of the Second Part, and its/his/her past, present
and future directors (including the Salton Designees, but excluding the
Windmere
29
Designees), offices, employees, stockholders, owners, agents,
representatives, attorneys, heirs, executors, administrators,
transferees, and assigns (collectively for purposes of this paragraph,
"the Salton Releasees"), jointly and severally, from any and all sums
of money, liabilities, accounts, claims, rights, demands, contracts,
actions, debts, controversies, agreements, damages, costs, expenses,
attorney's fees, causes of action and suits in law or equity, known or
unknown, suspected or unsuspected, fixed or contingent, including any
rights of subrogation, contribution or indemnification, that may exist
in law or equity or by contract, that it or any of them had, now has or
hereafter shall or may have, based upon, arising from or in any way
connected with or related to (i) the business or operations of Windmere
or Salton, (ii) the interpretation or implementation of agreements or
understandings between Windmere and Salton, and (iii) the conduct,
acts, omissions or failures to act, of whatever kind or character, of
any of the Salton Releases; PROVIDED, HOWEVER, that nothing herein
shall be deemed to release or discharge the Salton Releasees from (a)
any amounts or other obligations owed by them for commercial
transactions in the ordinary course of business, or (b) their
obligations under these Mutual Releases, the aforesaid Stock Agreement
or any other document or instrument made or entered into pursuant to
the Stock Agreement.
2. Subject to the condition set forth in Paragraph 3 hereof,
each of the Parties of the Second Part, on behalf of
itself/himself/herself, and its/his/her predecessors,
successors, assigns, heirs, executors and administrators,
hereby and forever releases and discharges Windmere and its
past, present and future directors, officers, employees,
stockholders, owners, agents (including the Salton Designees),
representatives, attorneys, transferees, and assigns
(collectively for purposes of this paragraph, "the Windmere
Releasees"), jointly and severally, from any and all sums of
money, liabilities, accounts, claims, rights, demands,
contracts, actions, debts, controversies, agreements, damages,
costs, expenses, attorney's fees, causes of action and suits
in law or equity, known or unknown, suspected or unsuspected,
fixed or contingent, including any rights of subrogation,
contribution or indemnification, that may exist in law or
equity or by contract, that it/he/she or any of them had, now
has or hereafter shall or may have, based upon, arising from
or in any way connected with or related to (i) the business or
operations of Windmere or Salton, (ii) the interpretation or
implementation of agreements or understandings between
Windmere and Salton, and (iii) the conduct, acts, omissions or
failures to act, of whatever kind or character, of any of the
Windmere Releasees; PROVIDED, HOWEVER, that nothing herein
shall be deemed to release or discharge the Windmere Releasees
2
30
from (a) any amounts or other obligations owed by them for commercial
transactions in the ordinary course of business, or (b) their
obligations under these Mutual Releases, the aforesaid Stock Agreement,
or any other document or instrument made or entered into pursuant to
the Stock Agreement.
3. The mutual releases set forth in Paragraphs 1 and 2
hereof.
a. shall not become effective unless and until the
transactions contemplated by either Salton Option or the
Windmere Option of the aforesaid Stock Agreement has been
consummated; and
b. are intended to speak as of the date these Mutual
Releases become effective.
4. Each party warrants that:
a. the person executing these Mutual Releases on
its/his/her behalf's authorized to so execute them;
b. it/he/she has the power to settle and release fully and
completely all actions, causes of action, debts, dues,
liabilities, controversies, claims and demands as set forth
herein, and is entering into these Mutual Releases
voluntarily.
c. it/he/she has been represented by legal counsel in connection
with the execution of these Mutual Releases, and that
it/he/she has made such investigation of the facts pertaining
to the matters being released as it/he/she deems necessary.
5. These Mutual Releases may be executed in counterparts, and
when each party has signed and delivered one such counterpart, each
counterpart shall be deemed an original, and when taken together with
the other signed counterparts, shall constitute one agreement and shall
be binding upon and effective as to all parties.
6. These Mutual Releases may be amended only by a written
instrument duly executed by the parties or their respective
successors or assigns.
7. Neither these Mutual Releases, nor any of their terms and
provisions, nor any of the negotiations connected with them, (a) is, or
is intended to be, an admission by any party of any liability, fault or
wrongdoing of any party, or (b) shall be offered or received as
evidence in any action or proceeding of
3
31
any kind other than such proceedings as may be necessary to consummate
or enforce these Mutual Releases.
8. These Mutual Releases shall be construed under, and
interpreted in accordance with, the law of the State of Illinois
without regard to its conflict of laws provisions.
Dated: ,1998
------------------
PARTIES OF THE FIRST PART
WINDMERE-DURABLE HOLDINGS, INC.
By:
------------------------------
Its:
------------------------------
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇▇ Chud
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
PARTIES OF THE SECOND PART
SALTON-MAXIM HOUSEWARES, INC.
