AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NEWTECH ELECTRONICS INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 5190 65-0225504
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
JOEL NEWMAN
CHIEF EXECUTIVE OFFICER
NEWTECH ELECTRONICS INDUSTRIES, INC.
16550 N.W. 10TH AVENUE 16550 N.W. 10TH AVENUE
MIAMI, FLORIDA 33169 MIAMI, FLORIDA 33169
(305) 624-0019 (305) 624-0019
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
PAUL BERKOWITZ, ESQ. GEOFFREY E. LIEBMANN, ESQ.
MICHAEL HEIN, ESQ. CAHILL GORDON & REINDEL
GREENBERG TRAURIG HOFFMAN 80 PINE STREET
LIPOFF ROSEN AND QUENTEL, P.A. NEW YORK, NEW YORK 10005
1221 BRICKELL AVENUE (212) 701-3000
MIAMI, FLORIDA 33131 TELECOPY: (212) 269-5420
(305) 579-0500
TELECOPY: (305) 579-0717
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C>
- --------------------------------------------------------------------------------
Common Stock, par value $0.01 per share.. $103,500,000 $30,533
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
(2) Includes shares of Common Stock which may be purchased by the Underwriters
pursuant to an over-allotment option.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUSSubject to Completion, dated May 14, 1998
- --------------------------------------------------------------------------------
Shares
Newtech Electronics Industries, Inc.
[LOGO]
Common Stock
- --------------------------------------------------------------------------------
Of the shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of Newtech Electronics Industries, Inc., a Florida corporation (the
"Company"), offered hereby (the "Offering"), shares are being offered by
the Company and shares are being offered by certain shareholders of the
Company (the "Selling Shareholders"). See "Selling Shareholders." The Company
will not receive any of the proceeds from the sale of the shares of Common
Stock offered by the Selling Shareholders.
Prior to the Offering, there will be no public market for the Common Stock. It
is currently estimated that the initial public offering price will be between
$ and $ . See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied for listing of the Common Stock on the Nasdaq National Market under the
symbol "NTCH."
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 7-16.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Shareholders(3)
---------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- ----------- ---------- ---------------- ------------- ----------------
Total(3) $ $ $ $
- ------- ---------- ---------------- ------------- ----------------
</TABLE>
(1) THE COMPANY AND THE SELLING SHAREHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES OF THE OFFERING, WHICH ARE PAYABLE BY THE
COMPANY, ESTIMATED TO BE $ .
(3) THE SELLING SHAREHOLDERS HAVE GRANTED THE UNDERWRITERS A 30-DAY OPTION TO
PURCHASE UP TO ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS
PER SHARE SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS
EXERCISED IN FULL, THE TOTAL PRICE TO PUBLIC WILL BE $ , THE TOTAL
UNDERWRITING DISCOUNTS AND COMMISSIONS WILL BE $ AND THE TOTAL
PROCEEDS TO SELLING SHAREHOLDERS WILL BE $ . SEE "UNDERWRITING."
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York on or about , 1998. The Underwriters include:
SBC Warburg Dillon Read Inc. Jefferies & Company, Inc.
<PAGE>
[INSIDE FRONT COVER]
[PHOTOGRAPHS OF PRODUCTS; DIAGRAM WITH NAMES OF PRODUCTS, BRANDS AND CUSTOMERS]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO (THE "CONSOLIDATED FINANCIAL
STATEMENTS"), APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, INFORMATION SET FORTH IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) REFLECTS THE MERGER ON APRIL
3, 1998 OF ELECTRONIC INDUSTRIES OF AMERICA, INC. WITH AND INTO THE COMPANY,
WITH THE COMPANY AS THE SURVIVING CORPORATION, AND A SIMULTANEOUS
10,000-FOR-ONE STOCK SPLIT. AS USED HEREIN, THE "COMPANY" MEANS NEWTECH
ELECTRONICS INDUSTRIES, INC., ITS SUBSIDIARIES AND THEIR RESPECTIVE
PREDECESSORS UNLESS THE CONTEXT OTHERWISE REQUIRES.
THE COMPANY
Newtech Electronics Industries, Inc., established in 1990, designs,
sources, manufactures, and markets high-quality, value-priced brand-name
consumer electronic products. The Company offers a broad line of audio, video
and telecommunications products and selected home appliances, including
televisions, video cassette players and recorders ("VCRs"), home audio systems,
compact disc ("CD") players, cassette players, telephones and portable
microwave ovens. The Company's strategy has been to build a portfolio of
licensed and owned brand names, including White-Westinghouse, Admiral, Philco,
Craig and Newtech. By having a portfolio of brand names, the Company is able to
offer retailers proprietary and flexible merchandising programs. The Company
currently sells its products to 15 retailers which operate over 14,000 retail
outlets in the United States and Canada, including mass merchandisers such as
Kmart Corporation ("Kmart") and Wal-Mart Stores, Inc. ("Wal-Mart"), and other
retailers, including Rite-Aid Corporation ("Rite-Aid"), Zellers Inc.
("Zellers") and Ames Department Stores, Inc. ("Ames"). In addition, the Company
sells its products to customers in Mexico, the Caribbean and Central and South
America. In January 1997, the Company entered into a long-term strategic
alliance with Kmart, pursuant to which the Company appointed Kmart as the
exclusive "discount department store" to market and sell a range of audio,
video and telecommunications products in the United States under the
White-Westinghouse brand name (the "White-Westinghouse Trademark"). The
agreement provides for minimum purchases by Kmart of a total of $1.1 billion of
White-Westinghouse brand consumer electronic products in specified yearly
increments over a seven-and-a-half-year period. The Company believes that this
strategic alliance provides a platform for significant growth. See
"Business--Strategic Alliances." In large part due to this alliance, from 1996
to 1997, net sales increased 434% to $208.4 million from $39.1 million. The
Company plans to grow its business by expanding its customer base, acquiring
and licensing additional brand names, expanding the territories and product
lines available under its existing licenses, and increasing penetration of
existing distribution channels.
THE CONSUMER ELECTRONICS INDUSTRY
The consumer electronics industry is large and diverse, encompassing a
wide variety of technologies and products, including televisions, VCRs, audio
systems, CD players, cassette players and telephones. The Consumer Electronics
Manufacturers Association ("CEMA") estimates that total factory sales of video
products, home and portable audio products, mobile electronics and telephones
and telephone answering devices to the U.S. market in 1997 was approximately
$31.8 billion. U.S. sales in 1997 included approximately $8.4 billion of
televisions (including TV/VCR combinations), $2.7 billion of VCRs, $1.7 billion
of audio systems, $4.3 billion of CD players (including portable and home CD
players), $0.3 billion of cassette players and $5.9 billion of telephones and
telephone answering devices. (These figures include a number of video products,
home and portable audio products, mobile electronics and telephone and
telephone answering devices that the Company does not offer.) Industry
participants have traditionally offered such merchandise using three principal
branding strategies and corresponding price points: (i) premium brands, such as
Sony and Panasonic; (ii) mass-market brands, such as General Electric ("GE")
and Magnavox; and (iii) value-priced brands, such as White-Westinghouse and
GPX.
3
<PAGE>
BUSINESS STRATEGY
The Company plans to establish itself as the leading supplier of high
quality, value-priced consumer electronic products and selected household
appliances. The Company believes that its portfolio of well-recognized brand
names, superior design capabilities, flexible and low-cost sourcing and
manufacturing and responsive after-sales service provide it with competitive
advantages in achieving this goal.
OPERATING STRATEGY. The Company's operating strategy is based on the
following key elements:
/bullet/ OFFER A PORTFOLIO OF WELL-RECOGNIZED BRAND NAMES. The Company
believes that its strategy of offering a portfolio of well-recognized
brand names enables retailers to differentiate themselves in the
marketplace through proprietary and flexible merchandising programs. For
example, the Company's recent strategic alliance with Kmart designates
Kmart as the exclusive "discount department store" to market and sell a
range of audio, video and telecommunications products in the United States
under the White-Westinghouse Trademark.
/bullet/ OFFER HIGH-QUALITY PRODUCTS OF SUPERIOR DESIGN. The Company has
assembled an in-house design and engineering team with significant
industry experience and expertise. The Company believes that the superior
design and style of its products distinguish them from those of its
competitors in the value-priced category and help drive consumer
purchasing decisions. In addition, the Company highlights the design and
style features of its products with detailed descriptions and
illustrations on packaging, which the Company believes further
distinguishes its products from those of its competitors.
/bullet/ MAINTAIN LOW-COST, FLEXIBLE SOURCING AND MANUFACTURING
CAPABILITIES. The Company's products are manufactured both at the
Company's facility in the People's Republic of China (the "PRC") and at
various third-party facilities throughout the world. The Company believes
that its manufacturing facility allows flexibility in sourcing products
and a better understanding of manufacturing cost and time parameters,
which provide the Company with leverage in negotiating with outside
manufacturers.
/bullet/ PROVIDE RESPONSIVE AFTER-SALES SERVICE. The Company believes that
after-sales service is an important competitive factor in the consumer
electronics industry and that its model of responsive after-sales service
is superior to others in the value-priced segment. This model is based on
a toll-free interactive phone system that directs callers to independent
local service centers staffed by in-house and outsourced personnel who
provide basic troubleshooting and advanced technical support, thus
enabling the Company to provide responsive service at a reasonable cost to
the Company.
GROWTH STRATEGY. The Company plans to continue to grow its business using
a strategy comprised of the following principal elements:
/bullet/ EXPAND ITS CUSTOMER BASE. The Company believes that it has
significant opportunities to increase the number of outlets at which its
products are sold. For example, in the second half of 1997, the Company
began selling products to Ames, Bradlees, Inc. ("Bradlees"), Musicland
Stores Corp. ("Musicland") and Heilig Meyers Co. ("Heilig Meyers"). Also,
the Company has recently received its first purchase order from Zellers, a
division of Hudson Bay Company, one of the largest retailers in Canada.
The Company plans to pursue additional proprietary strategic alliances
similar to its arrangement with Kmart, as well as other merchandising
programs.
/bullet/ ACQUIRE AND LICENSE ADDITIONAL BRAND NAMES. The Company plans to
continue to acquire and license additional brand names in order to
maximize its ability to provide retailers with proprietary and flexible
merchandising programs. Towards this end, in September 1997, the Company
obtained a license to sell portable microwave ovens in the United States
and Canada
4
<PAGE>
under the Philco brand name, the Company's first product offering outside
of the consumer electronics industry. In addition, in December 1997, the
Company acquired the Craig trademark, a well-recognized brand name in the
consumer electronics industry, under which the Company sells a broad range
of its audio, video and telecommunications products, as well as portable
microwave ovens.
/bullet/ EXPAND THE SCOPE OF EXISTING BRANDS. The Company plans to continue
to negotiate for the expansion of the territories and product lines under
its existing brand-name licenses. In September 1997, the Company secured
the right to add portable microwave ovens to the consumer electronic
products it sells under the White-Westinghouse Trademark in the United
States and Canada. In addition, in December 1997, the Company expanded its
marketing territory for the Admiral brand name to include Mexico.
/bullet/ INCREASE PENETRATION OF EXISTING DISTRIBUTION CHANNELS. The
Company plans to leverage its customer relationships and success in
broadening product lines and acquiring and licensing additional brand
names to increase product sales to existing customers. The Company
believes that this strategy is responsive to the desire of major retailers
to source products through fewer vendors.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company ....................... shares
Common Stock offered by the Selling Shareholders .......... shares
Common Stock to be outstanding after the Offering ......... shares(1)
Use of proceeds by the Company ............................ The Company intends to apply the net
proceeds of the Offering to repayment
of certain indebtedness, possible future
acquisitions and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol .................... NTCH
</TABLE>
- ----------------
(1) Does not include: (i) shares of Common Stock reserved for
issuance upon exercise of the Underwriters' over-allotment option, (ii) an
aggregate of 649,000 shares of Common Stock reserved for issuance upon
exercise of outstanding options under the Company's 1997 Stock Option Plan
and (iii) an aggregate of 351,000 shares of Common Stock reserved for
issuance upon exercise of options available for grant under the 1997 Stock
Option Plan.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales .............................................. $ 13,353 $ 39,060 $ 208,417
Cost of products sold .................................. 11,993 35,172 186,433
----------- ----------- -----------
Gross profit ........................................... 1,360 3,888 21,984
Selling expenses(1) .................................... 846 1,285 10,533
General and administrative expenses .................... 1,155 1,842 4,598
Write-off of advances to affiliate ..................... -- 980 --
----------- ----------- -----------
Total expenses ......................................... 2,001 4,107 15,131
Income (loss) from operations .......................... (641) (219) 6,853
Other (income) expense:
Interest expense ...................................... 307 201 1,763
Interest and other income ............................. (197) (587) (581)
----------- ----------- -----------
Total other (income) expense ........................... 110 (386) 1,182
Income (loss) before income taxes ...................... (751) 167 5,671
Income tax benefit ..................................... -- (135) (351)
----------- ----------- -----------
Net income (loss) ...................................... $ (751) $ 302 $ 6,022
=========== =========== ===========
Net income (loss) per common share
Basic ................................................. $ (.08) $ .03 $ .60
Diluted ............................................... $ (.08) $ .03 $ .57
Weighted average number of common shares outstanding
Basic ................................................. 10,000,000 10,000,000 10,000,000
Diluted(2) ............................................ 10,000,000 10,000,000 10,508,159
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
PRO FORMA AS
ACTUAL ADJUSTED(3)(4)
---------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .......... $ 2,031 $
Current assets ..................... 62,673
Total assets ....................... 68,593
Total debt ......................... 37,167
Total shareholders' equity ......... 12,285
</TABLE>
- ----------------
(1) Selling expenses in 1995, 1996 and 1997 included freight costs of $49,000,
$20,000 and $4.5 million, respectively. Approximately $4.3 million of such
freight costs in 1997 were due primarily to the Company's decision to
airfreight products to customers during the 1997 holiday season. The
additional airfreight costs resulted mainly from delays in bringing the
Company's PRC manufacturing facility to required production levels.
(2) Includes the impact of 649,000 shares of Common Stock issuable upon the
exercise of outstanding stock options granted under the Company's 1997
Stock Option Plan. See Note 10 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus.
(3) Adjusted to reflect the sale of shares of Common Stock offered by
the Company at an assumed public offering price of $ per share and
the application of the estimated net proceeds therefrom as set forth in
"Use of Proceeds."
(4) Gives pro forma effect to (i) the repayment to the Company of an
approximately $271,000 loan to Joel Newman, the Company's Chairman, Chief
Executive Officer and President and 47.5% shareholder, and (ii) the
payment of certain share subscription receivables, consisting of
promissory notes in the aggregate principal amount of $5.0 million issued
to the Company by Windmere Holdings Corporation, a 47.5% shareholder of
the Company, as consideration for the purchase of Common Stock. See
"Capitalization", "Management" and "Certain Transactions." Mr. Newman has
agreed to repay in full the loan with a portion of the net proceeds to him
from the sale of Common Stock in the Offering. With respect to the
promissory notes issued to the Company by Windmere Holdings Corporation,
one such promissory note, in the principal amount of $3.0 million, became
due on April 15, 1998, and $2.5 million of the principal amount has been
repaid (with the maturity extended to June 1, 1998 for the remaining
$500,000 principal amount), and Windmere Holdings Corporation has agreed
to repay in full the other promissory note, in the principal amount of
$2.0 million, with a portion of the net proceeds to such Selling
Shareholder from the sale of Common Stock in the Offering. See "Use of
Proceeds" and "Principal and Selling Shareholders."
6
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE
PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING,
BUT NOT LIMITED TO, THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS.
DEPENDENCE ON KMART AGREEMENT
On January 27, 1997, the Company entered into an agreement with Kmart (the
"Kmart Agreement") pursuant to which the Company appointed Kmart as the
exclusive "discount department store" to market and sell a broad range of
audio, video and telecommunications products in the United States under the
White-Westinghouse Trademark licensed to the Company by White Consolidated
Industries, Inc. ("WCI"). See "Business--Brand Portfolio--White-Westinghouse"
and "--Strategic Alliances." During 1997, Kmart purchased approximately $158.7
million of merchandise from the Company pursuant to the Kmart Agreement, which
accounted for approximately 76% of the Company's net sales. The termination of
the Kmart Agreement would, and any significant modification thereof could, have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Kmart Agreement provides for minimum purchases by Kmart which increase
throughout its term (with specified minimums applying to each of the audio,
video and telephone categories) and the payment of penalties for shortfalls. In
the event that aggregate U.S. retail sales in the consumer electronics industry
for any particular category decrease by more than 10% in any year from that
sold in the prior year, Kmart has the right to reduce the minimum purchase
requirements for such category to an amount not less than 80% of the minimum
for such period. There can be no assurance that U.S. retail consumer electronic
sales will not decrease, causing a reduction in Kmart's minimum purchase
requirements.
Kmart further has the right to procure the manufacture of products from
other manufacturers under the White-Westinghouse Trademark on behalf of the
Company, which procurements count towards its minimum purchase requirements. In
such cases, Kmart has the option of paying the purchase price to the
third-party manufacturers directly or making such payment to the Company, in
which case the Company pays the third-party manufacturers. In the event that
Kmart fails to pay a third-party manufacturer, the Company must make the
payment. During 1997, Kmart purchased approximately $79.1 million of
merchandise from third parties under the Kmart Agreement and, pursuant to the
Kmart Agreement, paid the Company a percentage of such amount. Because the
Company's gross profit is higher for the sales of its own products than its
gross profit on third-party manufacturer sales under the Kmart Agreement, an
increase in the percentage of third-party manufacturer sales could lower its
overall gross profit and have a material adverse effect on the Company's
business, financial condition and results of operations.
The initial term of the Kmart Agreement is through June 30, 2004; however,
each of Kmart and the Company have the right, by written notice given prior to
June 30, 2000, to terminate the agreement without cause any time after June 30,
2002. Each of Kmart and the Company further have the right to terminate the
agreement without cause on June 30, 2003 and on each June 30 thereafter; in the
case of the Company, such termination requires 12 months' notice.
Kmart also has the right to terminate the agreement upon the termination
of the January 27, 1997 contract between Kmart and Salton/Maxim Housewares,
Inc. ("Salton") for the sale of kitchen housewares, personal care products,
fans, heaters and electrical air cleaners and humidifiers under the
White-Westinghouse Trademark (the "Salton Agreement"). The termination
provisions of the Salton Agreement are substantially the same as those of the
Kmart Agreement, and the Company has no control over the performance or
termination of the Salton Agreement. In addition, Salton's license agreement
with WCI for the sale of kitchen housewares under the White-Westinghouse
Trademark expires in June 1998, and Salton's license agreement with WCI for the
sale of personal care products,
7
<PAGE>
fans, heaters and electrical air cleaners and humidifiers under the
White-Westinghouse Trademark expires in December 1998. Each such license
agreement may be extended for 13 one-year periods at the option of Salton,
provided that Salton meets certain minimum sales levels. In addition, either
party may terminate such license agreements without cause on 12 months' notice
beginning in 2001. The Company has no control over the performance or
termination of the Salton Agreement with Kmart or Salton's license agreements
with WCI. Furthermore, an adverse decision in the Trademark Litigation
discussed below could result in Salton being limited in further use of the
White-Westinghouse Trademark and in termination or significant modification of
the Salton Agreement. See "--Trademark Litigation." Fifty percent of Salton's
outstanding shares of common stock are owned by Windmere Holdings Corporation
("Windmere"), a wholly-owned subsidiary of Windmere-Durable Holdings, Inc.
("Windmere-Durable"). Upon the completion of the Offering, Windmere will own in
the aggregate approximately % of the outstanding shares of the Company's
Common Stock. See "--Control by Principal Shareholders."
Kmart also has the right to terminate the Kmart Agreement on the basis of
any claim which Kmart reasonably believes impairs or would impair Kmart's
ability to receive the benefits of the Kmart Agreement, whether relating to any
or all products. See "--Trademark Litigation." In the Trademark Litigation, CBS
seeks, among other things, a preliminary injunction enjoining the Company,
Salton, Windmere-Durable and WCI from using the White-Westinghouse Trademark in
connection with the sale of certain products, including products in categories
representing 42.0% of the products now being sold by the Company to Kmart under
the Kmart Agreement.
TRADEMARK LITIGATION
In November 1996, WCI filed suit for injunctive relief and damages against
Westinghouse Electric Corporation (now known as CBS Corporation ("CBS")) in the
United States District Court for the Northern District of Ohio alleging that
CBS's grant of licenses to the Westinghouse trademark for use on lighting
products, fans and electrical accessories for use in the home violates WCI's
rights to the Westinghouse trademark and constitutes a breach of the agreements
under which CBS's predecessor sold WCI its appliance business and certain
trademark rights in 1975. In response to that suit, CBS filed a related action
in December 1996 in the United States District Court for the Western District
of Pennsylvania, naming WCI, the Company, Windmere-Durable, Salton and certain
other parties as defendants. The two actions have now been consolidated in the
Pennsylvania court (the "Trademark Litigation"). CBS's complaint alleges among
other things that WCI's license to the Company to use the White-Westinghouse
Trademark on CD players, audio systems that include CD players, VCRs, TV-VCR
combinations, headphones, and telephones, telephone answering machines and
telephone accessories infringes its right to the Westinghouse trademark. CBS
does not appear to be challenging the validity of the Company's license to use
the mark on TVs without VCRs, on radios, on audio systems or cassette tape
players that do not include CD players, on stereo speakers or on microwave
ovens. CBS seeks an injunction prohibiting the Company, Salton and WCI from
using the White-Westinghouse Trademark on products not specifically enumerated
in the transaction documents, and unspecified damages and attorneys' fees. An
adverse decision in the Trademark Litigation could result in the Company being
limited in further use of the White-Westinghouse Trademark and in termination
or significant modification of the Kmart Agreement, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The legal costs that may be incurred in defending against this action
could be substantial; however, pursuant to an indemnification agreement among
WCI, Kmart and Windmere-Durable, WCI is defending and indemnifying Kmart and
Windmere-Durable for all costs and expenses for claims, damages and losses,
including the costs of litigation, and, pursuant to the license agreements with
WCI, WCI is defending and indemnifying Salton and the Company for all costs and
expenses for claims, damages and losses, including the costs of litigation. In
addition, the litigation could be protracted and result in diversion of
management and other resources of the Company. The Company believes that its
use of the White-Westinghouse Trademark does not infringe upon or otherwise
violate CBS's trademark rights. There can be no assurance that WCI will prevail
in its lawsuit or that WCI, the Company and their codefendants will prevail in
their opposition to CBS's lawsuit. In the event that a favorable
8
<PAGE>
outcome for the Company is not obtained, the Company intends to vigorously
pursue its rights under the license agreements described above, including the
right to indemnification, although there can be no assurance that the parties
to the license agreements will agree on the scope of the indemnity.
Related proceedings have also been commenced before the Trademark Trial
and Appeal Board (the "Trademark Board") of the United States Patent and
Trademark Office in opposition to WCI's and CBS's efforts to register certain
uses of the Westinghouse and White-Westinghouse trademarks. Although the
Company is not a party to those proceedings, some of them relate to the
Company's uses of the White-Westinghouse Trademark. Those proceedings have been
stayed pending resolution of the Trademark Litigation in the Pennsylvania
court. Even if the Trademark Litigation is resolved, it is possible that these
proceedings before the Trademark Board will continue and will have a material
adverse effect upon the Company's business, financial condition and results of
operations.
INVENTORY MANAGEMENT RISKS
The Company is subject to significant risks in connection with its
inventory management. In order to assure an adequate supply of products to meet
the relatively high demand during the third and fourth quarters of each year,
the Company must commit to acquire products six to nine months in advance of
delivery. If the Company underestimates its need for inventory or experiences
delays in production, the Company may have to operate its plant on a more
expensive overtime basis, pay a significant premium to obtain the necessary
contract-manufacturing capacity or ship products by air rather than less
expensive ground or sea transportation in order to meet customer orders. In
such event, profit margins, sales and/or customer relationships could be
materially adversely affected. For example, in 1997, the Company incurred
approximately $4.3 million of freight costs due primarily to the Company's
decision to airfreight products to customers during the 1997 holiday season.
Such additional airfreight costs resulted mainly from delays in bringing the
Company's PRC manufacturing facility to required production levels. Similarly,
if the Company overestimates its inventory needs, the Company will be required
to reduce prices in order to dispose of such inventory or increase borrowings
to finance the carrying costs of such inventory, thereby adversely affecting
its profitability and cash flows. There can be no assurance that the Company
will be able to borrow such amounts on reasonable terms, if at all. To the
extent that the Company is unable to adequately plan, time, and budget its
sourcing and manufacturing operations, incurs delays in delivery, fails to
adequately forecast prices and demand or reduce costs when necessary, a
material adverse effect on the Company's business, financial condition and
results of operations could result. See "--Seasonality and Fluctuations in
Quarterly Performance" and "Business--Sourcing and Manufacturing."
RISK OF PRODUCT RETURNS AND WARRANTY CLAIMS
The Company incurs expenses as a result of product returns and warranty
claims. Such returns and warranty claims may result from defective goods,
inadequate performance relative to customer expectations, improper packaging,
liberal retailer return policies and other causes which may be outside the
Company's control. During the three years ended December 31, 1995, 1996 and
1997, product returns and warranty claims were approximately 3.8%, 0.8% and
1.6%, respectively, of gross sales. In 1995, 1996 and 1997, approximately
97.0%, 83.0% and 75.0%, respectively, of the Company's gross sales were made
under net sale arrangements, whereby the Company's customers are responsible
for product returns, which cannot be returned to the Company. While the Company
plans to maintain or increase the percentage of sales that are on a net basis,
there can be no assurance that the Company will be successful in maintaining or
increasing such percentage. Any significant increase in product returns and
warranty claims could have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED DISTRIBUTION CHANNELS AND CONCENTRATION OF CUSTOMERS AND CREDIT RISK
The Company has been, and is, highly dependent upon its largest customers
and has derived, and is expected to derive, a substantial percentage of its
revenues from such customers. In particular, the Company's largest customer,
Kmart, accounted for approximately 76% of the Company's net sales during 1997,
and in 1996 net sales to each of the following customers represented more than
9
<PAGE>
10% of the Company's net sales: (i) Kmart represented 37%, (ii) Wal-Mart
represented 34%, (iii) Sanyo do Brasil represented 12%, and (iv) Family Dollar
Stores represented 11%. The Company's top five customers accounted for
approximately 95% and 90% of net sales during 1996 and 1997, respectively.
Although certain of the Company's customers have posted standby letters of
credit which may be drawn upon by the Company in the event of payment default,
such letters of credit may not be sufficient to reimburse the Company fully for
all outstanding invoices. The loss of any one of the Company's largest
customers or the failure of any one of such customers to pay on a timely basis
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Customers."
SUBSTANTIAL COMPETITION
The consumer electronics industry is extremely competitive and is
dominated by large and well-capitalized companies. The Company competes with
the entire consumer electronics industry for consumer dollars, shelf space for
products and sales support. The Company's competitors may not need to rely on
external financing or relationships with independent manufacturers to the same
extent as the Company. Furthermore, the Company's competitors may experience
cost advantages depending on labor costs, currency exchange rates and other
factors in the countries in which their manufacturing operations are located,
relative to the countries in which the Company's products are manufactured. The
Company has adopted a marketing strategy that targets the value-priced segment
of the consumer electronics market, which is particularly price sensitive.
There is competition among a number of brands in this market segment, including
Emerson and GPX. In addition, although Magnavox, GE, Sony and Panasonic brand
products are not currently emphasized in the value-priced segment of the
market, they do compete with the Company's products for consumer dollars, shelf
space and sales support. To the extent that these brands compete directly with
the Company's brands on the basis of price, or their product prices were
otherwise reduced, the Company's ability to market and sell competitive
products could be severely affected, which would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Strategy," "--Customers," and "--Competition."
DEPENDENCE ON KEY INDIVIDUALS
The success of the Company is dependent upon the continued services of the
Company's senior management. The loss of the services of these individuals,
including Joel Newman, its Chairman of the Board, President and Chief Executive
Officer, and Hatch Masuda, its Senior Vice President, Design and Product
Development, could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company has entered into
two-year employment agreements with Messrs. Newman and Masuda effective upon
the consummation of the Offering. The Company does not maintain key person life
insurance policies on any members of management. See "Management--Employment
Agreements and Termination of Employment and Change in Control Arrangements."
The Company believes that its future success will also depend in part upon
its ability to attract and retain qualified management personnel. Competition
for such personnel is intense and the Company competes for qualified personnel
with numerous other employers, some of whom have greater financial and other
resources than the Company. There can be no assurance that the Company will be
successful in attracting and retaining such personnel. See "Management."
INTEGRATION OF POTENTIAL ACQUISITIONS
The Company plans to use a portion of the net proceeds from the Offering
for acquisitions of brand names, product lines and other companies or assets
that the Company believes would complement or expand its existing business.
Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including: (i) the diversion of management's
attention; (ii) the risk that the acquired assets or the operations and
personnel of the acquired companies will not be effectively integrated; (iii)
the amortization of acquired intangible assets; (iv) the assumption of
potential liabilities, disclosed or undisclosed, associated with the assets or
businesses acquired, which
10
<PAGE>
liabilities may exceed the amount of indemnification, if any, available from
the seller; (v) the risk that the financial and accounting systems utilized by
the businesses acquired will not meet the Company's standards; (vi) the risk
that the businesses acquired will not maintain the quality of services that the
Company has historically provided; (vii) the dilutive effect of the use of the
Company's Common Stock as consideration for acquisitions; and (viii) the
inability to attract and retain qualified management. There can be no assurance
that the Company will consummate future acquisitions on satisfactory terms, if
at all, that adequate financing will be available on terms acceptable to the
Company, if at all, or that any acquired operations will be successfully
integrated or that such operations will ultimately have a positive impact on
the Company's business, financial condition and results of operations. See
"Business--Strategy."
RISKS ASSOCIATED WITH DEVELOPMENT AND MANUFACTURING
The Company's product design and engineering team typically develops new
products over a period of six months. Thereafter, the preparation of the
manufacturing process through the first production run generally requires
another three to six months. Any delays in the foregoing process could prevent
the Company from receiving expected revenue from the sales of that product,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company does not maintain long-term
purchase contracts with manufacturers and operates principally on a purchase
order basis. The loss of a supplier could, in the short-term, have a material
adverse effect on the Company's business, financial condition and results of
operations until alternative supply arrangements were secured. See
"Business--Sourcing and Manufacturing."
AVAILABILITY OF TECHNOLOGY
The Company relies on available technology developed by others as the
basis for the operations and features of its products. The Company currently
has no intention of expanding its business to include the development of
innovative technology. As a result, the Company is subject to the risk that a
technological development not available to it will result in the obsolescence
of various of its products or competitive advantages to the developers of such
technology. The Company is also subject to the risk that some technological or
new product development that is not available to the Company, either due to
third-party proprietary protection, cost, or otherwise, could render the
marketing of the Company's products difficult or not profitable due to
competitive pressure from the new development. See "Business--Product Design
and Development."
SEASONALITY AND FLUCTUATIONS IN QUARTERLY PERFORMANCE
The Company's business is highly seasonal, with operating results varying
substantially from quarter to quarter. During 1997, approximately 82.5% of the
Company's sales took place in the third and fourth quarters of the calendar
year. In order to facilitate sales during the year-end buying season, the
Company must make financial commitments and pay for product inventory and
certain expenses well in advance of any sales of such inventory. Typically, the
Company expects to experience lower profitability or losses in the first and
second quarters of each year for this reason. As a result, if the timing or
amount of customer orders fall below the Company's expectations, operating
results and cash flows would be materially adversely affected because expenses
based on these expectations will have already been incurred. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS ASSOCIATED WITH RETAIL SALES
The Company is subject to many of the same economic factors that impact
other designers and manufacturers of retail-oriented products, including costs
of materials, insurance, inflation, transportation, and retail sector and
general economic conditions, which can impact consumer demand in general and
for the Company's products in particular. These factors could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, because the Company's business strategy is heavily
dependent on the use of brand names, adverse publicity with respect to products
that are not sold by the Company but bear the brand names used by the Company
11
<PAGE>
could have a material adverse effect on the Company's business, financial
condition and results of operations, notwithstanding the fact that the products
at issue are different than those sold by the Company.
PRODUCT LIABILITY
Any defects in the Company's products that result in personal injury could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company maintains insurance to cover such risks;
however, the coverage in certain events may not be adequate to insure against
all product liability claims.
DEPENDENCE ON MANAGEMENT INFORMATION SYSTEMS; YEAR 2000 ISSUES
The Company believes that the successful operation of the Company's
business is dependent in part on its computerized inventory management, order
processing and distribution systems and other computer software programs and
operating systems. These systems will require modification, improvement or
replacement as the Company grows. The Company may, from time to time,
experience delays, complications or expenses in integrating and operating these
systems, any of which could have a material adverse effect upon the Company's
business, financial condition and results of operations.
The Company has implemented a Year 2000 program to ensure that its
computer systems and applications will function properly beyond 1999. While the
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be completed successfully on a
timely basis, no assurance can be given that these efforts will be successful
or that such efforts will be completed on a timely basis. The failure to
successfully complete such implementation on a timely basis may cause
interruptions in operations which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
although the Company is discussing with its vendors and customers the
possibility of any interface difficulties which may affect the Company, the
ability of third parties with whom the Company transacts business to address
their Year 2000 issues is outside the Company's control and no assurance can be
given that such interface difficulties will not arise or that such difficulties
will not have a material adverse effect on the Company's business, financial
condition or results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
RISK OF DOING BUSINESS IN FOREIGN COUNTRIES; RISK OF IMPORT LIMITATIONS
The Company's products are principally manufactured in the PRC both at the
Company's manufacturing facility and by independent manufacturers. The Company
has also engaged independent manufacturers in Indonesia, Malaysia, Mexico,
Thailand and the Philippines. The Company does not have long-term contracts
with any of its independent manufacturers. Manufacturing in the PRC and in
other foreign countries is subject to a number of risks, including but not
limited to transportation delays and interruptions, political and economic
disruptions, the imposition of tariffs and import and export controls, loss of
property or revenue from expropriation or political demands, and changes in
governmental policies. While the Company to date has not experienced any
material adverse effects due to such risks, there can be no assurance that such
events will not occur in the future and possibly result in increases in costs
and delays of, or interference with, product deliveries resulting in losses of
sales and damage to customer relationships.
Generally, the PRC and other countries in which the Company does business
may not offer legal mechanisms to redress an unfair trade practice, contract
breach, or other problem requiring the enforcement of contractual provisions or
other redress. In particular, the PRC does not have a well-developed,
consolidated body of law governing foreign investment enterprises, and the
administration of laws and regulations by government agencies may be subject to
considerable discretion and variation and administrative review and approval by
various national and local agencies of the PRC government. As a result, in the
event of any damage to the Company resulting from the breach of a contract, the
failure to fulfill manufacturing commitments, the taking of Company property,
or other similar event creating a loss for the Company or interruption of its
business, there may not be an adequate avenue of recourse against the parties
responsible for such damages.
12
<PAGE>
MOST FAVORED NATION RISK
The Company has a significant amount of its assets in the PRC, primarily
consisting of inventory, equipment and molds. The supply and cost of products
manufactured in the PRC can be adversely affected, among other reasons, by
changes in foreign currency exchange rates, increased import duties, imposition
of tariffs, imposition of import quotas, interruptions in sea or air
transportation and political or economic changes. Presently, products imported
into the United States from the PRC are subject to favorable duty rates based
on the "Most Favored Nation" status of the PRC ("MFN Status"). MFN Status is
reviewed on an annual basis by the United States President and Congress and was
renewed in June 1997.
If MFN Status for goods produced in the PRC were removed, there would be a
substantial increase in tariffs imposed on goods of PRC origin entering the
United States, including those manufactured by the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Although the Company produces products in other
locations, at the present time, the Company plans to continue its production
primarily in the PRC.
CURRENCY RISKS
Although the Company currently effects substantially all of its
transactions in United States dollars and most of its sales are made in the
United States, in those situations in which transactions are in foreign
currencies the Company is exposed to risks such as currency instability,
currency exchange losses and the ability to repatriate earnings under existing
exchange control laws. Moreover, the Company's operations in the PRC involve
manufacturing and other business operations that rely upon a currency other
than the United States dollar. The Company does not currently engage in
hedging, and no assurance can be given that an effective currency hedging
policy could offset these currency risks.
GOVERNMENT REGULATION
Most of the Company's customers (as well as several state and local
authorities) require that the Company's products meet the safety standards of
the Underwriters Laboratories, Inc. The Company's telephones and clock radios
sold for use in the United States must be registered with and approved by the
United States Federal Communications Commission (the "FCC") and its portable
microwave ovens must be registered with and approved by the United States Food
and Drug Administration (the "FDA"). Products sold in Canada must comply with
the standards of the Canadian Standards Association. In addition, the Company's
products must meet the applicable safety standards imposed by the other
countries in which they are sold. The Company is subject to numerous tariffs,
duties, charges and assessments on the import of its products. The Company
retains import agencies and expediters to facilitate the import of its products
and the payment of these charges and duties. Although these duties and charges
have not substantially affected the Company's ability to market its products
for delivery in the United States and elsewhere, regulations affecting these
charges and duties are subject to change, which could have the effect of
increasing the cost of goods imported and sold by the Company. See
"Business--Regulation."
NO DIVIDENDS
The Company presently intends to retain all earnings, if any, for the
operation and development of its business and does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of cash dividends will be at the discretion of
the Board of Directors and will depend on a number of factors, including future
earnings, capital requirements, the financial condition and prospects of the
Company, any restrictions under credit agreements existing from time to time,
and such other factors as the Company's Board of Directors may deem relevant.
In addition, the Company's new credit facility will contain covenants that
restrict the Company from making certain capital and other distributions. The
Company has invested, and intends to continue to invest, the earnings of its
foreign subsidiaries in foreign operations indefinitely, rather than distribute
them to the Company. As a result, U.S. income taxes have not been provided for
on such undistributed earnings. At December 31, 1996 and 1997, the cumulative
amount of undistributed
13
<PAGE>
earnings on which the Company had not recognized United States income taxes was
approximately $2.2 million and $7.5 million, respectively. See "Use of
Proceeds" and "Dividend Policy."
CONTROL BY PRINCIPAL SHAREHOLDERS
Upon completion of the Offering, the current shareholders of the Company
will own approximately % of the outstanding shares of Common Stock
(approximately % if the Underwriters' over-allotment option is exercised
in full). Included in this percentage are shares of Common Stock owned by Joel
Newman and Windmere, who in the aggregate will own approximately % of the
outstanding shares of Common Stock (approximately % if the Underwriters'
over-allotment option is exercised in full). Accordingly, the Company's current
shareholders, as a group, will have the ability to control all matters
requiring shareholder approval, including the election of the Company's
directors and any amendments to the Company's Amended and Restated Articles of
Incorporation (the "Articles") and Amended and Restated Bylaws (the "Bylaws"),
and to control the business of the Company. Such control could preclude any
acquisition of the Company and could adversely affect the market price of the
Common Stock. See "Principal and Selling Shareholders" and "Description of
Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock, of which the shares sold in the Offering (plus
an additional shares if the Underwriters' over-allotment option is
exercised in full) will be freely tradeable without restriction or further
registration under the Securities Act, except for any shares owned by an
affiliate of the Company, which will be subject to the resale limitations of
Rule 144 ("Rule 144") under the Securities Act. The remaining shares
(the "Restricted Shares") are subject to certain restrictions described below.
Holders of of the Restricted Shares will be eligible to sell a portion of
such shares pursuant to Rule 144 beginning 90 days after the date of this
Prospectus, subject to the manner of sale, volume, notice and information
requirements of Rule 144. Notwithstanding the eligibility of certain shares to
be sold following the completion of the Offering, such shares are subject to
certain additional restrictions on transfer pursuant to certain agreements
described below.
The Company and its executive officers, directors, and the Selling
Shareholders have agreed with SBC Warburg Dillon Read Inc. (the "Lock-up
Agreements") that they will not sell, contract to sell, pledge, grant any
option to purchase, transfer or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into, or exchangeable
for, Common Stock or warrants or other rights to purchase or acquire shares of
Common Stock or permit the registration of shares of Common Stock, for a period
of 180 days after the date of this Prospectus, without the prior written
consent of SBC Warburg Dillon Read Inc., except, without such consent, the
Company may issue and register, and the Company and the Selling Shareholders
may sell, the shares of Common Stock offered in the Offering (including the
Underwriters' over-allotment option). SBC Warburg Dillon Read Inc., in its sole
discretion, without notice, may release some or all of the shares subject to
Lock-up Agreements from time to time. Sales of substantial amounts of Common
Stock in the public market, or the availability of such shares for future sale,
could adversely affect the market price of the Common Stock and could impair
the Company's future ability to raise additional capital through an offering of
its equity securities. See "Shares Eligible for Future Sale" and
"Underwriting."
In addition, 1,000,000 shares of Common Stock have been reserved for
issuance under the Company's 1997 Stock Option Plan (the "Plan"), 649,000 of
which are currently subject to outstanding options. With respect to 618,700 of
such options which were granted February 28, 1997, (i) as of the date of this
Prospectus, 123,740 will be vested and immediately exercisable and all of the
shares issuable upon the exercise of such options, would be eligible for resale
subject to compliance with Rule 701 ("Rule 701") under the Securities Act and
to the Lock-up Agreements with SBC Warburg Dillon Read Inc. described above,
and (ii) 123,740 will vest on each February 28, commencing February 28, 1999.
With respect to 29,900 of such options, 5,980 will vest on each anniversary of
October 27, 1997, the date they were granted. With respect to 400 of such
options, 80 will vest on each anniversary of November 30, 1997, the date they
were granted. Once vested, the shares issuable upon the exercise all
14
<PAGE>
the foregoing options would be eligible for resale subject to compliance with
Rule 701. Additionally, the Company intends to file registration statements
under the Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Plan. The
Company expects to file these registration statements following the closing of
the Offering, and such registration statements are expected to become effective
upon filing. Shares covered by these registration statements will thereupon be
eligible for sale in the public markets, subject only to the Lock-up
Agreements. See "Management--Stock Option Plan" and "Shares Eligible for Future
Sale."
Upon the expiration of 180 days after the date of this Prospectus,
Windmere and Joel Newman, the Company's Chairman, Chief Executive Officer and
President, together will hold an aggregate of shares ( shares if
the Underwriters' over-allotment option is exercised in full), as well as
options to acquire 175,000 shares, and each will have the right to (i) request
that the Company register, as expeditiously as possible, any or all of the
Common Stock then owned by such shareholder, including all shares of Common
Stock issuable pursuant to any derivative securities of the Company then held
by such shareholder and (ii) include such shares of Common Stock in
registrations proposed to be effected by the Company. See "Shares Eligible for
Future Sale--Registration Rights."
Following the Offering, the Company may issue its Common Stock from time
to time in connection with the acquisition of the assets or capital stock of
acquisition targets. Such securities may be issued in registered transactions
or in transactions exempt from registration under the Securities Act.
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there will be no public market for the Common Stock
and there can be no assurance that an active public market for the Common Stock
will develop or, if a trading market does develop, that it will continue after
the Offering. The initial public offering price will be determined by
negotiations among the Company, the Selling Shareholders and the Underwriters.
See "Underwriting" for a description of the factors considered in determining
the initial public offering price. The market price of the Common Stock could
be subject to significant fluctuations in response to variations in financial
results or announcements of material events by the Company or its competitors.
Quarterly operating results of the Company, changes in general conditions in
the economy or the consumer electronics industry or other developments
affecting the Company or its competitors could cause the market price of the
Common Stock to fluctuate substantially. In addition, the equity markets have,
on occasion, experienced significant price and volume fluctuations that have
affected the market prices for many companies' securities and that have often
been unrelated to the operating performance of these companies. Any such
fluctuations that occur following completion of the Offering may adversely
affect the market price of the Common Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of Florida Law and the Articles and Bylaws of the
Company may make a change in control of the Company more difficult to effect,
even if a change in control were in the shareholders' interest. In addition,
the Articles allow the Board of Directors to determine the terms of preferred
stock which may be issued by the Company without approval of the holders of the
Common Stock, and thereby enable the Board of Directors to inhibit the ability
of the holders of the Common Stock to effect a change in control of the
Company. See "Description of Capital Stock--Provisions with Possible
Anti-Takeover Effect."
Employment agreements between the Company and each of Joel Newman, the
Company's Chairman, Chief Executive Officer and President, Hatch Masuda, the
Company's Senior Vice President, Design and Product Development, and Leonor
Schuck, the Company's Vice President, Finance and Chief Financial Officer,
require the Company to pay certain amounts upon termination of employment
following certain events, including a change in control of the Company. Such
agreements may inhibit a change in control of the Company. See
"Management--Employment Agreements and Termination of Employment and Change in
Control Arrangements."
15
<PAGE>
BROAD DISCRETION OF MANAGEMENT IN APPLYING PROCEEDS OF OFFERING
The Company intends to use the net proceeds of the Offering for repayment
of certain indebtedness, possible future acquisitions and general corporate
purposes. To the extent proceeds are used for purposes other than the repayment
of debt, the Company's management will have broad discretion in applying the
net proceeds of the Offering. See "Use of Proceeds."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution of approximately $ in the net
tangible book value per share of Common Stock from the initial public offering
price. See "Dilution."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company (at an assumed initial public offering
price of $ per share, the midpoint of the range of estimated offering
prices set forth on the cover page hereof), after deducting underwriting
discounts and commissions and estimated offering expenses, are estimated to be
approximately $ million. The Company will not receive any of the proceeds
from the sale of any Common Stock by the Selling Shareholders. Of the net
proceeds to the Company, (i) approximately $ million will be used to repay
a portion of the Company's then outstanding bank indebtedness, (ii)
approximately $8.2 million will be used to repay the outstanding indebtedness
of two of its wholly-owned Hong Kong subsidiaries to an affiliate of Windmere,
and (iii) the remaining net proceeds will be applied to fund possible future
acquisitions and for general corporate purposes. See "Certain Transactions."
There are no present understandings, commitments or agreements with respect to
any future acquisition. Pending the application of the remaining net proceeds,
the Company will invest such proceeds in money market funds or other
short-term, investment grade, interest bearing securities.
As of March 31, 1998, the outstanding balance under the Company's current
revolving credit facility consisted of $10.0 million, bearing interest at the
prime rate of Bank Leumi Le-Israel B.M. (which prime rate was 8.5% as of March
31, 1998) and $18.6 million bearing interest at 1.0% above such prime rate, and
in each case payable on June 30, 1998. The Company has received a commitment
letter for a new $105.0 million revolving credit facility, and, prior to the
consummation of the Offering, the Company will use a portion of the funds
available thereunder to (i) repay all outstanding amounts under, and terminate,
its current credit facility and (ii) repay in full its shareholder
indebtedness. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources." The Company will
use the remaining available funds under its new credit facility to finance
working capital requirements. See "Certain Transactions."
Indebtedness of the Company's Hong Kong subsidiaries to be repaid consists
of $8.2 million bearing interest at 1.0% above the prime rate of NationsBank,
National Association (South) (which prime rate was 8.5% as of March 31, 1998),
$6.2 million of which is payable in October 2003 and $2.0 million of which is
payable in 24 equal quarterly installments from 1998 through 2003.
Joel Newman, the Company's Chairman, Chief Executive Officer and
President, has agreed with the Company to use a portion of the net proceeds
from his sale of Common Stock in the Offering to repay in full an approximately
$271,000 loan made by the Company to him. The loan bears interest at 7.0% per
annum, is unsecured and is payable on demand. Windmere has agreed with the
Company to use a portion of the net proceeds from its sale of Common Stock in
the Offering to repay in full its 8.0% promissory note due April 15, 2001 in
the principal amount of $2.0 million, payable to the Company. See
"Capitalization." Windmere issued such promissory note to the Company in
consideration for its subscription for Common Stock in April 1996. See "Certain
Transactions" and "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company presently intends to retain all earnings, if any, for the
operation and development of its business and does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of cash dividends will be at the discretion of
the Board of Directors and will depend on a number of factors, including future
earnings, capital requirements, the financial condition and prospects of the
Company, any restrictions under credit agreements existing from time to time,
and such other factors as the Company's Board of Directors may deem relevant.
In addition, the Company's new credit facility will contain covenants that
restrict the Company from making certain capital and other distributions.
The Company has invested, and intends to continue to invest, the earnings
of its foreign subsidiaries in foreign operations indefinitely, rather than
distribute them to the Company. As a result, U.S. income taxes have not been
provided for on such undistributed earnings. At December 31, 1996 and 1997, the
cumulative amount of undistributed earnings on which the Company had not
recognized United States income taxes was approximately $2.2 million and $7.5
million, respectively.
17
<PAGE>
CAPITALIZATION
The following table sets forth the borrowings under lines of credit,
current portion of long-term debt and capitalization of the Company as of
December 31, 1997 and as adjusted to reflect the net proceeds from the sale by
the Company of shares of Common Stock offered hereby (at an assumed
offering price of $ per share (the midpoint of the range of estimated
offering prices set forth on the cover page hereof) and after deducting
underwriting discounts and commissions and estimated offering expenses), and
the application of the estimated net proceeds therefrom as described under "Use
of Proceeds." This table should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included elsewhere in this
Prospectus. See also "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
----------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Borrowing under line of credit ............................................... $ 21,796 $
Current portion of notes payable to affiliate ................................ 412
Notes payable to shareholders ................................................ 7,174
--------
Total short-term debt ........................................................ $ 29,382 $
Long-term debt:
Notes payable to affiliate, long-term portion ................................ $ 7,785 $
-------- ----
Shareholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued
and outstanding ............................................................ -- --
Common stock, $0.01 par value; 50,000,000 shares authorized, 10,000,000
shares outstanding; shares outstanding pro forma as adjusted(2) ............ 100
Additional paid-in capital ................................................... 9,900
Promissory notes due on purchase of Common Stock(3) .......................... (5,000) --
Retained earnings ............................................................. 7,285
--------
Total shareholders' equity .................................................. 12,285
--------
Total capitalization ........................................................ $ 20,070 $
======== ========
</TABLE>
- ----------------
(1) Pro forma adjustment reflects the payment of certain share subscription
receivables. See note (3) below.
(2) Does not include: (i) an aggregate of 649,000 shares of Common Stock
reserved for issuance upon exercise of outstanding options under the Plan
and (ii) an aggregate of 351,000 shares of Common Stock reserved for
issuance upon exercise of options available for grant under the Plan. See
"Management--Stock Option Plan" and "Description of Capital Stock--Options
to Purchase Common Stock."
(3) Represents certain share subscription receivables, consisting of promissory
notes in the aggregate principal amount of $5.0 million issued to the
Company by Windmere as consideration for the purchase of Common Stock. See
"Certain Transactions." One promissory note, in the principal amount of
$3.0 million, became due on April 15, 1998, and $2.5 million of the
principal amount has been repaid (with the maturity extended to June 1,
1998 for the remaining $500,000 principal amount), and Windmere has agreed
to repay in full the other promissory note, in the principal amount of
$2.0 million, with a portion of the net proceeds to Windmere from the sale
of Common Stock in the Offering. See "Use of Proceeds" and "Principal and
Selling Shareholders."
18
<PAGE>
DILUTION
Purchasers of Common Stock offered hereby will experience an immediate and
substantial dilution in the net tangible book value of the Common Stock from
the initial public offering price. At December 31, 1997, the net tangible book
value of the Company was $8.6 million, or $.86 per share. Net tangible book
value per share is determined by dividing the Company's net tangible book value
(tangible assets less total liabilities), by the number of shares of Common
Stock outstanding. Without taking into account any changes in net tangible book
value after December 31, 1997, other than to give effect to (i) the issuance
and sale of the shares of Common Stock offered by the Company hereby (at
an assumed initial public offering price of $ per share, the midpoint of
the range of estimated offering prices set forth on the cover page hereof)
after deducting underwriting discounts and commissions and estimated offering
expenses to be paid by the Company and (ii) the application of the net proceeds
to repay indebtedness as set forth in "Use of Proceeds," the net tangible book
value of the Company (assuming payment in full of certain share subscription
receivables, see note (a) below and "Certain Transactions") would have been
$ or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing shareholders and an
immediate dilution in net tangible book value of $ per share to new
investors purchasing shares of Common Stock in the Offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ................................. $
Net tangible book value per share at December 31, 1997(1) ..................... $ .86
Increase in net tangible book value per share attributable to new investors ...
Pro forma net tangible book value per share after the Offering ..................
Dilution per share to new investors ............................................. $
========
</TABLE>
- ----------------
(1) Does not include: (i) an aggregate of 649,000 shares of Common Stock
reserved for issuance upon exercise of outstanding options under the Plan
and (ii) an aggregate of 351,000 shares of Common Stock reserved for
issuance upon exercise of options available for grant under the Plan. To
the extent that such options are eventually exercised, there may be
further dilution to new investors. See "Management--Stock Option Plan,"
"Description of Capital Stock--Options to Purchase Common Stock" and
"Shares Eligible for Future Sale." Assuming the Underwriters'
over-allotment option is exercised in full, existing shareholders will
hold shares, or % of the total number of shares outstanding after the
Offering, and the number of shares held by new investors will increase by
shares to shares, or % of the total shares of Common Stock
outstanding after the Offering. See "Principal and Selling Shareholders."
The following table summarizes as of December 31, 1997, the difference
between the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by existing
shareholders and new investors purchasing shares in this Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(a) ......... % $ % $
New investors ....................
Total .......................... 100.0% 100.0%
===== =====
</TABLE>
- ----------------
(a) Assuming payment in full of certain share subscription receivables,
consisting of promissory notes in the aggregate principal amount of $5.0
million issued to the Company by Windmere as consideration for the
purchase of Common Stock. See "Certain Transactions." One promissory note,
in the principal amount of $3.0 million, became due on April 15, 1998, and
$2.5 million of the principal amount has been repaid (with the maturity
extended to June 1, 1998 for the remaining $500,000 principal amount) ,
and Windmere has agreed to repay in full the other promissory note, in the
principal amount of $2.0 million, with a portion of the net proceeds to
Windmere from the sale of Common Stock in the Offering. See "Use of
Proceeds" and "Principal and Selling Shareholders."
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following Selected Consolidated Financial Data for the years ended
December 31, 1995, 1996 and 1997 and as of December 31, 1995, 1996 and 1997 are
derived from the Consolidated Financial Statements of the Company, which have
been audited by Ernst & Young LLP, independent auditors, except for the
financial statements of Durable Electronics Industries Limited, a consolidated
subsidiary of the Company, which were audited by Grant Thornton, independent
auditors. The following Selected Consolidated Financial Data for the years
ended December 31, 1993 and 1994 and as of December 31, 1993 and 1994 present
the combination of the financial statements of the Company's predecessors,
which financial statements have been audited by a nationally-recognized firm of
independent certified public accountants. The Selected Consolidated Financial
Data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company and the related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales ................................... $ 9,228 $ 9,490 $ 13,353 $ 39,060 $ 208,417
Cost of products sold ....................... 7,602 8,104 11,993 35,172 186,433
----------- ----------- ----------- ----------- -----------
Gross profit ................................ 1,626 1,386 1,360 3,888 21,984
Selling expenses(1) ......................... 476 618 846 1,285 10,533
General and administrative expenses ......... 690 791 1,155 1,842 4,598
Write-off of advances to affiliate .......... -- -- -- 980 --
----------- ----------- ----------- ----------- -----------
Total expenses .............................. 1,166 1,409 2,001 4,107 15,131
Income (loss) from operations ............... 460 (23) (641) (219) 6,853
Other (income) expense:
Interest expense ........................... 33 88 307 201 1,763
Interest and other income .................. (207) (117) (197) (587) (581)
----------- ----------- ----------- ----------- -----------
Total other (income) expense ................ (174) (29) 110 (386) 1,182
Income (loss) before income taxes ........... 634 6 (751) 167 5,671
Income tax benefit .......................... -- -- -- (135) (351)
----------- ----------- ----------- ----------- -----------
Net income (loss) ........................... $ 634 $ 6 $ (751) $ 302 $ 6,022
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic ...................................... $ .06 $ -- $ (.08) $ .03 $ .60
Diluted .................................... $ .06 $ -- $ (.08) $ .03 $ .57
Weighted average number of common
shares outstanding:
Basic ...................................... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Diluted(2) ................................. 10,000,000 10,000,000 10,000,000 10,000,000 10,508,159
AS OF DECEMBER 31,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------ ------------ ----------- ----------- -----------
BALANCE SHEET DATA:
Cash and cash equivalents ................... $ 1,432 $ 1,877 $ 434 $ 2,672 $ 2,031
Current assets .............................. 2,576 6,158 5,318 9,804 62,673
Total assets ................................ 2,800 6,321 5,492 10,372 68,593
Total debt .................................. 875 3,438 3,881 28 37,167
Total shareholders' equity .................. 1,706 1,712 960 6,263 12,285
</TABLE>
- ----------------
(1) Selling expenses in 1995, 1996 and 1997 included freight costs of $49,000,
$20,000 and $4.5 million, respectively. Approximately $4.3 million of such
freight costs in 1997 were due primarily to the Company's decision to
airfreight products to customers during the 1997 holiday season. The
additional airfreight costs resulted mainly from delays in bringing the
Company's PRC manufacturing facility to required production levels.
(2) Includes the impact of 649,000 shares of Common Stock issuable upon the
exercise of outstanding stock options granted under the Company's 1997
Stock Option Plan. See Note 10 to the Company's Consolidated Financial
Statements included elsewhere in this Prospectus.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION ON THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW AND HIGHLIGHTS
The Company derives substantially all of its revenues from sales of
consumer electronic products, including audio, video and telecommunications
products, such as televisions, VCRs, home audio products and telephones, as
well as portable microwave ovens. The Company currently offers products under
licensed and owned brand names, including White-Westinghouse, Admiral, Philco,
Craig and Newtech, and also under private labels. The Company sells its
products to mass merchandisers, including Kmart and Wal-Mart, and to other
retailers, including Rite-Aid, Zellers and Ames.
Net sales represent gross sales after product returns and warranty claims.
For 1995, 1996, and 1997, product returns approximated 3.8%, 0.8%, and 1.6%,
respectively, of gross sales. In 1995, 1996 and 1997, approximately 97.0%,
83.0% and 75.0%, respectively, of the Company's gross sales were made under net
sale arrangements, whereby the Company's customers are responsible for product
returns, which cannot be returned to the Company. The Company plans to maintain
or increase the percentage of sales that are on a net basis, but there can be
no assurance that the Company will be successful in maintaining or increasing
such percentage. Any increase in the rate of product returns and warranty
claims would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's revenues are generated principally from three sources:
(i) DOMESTIC SALES. Domestic sales are made to customers located in the
United States and Canada from the Company's inventories maintained at U.S.
warehouse facilities. The Company's strategy of selling out of U.S. warehouses
enables it to provide timely delivery. The Company purchases products overseas
for its own account and warehouses the products in public warehouses in Los
Angeles, California, Memphis, Tennessee, Little Rock, Arkansas, and Miami,
Florida, and in warehouse space at its main office in Miami, Florida. The
Company is responsible for costs of shipping, insurance, customs clearance and
duties, storage and distribution related to such warehouse products and,
therefore, domestic sales command higher sales prices than import sales.
Domestic sales comprised approximately 36% of the Company's total sales in
1997.
(ii) IMPORT SALES. Import sales are made by delivering products FOB
shipping point. Import sales are made to customers located within or outside
the United States who pay pursuant to their own international, irrevocable,
transferable letters of credit or on open credit terms with the Company. The
Company has the right to draw against the customer's letter of credit, if any,
once the products are delivered to the port of embarkation and the appropriate
documentation has been presented to the issuing bank within the time periods
established by the letter of credit. Import sales comprised approximately 26%
of the Company's total sales in 1997.
(iii) THIRD-PARTY MANUFACTURER SALES. Third-party manufacturer sales are
made in certain circumstances under the Kmart Agreement pursuant to which the
Company appointed Kmart as the exclusive "discount department store" in the
United States to market and sell certain products under the White-Westinghouse
Trademark. See "Business--Brand Portfolio--White-Westinghouse" and "--Strategic
Alliances." Under the terms of the Kmart Agreement, the Company supplies Kmart,
either through the Company or through other manufacturers, with a broad range
of audio, video and telecommunications products. Kmart has the right to procure
the manufacture of products from other manufacturers under the
White-Westinghouse Trademark on behalf of the Company. In such cases, Kmart has
the option of paying the purchase price to third-party manufacturers directly
or making such payment to the Company, in which case the Company pays the
third-party manufacturers. In addition,
21
<PAGE>
Kmart pays the Company a percentage of such purchase price. In the event that
Kmart fails to pay a third-party manufacturer, the Company must make such
payment. Because the Company is responsible for payment to third-party
manufacturers under the Kmart Agreement, the Company records the price paid to
third-party manufacturers plus the percentage payable to the Company as revenue
and records the price paid to third-party manufacturers as cost of products
sold. Gross profit margins on these sales are typically lower than those
resulting from domestic or import sales. Third-party manufacturer sales
comprised approximately 38% of the Company's total sales in 1997.
Cost of products sold includes both the cost of goods purchased from
suppliers and manufacturing costs associated with the Company's PRC
manufacturing facility. The Company's PRC manufacturing facility accounted for
approximately 7.1% of the Company's product supply in 1997. The Company expects
to source a higher percentage of its products from this facility in 1998. Cost
of products sold also includes freight and duties for domestic sales. Included
in cost of products sold are product design and development costs. The
Company's product design and development activities generally involve the
modification and application of available technologies. Product design and
development costs are those costs typically associated with the Company's
cosmetic and feature design and testing of its products. The Company's product
design and development expenditures were approximately $220,000, $359,000 and
$727,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
The Company's selling expenses are composed of both variable expenses,
which generally correlate to sales levels, such as commissions, freight and
royalty expenses, and non-variable expenses, including customary selling
expenses and the cost of attendance at the annual Consumer Electronics Show and
other trade shows.
General and administrative expenses include office and warehouse space and
administrative payroll, among other customary general and administrative
expenses.
The Company attempts to order products and maintain inventory controls to
minimize the costs and risks of inventory obsolescence and the retention of
significant inventories, both of which result in financing and other costs.
This inventory management strategy is frequently difficult to implement. Such
difficulty is increased by the relatively long product development and ordering
cycle and the unpredictability of consumer demand. Maintaining inventory levels
to meet normal demands throughout the year is critical, given the Company's
capital requirements and limitations.
The Company's earnings in 1997 were from foreign operations where
generally the Company is not required to pay income taxes. U.S. income taxes
have not been provided on the undistributed earnings of these foreign
operations because the Company intends to reinvest these earnings in foreign
operations indefinitely.
The Company effected a 10,000-for-one stock split as of April 3, 1998 in
connection with the merger with and into the Company of one of its affiliates,
resulting in 10,000,000 shares of Common Stock outstanding.
22
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales ................................... 100.0% 100.0% 100.0%
Cost of products sold ....................... 89.8 90.0 89.5
----- ----- -----
Gross profit ................................ 10.2 10.0 10.5
Selling expenses ............................ 6.4 3.3 5.1
General and administrative expenses ......... 8.6 4.7 2.2
Write-off of advances to affiliate .......... 0.0 2.5 0.0
----- ----- -----
Income (loss) from operations ............... ( 4.8) ( 0.5) 3.2
Other (income) expense:
Interest expense ............................ 2.3 0.5 0.8
Interest and other income ................... ( 1.5) ( 1.5) ( 0.3)
----- ----- -----
Income (loss) before income taxes ........... ( 5.6) 0.5 2.7
Income tax benefit .......................... 0.0 ( 0.3) ( 0.2)
----- ----- -----
Net income (loss) ........................... ( 5.6)% 0.8% 2.9%
===== ===== =====
</TABLE>
1997 COMPARED TO 1996
NET SALES. Net sales increased $169.3 million, or 433.6%, from $39.1
million in 1996 to $208.4 million in 1997. During 1997, 78.4%, 5.1% and 16.6%
of sales were attributable to the White-Westinghouse, Admiral and Newtech
brands, respectively. The White-Westinghouse brand showed the largest increase
from $13.6 million in 1996 to $163.5 million in 1997, primarily due to the
increase in sales to Kmart during 1997 as a result of the Kmart Agreement
entered into in January 1997. In September 1997, the Company obtained a license
to sell portable microwave ovens in the United States and Canada under the
Philco brand name, and in December 1997 the Company acquired the Craig
trademark.
COST OF PRODUCTS SOLD AND GROSS PROFIT. Cost of products sold for 1997
increased $151.2 million, or 430.1%, from $35.2 million in 1996 to $186.4
million in 1997, primarily due to the increase in the Company's net sales as a
result of the agreement entered into with Kmart in January 1997. Gross profit
as a percentage of net sales increased from 10.0% in 1996 to 10.5% in 1997. The
slight improvement was a result of higher audio sales in 1997 ($66.6 million)
compared to 1996 ($29.8 million) which on average command higher gross margins
than video and third-party sales. This increase was partially offset by
third-party sales in 1997 ($79.1 million) which on average have lower gross
margins than audio and video sales. The Company had no third-party sales in
1996.
SELLING EXPENSES. Selling expenses for 1997 increased $9.2 million, or
719.7%, to $10.5 million, compared to $1.3 million in 1996. Approximately $4.5
million of such increase was due to freight costs. The Company incurred
approximately $4.3 million in additional freight costs due primarily to its
decision to airfreight products to customers during the 1997 holiday season.
The additional airfreight costs resulted mainly from delays in bringing
Company's PRC facility to required production levels. Royalty expenses for 1997
increased by $2.6 million, or 756.3%, from $0.3 million in 1996 to $2.9 million
in 1997 as a result of the increase in sales of branded items on which
royalties are payable.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $2.8 million, or 149.5%, from $1.8 million in 1996 to $4.6 million in
1997. This increase was primarily attributable to an increase in salary expense
of $1.1 million, or 132.0%, from $0.8 million in 1996 to $1.9 million in 1997
due to an increase in the number of employees as a result of the growth in
operations.
Total selling, general and administrative expenses as a percentage of net
sales decreased from 8.0% in 1996 to 7.3% in 1997 (5.1% in 1997 excluding the
additional freight costs discussed above).
WRITE-OFF OF ADVANCES TO AFFILIATE. In 1996, the Company wrote off $1.0
million due from Newtech do Brazil, an affiliate of the Company which closed
its operations.
23
<PAGE>
INTEREST EXPENSE. Interest expense for 1997 increased $1.6 million, or
774.9%, to $1.8 million, compared to $0.2 million in 1996. The increase in 1997
was primarily the result of increased borrowings to finance the Company's
expansion in 1997.
INCOME TAX BENEFIT. The benefit for income taxes increased from a benefit
of $0.1 million in 1996 to a benefit of $0.4 million in 1997 as a result of
losses incurred during 1997 by the Company's U.S. subsidiary. The Company's
earnings in 1997 were from foreign operations where generally the Company is
not required to pay income taxes. U.S. income taxes have not been provided on
the undistributed earnings of these foreign operations because the Company
intends to reinvest these earnings in foreign operations indefinitely.
1996 COMPARED TO 1995
NET SALES. Net sales increased $25.7 million, or 192.5%, from $13.4
million in 1995 to $39.1 million in 1996. During 1996, 62.9%, 34.8% and 2.3% of
net sales were attributable to the Newtech, White-Westinghouse and Admiral
brands, respectively. The Newtech brand showed the largest increase from $9.7
million in 1995 to $24.6 million in 1996. This increase was mainly attributable
to sales to Wal-Mart.
COST OF PRODUCTS SOLD. Cost of products sold for 1996 increased $23.2
million, or 193.3%, from $12.0 million in 1995 to $35.2 million in 1996. The
increase in cost of products sold was due to increases in the Company's net
sales.
SELLING EXPENSES. Selling expenses increased approximately $0.5 million,
or 52.0%, from $0.8 million in 1995 to $1.3 million in 1996. This increase was
primarily attributable to an increase in royalties of $0.3 million as a result
of sales of White-Westinghouse branded products.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.6 million, or 59.5%, from $1.2 million in 1995 to $1.8 million in
1996. This increase was primarily attributable to an increase in salary expense
of $0.3 million, or 68.5%, from $0.5 million in 1995 to $0.8 million in 1996
due to an increase in the number of employees as a result of growth in
operations.
Total selling, general and administrative expenses as a percentage of net
sales decreased from 15.0% in 1995 to 8.0% in 1996.
INTEREST EXPENSE. Interest expense decreased slightly from $0.3 million in
1995 to $0.2 million in 1996, primarily due to decreased borrowings.
INTEREST AND OTHER INCOME. Interest and other income increased $0.4
million from $0.2 million in 1995 to $0.6 million in 1996 as a result of
interest income earned by the Company on the promissory notes issued by
Windmere as part of its acquisition of 50% of the Company's stock.
24
<PAGE>
QUARTERLY FINANCIAL DATA
The following table sets forth certain unaudited quarterly statement of
operations data for each of the Company's last four quarters. This data has
been prepared by the Company on a basis consistent with the Company's audited
financial statements and includes all adjustments (consisting of normal and
recurring adjustments) that management considers necessary for a fair
presentation of the data. These quarterly results are not necessarily
indicative of future results of operations. This data should be read in
conjunction with the Consolidated Financial Statements and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
1997 QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
---------- ----------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales ................................. $ 8,447 $ 27,941 $ 84,777 $ 87,252
Gross profit .............................. 1,210 3,372 7,822 9,580
Income (loss) from operations ............. (201) 1,877 4,172 1,005(1)
Income (loss) before income taxes ......... (131) 1,919 3,761 123
Net income ................................ 70 1,480 3,043 1,429
</TABLE>
- ----------------
(1) Includes approximately $4.3 million of additional freight costs due
primarily to the Company's decision to airfreight products to customers
during 1997 holiday season. The additional freight costs resulted mainly
from delays in bringing the Company's PRC facility to required production
levels.
SEASONALITY
The Company's business is highly seasonal, with operating results varying
substantially from quarter to quarter. Approximately 82.5% of the Company's
sales in 1997 took place in the third and fourth quarters of the calendar year.
In order to facilitate sales during the year-end buying season, the Company
must make financial commitments and pay for product inventory and certain
expenses well in advance of any sales of such inventory. Typically, the Company
expects to experience lower profitability or losses in the first and second
quarters of each year for this reason. As a result, if the timing or amount of
customer orders fall below the Company's expectations, operating results and
cash flows would be materially adversely affected because expenses based on
these expectations will have already been incurred.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has met its operating cash needs by utilizing
borrowings from shareholders and credit arrangements.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash used by operating
activities was $27.4 million for the twelve months ended December 31, 1997.
During the twelve months ended December 31, 1996, operating activities provided
net cash of $1.5 million. Working capital changes utilized $33.7 million in
cash in 1997, primarily due to increases in accounts receivable and inventory,
partially offset by an increase in accounts payable and accrued expenses. These
increases resulted from a general increase in the Company's business activity.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing
activities was $2.2 million and $0.4 million for the twelve months ended
December 31, 1997 and 1996, respectively. Substantially all of the $2.2 million
in 1997 was attributable to the purchase of property and equipment for the
Company's PRC manufacturing facility and the acquisition of the Craig
trademark.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash provided by financing
activities was $28.9 million and $1.1 million for the twelve months ended
December 31, 1997 and 1996, respectively. The increase in 1997 was primarily
due to increased borrowings under the Company's credit facility.
The Company's current credit facility is a $37.0 million revolving credit
facility with Bank Leumi Le-Israel B.M., Comerica Bank and the National Bank of
Canada (the "Banks") that includes sub-facilities for the issuance of standby
letters of credit and trade letters of credit and the creation of
25
<PAGE>
bankers' acceptances. The credit facility matures on June 30, 1998 and is
secured by substantially all of the Company's assets. As of December 31, 1997,
approximately $21.8 million was outstanding under direct borrowings, and
outstanding letters of credit and bankers acceptances totaled approximately
$6.2 million. The funds available under the credit facility are for the
acquisition, manufacture and shipment of inventory. The maximum aggregate
amount of borrowings and outstanding letters of credit and bankers acceptances
varies with the time of year. Borrowings and outstanding letters of credit and
bankers acceptances of up to $32.0 million at any one time are permitted during
May through October. During November, December and January through April,
borrowings and outstanding letters of credit and bankers acceptances may not
exceed $14.0 million at any one time (except that during November and December
of 1997 and January through April 7, 1998, such amounts were permitted up to
$37.0 million). Under the facility, the Company is required to comply with
certain financial covenants, including minimum tangible net worth. Availability
under the credit facility is based on a formula of eligible receivables,
inventories and letters of credit issued by the Company. Availability based on
accounts receivable ranges from 40% for unsecured foreign accounts receivable
to 90% for accounts receivable from certain customers that are secured by a
standby letter of credit. As of December 31, 1997, the Company had an
additional $7.5 million available under the credit facility. Advances under the
revolving credit facility bear interest at the prime rate of Bank Leumi
Le-Israel B.M. for amounts under $10.0 million and prime plus 1.0% for any
excess.
The Company's obligations under the credit facility are guaranteed by Joel
Newman, the Company's Chairman of the Board of Directors, Chief Executive
Officer, President and 47.5% shareholder, up to a limit of $3.0 million. The
Company's obligations under the credit facility are also guaranteed by
Windmere-Durable up to a limit of $9.0 million. Windmere, a wholly-owned
subsidiary of Windmere-Durable, is a 47.5% shareholder of the Company. See
"Certain Transactions."
On April 14, 1998 the Company received a commitment letter from the
National Bank of Canada for a $105.0 million revolving credit facility to repay
all outstanding amounts under, and terminate, its current credit facility and
all of its shareholder indebtedness and to finance working capital
requirements, including trade finance activities. The new facility will include
a $2.0 million sub-facility for the issuance of standby letters of credit and a
$10.0 million sub-facility for the creation of bankers' acceptances. The new
credit facility will have a term of three years and will be secured by
substantially all of the Company's assets. Under the facility the Company will
be required to comply with certain financial covenants, including a debt to
tangible net worth ratio (the "Leverage Ratio"), a current ratio, an interest
coverage ratio and a minimum tangible net worth and will be subject to
limitations on capital expenditures and capital and other distributions.
Availability under the credit facility will be based on a formula of eligible
receivables, inventories and letters of credit issued by the Company.
Availability based on accounts receivable will range from 40% for unsecured
foreign accounts receivable to 90% for accounts receivable from certain
customers that are secured by a standby letter of credit. Interest on advances
under the revolving credit will be based on the Company's Leverage Ratio. If
the Leverage Ratio is less than 2.0 to 1.0, then the Company may select the
National Bank of Canada's prime rate or LIBOR plus 2.15%. If the Leverage Ratio
is equal to or greater than 2.0 to 1.0, then the Company may select such prime
rate or LIBOR plus 2.4%. The Company's obligations under the new credit
facility will not be guaranteed by either Mr. Newman or Windmere-Durable.
Prior to the consummation of the Offering, the Company will use a portion
of the funds available under its new credit facility to repay in full (i) a
$2.0 million working capital loan from Joel Newman, plus accrued and unpaid
interest thereon, and (ii) an aggregate of approximately $5.0 million in
working capital loans from Windmere, plus accrued and unpaid interest thereon.
See "Certain Transactions."
The Company anticipates that the net proceeds from the Offering, cash
provided by operations and borrowings under credit facilities will be
sufficient to meet its liquidity requirements for the next 18 to 24 months. In
the event that the Company consummates an acquisition, its capital requirements
could increase; however, there are no present understandings, commitments or
agreements with respect to any future acquisition.
26
<PAGE>
YEAR 2000 ISSUES. The Company has implemented a Year 2000 program to
ensure that its computer systems and applications will function properly beyond
1999. The Company believes that it has allocated adequate resources for this
purpose and expects its Year 2000 date conversion program to be completed
successfully on a timely basis. Although the ability of third parties with whom
the Company transacts business to address their Year 2000 issues is outside the
Company's control, the Company is discussing with its vendors and customers the
possibility of any interface difficulties which may affect the Company. The
Company currently does not expect the costs necessary to address this matter to
be material to its financial condition, results of operations or cash flows.
INFLATION
Inflation has not had a significant impact on the Company in the past
three years nor does the Company expect inflation to have a significant impact
in the foreseeable future.
27
<PAGE>
BUSINESS
GENERAL
Newtech Electronics Industries, Inc., established in 1990, designs,
sources, manufactures, and markets high-quality, value-priced brand-name
consumer electronic products. The Company offers a broad line of audio, video
and telecommunications products and selected home appliances, including
televisions, VCRs, home audio systems, CD players, cassette players, telephones
and portable microwave ovens. The Company's strategy has been to build a
portfolio of licensed and owned brand names, including White-Westinghouse,
Admiral, Philco, Craig, and Newtech. By having a portfolio of brand names, the
Company is able to offer retailers proprietary and flexible merchandising
programs. The Company currently sells its products to 15 retailers which
operate over 14,000 retail outlets in the United States and Canada, including
mass merchandisers such as Kmart and Wal-Mart, and other retailers, including
Rite-Aid, Zellers and Ames. In addition, the Company sells its products to
customers in Mexico, the Caribbean and Central and South America. In January
1997, the Company entered into a long-term strategic alliance with Kmart,
pursuant to which the Company appointed Kmart as the exclusive "discount
department store" to market and sell a broad range of audio, video and
telecommunications products in the United States under the White-Westinghouse
Trademark. The agreement provides for minimum purchases by Kmart of a total of
$1.1 billion of White-Westinghouse brand consumer electronic products in
specified yearly increments over a seven-and-a-half-year period. The Company
believes that this strategic alliance provides a platform for significant
growth. See "-- Strategic Alliances." In large part due to this alliance, from
1996 to 1997, net sales increased 433.6% to $208.4 million from $39.1 million.
The Company plans to grow its business by expanding its customer base,
acquiring and licensing additional brand names, expanding the territories and
product lines available under its existing licenses, and increasing penetration
of existing distribution channels.
THE CONSUMER ELECTRONICS INDUSTRY
The consumer electronics industry is large and diverse, encompassing a
wide variety of technologies and products, including televisions, VCRs, audio
systems, CD players, cassette players and telephones. CEMA estimates that total
factory sales of video products, home and portable audio products, mobile
electronics and telephones and telephone answering devices to the U.S. market
in 1997 was approximately $31.8 billion. U.S. sales in 1997 included
approximately $8.4 billion of televisions (including TV/VCR combinations), $2.7
billion of VCRs, $1.7 billion of audio systems, $4.3 billion of CD players
(including portable and home CD players), $0.3 billion of cassette players and
$5.9 billion of telephones and telephone answering devices. (These figures
include a number of video products, home and portable audio products, mobile
electronics and telephones and telephone answering devices that the Company
does not offer.) Industry participants have traditionally offered such
merchandise using three principal branding strategies and corresponding price
points: (i) premium brands, such as Sony and Panasonic; (ii) mass-market
brands, such as GE and Magnavox; and (iii) value-priced brands, such as
White-Westinghouse and GPX.
STRATEGY
The Company plans to establish itself as the leading supplier of high
quality, value-priced consumer electronic products and selected household
appliances. The Company believes that its portfolio of well-recognized brand
names, superior design capabilities, flexible and low-cost sourcing and
manufacturing and responsive after-sales service provide it with competitive
advantages in achieving this goal.
OPERATING STRATEGY. The Company's operating strategy is based on the
following key elements:
/bullet/ OFFER A PORTFOLIO OF WELL-RECOGNIZED BRAND NAMES. The Company
believes that its strategy of offering a portfolio of well-recognized
brand names enables retailers to differentiate themselves in the
marketplace through proprietary and flexible merchandising programs. For
example, the
28
<PAGE>
Company's recent strategic alliance with Kmart designates Kmart as the
exclusive "discount department store" to market and sell a range of audio,
video and telecommunications products in the United States under the
White-Westinghouse Trademark.
/bullet/ OFFER HIGH-QUALITY PRODUCTS OF SUPERIOR DESIGN. The Company has
assembled an in-house design and engineering team with significant
industry experience and expertise. The Company believes that the superior
design and style of its products distinguish them from those of its
competitors in the value-priced category and help drive consumer
purchasing decisions. In addition, the Company highlights the design and
style features of its products with detailed descriptions and
illustrations on packaging, which the Company believes further
distinguishes its products from those of its competitors.
/bullet/ MAINTAIN LOW-COST, FLEXIBLE SOURCING AND MANUFACTURING
CAPABILITIES. The Company's products are manufactured both at the
Company's facility in the PRC and at various third-party facilities
throughout the world. The Company believes that its manufacturing facility
allows flexibility in sourcing products and a better understanding of
manufacturing cost and time parameters, which provide the Company with
leverage in negotiating with outside manufacturers.
/bullet/ PROVIDE RESPONSIVE AFTER-SALES SERVICE. The Company believes that
after-sales service is an important competitive factor in the consumer
electronics industry and that its model of responsive after-sales service
is superior to others in the value-priced segment. This model is based on
a toll-free interactive phone system that directs callers to independent
local service centers staffed by in-house and outsourced personnel who
provide basic troubleshooting and advanced technical support, thus
enabling the Company to provide responsive service at a reasonable cost to
the Company.
GROWTH STRATEGY. The Company plans to continue to grow its business using
a strategy comprised of the following principal elements:
/bullet/ EXPAND ITS CUSTOMER BASE. The Company believes that it has
significant opportunities to increase the number of outlets at which its
products are sold. For example, in the second half of 1997, the Company
began selling products to Ames, Bradlees, Musicland and Heilig Meyers.
Also, the Company has recently received its first purchase order from
Zellers, a division of Hudson Bay Company, one of the largest retailers in
Canada. The Company plans to pursue additional proprietary strategic
alliances similar to its arrangement with Kmart, as well as other
merchandising programs.
/bullet/ ACQUIRE AND LICENSE ADDITIONAL BRAND NAMES. The Company plans to
continue to acquire and license additional brand names in order to
maximize its ability to provide retailers with proprietary and flexible
merchandising programs. Towards this end, in September 1997, the Company
obtained a license to sell portable microwave ovens in the United States
and Canada under the Philco brand name, the Company's first product
offering outside of the consumer electronics industry. In addition, in
December 1997, the Company acquired the Craig trademark, a well-recognized
brand name in the consumer electronics industry, under which the Company
sells a broad range of its audio, video and telecommunications products,
as well as portable microwave ovens.
/bullet/ EXPAND THE SCOPE OF EXISTING BRANDS. The Company plans to continue
to negotiate for the expansion of the territories and product lines under
its existing brand-name licenses. In September 1997, the Company secured
the right to add portable microwave ovens to the consumer electronic
products it sells under the White-Westinghouse Trademark in the United
States and Canada. In addition, in December 1997, the Company expanded its
marketing territory for the Admiral brand name to include Mexico.
/bullet/ INCREASE PENETRATION OF EXISTSING DISTRIBUTION CHANNELS. The
Company plans to leverage its customer relationships and success in
broadening product lines and acquiring and licensing
29
<PAGE>
additional brand names to increase product sales to existing customers.
The Company believes that this strategy is responsive to the desire of
major retailers to source products through fewer vendors.
PRODUCT LINES
The Company's business consists primarily of the design, sourcing,
manufacturing and marketing of high quality televisions, VCRs, audio equipment,
mobile audio products, auto sound equipment and radios in the value-priced
segment of the consumer electronics industry, as well as high quality, value-
priced portable microwave ovens. The Company also manufactures and sells a
variety of small consumer electronic products in the value-priced segment, such
as telephones, answering machines and clock radios. In 1996 and 1997, the
Company introduced approximately 40 and 128 new models, respectively. The
Company currently offers over 200 models of consumer electronic products and
portable microwave ovens. The Company typically offers the same product,
frequently with variations in design and features, under several brand names
and treats the same or similar products offered under different brand names as
separate models. The Company's products include the following:
PRODUCTS (NUMBER OF MODELS)
<TABLE>
<CAPTION>
HOME AND PORTABLE
TVS AND VCRS (46) AUTOMOTIVE AUDIO PRODUCTS (30) AUDIO PRODUCTS (120)
- -------------------------------- -------------------------------- --------------------------------------
<S> <C> <C>
/bullet/ Portable black and /bullet/ CD player radios with /bullet/ Home audio systems with
white TVs detachable face-plates single CD player
/bullet/ Portable color TVs /bullet/ Trunk mounted /bullet/ Home audio systems with
/bullet/ Color TVs with CD changers CD changer systems
remote control /bullet/ AM/FM cassette players, /bullet/ Portable AM/FM
/bullet/ TV/VCR combinations including those with cassette systems
/bullet/ VCRs detachable face-plates /bullet/ Portable CD systems with
/bullet/ Amplifiers detachable speakers
/bullet/ Speakers /bullet/ Portable CD stereo systems
/bullet/ Portable CD changer
stereo systems
/bullet/ Personal CD players
/bullet/ Personal cassette players
TELEPHONE PRODUCTS (37) MICROWAVE OVENS: (12) /bullet/ Personal sports electronics
- -------------------------------- -------------------------------- products designed for use
/bullet/ Corded and cordless /bullet/ Microwave ovens with when exercising or traveling
telephones rotary controls /bullet/ Portable radios
/bullet/ "Feature" telephones /bullet/ Microwave ovens with /bullet/ Electronic clock radios
/bullet/ Answering machines electronic touchpad
controls /bullet/ Electronic clock radios
/bullet/ Combination telephone/ with CD players
answering machines /bullet/ Electronic clock radios with
/bullet/ Telephone clock radios cassette players
/bullet/ Hand-held microcassette
recorders
</TABLE>
30
<PAGE>
BRAND PORTFOLIO
The Company owns or licenses certain well-recognized brand names under
which it markets most of its products. These licenses are granted pursuant to
license agreements which generally provide for royalty payments based on the
value of the goods sold, minimum royalty amounts and sales of trademarked
products and generally prohibit the Company from entering into license
agreements for competing products. The key provisions of the Company's
principal license agreements are described below.
WHITE-WESTINGHOUSE
In May 1996, the Company entered into a trademark license agreement with
WCI which grants the Company the exclusive license to design, manufacture,
advertise, sell and promote consumer audio, video and telecommunications
products in the United States and Canada under the White-Westinghouse
Trademark. The initial term of the agreement is through December 31, 1998, and
may be extended at the Company's option for up to 14 one-year renewal terms
through December 31, 2012. WCI may, at its option, terminate the agreement
during a renewal term if certain minimum sales targets are not met. Pursuant to
a separate agreement entered into in September 1997, WCI granted the Company an
exclusive license to design, manufacture, advertise, sell and promote portable
microwave ovens in the United States and Canada under the White-Westinghouse
Trademark. The initial term of this agreement is through December 31, 2002 and
may be extended at the Company's option for up to six two-year renewal terms
through December 31, 2014. WCI may, at its option, terminate the agreement
during a renewal term if certain minimum sales targets are not met. See
"--Strategic Alliances."
ADMIRAL
In October 1993, the Company entered into a trademark user agreement with
Maytag Corporation ("Maytag") and its wholly-owned subsidiary, Maytag
International, Inc., which grants the Company the exclusive license to
manufacture and sell audio and video products in most countries in the
Caribbean and South and Central America under the Admiral brand name. In
January 1997, the Company obtained the right to sell such products in Mexico
under the Admiral brand name. The initial term of the agreement is through
December 31, 2003, and may be extended at the Company's option for up to two
five-year renewal terms through December 31, 2013, provided certain performance
goals have been achieved during the initial term or the first renewal term, as
the case may be.
PHILCO
In September 1997, the Company entered into a trademark license agreement
with WCI which grants the Company the exclusive license to design, manufacture,
advertise, sell and promote portable microwave ovens in the United States and
Canada under the Philco brand name. The initial term of the agreement is
through December 31, 2002, and may be extended at the Company's option for up
to six two-year renewal terms through December 31, 2014. WCI may, at its
option, terminate the agreement during a renewal term if certain minimum sales
targets are not met.
CRAIG
In December 1997, the Company purchased certain assets of Craig Consumer
Electronics, Inc. ("Craig"), consisting of the Craig trademark and a consumer
trade show booth. The Company now owns the registered trademark "Craig" and the
associated script logo. The Company sells a broad range of its audio, video and
telecommunications products, as well as portable microwave ovens, under the
Craig brand name.
NEWTECH
The Company has sold its products under the Newtech brand name since its
inception in 1990. The Company owns the registered trademark "Newtech" and the
associated script logo. See "Trademarks."
31
<PAGE>
The Company currently offers a broad range of audio and video products,
telephones and related products and portable microwave ovens under the Newtech
brand name.
STRATEGIC ALLIANCES
On January 27, 1997, the Company entered into the Kmart Agreement,
pursuant to which the Company appointed Kmart as the exclusive "discount
department store" (as defined in the Kmart Agreement) to market and sell a
broad range of audio, video and telephone products in the United States under
the White-Westinghouse Trademark. The agreement prohibits the Company from
granting the right to sell such products under the White-Westinghouse Trademark
to certain other "discount department stores," mass merchandisers and specified
retailers. The agreement does not prohibit the Company from granting the right
to sell such products outside the U.S., although the Company only has a license
to market and sell such products under the White-Westinghouse Trademark in the
U.S. and Canada. See "--Brand Portfolio--White-Westinghouse."
The Kmart Agreement provides for minimum purchases by Kmart which increase
throughout its term from $135.0 million for the 18-month period ending June 30,
1998 to $171.0 million for the 12-month period ending June 30, 2004. During
1997, Kmart purchased approximately $158.7 million of merchandise from the
Company pursuant to the Kmart Agreement, which accounted for approximately 76%
of the Company's net sales. Specified minimums apply to each of the audio,
video and telephone categories. The failure of Kmart to purchase the minimum
quantities requires the payment of 4.0% of the shortfall with respect to video
products and 5.0% for all other products. In the event that aggregate U.S.
retail sales in the consumer electronics industry for any particular category
decrease by more than 10% in any year from that sold in the prior year, Kmart
has the right to reduce the minimum purchase requirements to an amount not less
than 80% of the minimum for such period.
Kmart further has the right to procure the manufacture of products from
other manufacturers under the White-Westinghouse Trademark on behalf of the
Company, which procurements count toward its minimum purchase requirements. In
such cases, Kmart has the option of paying the purchase price to third-party
manufacturers directly or making such payment to the Company, in which case the
Company pays the third-party manufacturer. In addition, Kmart pays the Company
a percentage of such purchase price. The Kmart Agreement provides that in the
event Kmart fails to pay a third-party manufacturer, the Company must make the
payment. During 1997, Kmart purchased approximately $79.1 million of
merchandise from third parties under the Kmart Agreement. Because the Company
is responsible for payment to the third-party manufacturer, the Company records
the price paid to the third-party manufacturer plus the percentage payable to
the Company as revenue and records the price paid to the third-party
manufacturer as the cost of products sold. Gross profit margins on these sales
are typically lower than those resulting from sales of the Company's own
products. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The initial term of the Kmart Agreement is through June 30, 2004;
provided, however, that each of Kmart and the Company have the right, by
written notice given prior to June 30, 2000, to terminate the agreement without
cause any time after June 30, 2002. Should either party exercise such right,
the Company will, after July 31, 2001, have the right to sell the products
subject to the Kmart Agreement to any purchaser, including the "discount
department stores" prohibited under the agreement. Each of Kmart and the
Company further have the right to terminate the agreement without cause on June
30, 2003 and on each June 30 thereafter; in the case of the Company, such
termination requires 12 months' notice.
Kmart also has the right to terminate the agreement upon the termination
of the Salton Agreement with Kmart for the sale of kitchen housewares, personal
care products, fans, heaters and electrical air cleaners and humidifiers under
the White-Westinghouse Trademark. The termination provisions of the Salton
Agreement are substantially the same as the those of the Kmart Agreement. In
addition, Salton's license agreement with WCI for the sale of kitchen
housewares under the White-Westinghouse Trademark expires in June 1998, and
Salton's license agreement with WCI for the sale of personal care
32
<PAGE>
products, fans, heaters and electrical air cleaners and humidifiers under the
White-Westinghouse Trademark expires in December 1998. Each such license
agreement may be extended for 13 one-year periods at the option of Salton,
provided that Salton meets certain minimum sales levels. In addition, either
party may terminate such license agreements without cause on 12 months' notice
beginning in 2001. The Company has no control over the performance or
termination of the Salton Agreement with Kmart or Salton's license agreements
with WCI. Furthermore, an adverse decision in the Trademark Litigation could
result in Salton being limited in further use of the White-Westinghouse
Trademark and in termination or significant modification of the Salton
Agreement. Windmere-Durable has guaranteed the performance of both the Company
and Salton under their respective agreements with Kmart. Kmart also has the
right to terminate the Kmart Agreement on the basis of any claim which Kmart
reasonably believes impairs or would impair Kmart's ability to receive the
benefits of the Kmart Agreement, whether relating to any or all products. In
the Trademark Litigation, CBS seeks, among other things, a preliminary
injunction enjoining the Company, Salton, Windmere-Durable and WCI from using
the White-Westinghouse Trademark in connection with the sale of certain
products, including products in categories representing 42.0% of the products
sold by the Company to Kmart under the Kmart Agreement in 1997. Although the
Trademark Litigation was pending prior to the execution of the Kmart Agreement,
it is possible that the Trademark Litigation may be viewed by Kmart as a claim
which Kmart reasonably believes impairs or would impair its ability to receive
the benefits of the Kmart Agreement. See "--Legal Proceedings" and "Risk
Factors--Dependence on Kmart Agreement."