By:
-------------------------------
Its:
------------------------------
----------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
4
32
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
DOMINATOR INVESTORS GROUP
By:
-------------------------------
Its:
------------------------------
DUQUESNE FINANCIAL CORP.
By:
-------------------------------
Its:
------------------------------
5
33
Exhibit E
Credit Extension Agreement dated as of [Closing of Salton Option], 1998
between
Windmere-Durable Holdings, Inc.("Windmere")
and
Salton/Maxim Housewares, Inc. ("Salton")
RECITALS
A. This Agreement shall become effective on the date when
Salton purchases all of the stock of Salton owned by Windmere (the "Purchase")
and Windmere has received in part payment a note from Salton in the original
principal amount of fifteen million dollars ($15,000,000) (the "Note");
B. Under the terms of the Note, Salton is to receive a credit
of five percent (5%) of the amount of all purchases made by Salton or its
Affiliates (as that term is defined in the Note) of products from Windmere or
its Affiliates against payments owing on the Note, as more fully set forth in
the Note.
C. Windmere has agreed to extend payment terms to Salton
covering the sale by Windmere and its Affiliates of products to Salton.
D. Capitalized terms not defined in this Agreement are defined
in the Stock Agreement dated May , 1998 among Windmere, Salton and certain other
parties.
THEREFORE, in consideration of closing of the Purchase and other good and
valuable consideration to each party, receipt of which is hereby acknowledged,
Windmere and Salton agree as hereinafter set forth (the "Agreement").
1. PAYMENT TERMS. In the case of all purchases of products
made by Salton and its Affiliates from Windmere and its Affiliates, payment
shall not be due for a period of one hundred twenty days (120) commencing on and
after the date the products are delivered FOB Hong Kong or another port in
mainland China, provided that such payment terms shall not cover an aggregate
amount of purchases that: (i) at any time exceeds twelve million dollars
($12,000,000) U.S. and (ii) in any period of twelve (12) consecutive months
exceeds forty eight million dollars ($48,000,000) U.S. and further PROVIDED
THAT, if payment in full is not made within said time limit, interest on the
unpaid balance shall be paid at the rate of four percent (4%) above the prime
rate from time to time charged by NationsBank, on said unpaid balance, from the
121st day until payment is made. Nothing contained herein shall obligate Salton
or any Salton Affiliate to buy any products from Windmere or any Windmere
Affiliate, nor obligate Windmere or any Windmere Affiliate to sell any products
to Salton or any Salton Affiliate.
2. EXPIRATION. This agreement shall expire on the later to
occur of: (i) payment in full of the Note and (ii) the termination of the
Purchase, Distribution and Marketing Agreement dated January 27, 1997 between
Salton and KMart Corporation.
34
3. INCORPORATION OF RECITALS. The recitals to this Agreement
are incorporated into this Agreement.
4. ARBITRATION. Salton and Windmere agree that any dispute
which arises under or in connection with (a) the purchase by or on behalf of
Salton or any of its affiliates of products from Windmere or any of its
affiliates (including Durable Electrical Metal Factory, Ltd.), (b) the terms of
this Agreement, (c) the terms of Exhibit B to the Stock Agreement, (d) the terms
of Exhibit C to the Stock Agreement, or (e) the failure to pay interest when due
on the Note in the form of Exhibit A to the Stock Agreement, shall be submitted
to the American Arbitration Association under and in accordance with its then
prevailing commercial arbitration rules, if the claims and counterclaims in such
dispute do not exceed an aggregate of $5,000,000. Nothing herein shall require
the parties to arbitrate any dispute arising under the Stock Agreement, the
Mutual Releases in the form of Exhibit D to the Stock Agreement, any provision
of said Note (other than the payment of interest due thereon), or any dispute
(regardless of how it arises) where the claims and counterclaims in the
aggregate exceed $5,000,000.
Following a demand for arbitration, Salton and Windmere shall each name
one arbitrator within 10 days. In the event that either party fails to designate
an arbitrator within that time period, the other party may designate the second
arbitrator as well. The third arbitrator shall be chosen by the first two within
ten days after they both have been appointed, or, failing agreement on the third
arbitrator, he shall be chosen by the head of the Chicago, Illinois office of
the American Arbitration Association.
The arbitrators shall apply, to the greatest extent practicable, the
Expedited Procedures provided for in the commercial arbitration rules, even
though the amount in dispute may exceed $50,000. Any such arbitration shall take
place in Chicago, Illinois. The written decision of the arbitrators shall be
provided to the parties and shall be binding on them, and enforceable in any
court of law. The arbitrators shall have the authority to award consequential
damages. Each party shall be responsible for its own attorneys fees, but shall
bear equally the expenses of the arbitration.
Salton/Maxim Housewares, Inc., Windmere Durable Holdings,Inc.
a Delaware corporation a Florida corporation
By By
--------------------------------- --------------------------
Its Its
--------------------------------- --------------------------