In addition to its strategic alliance with Kmart, the Company has entered
into alliances with other customers for multi-year purchases of merchandise in
exchange for exclusivity in certain territories in Mexico, the Caribbean and
Central and South America. The Company plans to enter into other similar
merchandising programs. The Company believes that such strategic alliances are
responsive to the trend for major retailers to market and sell products under
proprietary brands.
PRODUCT DESIGN AND DEVELOPMENT
Value-priced consumer electronic products typically do not have unique or
innovative technical features. Competition in this segment is therefore more
dependent on product design, visual appeal and price. As such, the Company
recognizes that superior product design provides an important competitive
advantage. The Company has assembled an in-house design and engineering team
with significant industry experience and expertise for this purpose. The
Company believes that the superior design and style of its products distinguish
them from those of its competitors in the value-priced category and help drive
consumer purchasing decisions. The Company's in-house design and engineering
team conducts research activities relating to the improvement of existing
products and the development of new products. The design and engineering team
presently consists of approximately 10 employees, including engineers, product
designers, draftsmen and product managers, whose operations are supported by
approximately six outsourced engineers, designers and draftsmen, among others.
Management believes that the enhancement and extension of the Company's
existing products and the development of new product categories have
contributed significantly to the Company's growth to date and are necessary for
the Company's continued success and growth. The Company's product design and
engineering team evaluates new ideas and seeks to develop new products and
improvements to existing products to satisfy industry requirements and changing
consumer preferences. The Company selects design and manufacturing
specifications that adapt and implement available technology and features to
satisfy its customers' requirements for quality, product mix and pricing.
Company employees work closely with both retailers and suppliers to identify
trends in consumer preferences and to generate new product ideas. During 1996
and 1997, the Company introduced approximately 40 and 128 new product models,
respectively. The Company also regularly enhances existing products by adding
new features and modernizing their design in order to maintain their visual
appeal and competitiveness.
In addition, the Company highlights the design and style features of its
products with detailed descriptions and illustrations on packaging, which the
Company believes further distinguishes its products from those of its
competitors. The Company believes that this packaging strategy makes its
33
<PAGE>
products more attractive to consumers as it facilitates an understanding of the
product features in retail locations where salespersons may not be available to
provide detailed explanations and demonstrations.
The product design and development process for products sold under
licensed brand names also involves product review by the relevant licensor for
purposes of quality control. Pursuant to the license agreements with WCI, prior
to any use of the White-Westinghouse or Philco brand names, the Company must
submit to WCI for its approval specimens of each of the Company's products
(including products supplied by third-party manufacturers under the Kmart
Agreement, see "--Strategic Alliances") and the related artwork, packaging,
advertising and promotional literature that the Company plans to use.
Thereafter, the Company must submit to WCI, at four-month intervals, production
run samples of each product. Pursuant to the license agreement with Maytag for
the Admiral brand name, the Company must submit to Maytag, upon request,
performance and failure data, as well as product samples for inspection and
testing. In addition, Maytag may from time to time inspect and test the
Company's facilities for compliance with quality standards.
SOURCING AND MANUFACTURING
The Company is responsible for the final design and manufacturing
specifications of all of its products. Actual assembly, utilizing components
specified by the Company, is either performed at the Company's PRC
manufacturing facility or is outsourced to one of approximately 30 independent
manufacturers in accordance with specifications mandated by the Company. The
Company believes that its manufacturing facility allows flexibility in sourcing
products and a better understanding of the manufacturing cost and time
parameters, providing it with leverage in negotiating with such independent
manufacturers.
The Company purchased the Hong Kong corporation that owns its PRC
manufacturing facility from a subsidiary of Windmere-Durable in November 1997.
The facility is leased from the PRC government pursuant to a lease that expires
December 31, 2001. The Company currently utilizes the facility for the assembly
of audio products. The facility is approximately 182,700 square feet and
contains 18 assembly lines and is currently operated by approximately 1,300 of
the Company's employees. The facility typically employs up to 300 additional
workers during the third and fourth quarters of the calendar year when the
substantial majority of the Company's sales typically take place and production
is highest in order to fill customer orders. In 1997, this facility accounted
for approximately 7.1% of the Company's total product supply. The Company
expects to source a higher percentage of its products from this facility in
1998. Windmere-Durable provides certain administrative services for the factory
from offices in Hong Kong for a monthly management fee of approximately
$11,800. See "Certain Transactions--Windmere."
During 1997, the Company's three largest independent manufacturers, which
are located in the PRC, Indonesia and Malaysia, respectively, supplied
approximately 36.0% of the Company's total products. The Company utilizes
additional manufacturers located in Indonesia, Malaysia, Mexico, Thailand, the
United States and the Philippines. The Company changes suppliers from time to
time as market conditions require. Substantially all of these suppliers
assemble products with components manufactured by third parties. The Company
believes that this is the standard method of operating and contracting for the
manufacture of products in the consumer electronics industry. During
production, the Company sends employees to the independent manufacturers'
facilities to monitor and facilitate timely manufacture and delivery of
products produced to the Company's specifications.
The Company considers its relationships with its independent manufacturers
and component suppliers to be good and believes that, absent extreme
circumstances affecting the supply of materials or the demand on manufacturing
time, the supply of products will be available when needed. The Company does
not maintain long-term purchase contracts with manufacturers and operates
principally on a purchase order basis. The Company believes that it is not
currently dependent on any single manufacturer for any of its products, and
that the loss of any one manufacturer would not have a long-term material
adverse effect on the Company because other independent manufacturers with
34
<PAGE>
which the Company does business, as well as its own facility, would be able to
increase production to fulfill the Company's requirements. However, the loss of
a supplier or the Company's PRC facility could, in the short-term, materially
and adversely affect the Company's business until alternative supply
arrangements could be secured.
SALES, DISTRIBUTION AND MARKETING
The Company sells its products in the United States and Canada to mass
merchandisers such as Kmart and Wal-Mart, and to other retailers, including
Rite-Aid, Zellers and Ames. In addition, the Company markets and sells its
products in Mexico, the Caribbean and South and Central America, primarily
through independent distributors.
The Company has two marketing directors, one executive director of sales
and three vice presidents of sales. Two vice presidents of sales are
responsible for sales in various regions of North America, and the third is
responsible for all sales outside North America, principally South and Central
America and the Caribbean. The Company sells its products directly to certain
customers and indirectly through independent sales organizations that are paid
commissions based on the amount of their net sales.
The Company does not undertake any direct advertising. However, the
Company's retail customers place advertisements that generally promote the
Company's brand names in newspapers and other publications, catalogs, flyers,
and by display point-of-purchase advertising. The Company markets its products
at trade shows, including the Consumer Electronics Show held in Las Vegas,
Nevada in January of each year.
CUSTOMERS
There is a limited number of potential customers that can achieve a broad
distribution of the Company's products. Moreover, the Company has been and is
highly dependent upon its largest customers and has derived and is expected to
derive a substantial percentage of its revenues from such customers. In
particular, the Company's largest customer, Kmart, accounted for approximately
76% of the Company's net sales during 1997. No other customer accounted for
more than 10% of the Company's net sales during 1997. In 1996, net sales to
each of the following customers represented more than 10% of the Company's net
sales: (i) Kmart represented 37%, (ii) Wal-Mart represented 34%, (iii) Sanyo do
Brasil represented 12%, and (iv) Family Dollar Stores represented 11%. The
Company's top five customers accounted for approximately 95% and 90% of net
sales during 1996 and 1997, respectively. The inclusion of even a single
product in sales to a particular customer can substantially increase the
percentage of the Company's sales accounted for by that customer. The Company
believes that it has developed strong relationships with its significant
customers.
PRODUCT RETURNS AND WARRANTY CLAIMS
The Company's net sales represent gross sales after product returns and
warranty claims. Product returns and warranty claims result from defective
goods, inadequate performance relative to customer expectations, improper
packaging, liberal retailer return policies and other causes which are outside
the Company's control. For 1995, 1996, and 1997, product returns and warranty
claims approximated 3.8%, 0.8%, and 1.6%, respectively, of gross sales. In
1995, 1996 and 1997, approximately 97.0%, 83.0% and 75.0%, respectively, of the
Company's gross sales were made under net sale arrangements, whereby the
Company's customers are responsible for product returns, which cannot be
returned to the Company. While the Company plans to maintain or increase the
percentage of sales that are on a net basis, there can be no assurance that the
Company will be successful in maintaining or increasing such percentage.
AFTER-SALES SERVICE
After-sales service is an important competitive factor in the consumer
electronics industry. The Company believes that its combination of dedicated
in-house personnel and flexible outsourcing
35
<PAGE>
arrangements enables it to provide responsive after-sales service at a
reasonable cost to the Company. The Company has contracted with a third party
to administer its after-sales service, including operating the toll-free phone
system and providing the technical support staff. The Company's after-sales
service is made available to customers, retailers and service centers through a
toll-free, computerized interactive phone system that (i) directs callers to
independent local service centers within their community, (ii) provides basic
troubleshooting and general product information and assistance for customers
and retailers by trained technical support staff, (iii) provides advanced
technical support to customer service centers in order to expedite customer
repairs, (iv) takes orders for parts 365 days a year, 24 hours a day, utilizing
a world-wide network of purchasing affiliates to offer competitive prices and
(v) provides service literature and handles consumer affairs calls and
complaints. The Company pays the service administrator a fee for each call
handled. The Company's after-sales service is available for both warranty
product claims and out-of-warranty product claims. Repairs covered by the
Company's 90-day warranty are billed to the Company, and out-of-warranty claims
are paid by the customer. In order to ensure the quality of after-sales
service, the Company regularly audits the service centers and phone system.
TRADEMARKS
The Company owns the United States registered trademark "Craig" and the
associated script logo. See "--Brand Portfolio--Craig." The Craig trademark has
also been registered, or a trademark application is pending, in more than 50
other countries. The Company believes that it has proprietary protection for
the Craig trademark in most foreign countries in which the Company currently
sells Craig products or plans to do so in the future. The Company owns the
United States registered trademark "Newtech" and plans to register the Newtech
trademark in the foreign countries in which the Company currently sells Newtech
products or plans to do so in the future.
REGULATION
Most of the Company's customers (as well as several state and local
authorities) require that the Company's products meet the safety standards of
the Underwriters Laboratories, Inc. The Company's telephones and clock radios
sold for use in the United States must be registered with and approved by the
FCC, and its portable microwave ovens must be registered with and approved by
the FDA. Products sold in Canada must comply with the standards of the Canadian
Standards Association. In addition, the Company's products must meet the
applicable safety standards imposed by the other countries in which they are
sold. The Company has not experienced difficulty in satisfying such standards.
The Company is also subject to numerous tariffs, duties, charges and
assessments on the import of its various products. The Company retains import
agencies and expediters to facilitate the import of its products and the
payment of these charges and duties. Although these duties and charges have not
substantially affected the Company's ability to market its products for
delivery in the United States and elsewhere, regulations affecting these
charges and duties are subject to change, which could have the effect of
increasing the cost of goods imported and sold by the Company. Currently,
because certain of the Company's products are manufactured in the PRC, the
continual designation of MFN Status for the PRC pursuant to treaties with the
United States and stable diplomatic relations with the PRC are critical to the
ongoing and continuous supply of products. Additional regulation implemented in
the United States or elsewhere could also limit the ability to manufacture,
transport, or import goods.
COMPETITION
The consumer electronics industry is extremely competitive and is
dominated by large and well-capitalized companies. The Company competes with
the entire consumer electronics industry for consumer dollars, shelf space for
products and sales support. The Company's competitors may not rely on external
financing or relationships with independent manufacturers to the same extent as
the Company. Furthermore, the Company's competitors may have cost advantages
depending on labor
36
<PAGE>
costs, currency exchange rates and other factors in the countries where their
manufacturing operations take place, relative to the countries where the
Company's products are manufactured. The Company has adopted a marketing
strategy that targets the value-priced segment of the consumer electronics
market, which is particularly price sensitive. There is competition among a
number of brands in this market segment, including Emerson and GPX. In
addition, although Magnavox, GE, Sony and Panasonic brand products are not
currently emphasized in the value-priced segment of the market, they do compete
with the Company's products for consumer dollars, shelf space and sales
support. To the extent that these brands compete directly with the Company's
brands on the basis of price, or their product prices were otherwise reduced,
the Company's ability to market and sell competitive products could be severely
affected, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
EMPLOYEES
As of March 1, 1998, the Company had a total of approximately 1,400
full-time employees. Among these employees, approximately 50 were located in
the United States, including approximately 45 at the Company's Miami, Florida
headquarters, approximately 25 were located in Hong Kong, and approximately
1,325 were located in the PRC, including approximately 1,300 employees who work
at the Company's manufacturing facility in Shenzhen in the Province of
Goangzau. The facility typically employs up to 300 additional employees during
the third and fourth quarters of the calendar year when the substantial
majority of the Company's sales typically take place and production is highest
in order to fill customer orders. The Company believes that its relationships
with its employees are good. The Company is not party to any collective
bargaining agreement, nor is the Company aware of any effort to organize
employees of the Company into any union or similar labor organization.
LEGAL PROCEEDINGS
In November 1996, WCI filed suit for injunctive relief and damages against
Westinghouse Electric Corporation (now known as CBS Corporation) in the United
States District Court for the Northern District of Ohio alleging that CBS's
grant of licenses to the Westinghouse trademark for use on lighting products,
fans and electrical accessories for use in the home violates WCI's rights to
the Westinghouse trademark and constitutes a breach of the agreements under
which CBS's predecessor sold WCI its appliance business and certain trademark
rights in 1975. In response to that suit, CBS filed a related action in
December 1996 in the United States District Court for the Western District of
Pennsylvania, naming WCI, the Company, Windmere-Durable, Salton and certain
other parties as defendants. The two actions have now been consolidated in the
Pennsylvania court. CBS's complaint alleges among other things that WCI's
license to the Company to use the White-Westinghouse Trademark on CD players,
audio systems that include CD players, VCRs, TV-VCR combinations, headphones,
and telephones, telephone answering machines and telephone accessories
infringes its right to the Westinghouse trademark. CBS does not appear to be
challenging the validity of the Company's license to use the mark on TVs
without VCRs, on radios, on audio systems or cassette tape players that do not
include CD players, on stereo speakers or on microwave ovens. CBS seeks an
injunction prohibiting the Company, Salton and WCI from using the
White-Westinghouse Trademark on products not specifically enumerated in the
transaction documents, and unspecified damages and attorneys' fees. An adverse
decision in the Trademark Litigation could result in the Company being limited
in further use of the White-Westinghouse Trademark and in termination or
significant modification of the Kmart Agreement, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations. The legal costs that may be incurred in defending
against this action could be substantial; however, pursuant to an
indemnification agreement dated January 23, 1997 by and among WCI, Kmart and
Windmere-Durable, WCI is defending and indemnifying Kmart and Windmere-Durable
for all costs and expenses for claims, damages and losses, including the costs
of litigation, and, pursuant to the license agreements with WCI, WCI is
defending and indemnifying Salton and the Company for all cost and expenses for
claims, damages and losses, including the costs of litigation. In addition, the
litigation could be protracted and result in diversion of management and other
resources of the Company. The Company believes that its use of the
White-Westinghouse
37
<PAGE>
Trademark does not infringe upon or otherwise violate CBS's trademark rights.
There can be no assurance that WCI will prevail in its lawsuit or that WCI, the
Company and their co-defendants will prevail in their opposition to CBS's
lawsuit. In the event that a favorable outcome for the Company is not obtained,
the Company intends to vigorously pursue its rights to indemnification under
the license agreements described above.
Related proceedings have also been commenced before the Trademark Board of
the United States Patent and Trademark Office in opposition to WCI's and CBS's
efforts to register certain uses of the Westinghouse and White-Westinghouse
trademarks. Although the Company is not a party to those proceedings, some of
them relate to the Company's uses of the White-Westinghouse Trademark. Those
proceedings have been stayed pending resolution of the Trademark Litigation in
the Pennsylvania court. Even if the Trademark Litigation is resolved, it is
possible that these proceedings before the Trademark Board will continue and
will have a material adverse effect upon the Company's business, financial
condition and results of operations.
The Company is not currently a party to any other pending legal
proceedings, the adverse outcome of which, individually or in the aggregate,
would have a material adverse effect on the business, financial condition or
results of operations of the Company. The Company is from time to time involved
in various legal proceedings, including collection matters and disputes over
product defects, individual employment disputes, and similar matters. The
Company maintains insurance to attempt to insure against liability associated
with a product defect. However, to the extent that any such defect were
pervasive in any particular product or line of products, the Company could be
required to undertake to recall those products or could be subject to
significant exposure with respect to the institution of legal proceedings.
FACILITIES
The Company's main office and administrative facilities (as well as
additional warehouse space) are located in approximately 13,700 square feet of
space in Miami, Florida. The Company's lease for this space expires on December
31, 1999 and may be extended at the option of the Company for two one-year
renewal terms. Rent under the lease is $8,000 per month. The Company also
leases approximately 6,730 square feet of office space in Hong Kong, which
contains a showroom and product development facilities. The Company's lease for
this space expires on October 12, 1999. Rent under the lease is approximately
$5,700 per month. The Company leases an approximately 182,700 square foot
manufacturing facility located in Shenzhen in the Province of Goangzau in the
PRC. The facility is leased from the PRC government pursuant to a lease that
expires December 31, 2001. Rent under the lease is approximately $278,000 per
year. The PRC facility currently manufacturers audio products and contains 18
assembly lines.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY PERSONNEL
The executive officers, directors and other key personnel affecting the
Company's operations are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- ----- ----------------------------------------------------------
<S> <C> <C>
Joel Newman ................. 48 Chairman of the Board, President, Chief Executive Officer
and Director
Hatch Masuda ................ 58 Senior Vice President, Design and Product Development
Ichiro Okamoto .............. 51 Vice President, Overseas Operations and
Managing Director--Hong Kong
Leonor Schuck ............... 37 Vice President, Finance and Chief Financial Officer
Stuart Slugh ................ 43 Vice President, Engineering and After-Sales Service
Vivian Hernandez ............ 48 Vice President, Administration
Barry Light ................. 39 Director of Marketing
Alejandro Ricardes .......... 40 Vice President, Sales--Caribbean, Europe and
Latin America
Terry Arf ................... 49 Vice President, Sales--West Coast
David M. Friedson ........... 41 Director
Arnold Thaler ............... 59 Director
Noel Shapiro ................ 70 Director
</TABLE>
The Company's Board of Directors intends to appoint at least two
additional directors who are not affiliated with the Company within 90 days of
the consummation of the Offering.
JOEL NEWMAN has been the Chairman of the Board, President and Chief
Executive Officer of the Company since its inception in 1990. In 1978, Mr.
Newman formed Cosmo Communications Corp. ("Cosmo"), a distributor and
manufacturer of clocks and consumer electronic products, where he served as
Chairman and Chief Executive Officer until he sold his interest in Cosmo in
1986. Mr. Shapiro, a Director of the Company, is Mr. Newman's father-in-law.
HATCH MASUDA has been Senior Vice President, Design and Product
Development of the Company since 1996. Prior to that, since 1995 Mr. Masuda
served as the Company's Vice President, Design and Product Development. From
1979 through 1995, Mr. Masuda worked as Vice President, Design and Product
Development at Emerson Radio Corp.
ICHIRO OKAMOTO has been Vice President, Overseas Operations of the Company
since 1996 and Managing Director--Hong Kong since 1995. Prior to joining the
Company, Mr. Okamoto served as Director of Engineering at Emerson Radio Corp.
in Hong Kong from 1994 to 1995, as Managing Director of Yorx Corp. in Hong Kong
from 1993 to 1994 and as General Manager of Emerson's Tokyo Office from 1986 to
1993.
LEONOR SCHUCK has been Vice President, Finance and Chief Financial Officer
of the Company since 1995. From 1991 to 1995, Ms. Schuck served as the Chief
Financial Officer of Bijoux Terner, L.P., a costume jewelry wholesaler. Prior
to that, Ms. Schuck worked at Ernst & Young LLP for nine years, the last two
years as Senior Manager. Ms. Schuck is a certified public accountant.
STUART SLUGH has been Vice President, Engineering and After-Sales Service
of the Company since 1996, after working in the same capacity at Emerson Radio
Corp. since 1983.
VIVIAN HERNANDEZ has been Vice President, Administration of the Company
since 1997. Prior to that, from 1991 to 1997, Ms. Hernandez served as Sales
Administrator of the Company.
BARRY LIGHT has been Director of Marketing of the Company since 1997.
Prior to joining the Company, Mr. Light held the same position at Emerson Radio
Corp. since 1993. Prior to that, Mr. Light worked at Sharp Electronics
Corporation as Product Marketing Manager for Audio from 1989 to 1993.
39
<PAGE>
ALEJANDRO RICARDES has been Vice President, Sales--Caribbean, Europe and
Latin America since 1995. Prior to joining the Company, Mr. Ricardes held
several managerial positions in sales at Philco Argentina, Panasonic Chile, and
Kelvinator Argentina.
TERRY ARF has been Vice President, Sales--West Coast of the Company since
1997. Prior to joining the Company, Mr. Arf held several sales and management
positions over the past 20 years in the consumer electronics industry with
various companies, including Craig Consumer Electronics, Inc., Ryka Inc. and
Musicland.
DAVID M. FRIEDSON has served as a Director of the Company since 1996. Mr.
Friedson has served as Chairman of the Board of Windmere-Durable since April
1996, Chief Executive Officer of Windmere-Durable since January 1987 and as
President of Windmere-Durable since January 1985.
ARNOLD THALER has served as a Director of the Company since 1996. Mr.
Thaler has served as a Senior Vice President of Windmere-Durable since February
1996 and has served as an Executive Vice President--Product Development,
Engineering and Manufacturing of Windmere-Durable since December 1988.
NOEL SHAPIRO has served as a Director of the Company since its inception
in 1990. Mr. Shapiro has served as president of Star Ranch Enterprises Inc., an
agricultural and investment company, since 1972 and has served as president of
Arrow Construction Corporation, a construction and real estate development
company, since 1965. Mr. Shapiro is the father-in-law of Mr. Newman.
CONSULTANTS
Pursuant to a consulting agreement with Venture Marketing, Inc., the
Company is provided with the full time services of two sales consultants.
Robert Winer is the sole shareholder of Venture Marketing, Inc. and serves in a
capacity equivalent to the Company's Executive Vice President, Sales--North
America. Mr. Winer has provided these services since 1996. Prior thereto, Mr.
Winer served as Executive Vice President of Sound Design Corp.--GDI
Technologies for 18 years. Stuart Katz serves in a capacity equivalent to the
Company's Vice President, Sales--East Coast. Mr. Katz has provided these
services since 1996. For the prior 20 years, Mr. Katz held several sales and
management positions in the consumer electronics industry with various
companies, including Emerson Radio Corp. and Yorx Corp. The Company pays
Venture Marketing, Inc. for the services of Messrs. Winer and Katz based on a
commission structure with respect to net sales. In 1997, the Company paid
Venture Marketing, Inc. a total of $120,000 in commissions.
DIRECTORS COMPENSATION
The Company does not currently pay any fees to directors. The Company
intends to pay each director who is not an employee of the Company, Windmere or
Windmere-Durable an annual director's retainer of $6,000 and $500 for each
meeting of the Board, including committee meetings, attended by the director
after the consummation of the Offering. The Company also reimburses, and
intends to continue to reimburse, all directors for all travel-related expenses
incurred in connection with their activities as directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors intends to establish, within 90 days
after the consummation of the Offering, an Audit Committee and a Compensation
Committee, each of which will be composed of the two unaffiliated directors
that the Board intends to appoint during such period. The Audit Committee will
be responsible for reviewing audit functions, including accounting and
financial reporting practices of the Company, the adequacy of the Company's
system of internal accounting control, the quality and integrity of the
Company's financial statements and relations with independent auditors. The
Compensation Committee will be responsible for establishing the compensation of
the
40
<PAGE>
Company's directors, officers and employees, including salaries, bonuses,
commission, and benefit plans, administering the Company's stock option plans
and other matters relating to compensation.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
1997 to the Chief Executive Officer and the other four most highly paid
executive officers who were serving as executive officers at the end of 1997
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ -------------
NUMBER OF
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS
- --------------------------- ----------- ---------- -------------
<S> <C> <C> <C>
Joel Newman, Chairman, President and
Chief Executive Officer ............................. $400,000 $236,147 175,000
Hatch Masuda, Senior Vice President, Design and
Product Development ................................. 193,236 63,294 125,000
Ichiro Okamoto, Vice President, Overseas Operations and
Managing Director--Hong Kong ........................ 105,384 30,000 60,000
Stuart Slugh, Vice President, Engineering and
After-Sales Service ................................. 110,000 4,135 45,000
Leonor Schuck, Vice President, Finance and
Chief Financial Officer ............................. 88,462 10,828 60,000
</TABLE>
- ----------------
(1) The columns for "Other Annual Compensation" and "All Other Compensation"
have been omitted because there is no compensation required to be reported
in such columns. The aggregate amount of perquisites and other personal
benefits provided to each Named Executive Officer is less than 10% of the
total annual salary and bonus of such officer.
OPTION GRANTS, EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to grants of
options to purchase shares of Common Stock during the fiscal year ended
December 31, 1997 to the Named Executive Officers. The amounts shown as
potential realizable values on the options are based on assumed annualized
rates of appreciation in the price of the Common Stock of 5% and 10% over the
term of the options, as set forth in rules of the Securities and Exchange
Commission. Actual gains, if any, on stock option exercises are dependent on
future performance of the Common Stock. There can be no assurance that the
potential realizable values reflected in this table will be achieved.
STOCK OPTION GRANTS IN THE FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
PERCENT OF APPRECIATION FOR OPTION
NUMBER OF TOTAL OPTIONS TERM(1)
SECURITIES GRANTED TO EXERCISE OF ----------------------------
<S> <C> <C> <C> <C> <C> <C>
UNDERLYING EMPLOYEES IN BASE PRICE
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) EXPIRATION DATE 5%($) 10%($)
- ---- ----------------- -------------- ------------ ------------------- ------- -------
Joel Newman ............ 175,000 27.0% $ 2.00 February 28, 2007 $ 285,058 453,898
Hatch Masuda ........... 125,000 19.3 2.00 February 28, 2007 157,225 398,425
Ichiro Okamoto ......... 60,000 9.2 2.00 February 28, 2007 75,468 191,244
Stuart Slugh ........... 45,000 6.9 2.00 February 28, 2007 56,601 143,433
Leonor Schuck .......... 60,000 9.2 2.00 February 28, 2007 75,468 191,244
</TABLE>
- ----------------
(1) The Company determined that the Common Stock had a fair market value of
$2.00 on the date of grant.
41
<PAGE>
The following table sets forth data concerning the value of unexercised
options as of December 31, 1997 held by the Company's Named Executive Officers.
No options were exercised during fiscal 1997.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- ---- ------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Joel Newman ............ -- 175,000 -- 350,000
Hatch Masuda ........... -- 125,000 -- 250,000
Ichiro Okamoto ......... -- 60,000 -- 120,000
Stuart Slugh ........... -- 45,000 -- 90,000
Leonor Schuck .......... -- 60,000 -- 120,000
</TABLE>
- ----------------
(1) The Company determined that the Common Stock had a fair market value of
$4.00 per share on December 31, 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with each of Joel
Newman, Hatch Masuda and Leonor Schuck. The employment agreement with Mr.
Newman provides for his employment as the Chairman, Chief Executive Officer and
President of the Company with a base salary of $475,000 per year, to be
increased annually by a percentage equal to the increase in the consumer price
index. The employment agreement with Mr. Masuda provides for his employment as
the Company's Senior Vice President, Design and Product Development with a base
salary of $192,000 per year, to be increased annually by a percentage equal to
the increase in the consumer price index. The employment agreement with Ms.
Schuck provides for her employment as the Company's Vice President, Finance and
Chief Financial Officer with a base salary of $110,000 per year, to be
increased annually by a percentage equal to the increase in the consumer price
index.
The term of each employment agreement commences on the date of the
consummation of the Offering (the "Commencement Date") and continues until the
second anniversary thereof, provided that on the first and each subsequent
anniversary of the Commencement Date, such term will automatically be extended
for one additional year. Except for termination for cause, each agreement may
only be terminated by the giving of notice on an anniversary of the
Commencement Date by either party of its intention not to extend the agreement
beyond the remaining two years of the term. Each agreement provides that upon
the employee's death, the Company will pay to his or her estate a sum
equivalent to one year's base salary. The Company may terminate each employee's
employment in the event of his or her disability for a period of 360
consecutive days or more, which termination is effective one year from the date
of notice of such termination by the Company. Upon a change in control of the
Company (as defined in each agreement), each employee has the option of
terminating his or her employment agreement immediately upon notice to the
Company, in which event (i) all of the stock options held by such employee will
be immediately exercisable and the stock of the Company acquired pursuant to
such exercise may be sold subject to no restrictions by the Company (other than
those imposed by federal and state securities laws), and (ii) the Company will
pay to the employee at the time of such termination a lump sum equal to three
times such employee's base salary for the fiscal year in which such termination
occurs.
STOCK OPTION PLAN
Under the Company's 1997 Stock Option Plan (the "Plan"), which became
effective as of February 28, 1997, 1,000,000 shares of Common Stock are
reserved for issuance upon exercise of stock options granted under the Plan.
The Plan is designed as a means to attract and retain qualified and competent
persons who provide services to the Company and its subsidiaries. The Board of
Directors, or a committee (the "Committee") of two or more non-employee
directors appointed by the Board of Directors, will administer and interpret
the Plan. The Board of Directors and the Committee each shall
42
<PAGE>
be authorized to grant options thereunder to all eligible employees, directors
(whether or not also employees of the Company or any of its subsidiaries),
consultants and independent contractors of the Company or its subsidiaries. In
the event of a change in the Common Stock due to a stock dividend or
recapitalization, the Plan provides for appropriate adjustment in the number of
shares available for grant under the Plan and the number of shares and the
exercise price per share under any option then outstanding under the Plan, so
that the same percentage of the Company's issued and outstanding shares shall
remain subject to being optioned under the Plan or subject to purchase at the
same aggregate exercise price under any such outstanding option, as applicable.
Unless otherwise provided in any option, the Committee or the Board of
Directors may change the option price and/or number of shares under any
outstanding option when, in their discretion, such adjustment becomes
appropriate so as to preserve but not increase benefits under the Plan. The
aggregate number of shares subject to options granted to any one optionee under
the Plan may not exceed 400,000 subject to adjustment as described above.
However, no incentive stock options (as defined in Section 422 of the Internal
Revenue Code) may be granted to a person who is not also an employee of the
Company or a subsidiary.
The Plan provides for the granting of both incentive stock options and
nonqualified stock options. Options may generally be granted under the Plan on
such terms and at such prices as determined by the Committee or the Board of
Directors, except that the per share exercise price of any incentive stock
options cannot be less than the fair market value of a share of the Common
Stock on the date of grant. Each option is exercisable after the period or
periods specified in the option agreement, but no option may become exercisable
after the expiration of ten years from the date of grant. The Board of
Directors or Committee may in its sole discretion accelerate the exercisability
or vesting of any option or shares previously acquired by the exercise of any
options (including, without limitation, in the event of a change in control, as
defined in the Plan). Incentive stock options granted to an individual who owns
(or is deemed to own) at least 10% of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries must have an
exercise price of at least 110% of the fair market value of the Common Stock
subject to such option on the date of grant and a term of no more than five
years. Incentive stock options granted under the Plan are not transferable
other than by will or by the laws of descent and distribution. Nonqualified
stock options are also not transferable unless the prior written consent of the
Committee or the Board of Directors is obtained and such transfer does not
violate Rule 16b-3 under the Securities Exchange Act of 1934. Unless otherwise
provided in any option, and subject to such guidelines as the Committee or the
Board of Directors may establish, the option price may be paid by cash,
certified or official bank check, personal check if accepted by the Committee
or the Board of Directors, money order, shares of Common Stock, withholding of
shares of Common Stock, any cashless exercise procedure approved by the
Committee or the Board of Directors, other consideration deemed appropriate by
the Committee or the Board of Directors, or a combination of the above. The
Plan also authorizes the Company to make or guarantee loans to optionees to
enable them to exercise their options. Such loans must (i) provide for recourse
to the optionee, (ii) bear interest at the prime rate of the Company's
principal lender, (iii) be secured by the shares of Common Stock purchased, and
(iv) contain such other terms as the Committee or the Board of Directors in its
sole discretion shall reasonably require. The Board of Directors or the
Committee has the authority to amend or terminate the Plan or any options,
provided that no such action may substantially impair the rights or benefits of
the holder of any outstanding option without the consent of such holder, and
provided further that certain amendments to the Plan are subject to shareholder
approval. Unless terminated sooner, the Plan will continue in effect until all
options granted thereunder have expired or been exercised, provided that no
options may be granted after February 28, 2007.
Options granted under the Plan will be exercisable in accordance with the
option agreement executed in connection with such grant. The Company has
granted options under the Plan to purchase an aggregate of 649,000 shares of
Common Stock to 34 employees. Options to purchase 618,700 shares of Common
Stock were granted to 21 employees on February 28, 1997 and remain outstanding
on the date hereof.
43
<PAGE>
Options to purchase 29,900 shares of Common Stock were granted to 11
employees on October 27, 1997 and remain outstanding on the date hereof.
Options to purchase 400 shares of Common Stock were granted to two employees on
November 30, 1997, and remain outstanding on the date hereof. One fifth of the
options held by each employee vest on each anniversary of the grant thereof.
The option agreements executed by the employees in connection therewith
prohibit the sale or other disposition of any shares of Common Stock acquired
pursuant to the exercise of such options for a period of 180 days after the
date of this Prospectus without the prior written consent of the Underwriters.
CERTAIN TRANSACTIONS
WINDMERE
INITIAL WINDMERE INVESTMENT. In April 1996, the Company issued 5,000,000
shares of Common Stock to Windmere in exchange for (i) $3.0 million in cash,
(ii) an 8% unsecured subordinated promissory note of Windmere due April 15,
1998 in the aggregate principal amount of $3.0 million, (iii) an 8% unsecured
subordinated promissory note of Windmere due April 15, 2001 in the aggregate
principal amount of $2.0 million (together with the 8% subordinated promissory
note in (i) above, the "Windmere Notes") and (iv) an 8% unsecured convertible
subordinated promissory note of Windmere due April 15, 2001 in the aggregate
principal amount of $2.0 million (the "Windmere Convertible Note"). The Company
assigned the Windmere Convertible Note to certain holders of its debt in
exchange for the repayment in full of such indebtedness. The $3.0 million
Windmere Note became due on April 15, 1998, and $2.5 million of the principal
amount has been repaid. The maturity of the note has been extended to June 1,
1998 with respect to the remaining $500,000 principal amount. The other
Windmere Note has been pledged to the Banks (as defined below) under the
Company's current credit facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources."
Windmere has agreed with the Company to use a portion of the net proceeds from
its sale of Common Stock in the Offering to repay the $2.0 million Windmere
Note in full. See "Use of Proceeds," "Capitalization" and "Principal and
Selling Shareholders." Since April 1996, Windmere has paid the Company
approximately $685,000 in interest on the Windmere Notes.
WINDMERE WORKING CAPITAL LOANS TO THE COMPANY. In June 1997, Windmere
loaned to the Company $2.0 million for working capital purposes, in return for
which the Company issued to Windmere a $2.0 million unsecured demand
subordinated promissory note bearing interest at the rate of 2.0% above the
prime rate of NationsBank, National Association (South). In August 1997,
Windmere opened four letters of credit on behalf of the Company, for working
capital purposes, in return for which the Company issued to Windmere in
September 1997 an unsecured demand subordinated revolving promissory note in
the principal amount of up to approximately $3.0 million bearing interest at
the rate of 2.0% above the prime rate of NationsBank, National Association
(South) (the "Revolving Note"). In addition, the Revolving Note provides that
Windmere may offset any amounts not paid by the Company thereunder by a
reduction in outstanding principal under the remaining Windmere Note. Prior to
the consummation of the Offering, the Company will use a portion of the funds
available under its new credit facility to repay in full the Revolving Note and
the $2.0 million note, plus accrued and unpaid interest thereon. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." Since June 1997, the Company has
paid Windmere approximately $218,000 in interest on these notes.
WINDMERE GUARANTY UNDER CURRENT CREDIT FACILITY. By an Amendment to
Guaranty Agreement dated as of September 15, 1997 between Windmere-Durable and
the Banks, Windmere-Durable increased the limit of its guaranty of the
Company's obligations to the Banks under the current credit facility from $3.0
million to $9.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." In
connection with this increase, the Company, on September 18, 1997, entered into
an Indemnification and Security Agreement (the "Indemnification and Security
Agreement") with Windmere-Durable pursuant to
44
<PAGE>
which the Company granted to Windmere-Durable a security interest in
substantially all of the Company's assets, subordinate only to the interest of
the Banks. The security interest granted pursuant to the Indemnification and
Security Agreement also secures the Company's obligations to Windmere under the
Revolving Note.
The Company and Windmere-Durable have agreed that the security interest in
the Company's assets granted by the Indemnification and Security Agreement will
terminate upon an increase by Mr. Newman of the limitation of his guaranty of
the Company's obligations to the Banks from $3.0 million to $6.0 million. Such
increase in the guaranty will not, however, terminate Windmere's right to
offset any amounts due and owing to it by the Company under the Revolving Note
against Windmere's payment obligations under the Windmere Notes.
The parties have further agreed that upon any default by the Company under
the Revolving Note, the payment by Mr. Newman of one-half of the amount due
will also result in the termination of Windmere-Durable's security interest
under the Indemnification and Security Agreement, provided, that (i) Mr. Newman
has increased the amount of his guaranty as set forth above, (ii) the loan from
the Banks has been reduced to $3.0 million or (iii) the guarantees of
Windmere-Durable and Mr. Newman to the Banks have been terminated as a result
of the repayment and termination of the Company's current credit facility.
Both the guaranty provided by Windmere-Durable and the guaranty provided
by Joel Newman will be terminated upon the refinancing of the Company's current
credit facility with funds available under the new credit facility contemplated
by the commitment letter from the National Bank of Canada. The new credit
facility will not include a guaranty by either Windmere-Durable or Mr. Newman.
ACQUISITION OF PRC MANUFACTURING FACILITY FROM WINDMERE. In the fall of
1997, the Company acquired Durable Electronics Industries Limited, a Hong Kong
company ("DEI"), from Durable Electrical Metal Factory, a Hong Kong company
("DEM") wholly-owned by Windmere-Durable. DEI owns the Company's PRC
manufacturing facility. The acquisition was effected through the purchase by
NewTech Electronics Industries Limited, a Hong Kong company and wholly-owned
subsidiary of the Company ("NEIL"), of (i) certain technology and know-how from
DEI on October 1, 1997 for approximately $2.0 million and (ii) of all of the
capital stock of DEI from DEM on November 1, 1997 for approximately $1,300 in
cash. At the time of the acquisition, DEI was indebted to DEM in the amount of
approximately $6.2 million.
In connection with the acquisition, (i) DEI granted to DEM a security
interest in its fixed assets and inventory to secure its obligation to repay
such indebtedness, (ii) DEI assigned NEIL's indebtedness for the $2.0 million
purchase price of the technology and know-how to DEM, (iii) DEM made available
to DEI a loan for equipment acquisitions and working capital in the amount of
up to $500,000 on a demand basis (and due no later than October 31, 2003),
which amount may be increased at DEM's discretion, (iv) DEM agreed not to
compete in the design, research, development or manufacture of music centers
and video compact disk players in the PRC prior to September 30, 2003, (v) DEM
agreed to make available to NEIL, without charge, its general manufacturing
software program until October 31, 2003, (vi) the Company agreed to guarantee
all of NEIL's and DEI's indebtedness to DEM, (vii) NEIL and DEI became obligors
under the Company's current credit facility, and (viii) all of the obligations
of the Company, NEIL and DEI to DEM were subordinated to their obligations to
the Banks under the Company's current credit facility. NEIL and DEI will also
be obligors under the Company's new credit facility with the NationsBank of
Canada. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DEI's $6.2 million indebtedness to DEM is to be repaid on October 31, 2003.
NEIL's $2.0 million indebtedness to DEM is payable in 24 equal quarterly
installments from 1998 through 2003. All the indebtedness of NEIL and DEI to DEM
described in the foregoing paragraph bears interest at a rate equal to 1.0%
percent above the prime rate of NationsBank, National Association (South). Since
the date of the DEI acquisition, DEI and NEIL have paid DEM approximately
$354,000 in principal and interest pursuant to such indebtedness.
45
<PAGE>
Windmere-Durable provides the Company with certain administrative services
with respect to the PRC manufacturing facility for a monthly management fee of
approximately $11,800. Pursuant to this arrangement, Windmere or its affiliates
pay certain accounts payable and collect certain accounts receivable on behalf
of the Company and its subsidiaries, including DEI. Amounts paid by Windmere or
its affiliates on behalf of the Company are reimbursed by the Company. Since
the date of the DEI acquisition, the Company has paid Windmere-Durable a total
of approximately $129,000 under this arrangement.
JOEL NEWMAN
NEWMAN WORKING CAPITAL LOAN TO THE COMPANY. In July 1997, Mr. Newman
loaned the Company $2.0 million for working capital purposes, in return for
which the Company issued to Mr. Newman a $2.0 million unsecured demand
promissory note. The note bears interest at the rate of 2.0% above the prime
rate of NationsBank, National Association (South). Prior to the consummation of
the Offering, the Company will use a portion of the funds available under its
new credit facility to repay the note in full. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." Since June 1997, the Company has paid Mr. Newman
approximately $106,000 in interest on the note.
NEWMAN COLLATERAL AND GUARANTY UNDER CREDIT FACILITIES. In 1996 and 1997,
the Company paid Mr. Newman approximately $72,000 and $42,000, respectively, in
consideration for the pledge by Mr. Newman of certain securities as collateral
for the Company's obligations under its then existing credit facility. Such
pledge was terminated in July 1997 when the Company's current credit facility
was established. In addition, the guaranty provided by Joel Newman under the
Company's current credit facility will be terminated upon the refinancing of
the facility with funds available under the new credit facility contemplated by
the commitment letter from the National Bank of Canada. The new credit facility
will not include a guaranty by Mr. Newman.
COMPANY LOANS TO NEWMAN. During 1995, 1996 and 1997, the Company loaned
Mr. Newman an aggregate of approximately $271,000. This loan bears interest at
7.0% per annum, is unsecured and is payable on demand. Mr. Newman has agreed
with the Company to use a portion of the net proceeds from his sale of Common
Stock in the Offering to repay this loan in full. See "Use of Proceeds" and
"Principal and Selling Shareholders." Since 1995, Mr. Newman has paid the
Company approximately $52,000 in interest on this loan.
AIRCRAFT LEASE. The Company leases a jet aircraft from F Fifty Holdings,
Inc., a company owned by Joel Newman ("F Fifty"). Mr. Newman owns 47.5% of the
Common Stock on the date of this Prospectus and is the Company's Chairman of
the Board, President and Chief Executive Officer. The Company pays an annual
fee of $150,000, and when the aircraft is being utilized, the Company pays an
additional hourly fee at the current market rate. The Company is not
responsible for insurance, fuel costs, crew costs, maintenance costs, landing
fees, parking fees, overflight charges or any other such expenses. The term of
the lease is from June 1, 1997 through June 30, 2007. Since June 1997, the
Company has paid F Fifty a total of approximately $369,000 for the lease of the
aircraft. In June 1997, the Company loaned F Fifty $330,000 to purchase the
aircraft. This loan does not bear interest and is unsecured and payable on
demand. In 1997, Windmere used the aircraft from time to time and paid the
Company approximately $90,000 for such use. Since January 1998, Windmere has
leased the aircraft from F Fifty. Windmere pays F Fifty an annual fee of
$180,000 and pays no hourly fee, provided it does not use the aircraft for more
than 100 hours per year.
46
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Common Stock immediately prior to the Offering and as adjusted
to reflect the sale of the shares offered by this Prospectus by (i) each of the
Company's Named Executive Officers and directors, (ii) each person who is the
beneficial owner of 5% or more of the Common Stock and (iii) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(2) SHARES TO BE AFTER THE OFFERING(2)
--------------------------- SOLD IN THE ------------------------
NAME AND ADDRESS(1) NUMBER PERCENTAGE OFFERING NUMBER PERCENTAGE
- ------------------- ------------ ------------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Joel Newman(3)(4) .................... 4,785,000 47.3% %
Windmere(4) .......................... 4,750,000 46.9
Hatch Masuda(5) ...................... 25,000 * -- 25,000 *
Ichiro Okamoto(6) .................... 12,000 * -- 12,000 *
Stuart Slugh(7) ...................... 9,000 * -- 9,000 *
Leonor Schuck(8) ..................... 12,000 * -- 12,000 *
David Friedson(9) .................... 4,750,000 46.9
Arnold Thaler(10) .................... -- -- -- -- --
Cesar Alvarez(11) .................... 500,000 4.9 -- 500,000
All directors and Named Executive
Officers of the Company
as a group (7 persons)(12) ......... 10,093,000 99.7% %
</TABLE>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, the address of each party is c/o the Company,
16550 N.W. 10th Avenue, Miami, Florida 33169.
(2) Based on 10,000,000 shares outstanding at April 15, 1998 and as
adjusted after the Offering. Pursuant to the rules of the Commission,
certain shares which a person has the right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options and warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(3) Includes (i) 4,750,000 shares directly owned and (ii) 35,000 shares
subject to presently exercisable stock options. Excludes 140,000 shares
subject to unexercisable stock options.
(4) Does not reflect the possible sales of shares upon exercise of the
Underwriters' over-allotment option. Joel Newman and Windmere have granted
an option to the Underwriters, exercisable for 30 days after the date of
this Prospectus, to purchase up to an aggregate of additional shares
of Common Stock at the initial public offering price set forth on the
cover page of this Prospectus, less the underwriting discounts and
commissions. If the Underwriters exercise the option in full, Mr. Newman
and Windmere will sell and shares, respectively, resulting
in Mr. Newman and Windmere owning shares ( %) and
shares ( %), respectively, after the closing of the Offering. See
"Underwriting."
(5) Includes 25,000 shares subject to presently exercisable stock options.
Excludes 100,000 shares subject to unexercisable stock options.
(6) Includes 12,000 shares subject to presently exercisable stock options.
Excludes 48,000 shares subject to unexercisable stock options.
(7) Includes 9,000 shares subject to presently exercisable stock options.
Excludes 36,000 shares subject to unexercisable stock options.
(8) Includes 12,000 shares subject to presently exercisable stock options.
Excludes 48,000 shares subject to unexercisable stock options.
(9) Includes 4,750,000 shares (47.5%) held of record by Windmere prior to the
Offering. Windmere is a wholly-owned subsidiary of Windmere-Durable. Mr.
Friedson is the Chairman of the Board of Directors, Chief Executive
Officer, President and a shareholder of Windmere-Durable. Mr. Friedson
may, by virtue of his relationship with Windmere-Durable, be deemed to
beneficially own the shares of Common Stock held of record by Windmere.
Mr. Friedson disclaims beneficial ownership of the shares, except to the
extent of his respective investment interests in Windmere and
Windmere-Durable. The address of Mr. Friedson is c/o Windmere-Durable
Holdings, Inc., 5980 Miami Lakes Drive, Miami Lakes, Florida 33014-9897.
(10) The address of Mr. Thaler is c/o Windmere-Durable Holdings, Inc. 5980
Miami Lakes Drive, Miami Lakes, Florida 33014-9897.
(11) The address of Mr. Alvarez is c/o Greenberg Traurig Hoffman Lipoff Rosen &
Quentel, P.A., 1221 Brickell Avenue, 22nd Floor, Miami, Florida 33131.
(12) Includes (i) 4,750,000 shares directly owned by each of Mr. Newman and
Windmere and (ii) an aggregate of 93,000 shares subject to presently
exercisable stock options held by Messrs. Newman, Masuda, Okamoto and
Slugh and by Ms. Schuck. Excludes an aggregate of 372,000 shares subject
to unexercisable stock options held by Messrs. Newman, Masuda, Okamoto and
Slugh and by Ms. Schuck.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $0.01 per share, of which will be
outstanding upon the consummation of the Offering, and (ii) 1,000,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), none of
which will be outstanding. The following description of the Company's capital
stock does not purport to be complete and is qualified in its entirety by
reference to the Florida Business Corporation Act (the "FBCA"), as amended from
time to time, and the Articles and Bylaws, which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part. See "Additional
Information."
COMMON STOCK
The holders of the Common Stock are entitled to one vote per share of
record on all matters to be voted upon by shareholders and to vote together as
a single class for the election of directors and in respect of other corporate
matters. At a meeting of shareholders at which a quorum is present, for all
matters other than the election of directors, a majority of the votes cast
decides all questions, unless the matter is one upon which a different vote is
required by express provision of law or the Articles or Bylaws. Directors will
be elected by a plurality of the votes of the shares present at a meeting.
There is no cumulative voting with respect to the election of directors (or any
other matter).
The holders of Common Stock have no preemptive rights and have no rights
to convert their Common Stock into any other securities. Subject to the rights
of holders of Preferred Stock, if any, in the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to participate equally and ratably in all assets remaining after payment of
liabilities and distribution of any preferential amount.
The holders of Common Stock are entitled to receive ratably such dividends
as the Board of Directors may declare out of funds legally available therefor,
when and if so declared, subject to any preference in favor of outstanding
shares of Preferred Stock, if any. The payment by the Company of dividends, if
any, rests within the discretion of its Board of Directors and will depend upon
the Company's results of operations, financial condition and capital
expenditure plans, as well as other factors considered relevant by the Board of
Directors.
PREFERRED STOCK
Upon completion of the Offering, no shares of Preferred Stock will be
outstanding, and the Company has no present intention to issue any shares of
Preferred Stock. The Board of Directors of the Company, without further action
by the shareholders, will be authorized to issue from time to time up to
1,000,000 shares of Preferred Stock in one or more series and to fix and
determine as to any series all the relative rights and preferences of shares in
such series, including, without limitation, relative voting, dividend,
redemption, liquidation, conversion and other powers, preferences, rights,
qualifications and limitations. The issuance of shares of Preferred Stock, or
the issuance of rights to purchase such shares, could be used to discourage an
unsolicited acquisition proposal that some, or a majority, of the shareholders
might believe to be in the best interests of the Company or in which
shareholders might receive a premium for their stock over the then market price
of such stock. In addition, under certain circumstances, the issuance of
Preferred Stock could adversely affect the voting power of the holders of the
Common Stock.
OPTIONS TO PURCHASE COMMON STOCK
Options to purchase 618,700 shares of Common Stock at an exercise price of
$2.00 per share were granted to 21 employees on February 28, 1997 and remain
outstanding on the date hereof. Options to
48
<PAGE>
purchase 29,900 shares of Common Stock at an exercise price of $4.00 per share
were granted to 12 employees on October 27, 1997, and options to purchase 400
shares of Common Stock at an exercise price of $4.00 per share were granted to
two employees on November 30, 1997 and remain outstanding on the date hereof.
One fifth of the options held by each employee vest on each anniversary of the
grant thereof. The option agreements executed by the employees in connection
therewith prohibit the sale or other disposition of any shares of Common Stock
acquired pursuant to the exercise of such options for a period of 180 days
after the date of this Prospectus without the prior written consent of the
Underwriters. See "Management--Stock Option Plan."
LIMITED LIABILITY AND INDEMNIFICATION
Under the FBCA, a director is not personally liable for monetary damages
to the corporation or any other person for any statement, vote, decision, or
failure to act unless (i) the director breached or failed to perform his duties
as a director and (ii) a director's breach of, or failure to perform, those
duties constitutes (1) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause
to believe his conduct was unlawful, (2) a transaction from which the director
derived an improper personal benefit, either directly or indirectly, (3) a
circumstance under which an unlawful distribution is made, (4) in a proceeding
by or in the right of the corporation or procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interest of
the corporation or willful misconduct, or (5) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or
an act or omission which was committed in bad faith or with malicious purpose
or in a manner exhibiting wanton and willful disregard of human rights, safety,
or property. A corporation may purchase and maintain insurance on behalf of any
director or officer against any liability asserted against him and incurred by
him in his capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the FBCA.
The Articles and Bylaws provide that the Company shall, to the fullest
extent permitted by applicable law, as amended from time to time, indemnify and
may advance expenses to all directors of the Company, as well as any officers
or employees of the Company to whom the Company has agreed to grant
indemnification.
PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECT
Certain provisions of the FBCA and of the Articles and the Bylaws,
summarized in the following paragraphs, may be considered to have an
anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a shareholder might consider to be in
such shareholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by shareholders.
These provisions may also have the effect of rendering changes in the Board of
Directors and management of the Company more difficult. Any discouraging effect
upon takeover attempts could potentially depress the market price of the Common
Stock or inhibit temporary fluctuations in the market price of the Common Stock
that otherwise could result from actual or rumored takeover attempts.
ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW. Florida has enacted legislation
that may deter or frustrate takeovers of Florida corporations. The "Control
Share Acquisitions" section of the FBCA generally provides that shares acquired
in excess of certain specified thresholds, beginning at 20% of a corporation's
outstanding voting shares, will not possess any voting rights unless such
voting rights are approved by a majority vote of a corporation's disinterested
shareholders. The "Affiliated Transactions" section of the FBCA generally
requires majority approval by disinterested directors or supermajority approval
of disinterested shareholders of certain specified transactions (such as a
merger, consolidation, sale of assets, issuance or transfer of shares or
reclassifications of securities) between a corporation and a holder of more
than 10% of the outstanding shares of the corporation, or any affiliate of such
shareholder.
49
<PAGE>
The directors of the Company are subject to the "general standards for
directors" provisions set forth in the FBCA. These provisions provide that in
discharging his or her duties and determining what is in the best interests of
the Company, a director may consider such factors as the director deems
relevant, including the long-term prospects and interests of the Company and
its shareholders and the social, economic, legal or other effects of any
proposed action on the employees, suppliers or customers of the Company, the
community in which the Company operates and the economy in general.
Consequently, in connection with any proposed action, the Board of Directors is
empowered to consider interests of other constituencies in addition to the
Company's shareholders, and directors who take into account these other factors
may make decisions which are less beneficial to some, or a majority, of the
shareholders than if the law did not permit consideration of such other
factors.
AUTHORIZED BUT UNISSUED SHARES. Subject to the applicable requirements of
the Nasdaq National Market, the authorized but unissued shares of Common Stock
and Preferred Stock are available for future issuance without shareholder
approval. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved Common Stock and Preferred Stock may enable the
Board of Directors to issue shares to persons friendly to current management
which would render more difficult or discourage an attempt to obtain control of
the Company by means of a proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management.
SPECIAL MEETING OF SHAREHOLDERS. The Articles provide that special
meetings of shareholders of the Company may be called only by the Board of
Directors, the Company's Chief Executive Officer or the holders of not less
than 50% of all votes entitled to be cast on any issue proposed to be
considered at such special meeting. This provision will make it more difficult
for shareholders to take actions opposed by the Board of Directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Articles provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for
election as directors at an annual or special meeting of shareholders, must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 120 days nor more than 180 days prior to the first
anniversary of the date of the Company's notice of annual meeting provided with
respect to the previous year's annual meeting; provided, however, that in the
event of a special meeting or if no annual meeting was held in the previous
year or the date of the annual meeting has been changed by more than 30
calendar days from the date contemplated by the previous year's notice of
annual meeting, such notice by the shareholder to be timely must be delivered
to or mailed and received at the principal executive offices of the Company not
later than the close of business on the seventh day following the date on which
notice of the date of the meeting is mailed to shareholders or made public,
whichever occurs first. The Articles also specify certain requirements for a
shareholder's notice to be in proper written form. These provisions may
preclude some shareholders from bringing matters before the shareholders at an
annual or special meeting or from making nominations for directors at an annual
or special meeting.
VACANCIES. The Articles provide that a vacancy on the Board of Directors
occurring from an increase in the number of directors or otherwise may be
filled by the vote of a majority of directors then in office, though less than
a quorum, or by a sole remaining director.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
50
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offering, the Company will have shares of
Common Stock outstanding, assuming no outstanding stock options are exercised.
Of these shares, the shares of Common Stock sold in the Offering (
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable by persons other than affiliates of the Company, without
restriction under the Securities Act. The remaining shares of Common
Stock will be "restricted securities" within the meaning of Rule 144 under the
Securities Act, and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including
the exemptions contained in Rule 144 and Rule 701. Commencing 90 days after the
date hereof, of these shares of Common Stock will become eligible for
sale in the open market, subject to volume and other limitations imposed by
Rule 144. In addition, the Company has granted certain registration rights with
respect to holders of shares of Common Stock ( shares if the
Underwriters' over-allotment option is exercised in full), as well as options
to acquire 175,000 shares. Sales of all or a portion of such shares could have
a material adverse effect upon the price of the Common Stock. However, the
directors, executive officers and Selling Shareholders of the Company have
agreed not to sell, contract to sell or otherwise dispose of any of these
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of SBC Warburg Dillon Read Inc.,
as discussed below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned his or her shares for at least one year (including the prior
holding period of any prior owner other than an affiliate) is entitled to sell
within any three-month period that number of shares which does not exceed the
greater of 1% of the outstanding shares of the Common Stock, or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements, and the availability of current public information about
the Company. A person (or persons whose shares are aggregated) who is not or
has not been deemed an "affiliate" of the Company for at least three months,
and who has beneficially owned shares for at least two years (including the
holding period of any prior owner other than an affiliate) would be entitled to
sell such shares under Rule 144 without regard to the limitations discussed
above.
In general, under Rule 701, beginning 90 days after the closing of the
Offering, certain shares issued upon the exercise of options granted by the
Company prior to the date of this Prospectus will also be available for sale in
the public market. Any employee, officer or director of or consultant to the
Company who purchased his or her shares pursuant to a written compensatory plan
or contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates and non-affiliates to sell their Rule 701 shares under
Rule 144 without complying with the one-year holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell such shares in
the public market in reliance on Rule 144 without having to comply with the
public information, volume limitation or notice provisions of Rule 144. In both
cases, a holder of Rule 701 shares is required to wait until 90 days after the
date of this Prospectus before selling such shares in the public market.
An aggregate of 1,000,000 shares of Common Stock are reserved for issuance
to employees and directors of the Company pursuant to the Plan. Currently,
649,000 shares of Common Stock are issuable under outstanding options granted
to employees pursuant to the Plan. With respect to 618,700 such options, which
were granted on February 28, 1997, (i) as of the date of this Prospectus,
123,740 will be vested and immediately exercisable, and all of the shares
issuable upon the exercise of such options would be eligible for resale subject
to compliance with Rule 701 and to the Lock-up Agreements with SBC Warburg
Dillon Read Inc. described below and (ii) 123,740 will vest on each February
28, commencing February 28, 1999. With respect to 29,900 such options, 5,980
will vest on each anniversary of October 27, 1997, the date they were granted.
With respect to 400 such options, 80 will vest on each anniversary of November
30, 1997, the date they were granted. Once vested, the shares issuable upon the
exercise of all of the foregoing options would be eligible subject to
compliance with Rule 701.
51
<PAGE>
After consummation of the Offering, the Company intends to file one or
more registration statements on Form S-8 with respect to shares of Common Stock
issuable under the Plan. See "Management--Stock Option Plan." Shares covered by
any such registration statement will be eligible for sale in the public market
upon the effectiveness of such registration statement (which occurs immediately
upon filing), subject to the limitations of Rule 144 that are applicable to
affiliates and to the Lock-up Agreements described below.
The Company and its executive officers, directors, and selling
shareholders have agreed with SBC Warburg Dillon Read Inc. pursuant to the
Lock-up Agreements that they will not sell, contract to sell, pledge, grant any
option to purchase, transfer or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into, or exchangeable
for, Common Stock or warrants or other rights to purchase or acquire shares of
Common Stock or permit the registration of shares of Common Stock, for a period
of 180 days after the date of this Prospectus, without the prior written
consent of SBC Warburg Dillon Read Inc., except, without such consent, the
Company may issue and register, and the Company and the Selling Shareholders
may sell, the shares of Common Stock offered in the Offering (including the
over-allotment). SBC Warburg Dillon Read Inc., in its sole discretion, without
notice, may release some or all of the shares subject to Lock-up Agreements
from time to time.
Prior to this Offering there will be no market for the Common Stock, and
no accurate prediction can be made of the effect, if any, that market sales of
restricted securities or of shares subject to stock options or the availability
of these shares for sale will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of any of these
shares in the public market could adversely affect prevailing market prices for
the Common Stock. See "Risk Factors--Shares Eligible for Future Sale."
REGISTRATION RIGHTS
Upon the expiration of 180 days after the date of this Prospectus, each of
Joel Newman and Windmere has the right to (i) request that the Company
register, as expeditiously as possible, any or all of the Common Stock then
owned by such shareholder, including all shares of Common Stock issuable
pursuant to any derivative securities of the Company then held by such
shareholder and (ii) include such shares of Common Stock in registrations
proposed to be effected by the Company. In addition, upon receipt of any such
request from Mr. Newman or Windmere, the Company must notify the other of such
request and offer to include the shares held by such non-requesting shareholder
in the registration statement to be filed pursuant to the request. The Company
has agreed to indemnify such shareholders against liabilities under the
Securities Act in certain circumstances in connection with any such
registration statement.
52
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the acquisition, ownership and disposition of Common
Stock by a "Non-U.S. Holder." For this purpose, a "Non-U.S. Holder" is any
person who is, for U.S. federal income tax purposes, a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, as those terms are defined in section 7701(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The rules classifying trusts as foreign
for U.S. federal income tax purposes have changed recently, and a prospective
purchaser of Common Stock that is a trust is urged to consult its tax adviser
regarding its classification. This discussion does not address tax consequences
to U.S. citizens or residents or domestic corporations, partnerships, estates
or trusts. This discussion does not address all aspects of U.S. federal income
and estate taxation and does not deal with state, local or foreign tax
consequences that may be relevant to a Non-U.S. Holder in light of his
particular circumstances. This discussion is based on provisions of the Code,
existing and proposed regulations promulgated thereunder and administrative and
judicial interpretations thereof as of the date hereof, all of which are
subject to change, possibly retroactively. Each prospective purchaser of Common
Stock is advised to consult his tax adviser with respect to current and
possible future U.S. federal income and estate tax consequences of acquiring,
owning and disposing of Common Stock as well as any tax consequences that may
arise under the laws of any state, local, foreign or other taxing jurisdiction.
DIVIDENDS
A dividend paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of U.S. federal income tax at a 30 percent rate or at a
lower rate that any be specified by an applicable income tax treaty. However, a
dividend that is effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States (or, if a tax treaty applies,
is attributable to a U.S. permanent establishment of the Non-U.S. Holder) is
not subject to U.S. withholding tax (provided certain certification and
disclosure requirements are satisfied) but instead is subject to U.S. federal
income tax on a net income basis at regular graduated U.S. federal income tax
rates. Any effectively connected dividend realized by a foreign corporation
will be subject, under certain circumstances, to an additional "branch profits
tax" at a 30 percent rate or at a lower rate that may be specified by an
applicable income tax treaty. A Non-U.S. Holder of Common Stock who is eligible
for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may
obtain a refund of any excess tax withheld by filing an appropriate claim for
refund with the U.S. Internal Revenue Service ("IRS").
Under U.S. Treasury regulations in effect for payments made before January
1, 2000, dividends paid to an address outside the United States are presumed to
be paid to a resident of that country (unless the payer has knowledge to the
contrary) for purposes of the withholding tax discussed above and, under the
current interpretation of U.S. Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under U.S. Treasury
regulations that apply to payments made after December 31, 1999, a Non-U.S.
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate (and avoid backup withholding of tax, as discussed below) would be
required to satisfy certain certification and other requirements.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of the
Non-U.S. Holder in the United States, (ii) in the case of a Non-U.S. Holder who
is an individual and holds the Common Stock as a capital asset, the holder is
present in the United States for 183 or more days in the taxable year of the
sale or other disposition and certain other conditions are met, (iii) the
Non-U.S. Holder is subject to U.S. federal income tax pursuant to rules
applicable to certain U.S. expatriates and prior lawful permanent residents of
the United States or (iv) the Company is or, in certain circumstances, has been
a "United States real property holding
53
<PAGE>
corporation" for U.S. federal income tax purposes. The Company is not currently
and does not anticipate becoming a "United States real property holding
corporation" for U.S. federal income tax purposes.
An individual Non-U.S. Holder described in clause (i) above generally will
be subject to tax on its net effectively connected gains at regular graduated
U.S. federal income tax rates. Gain recognized by a Non-U.S. Holder described
in clause (i) above that is a foreign corporation will be subject to tax at
regular graduated U.S. federal income tax rates and, in addition, under certain
circumstances, will be subject to an additional "branch profits tax" at a 30
percent rate or at a lower rate that may be specified by an applicable income
tax treaty. Gain recognized by an individual Non-U.S. Holder described in
clause (ii) above, which may be offset by U.S. source capital losses (even
though the individual is not considered a resident of the United States), will
be subject to a 30 percent tax.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual Non-U.S. Holder at
the time of death will be included in the Non-U.S. Holder's gross estate for
U.S. federal estate tax purposes unless an applicable estate tax treaty
provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The company must report annually to the IRS and to each Non-U.S. Holder
the amount of dividends paid to that Non-U.S. Holder and the tax withheld with
respect to those dividends, regardless of whether withholding was required.
Copies of the information returns reporting the dividends and the tax withheld
also may be made available to the tax authorities in the country in which the
Non-U.S. Holder resides under the provisions of an applicable income tax treaty
or other agreement.
Under U.S. Treasury regulations in effect for payments made before January
1, 2000, backup withholding of tax generally will not apply to dividends paid
to a Non-U.S. Holder at an address outside the United States (unless the payer
has knowledge that the payee is a United States person). Under Treasury
regulations that apply to payments made after December 31, 1999, however, a
Non-U.S. Holder will be subject to backup withholding of tax, at the rate of 31
percent, unless applicable certification and other requirements are met.
Payment of the proceeds of a sale of Common Stock by or through a U.S.
office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder or otherwise establishes an exemption. In general,
backup withholding and information reporting will not apply to a payment made
outside the United States of the proceeds of a sale of Common Stock by or
through a foreign office of a broker. However, U.S. information reporting
requirements (but not backup withholding) will apply to a payment of
disposition proceeds outside the United States if: (i) the payment is made
through an office outside the United States of a broker that, for U.S. federal
income tax purposes, is a United States person, a controlled foreign
corporation, or a foreign person that derives 50 percent or more of its gross
income for a specified period from the conduct of a trade or business in the
United States, and (ii) the broker fails to maintain documentary evidence in
its records that (a) the beneficial owner is a Non-U.S. Holder and certain
other conditions are met or (b) the beneficial owner otherwise is entitled to
an exemption.
Any amounts withheld under the backup withholding rules may be allowed as
a refund or as a credit against the holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
54
<PAGE>
UNDERWRITING
The names of the Underwriters of the shares of Common Stock offered hereby
and the aggregate number of shares of Common Stock which each has severally
agreed to purchase from the Company, subject to the terms and conditions
specified in the Underwriting Agreement, are as follows:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ------
<S> <C>
SBC Warburg Dillon Read Inc. .........
Jefferies & Company, Inc. ............
--------
Total ................................
========
</TABLE>
The Managing Underwriters are SBC Warburg Dillon Read Inc. and Jefferies &
Company, Inc.
If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby if any Underwriter defaults in its
obligation to purchase such shares and if the aggregate obligations of the
Underwriters so defaulting do not exceed ten percent of the shares offered
hereby, the remaining Underwriters, or some of them, must assume such
obligations.
The Underwriters propose to offer the shares of Common Stock to the public
initially at the offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not to exceed $
per share. The Underwriters may allow, and such dealers may re-allow, a
concession not to exceed $ per share on sales to certain other dealers.
The offering of the shares of Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares. After the
shares are released for sale to the public, the public offering price, the
concession and the reallowance may be changed by the Managing Underwriters.
The Selling Shareholders have granted to the Underwriters an option for 30
days from the date of the Underwriting Agreement to purchase up to an
additional shares of Common Stock from them at the offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only to cover over-allotments made of the
shares in connection with this Offering. To the extent the Underwriters
exercise this option, each of the Underwriters will be obligated, subject to
certain conditions, to purchase the number of additional shares proportionate
to such Underwriter's initial commitment.
The Company, each of its directors and executive officers and the Selling
Shareholders have agreed that they will not sell, contract to sell, pledge,
grant any option to purchase, transfer or otherwise dispose of, directly or
indirectly, any shares of the Common Stock or any securities convertible into
or exchangeable for Common Stock or warrants or other rights to purchase or
acquire shares of Common Stock or permit the registration of shares of Common
Stock for a period of 180 days after the date of this Prospectus, without the
prior written consent of SBC Warburg Dillon Read Inc., except, without such
consent, the Company may issue and register, and the Company and the Selling
Shareholders may sell, the shares of Common Stock offered in the Offering
(including the Underwriters' over-allotment option).
The Managing Underwriters, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate cover transactions and
penalty bids in accordance with Regulation M
55
<PAGE>
under the Exchange Act. Over-allotment involves syndicate sales in excess of
the Offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Managing Underwriters to reclaim a selling concession
from a syndicate member when the Common Stock originally sold by such syndicate
member is purchased in a syndicate covering transaction to cover syndicate
short positions. Such stabilizing transactions, syndicate covering transactions
and penalty bids may cause the price of the Common Stock to be higher than it
would otherwise be in the absence of such transactions. These transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may
be discontinued at any time.
Prior to the Offering, there will be no public market for the Common
Stock. Consequently, the initial public offering price for the shares of Common
Stock included in the Offering will be determined by negotiation among the
Company, the Selling Shareholders and the Managing Underwriters. Among the
principal factors to be considered in determining such price are prevailing
market and general economic conditions, the revenues and earnings of the
Company in recent periods, the current financial position of the Company,
estimates of the business potential of the Company and its industry, the
present state of the Company's development, an assessment of the Company's
management, market valuations of securities of companies engaged in activities
deemed by the Managing Underwriters to be similar to those of the Company, and
other factors deemed relevant. Consideration will also be given to the general
state of the securities market, the market conditions for new issues of
securities and the demand for similar securities of comparable companies. The
Company has applied for listing of the Common Stock on the Nasdaq National
Market under the symbol "NTCH."
The Company and the Selling Shareholders have agreed in the Underwriting
Agreement to indemnify the Underwriters against certain liabilities, including
any liabilities under the Securities Act, or to contribute to payments, the
Underwriters may be required to make in respect thereof.
The Underwriters do not intend to confirm sales to accounts over which
they exercise discretionary authority.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and for the Selling Shareholders by Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida, and for the
Underwriters by Cahill Gordon & Reindel, a partnership including a professional
corporation, New York, New York. Cesar L. Alvarez, a shareholder of Greenberg
Traurig Hoffman Lipoff Rosen & Quentel, P.A., owns 500,000 shares of the
Company's Common Stock. As to certain matters of Florida Law, Cahill Gordon &
Reindel will rely on the opinion of Greenberg Traurig Hoffman Lipoff Rosen &
Quentel, P.A.
EXPERTS
The Consolidated Financial Statements of the Company at December 31, 1996
and 1997 and for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent certified public accountants, as set forth in
their reports thereon appearing elsewhere herein, which, as to the year 1997, is
based in part on the report of Grant Thornton, independent auditors. The
financial statements referred to above are included in reliance upon reports
given upon the authority of such firms as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-1 (the
"Registration Statement") with the Commission under the Securities Act in
respect of the Common Stock offered hereby. For purposes
56
<PAGE>
of this Prospectus, the term "Registration Statement" means the initial
Registration Statement and any and all amendments thereto. This Prospectus
omits certain information contained in the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement, including the exhibits thereto. Statements
herein concerning the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to such contract
or other document filed with the Commission as an exhibit to the Registration
Statement, or otherwise, each such statement, being qualified by and subject to
such reference in all respects.
As a result of the Offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith
will file reports, proxy and information statements, and other information with
the Commission. Reports, registration statements, proxy and information
statements, and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at its regional offices located at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of these material may be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission maintains
a site on the World Wide Web (http://www.sec.gov) that contains reports,
registration statements, proxy and information statements, and other
information.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements which have been certified by its
independent auditors, and quarterly reports containing unaudited summary
financial information for each of the first three quarters of each fiscal year.
57
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants .......... F-2
Report of Independent Certified Public Accountants .......... F-3
Audited Consolidated Financial Statements
Consolidated Balance Sheets ................................. F-4
Consolidated Statements of Operations ....................... F-5
Consolidated Statements of Shareholders' Equity ............. F-6
Consolidated Statements of Cash Flows ....................... F-7
Notes to Consolidated Financial Statements .................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Newtech Electronics Industries, Inc.
We have audited the accompanying consolidated balance sheets of Newtech
Electronics Industries, Inc. (formerly New M-Tech Corporation) and subsidiaries
as of December 31, 1996 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of Durable Electronics Industries Limited, a wholly-owned
subsidiary formed in 1997, which statement reflects total assets of $6,799,000
at December 31, 1997. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to data
included for Durable Electronics Industries Limited, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Newtech Electronics
Industries, Inc. and subsidiaries at December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
April 3, 1998, except for /s/ ERNST & YOUNG LLP
the last paragraph of Note 1,
as to which the date is April 10, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Durable Electronics Industries Limited
(Formerly known as Durable Electronics Factory Limited)
We have audited the balance sheet of Durable Electronics Industries Limited
(incorporated in Hong Kong with limited liability) as of December 31, 1997, and
the related statement of operations and retained earnings and cash flows for the
period from November 1, 1997 to December 31, 1997 (not presented separately
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Durable Electronics
Industries Limited as of December 31, 1997, and the results of its operations
and retained earnings and its cash flows for the period from November 1, 1997
to December 31, 1997, in conformity with generally accepted accounting
principles in the United States of America.
/S/ GRANT THORNTON
Hong Kong
April 2, 1998
F-3
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 2,671,973 $ 2,030,726
Short-term investments .................................................. 1,297,480 1,400,082
Accounts receivable, net of allowance for doubtful accounts of $73,000
in 1996 and $150,000 in 1997 .......................................... 1,590,019 30,686,010
Due from affiliates ..................................................... -- 1,349,732
Account receivable from officer ......................................... 229,551 270,980
Inventory ............................................................... 3,445,807 25,187,800
Prepaid expenses and other current assets ............................... 433,681 1,261,348
Deferred tax asset ...................................................... 135,474 486,236
------------ ------------
Total current assets ..................................................... 9,803,985 62,672,914
Property and equipment, net .............................................. 379,940 2,177,754
Other assets, net ........................................................ 141,775 71,787
Intangible assets, net ................................................... 46,600 3,670,965
------------ ------------
Total assets ............................................................. $ 10,372,300 $ 68,593,420
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit .......................................................... $ 27,701 $ 21,796,446
Accounts payable and bank overdraft ..................................... 3,802,564 16,395,436
Notes payable to affiliate, current portion ............................. -- 412,005
Notes payable to shareholders ........................................... -- 7,173,564
Accrued expenses ........................................................ 279,234 2,745,649
------------ ------------
Total current liabilities ................................................ 4,109,499 48,523,100
Notes payable to affiliate, long-term portion ............................ -- 7,785,120
Shareholders' equity:
Preferred stock, $.01 per value; 1,000,000 shares authorized, none issued
Common stock, $.01 par value; 50,000,000 shares authorized, 10,000,000
shares issued ......................................................... 100,000 100,000
Additional paid-in capital .............................................. 9,900,152 9,900,152
Promissory notes due for purchase of common stock ....................... (5,000,000) (5,000,000)
Retained earnings ....................................................... 1,262,649 7,285,048
------------ ------------
Total shareholders' equity ............................................... 6,262,801 12,285,200
------------ ------------
Total liabilities and shareholders' equity ............................... $ 10,372,300 $ 68,593,420
============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
Net sales ........................................... $13,353,011 $39,060,136 $208,416,612
Cost of products sold ............................... 11,993,097 35,171,566 186,433,089
----------- ----------- ------------
Gross profit ........................................ 1,359,914 3,888,570 21,983,523
Selling expenses .................................... 845,541 1,284,872 10,532,664
General and administrative expenses ................. 1,154,941 1,842,490 4,597,839
Write-off of advances to affiliate .................. -- 980,018 --
----------- ----------- ------------
Total expenses ...................................... 2,000,482 4,107,380 15,130,503
----------- ----------- ------------
Income (loss) from operations ....................... (640,568) (218,810) 6,853,020
Other (income) expense:
Interest expense ................................... 307,305 201,506 1,762,908
Interest and other income .......................... (196,728) (587,154) (581,525)
----------- ----------- ------------
Total other (income) expense ........................ 110,577 (385,648) 1,181,383
----------- ----------- ------------
Income (loss) before income taxes ................... (751,145) 166,838 5,671,637
Income tax benefit .................................. -- (135,474) (350,762)
----------- ----------- ------------
Net income (loss) ................................... $ (751,145) $ 302,312 $ 6,022,399
=========== =========== ============
Net income (loss) per common share:
Basic .............................................. $ (0.08) $ 0.03 $ 0.60
=========== =========== ============
Diluted ............................................ $ (0.08) $ 0.03 $ 0.57
=========== =========== ============
Weighted average number of common shares outstanding:
Basic .............................................. 10,000,000 10,000,000 10,000,000
=========== =========== ============
Diluted ............................................ 10,000,000 10,000,000 10,508,159
=========== =========== ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PROMISSORY
ADDITIONAL NOTES DUE FOR
PAID-IN PURCHASE OF TOTAL
COMMON CAPITAL COMMON RETAINED SHAREHOLDERS'
STOCK (DEFICIENCY) STOCK EARNINGS EQUITY
----------- -------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ............. $ 50,000 $ (49,848) $ -- $1,711,482 $ 1,711,634
Net loss ................................ -- -- -- (751,145) (751,145)
-------- ---------- ------------ ---------- -----------
Balance at December 31, 1995 ............. 50,000 (49,848) -- 960,337 960,489
Issuance of 5,000,000 shares
of common stock for cash
of $3,000,000 and
promissory notes (see Note 8) ......... 50,000 9,950,000 (5,000,000) -- 5,000,000
Net income .............................. -- -- -- 302,312 302,312
-------- ---------- ------------ ---------- -----------
Balance at December 31, 1996 ............. 100,000 9,900,152 (5,000,000) 1,262,649 6,262,801
Net income .............................. -- -- -- 6,022,399 6,022,399
-------- ---------- ------------ ---------- -----------
Balance at December 31, 1997 ............. $100,000 $9,900,152 $ (5,000,000) $7,285,048 $12,285,200
======== ========== ============ ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ........................................... $ (751,145) $ 302,312 $ 6,022,399
Adjustments to reconcile net income (loss) to net cash
(used) provided by operating activities:
Depreciation and amortization of property and
equipment ................................................ 27,846 68,034 222,151
Amortization of intangible assets .......................... 5,000 5,000 108,730
Provision for warranties and product returns ............... -- -- 465,790
Deferred income taxes ...................................... -- (135,474) (350,762)
Provision for bad debts .................................... 54,119 85,348 160,102
Changes in operating assets and liabilities:
Accounts receivable ....................................... 802,544 (785,693) (29,256,093)
Inventory ................................................. (186,788) (1,960,918) (16,905,441)
Prepaid expenses and other current assets ................. (352,096) (81,585) 216,778
Other assets .............................................. (2,217) (94,422) 69,988
Due from affiliates ....................................... (664,738) 701,677 (1,946,247)
Account receivable from officer ........................... (64,738) 2,955 (41,429)
Accounts payable and bank overdraft ....................... 143,477 3,339,391 12,159,818
Accrued expenses .......................................... (665,317) 91,988 1,703,873
------------- ------------- -------------
Net cash (used) provided by operating activities ............ (1,654,053) 1,538,613 (27,370,343)
INVESTING ACTIVITIES
Purchases of short-term investments ......................... (3,405,673) (3,653,038) (2,783,602)
Proceeds from redemptions of short-term investments ......... 3,215,058 3,578,637 2,681,000
Acquisition of Durable Electronics Industries, Limited....... -- -- (1,292)
Purchase of trademark ....................................... -- -- (1,125,000)
Purchases of property and equipment ......................... (41,384) (372,798) (984,319)
------------- ------------- -------------
Net cash used in investing activities ....................... (231,999) (447,199) (2,213,213)
FINANCING ACTIVITIES
Borrowings under line of credit ............................. 10,828,382 21,907,626 98,383,924
Repayments on the line of credit ............................ (10,385,059) (23,760,843) (76,615,179)
Increase in notes payable to shareholders ................... -- -- 7,173,564
Sale of common stock ........................................ -- 3,000,000 --
------------- ------------- -------------
Net cash provided by financing activities ................... 443,323 1,146,783 28,942,309
</TABLE>
F-7
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
---------------- ------------- --------------
<S> <C> <C> <C>
Net (decrease) increase in cash and cash equivalents ......... $ (1,442,729) $2,238,197 $ (641,247)
Cash and cash equivalents, beginning of year ................. 1,876,505 433,776 2,671,973
------------ ---------- ----------
Cash and cash equivalents, end of year ....................... $ 433,776 $2,671,973 $2,030,726
============ ========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid during the year ................................ $ 302,495 $ 214,343 $1,334,914
============ ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Purchase of know-how technology .............................. $ -- $ -- $1,977,613
============ ========== ==========
Payment of notes payable to investors by assignment
of convertible promissory note issued by Windmere
Corporation .................................................. $ -- $2,000,000 $ --
============ ========== ==========
Sale of common stock paid by promissory notes ................ $ -- $7,000,000 $ --
============ ========== ==========
</TABLE>
The consolidated statements of cash flows for the year ended December 31, 1997
excludes the effects of certain noncash activities in connection with the
acquisition of Durable Electronics Industries, Limited. The following is a
summary of the noncash effects of this transaction:
<TABLE>
<S> <C>
Allocation of purchase price:
Inventory ............................................................ $ 4,836,552
Prepaid expenses and other assets .................................... 1,044,445
Account receivable from Newtech Electronics Industries, Inc. ......... 5,457,478
Property and equipment ............................................... 1,035,646
Goodwill ............................................................. 630,482
Note payable ......................................................... (6,219,512)
Accounts payable ..................................................... (5,890,532)
Accrued expenses ..................................................... (296,752)
Due to affiliate ..................................................... (596,515)
------------
$ 1,292
============
</TABLE>
SEE ACCOMPANYING NOTES.
F-8
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. NATURE OF BUSINESS
Newtech Electronics Industries, Inc. (formerly New M-Tech Corporation) and
its wholly-owned subsidiaries (together the Company) design, source,
manufacture, and market high-quality, value-priced brand-name consumer
electronic products. The Company offers a broad line of audio, video and
telecommunications products and selected home appliances, including
televisions, video cassette players and recorders, home audio systems, compact
disc players, cassette players, telephones, and portable microwave ovens. The
Company offers its products under licensed and owned brand names including
White-Westinghouse, Admiral, Philco, Craig and Newtech and also under private
labels. The trademark licenses allow the Company to use the brand name in
specific parts of the world and distribute specific products under these
brands. The Company distributes its products under its own brands on a
worldwide basis.
The Company's business has historically experienced, and the Company
expects to continue to experience, seasonal fluctuations in revenue with a
larger percentage of revenues typically being realized in the third and fourth
fiscal quarters.
Windmere Corporation (Windmere) owns 50% of the Company's outstanding
common stock.
On April 10, 1998, New M-Tech Corporation changed its name to Newtech
Electronics Industries, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newtech
Electronics Industries, Inc. and its wholly-owned subsidiaries, Newtech (Hong
Kong), Ltd. (NTHK), Durable Electronics Industries Limited (DEI), and Newtech
Electronics Industries Limited (NEI) (formerly known as Pomillio, Ltd.). NTHK,
DEI and NEI are foreign corporations organized under the laws of Hong Kong. All
significant intercompany balances and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS
The Company defines as cash equivalents all highly liquid investments with
a maturity of three months or less at the time of purchase.
SHORT-TERM INVESTMENTS
The Company's short-term investments are recorded at cost, which
approximates market value, and are being held to maturity. The short-term
investments are pledged as collateral under the Company's credit facility.
F-9
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INVENTORY
Inventory, consisting primarily of consumer electronic products, is stated
at the lower of cost or market, with cost determined on a first-in, first-out
basis. Inventory cost includes product cost, freight-in, import duties, and
other purchasing costs. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
------------ -------------
<S> <C> <C>
Raw materials .......... $ -- $ 2,209,760
Finished goods ......... 3,445,807 22,978,040
---------- -----------
$3,445,807 $25,187,800
========== ===========
</TABLE>
ACCOUNTS RECEIVABLE
The Company's accounts receivable are primarily due from mass
merchandisers and other retailers. Approximately 39% and 72% of the accounts
receivable balance at December 31, 1996 and 1997, respectively, is due from the
Company's largest customer, Kmart Corporation (Kmart).
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is recorded on the straight-line method over the estimated useful
lives of the related assets, which range from two to seven years.
INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
AMORTIZATION
PERIOD DECEMBER 31,
(YEARS) 1996 1997
------------- ------------ -------------
<S> <C> <C> <C>
Trademarks ............................ 10 $ 62,541 $1,187,541
Purchased know-how technology ......... 6 -- 1,977,613
Goodwill .............................. 5 -- 630,482
--------- ----------
62,541 3,795,636
Accumulated amortization .............. (15,941) (124,671)
--------- ----------
$ 46,600 $3,670,965
========= ==========
</TABLE>
Goodwill represents the excess of cost over fair value of net assets
acquired. The Company reviews the carrying value of intangible assets on an
ongoing basis. When factors indicate that an intangible asset may be impaired,
the Company uses an estimate of the undiscounted future cash flows over the
remaining life of the asset in measuring whether the intangible asset is
recoverable. If such an analysis indicates that impairment has in fact
occurred, the amortized cost of the intangible asset is written down to its
estimated fair value. No such write down has occurred for the years ended
December 31, 1995, 1996 and 1997.
F-10
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenues when title to the goods is passed to the
customer. Generally, this occurs when the products are shipped to its
customers.
Third party manufacturer sales are made in certain circumstances under the
Company's agreement with Kmart (see Note 12). Kmart has the right to procure
the manufacture of products from other manufacturers on behalf of the Company.
In such cases, Kmart pays to the Company the amount payable to the third party
manufacturers plus a percentage of such price. Kmart has the option of paying
third party manufacturers directly or making payment to the Company, in which
case the Company pays the third party manufacturers. In the event that Kmart
fails to make payment to a third party manufacturers, the Company remains
responsible for the payment to the third party manufacturers.
The Company records the purchase price paid to third party manufacturers
and the percentage payable to the Company as revenue and records the amount
payable to the third party manufacturers as cost of products sold. Sales by
third party manufacturers under the Kmart agreement amounted to approximately
$79,100,000 for the year ended December 31, 1997. There were no such sales for
the years ended December 31, 1995 and 1996.
ALLOWANCE FOR WARRANTIES AND PRODUCT RETURNS
The Company's products are generally sold with a warranty. In the case of
defects in material or workmanship, the Company agrees to replace or repair the
defective product without charge during the warranty period, generally ninety
days from the date of sale.
The effect of warranty and product returns is estimated based on
historical experience and sales are recorded net of a provision for estimated
returns. At December 31, 1996 and 1997, the Company's allowance for warranties
and product returns is reflective of the historical claims and returns
experience. In 1995, 1996, and 1997, approximately 97%, 83% and 75%,
respectively, of the Company's gross sales were made under net sales
arrangements whereby the Company's customers are responsible for product
defects. The allowance for warranties and product returns was determined by
management to be zero at December 31, 1995 and 1996 and $465,790 at December
31, 1997.
FOREIGN CURRENCY TRANSACTIONS
Substantially all purchases and sales of the Company's inventory are
denominated in U.S. dollars.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. Deferred
income tax assets and liabilities are determined based upon differences between
the financial statement and income tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion of the
tax assets will not be realized.
F-11
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
NET INCOME (LOSS) PER COMMON SHARE
In 1997, the Company retroactively adopted SFAS No. 128, EARNINGS PER
SHARE. SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share (EPS) with basic and diluted EPS. For the year ended
December 31, 1997, the only difference between the basic and diluted EPS
calculation is the dilutive impact of stock options which are included in the
diluted EPS calculation. For the years ended December 31, 1995 and 1996, there
is no difference between the basic and diluted EPS calculation.
Net income per common share is calculated using the weighted average
number of common shares for the basic EPS presentation, and the weighted
average number of common and common equivalent shares for the diluted EPS
presentation, outstanding during the respective periods.
ACCOUNTING FOR STOCK-BASED COMPENSATION
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, became effective
January 1, 1996. This accounting standard defines a fair value method of
accounting for issuance of stock options and other equity instruments. Under
the fair value method, compensation cost is measured at the grant date based on
the fair value of the award and is recognized over the service period, which is
usually the vesting period. Pursuant to SFAS No. 123, companies are encouraged,
but are not required, to adopt the fair value method of accounting for employee
stock-based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB Opinion No. 25), but are required
to disclose pro forma net income (loss) and per share amounts as if the Company
had applied the new method of accounting.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its employee stock-based transactions and Note 10 shows the pro
forma effects required by SFAS No. 123.
CONCENTRATION OF CREDIT AND OTHER RISKS
Many of the Company's sales involve customers' use of an irrevocable
letter of credit. In those instances where credit is extended, it is based on
the evaluation of the customer's financial condition. Collateral is generally
not required. Credit losses are provided for in the financial statements and
have been within management's expectations.
The Company's products are principally manufactured in the People's
Republic of China (PRC), both at the Company's manufacturing facility and by
independent manufacturers. The Company has also engaged independent
manufacturers in Indonesia, Malaysia, Mexico, Thailand, the United States of
America (U.S.) and the Philippines. Manufacturing in the PRC and in other
foreign countries subjects the Company to the risk that political or economic
upheaval in these countries could cause production disruptions and/or increases
to its costs, although no such events have occurred in the past several years.
Presently, products imported into the U.S. from the PRC are subject to
favorable duty rates based on the "Most Favored Nation" status of the PRC (MFN
Status). MFN Status is reviewed on an annual basis by the President and
Congress of the U.S. If political or economic instability in the PRC develops
or if higher duties were applied to imports into the U.S., the Company could
experience an adverse impact on its cost of sales and earnings.
F-12
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accordingly, actual results could differ from those
reported.
NEW ACCOUNTING PRONOUNCEMENTS
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in financial
statements. SFAS No. 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. The Company is in the process of
evaluating the disclosure requirements of SFAS No. 130. The adoption of SFAS
No. 130 is not expected to have a material impact on the Company's consolidated
operations, financial condition or cash flows.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in annual financial
statements and in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. Financial
statement disclosures for prior periods are required to be restated. The
Company is in the process of evaluating the disclosure requirements of SFAS No.
131. The adoption of SFAS No. 131 will have no impact on the Company's
consolidated operations, financial condition or cash flows.
3. ACQUISITION
On October 1, 1997, the Company purchased DEI's rights to certain
technology consisting of the know-how, experience, use of certain computer
software, drawings and other technical information (know-how technology). At
the time, DEI was a wholly-owned subsidiary of Durable Metal Factory Limited
(DEM), a subsidiary of Windmere-Durable Holdings, Inc. DEI, which was
incorporated on December 11, 1996, operates a manufacturing facility located in
the PRC which the Company utilizes for the production of audio products. The
purchase price for the know-how technology was determined by management to be
$1,977,613 and was paid for by the Company in the form of a note payable to
DEI. The terms of the note payable require an $82,403 payment on March 3, 1998
and 23 equal quarterly installments of $82,400 beginning on March 31, 1998. The
unpaid balance bears interest at one percent above the prime rate, as defined
(9.5% at December 31, 1997). Interest is payable quarterly. DEI assigned the
note payable to DEM on November 1, 1997. This note payable to affiliate has
been guaranteed by the Company.
On November 1, 1997, NEI purchased all the outstanding shares of common
stock of DEI, in exchange for $1,292 in cash. The acquisition was accounted for
as a purchase and accordingly,
F-13
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITION--(CONTINUED)
operations of DEI have been reflected in the consolidated statement of
operations from November 1, 1997. The purchase price exceeded the fair value of
the net assets acquired by approximately $630,000. This amount was classified
as goodwill and is being amortized over five years. Included in the net assets
acquired is the assumption of a note payable to DEM of $6,219,512, which is to
be repaid on October 31, 2003 and bears interest at one percent above the prime
rate, as defined (9.5% at December 31, 1997). This note payable to affiliate
has been guaranteed by the Company.
DEM has also agreed to loan up to $500,000 on a demand basis to DEI, the
amount of which loan may be increased at the sole discretion of DEM. The
proceeds of the loan may be used for equipment acquisitions and working capital
needs. Unless demand is made prior to such time, the loan will be payable on
October 31, 2003 and will bear interest at one percent above the prime rate, as
defined (9.5% at December 31, 1997). At December 31, 1997, DEM had not made any
loan advances to DEI. Any advances to DEI will be guaranteed by the Company.
The following table summarizes, on an unaudited pro forma basis, the
result of operations for the year ended December 31, 1997, as though the
acquisition of DEI had occurred as of the beginning of the year (IN THOUSANDS,
EXCEPT PER SHARE DATA):
<TABLE>
<S> <C>
Net sales .......................... $ 208,417
Income before income taxes ......... 3,714
Net income ......................... 4,065
Earnings per share: ................
Basic ............................. 0.41
Diluted ........................... 0.39
</TABLE>
4. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES -----------------------------
(IN YEARS) 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Machinery and equipment .......... 5 $ 147,638 $ 949,240
Furniture and fixtures ........... 7 122,485 443,124
Automobiles ...................... 5 10,925 16,408
Molds and tools .................. 3 164,700 759,361
Leasehold improvements ........... 2-4 61,050 358,631
---------- ----------
506,798 2,526,764
Accumulated depreciation ......... (126,858) (349,010)
---------- ----------
$ 379,940 $2,177,754
========== ==========
</TABLE>
At December 31, 1997, DEI had entered into commitments to purchase certain
molds amounting to $333,850.
5. LINE OF CREDIT
On July 31, 1995, the Company entered into a $14 million credit facility
with a bank which provided up to $5 million in direct borrowings, with the
balance available for letters of credit. On
F-14
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LINE OF CREDIT--(CONTINUED)
July 23, 1997, the Company replaced the $14 million credit facility with a new
credit facility with the existing lender and two additional banks. Direct
borrowings under the credit facility are subject to an availability calculation
based on the eligible borrowing base. The credit facility provides for
aggregate borrowings and issuances of letters of credit of up to $37 million,
of which $32 million may be used for direct borrowings. At December 31, 1997,
direct borrowings under the credit facilities were $21,796,446 ($27,701 at
December 31, 1996) and outstanding letters of credit for the purpose of
purchasing inventory totaled $6,209,021 ($4,651,000 at December 31, 1996). The
outstanding balance under the credit facility accrues interest at the prime
rate, as defined (8.5% at December 31, 1997) for direct borrowings under $10
million and at the prime rate plus 1% (9.5% at December 31, 1997) for
borrowings over $10 million. The credit facility expires June 30, 1998 and is
secured by all assets of the Company and certain guarantees of the
shareholders.
At December 31, 1997, based on the availability calculation, approximately
$7.5 million of additional borrowings was available under this credit facility.
The credit facility contains certain covenants that, among other things,
restrict the payment of dividends and restrict additional indebtedness and
obligations, and require maintenance of certain financial ratios.
6. NOTES PAYABLE TO AFFILIATE AND SHAREHOLDERS
Notes payable to affiliate and shareholders, at December 31, 1997, are as
follows:
<TABLE>
<S> <C>
Notes payable to affiliate ............ $ 8,197,125
Notes payable to shareholders ......... 7,173,564
-----------
15,370,689
Less current portion .................. 7,585,569
-----------
Long-term portion ..................... $ 7,785,120
===========
</TABLE>
In June 1997, Windmere, a shareholder, provided the Company with a $2
million loan for working capital purposes. The loan bears interest at the rate
of two percent above the prime rate, as defined (10.5% at December 31, 1997),
is unsecured and payable on demand. At December 31, 1997 the outstanding
balance on this loan was $2 million. Interest paid to Windmere on this loan for
the year ended December 31, 1997 amounted to approximately $111,000.
In September 1997, Windmere provided the Company with a revolving loan
which was evidenced by a note in the principal amount of $3,091,352, to be used
for working capital purposes. The revolving note is payable on demand at any
time on or after December 31, 1997 and pays interest at two percent above the
prime rate, as defined (10.5% at December 31, 1997). In the event that the
Company fails to pay any amounts due under the revolving note, Windmere will be
entitled to offset any such amounts by a reduction of the $5 million promissory
notes payable to the Company by Windmere (see Note 8). At December 31, 1997,
the outstanding balance of this revolving note was $3,067,701. Interest paid to
Windmere on this note for the year ended December 31, 1997 amounted to
approximately $61,000.
In July 1997, a shareholder provided the Company with a $2 million loan
for working capital purposes. The loan bears interest at the rate of two
percent above the prime rate, as defined (10.5% at
F-15
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. NOTES PAYABLE TO AFFILIATE AND SHAREHOLDERS--(CONTINUED)
December 31, 1997), is unsecured and payable on demand. At December 31, 1997,
the outstanding balance on this loan totals $2,105,863, including $105,863 of
accrued interest.
In connection with the October 1, 1997 purchase of DEI's rights to certain
know-how technology, NEI entered into a $1,977,613 note payable to DEI. DEI
assigned the note payable to DEM on November 1, 1997. The terms of the note
require an $82,403 payment on March 3, 1998 and 23 equal quarterly installments
of $82,400 beginning on March 31, 1998. The unpaid balance bears interest at
one percent above the prime rate, as defined (9.5% at December 31, 1997).
Interest is payable quarterly.
DEI has a note payable to DEM of $6,219,512 which is to be repaid on
October 31, 2003 and bears interest at one percent above the prime rate, as
defined (9.5% at December 31, 1997). Interest is payable quarterly.
Maturities of the notes payable to affiliate as of December 31, 1997, are
as follows:
<TABLE>
<S> <C>
1998 ............... $ 412,005
1999 ............... 329,604
2000 ............... 329,604
2001 ............... 329,604
2002 ............... 329,604
2003 ............... 6,466,704
----------
Total .............. $8,197,125
==========
</TABLE>
7. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, short-term investments,
accounts receivable, amounts due under the line of credit, accounts payable and
accrued expenses approximate fair value because of their short duration to
maturity. The carrying amounts of the notes payable to affiliate and notes
payable to shareholders approximates fair value because their interest rates
are tied to a quoted variable index.
8. EQUITY TRANSACTIONS
On April 15, 1996, the Company effected a reverse one-for-two stock split
and issued five million shares of common stock to Windmere pursuant to a stock
purchase agreement between the Company and Windmere (the Stock Purchase
Agreement). As part of this transaction, the Company's then sole shareholder
contributed all of his shares in NTHK to the Company in a transaction that was
accounted for using the pooling of interests method of accounting and,
accordingly, the Company's consolidated financial statements were restated to
include the accounts and operations of NTHK for the periods prior to the
transaction.
F-16
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. EQUITY TRANSACTIONS--(CONTINUED)
Combined and separate results of the merged entities are presented in the
following table:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, THROUGH APRIL 15,
1995 1996
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
Net sales ..............................
Newtech Electronics Industries ......... $ 2,254,301 $ 429,294
NTHK ................................... 11,098,710 1,163,510
----------- ------------
Combined ............................... $13,353,011 $ 1,592,804
=========== ============
Net income (loss) ......................
Newtech Electronics Industries ......... $ (966,981) $ (377,416)
NTHK ................................... 215,836 (1,166,858)
----------- ------------
Combined ............................... $ (751,145) $ (1,544,274)
=========== ============
</TABLE>
The Stock Purchase Agreement called for Windmere to pay $10 million in
exchange for 5,000,000 shares of the Company's common stock, issued by the
Company payable as follows: $3 million in cash and the issuance, by Windmere,
of three notes: a $3 million, 8% promissory note due April 15, 1998; a $2
million, 8% promissory note due April 15, 2001; and a $2 million convertible
promissory note due April 15, 2001. The $2 million convertible promissory note
was simultaneously assigned to the holders of $2 million in notes payable by
the Company in exchange for the notes payable.
9. INCOME TAXES
The components of the benefit for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997
------ ------------- -------------
<S> <C> <C> <C>
Current ................ $-- $ -- $ --
Deferred--U.S. ......... -- (135,474) (350,762)
--- ---------- ----------
Total .................. $-- $ (135,474) $ (350,762)
=== ========== ==========
</TABLE>
The differences between the reported benefit from income taxes and income
taxes computed at the U.S. statutory federal income tax rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1996 1997
-------------- ------------- ---------------
<S> <C> <C> <C>
Income tax expense (benefit) computed at the U.S.
statutory rate of 34% .............................. $ (255,389) $ 56,725 $ 1,928,357
Change in deferred tax valuation allowance .......... 381,598 (452,571) --
Effect of non-U.S. operations and tax rates ......... (73,384) (85,600) (2,264,472)
Remitted earnings of foreign subsidiary ............. -- 286,421 --
Other, net .......................................... (52,825) 59,551 (14,647)
---------- ---------- ------------
Total ............................................ $ -- $ (135,474) $ (350,762)
========== ========== ============
</TABLE>
F-17
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES--(CONTINUED)
Significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward .......... $135,887 $261,168
Allowance for bad debts .................. -- 56,445
Warranties ............................... -- 175,277
Allowance for depreciation ............... -- 1,285
-------- --------
Total current deferred tax asset ......... 135,887 494,175
Deferred tax liability:
Miscellaneous accruals ................... (413) (7,939)
-------- --------
Net deferred tax asset ................... $135,474 $486,236
======== ========
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards for
income tax purposes of approximately $695,000, which expire in various amounts
in the year from 2010 to 2012. No valuation allowance has been established for
the net deferred tax asset, because, in the opinion of management, the deferred
tax asset will be realized.
The income (loss) before provision for income taxes consisted of the
following for the year ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
United States .......... $ (966,980) $ (84,929) $ (988,573)
Non--U.S. .............. 215,835 251,767 6,660,210
---------- ---------- ----------
Total ................ $ (751,145) $ 166,838 $5,671,637
========== ========== ==========
</TABLE>
U.S. income taxes have not been provided on the undistributed earnings of
the Company's foreign subsidiaries because the Company intends to reinvest
these earnings indefinitely. Cummulative undistributed earnings of the
Company's foreign subsidiaries amounted to approximately $2,694,800, $2,154,200
and $7,486,600 at December 31, 1995, 1996 and 1997, respectively.
10. COMMON STOCK
On April 3, 1998, the Company amended and restated its Articles of
Incorporation to increase the number of shares of authorized capital stock to
51,000,000 shares, consisting of 50,000,000 shares of common stock, par value
$.01 per share and 1,000,000 shares of preferred stock, par value $.01.
On April 3, 1998, the Company effected a stock split of 10,000 for one.
The financial statements have been restated to give retroactive recognition to
the stock split in the prior periods, including all references in the financial
statements to number of shares and per share amounts.
On February 28, 1997, the Company adopted the 1997 Stock Option Plan (the
Plan). Pursuant to the terms of the Plan, incentive stock options and
non-qualified stock options may be granted to eligible employees, consultants,
directors and independent contractors of the Company, or its subsidiaries. The
Company has reserved 1,000,000 shares of its common stock for issuance under
the Plan. The vesting period and the terms of the incentive stock options and
the non-qualified stock options granted are
F-18
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMON STOCK--(CONTINUED)
administered by either a Committee established by the Board of Directors (the
Committee) or the Board of Directors. Upon adoption of the Plan, the Company
granted non-qualified stock options to its employees to purchase 618,700 shares
of its common stock at an exercise price of $2.00 per share. The $2.00 exercise
price was determined by the Board of Directors to be the fair value of the
underlying common stock at the date of grant. On October 27, 1997 and November
30, 1997, non-qualified stock options amounting to 29,900 and 400,
respectively, were granted to employees pursuant to the Plan. The exercise
price of these non-qualified stock options is $4.00 and was determined by the
Board of Directors to be the fair value of the underlying common stock at the
date of grant. As a result, no compensation cost has been recognized under the
provisions of APB Opinion No. 25. At December 31, 1997, 351,000 shares remained
available for future grants. Options vest one fifth each year beginning on the
first anniversary of the date of grant and become 100% vested on the fifth
anniversary of the date of grant. At December 31, 1997, none of these options
were vested. The non-qualified stock options expire no later than ten years
from the date of grant.
The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for the Plan. Had
compensation cost for the Plan been determined based on the fair value of the
stock options on the grant date for awards issued in 1997 consistent with the
provisions of SFAS No. 123, the Company's net earnings and EPS would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
---------------
<S> <C>
Net income--pro forma ....................... $ 5,986,932
Basic earnings per share--pro forma ......... 0.60
Diluted earnings per share--pro forma ....... 0.57
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Minimum Value fair value model with the following weighted-average
assumptions used for grants in 1997: dividend yield of 0.0%; risk-free interest
rate of 6.39% and average expected life of five years.
At December 31, 1997, the weighted average exercise price of the options
outstanding is $2.10 and the weighted average remaining contractual life of
those options is four years.
11. RELATED PARTY TRANSACTIONS
In June 1997, the Company entered into an agreement with F Fifty Holdings,
Inc. for the lease of a jet aircraft. F Fifty Holdings, Inc. is wholly owned by
a shareholder of the Company. The term of the lease is from June 1, 1997
through June 30, 2007 and requires annual rental payments of $150,000. The
Company also pays an additional hourly fee at the current market rate based on
the utilization of the aircraft. The Company made payments to F Fifty Holdings,
Inc. amounting to approximately $246,000 for the year ended December 31, 1997.
The Company provided this affiliated entity a noninterest bearing advance of
$330,000, which is included in due from affiliates at December 31, 1997. The
Company received $90,000 from Windmere for the use of the aircraft during the
year ended December 31, 1997.
Also included in due from affiliates at December 31, 1997 is $125,000 due
from Electronics Industries of America, Inc., an inactive entity which is
wholly owned by the shareholders of the Company and holds a license to
distribute microwave ovens under the Philco brand name. On April 3,
F-19
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. RELATED PARTY TRANSACTIONS--(CONTINUED)
1998 this entity was merged into Newtech Electronics Industries, Inc. with
Newtech Electronics Industries, Inc. being the surviving entity.
Windmere provides the Company with certain administrative services with
respect to DEI for a monthly management fee of approximately $11,800. Since the
date of the DEI acquisition, the Company has paid Windmere a total of
approximately $93,200. Additionally, DEM pays certain expenses on behalf of DEI
and collects accounts receivable on behalf of DEI. At December 31, 1997, DEM
owed DEI $829,014.
The Company has an unsecured loan receivable from a shareholder, due on
demand and bearing interest at 7% per annum. The outstanding balance of this
loan amounted to $229,551 and $270,980 at December 31, 1996 and 1997,
respectively. Interest income on the loan amounted to $15,125, $16,374 and
$17,519 for the years ended December 31, 1995, 1996 and 1997, respectively.
During 1997, the Company entered into various notes payable to affiliate
and shareholders (see Note 6). Interest expense associated with these notes
amounted to $465,643 for the year ended December 31, 1997. Of this amount,
$359,780 related to interest on the notes payable to Windmere and its
affiliate.
In certain instances Windmere may pay for expenditures on behalf of the
Company which are reimbursed by the Company. Amounts payable to Windmere for
these expenditures totaling $0 and $1,099,549 are included in accounts payable
at December 31, 1996 and 1997, respectively.
The Company made payments to a shareholder amounting to $72,000 and
$42,000 for the years ended December 31, 1996 and 1997, respectively, for the
use of his personal assets as collateral on the Company's credit facility (see
Note 5).
On April 15, 1996, the Company entered into an agreement with Windmere
which resulted in the issuance to the Company of $5 million in promissory notes
(see Note 8). Interest income on these promissory notes amounted to $284,931
and $400,000 for the years ended December 31, 1996 and 1997, respectively.
Accrued interest receivable on these promissory notes amounted to $100,822 at
December 31, 1996 and 1997. This amount is included in prepaid expenses and
other assets.
During 1996, Newtech Do Brazil, a company under common ownership and
control, closed its operations. As a result, the Company wrote off $980,018 due
from this affiliate. Sales to Newtech Do Brazil amounted to $1,395,000 and
$502,541 for the years ended December 31, 1995 and 1996, respectively.
12. SUPPLY CONTRACT AND SIGNIFICANT CUSTOMERS
The Company entered into a seven and a half year supply contract with
Kmart on January 27, 1997, pursuant to which the Company appointed Kmart as the
exclusive discount department store to market and sell a broad range of audio,
video and telecommunications products in the U.S. under the White-Westinghouse
brand name. The agreement provides for minimum purchases, subject to
adjustment, by Kmart applied to specific product categories. The minimum
purchases by Kmart increase from $135 million for the 18 month period ending
June 30, 1998 to $171 million for the 12 month period ending June 30, 2004.
Sales to Kmart, amounted to approximately $0, $14,441,000, and $158,734,000 in
1995, 1996, and 1997, respectively, representing 0%, 37% and 76% of net sales
in each of these years, respectively.
F-20
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. SUPPLY CONTRACT AND SIGNIFICANT CUSTOMERS--(CONTINUED)
Sales to certain other customers, each constituting 10% or more of total
sales, were approximately $7,172,000, $22,040,000 and $0 for the years ended
December 31, 1995, 1996 and 1997, respectively.
The Company had sales to unrelated customers outside the U.S. of
approximately $5,527,000, $6,204,000 and $9,084,000 for the years ended
December 31, 1995, 1996 and 1997, respectively. These sales were made
principally to customers in Mexico, Central, and South America and the
Caribbean.
13. GEOGRAPHIC INFORMATION
The Company operates predominantly in a single industry: the design,
sourcing, manufacturing, and marketing of high-quality, value-priced brand-name
consumer electronic products. While the Company offers a wide range of items
for sale, many of them are manufactured at common production facilities and
marketed by a common sales force.
In addition to its U.S. operations, the Company has subsidiaries in Hong
Kong. All significant intercompany revenues and expenses are eliminated in
computing revenues and operating income.
Segment information by geographic area for the three years ended December
31, 1995, 1996, and 1997 is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
UNITED STATES
Net sales ...................... $ 2,254,301 $14,852,520 $129,530,298
Loss from operations ........... (1,447,307) (378,375) (714,324)
Identifiable assets ............ 3,324,919 7,086,477 51,667,843
HONG KONG
Net sales ...................... 11,098,710 24,207,616 78,886,314
Income from operations ......... 806,739 159,565 7,567,344
Identifiable assets ............ 2,166,908 3,285,823 16,925,577
</TABLE>
F-21
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMITMENTS AND CONTINGENCIES
The Company leases office space and a manufacturing facility under
operating leases which expire at various dates through 2001. The Company also
leases an aircraft from a corporation that is wholly-owned by a shareholder of
the Company through June 30, 2007 (see Note 11).
Future minimum payments under operating leases at December 31, 1997 are
approximately as follows:
<TABLE>
<S> <C>
Year ending December 31: .........
1998 ............................ $ 621,800
1999 ............................ 632,600
2000 ............................ 484,000
2001 ............................ 504,000
2002 ............................ 150,000
Thereafter ....................... 675,000
----------
Total ............................ $3,067,400
==========
</TABLE>
Total rent expense for the years ended December 31, 1995, 1996 and 1997
was approximately $96,000, $130,000 and $714,000, respectively.
The Company has license agreements with White Consolidated Industries,
Inc. (White Consolidated). The initial term of the agreement is through
December 31, 1998, and may be extended at the Company's option for up to
fourteen one-year renewal terms through December 31, 2012. The current level of
royalty payments are in excess of the minimum requirements. The Company also
has various license agreements with other parties which may be extended at the
Company's option, with renewal terms ranging from December 31, 2012 to December
31, 2014. The agreements are typically renewable upon mutual consent. These
license agreements require royalty payments based on the sales of licensed
product in a given period. Total royalties paid under these agreements,
including the White Consolidated agreement, were $31,000, $339,000 and
$2,902,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
Future minimum royalty guarantees, at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1998 .................. $ 3,405,000
1999 .................. 3,025,000
2000 .................. 3,025,000
2001 .................. 3,025,000
2002 .................. 3,025,000
2003 .................. 325,000
-----------
Total .................. $15,830,000
===========
</TABLE>
The Company, White Consolidated, Windmere and certain other parties have
been named as defendants in litigation filed by Westinghouse Electric
Corporation (Westinghouse) in the United States District Court for the Western
District of Pennsylvania on December 18, 1996. The action arises from a dispute
between Westinghouse and White Consolidated over rights to use the
"Westinghouse" trademark for consumer products, based on transactions between
Westinghouse and White Consolidated in the 1970's and the parties' subsequent
conduct. Procedural motions concerning the
F-22
<PAGE>
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
jurisdiction in which the dispute should be heard have been filed by the
parties. The action seeks, among other things, a preliminary injunction
enjoining the defendants from using the trademark, unspecified damages and
attorneys' fees. Pursuant to the Company's license agreements with White
Consolidated, White Consolidated is defending the Company and is obligated to
indemnify the Company from and against any and all costs and expenses of
claims, losses and damages arising out of the action, including the costs of
litigation.
15. SUBSEQUENT EVENTS (UNAUDITED)
On April 16, 1998, the Company received a Commitment Letter from National
Bank of Canada for a $105 million revolving credit facility to repay all
outstanding amounts under its current credit facility and all of its
shareholder indebtedness and to finance working capital requirements, including
trade financing activities. The new credit facility will include a $2.0 million
sub-facility for the issuance of standby letters of credit and a $10.0 million
sub-facility for the creation of bankers' acceptances. The new credit facility
will have a term of three years and be secured by substantially all of the
Company's assets. Under the facility, the Company will be required to comply
with certain financial covenants and will be subject to limitations on capital
expenditures and capital and other distributions. Availability under the credit
facility will be based on a formula of eligible receivables, inventories and
letters of credit issued by the Company. Availability based on accounts
receivable will range from 40% for unsecured foreign accounts receivable to 90%
for accounts receivable from certain customers that are secured by a standby
letter of credit. Interest on advances under the revolving credit facility will
be based on the Company's leverage ratio which enable the Company to select
either the prime rate or LIBOR plus a percentage, as defined.
F-23
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer contained herein, and if given or made,
such information or representation must not be relied upon as having been
authorized by the Company, the Selling Shareholders or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy, shares of Common Stock in any jurisdiction where or to any person to
whom it is not lawful to make any such offer or solicitation in such
jurisdiction or in which the person making such offer or solicitation is not
qualified to do so. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Prospectus Summary ........................... 3
Risk Factors ................................. 7
Use of Proceeds .............................. 17
Dividend Policy .............................. 17
Capitalization ............................... 18
Dilution ..................................... 19
Selected Consolidated Financial Data ......... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 21
Business ..................................... 28
Management ................................... 39
Certain Transactions ......................... 44
Principal and Selling Shareholders ........... 47
Description of Capital Stock ................. 48
Shares Eligible for Future Sale .............. 51
Certain United States Tax Consequences to
Non-U.S. Holders .......................... 53
Underwriting ................................. 55
Legal Matters ................................ 56
Experts ...................................... 56
Additional Information ....................... 56
Index to Financial Statements ................ F-1
</TABLE>
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS, 1998
[LOGO]
Shares
Newtech Electronics Industries, Inc.
Common Stock
SBC Warburg Dillon Read Inc.
Jefferies & Company, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions) of
the sale of the shares of Common Stock are as follows:
<TABLE>
<S> <C>
SEC registration fee ....................... $ 30,533
NASD filing fee ............................ 10,850
Nasdaq National Market listing fee ......... *
Legal fees and expenses .................... *
Accounting fees and expenses ............... *
Printing and engraving expenses ............ *
Transfer agent and registrar fees .......... 10,000
Miscellaneous fees and expenses ............ *
--------
Total ...................................... $
========
</TABLE>
- ----------------
* To be provided by amendment.
All amounts, except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq National Market listing fee, are
estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the FBCA to
indemnify its directors and officers to the extent provided for in such
statute. The Registrant's Amended and Restated Articles of Incorporation
provide that the Registrant will indemnify and may insure its officers and
directors to the full extent not prohibited by law. The Registrant has also
entered into an agreement (the form of which is filed as Exhibit 10.1 hereto)
with each of its directors and executive officers where it has agreed to
indemnify each of them to the fullest extent permitted by law. In general,
Florida law permits a Florida corporation to indemnify its directors, officers,
employees and agents, and persons serving at the corporation's request in such
capacities for another enterprise, against liabilities arising from conduct
that such persons reasonably believed to be in, nor not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Pursuant to the Underwriting Agreement to be filed as Exhibit 1.1 to this
Registration Statement, the Underwriter has agreed to indemnify the directors,
officers and controlling persons of the Registrant against certain civil
liabilities that may be incurred in connection with the Offering, including
certain liabilities under the Securities Act of 1933, as amended,
Section of the Underwriting Agreement (to be filed as Exhibit 1.1 to
this Registration Statement) provides that the Underwriters severally and not
jointly will indemnify and hold harmless the Registrant and each director,
officer and controlling person of the Registrant from and against any liability
caused by any statement or omission in the Registration Statement, in the
Prospectus, in any Preliminary Prospectus or in any amendment of supplement
thereto, in each case to the extent that the statement or omission was made in
reliance upon and in conformity with written information furnished to the
Registrant by the Underwriters expressly for use therein.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities that were not registered under the Securities Act have been
issued or sold by the Registrant within the past three years except as follows:
<TABLE>
<CAPTION>
DATE OF SALE
AMOUNT AND TYPE OF SECURITIES OR ENTITLEMENT PURCHASER(S) CONSIDERATION
- ---------------------------------- ---------------- ------------------------------- --------------
<S> <C> <C> <C>
5,000,000 shares of Common Stock April 16, 1996 Windmere Holdings Corporation $10,000,000
</TABLE>
The aforementioned issuances and sales were made in reliance upon the
exemption from the registration provisions of the 1933 Act afforded by Section
4(2) thereof and/or Regulation D promulgated thereunder, as transactions by an
issuer not involving a public offering. The purchasers of the securities
described above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities may not be offered, sold or
transferred other than pursuant to an effective registration statement under
the 1933 Act, or an exemption from such registration requirements. The
Registrant will place stop transfer instructions with its transfer agent with
respect to all such securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Articles of Amendment to Articles of Incorporation filed April 10, 1998.
3.3 Amended and Restated Bylaws of the Registrant.
4.1 See Exhibits 3.1 and 3.2 for provisions in the Registrant's Articles of Incorporation and Bylaws
defining the rights of holders of the Registrant's Common Stock.
4.2 Form of Registrant's Common Stock Certificate.*
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. with respect to legality
of the Common Stock being issued.*
10.1 Form of Indemnification Agreement between the Registrant and each of its directors and
executive officers.
10.2 Registrant's 1997 Stock Option Plan.
10.3+ Trademark User Agreement dated as of October 1, 1993 among Maytag Corporation, Maytag
International, Inc., the Registrant and Newtech (Hong Kong) Ltd.
10.4+ Trademark License Agreement dated as of May 1, 1996 between the Registrant and White
Consolidated Industries, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.5 + Trademark License Agreement dated as of September 15, 1997 between the Registrant and
White Consolidated Industries, Inc.
10.6 + Trademark License Agreement dated as of September 15, 1997 between the Registrant and
White Consolidated Industries, Inc.
10.7 Purchase and Distribution Agreement dated as of January 6, 1997 between the Registrant and
AAAA World Import Export, Inc.
10.8 + Purchase, Distribution and Marketing Agreement dated as of January 27, 1997 between the
Registrant and Kmart Corporation.
10.9 Guaranty dated January 27, 1997 among Windmere-Durable Holdings, Inc., Kmart
Corporation and the Registrant.
10.10 Indemnification Agreement dated as of January 23, 1997 among White Consolidated
Industries, Inc., Kmart Corporation and Windmere-Durable Holdings, Inc.
10.11 Deed of Assignment of Industrial Know-How dated as of October 1, 1997 between Durable
Electronics Industries Limited and Pomillo Limited
10.12 Loan Agreement dated as of October 1, 1997 among Durable Electronics Industries Limited,
Pomillo Limited and the Registrant relating to a $1,977,613 loan to Pomillo Limited.
10.13 Agreement for the Sale and Purchase of Shares of Durable Electronics Industries Limited
dated as of November 1, 1997 between Durable Electrical Metal Factory Limited and Pomillo
Limited.
10.14 Deed of Assignment dated as of November 1, 1997 among Durable Electronics Industries
Limited, Durable Electrical Metal Factory Limited and Pomillo Limited.
10.15 Loan Agreement dated as of November 1, 1997 among Durable Electrical Metal Factory
Limited, Durable Electronics Industries Limited and the Registrant relating to a $6,219,512
loan to Durable Electronics Industries Limited
10.16 Working Capital Loan Agreement dated as of November 1, 1997 among Durable Electrical
Metal Factory Limited, Durable Electronics Industries Limited and the Registrant relating to a
$500,000 loan to Durable Electronics Industries Limited.
10.17 Purchase Agreement dated as of December 8, 1997 between BT Commercial Corporation and
the Registrant.
10.18 Product Support Agreement dated October 1996 between VAC Service Corp. and the
Registrant.
10.19 Lease Agreement, dated December 19, 1997 between H. Joel Rahn as lessor and the
Registrant as lessee.
10.20 Tenancy Agreement dated November 19, 1997 between the Registrant and Lai Sun
Development Registrant Limited
10.21 Aircraft Lease dated as of June 1, 1997 between the Registrant and F Fifty Holdings, Inc.
10.22 Charge dated November 1, 1997 between Durable Electronics Industries Limited and Durable
Electrical Metal Factory Limited.
10.23 Credit Agreement dated as of July 23, 1997 by and among the Registrant and Newtech (Hong
Kong) Limited, as Borrowers, and Bank Leumi Le-Israel B.M., Comerica Bank and National
Bank of Canada, as the Banks, and Bank Leumi Le-Israel B.M., as the Agent, as amended.
10.24 Indemnification and Security Agreement dated as of September 18, 1997 of the Registrant in
favor of Windmere Durable-Holdings, Inc.
10.25 Letter Agreement dated as of September 16, 1997 among Joel Newman, Windmere Durable-
Holdings, Inc. and the Registrant.
10.26 Guaranty Agreement dated as of July 23, 1997 among Joel Newman and Bank Leumi Le-Israel B.M.,
as Agent for the Banks named therein.
10.27 Guaranty Agreement dated as of July 23, 1997 among Windmere Durable-Holdings, Inc. and
Bank Leumi Le-Israel B.M., as Agent for the Banks named therein, as amended.
10.28 Promissory Note of the Registrant in the principal amount of $2,000,000 payable to Windmere
Holdings Corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.29 Revolving Note of the Registrant in the principal amount of $3,091,352 payable to Windmere
Holdings Corporation.
10.30 Promissory Note of the Registrant in the principal amount of $2,000,000 payable to Joel
Newman.
10.31 Promissory Note of Windmere Holdings Corporation in the principal amount of $3,000,000
payable to the Registrant.
10.32 Promissory Note of Windmere Holdings Corporation in the principal amount of $2,000,000
payable to the Registrant.
10.33 Lease Agreement dated as of December 16, 1996 between Durable Electronics Industries
Limited and the Shenzhen Buji District Economic Development Company.
10.34 Employment Agreement dated as of April 15, 1998 between the Registrant and Joel Newman.
10.35 Employment Agreement dated as of April 15, 1998 between the Registrant and Hatch Masuda.
10.36 Employment Agreement dated as of April 15, 1998 between the Registrant and Leonor
Schuck.
10.37 Registration Rights Agreement dated as of April 15, 1998 among the Registrant, Joel Newman
and Windmere Holdings Corporation.
21.1 List of subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Grant Thornton.
23.3 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A. (included in its opinion
to be filed as Exhibit 5.1).*
24.1 Powers of Attorney of Directors and Executive Officers (included on the Signature Page of
this Registration Statement).
27 Financial Data Schedule.
</TABLE>
- ----------------
* To be filed by amendment.
+ Certain provisions of this exhibit have been omitted and are subject to a
request for confidential treatment filed with the Securities and Exchange
Commission.
(b) The following financial statement schedules have been filed with this
Registration Statement:
<TABLE>
<S> <C>
Schedule II-Valuation and Qualifying Accounts ......... S-1
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
II-4
<PAGE>
(i) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on this 14th day of May, 1998.
NEWTECH ELECTRONICS INDUSTRIES, INC.
By: /S/ JOEL NEWMAN
-----------------------------------
Joel Newman
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Newtech Electronics Industries,
Inc. hereby constitute and appoint Joel Newman and Leonor Schuck and each of
them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact and
agents with full power to execute in our name and behalf in the capacities
indicated below any and all amendments (including Rule 462(b) amendments,
post-effective amendments and amendments thereto) to this Registration
Statement and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully in all intents and purposes as
he might or could do in person, and hereby ratify and confirm that such
attorneys-in-fact, or either of them, or their substitutes shall lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ JOEL NEWMAN Chairman, President and May 14, 1998
- ---------------------- Chief Executive officer
Joel Newman
/S/ LEONOR SCHUCK
- ---------------------- Vice President, Finance and May 14, 1998
Leonor Schuck Chief Financial Officer
(principal accounting officer)
/S/ NOEL SHAPIRO
- ---------------------- Director May 14, 1998
Noel Shapiro
/S/ DAVID M. FRIEDSON
- ---------------------- Director May 14, 1998
David M. Friedson
/S/ ARNOLD THALER
- ---------------------- Director May 14, 1998
Arnold Thaler
</TABLE>
II-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Newtech Electronics Industries, Inc.
We have audited the consolidated financial statements of Newtech
Electronics Industries, Inc. and subsidiaries as of December 31, 1996 and 1997,
and for each of the three years in the period ended December 31, 1997, and have
issued our report thereon dated April 3, 1998 (included elsewhere in this
Registration Statement). Our audits also included the financial schedule listed
in Item 16(b) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Miami, Florida
April 3, 1998 /s/ ERNST & YOUNG LLP
S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
NEWTECH ELECTRONICS INDUSTRIES, INC. AND SUBSIDIARIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts .................... $71,513 $ 54,119 $ 103,932 $ 21,700
------- ---------- ---------- ---------
YEAR ENDED DECEMBER 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts .................... $21,700 $ 85,348 $ 34,048 $ 73,000
------- ---------- ---------- ---------
YEAR ENDED DECEMBER 31, 1997
Deducted from asset accounts:
Allowance for doubtful accounts .................... $73,000 $ 160,102 $ 83,102 $ 150,000
------- ---------- ---------- ---------
Allowance for warranty and product returns ......... $ 0 $2,004,185 $1,538,395 $ 465,790
------- ---------- ---------- ---------
</TABLE>
- ----------------
Note: At December 31, 1996 and 1995 and for the years then ended, there were no
allowance deductions from asset accounts for warranty and product
returns.
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Articles of Amendment to Articles of Incorporation filed April 10, 1998.
3.3 Amended and Restated Bylaws of the Registrant.
10.1 Form of Indemnification Agreement between the Registrant and each of its
directors and executive officers.
10.2 Registrant's 1997 Stock Option Plan.
10.3 + Trademark User Agreement dated as of October 1, 1993 among Maytag
Corporation, Maytag International, Inc., the Registrant and Newtech (Hong
Kong) Ltd.
10.4 + Trademark License Agreement dated as of May 1, 1996 between the Registrant
and White Consolidated Industries, Inc.
10.5 + Trademark License Agreement dated as of September 15, 1997 between the
Registrant and White Consolidated Industries, Inc.
10.6 + Trademark License Agreement dated as of September 15, 1997 between the
Registrant and White Consolidated Industries, Inc.
10.7 Purchase and Distribution Agreement dated as of January 6, 1997 between the
Registrant and AAAA World Import Export, Inc.
10.8 + Purchase, Distribution and Marketing Agreement dated as of January 27, 1997
between the Registrant and Kmart Corporation.
10.9 Guaranty dated January 27, 1997 among Windmere-Durable Holdings, Inc.,
Kmart Corporation and the Registrant.
10.10 Indemnification Agreement dated as of January 23, 1997 among White
Consolidated Industries, Inc., Kmart Corporation and Windmere-Durable
Holdings, Inc.
10.11 Deed of Assignment of Industrial Know-How dated as of October 1, 1997
between Durable Electronics Industries Limited and Pomillo Limited
10.12 Loan Agreement dated as of October 1, 1997 among Durable Electronics
Industries Limited, Pomillo Limited and the Registrant relating to a $1,977,613
loan to Pomillo Limited.
10.13 Agreement for the Sale and Purchase of Shares of Durable Electronics
Industries Limited dated as of November 1, 1997 between Durable Electrical
Metal Factory Limited and Pomillo Limited.
10.14 Deed of Assignment dated as of November 1, 1997 among Durable Electronics
Industries Limited, Durable Electrical Metal Factory Limited and Pomillo
Limited.
10.15 Loan Agreement dated as of November 1, 1997 among Durable Electrical Metal
Factory Limited, Durable Electronics Industries Limited and the Registrant
relating to a $6,219,512 loan to Durable Electronics Industries Limited
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
10.16 Working Capital Loan Agreement dated as of November 1, 1997 among
Durable Electrical Metal Factory Limited, Durable Electronics Industries
Limited and the Registrant relating to a $500,000 loan to Durable Electronics
Industries Limited.
10.17 Purchase Agreement dated as of December 8, 1997 between BT Commercial
Corporation and the Registrant.
10.18 Product Support Agreement dated October 1996 between VAC Service Corp.
and the Registrant.
10.19 Lease Agreement, dated December 19, 1997 between H. Joel Rahn as lessor
and the Registrant as lessee.
10.20 Tenancy Agreement dated November 19, 1997 between the Registrant and Lai
Sun Development Registrant Limited
10.21 Aircraft Lease dated as of June 1, 1997 between the Registrant and F Fifty
Holdings, Inc.
10.22 Charge dated November 1, 1997 between Durable Electronics Industries
Limited and Durable Electrical Metal Factory Limited.
10.23 Credit Agreement dated as of July 23, 1997 by and among the Registrant and
Newtech (Hong Kong) Limited, as Borrowers, and Bank Leumi Le-Israel B.M.,
Comerica Bank and National Bank of Canada, as the Banks, and Bank Leumi
Le-Israel B.M., as the Agent, as amended.
10.24 Indemnification and Security Agreement dated as of September 18, 1997 of the
Registrant in favor of Windmere Durable-Holdings, Inc.
10.25 Letter Agreement dated as of September 16, 1997 among Joel Newman,
Windmere Durable-Holdings, Inc. and the Registrant.
10.26 Guaranty Agreement dated as of July 23, 1997 among Joel Newman and Bank
Leumi Le-Israel B.M., as Agent for the Banks named therein.
10.27 Guaranty Agreement dated as of July 23, 1997 among Windmere Durable-
Holdings, Inc. and Bank Leumi Le-Israel B.M., as Agent for the Banks named
therein, as amended.
10.28 Promissory Note of the Registrant in the principal amount of $2,000,000 payable
to Windmere Holdings Corporation.
10.29 Revolving Note of the Registrant in the principal amount of $3,091,352 payable
to Windmere Holdings Corporation.
10.30 Promissory Note of the Registrant in the principal amount of $2,000,000 payable
to Joel Newman.
10.31 Promissory Note of Windmere Holdings Corporation in the principal amount of
$3,000,000 payable to the Registrant.
10.32 Promissory Note of Windmere Holdings Corporation in the principal amount of
$2,000,000 payable to the Registrant.
10.33 Lease Agreement dated as of December 16, 1996 between Durable Electronics
Industries Limited and the Shenzhen Buji District Economic Development
Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ----
<S> <C> <C>
10.34 Employment Agreement dated as of April 15, 1998 between the Registrant and
Joel Newman.
10.35 Employment Agreement dated as of April 15, 1998 between the Registrant and
Hatch Masuda.
10.36 Employment Agreement dated as of April 15, 1998 between the Registrant and
Leonor Schuck.
10.37 Registration Rights Agreement dated as of April 15, 1998 among the Registrant,
Joel Newman and Windmere Holdings Corporation.
21.1 List of subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Grant Thornton.
27 Financial Data Schedule.
</TABLE>
- ----------------
+ Certain provisions of this exhibit have been omitted and are subject to a
request for confidential treatment filed with the Securities and Exchange
Commission.
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NEW M-TECH CORPORATION
Pursuant to Sections 607.0704, 607.1003 and 607.1007 of the Florida
Business Corporation Act, the Articles of Incorporation of New M-Tech
Corporation are hereby amended and restated in their entirety as follows:
ARTICLE I
The name of the corporation is New M-Tech Corporation (hereinafter
called the "Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to engage in the
transaction of any lawful business for which corporations may be incorporated
under the laws of the State of Florida.
ARTICLE III
A. AUTHORIZED CAPITAL STOCK. The aggregate number of shares of all
classes of stock which the Corporation shall have authority to issue is
51,000,000 (Fifty One Million) shares, consisting of:
(i) 50,000,000 (Fifty Million) shares of common stock, par
value $0.01 per share (the "Common Stock"), and
(ii) 1,000,000 (One Million) shares of preferred stock, par
value $0.01 per share (the "Preferred Stock").
B. PROVISIONS RELATING TO THE PREFERRED STOCK.
1. GENERAL. The Preferred Stock may be issued from time to
time in one or more classes or series, the shares of each class or series to
have such designations and powers, preferences and rights, and qualifications,
limitations and restrictions thereof as are stated and expressed herein and in
the resolution or resolutions providing for the issue of such class or series
adopted by the Board of Directors (the "Board") as hereinafter prescribed.
<PAGE>
2. PREFERENCES. Authority hereby is expressly granted to and
vested in the Board to authorize the issuance of the Preferred Stock from time
to time in one or more classes or series, to determine and take necessary
proceedings to fully effect the issuance and redemption of any such Preferred
Stock and, with respect to each class or series of the Preferred Stock, to fix
and state, by resolution or resolutions from time to time adopted providing for
the issuance thereof, the following:
(a) whether the class or series is to have voting
rights, full or limited, or is to be without voting rights;
(b) the number of shares to constitute the class or
series and the designations thereof;
(c) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;
(d) whether the shares of any class or series shall
or shall not be redeemable and, if redeemable, the redemption price or prices,
and the time or times at which and the terms and conditions upon which, such
shares shall be redeemable and the manner of redemption;
(e) whether the shares of a class or series shall or
shall not be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds be established, the annual amount
thereof and the terms and provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are payable
in cash, stock of the Corporation or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the relation
to the payment of the dividends payable on any other class or classes or series
of stock, whether such dividend shall or shall not be cumulative or
noncumulative, and, if cumulative, the date or dates from which such dividends
shall accumulate;
(g) the preferences, if any, and the amounts thereof
that the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(h) whether the shares of any class or series shall
or shall not be convertible into, or exchangeable for, the shares of any other
class or classes or of any other series of the same or any other class or
classes of the Corporation and the conversion price or prices or ratio or ratios
or the rate or rates at which such conversion or exchange may be made, with such
adjustments, if any, as shall be stated and expressed or provided for in such
resolution or resolutions; and
(i) such other special rights and protective
provisions with respect to any class or series as the Board may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board may increase the
2
<PAGE>
number of shares of Preferred Stock designated for any existing class or series
by a resolution adding to such class or series authorized and unissued shares of
the Preferred Stock not designated for any other class or series. The Board may
decrease the number of shares of the Preferred Stock designated for any existing
class or series by a resolution, subtracting from such series unissued shares of
the Preferred Stock designated for such class or series, and the shares so
subtracted shall become authorized, unissued and undesignated shares of the
Preferred Stock.
C. PROVISIONS RELATING TO THE COMMON STOCK. The Common Stock shall be
subject to the express terms of the Preferred Stock and any class or series
thereof.
1. VOTING RIGHTS. Except as otherwise required by law or as
may be provided by the resolutions of the Board authorizing the issuance of any
class or series of the Preferred Stock, as hereinabove provided, all rights to
vote and all voting power shall be vested exclusively in the holders of the
Common Stock.
2. DIVIDENDS. Subject to the rights of the holders of the
Preferred Stock, the holders of the Common Stock shall be entitled to receive
when, as and if declared by the Board, out of funds legally available therefor,
dividends and other distributions payable in cash, property, stock (including
shares of any class or series of the Corporation, whether or not shares of such
class or series are already outstanding) or otherwise.
3. LIQUIDATING DISTRIBUTIONS. Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary,
and after the holders of the Preferred Stock shall have been paid in full the
amounts to which they shall be entitled, if any, or a sum sufficient for such
payment in full shall have been set aside, the remaining net assets of the
Corporation, if any, shall be divided among and paid ratably to the holders of
the Common Stock in accordance with their respective rights and interests, to
the exclusion of the holders of the Preferred Stock.
ARTICLE IV
The Corporation shall exist perpetually unless sooner dissolved
according to law.
ARTICLE V
The Corporation's mailing address and the address of the Corporation's
principal office is 16550 N.W. 10th Avenue, Miami, Florida 33169. The street
address of the Corporation's registered office is 1201 Hays Street, City of
Tallahassee, County of Leon, State of Florida 32301, and the name of its
registered agent at such office is Corporation Service Company.
ARTICLE VI
A. NUMBER AND TERM OF DIRECTORS. The Corporation's Board shall consist
of not less than one (1) member, with the exact number to be fixed from time to
time by resolution of the Board. No decrease in the number of directors shall
have the effect of shortening the term of any incumbent director.
B. DIRECTOR VACANCIES; REMOVAL. Whenever any vacancy on the Board shall
occur due to death, resignation, retirement, disqualification, removal, increase
in the number of directors or otherwise, a majority of directors in office,
although less than a quorum of the entire Board or
3
<PAGE>
a sole remaining director, may fill the vacancy or vacancies for the balance of
the unexpired term or terms, at which time a successor or successors shall be
duly elected by the shareholders and qualified. Notwithstanding the provisions
of any other Article herein, only the remaining directors of the Corporation
shall have the authority, in accordance with the procedure stated above, to fill
any vacancy that exists on the Board for the balance of the unexpired term or
terms. The Company's shareholders shall not, and shall have no power to, fill
any vacancy on the Board. Shareholders may remove a director from office prior
to the expiration of his or her term, with or without "cause," by an affirmative
vote of two-thirds of all votes entitled to be cast for the election of
directors.
C. AMENDMENTS. Notwithstanding anything contained in these Articles of
Incorporation to the contrary, Paragraphs A and B of this Article VI shall not
be altered, amended or repealed except by an affirmative vote of at least
two-thirds of all votes entitled to be cast for the election of directors.
D. SHAREHOLDER NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation. Nominations of persons for election to
the Board at an annual or special meeting of shareholders may be made by or at
the direction of the Board by any nominating committee or person appointed by
the Board or by any shareholder of the Corporation entitled to vote for the
election of directors at such meeting who complies with the procedures set forth
in this Section D; provided, however, that nominations of persons for election
to the Board at a special meeting may be made only if the election of directors
is one of the purposes described in the special meeting notice required by
Section 607.0705 of the Florida Business Corporation Act. Nominations of persons
for election at a special meeting, other than nominations made by or at the
direction of the Board, shall be made pursuant to notice in writing delivered to
or mailed and received by the Secretary of the Corporation at its principal
executive offices not later than the close of business on the fifth day
following the date on which notice of such meeting is mailed to shareholders or
made public, whichever first occurs. Nominations of persons for election at an
annual meeting, other than nominations made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
one hundred twenty (120) days nor more than one hundred eighty (180) days prior
to the first anniversary of the date of the Corporation's notice of annual
meeting provided with respect to the previous year's annual meeting; provided,
however, that if no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than thirty (30) calendar days from
the date contemplated by the previous year's notice of annual meeting, such
notice by the shareholder to be timely must be so delivered or received not
later than the close of business on the seventh (7th) day following the date on
which notice of the date of the annual meeting is mailed to shareholders or made
public, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth the following information: (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a director at the annual or
special meeting, (i) the name, age, business address and residence address of
the proposed nominee, (ii) the principal occupation or employment of the
proposed nominee, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the proposed nominee, and (iv) any
other information relating to the proposed nominee that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as
to the shareholder giving the notice of nominees for election at the annual or
special meeting, (i) the
4
<PAGE>
name and record address of the shareholder, and (ii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
shareholder. The Corporation may require any proposed nominee for election at an
annual or special meeting of shareholders to furnish such other information as
may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. No person shall
be eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the requirements of this Section D,
and if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
ARTICLE VII
The Corporation shall indemnify and may advance expenses to its
directors to the fullest extent permitted by law in existence either now or
hereafter, as well as any officers or other employees of the Corporation to whom
the Corporation has agreed to grant indemnification.
ARTICLE VIII
A. CALL OF SPECIAL SHAREHOLDERS MEETING. Except as otherwise required
by law, the Corporation shall not be required to hold a special meeting of
shareholders of the Corporation unless (in addition to any other requirements of
law) (i) the meeting is called by the Board pursuant to a resolution approved by
a majority of the entire Board; (ii) the meeting is called by the Corporation's
Chief Executive Officer or (iii) the meeting is called by the holders of not
less than 50% of all votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting by a writing signed, dated and
delivered to the Corporation's Secretary containing one or more demands for the
meeting and particularly describing the purpose of purposes for which it is to
be held. Only business within the purpose or purposes described in the special
meeting notice required by Section 607.0705 of the Florida Business Corporation
Act may be conducted at a special shareholders' meeting.
B. ADVANCE NOTICE OF SHAREHOLDER-PROPOSED BUSINESS FOR ANNUAL MEETING.
At an annual meeting of the shareholders, only such business shall be conducted
as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board,
(b) otherwise properly brought before the meeting by or at the direction of the
Board, or (c) otherwise properly brought before the meeting by a shareholder. In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than one hundred
twenty (120) days nor more than one hundred eighty (180) days prior to the first
anniversary of the date of the Corporation's notice of annual meeting provided
with respect to the previous year's annual meeting; provided, however, that if
no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than thirty (30) calendar days from the date
contemplated by the previous year's notice of annual meeting, such notice by the
shareholder to be timely must be so delivered or received not later than the
close of business on the seventh (7th) day following the date on which notice of
the date of the annual meeting is mailed to shareholders or made public,
whichever first occurs. Such shareholder's notice to the Secretary shall set
forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a brief
5
<PAGE>
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business, (iii) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the shareholder, and (iv) any material interest of the shareholder in
such business. The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the requirements of this Section B, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
IN WITNESS WHEREOF, the undersigned, for the purpose of
amending and restating the Corporation's Articles of Incorporation pursuant to
the Florida Business Corporation Act of the State of Florida, executed these
Amended and Restated Articles of Incorporation as of April 3, 1998.
NEW M-TECH CORPORATION
By:/s/ JOEL NEWMAN
------------------------------
Joel Newman, President
6
<PAGE>
ACCEPTANCE OF APPOINTMENT OF REGISTERED AGENT
The undersigned, having been named the Registered Agent of NEW M-TECH
CORPORATION, accepts such designation and is familiar with, and accepts, the
obligations of such position, as provided in Section 607.0505 of the Florida
Statutes.
CORPORATION SERVICE COMPANY
/S/ KAREN ROZAR
------------------------------------------
Karen Rozar, Agent for Registered Agent
Dated: April 3, 1998
7
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NEW M-TECH CORPORATION
Pursuant to the provisions of ss.607.1006 of the Florida Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The current name of the corporation is New M-Tech Corporation (the
"Corporation"), Charter #S10349 filed on November 1, 1990, effective October 25,
1990.
2. The following Amendment to the Articles of Incorporation was adopted
by written consent of the shareholders of the Corporation effective as of April
9, 1998, following approval by written consent of all of the Directors of the
Corporation effective as of April 9, 1998, in the manner prescribed by
ss.607.1003 of the Florida Business Corporation Act:
RESOLVED, that Article I of the Corporation's
Articles of Incorporation shall be amended in its entirety to
read as follows:
ARTICLE I
The name of the Corporation is Newtech Electronics Industries,
Inc. (hereinafter called the "Corporation").
3. Except as hereby amended, the Articles of Incorporation of the
Corporation shall remain the same.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned being the Vice President of the
Corporation, has executed these Articles of Amendment to the Amended and
Restated Articles of Incorporation of New M-Tech Corporation, effective as of
the 9th day of April, 1998.
NEW M-TECH CORPORATION
a Florida corporation
By:/S/ LEONOR E. SCHUCK
--------------------------------
Leonor E. Schuck, Vice President
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
NEWTECH ELECTRONICS INDUSTRIES, INC.
(A FLORIDA CORPORATION)
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
------
<S> <C>
ARTICLE ONE........................................................................................1
Section 1. Registered Office.......................................................1
Section 2. Other Offices...........................................................1
ARTICLE TWO........................................................................................1
Section 1. Place...................................................................1
Section 2. Time of Annual Meeting..................................................1
Section 3. Call of Special Meetings................................................1
Section 4. Conduct of Meetings.....................................................1
Section 5. Notice and Waiver of Notice.............................................2
Section 6. Business and Nominations for Annual and Special Meetings................2
Section 7. Quorum..................................................................2
Section 8. Voting Rights Per Share.................................................3
Section 9. Voting of Shares........................................................3
Section 10. Proxies.................................................................3
Section 11. Shareholder List........................................................4
Section 12. Action Without Meeting..................................................4
Section 13. Fixing Record Date......................................................4
Section 14. Inspectors and Judges...................................................5
Section 15. Voting for Directors....................................................5
ARTICLE THREE......................................................................................5
Section 1. Number; Term; Election; Qualification...................................5
Section 2. Resignation; Vacancies; Removal.........................................6
Section 3. Powers..................................................................6
Section 4. Place of Meetings.......................................................6
Section 5. Annual Meetings.........................................................6
Section 6. Regular Meetings........................................................6
Section 7. Special Meetings and Notice.............................................6
Section 8. Quorum and Required Vote................................................7
Section 9. Action Without Meeting..................................................7
Section 10. Conference Telephone or Similar Communications Equipment Meetings.......7
Section 11. Committees..............................................................7
Section 12. Compensation of Directors...............................................8
Section 13. Chairman of the Board...................................................8
</TABLE>
i
<PAGE>
<TABLE>
PAGE
NUMBER
------
<S> <C>
ARTICLE FOUR.......................................................................................8
Section 1. Positions...............................................................8
Section 2. Election of Specified Officers by Board.................................8
Section 3. Election or Appointment of Other Officers...............................8
Section 4. Compensation............................................................9
Section 5. Term; Resignation; Removal; Vacancies...................................9
Section 6. Chief Executive Officer.................................................9
Section 7. President...............................................................9
Section 8. Vice Presidents.........................................................9
Section 9. Secretary...............................................................9
Section 10. Chief Financial Officer................................................10
Section 11. Treasurer..............................................................10
Section 12. Other Officers; Employees and Agents...................................10
ARTICLE FIVE......................................................................................10
Section 1. Issue of Certificates..................................................10
Section 2. Legends for Preferences and Restrictions on Transfer...................11
Section 3. Facsimile Signatures...................................................11
Section 4. Lost Certificates......................................................11
Section 5. Transfer of Shares.....................................................11
Section 6. Registered Shareholders................................................12
Section 7. Redemption of Control Shares...........................................12
ARTICLE SIX.......................................................................................12
Section 1. Dividends..............................................................12
Section 2. Reserves...............................................................12
Section 3. Checks.................................................................12
Section 4. Fiscal Year............................................................12
Section 5. Seal...................................................................12
Section 6. Gender.................................................................13
ARTICLE SEVEN.....................................................................................13
</TABLE>
ii
<PAGE>
BYLAWS
OF
NEWTECH ELECTRONICS INDUSTRIES, INC.
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of NEWTECH
ELECTRONICS INDUSTRIES, INC., a Florida corporation (the "Corporation"), shall
be located at 1201 Hays Street, City of Tallahassee, County of Leon, State of
Florida 32301, unless otherwise determined by the Board of Directors of the
Corporation (the "Board of Directors") in accordance with applicable law.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided, that there shall be an annual meeting held every
calendar year at which the shareholders shall elect a board of directors and
transact such other business as may properly be brought before the meeting.
Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
shareholders shall be held if called in accordance with the procedures set forth
in the Corporation's Articles of Incorporation (the "Articles of Incorporation")
for the call of a special meeting of shareholders.
Section 4. CONDUCT OF MEETINGS. The Chairman of the Board of Directors
(or in his absence, the Chief Executive Officer, or in his absence, such other
designee of the Chairman of the Board of Directors) shall preside at the annual
and special meetings of shareholders and shall be given full discretion in
establishing the rules and procedures to be followed in conducting the meetings,
except as otherwise provided by law or in these Bylaws.
Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by
law, written or printed notice stating the place, date and time of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered (i) not
<PAGE>
less than ten (10) nor more than sixty (60) days before the date of the meeting
with respect to annual and special meetings called by the Board of Directors or
the Chairman of the Board and (ii) not less than fifty (50) nor more than sixty
(60) days before the date of the meeting with respect to special meetings called
by shareholders, either personally or by first-class mail or other legally
sufficient means, by or at the direction of the Chairman of the Board, Chief
Executive Officer, President, or the persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If the notice is mailed
at least thirty (30) days before the date of the meeting, it may be done by a
class of United States mail other than first class. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at the address appearing on the stock transfer books of the
Corporation, with postage thereon prepaid. If a meeting is adjourned to another
time and/or place, and if an announcement of the adjourned time and/or place is
made at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the Board of Directors, after adjournment, fixes a new record
date for the adjourned meeting. Whenever any notice is required to be given to
any shareholder, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of the
meeting stated therein, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, shall constitute an effective
waiver of such notice. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the shareholders need be specified in any
written waiver of notice. Attendance of a person at a meeting shall constitute a
waiver of (a) lack of or defective notice of such meeting, unless the person
objects at the beginning to the holding of the meeting or the transacting of any
business at the meeting, or (b) lack of or defective notice of a particular
matter at a meeting that is not within the purpose or purposes described in the
meeting notice, unless the person objects to considering such matter when it is
presented.
Section 6. BUSINESS AND NOMINATIONS FOR ANNUAL AND SPECIAL MEETINGS.
Business transacted at any special meeting shall be confined to the purposes
stated in the notice thereof. At any annual meeting of shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting in accordance with the requirements and procedures set forth in the
Articles of Incorporation. Only such persons who are nominated for election as
directors of the Corporation in accordance with the requirements and procedures
set forth in the Articles of Incorporation shall be eligible for election as
directors of the Corporation.
Section 7. QUORUM. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or applicable law, shares representing a majority of the votes
pertaining to outstanding shares which are entitled to be cast on the matter by
the voting group constitute a quorum of that voting group for action on that
matter. If less than a quorum of shares are represented at a meeting, the
holders of a majority of the shares so represented may adjourn the meeting from
time to time. After a quorum has been established at any shareholders' meeting,
the subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
-2-
<PAGE>
Section 8. VOTING RIGHTS PER SHARE. Each outstanding share, regardless
of class, shall be entitled to vote on each matter submitted to a vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class are limited or denied by or pursuant to the Articles of
Incorporation or the Florida Business Corporation Act.
Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by such person, either in person or by proxy, but no trustee shall be entitled
to vote shares held by such person without a transfer of such shares into his
name or the name of his nominee. Shares held by or under the control of a
receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of
creditors may be voted by such person without the transfer thereof into his
name. If shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary of the Corporation
is given notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
then acts with respect to voting shall have the following effect: (a) if only
one votes, in person or by proxy, his act binds all; (b) if more than one vote,
in person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
Secton 10. PROXIES. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
such person by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation (the "Secretary") or such other officer or agent which is
authorized to tabulate votes, and shall be valid for up to 11 months, unless a
longer period is expressly provided in the appointment form. The death or
incapacity of the shareholder appointing a proxy does not affect the right of
the Corporation to accept the proxy's authority unless notice of the death or
incapacity is received by the Secretary or other officer or agent authorized to
tabulate votes before the proxy authority under the appointment is exercised. An
-3-
<PAGE>
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest.
Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or such person's agent or attorney is entitled on written demand to
inspect the shareholders' list (subject to the requirements of law), during
regular business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or agent or attorney of such
shareholder is entitled to inspect the list at any time during the meeting or
any adjournment. The shareholders' list is prima facie evidence of the identity
of shareholders entitled to examine the shareholders' list or to vote at a
meeting of shareholders.
Section 12. ACTION WITHOUT MEETING. Any action required or permitted by
law to be taken at a meeting of shareholders may be taken without a meeting or
notice if a consent, or consents, in writing, setting forth the action so taken,
shall be dated and signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all voting groups and shares entitled to vote
thereon were present and voted with respect to the subject matter thereof, and
such consent shall be delivered to the Corporation, within the period required
by Section 607.0704 of the Florida Business Corporation Act, by delivery to its
principal office in the State of Florida, its principal place of business, the
Secretary or another officer or agent of the Corporation having custody of the
book in which proceedings of meetings of shareholders are recorded. Within ten
(10) days after obtaining such authorization by written consent, notice must be
given to those shareholders who have not consented in writing or who are not
entitled to vote on the action, in accordance with the requirements of Section
607.0704 of the Florida Business Corporation Act.
Section 13. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days, and, in case of a meeting of shareholders, not less than ten (10)
days, before the meeting or action requiring such determination of shareholders;
provided, however, that with respect to a special shareholders meeting called by
shareholders, the record date shall be the date the shareholders calling the
special meeting first deliver their demand to the Corporation and such date may
not be altered through (i) an amended demand or (ii) the replacement of an old
demand with a new demand having a substantially similar purpose. If no record
date is fixed for the determination of shareholders entitled to notice of or to
vote at a meeting of shareholders or the determination of shareholders entitled
to receive payment of a dividend, the date before the day on which the first
notice of the meeting is mailed or the date on which the resolutions of the
Board of Directors declaring such dividend is adopted, as the case may be, shall
be the record date for such
-4-
<PAGE>
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof, except where the
Board of Directors fixes a new record date for the adjourned meeting.
Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If any inspector or inspectors, or judge or judges, are not appointed,
the person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by the Board of
Directors in advance of the meeting, or at the meeting by the person presiding
thereat. The inspectors or judges, if any, shall determine the number of shares
of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.
Section 15. VOTING FOR DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER; TERM; ELECTION; QUALIFICATION. The number of
directors of the Corporation shall be fixed from time to time, within the limits
specified by the Articles of Incorporation, by resolution of the Board of
Directors. Directors shall be elected in the manner and hold office for the term
as prescribed in the Articles of Incorporation. Directors must be natural
persons who are 18 years of age or older but need not be residents of the State
of Florida, shareholders of the Corporation or citizens of the United States.
Section 2. RESIGNATION; VACANIES; REMOVAL. A director may resign at any
time by giving written notice to the Board of Directors or the Chairman of the
Board. Such resignation shall take effect at the date of receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
In the event the notice of resignation specifies a later effective date, the
Board of Directors may fill the pending vacancy (subject to the provisions of
the Corporation's Articles of Incorporation) before the effective date if they
provide that the successor does not take office until the effective date.
Director vacancies shall be filled, and directors may be removed, in the manner
prescribed in the Corporation's Articles of Incorporation.
-5-
<PAGE>
Section 3. POWERS. The business and affairs of the Corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised and done by the shareholders.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.
Section 5. ANNUAL MEETINGS. Unless scheduled for another time by the
Board of Directors, the first meeting of each newly elected Board of Directors
shall be held, without call or notice, immediately following each annual meeting
of shareholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the Chief Executive Officer or Chairman of the
Board and shall be called by the Secretary on the written request of any two
directors. At least forty-eight (48) hours' prior written notice of the date,
time and place of special meetings of the Board of Directors shall be given to
each director. Except as required by law, neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. Notices to
directors shall be in writing and delivered to the directors at their addresses
appearing on the books of the Corporation by personal delivery, mail or other
legally sufficient means. Subject to the provisions of the preceding sentence,
notice to directors may also be given by telegram, teletype or other form of
electronic communication. Notice by mail shall be deemed to be given at the time
when the same shall be received. Whenever any notice is required to be given to
any director, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before, during or after the meeting, shall
constitute an effective waiver of such notice. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.
Section 8. QUORUM AND REQUIRED VOTE. A majority of the prescribed
number of directors determined as provided in the Articles of Incorporation
shall constitute a quorum for the transaction of business and the act of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors, unless a greater number is required
by the Articles of Incorporation. Whenever, for any reason, a vacancy occurs in
the Board of Directors, a quorum shall consist of a majority of the remaining
directors until the vacancy has been filled. If a quorum shall not be present at
any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn the meeting to another time and place, without notice other
than announcement at the time of adjournment. At such adjourned meeting at which
a quorum shall be present, any business may be transacted that might have been
transacted at the meeting as originally notified and called.
-6-
<PAGE>
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this Section 9 is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT
MEETINGS. Directors and committee members may participate in and hold a meeting
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground the
meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the whole Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by applicable law. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee may be filled only by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or such member by law.
Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Similarly, members of special or standing committees may be allowed
compensation for attendance at committee meetings or a stated salary as a
committee member and payment of expenses for attending committee meetings.
Directors may receive such other compensation as may be approved by the Board of
Directors.
Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a Chairman of the Board who shall preside at meetings of the
shareholders and of the directors. The Chairman of the Board shall also serve as
the chairman of any executive committee. The Chairman of the Board shall have
such other powers and shall perform such other duties as shall be designated by
the Board of Directors. The Chairman of the Board shall be a member of the Board
of Directors but no other officers of the Corporation need be a director.
-7-
<PAGE>
The Chairman of the Board shall serve until his successor is chosen and
qualified, but he may be removed at any time by the affirmative vote of a
majority of the Board of Directors.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a Chief Executive Officer, a President, one or more Vice Presidents (any one or
more of whom may be given the additional designation of rank of Executive Vice
President or Senior Vice President), a Secretary, a Chief Financial Officer and
a Treasurer. Any two or more offices may be held by the same person.
Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a Chief Executive Officer, a President, one or more Vice Presidents
(including any Senior or Executive Vice Presidents), a Secretary, a Chief
Financial Officer and a Treasurer.
Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the Chief Executive Officer. The Board of Directors shall
be advised of appointments by the Chief Executive Officer at or before the next
scheduled Board of Directors meeting.
Section 4. COMPENSATION. The salaries, bonuses and other compensation
of all officers of the Corporation to be elected by the Board of Directors
pursuant to Section 2 of this Article Four shall be fixed from time to time by
the Board of Directors or pursuant to its direction. The salaries of all other
elected or appointed officers of the Corporation shall be fixed from time to
time by the Chief Executive Officer or pursuant to his direction.
Section 5. TERM; RESIGNATION; REMOVAL; VACANCIES. The officers of the
Corporation shall hold office until their successors are chosen and qualified.
Any officer or agent elected or appointed by the Board of Directors or the Chief
Executive Officer may be removed, with or without cause, by the Board of
Directors, but such removal shall be without prejudice to the contract rights,
if any, of the person so removed. Any officer or agent appointed by the Chief
Executive Officer pursuant to Section 3 of this Article Four may also be removed
from such office or position by the Board of Directors or the Chief Executive
Officer, with or without cause. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors, or, in the case of an officer appointed by the Chief
Executive Officer, by the Chief Executive Officer or the Board of Directors. Any
officer of the Corporation may resign from his respective office or position by
delivering notice to the Corporation, and such resignation shall be effective
without acceptance. Such resignation shall be effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the Corporation accepts the future effective date, the Board
of Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until such effective date.
-8-
<PAGE>
Section 6. CHIEF EXECUTIVE OFFICER. Subject to the control of the Board
of Directors, the Chief Executive Officer shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. In the absence of
the Chairman of the Board or in the event the Board of Directors shall not have
designated a Chairman of the Board, the Chief Executive Officer shall preside at
meetings of the shareholders and the Board of Directors.
Section 7. PRESIDENT. The President shall have such powers and perform
such duties as may be prescribed by the Board of Directors or the Chief
Executive Officer.
Section 8. VICE PRESIDENTS. The Vice Presidents, in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors or the Chief Executive Officer shall
prescribe or as the President may from time to time delegate. Executive Vice
Presidents shall be senior to Senior Vice Presidents, and Senior Vice Presidents
shall be senior to all other Vice Presidents.
Section 9. SECRETARY. The Secretary shall attend all meetings of the
shareholders and all meetings of the Board of Directors and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. The Secretary shall give, or cause to be
given, notice of all meetings of the shareholders and special meetings of the
Board of Directors and shall keep in safe custody the seal of the Corporation
and, when authorized by the Board of Directors, affix the same to any instrument
requiring it. The Secretary shall perform such other duties as may be prescribed
by the Board of Directors, the Chief Executive Officer or the President.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
be responsible for maintaining the financial integrity of the Corporation, shall
prepare the financial plans for the Corporation and shall monitor the financial
performance of the Corporation and its subsidiaries, as well as performing such
other duties as may be prescribed by the Board of Directors, the Chief Executive
Officer or the President.
Section 11. TREASURER. The Treasurer shall have the custody of
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors at its regular meetings or when the Board of Directors so requires an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. The Treasurer shall perform such other duties as may be
prescribed by the Board of Directors, the Chief Executive Officer or the
President.
Section 12. OTHER OFFICERS; EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to such person by
-9-
<PAGE>
the Board of Directors, the officer so appointing such person or such officer or
officers who may from time to time be designated by the Board of Directors to
exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates (and upon request every holder of uncertificated shares) shall
be entitled to have a certificate signed by or in the name of the Corporation by
the Chairman of the Board or a Vice Chairman of the Board, or the Chief
Executive Officer, President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer, and there shall be set forth or fairly summarized
upon the certificate, or the certificate shall indicate that the Corporation
will furnish to any shareholder upon request and without charge, a full
statement of such restrictions. If the Corporation issues any shares that are
not registered under the Securities Act of 1933, as amended, or not registered
or qualified under the applicable state securities laws, the transfer of any
such shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS
NOT REQUIRED"
Section 3. FACSIMILE SIGNATURES. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile
-10-
<PAGE>
signature has been placed upon such certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Corporation may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Florida.
Section 7. REDEMPTION OF CONTROL SHARES. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may, at the discretion of the Board of Directors, redeem the
control shares at the fair value thereof at any time during the 60-day period
after the last acquisition of such control shares. If a person acquiring control
shares of the Corporation files an acquiring person statement with the
Corporation, the control shares may be redeemed by the Corporation, at the
discretion of the Board of Directors, only if such shares are not accorded full
voting rights by the shareholders as provided by law.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, stock (including its own shares) or otherwise pursuant to law
and subject to the provisions of the Articles of Incorporation.
-11-
<PAGE>
Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31st of each year, unless otherwise fixed by resolution of the Board of
Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6. GENDER. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENT OF BYLAWS
Except as otherwise set forth herein, these Bylaws may be altered,
amended or repealed or new Bylaws may be adopted at any meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the directors present at such meeting.
-12-
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the ____ day of
_____________, 199_, between NEWTECH ELECTRONICS INDUSTRIES, INC., a Florida
corporation (the "Company"), and ________________________ (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as
_____________ of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve
as _________________ of the Company, the Indemnitee requires that he be
indemnified from liability to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the
Company shall indemnify and hold harmless the Indemnitee from and against any
and all claims, damages, expenses (including attorneys' fees), judgments, fines
(including excise taxes assessed with respect to an employee benefit plan),
amounts paid in settlement and all other liabilities actually and reasonably
incurred by him in connection with the investigation, defense, prosecution,
settlement or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Company) and to which the Indemnitee was or
is a party or is threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director, shareholder, employee or agent of the
Company, or is or was serving at the request of the Company as an officer,
director, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
or by reason of anything done or not done by the Indemnitee in any such capacity
or capacities, provided that the Indemnitee acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE RIGHT OF
THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and hold
harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably incurred
by him in connection with the investigation, defense, settlement or appeal of
any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor and to which the Indemnitee was or is
a party or is threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director, shareholder, employee or agent of the
Company, or is or was serving at
<PAGE>
the request of the Company as an officer, director, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Indemnitee in such capacity or capacities, provided that (i) the Indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, (ii) indemnification for amounts
paid in settlement shall not exceed the estimated expense of litigating the
proceeding to conclusion, and (iii) no indemnification shall be made in respect
of any claim, issue or matter as to which the Indemnitee shall have been
adjudged to be liable for misconduct in the performance of his duty to the
Company unless and only to the extent that the court in which such action or
suit was brought (or any other court of competent jurisdiction) shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, the Indemnitee is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. The
Company shall reimburse the Indemnitee for any expenses (including attorney's
fees) and amounts paid in settlement actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of any action
or suit described in Section 2 hereof that results in an adjudication that the
Indemnitee was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Company; provided,
however, that the Indemnitee acted in good faith and in a manner he believed to
be in the best interests of the Company.
4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under Sections
l and 2 hereof (unless ordered by a court) and any reimbursement made under
Section 3 hereof shall be made by the Company only as authorized in the specific
case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(1) first, by the Company's Board of Directors (the
"Board") by majority vote or consent of a quorum consisting of directors
("Disinterested Directors") who are not, at the time of the Determination, named
parties to such action, suit or proceeding; or
(2) next, if such a quorum of Disinterested Directors
cannot be obtained, by majority vote or consent of a committee duly designated
by the Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated,
by any independent legal counsel (who may be the outside counsel regularly
employed by the Company); or
(4) next, if such legal counsel determination cannot
be obtained, by vote or consent of the holders of a majority of the Company's
common stock that are represented in person or by proxy and entitled to vote at
a meeting called for such purpose.
4.1 NO PRESUMPTIONS. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall
-2-
<PAGE>
not, of itself, create a presumption that the Indemnitee did not act in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
4.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with
respect to an employee benefit plan for a purpose he reasonably believed to be
in the interests of the participants in and beneficiaries of the plan shall be
deemed to be conduct that the Indemnitee reasonably believed to be not opposed
to the best interests of the Company.
4.3 RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections l, 2 or 3 hereof,
as the case may be.
4.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of any action,
suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the
Indemnitee pays less than $25,000.
4.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the
Indemnitee is entitled under any provision of this Agreement to indemnification
and/or reimbursement by the Company for some or a portion of the claims,
damages, expenses (including attorneys' fees), judgments, fines or amounts paid
in settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or
-3-
<PAGE>
parties making the Determination shall determine the portion (if less than all)
of such claims, damages, expenses (including attorneys' fees), judgments, fines
or amounts paid in settlement for which the Indemnitee is entitled to
indemnification and/or reimbursement under this Agreement.
4.6 LIMITATIONS ON INDEMNIFICATION. No indemnification
pursuant to Sections 1 and 2 hereof shall be paid by the Company if a judgment
(after exhaustion of all appeals) or other final adjudication determines that
the Indemnitee's actions, or omissions to act, were material to the cause of
action so adjudicated and constitute:
(a) a violation of criminal law, unless the
Indemnitee had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
(b) a transaction from which the Indemnitee received
an improper personal benefit within the meaning of Section 607.0850(7) of the
Florida Business Corporation Act;
(c) a circumstance under which the liability
provisions of Section 607.0834 of the Florida Business Corporation Act are
applicable; or
(d) willful misconduct or conscious disregard for the
best interests of the Company in a proceeding by or in the right of the Company
to procure a judgment in its favor or in a proceeding by or in the right of a
shareholder of the Company.
5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
5.1 COSTS. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
5.2 TIMING OF THE DETERMINATION. The Company shall use its
best efforts to make the Determination contemplated by Section 4 hereof
promptly. In addition, the Company agrees:
(a) if the Determination is to be made by the Board
or a committee thereof, such Determination shall be made not later than 15 days
after a written request for a Determination (a "Request") is delivered to the
Company by the Indemnitee;
(b) if the Determination is to be made by independent
legal counsel, such Determination shall be made not later than 30 days after a
Request is delivered to the Company by the Indemnitee; and
-4-
<PAGE>
(c) if the Determination is to be made by the
shareholders of the Company, such Determination shall be made not later than 120
days after a Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
5.3 REASONABLENESS OF EXPENSES. The evaluation and finding as
to the reasonableness of expenses incurred by the Indemnitee for purposes of
this Agreement shall be made (in the following order of preference) within 15
days of the Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by a majority vote of a
quorum consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under
subdivision (a), by majority vote or consent of a committee duly designated by
the Board (in which designation all directors, whether or not Disinterested
Directors, may participate), consisting solely of two or more Disinterested
Directors; or
(c) next, if a finding cannot be obtained under
either subdivision (a) or (b), by vote or consent of the holders of a majority
of the Company's Common Stock that are represented in person or by proxy at a
meeting called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a
Determination that the Indemnitee has met the applicable standard of conduct set
forth in Section l, 2 or 3 hereof, as the case may be, and the finding of
reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of
time prescribed for making such determination(s), the Company shall pay to the
Indemnitee in cash the amount to which the Indemnitee is entitled to be
indemnified and/or reimbursed, as the case may be, without further authorization
or action by the Board; provided, however, that the expenses for which
indemnification or reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 SHAREHOLDER VOTE ON DETERMINATION. The Indemnitee and any
other shareholder who is a party to the proceeding for which indemnification or
reimbursement is sought shall be entitled to vote on any Determination to be
made by the Company's shareholders, including a Determination made pursuant to
Section 5.7 hereof. In addition, in connection with each meeting at which a
shareholder Determination will be made, the Company shall solicit proxies that
expressly include a proposal to indemnify or reimburse the Indemnitee. The
-5-
<PAGE>
Company proxy statement relating to the proposal to indemnify or reimburse the
Indemnitee shall not include a recommendation against indemnification or
reimbursement.
5.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the
Determination required under Section 4 is to be made by independent legal
counsel, such counsel shall be selected by the Indemnitee with the approval of
the Board, which approval shall not be unreasonably withheld. The fees and
expenses incurred by counsel in making any Determination (including
Determinations pursuant to Section 5.8 hereof) shall be borne solely by the
Company regardless of the results of any Determination and, if requested by
counsel, the Company shall give such counsel an appropriate written agreement
with respect to the payment of their fees and expenses and such other matters as
may be reasonably requested by counsel.
5.7 RIGHT OF DIRECTOR TO APPEAL AN ADVERSE DETERMINATION BY
BOARD. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
l, 2 or 3 hereof, upon the written request of the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's shareholders at the next regular or
special meeting of shareholders. Subject to Section 8 hereof, such Determination
by the Company's shareholders shall be binding and conclusive for all purposes
of this Agreement.
5.8 RIGHT OF DIRECTOR TO SELECT FORUM FOR DETERMINATION. If,
at any time subsequent to the date of this Agreement, "Continuing Directors" do
not constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal counsel
selected by the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a majority vote or
consent of a Board committee consisting solely of Continuing Directors. For
purposes of this Agreement, a "Continuing Director" means either a member of the
Board at the date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
5.9 ACCESS BY INDEMNITEE TO DETERMINATION. The Company shall
afford to the Indemnitee and his representatives ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a shareholder Determination.
5.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each
action or suit described in Section 2 hereof, the Company shall cause its
counsel to use its best efforts to obtain from the Court in which such action or
suit was brought (i) an express adjudication whether the Indemnitee is liable
for negligence or misconduct in the performance of his duty to the Company, and,
if the Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
-6-
<PAGE>
6. SCOPE OF INDEMNITY. The actions, suits and proceedings described in
Sections 1 and 2 hereof shall include, for purposes of this Agreement, any
actions that involve, directly or indirectly, activities of the Indemnitee both
in his official capacities as a Company director or officer and actions taken in
another capacity while serving as director or officer, including, but not
limited to, actions or proceedings involving (i) compensation paid to the
Indemnitee by the Company, (ii) activities by the Indemnitee on behalf of the
Company, including actions in which the Indemnitee is plaintiff, (iii) actions
alleging a misappropriation of a "corporate opportunity," (iv) responses to a
takeover attempt or threatened takeover attempt of the Company, (v) transactions
by the Indemnitee in Company securities, and (vi) the Indemnitee's preparation
for and appearance (or potential appearance) as a witness in any proceeding
relating, directly or indirectly, to the Company. In addition, the Company
agrees that, for purposes of this Agreement, all services performed by the
Indemnitee on behalf of, in connection with or related to any subsidiary of the
Company, any employee benefit plan established for the benefit of employees of
the Company or any subsidiary, any corporation or partnership or other entity in
which the Company or any subsidiary has a 5% ownership interest, or any other
affiliate of the Company, shall be deemed to be at the request of the Company.
7. ADVANCE FOR EXPENSES.
7.1 MANDATORY ADVANCE. Expenses (including attorneys' fees,
court costs, judgments, fines, amounts paid in settlement and other payments)
incurred by the Indemnitee in investigating, defending, settling or appealing
any action, suit or proceeding described in Section 1 or 2 hereof shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such expenses to the
Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2 UNDERTAKING TO REPAY. The Indemnitee hereby undertakes
and agrees to repay to the Company any advances made pursuant to this Section 7
if and to the extent that it shall ultimately be found that the Indemnitee is
not entitled to be indemnified by the Company for such amounts.
7.3 MISCELLANEOUS. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee's financial ability
to make repayment, and regardless whether indemnification of the Indemnitee by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 7 shall be unsecured and interest-free.
8. COURT-ORDERED INDEMNIFICATION. Regardless whether the Indemnitee has
met the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case
may be, and notwithstanding the presence or absence of any Determination whether
such standards have been satisfied, the Indemnitee may apply for indemnification
(and/or reimbursement pursuant to Section 3 or 12 hereof) to the court
conducting any proceeding to which the Indemnitee is a party or to any other
court of competent jurisdiction. On receipt of an application, the court, after
giving any notice the court considers necessary, may order indemnification
(and/or reimbursement) if it determines the Indemnitee is fairly and reasonably
entitled to indemnification (and/or reimbursement) in view of all the relevant
circumstances (including this Agreement).
-7-
<PAGE>
9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by Federal
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF CLAIMS.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Company (or any of its subsidiaries) against the Indemnitee,
his spouse, heirs, executors, personal representatives or administrators after
the expiration of 2 years from the date the Indemnitee ceases (for any reason)
to serve as either director or an executive officer of the Company, and any
claim or cause of action of the Company (or any of its subsidiaries) shall be
extinguished and deemed released unless asserted by filing of a legal action
within such 2-year period.
11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any other
provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any other
provision of this Agreement, and regardless of the presence or absence of any
Determination, the Company promptly (but not later than 30 days following the
Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
13. MISCELLANEOUS.
13.1 NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth above
their signatures to this Agreement.
-8-
<PAGE>
13.2 ENTIRE AGREEMENT. Except for the Company's Articles of
Incorporation, this Agreement constitutes the entire understanding of the
parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
13.3 SEVERABILITY OF PROVISIONS. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.4 APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
13.5 EXECUTION IN COUNTERPARTS. This Agreement and any
amendment may be executed simultaneously or in two or more counterparts, each of
which together shall constitute one and the same instrument.
13.6 COOPERATION AND INTENT. The Company shall cooperate in
good faith with the Indemnitee and use its best efforts to ensure that the
Indemnitee is indemnified and/or reimbursed for liabilities described herein to
the fullest extent permitted by law.
13.7 AMENDMENT. No amendment, modification or alteration of
the terms of this Agreement shall be binding unless in writing, dated subsequent
to the date of this Agreement, and executed by the parties.
13.8 BINDING EFFECT. The obligations of the Company to the
Indemnitee hereunder shall survive and continue as to the Indemnitee even if the
Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
13.9 GENDER AND NUMBER. Wherever the context shall so require,
all words herein in the male gender shall be deemed to include the female or
neuter gender, all singular words shall include the plural and all plural words
shall include the singular.
13.10 NONEXCLUSIVITY. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of shareholders or otherwise.
13.11 EFFECTIVE DATE. The provisions of this Agreement shall
cover claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be
-9-
<PAGE>
retroactive to cover acts or omissions or alleged acts or omissions which
heretofore have taken place.
Executed as of the date first above written.
THE COMPANY:
___________________________________
By:________________________________
Title:
THE INDEMNITEE:
Print address
___________________________________
___________________________________
___________________________________
EXHIBIT 10.2
NEWTECH CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to advance the interests of NEW
M-TECH CORPORATION d/b/a Newtech Corporation, a Florida corporation (the
"Company"), and its Subsidiaries by providing an additional incentive to attract
and retain qualified and competent persons who provide services to the Company
and its Subsidiaries, and upon whose efforts and judgment the success of the
Company and its Subsidiaries is largely dependent, through the encouragement of
stock ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Control" shall mean approval by the
shareholders of the Company of a reorganization (other than resulting from the
bankruptcy or insolvency of the Company), merger, consolidation or other form of
corporate transaction or series of transactions other than the public offering
of securities, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization (other than
one resulting from the bankruptcy or insolvency of the Company), merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the Company or the sale of
all or substantially all of the assets of the Company (unless such
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned).
(c) "Committee" shall mean the committee appointed by the
Board pursuant to Section 13(a) hereof.
(d) "Common Stock" shall mean the Company's Common Stock.
(e) "Director" shall mean a member of the Board.
(f) "Fair Market Value" of a Share on any date of reference
shall mean the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee in its sole
discretion shall determine otherwise. For the purpose of determining Fair Market
Value, the "Closing Price" of the Common Stock on any business day shall be (i)
if the Common Stock is listed or admitted for trading on any United States
national securities exchange, or if actual transactions are otherwise reported
on a
<PAGE>
consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), or any
similar system of automated dissemination of quotations of securities prices in
common use, the last reported sale price of Common Stock on such system or, if
sales prices are not reported, the mean between the closing high bid and low
asked quotations for such day of Common Stock on such system, as reported in any
newspaper of general circulation or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
least two securities dealers have inserted both bid and asked quotations for
Common Stock on at least five of the ten preceding days. If neither (i), (ii),
or (iii) above is applicable, then Fair Market Value shall be determined in good
faith by the Committee or the Board, and the Committee or the Board may
determine such Fair Market Value as of any date that is not more than one year
prior to the date for which such determination is being made.
(g) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Internal Revenue Code.
(h) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(i) "Non-Qualified Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(j) "Option" (when capitalized) shall mean any option granted
under this Plan.
(k) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(l) "Outside Director" shall mean a member of the Board who
qualifies as an "outside director" under Section 162(m) of the Internal Revenue
Code and the regulations thereunder and as a "Non-Employee Director" under Rule
16b-3 promulgated under the Securities Exchange Act.
(m) "Plan" shall mean this 1997 Stock Option Plan for the
Company.
(n) "Publicly-Traded Date" shall mean the date on which the
Common Stock of the Company, or the stock of any successor company into which
the Option or any substituted option or right becomes exercisable pursuant to
Section 10(c) hereof, is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act.
(o) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
-2-
<PAGE>
(p) "Share" shall mean a share of Common Stock.
(q) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AVAILABLE FOR OPTION GRANTS. The Committee or the Board may
grant to Optionees from time to time Options to purchase an aggregate of up to
One Million (1,000,000) Shares from the Company's authorized and unissued
Shares. Prior to the creation of this Plan, there are 10,000,000 shares issued
and outstanding in the Company. If any Option granted under the Plan shall
terminate, expire, or be cancelled or surrendered as to any Shares, new Options
may thereafter be granted covering such Shares.
4. INCENTIVE AND NON-QUALIFIED OPTIONS.
(a) An Option granted hereunder shall be either an Incentive
Stock Option or a Non-Qualified Stock Option as determined by the Committee or
the Board at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or a Non-Qualified Stock Option. All Incentive
Stock Options shall be granted within 10 years from the effective date of this
Plan. Incentive Stock Options may not be granted to any person who is not an
employee of the Company or any Subsidiary.
(b) Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate fair market value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Section
422(b) of the Internal Revenue Code are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and its
parent and subsidiary corporations as defined in Section 424 of the Internal
Revenue Code), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option grant document
that may contain any term deemed necessary or desirable by the Committee or the
Board, provided such terms are not inconsistent with this Plan or any applicable
law. Optionees shall be (i) those persons selected by the Board or the Committee
from the class of all regular employees of, or persons who provide consulting or
other services as independent contractors to, the Company or its Subsidiaries,
including Directors and officers of the Company or any of its Subsidiaries who
are regular employees, and (ii) Directors who are not employees of the Company
or of any Subsidiaries.
(b) In granting Options, the Committee or the Board shall take
into consideration the contribution the person has made to the success of the
Company or its
-3-
<PAGE>
Subsidiaries and such other factors as the Committee or the Board shall
determine. The Committee or the Board shall also have the authority to consult
with and receive recommendations from officers and other personnel of the
Company and its Subsidiaries with regard to these matters. The Committee or the
Board may from time to time in granting Options under the Plan prescribe such
other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights may not be
exercised prior to the Publicly-Traded Date and/or that the Options terminate if
the Publicly-Traded Date does not occur within a specified period after the date
of grant, (iii) providing that the Option rights accrue or become exercisable in
installments over a period of years, or upon the attainment of stated goals or
both, or (iv) relating an Option to the continued employment of the Optionee for
a specified period of time, provided that such terms and conditions are not more
favorable to an Optionee than those expressly permitted herein. The Company also
may agree to make certain payments to the Optionee in the event that the Options
terminate or are canceled by the Company prior to the Publicly-Traded Date.
(c) The Options granted to employees under this Plan may be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither the Plan nor
any Option granted under the Plan shall confer upon any person any right to
employment or continuance of employment by the Company or its Subsidiaries.
(d) Notwithstanding any other provision of this Plan, an
Incentive Stock Option shall not be granted to any person owning directly or
indirectly (through attribution under Section 424(d) of the Internal Revenue
Code) at the date of grant, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (or of its parent or
subsidiary corporation [as defined in Section 424 of the Internal Revenue Code]
at the date of grant) unless the option price of such Option is at least 110% of
the Fair Market Value of the Shares subject to such Option on the date the
Option is granted, and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
(e) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, the aggregate number of Options
granted to any one Optionee may not exceed 400,000, subject to adjustment as
provided in Section 10 hereof.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee or the Board but shall not be less than the
par value, if any, per Share; provided, however, that in no event shall the
option price per Share of any Incentive Stock Option be less than the Fair
Market Value of the Shares underlying such Option on the date such Option is
granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee or the Board in its sole
-4-
<PAGE>
discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or Subsidiary employing the Optionee to
withhold in accordance with applicable Federal or state tax withholding
requirements. Unless further limited by the Committee or the Board in any
Option, and subject to such guidelines as the Committee or the Board may
establish, the option price of any Shares purchased shall be paid (1) in cash,
(2) by certified or official bank check, (3) by money order, (4) with Shares,
(5) by the withholding of Shares issuable upon exercise of the Option or by any
other form of cashless exercise procedure approved by the Committee or the
Board, or (6) in such other consideration as the Committee or the Board deems
appropriate, or by a combination of the above. The Committee or the Board in its
sole discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, or
through the withholding of Shares issuable upon exercise of the Option, the
value of the Shares surrendered or withheld shall be their Fair Market Value on
the date the Option is exercised. The Company in its sole discretion may, on an
individual basis or pursuant to a general program established in connection with
this Plan, lend money to an Optionee, guarantee a loan to an Optionee, or
otherwise assist an Optionee to obtain the cash necessary to exercise all or a
portion of an Option granted hereunder or to pay any tax liability of the
Optionee attributable to such exercise. If the exercise price is paid in whole
or part with Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
prime rate of the Company's principal lender, and (iv) contain such other terms
as the Board in its sole discretion shall reasonably require. No Optionee shall
be deemed to be a holder of any Shares subject to an Option unless and until a
stock certificate or certificates for such Shares are issued to such person(s)
under the terms of this Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 10
hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee or the
Board shall provide in such Option, except as otherwise provided in this Section
8.
(a) The expiration date of an Option shall be determined by
the Committee or the Board at the time of grant, but in no event shall an Option
be exercisable after the expiration of 10 years from the date on which the
Option is granted.
(b) The Committee or the Board may in its sole discretion and
in writing accelerate the date on which any Option may be exercised, (including
without limitation acceleration in the event of a Change in Control or a
termination of the Option pursuant to Section 9(b) hereof) and may accelerate in
writing the vesting of any Shares subject to any Option or previously acquired
by the exercise of any Option.
-5-
<PAGE>
9. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(i) unless the Committee or the Board shall otherwise
determine in writing in its sole discretion, the date on which the
Optionee's employment with the Company and its Subsidiaries is
terminated for any reason other than by reason of (A) Cause, which,
solely for purposes of this Plan, shall mean the termination of the
Optionee's employment by reason of the Optionee's willful misconduct or
gross negligence, (B) a mental or physical disability (within the
meaning of Internal Revenue Code Section 22(e)) as determined by a
medical doctor satisfactory to the Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment with the Company and its Subsidiaries for Cause;
(iii) twelve months after the date on which the
Optionee's employment with the Company and its Subsidiaries is
terminated by reason of a mental or physical disability (within the
meaning of Internal Revenue Code Section 22(e)) as determined by a
medical doctor satisfactory to the Committee or the Board;
(iv) (A) twelve months after the date of termination
of the Optionee's employment with the Company and its Subsidiaries by
reason of the death of the employee, or, if later, (B) three months
after the date on which the Optionee shall die if such death shall
occur during the one year period specified in Subsection 9(a)(iii)
hereof; or
(v) immediately in the event that the Optionee shall
file any lawsuit or arbitration claim against the Company or any
Subsidiary, or any of their respective officers, directors or
shareholders.
All references herein to the termination of the Optionee's employment shall, in
the case of an Optionee who is not an employee of the Company or a Subsidiary,
refer to the termination of the Optionee's service as director or independent
contractor with the Company.
(b) To the extent not previously exercised, each Option shall
terminate immediately in the event of (i) the liquidation or dissolution of the
Company, or (ii) any reorganization, merger, consolidation or other form of
corporate transaction in which the Company does not survive, unless the
successor corporation, or a parent or subsidiary of such successor corporation,
assumes, in such successor corporation's sole discretion, the Option or
substitutes an equivalent option or right pursuant to Section 10(c) hereof. The
Committee or the Board shall give written notice of any proposed transaction
referred to in clauses (i) or (ii) of this Section 9(b) a reasonable period of
time prior to the closing date for such transaction (which notice may be given
either before or after approval of such transaction).
-6-
<PAGE>
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, then and in such
event and if determined to be appropriate by the Board in its sole discretion:
(i) appropriate adjustment may be made, in the sole
discretion of the Board, in the maximum number of Shares available for
grant under the Plan, or available for grant to any person under the
Plan, so that the same percentage of the Company's issued and
outstanding Shares shall continue to be subject to being so optioned;
and
(ii) appropriate adjustment may be made, in the sole
discretion of the Board, in the number of Shares and the exercise price
per Share thereof then subject to any outstanding Option, so that the
same percentage of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price.
(b) Unless otherwise provided in any Option, the Committee or
the Board may change the terms of Options outstanding under this Plan, with
respect to the option price or the number of Shares subject to the Options, or
both, when, in the Committee's or Board's sole discretion, such adjustments
become appropriate so as to preserve but not increase benefits under the Plan.
(c) In the event of a proposed sale of all or substantially
all of the Company's assets or any reorganization, merger, consolidation or
other form of corporate transaction in which the Company does not survive, where
the securities of the successor corporation, or its parent company, are issued
to the Company's shareholders, then the successor corporation or a parent of the
successor corporation may, with the consent of the Committee or the Board,
assume each outstanding Option or substitute an equivalent option or right. If
the successor corporation, or its parent, does not cause such an assumption or
substitution to occur, or the Committee or the Board does not consent to such an
assumption or substitution, then each Option shall terminate pursuant to Section
9(b) hereof upon the consummation of sale, merger, consolidation or other
corporate transaction.
(d) The issuance by the Company of shares of its capital stock
of any class, or securities convertible into shares of capital stock of any
class, either in connection with a direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made to, the number of or exercise
price for Shares then subject to outstanding Options granted under the Plan.
(e) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations,
-7-
<PAGE>
reorganizations or other changes in the Company's capital structure or its
business; (ii) any merger or consolidation of the Company; (iii) any issue by
the Company of debt securities, or preferred or preference stock that would rank
above the Shares subject to outstanding Options; (iv) the dissolution or
liquidation of the Company; (v) any sale, transfer or assignment of all or any
part of the assets or business of the Company; or (vi) any other corporate act
or proceeding, whether of a similar character or otherwise.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the prior written
consent of the Committee or the Board is obtained and the transaction does not
violate the requirements of Rule 16b-3 promulgated under the Securities Exchange
Act no Non-Qualified Stock Option, shall be subject to alienation, assignment,
pledge, charge or other transfer other than by the Optionee by will or the laws
of descent and distribution, and any attempt to make any such prohibited
transfer shall be void. Each Option shall be exercisable during the Optionee's
lifetime only by the Optionee, or in the case of a Non-Qualified Stock Option
that has been assigned or transferred with the prior written consent of the
Committee or the Board, only by the permitted assignee.
(b) Unless the prior written consent of the Committee or the
Board is obtained and the transaction does not violate the requirements of Rule
16b-3 promulgated under the Securities Exchange Act, no Shares acquired by an
Officer or Director pursuant to the exercise of an Option may be sold, assigned,
pledged or otherwise transferred prior to the expiration of the six-month period
following the date on which the Option was granted.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition to any sale or issuance of Shares upon
exercise of any Option, the Committee or the Board may require such agreements
or undertakings as the Committee or the Board may deem necessary or advisable to
facilitate compliance with any applicable law or regulation including, but not
limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring
the Shares to be issued to him for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares;
and
(ii) a representation, warranty and/or agreement to
be bound by any legends endorsed upon the certificate(s) for such
Shares that are, in the opinion of the
-8-
<PAGE>
Committee or the Board, necessary or appropriate to facilitate
compliance with the provisions of any securities laws deemed by the
Committee or the Board to be applicable to the issuance and transfer of
such Shares.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board or, at the
discretion of the Board, by a committee appointed by the Board (the "Committee")
which shall be composed of two or more Directors. At any time that any shares of
the Common Stock of the Company shall be registered under Section 12 of the
Securities Exchange Act of 1934, the membership of the Committee shall be
constituted so as to comply at all times with the then applicable requirements
for Outside Directors of Rule 16b-3 promulgated under the Securities Exchange
Act and Section 162(m) of the Internal Revenue Code. The Committee shall serve
at the pleasure of the Board and shall have the powers designated herein and
such other powers as the Board may from time to time confer upon it.
(b) The Board may grant Options pursuant to this Plan to any
persons to whom Options may be granted under Section 5(a) hereof.
(c) The Committee or the Board, from time to time, may adopt
rules and regulations for carrying out the purposes of the Plan. The
determinations by the Committee or the Board, and the interpretation and
construction of any provision of the Plan or any Option by the Committee or the
Board, shall be final and conclusive.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee or beneficiary, any law or regulation of any governmental authority
having jurisdiction in the premises shall require the Company to withhold, or to
make any deduction for, any taxes or take any other action in connection with
the issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by the
Optionee or beneficiary, or other appropriate action shall have been taken.
15. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in
all respects with Rule 16b-3 promulgated under the Securities Exchange Act
("Rule 16b-3"), any ambiguities or inconsistencies in construction of the Plan
shall be interpreted to give effect to such intention, and if any provision of
the Plan is found not to be in compliance with Rule 1 6b-3, such provision shall
be deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3. The Committee or the Board may from time to time adopt rules and
regulations under, and amend, the Plan in furtherance of the intent of the
foregoing.
-9-
<PAGE>
(b) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under section 422 of the Internal Revenue Code. If any provision of the
Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan.
(c) This Plan shall be governed by the laws of the State of
Florida.
(d) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee or the
Board may from time to time amend, suspend or terminate the Plan or any Option;
provided, however, that, any amendment to the Plan shall be subject to the
approval of the Company's shareholders if such shareholder approval is required
by any federal or state law or regulation (including, without limitation, Rule
16b-3 or to comply with Section 162(m) of the Internal Revenue Code) or the
rules of any Stock exchange or automated quotation system on which the Common
Stock may then be listed or granted. Except to the extent provided in Sections 9
and 10 hereof, no amendment, suspension or termination of the Plan or any Option
issued hereunder shall substantially impair the rights or benefits of any
Optionee pursuant to any Option previously granted without the consent of the
Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
shall be the date on which the Board adopts this Plan, and the Plan shall
terminate on the tenth anniversary of the effective date.
-10-
<PAGE>
NEWTECH CORPORATION
STOCK OPTION GRANT
FOR
____________________
(EMPLOYEE)
GRANT
1. GRANT OF OPTION. New M Tech Corporation d/b/a Newtech Corporation, a
Florida corporation, (the "Company") hereby grants, as of February 28, 1997, to
the Employee (the "Optionee") an option (the "Option") to purchase up to
____________________ shares of the Company's Common Stock, no par value (the
"Shares"), at an exercise price per share equal to $2.00 (the "Option Price").
The Option shall be subject to the terms and conditions set forth herein and in
the Plan (as hereinafter defined). The Option was issued pursuant to the
Company's 1997 Stock Option Plan (the "Plan"), which is incorporated herein for
all purposes. The Option is a nonqualified stock option. The Optionee, as a
condition of this option, agrees to be bound by all of the terms and conditions
of the Plan and of this grant.
2. DEFINITIONS. Unless otherwise provided herein, terms used herein
that are defined in the Plan and not defined herein shall have the meanings
attributed thereto in the Plan.
3. EXERCISE SCHEDULE.
(a) In no event shall any portion of the Option be exercisable
until 180 days have elapsed from the date on which the Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act. (the "Publicly-Traded Date").
(b) After the Publicly-Traded Date, except as otherwise
provided in Section 6 of this Agreement, or in the Plan, the Option
shall be exercisable in whole or in part and cumulatively accordingly
to the following schedule:
The first 20% of the Shares will become exercisable on
February 28, 1998.
The second 20% of the Shares will become exercisable on
February 28, 1999.
The third 20% of the Shares will become exercisable on
February 28, 2000.
The fourth 20% of the Shares will become exercisable on
February 28, 2001.
The fifth 20% of the Shares will become exercisable on
February 28, 2002.
The Option shall terminate on, and in no event shall the Option be exercisable
after, February 28, 2007.
4. METHOD OF EXERCISE. This Option shall be exercisable in whole or in
part in accordance with the exercise schedule set forth in Section 3 hereof by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment
<PAGE>
intent with respect to such Shares as may be required by the Company pursuant to
the provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Chief Financial
Officer or the Chief Executive Officer of the Company. The written notice shall
be accompanied by payment of the exercise price. This Option shall be deemed to
be exercised after (a) receipt by the Company of such written notice accompanied
by the exercise price, and (b) arrangements that are satisfactory to the Board
or the Committee in its sole discretion have been made for Optionee's payment to
the Company of the amount that is necessary to be withheld in accordance with
applicable Federal or state withholding requirements. No Shares will be issued
pursuant to the Option unless and until such issuance and such exercise shall
comply with all relevant provisions of applicable law, including the
requirements of any stock exchange upon which the Shares then may be traded. The
Company hereby covenants and agees to cause there to be a sufficient number of
authorized shares of Common Stock available for the exercise of the Option at
the time of exercise in accordance with the terms hereof.
5. METHOD OF PAYMENT. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee: (a)
cash; (b) check, or (c) such other consideration or in such other manner as may
be determined by the Board or the Committee, which other method, in the sole
discretion of the Board or the Committee may include, without limitation,
payment of the exercise price in whole or in part (i) with Shares, (ii) by a
promissory note payable to the order of the Company in a form acceptable to the
Board or the Committee, or (iii) by the Company retaining from the Shares to be
delivered upon exercise of the Option that number of Shares having a Fair Market
Value on the date of exercise equal to the option price for the number of Shares
with respect to which the Optionee exercises the Option.
6. TERMINATION OF OPTION.
(a) Any unexercised portion of the Option shall automatically
and without notice terminate and become null and void at the time of
the earliest to occur of:
(i) immediately on the date on which the Optionee's
employment with the Company and its Subsidiaries is terminated
for any reason other than by reason of (A) Cause, which,
solely for purposes of this Agreement, shall mean the
termination of the Optionee's employment by reason of the
Optionee's willful misconduct or gross negligence, (B) a
mental or physical disability (within the meaning of Section
22(e) of the Internal Revenue Code of 1986, as amended) of the
Optionee as determined by a medical doctor satisfactory to the
Committee, or (C) death;
(ii) immediately upon the termination of the
Optionee's employment with the Company and its Subsidiaries
for Cause;
(iii) twelve months after the date on which the
Optionee's employment with the Company and its Subsidiaries is
terminated by reason of a mental or physical disability
(within the meaning of Section 22(e) of the Internal Revenue
Code of 1986, as amended) as determined by a medical doctor
satisfactory to the Committee;
2
<PAGE>
(iv) twelve months after the date of termination of
the Optionee's employment with the Company and its
Subsidiaries by reason of the death of the Optionee (or, if
later, three months after the date on which the Optionee shall
die if such death shall occur during the one year period
specified in paragraph (iii) of this Section 6);
(v) immediately in the event that the Optionee shall
file any lawsuit or arbitration claim against the Company or
any Subsidiary, or any of their respective officers, directors
or shareholders; or
(vi) on the earlier of the fifth anniversary of the
date on which the Option was granted, if the Publicly-Traded
Date has not then occurred.
(b) The Board or the Committee in its sole discretion may at
any time prior to the Publicly-Traded Date, cancel the Option by giving
written notice to the Optionee (or his estate if the Optionee is
deceased).
(c) To the extent not previously exercised, each Option
granted under the Plan shall terminate immediately in the event of (i)
the liquidation or dissolution of the Company, or (ii) any
reorganization, merger, consolidation or other form of corporate
transaction in which the Company does not survive, unless a successor
company assumes, in its sole discretion, the Option or substitutes an
equivalent option or right pursuant to Section 10(c) of the Plan. In
the event that any of the foregoing events shall occur prior to the
Publicly-Traded Date, the Committee or the Board shall give written
notice, of such proposed transaction referred to in clauses (i) or (ii)
of this Section 6(c) a reasonable period of time prior to the closing
date for such transactions (which notice may be given either before or
after approval of such transaction).
7. PAYMENT UPON TERMINATION OF OPTION.
(a) In the event that the Option is terminated pursuant to
Section 6(a)(vi) hereof, or the Option is canceled by the Board or the
Committee pursuant to Section 6(b) or (c) of this Agreement, then the
Company shall pay to the Optionee an amount equal to the product of (i)
the number of Shares with respect to which the Option would have been
exercisable at the time the Option is terminated or canceled but for
Section 3(a) of this Agreement, multiplied by (ii) the "Increase in
Retained Earnings Per Share". For purposes of this Agreement, the term
Increase in Retained Earnings Per Share shall mean the net increase, if
any, in the Retained Earnings Per Share of the Company from the first
day of the Company's fiscal quarter commencing on or immediately
following the date on which the Option is granted until the last day of
the Company's fiscal quarter that ends on or immediately prior to the
date (the "Termination Date") on which the Option is terminated or
canceled. Until February 28, 1999, there shall be subtracted $6.00 from
the Increased in Retained Earnings Per Share to arrive at the net
increase. "Retained Earnings Per Share" as of any date shall mean the
retained earnings of the Company, as reflected on the Company's
financial statements, computed in accordance with Generally
3
<PAGE>
Accepted Accounting Principles, divided by the aggregate number of
outstanding shares of common stock of the Company as of that date.
(b) The Company shall pay the Optionee the amount, if any,
required under paragraph (a) of this Section 7 in cash either, at the
Company's election, (i) in a single lump sum payment, made within 90
days after the Termination Date, or (ii) in up to 3 equal annual
installments commencing 12 months after the Termination Date, with each
equal payment including interest at the rate equal to 6% per annum.
(c) The Company shall not be required to make any payment to
the Optionee pursuant to this Section 7 (and Employee shall forfeit all
payments that may be due at any time in the future) in the event that
the Option is terminated pursuant to clauses (i) through (v) of Section
6(a) or in the event that the Optionee, competes directly or
indirectly, (or has any interest or involvement with any entity that
competes directly or indirectly), with the Company or its Subsidiaries,
whether as an officer, director, employee, agent, independent
contractor, consultant, partner, equity holder, debt holder, or
otherwise.
8. TRANSFERABILITY. The Option is not transferable otherwise than by
will or the laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
9. NO RIGHTS OF STOCKHOLDERS. Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any shares of Stock
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date of exercise of the Option.
10. NO ACCELERATION OF EXERCISABILITY OF OPTION. Except as otherwise
determined by the Board or the Committee, in its sole and absolute discretion,
in writing, this Option shall not become immediately exercisable in the event of
a Change in Control or in the event that the Option is canceled or terminated
pursuant to Sections 6(b) or (c) hereof.
11. MARKET STAND-OFF AGREEMENT. In the event of an initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities, the
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) acquired pursuant to the exercise of the Option, without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters.
12. NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Option nor this grant
shall confer upon the Optionee any right to continued employment or service with
the Company or any Subsidiary.
4
<PAGE>
13. LAW GOVERNING. This grant shall be governed in accordance with and
governed by the internal laws of the State of Florida.
14. INTERPRETATION. The Optionee accepts the Option subject to all the
terms and provisions of the Plan and this grant. The undersigned Optionee hereby
accepts as binding, conclusive and final all decisions or interpretations of the
Board or the Committee upon any questions arising under the Plan and this grant.
15. NOTICES. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Company, to the Company's Chief Executive Officer at New
M-Tech Corporation d/b/a Newtech Corporation, 16550 N.W. 10th Avenue, Miami,
Florida 33169, or if the Company should move its principal office, to such
principal office, and, in the case of the Optionee, to the Optionee's last
permanent address as shown on the Company's records, subject to the right of
either party to designate some other address at any time hereafter in a notice
satisfying the requirements of this Section.
16. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of certain of the federal tax consequences of exercise of this
Option and disposition of the Shares under the law in effect as of the date of
grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
There may be a regular federal income tax liability upon the exercise
of the Option. Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Option Price. If
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise. Any gain realized on disposition of the Shares will be
treated as short-term or long-term capital gain for federal income tax purposes,
depending upon whether the Shares have been held for at least one year following
exercise of the Option.
Any payments made by the Company to Optionee pursuant to Section 7 of
this Agreement upon termination or cancellation of the Option prior to the
Publicly-Traded Date will be taxable at ordinary income rates. If Optionee is an
employee, such payment will be subject to withholding.
17. ADHERENCE BY OPTIONEE. Is a condition precedent of this grant and
of any obligations by the Company under this grant that Optionee adhere strictly
to the terms and conditions of this grant and the Plan. Upon request at any time
and from time to time, Optionee is required to acknowledge agreement with the
terms and condition of the Plan and this Grant. It is a condition of this Option
that Employee always act in the best interest of the Company.
5
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day of this grant.
COMPANY:
NEW M TECH CORPORATION D/B/A
NEWTECH CORPORATION
By: ________________________________
Joel Newman, President
6
EXHIBIT 10.3
TRADEMARK USER AGREEMENT
BY AND BETWEEN
MAYTAG CORPORATION
AND
MAYTAG INTERNATIONAL, INC.
AND
NEWTECH CORPORATION
AND
NEWTECH (HONG KONG) LTD.
October 1993
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS .............................................. 1
ARTICLE TWO
USE OF LICENSED TRADEMARKS ............................... 2
ARTICLE THREE
SPECIAL COVENANTS REGARDING QUALITY CONTROL .............. 4
ARTICLE FOUR
PAYMENTS ................................................. 5
ARTICLE FIVE
RECORDS, AUDITING AND REPORTS ............................ 6
ARTICLE SIX
LICENSEE'S REPRESENTATIONS ............................... 7
ARTICLE SEVEN
REGISTRATION OF LICENSED TRADEMARKS ...................... 8
ARTICLE EIGHT
DURATION AND TERMINATION ................................. 9
ARTICLE NINE
INDEMNIFICATION AND RELEASE ............................. 12
ARTICLE TEN
RELATIONSHIPS BETWEEN THE PARTIES ....................... 12
ARTICLE ELEVEN
ARBITRATION ............................................. 12
ARTICLE TWELVE
MISCELLANEOUS ........................................... 13
SIGNATURE PAGE ................................................ 17
EXHIBIT A - Products .......................................... 18
EXHIBIT B - Licensed Trademarks ............................... 19
EXHIBIT C - Territory ......................................... 20
EXHIBIT D - Territory Extension ............................... 21
EXHIBIT E - Royalty ........................................... 22
EXHIBIT F - Trademark Service Fee ............................. 23
EXHIBIT G - Adjustments to Minimum Royalty ................. 24&25
<PAGE>
TRADEMARK USER AGREEMENT
THIS AGREEMENT (this "Agreement"), made and entered into as of this first
day of October 1993, by and between Maytag Corporation and its wholly-owned
subsidiary Maytag International, Inc., companies organized and existing under
the laws of the State of Delaware, U.S.A., respectively having their main
offices and places of business at 403 West Fourth Street N. Newton, IA 50208
and at 8700 W. Bryn Mawr Avenue, Chicago, IL 60631, U.S.A. (collectively the
"Licensor"), and Newtech Corporation and Newtech (Hong Kong), Ltd. companies
respectively organized and existing under the laws of the State of Florida,
U.S.A. and Hong Kong, respectively having their main offices and places of
business at 2875 N. E. 191st Street, North Miami Beach, FL 33180 and 610 Nathan
Road, Kowloon, Hong Kong (collectively the "Licensee").
WITNESSETH:
WHEREAS, Licensor is the owner of certain trademarks and the goodwill
associated therewith, and Licensor is willing to permit Licensee to use such
trademarks in connection with the manufacturer, use and sale of certain
specified Products in accordance with the terms and conditions hereinafter set
forth:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereafter set forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
A. "Contract Quarter" shall mean each consecutive calendar quarter
beginning on the date of commencement of the first Full Contract Year.
B. "Contract Year" shall mean either the Initial Contract Year or a Full
Contract Year. "Initial Contract Year" shall mean the period of time from the
effective date to the first December 31 following such date. A "Full Contract
Year" shall mean each successive twelve month period following the Initial
Contract Year, such Full Contract Year to commence on January 1 and to continue
through the following December 31.
C. "Effective Date" means the date on which this Agreement is executed by
all parties to the Agreement.
D. "Products" shall mean the products listed in Exhibit A to this
Agreement, and by this reference made a part hereof, bearing the Licensed
Trademarks. The products listed in Exhibit A to this Agreement may be changed
from time to time and products may be added or deleted, all by mutual agreement
in writing between the parties hereto. Any products subsequently added to
Exhibit A to this Agreement shall also be "Products".
E. "Licensed Trademarks" shall mean the trade names, trademarks and service
marks specified in Exhibit B to this Agreement, and by this reference made a
part hereof, whether or not such trade names, trademarks and service marks are
registered or whether or not registrations have been applied for in any
particular jurisdiction within the Territory. The items listed in Exhibit B to
this Agreement may be changed from time to time and items may be added or
deleted, all by mutual agreement in writing between the parties hereto.
1
<PAGE>
F. "Net Selling Price" shall mean the gross invoice price of any Products
bearing one of the Licensed Trademarks sold, used or otherwise disposed of by
License in bona fide, commercial transactions with third parties, less freight,
import duties, and taxes assessed against such sales, and less advertising and
promotional allowances equal to [*****] of the gross invoice price. In the case
of any Products not sold in a bona fide commercial transaction with a third
party, the "Net Selling Price" shall be based upon Licensee's average net
invoice price for the particular Products during the Royalty Period. To the
extent deductions for freight, import duties, and taxes are not itemized on the
invoice, Licensee shall provide documentation to support the deductions. Upon
Licensor's request, Licensee shall also provide summaries of its expenditures
for advertising and promotional allowances. In the event Licensee's expenditures
for advertising and promotional allowances are less than [*****] of the gross
invoice price for the period covered by Licensor's request, Licensor's sole
remedy shall be a recalculation of the Royalty for the applicable period based
upon a recalculated Net Selling Price using the actual advertising and
promotional allowances expended by Licensee (rather than the [*****] flat
deduction provided above).
G. "Royalty" shall have the meaning set forth in paragraph A of Article
Four.
H. "Royalty Period" shall have the meaning set forth in paragraph A of
Article Four.
I. "Territory" shall mean the countries specified in Exhibit C to this
Agreement. ("Territory" shall also include any other geographic territory as may
be included pursuant to Article 2 of this Agreement or as may be agreed to in
writing by Licensor from time to time in Licensor's sole discretion.)
ARTICLE TWO
USE OF LICENSED TRADEMARKS
A. GRANT. Licensor hereby grants to Licensee upon the terms and conditions
specified in this Agreement an exclusive, nontransferable right and license to
use the Licensed Trademarks during the term of this Agreement on or in
connection with Products sold by Licensee within the Territory. Whereas Licensee
will be contracting for the manufacture of Products, the scope of this license
is eextended to those facilities contracted by Licensee to produce the Products.
Licensee shall provide to Licensor a list of all production facilities it
intends to use to produce or manufacture the Products, and shall advise Licensor
in writing of any changes in the facilities.
B. EXTENSION OF TERRITORY. In addition to the countries specified in
Exhibit C, Licensor agrees to grant to Licensee a right of first refusal to
extend the Territory to those countries specified in Exhibit D to this
Agreement. Upon Licensor's determination that it is in a position to license the
Licensed Trademarks in a country specified in Exhibit D, Licensor shall notify
Licensee in writing of the country's availability for inclusion in the
Territory. Such country(ries) shall be included in the Territory unless Licensee
gives written notice within 45 days of its receipt of Licensor's notice in the
Territory ("Rejection Notice"). Licensee's Rejection Notice shall eliminate
Licensee's right of the first refusal as to such country(ries). Unless Licensee
shall have sent a Rejection Notice, the Trademark Service Fee (Exhibit F) and
the minimum Royalty necessary to qualify for the first and second renewal terms
as provided in Article Eight shall be increased as specified in Exhibit G.
2
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
C. RESERVED USE. Licensor reserves unto itself the right to use or license
to third parties to use in the Territory the Licensed Trademarks on all products
not listed in Exhibit A, as well as any other trademark belonging to Licensor,
notwithstanding paragraph A of this Article Two However, prior to the selling or
licensing of products listed in Exhibit A bearing another of Licensor's
trademarks within the Territory, Licensor shall provide written notice to
Licensee of its intent.
D. NO TRANSFER, CONFUSION OR ALTERATION. Licensee shall not subcontract,
sublicense or authorize any third party, other than distributors, wholesalers
and retailers purchasing Products from Licensee for sale in the Territory
pursuant to this Agreement, to use the Licensed Trademarks without the prior
written consent of Licensor and shall not manufacture, use, sell or deal in any
product or service under any trade name, trademarks, service mark or other
designation which is likely to cause confusion with the Licensed Trademarks.
Licensee shall use the Licensed Trademarks only in a manner so as not to deceive
the public. All Products not bearing the Licensed Trademarks marketed or sold by
Licensee shall be reasonably distinguishable from the Products bearing the
Licensed Trademarks.
E. MANNER OF USE PRIOR APPROVAL. Licensee shall be entitled to use the
Licensed Trademarks on Licensee's Products, letterhead, invoices and all
advertising and promotional material including introduction books or other
literature relating to the use of the Products but only in such form and in such
general manner as shall have been previously approved by Licensor in writing.
All representations of the Licensed Trademarks to be used by Licensee shall
first be submitted to Licensor for approval of design and color. Licensee shall
comply with any other reasonable labeling and marking requirements that Licensor
may prescribe from time to time on Products manufactured subsequent to
Licensor's modification.
F. ACKNOWLEDGEMENT OF LICENSOR'S OWNERSHIP. Licensee acknowledges and
agrees that Licensor is the exclusive owner in the Territory and elsewhere of
the Licensed Trademarks and of all the goodwill relating thereto, and Licensee
agrees that all rights to the Licensed Trademarks shall remain vested in
Licensor both during the term of this Agreement and thereafter in the Territory
and elsewhere. Except for the rights granted under this Agreement, Licensee
shall not represent that it has any right or title to the Licensed Trademarks,
to any trade name, trademark or service mark incorporating the Licensed
Trademarks or any portion thereof or to the registration thereto and shall not
at any time claim that the use of such Licensed Trademarks by it has created any
right, title or interest on its part to the Licensed Trademarks. In each
instance when it uses the Licensed Trademarks, in order to maintain the validity
of the Licensed Trademarks, Licensee shall identify, by appropriate means
consistent with applicable legal requirements, that the Licensed Trademarks
belong to Licensor. Licensee agrees to incorporate the language of this
paragraph, or similar language acknowledging Licensor's ownership of the
Licensed Trademarks, in all contracts for the production and distribution of the
Products.
G. CONTROL OF LITIGATION. Nothing in this Agreement shall be construed as
granting to Licensee any right to take any action either in its own name or in
Licensor's name, unless specifically approved in writing by Licensor prior to
the initiation of any action, against third parties for any passing-off by any
third party of products as the products of Licensor, whether by the use of a
similar trademark or imitation or otherwise, or of any infringement or
unauthorized use of any of the Licensed Trademarks or any of Licensor's
trademark registrations for the Licensed Trademarks. Licensee shall, however,
promptly inform Licensor of instances of
3
<PAGE>
such passing-off, infringement or use that come to its attention, Licensor,
in its sole discretion, shall determine what action, if any, is to be taken in
each such instance and by whom, but shall proceed in good faith and make
reasonable efforts to protect its trademark rights and restrain infringement or
unauthorized use of the Licensed Trademarks. Except to the extent specified in
Article 7 or otherwise expressly agreed by Licensor, any damages recovered in
any action so taken shall be the property of Licensor. From any damages so
received, Licensor agrees to give credit to Licensee against any amounts owed or
which may become due from Licensee based upon the reasonable determination of
Licensor of the damages caused to Licensee based on the rights granted to
Licensee pursuant to this Agreement.
H. LIMITATION. Except as specifically permitted by this Agreement, the
license granted by Licensor to Licensee under this Article Two shall be
nondivisible, nontransferable and nonassignable, and without the right to grant
sublicenses thereunder, except with the prior written consent of Licensor.
ARTICLE THREE
SPECIAL COVENANTS REGARDING QUALITY CONTROL
A. STANDARDS OF QUALITY. Licensee agrees that the nature and quality of all
goods sold by Licensee in connection with the Licensed Trademarks shall conform
to reasonable commercial standards set by and under the control of Licensor with
respect to each country in the Territory. Licensee agrees that it will use the
Licensed Trademarks in connection with Licensee's business. Licensee agrees that
the Product will be positioned generally under normal market conditions above
comparable products bearing Licensee's NEWTECH trademark. In addition Licensee
shall position the Products in each country within the Territory to be generally
consistent under normal market conditions with Licensor's established
positioning of its white goods distribution for the Licensed Trademarks within
such country. Licensee shall provide Licensor its product development and
quality control programs applicable to all goods sold pursuant to this
Agreement.
B. MAINTENANCE OF QUALITY. Licensee shall cooperate with Licensor to
facilitate Licensor's control of the quality of the Products as required by
Paragraph A of this Article and shall permit Licensor's representatives to enter
Licensee's places of business from time to time at Licensor's request to: (i)
ascertain whether the terms and conditions of this Agreement are being complied
with, (ii) inspect the facilities and procedures used by Licensee in the
manufacture and packaging of the Products and (iii) test for compliance with
standards of quality.
C. GOODWILL. Licensee agrees to conduct its business according to regularly
accepted commercial standards and use its best efforts to create, maintain and
promote Licensor's goodwill in connection with the Products and the Licensed
Trademarks. Licensee shall use its best efforts to promote the sale and
distribution of the Products in the Territory and, upon written request, shall
furnish Licensor with a report and forecast of market conditions and
developments.
D. PRODUCTS SAFETY. Licensee shall inform Licensor as soon as possible of
any material allegation or actual fault, material failure or defect in any of
the Products which might foreseeably give rise to concerns for health or safety
as a consequence of the use of the Products. Licensee shall (at its sole
expense) take all such reasonable action as deemed necessary in the interests of
consumer safety (including total product recall) to meet the requirements of
local safety standards.
4
<PAGE>
For the purpose of ensuring that the Products conform to the standards of safety
and quality of the Products sold under the Trademarks as required by paragraph A
of this Article 3, Licensee shall, when reasonably requested by Licensor from
time to time, supply performance and failure data and samples of the Products to
Licensor, at Licensee's expense, for the purposes of inspection and testing.
ARTICLE FOUR
PAYMENTS
In consideration of the rights and licenses granted by Licensor to Licensee
hereunder, Licensee shall pay to Licensor the following amounts in the manner
specified below:
A. ROYALTY. Licensee shall pay to Licensor a royalty fee (the "Royalty")
for all Products sold, used or otherwise disposed of by Licensee. The Royalty
shall be calculated by multiplying (i) the Net Selling Price of all Products
bearing the Licensed Trademark sold, used or otherwise disposed of by Licensee
by (ii) the applicable Royalty Percentage set forth in Exhibit E during the
preceding calendar year.
Such Royalty shall be calculated and paid with respect to the Initial Contract
Year and each Contract Quarter Year thereafter (each such period being
hereinafter referred to as a "Royalty Period") based upon statements of
Licensee. Licensee shall provide to Licensor all supporting documents and
calculations that Licensor may require to support the calculation of the
Royalty, including a written report stating the number and the types of the
Products sold, used or disposed by Licensee under this Agreement during the
immediately preceding Royalty Period. The Royalty, and the documentation and
statements supporting such Royalty, shall be delivered to Licensor no later than
60 days after the expiration of the applicable Royalty Period to which they
relate.
B. TRADEMARK SERVICE FEE. Licensee shall pay to Licensor within 15 days of
the Effective Date of this Agreement an initial trademark service fee in the
amount of [*****] of which shall be applied to the Royalty owed by Licensee with
respect to the Initial Contract Year and the first Full Contract Year. Licensee
shall also pay to Licensor within 60 days of the end of each Full Contract Year
the difference, if any, in the amount of Royalty payable pursuant to Paragraph A
of this Article Four and the amount for such Full Contract Year specified in
Exhibit F of this Agreement.
C. CURRENCY; CONVERSION. All payments due under this Article Four shall be
made in United States currency. Payments due under paragraph A of this Article
Four shall be converted into U.S. dollars at the rate of exchange for sales of
U.S dollars prevailing in New York, New York, USA on the last business day of
the Royalty Period with respect to which such payment relates.
D. METHOD OF PAYMENT. All payments required to be made to Licensor
hereunder shall be paid to Licensor by Licensee by bank wire transfer (or other
means acceptable to Licensor) to Maytag International's Account No. 242-l50-1 at
Harris Trust & Savings Bank, Chicago, IL 60606 USA, Electronic Wire Transfer
Code HAT RUS 44, ABA # 071000288.
5
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
E. TAXES, DUTIES AND WITHHOLDINGS. Any customs, duties, taxes (except as
provided in the following grammatical paragraph) or any similar charges that
may be incurred in the Territory with respect to this Agreement and the
manufacture, sale or use of Products shall be paid by Licensee.
Notwithstanding the foregoing, if the government of any jurisdiction in the
Territory imposes any income or similar taxes for such payment on Licensor and
requires that such taxes shall be withheld by Licensee, Licensee shall be and is
hereby authorized to do so. Licensee shall promptly transmit to Licensor tax
receipts issued by the appropriate tax authorities in respect of such taxes so
withheld and remitted as well as the applicable provisions of law, in English,
so as to enable Licensor to support a claim for credit against income tax
payable by Licensor. In the event Licensee is required to make such a
withholding from any payment to Licensor for tax purposes but Licensee fails to
provide a receipt to Licensor as prescribed in this paragraph E of Article Four,
then such payment to Licensor shall be increased to an amount equal to the
payment due to Licensor determined without regard to this paragraph.
F. INTEREST ON OVERDUE AMOUNTS. Any amount payable hereunder that is not
paid by Licensee when due shall bear interest until paid at three percent over
the per annum rate of interest announced or set from time to time by Citibank,
NA as its Base Rate as in effect in New York, New York, USA. Licensor shall also
be entitled to treat any such failure as a default hereunder.
ARTICLE FIVE
RECORDS, AUDITING AND REPORTS
A. LICENSEE TO MAINTAIN RECORDS. Licensee shall keep at its usual place of
business materially complete and correct sales records in accordance with
generally accepted accounting principles containing information in reasonable
detail from which amounts due to Licensor under this Agreement can be readily
calculated, including deductions to the Net Selling Price of Products.
B. ROYALTY REPORT. Licensee shall deliver to Licensor within 60 days after
the end of each Royalty Period during the tenn of this Agreement, a royalty
report, showing the nature, quantity, Net Selling Price, Royalties due (which
shall be paid at the time of delivery of such report) and other items necessary
to determine the Royalty with respect to Products bearing of the Licensed
Trademark used, sold or otherwise disposed of by Licensee during the applicable
Royalty Period.
Each such royalty report shall be signed by a responsible officer of
Licensee. If no Royalty is due and payable for the Royalty Period covered, the
report shall so state. The initial royalty report shall cover the Initial
Contract Year and shall be due on March 31, 1994.
C. ANNUAL FINANCIAL STATEMENT. Within 90 days after the end of each fiscal
year of License, Licensee shall furnish Licensor with annual balance sheets and
profit and loss statements of Licensee prepared in accordance with U.S.
generally accepted accounting principles and reported on by Licensee's
independent auditors.
D. AUDIT AND INSPECTION. Licensor shall have the right, at its option, to
inspect, review and audit (or have its representatives inspect, review and
audit), at reasonable business hours of Licensee, all books, records, documents
and other data
6
<PAGE>
of Licensee for the purpose of computing the Royalty due under paragraph A of
Article Four. Licensee shall give Licensor or any such representative reasonable
access to Licensee's premises and books, records, documents and other data.
ARTICLE SIX
LICENSEE'S REPRESENTATIONS
As an inducement to Licensor to enter into this Agreement, Licensee represents
and warrants to Licensor and agrees as follow:
A. ORGANIZATION AND AUTHORITY. Licensee i are corporations duly organized
and existing under the laws of Florida and Hong Kong respectively, and has full
power and authority to conduct its business as proposed to be conducted and to
enter into and perform this Agreement. Licensee, to the extent legally required,
is fully qualified and duly registered and has obtained all permits, licenses
and registrations necessary, under the laws of each jurisdiction in the
Territory or elsewhere, to perform its duties and obligations under this
Agreement and it will remain so qualified and registered and will maintain such
permits, licenses and registrations during the term of this Agreement.
B. AUTHORIZATION OF AGREEMENT. The executor, delivery and performance of
this Agreement has been duly and validly authorized and approved by the Boards
of Directors of Licensee and no further authorization or consent of the Licensee
or any of the stockholders of Licensee is required.
C. NO CONFLICT. Neither the execution and delivery of this Agreement nor
its performance will conflict with or result in a breach of the terms,
conditions or provisions of the charter or by-laws of Licensee, or any contract,
agreement, mortgage or other instrument or obligation of any nature to which
Licensee is a party or is bound; and neither the execution and delivery of this
Agreement nor its performance will contravene or violate any statute or any
judicial or governmental regulation, order, injunction, judgement or decree and
Licensee has received no notice which is inconsistent with the foregoing.
D. GOVERNMENT APPROVALS. In the performance of its duties and obligations
under this Agreement Licensee, to the extent legally required, shall comply with
all applicable laws and regulations and obtain all appropriate government
approvals pertaining to the sale, distribution, manufacturing and advertising of
the Products.
E. COMPLIANCE WITH LAWS. Licensee is in compliance, and during the term of
this Agreement Licensee and its employees and agents will comply, with all laws,
rules and regulations applicable to Licensee or the conduct of its business,
pertaining to the performance of its duties and obligations under this
Agreement.
F. U.S. FOREIGN CORRUPT PRACTICES ACT. Licensee and Licensor acknowledge
that the parties are corporations organized under the laws of the United States
of America and that an essential term and condition of entering into this
Agreement is that neither Licensee nor Licensor will take any action which might
cause the other party to be in violation of United States law. Accordingly, the
Licensee and Licensor represent, warrant and agree that they shall comply with
the U.S. Foreign Corrupt Practices Act, as amended from time to time, including,
to the extent then required by applicable law, the following provisions:
7
<PAGE>
(i) neither it nor any of its employees or agents have made or will
make use of the mails or any means or instrumentality of
interstate or foreign commerce corruptly in furtherance of an
offer, payment, promise to pay, or authorization of the payment
of any money, or offer, gift; promise to give, or authorization
of the giving of anything of value to any foreign official for
purposes of influencing any act or decision of such foreign
official in his official capacity, including a decision to fail
to perform his official functions or inducing such foreign
official to use his influence with a foreign government or
instrumentality thereof, to affect or influence any act or
decision of such government, or instrumentality in order to
assist any person in obtaining or retaining business for or with,
or directing business to any person; and
(ii) neither it nor any of its employees or agents have made or will
make use of the mails or any means or instrumentality of
interstate or foreign commerce corruptly in furtherance of an
offer, payment, promise to pay, or authorization of the payment
of any money, or offer, gift, promise to give, or authorization
of the giving of anything of value to any foreign political party
or official thereof or any candidate for foreign political office
for purposes of influencing any act or decision of such party,
official, or candidate in its or his official capacity, including
a decision to fail to perform its or his official functions or
inducing such party, official, or candidate to use its or his
influence with a foreign government or instrumentality thereof to
affect or influence any act or decision of such government or
instrumentality in order to assist any person in obtaining or
retaining business for or with, or directing business to any
person, provided that nothing contained in this paragraph shall
be construed to prohibit acts allowed by the U.S. Foreign Corrupt
Practices Act.
G. LITIGATION. There are no judgments, liens, actions, or proceedings
pending or threatened against Licensee, or any of its officers or directors, and
neither Licensee nor its officers or directors have been convicted of any crime.
ARTICLE SEVEN
REGISTRATION OF LICENSED TRADEMARKS
A. To the extent the Licensed Trademarks are not presently registered for
the Products in countries within the Territory, Licensor agrees to proceed in
good faith and make reasonable efforts to obtain such registrations and to
maintain in force its current registrations at its sole cost. Licensee shall
render to Licensor reasonable assistance in obtaining and maintaining such
registrations.
B. Nothing contained in this Article Seven or this Agreement shall be
construed as:
(i) a warranty or representation by Licensor that any manufacture,
sale or use of the Products hereunder will be free from
infringement of trademarks owned by anyone other than Licensor,
(ii) a warranty or representation by Licensor as to the validity or
scope of any Licensed Trademark;
8
<PAGE>
(iii) a release for any infringement prior to the date hereof.
C. In the event Licensor's rights to the Licensed Trademarks in any of the
countries of the Territory specified in Exhibit C are defective or invalidated
so as to prohibit Licensee's sale of Products in such country not caused by
actions of Licensee inconsistent with the terms of this Agreement, Licensee's
sole recourse shall be:
(i) a reduction as specified in Exhibit G to this Agreement, in the
applicable Trademark Service Fee (Exhibit F, and a reduction in
the minimum Royalty necessary to qualify for the first and second
five year renewal term as provided in Article Eight; and
(ii) in the event the prohibition on Licensee's sales results in
Licensee's possession of inventory of Products within such
country which it cannot sell, Licensor shall pay one-half of
Licensee's actual costs of relocating such inventory to another
country where the inventory can be sold, plus one-half of the
Licensee's actual losses, if any, (but not anticipated profits)
on the sale of the relocated Products. If the prohibition on
Licensee's sales results in an impoundment of Licensee's
inventory for a period greater than 90 days, Licensor shall pay
to Licensee one-half of Licensee's net cost of the impounded
inventory. Upon release of the inventory from impoundment,
Licensee shall reimburse Licensor for one-half of the value of
the inventory at the time of the release. If the inventory cannot
be sold within the country of impoundment, Licensee's
reimbursement to Licensor shall be reduced by one-half of
Licensee's actual costs of relocating such inventory to another
country where the inventory can be sold. For purposes of this
paragraph Licensor's obligations to pay any of Licensee's costs
specifically exclude any claim for lost profits or sales.
D. In the event Licensor's rights to the Licensed Trademarks are defective
or invalidated, or have not become available as contemplated in paragraph B of
Article 2, or through governmental action which prohibits sales or imposes a
tariff in excess of [*****] of the value of the Products so as to prohibit
Licensee's sale of Products in three out of the four countries of Argentina,
Brazil, Mexico and Venezuela, provided the prohibition is not caused by actions
of Licensee inconsistent with the terms of this Agreement, Licensee shall have
the right to terminate the Agreement without penalty for a period of six months
from the date Licensee became aware of the qualifying invalidation by providing
written notice to Licensor. Licensee's failure to exercise its rights to
terminate the Agreement within this period shall waive Licensee's termination
rights for the qualifying invalidation, but shall not terminate any rights for
future qualifying invalidations.
ARTICLE EIGHT
DURATION AND TERMINATION
A. BASIC TERM; RENEWALS. The basic term of this Agreement shall be for ten
(10) Full Contract Years from the Effective Date, unless sooner terminated as
provided in this Agreement. This Agreement shall be subject to renewal for:
9
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
(i) an additional term of five (5) Fu11 Contract Years provided the
average Royalty paid by Licensee for the eighth (8th) and ninth
(9th) Full Contract Year exceeds [*****] or as amended by the
operation of Articles Two and Seven and Exhibit G, and Licensee
provides written notice to Licensor of its intent to renew the
Agreement on or before June 30, 2003; and
(ii) a second additional term of five (5) Full Contract Years pro-
vided the average Royalty paid by Licensee for the thirteenth
(13th) and fourteenth (14th) Full Contract Year exceeds
[*****] or as amended by the operation of Articles Two and
Seven and Exhibit G, and Licensee provides written notice to
Licensor of its intent to renew the Agreement on or before June
30, 2008.
At the end of the basic term or the renewal term, this Agreement shall
expire automatically without notice.
B. In the event the first or second additional five-year term is not
granted due to Licensee's failure to meet the minimum Royalty Payment, Licensor
grants to Licensee a right of first refusal for a period of one year from the
end of the term of this Agreement, for any licensing agreement for Products
bearing the Licensed Trademarks within the Territory as in effect at the end of
the term of this Agreement. Licensor shall provide written notice of its intent
to enter into such an agreement, including the terms of such agreement. Licensee
shall have a period of ten days from the date of its receipt of Licensor's
notice, to accept the terms by providing written notice to Licensor of its
acceptance. Failure by Licensee to provide its notice of acceptance within the
ten day period shall extinguish Licensee's right of refusal for the licensing
agreement so noticed.
C. PREMATURE TERMINATION. In addition to the other provisions of this
Agreement and any other available remedies, either party may terminate this
Agreement (either in its entirely or with respect to specified Products) in the
event of a default by the other party upon written notice of termination to the
other party (given after the expiration of any applicable grace period specified
below), which termination shall become effective upon receipt of such notice of
termination.
For purposes of this Agreement, a "default by Licensee" shall mean:
(i) a challenge by Licensee to Licensor's ownership of the Licensed
Trademarks;
(ii) the impairment by Licensee of the Licensed Trademarks, and
failure by Licensee to cure such default within thirty days after
written notice by Licensor specifying the required action;
(iii) Licensee's becoming insolvent or bankrupt under the laws of the
United States, becoming legally obligated to cease its business
or to wind up its affairs and to go into liquidation, or
Licensee's commencing voluntary liquidation proceedings;
10
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
(iv) a change in control of Licensee within the first 36 months of
this Agreement which results in either Joel Newman's loss of the
title of President or day-to-day control of Licensee.
(v) the failure by Licensee to pay when due all sums payable to
Licensor under Article Four and failure by Licensee to cure such
default within 15 days after written notice of such default from
the Licensor to the Licensee;
(vi) a default by Licensee under any other provision of this Agreement
or under any other agreement between Licensee and Licensor or any
of its affiliated companies and failure by Licensee to cure such
default within 45 days after written notice of such default from
the Licensor to the Licensee;
For purposes of this Agreement a "default by Licensor" shall mean:
(i) a default by Licensor under any provision of this Agreement other
than Article Seven and failure by Licensor to cure such default
within 45 days after written notice of such default from the
Licensee to the Licensor.
Licensee's sole recourse for any loss of Licensor's rights to the Licensed
Trademarks in the Territory is established in paragraph C of Article Seven.
D. FAILURE TO USE LICENSED TRADEMARKS. In the event Licensee fails to use
the Licensed Trademarks in any particular country of the Territory for a period
of two (2) years anytime during the term of this Agreement, unless such non-use
is caused by governmental restrictions or reasonable legal concerns relating to
the validity of the Licensed Trademark in such country Licensor may remove such
country or countries from the Territory by providing written notice to Licensee
of its decision and by reducing the applicable Trademark Service Fee as
specified in Exhibit G.
E. EARLY TERMINATION BY LICENSEE. On or after March 1, 1996, Licensee shall
have the right to terminate is Agreement without cause by providing written
notice to Licensor of its decision to terminate this Agreement and by paying to
Licensor a termination fee equal to the Trademark Service Fee specified in
Exhibit F which would have been payable in the Contract Year following the
effective date of the termination. In the event the effective date of the
termination is other than the end of a Contract Year the termination fee shall
be calculated by proportioning the two applicable Trademark Service Fees on the
basis of one full calendar year.
Example: In the event Licensee terminates this Agreement
effective November 30, 1998, the termination fee would be
[*****].
F. EFFECT OF TERMINATION. Upon termination of this Agreement either by
expiration or otherwise, Licensee shall immediately:
(i) cease all use of the Licensed Trademarks; except Licensee
shall have a period of [*****] to sell or otherwise dispose
of its inventory of Products consistent with the terms of
this Agreement which period
11
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
may be extended for up to an additional [*****] provided
that Licensee can reasonably demonstrate to Licensor valid
business reasons for the extension, and that Licensee is not
in default of any other term of this Agreement; and
(ii) prepare a final accounting and pay all money accrued or due
and payable by Licensee to Licensor hereunder within [*****]
of such termination, or the period established in paragraph
F (i) of this Article 8
Expiration or termination of this Agreement for any reason shall not in any
case operate to relieve either party from its responsibility to fulfill any
obligations under this Agreement which shall have accrued to such party prior to
the time of expiration or termination.
At all times after the termination of this Agreement, whether by expiration
or otherwise, Licensee shall:
(i) not use any trade name, trademark, service mark, word,
design, slogan or legend associated with Licensor or which
so nearly resembles any of the Licensed Trademarks as to be
likely to deceive or cause confusion; and
(ii) not hold forth to third parties in any manner whatsoever
that Licensee has any connection with Licensor.
ARTICLE NINE
INDEMNIFICATION AND RELEASE
Licensee shall be solely responsible for, and shall indemnify and hold
Licensor harmless against and from, any liabilities, claims, damages, or
expenses (including attorneys fees) arising out of Licensee's use of the
Licensed Trademarks, or Licensee's manufacture, distribution, service, testing,
use or sale of the Products, except to the extent such liabilities arise from a
defect or invalidation of Licensor's rights to the Licensed Trademarks not
caused by actions of Licensee inconsistent with the terms of this agreement, and
Licensee hereby further releases Licensor from any such liabilities, claims,
damages or expenses (including attorneys' fees).
Licensee further agrees to maintain adequate insurance, including product
liability insurance in an amount not less than [*****] dollars, in force with
respect to all Products and shall name Licensor as an additional dollars insured
on all such policies.
ARTICLE TEN
RELATIONSHIP BETWEEN THE PARTIES
The relationship of Licensor and Licensee to one another under this
Agreement shall at all times be that of independent contractors. Nothing
contained in this Agreement shall be construed (i) to constitute either party as
the agent or representative of the other party or give either party any
authority to bind or commit the other party in any capacity whatsoever or (ii)
to create any partnership or fiduciary relationship between Licensor and
Licensee.
12
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
ARTICLE ELEVEN
ARBITRATION
In the event that any disagreement or dispute arising out of this Agreement
or its interpretation, validity or enforcement is not reached within thirty (30)
calendar days after notice of the dispute is received, then both parties hereby
consent and agree that the dispute shall be finally and conclusively settled in
a binding arbitration held in Chicago, Illinois under the then existing UNCITRAL
Rules of Arbitration.
The arbitration shall be conducted in the English language by a single
arbitrator chosen in accordance with the UNCITRAL Rules who is skilled in
business matters of this nature with significant experience in Latin America.
The costs of the arbitration shall be determined by the arbitrator, but in no
event shall either party be required to post security for costs. The arbitrator
shall allow each party to conduct 1imited discovery regarding the documents
which will be submitted at the hearing and oral depositions under oath or
affirmation by all important witnesses. The arbitration shall be conducted and
the decision rendered as soon as practical after the filing of an arbitration
demand. The decision of the arbitrator shall be final and shall be fully
enforceable in any jurisdiction where the non-prevailing party has assets.
Notwithstanding the foregoing agreement to arbitrate disputes, either party
shall have the right to request that a court of competent jurisdiction issue a
temporary restraining order or a temporary injunction or similar equitable
relief in order to protect a party from any immediate or irreparable harm or
damage which may occur pending the final decision of the arbitrator.
The parties agree that this Article on arbitration constitutes a fair,
reasonable and equitable manner of resolving disputes and does not unfairly
disadvantage or prejudice either party.
ARTICLE TWELVE
MISCELLANEOUS
A. AMENDMENTS. This Agreement may not be amended except by an instrument in
writing executed by a duly authorized representative of Licensor and Licensee.
B. SUCCESSORS AND ASSIGNS. This Agreement shall be binding and insure to
the benefit of the parties and their respective successors and assigns, but
neither this Agreement nor any rights hereunder may be assigned, transferred or
sublicensed by Licensee, directly or indirectly, voluntarily or by operation of
law, without the prior written consent of Licensor which consent shall not be
unreasonably withheld. A proposed assignment, transfer or sublicense to a direct
competitor of Licensor shall be considered a reasonable basis for Licensor's
refusal to consent. In the event Licensor is merged or consolidated into or
otherwise disposes of all or substantially all of its assets to another
corporation or other person, Licensor will use its best efforts to have such
other corporation or person assume and perform Licensor's obligations under this
Agreement.
C. SURVIVAL. The rights and obligations of the parties hereto under the
following provisions of this Agreement shall survive the termination, whether by
expiration or otherwise, of this Agreement Paragraph F of Article Two, Article
13
<PAGE>
Four, paragraphs A, B and C of Article Five, paragraph F of Article Eight,
Article Nine, Article Eleven and Article Twelve.
D. NOTICES. Any notices that the parties are required or permitted to
receive pursuant hereto shall be sent by registered or certified air mail,
return receipt requested, or by messenger, or by telegraph, facsimile or telex
communication, subsequently to be consumed in writing, to the other party at the
following addresses:
If to Licensor:
MAYTAG INTERNATIONAL INC.
8700 W. Bryn Mawr Ave
Chicago, IL 60631
U.S.A.
Attention: President
Telecopier 312-714-8180
If to Licensee:
NEWTECH CORPORATION
2875 N. E. 191st Street
North Miami Beach, Florida 33180
U.S.A.
Attention: President
Telecopier 305-933-8270
or to such other address as shall be designated by notice to the other party.
The date of mailing or, if by messenger, the date of dispatch, shall be the
effective date of such notice. Notices by facsimile or telex communication shall
be effective upon receipt.
E. ENTIRE AGREEMENT. This Agreement represents the complete agreement of
the parties an supersedes any prior agreements between them relative to the
subject matter hereof.
F. LANGUAGE. The language to be used for correspondence between the parties
in any notice or documentation shall be English.
This Agreement has been executed in the English language and the English
language document shall prevail over any translation into any other language.
Each party declares that its representative who signs this Agreement on its
behalf either (i) understands the English language and the contents hereof or
(ii) has had all the provisions hereof, including this paragraph F, translated
for him into a language and by an interpreter of his own choice in such manner
that he understands and agrees to all such provisions.
G. CALENDAR. All dates and periods of time referred to in this Agreement
shall be construed in accordance with the Gregorian calendar.
H. WAIVER. Any waiver of any term or condition of this Agreement must be in
writing and signed by the party giving the same. Any such waiver shall be
effective only in the specific instance and for the purpose given. A failure or
delay
14
<PAGE>
in exercising any right or remedy hereunder shall not operate as a waiver
thereof, nor shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise or any other
right or remedy.
I. APPLICABLE LAW. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Illinois of the United States of
America.
J. SUBMISSION TO JURISDICTION. Licensor and Licensee hereby irrevocably
submit in any suit, action or proceeding arising out of or relates to this
Agreement, or any of the transactions contemplated hereby to the jurisdiction of
the United States District Court for the Northern District of Illinois and the
jurisdiction of any court of the State of Illinois located in the State of
Illinois, United States of America, and waive any and all objections to
jurisdiction that they may have under the laws of the State of Illinois or the
United States of America. Licensee hereby irrevocably appoints CT Corporation
System, 208 S. LaSalle Street, Chicago, Illinois, 60604, U.S.A., as its agent
for service of process which may be served in any such suit, action or
proceeding, provided notice is given as specified in this Agreement. Licensee
agrees that a final judgment in any such suit, action or proceedings shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this paragraph J shall affect
the right of Licensor to bring any action or proceeding against Licensee or its
property in the courts of any other jurisdictions. To the extent that Licenscee
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, execution or otherwise) with respect
to itself or to its property, Licensee hereby irrevocable waives such immunity
in respect of its obligations under this Agreement.
K. JUDGMENT. If, for the purposes of the Licensor obtaining a judgment in
any court, it is necessary to convert a sum in United States Dollars due
hereunder into another currency (the "Other Currency"), the rate of exchange
used shall be that at which in accordance with normal banking procedures the
Licensor could purchase United States Dollars with the Other Currency on the
business day preceding that on which final judgment is given. The obligation of
Licensee in respect of any such sum due from it hereunder shall, notwithstanding
any judgment in such Other Currency, be discharged only to the extent that on
the business day following receipt by the Licensor of any sum adjudged to be so
due in the Other Currency the Licensor may in accordance with normal banking
procedures purchase United States Dollars with the Other Currency, if the United
States Dollars so purchased are less than the sum originally due to the Licensor
in United States Dollars, Licensee agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Licensor against such loss,
and if the United States Dollars so purchased exceed the sum originally due to
the Licensor in United States Dollars, the Licensor agrees to remit the Licensee
such excess.
L. INTERPRETATION. Article titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meanings or interpretation of this Agreement. Any Schedules and
Exhibits referred to herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth verbatim herein.
M. CONFIDENTIALITY. In the performance of this Agreement Licensor and
Licensee will be exchanging confidential information, including but not limited
to:
15
<PAGE>
(1) proprietary technical information regarding the Products; (2) customer lists
and sales volumes; (3) sales and marketing plans; (4) sales, costs, and other
financial data; (5) sources of supply for the Products; and (6) status of
intellectual property rights. Licensor and Licensee agree to retain such
exchanged confidential information confidence by exercising reasonable
precautions to Prevent unauthorized disclosure of the confidential information
to any third party, and not to use the confidential information for any purpose
other than in the furtherance of the objectives of this Agreement. In the event
of termination of this Agreement, this confidentiality obligation shall survive
for a period of two years from the effective date of termination.
N. PARTIAL INVALIDITY. Wherever possible, each provision hereof shall be
interpreted in such a manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement, and thus Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained herein
unless the deletion of such provision or provisions would result in such a
material change as to cause completion of the transactions contemplated hereby
to be unreasonable.
O. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original instrument, but all
of which shall be considered one and the same agreement and shall become binding
when one or more counterparts have been signed by each of the parties and
delivered to each of the other parties hereto.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives as of the date first mentioned above.
LICENSOR:
MAYTAG CORPORATION
By /s/ [ILLEGIBLE]
---------------------------------
Title: SR V.P. CORPORATE PLANNING
/s/ [ILLEGIBLE]
- ----------------------------------
(ATTEST)
(CORPORATE SEAL)
LICENSOR:
MAYTAG INTERNATIONAL, INC.
By /s/ [ILLEGIBLE]
---------------------------------
Title: PRESIDENT
/s/ [ILLEGIBLE]
- ----------------------------------
(ATTEST)
(CORPORATE SEAL)
LICENSEE:
NEWTECH CORPORATION
By /s/ [ILLEGIBLE]
---------------------------------
Title: PRESIDENT
/s/ [ILLEGIBLE]
- ----------------------------------
(ATTEST)
(CORPORATE SEAL)
LICENSEE:
NEWTECH (HONG KONG) LTD.
By /s/ [ILLEGIBLE]
---------------------------------
Title: PRESIDENT
/s/ [ILLEGIBLE]
- ----------------------------------
(ATTEST)
(CORPORATE SEAL)
17
<PAGE>
EXHIBIT A
TO
TRADEMARK USER AGREEMENT
ARTICLE ONE (D)
PRODUCTS
Televisions - color, black and white, projection
Radios - portable, clock
Video Cassette/Disc Recorders
Camcorders
Tape Recorders/Cassette Recorders
Audio Equipment - amplifiers, receivers, speakers, tuners,
turntables, headphones, compact disc players
Portable/Compact audio equipment
18
<PAGE>
EXHIBIT B
TRADEMARK USER AGREEMENT
ARTICLE ONE (E)
LICENSED TRADEMARKS
1. Admiral
19
<PAGE>
EXHIBIT C
TO
TRADEMARK USER AGREEMENT
ARTICLE ONE (I)
TERRITORY
Aruba
Bahamas
Belize
Bolivia
Brazil*
Chile
Costa Rica
Dominican Republic
El Salvador
French Guiana
Guyana
Honduras
Jamaica
Netherlands Antilles
Nicaragua
Panama
Paraguay
Peru
Puerto Rico
Surinam
Trinidad & Tobago
Uruguay
Venezuela
-------------------
* Licensee has been informed of pending litigation which may impact
Licensor's trademark rights in this country.
20
<PAGE>
EXHIBIT D
TO
TRADEMARK USER AGREEMENT
ARTICLE TWO (B)
TERRITORY EXTENSIONS
Antigua
Argentina
Barbados
Bermuda
British Virgin Islands
Cayman Islands
Columbia
Cuba
Dominica
Ecuador
Falklands
Granada
Guatemala
Haiti
Mexico
21
<PAGE>
EXHIBIT E
TO
TRADEMARK USER AGREEMENT
ARTICLE FOUR (A)
ROYALTY
[*****] on all Products.
22
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
EXHIBIT F
TRADEMARK USER AGREEMENT
ARTICLE FOUR (B)
TRADEMARK SERVICE FEE
Contract Year 1, ending December 31, 1994: [*****]
Contract Year 2, ending December 31, 1995: [*****]
Contract Year 3, ending December 31, 1996: [*****]
Contract Year 4, ending December 31, 1997: [*****]
Contract Year 5, ending December 31, 1998: [*****]
Contract Year 6, ending December 31, 1999: [*****]
Contract Year 7, ending December 31, 2000: [*****]
Contract Year 8, ending December 31, 2001 [*****]
Contract Year 9, ending December 31, 2002: [*****]
Contract Year 10, ending December 31, 2003: [*****]
FIRST EXTENSION TRADEMARK SERVICE FEE
Contract Year 11, ending December 31, 2004: [*****]
Contract Year 12, ending December 31, 2005: [*****]
Contract Year 13, ending December 31, 2006: [*****]
Contract Year 14, ending December 31, 2007: [*****]
Contract Year 15, ending December 31, 2008: [*****]
SECOND EXTENSION TRADEMARK SERVICE FEE
Contract Year 16, ending December 31, 2009: [*****]
Contract Year 17, ending December 31, 2010: [*****]
Contract Year 18, ending December 31, 2011: [*****]
Contract Year 19, ending December 31, 2012: [*****]
Contract Year 20, ending December 31, 2013: [*****]
23
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
EXHIBIT G
TO
TRADEMARK USER AGREEMENT
1. EXTENSION OF TERRITORY. ARTICLE TWO (B).
Upon Licensor's acceptance of any of the following countries
as extensions of the Territory, the Trademark Service Fee
(Exhibit F) applicable one year after which acceptance occurs and
for all applicable subsequent years shall be increased by the
percentage specified:
Antigua [*****]
Argentina [*****]
Barbados [*****]
Bermuda [*****]
British V.I. [*****]
Cayman Islands [*****]
Columbia [*****]
Cuba [*****]
Donunica [*****]
Ecuador [*****]
Falklands [*****]
Granada [*****]
Guatemala [*****]
Haiti [*****]
Mexico [*****]
If the date after which acceptance occurs is any day other
than January 1 of a Contract Year, the above percentage shall
be prorated for the remaining part i of such year based on the
number of days left for that year. In the event any of the above
specified countries are included within the Territory for the 9th
and 14th Contract Years, the minimum Royalty necessary to qualify
for the first and second renewal terms, as provided for in
paragraph A of Article 8, shall be increased by the applicable
percentages established above.
II. INVALIDATION OF LICENSOR'S RIGHTS TO LICENSED TRADEMARKS, ARTICLE
SEVEN (C).
In the event of an invalidation of Licensor's rights as
specified in paragraph C of Article Seven in an "affected
country", the Trademark Service Fee (Exhibit F) applicable for
the year in which the invalidation occurs and for all applicable
subsequent years, shall be reduced by a percentage equal to the
total net sales of Products in the affected country in the twelve
months preceding the invalidation divided by the total net sales
of Products in the Territory within the same twelve month period.
If the invalidation occurs during the first three Full Contract
Years and there has been no sales within the affected country
during the twelve month period preceding the invalidation, the
applicable Trademark Service Fee shall be reduced by the
percentage specified.
Aruba [*****]
Bahamas [*****]
Belize [*****]
24
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Bolivia [*****]
Brazil* [*****]
Chile [*****]
Costa Rica [*****]
Dominican Republic [*****]
El Salvador [*****]
French Guiana [*****]
Guyana [*****]
Honduras [*****]
Jamaica [*****]
Netherlands Antilles[*****]
Nicaragua [*****]
Panama [*****]
Paraguay [*****]
Peru [*****]
Puerto Rico [*****]
Surinam [*****]
Trinidad & Tobago [*****]
Uruguay [*****]
Venezuela [*****]
In the event any of the above specified countries are removed
from the Territory for the 9th and 14th Contract Years, the
minimum Royalty necessary to qualify for the first and
second renewal terms, as provided for in paragraph A of
Article 8, shall be decreased by the applicable percentages
established above.
III. MISCELLANEOUS PROVISIONS.
A. In the event of a Territory extension of any of the
countries specified in Paragraph I of this Exhibit and
Licensor's rights are subsequently invalidated in such
country(ies), the applicable Trademark User Fee shall be
reduced by the percentage established in Paragraph I.
B. In the event of an invalidation of Licensor's rights in
any of the countries specified in Paragraph 11 of this Exhibit
and Licensor's rights are subsequently restored in such
country(ies), the applicable Trademark User Fee shall be
increased by the amount of the reduction calculated at the time
of the invalidation.
C. In the event both a reduction and an increase are applicable
to calculating the Trademark User Fee in any one year, the
following procedure shall be used: (1) add all of the
percentage increases; (2) multiply the total increases by
the applicable Fee from Schedule F; (3) add all of the
percentage reductions; and (4) multiply the total reductions
by the applicable fee from Schedule F (prior to any
adjustments for this computation); (5) the product arrived
at in Step (2) should be added to the applicable fee from
Schedule F and the product from Step (4) should be
subtracted to arrive at the Adjusted Trademark User Fee.
25
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
EXHIBIT 10.4
TRADEMARK LICENSE AGREEMENT
AGREEMENT entered into as of May 1, 1996, by and between White Consolidated
Industries, Inc., a Delaware Corporation, having its principal office at 11770
Berea Road, Cleveland, Ohio 44111 ("Licensor"), and Newtech, Inc., a Florida
Corporation, having its principal office at 16550 N.W. 10th Avenue, Miami,
Florida 33169 (hereinafter referred to as "Licensee").
WHEREAS, Licensor is the owner of the trademark White-Westinghouse and
associated designs and trade dress, (together, the "Trademark"), and is using
the Trademark throughout the World, and
WHEREAS, Licensor has the right to grant Licensee the license, right and
permission to use the Trademark, and
WHEREAS, Licensee is in the business of manufacturing, distributing and selling
articles described and specified hereinafter (the "Products"), and desires to
secure the license, right and permission to use the Trademark upon, and in
connection with, the manufacturing, distributing and selling of such Products;,
and
WHEREAS, the Products that are the subject of this Agreement have been defined
by the parties as consumer audio and video products and telephones and related
products listed on Exhibit A hereto (and any other articles which the parties
mutually agree to be subject to the provisions of this Agreement which, in
accordance with the terms of this Agreement, bear the Trademark (collectively,
the "Trademarked Product").
WHEREAS, Licensor desires to grant to Licensee, and Licensee desires to accept
from Licensor, a license to use the Trademark in the design, manufacture,
advertising, sale and promotion of the Products, subject to each of the terms,
provisions and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements,
convenants and provisions contained herein, the parties hereto do hereby agree
as follows:
<PAGE>
Page 2--
ARTICLE 1
GRANT OF LICENSE AND DESIGNATION OF TRADEMARKED PRODUCT
Effective upon the execution of this Agreement, Licensor hereby grants to
Licensee, for the period hereinafter specified and upon the terms, provisions
and conditions of this Agreement, the exclusive right and license to use the
Trademark within the geographic area described in Article 2 hereof, in the
design, manufacture, advertising, sale and promotion of the Trademarked Product.
Licensor recognizes that Licensee's affiliate Newtech(HK), Ltd., a Hong Kong
corporation having its principal offices located at Room 909, Holywood Plaza,
610 Nathan Road, Kowloon, Hong Kong, may from time to time ship Trademarked
Product directly to Licensee's customers.
In the event of any disputes between the parties to this Agreement regarding the
definition of Trademarked Product, the final decision regarding such definition
shall rest in Licensor's sole and absolute discretion. The rights granted to
Licensee herein are limited to use on or in connection with the Trademarked
Product and Licensee specifically agrees not to use the Trademark in any manner
or on any product, service or item, except as set forth in the Agreement.
ARTICLE 2
GEOGRAPHIC AREA
The rights granted to Licensee hereunder may be exercised by Licensee within the
USA and Canada (the ''Territory''), and Licensee shall have exclusive rights
with respect to the Trademarked Product. Upon Licensee's request, Licensor may,
in its discretion, extend the areas in which Licensee may exercise said rights,
but any such extension shall, in each instance, be evidenced by a written and
duly executed amendment to this Agreement for such periods and upon such terms
and conditions as shall be determined by Licensor. From time to time Licensor
may wish to purchase Trademarked Product for sale outside the Territory.
Licensee agrees to sell Trademarked Product to Licensor at the same price
Licensee sells Trademarked Product to its best customer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LICENSOR
3.1 Organization and Power. Licensor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Licensor
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder.
<PAGE>
Page 3--
3.2 AUTHORIZATION. The execution, delivery and performance by Licensor of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensor is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
3.3 NO VIOLATION. Licensor is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
3.4 OWNERSHIP OF TRADEMARK. Licensor is the owner of the Trademark and, to
Licensor's knowledge, the use of the Trademark in the design, manufacture,
advertising, sale and promotion of any of the Trademarked Product will not
infringe any intellectual property or any other rights of any third party.
3.5 RIGHT TO GRANT LICENSE. Licensor has the full right, power and authority to
grant the license as set forth in Article 1 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LICENSEE
4.1 ORGANIZATION AND POWER. Licensee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Licensee
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder.
4.2 AUTHORIZATION. The execution, delivery and performance by Licensee of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensee is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
4.3 NO VIOLATION. Licensee is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
<PAGE>
Page 4--
ARTICLE 5
TERM OF AGREEMENT
5.1 CONTRACT TERM. The Contract Term of this Agreement commence of the date
first mentioned above and ending on December 31, 1998 at midnight Eastern
Standard Time, unless sooner terminated pursuant to the terms of this Agreement.
5.2 EXTENSION TERMS. Licensor hereby grants to Licensee the option to extend the
term of this Agreement for up to fourteen (14) one (1) year periods commencing
as of January 1, 1999 and ending on December 31, 2012, at midnight Eastern
Standard Time, unless sooner terminated pursuant to the terms of this Agreement
with such extended terms to be subject to the same terms and must achieve
specified levels of Minimum Sales during the then preceding Contract or
Extension Term of this Agreement as set forth in Article 8 hereof. Such options
to extend the term of this Agreement must be exercised by Licensee, if at all,
by giving written notice to Licensor at least one hundred and twenty (120) days
prior to the expiration of the then preceding Contract Term of this Agreement.
Nine months (270 days) prior to the end of the fourteenth extension, the parties
will negotiate, in good faith, the possibility of extending this Agreement for
one or more extension periods. Either party may terminate this Agreement without
cause, provided however, that such termination shall not be permitted within the
first 5 (five) years following the Effective Date of this Agreement. Notice of
termination must be given in writing to the other Party hereto 1 (one) year
prior to the termination date. Licensee shall have the right to sell off
inventory of Trademarked Product in accordance with Article 21. Neither Licensor
nor Licensee shall be liable for any compensation or damages by reason of such
early termination.
ARTICLE 6
ROYALTIES
6.1 EARNED ROYALTIES. Subject to of Article 7 hereof, Licensee shall pay to
Licensor for the rights granted hereunder a sum equal to the following
percentage of the Net Invoice Value of Trademarked Products Sold by Licensee
(the "Royalties").:
Audio & Telephone Products: [*****]
Video Products: [*****]
The Royalties shall be remitted in accordance with Section 7.4 of this
Agreement.
6.2 DEFINITION OF NET INVOICE VALUE. As used throughout this Agreement, the term
"Net Invoice Value" shall mean the aggregate of the invoiced amounts of
Trademarked Product sold by Licensee, less (a) returned goods, refunds, credits
and allowances actually made or allowed to customer with respect to Trademarked
Product, (b) freight or handling charges charged to customers or incurred on
returned goods, and (c) sales and excise taxes actually paid ("NIV").
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 5--
ARTICLE 7
MINIMUM ROYALTY PAYMENTS
7.1 MINIMUM ROYALTY PAYMENTS. The Minimum Royalties for the Contract Term shall
be paid [*****] dollars ($[*****]) in advance on execution of this Agreement and
the balance in four (4) equal installments of [*****] each by the 30th day of
March, June, September and December 1998. The Minimum Royalties for each
Extension Term as shown below shall be paid in four (4) equal installments each
by the 30th day of March, June, September and December of the respective term.
Term Year(s) Minimum
Contract Royalties
Term 1997/1998 [*****]
First Extension Term 1999 [*****]
Second Extension Term 2000 [*****]
Third Extension Term 2001 [*****]
Fourth Extension Term 2002 [*****]
Fifth Extension Term 2003 [*****]
Sixth Extension Term 2004 [*****]
Seventh Extension Term 2005 [*****]
Eighth Extension Term 2006 [*****]
Ninth Extension Term 2007 [*****]
Tenth Extension Term 2008 [*****]
Eleventh Extension Term 2009 [*****]
Twelfth Extension Term 2010 [*****]
Thirteenth Extension Term 2011 [*****]
Fourteenth Extension Term 2012 [*****]
7.2 INITIAL ROYALTY PAYMENT. Licensee shall pay Licensor an initial royalty
payment (the "initial Royalty Payment") of [*****] upon execution of this
Agreement. The Initial Royalty Payment shall be applied against the first
Royalties payable pursuant to Section 7.4 of this Agreement.
7.3 APPLICATION OF EARNED ROYALTIES. The Earned Royalties to be paid under
Article 6 shall be applied against the Minimum Royalties due under this Article
7, and Licensee shall pay by each due date specified in this Article 7 the sum
of: (i) the Minimum Royalties as specified above; plus (ii) the excess, if any,
of the Earned Royalties (per Article 6) over the Minimum Royalties for the then
current quarter payable by such due date (such sum hereinafter referred to as
the "Royalty Payment").
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 6--
7.4 QUARTERLY REPORTS OF SALES AND ROYALTY PAYMENTS. On or before the twentieth
(20th) day of each January, April, July and October during the Contract Term and
any Extension Term, Licensee shall deliver to Licensor the following: (i) a
written statement, certified to be true and correct by the Chief Financial
Officer of Licensee, setting forth the Gross an NIV sales for each Trademarked
Product during the preceding calendar quarter and a calculation of the Royalties
payable under Article 6 and 7 of this Agreement for such period, and (ii) a
check payable to Licensor in full payment of the amount due under Article 6 and
7 of this Agreement for such period. Each royalty payment, payable in US
currency, shall be remitted by check at Licensor's address as provide by this
Agreement.
ARTICLE 8
MINIMUM SALES OF TRADEMARKED PRODUCT
8.1 FAILURE TO MEET REQUIRED MINIMUM SALES. Licensee shall use its best efforts
to advertise and sell Trademarked Product in the Territory during the term of
this Agreement. Should Licensee fail to achieve the NIV sales over any [*****]
consecutive terms as set forth below in this Article 8 then Licensor may, at its
option, elect to terminate this Agreement by written notice delivered to
Licensee with [*****] after the end of any period in which Licensee failed
to achieve such required Minimum Sales. Such termination shall be effective upon
delivery of said notice but shall not affect Licensee's outstanding indebtedness
to Licensor or any of the provisions relating thereto.
Contract Term [*****]
First Extension Term [*****]
Second Extension Term [*****]
Third Extension Term [*****]
Fourth Extension Term [*****]
Fifth Extension Term [*****]
Sixth Extension Term [*****]
Seventh Extension Term [*****]
Eight Extension Term [*****]
Ninth Extension Term [*****]
Tenth Extension Term [*****]
Eleventh Extension Term [*****]
Twelfth Extension Term [*****]
Thirteenth Extension Term [*****]
Fourteenth Extension Term [*****]
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 7--
ARTICLE 9
ADVERTISING AND ART WORK
9.1 ADVANCE SUBMISSION. Licensee shall submit to Licensor for approval all
advertising and promotional items, budgets, programs and materials relating to
the Trademarked Product at least fourteen (14) days prior to intended usage.
Licensor shall provide Licensee with written approval or disapproval within ten
(10) business days after Licensor's receipt thereof. Should Licensor disapprove,
its written notice shall explain in detail the reasons for disapproval so that
Licensee may prepare and submit new advertising and art work.
9.2 ART WORK. Licensor shall make available to Licensee any and all necessary
film, photostats, artwork and full color reproductions of its Trademark,
artwork, designs and other materials necessary for Licensee's use in accordance
with this Agreement.
9.3 EXPENSE REIMBURSEMENT. Licensee shall reimburse Licensor for Licensor's
out-of- pocket expenses, including, reasonable hourly charges for creative
personnel incurred by Licensor in the preparation for Licensee, when and if
required, of new artwork, mechanicals, and film. All charges shall be agreed to
prior to the time such expenses are incurred, and all sums due to Licensor under
this Article 9 shall paid by Licensee upon receipt of an appropriate invoice.
ARTICLE 10
LICENSEE'S RECORDS
Licensee shall keep and maintain at its regular place of business separate and
complete books and records of all business transacted by Licensee in connection
with the Trademarked Product, including, but not limited to, books and records
relating to Gross and NIV of Sales and orders for Trademarked Product. Such
books and records shall be maintained in accordance with generally accepted
accounting procedures and principles consistently applied. Licensor or its duly
authorized agents or representatives shall have the right to inspect said books
and records at Licensee's premises during Licensee's regular business hours.
<PAGE>
Page 8--
ARTICLE 11
LICENSEE'S ANNUAL REPORTS AND ANNUAL ROYALTY PAYMENTS
On or before the fifteenth (15th) day of the second (2nd) month following the
end of Licensee's fiscal year, Licensee shall render to Licensor a statement
certified by Licensee's Chief Financial Officer disclosing gross and NIV Value
of sales, Royalties due and Royalties paid for Licensee's preceding fiscal year,
and for any Contract or Extension Term which ended within said fiscal year. If
said statement discloses that the amount of Royalties paid during any period to
which said statement relates was less than the amount required to be paid under
the provisions of this Agreement, Licensee shall pay said deficiency concurrent
with the delivery of the statement. If said statement discloses the Licensee has
paid Royalties in excess of the amounts required to be paid, Licensor shall
apply said excess to the next Royalty payment.
ARTICLE 12
AUDIT BY LICENSOR
At all times during the existence of this Agreement and for twelve (12) months
after the last report is rendered hereunder, Licensor, if it so chooses, may
cause its independent accountants to audit all books and records of Licensee
pertaining Trademark Product. Licensor shall have the further right to engage an
independent certified public accounting firm, to audit the books and records of
Licensee with regards to the Royalties due hereunder. In the event any such
audit shall disclose that the Licensee has understated NIV Sales or underpaid
Royalties for any reporting period, Licensee shall forthwith and upon written
demand of Licensor, pay the amount, if any, by which the Royalties owing exceed
Royalties paid, plus interest of twelve percent (12%) per annum on such
delinquent amounts, accruing from the date on which such amounts became
delinquent to the date on which such delinquent amounts were paid. In the event
that Licensee has understated NIV Sales and consequently has underpaid Royalties
in excess of One Thousand dollars ($1,000) of amount due for any Contract Term,
Licensee shall forthwith and upon written demand also pay ail costs, fees and
expenses incurred by Licensor in conducting such audit, including, without
limitation, reasonable travel expenses. Should such audit disclose that the
Royalties paid exceed the Royalties due, any excess revealed by such audit will
be remitted to Licensee.
<PAGE>
Page 9
ARTICLE 13
LICENSEE OBLIGATIONS
13.1 LICENSEE DILIGENCE. Licensee shall design, manufacture, advertise, sell and
ship the Trademarked Product and shall continuously and diligently during the
term hereof procure and maintain facilities and trained personnel sufficient and
adequate to accomplish the foregoing, all to the extent and in a manner no less
thorough, diligent and professional than the same accorded by Licensee for
Licensee's most favored premium products and/or services. A cessation of the
above for a continuous period of ninety (90) days shall be grounds for
termination by Licensor, without notice. The marketing of Trademarked Product
shall be conducted in a manner consistent with enhancing the long-term value of
the Trademark. It is the interest of the parties that Trademarked Product be
sold simultaneously through a wide range of retailers. Accordingly, Licensee
shall continuously and diligently design, price and promote Trademarked Product
to retailers in all major classes of trade including department stores (i.e.,
Macy's, Burdine's, Bloomingidale's, etc.), mass merchants (i.e., Walmart, Kmart,
etc.), regional discounters (i.e., Caldor, Bradlees, etc.), warehouse clubs
(i.e., Target, Sam's, etc.), specialty electronics chains (i.e., The Wiz, etc.),
mail order, premium and television shopping services. Licensee shall exhibit
Trademarked Product in exhibit or booth space at the annual electronics show.
13.2 LICENSOR INSPECTION RIGHTS. Licensor shall have the right to inspect any of
Licensee's facilities pertaining to the Trademarked Product during regular
business hours. Licensor shall conduct such inspection in the presence of an
officer, partner or authorized representative of Licensee.
13.3 NO COMPETITION WITH TRADEMARKED PRODUCT. During the term of this Agreement,
Licensee shall not enter another license Agreement for products that would
directly compete with the Trademarked Product.
13.4 FORFEITURE OF CATEGORIES OF TRADEMARK PRODUCT FOR NON-USE. Licensee's
failure to introduce for sale, by the commencement of the First Extension term,
Trademarked Product in any of the eleven (11) categories listed on Exhibit A
shall be deemed a forfeiture of its grant to use the Trademark in that
category(ies) of Trademarked Product. Failure of Licensee to ship Trademarked
Product in any of eleven categories of Trademarked Product for a period of one
(1) year shall be deemed a forfeiture of its grant to use the Trademark in those
categories of Trademark Product.
<PAGE>
Page 10--
13.5 FINANCIAL STANDARDS. Licensee shall provide its financial statements to
Licensor annually or as requested by Licensor, which are to be prepared in
accordance with U.S. GAAP. Licensee must promptly notify Licensor of a
termination of any significant line of credit or guarantee of indebtedness by
personal guarantor. Should Licensee's net worth fall below $2,000,000 in the
aggregate, Licensor may at its option terminate this Agreement. Likewise
Licensor may terminate this Agreement immediately if any of the following events
occur:
1) Licensee is in default under the provisions of any line of credit or
debt agreement with financing institution.
2) A sale or transfer of Licensee's assets which, in Licensor's opinion,
may affect the ability of Licensee to operate the business pursuant to
this Agreement, or
3) Licensee incurs net operating losses in the aggregate for three or more
consecutive years.
ARTICLE 14
APPROVALS AND QUALITY STANDARDS
14.1 ADVANCE APPROVAL. Prior to any use of any Trademark, Licensee shall, at
Licensee's expense, submit to Licensor, for Licensor's written approval, the
following: (a) two (2) specimens of each Product on which the Trademark is to
appear (the "Specimens"); (b) all artwork which Licensee intends to use in
connection with the Trademark; and (c) all packaging, advertising and
promotional literature which Licensee intends to use in the marketing or
merchandising of the Trademarked Product. Licensor shall give Licensee written
notice of approval or disapproval within ten (10) business days from its receipt
of the Specimens, and should Licensor disapprove, its written notice shall
explain in detail the reasons for disapproval so that Licensee may prepare and
submit new Specimens and/or samples.
14.2 STANDARDS. After Licensor has given its written approval of said Specimens,
then the approved product, quality, packaging, advertising and promotional
literature shall be the standard for all Trademarked Product produced thereafter
(the "Approved Quality").
14.3 PERIODIC SAMPLES. Thereafter, consecutively at four (4) month intervals,
Licensee shall, at Licensee's expense, submit to Licensor not less than two (2)
randomly selected production run samples of the Trademarked Product.
14.4 APPROVED QUALITY STANDARDS. Without the prior written approval of Licensor,
Licensee shall not sell or distribute any Trademarked Product which deviates
from the Approved
<PAGE>
Page 11--
Quality more than the deviation which would occur as a result of normal
deviations in raw material characteristics.
14.5 PRODUCT SERVICING AND REPAIRS. Licensee will propose, prior to the sale of
Trademarked Product at retail, a mechanism by which Licensee will respond to
inquiries from consumers and third party appliance repair vendors regarding the
operation of Trademarked Product and the procedures for obtaining parts for, or
repairs to, Trademarked Product, which mechanism shall be designed to minimize
any confusion with Licensor's existing customer service operations, or the
existing customer service operation of other Licensees of the Trademark.
14.6 PERIODIC REVIEW MEETINGS. Licensee will conduct periodic meetings with
Licensor to review Licensee's progress and performance under the terms of this
Agreement.
ARTICLE 15
RESTRICTIONS UPON SUBCONTRACTS
Licensee is responsible for the work of any subcontractor and for any debts,
obligations or liabilities incurred by any such subcontractor in connection with
the Trademarked Product. Licensee shall discontinue using any subcontractor who
shall fail to comply with the Approved Quality standards and/or delivery
schedules required by Licensee or Licensor.
ARTICLE 16
ASSIGNMENT; TRANSFERS; SUBLICENSE
The parties hereby acknowledge the substantial personal service nature of
Licensee's obligations hereunder. Therefore, without the prior written consent
of Licensor, which consent will not be unreasonably be withheld, Licensee shall
not voluntarily or by operation of law assign or transfer this Agreement or any
of Licensee's rights or duties hereunder or any interest of Licensee herein, nor
shall Licensee enter into any sublicense for the use of the Trademark by others.
Any assignment, transfer or sub-license without Licensor's written consent shall
be void and at the option of the Licensor shall constitute a default hereunder.
For purposes of this Article 16, the failure of Windmere Corporation, a Florida
Corporation, having its principal offices at 5980 Miami Lakes Drive, Miami
Lakes, Florida, 33014, and Joel Newman, President of Newtech (Licensee) to
maintain ownership of at least 51% of the outstanding voting stock of Licensee
shall be deemed an attempted assignment of this Agreement, unless Licensee has
made a public offering of its voting stock in which case Newtech and Windmere
need not retain 51% of the voting stock.
<PAGE>
Page 12--
ARTICLE 17
NO DILUTION OF TRADEMARK OR ATTACK UPON TRADEMARK
17.1 LIMIT ON USE. Licensee shall not at any time use, promote, advertise,
display or otherwise publish any Trademark or any material utilizing or
reproducing any Trademark in whole or in part, except as specifically provided
in this Agreement, without the prior written consent of Licensor, which consent
shall not be unreasonably withheld.
17.2 NOTICE. Licensee shall cause to appear on all Trademarked Product and on
all materials on, or in connection with which any Trademark is used, such
legends, markings and notices as may be required by law to give appropriate
notice of all Trademark, trade name or other rights therein or pertaining
thereto.
17.3 MATERIALS AND DOCUMENTS. Licensee shall provide all materials and execute
all documents required by law incident to the maintenance and/or preservation of
the Trademark and Licensor's rights therein.
17.4 NO CONTEST OF TRADEMARK VALIDITY. Licensee shall not contest the validity
of the Trademark or any rights of Licensor therein, nor shall Licensee willingly
become an adverse party in litigation in which others shall contest the
Trademark or Licensor's said rights. In addition thereto, Licensee shall not in
any way seek to avoid its obligations hereunder because of the assertion or
allegation by any persons, entities or government agencies, bureaus, or
instrumentalities that any Trademark is invalid or ineffective or by reason of
any contest concerning the rights of Licensor therein.
17.5 NO OTHER TRADEMARK PROTECTION. Licensee agrees not to seek any state,
Federal, foreign or other statutory trademark or service mark or other
protection for the Trademark as they are used in connection with the Licensee's
goods or services and all use of the Trademark shall be for the sole benefit of
the Licensor.
ARTICLE 18
INFRINGEMENT AND OTHER TRADEMARK LITIGATION
18.1 TRADEMARK DEFENSE. Licensee shall apprise Licensor immediately upon
discovery of any possible infringement of the Trademark which comes to the
attention of the Licensee. Licensor, at its sole cost and expense, and in its
own name, may prosecute and defend any action or proceeding which Licensor deems
necessary or desirable to protect the Trademark, including but not limited to
actions or proceedings involving their infringement. Upon written request by
Licensor, Licensee shall join Licensor at Licensor's sole expense in any such
action or proceeding. However, Licensee shall not commence any action or
<PAGE>
Page 13--
proceeding to protect the Trademark or any action or proceeding alleging
infringement thereof without the prior written consent of Licensor. Licensee may
prosecute and defend, at its sole expense and in its own name, any action or
proceeding to protect its designs or styles. Any and all damages recovered in
any action or proceeding commenced by Licensor shall belong solely and
exclusively to Licensor.
18.2 NO LIABILITY FOR VIOLATION. Licensor shall have no liability to Licensee or
any other person, nor shall be there by any right of contribution against
Licensor therefore, for any action or proceeding alleging any violation of any
antitrust, trade regulation, or similar statute, or for unfair competition.
Furthermore, in the event of any threatened or actual action or proceeding in
which Licensee and Licensor are or may be charged with jointly violating any
antitrust, trade regulation or similar statute, or any law pertaining to unfair
competition, Licensee may, at its option, elect to be represented in such
threatened or actual action or proceeding by Licensor's counsel at no cost to
Licensee for fees, costs or expenses. Should Licensee elect in such event to be
represented by Licensor's counsel, then Licensee shall relinquish any right to
control or direct such threatened or actual action or proceeding, and Licensor
shall maintain full control thereof. Such representation of Licensee shall
continue only so long as Licensor's counsel, in its sole and absolute
discretion, believes that it may properly and ethically represent both Licensor
and Licensee. In the event that Licensor's counsel decides that it may no longer
properly and ethically represent both Licensor and Licensee, then Licensor's
counsel shall continue to represent Licensor only, and Licensee's continued
defense shall be at Licensee's sole expense and shall be conducted by separate
counsel.
ARTICLE 19
ADDITIONAL RESTRICTIONS UPON USE OF TRADEMARK
19.1 IDENTIFICATION OF TRADEMARKED PRODUCT. It is the intention of the parties
hereto and the purpose of this Article 19 that all of the Trademark Product be
identified to the general public by the Trademark. Licensee shall use a
registration indicator in the form of a circled-R or "TM" symbol in conjunction
with the Trademark when so instructed by the Licensor. Licensee further agrees
to assist Licensor in obtaining registrations for the Trademark in the event any
Trademark is not yet registered for the Trademark Product. Licensee shall use
notice language in the manufacture, sale, advertising or other promotion of the
Trademarked Product as follows: "White-Westinghouse is a registered Trademark of
White Consolidated Industries, Inc. and is used under license." or other such
language as Licensor designates in writing.
<PAGE>
Page 14--
ARTICLE 20
DEFAULTS BY LICENSEE
20.1 DEFAULTS. Except as otherwise expressly provided in this Agreement, in the
event Licensee shall default in the performance of any of the terms, conditions
or obligations to be performed by Licensee hereunder, and if such default
involves the payment of money and same shall not be cured within [*****] after
Licensor gives written notice to Licensee of such default, or if such default
involves performance other than the payment of money and the same is not cured
within [*****] *** after Licensor gives written notice to Licensee of such
default, then and in any such event, Licensor may immediately and without prior
notice terminate this Agreement and all of the rights and obligations hereunder
(except as otherwise expressly provided by this Agreement). In the event that a
Receiver is appointed to, or one or more creditors take possession of all, or
substantially all, of the assets of the Licensee, or if Licensee shall make a
general assignment for the benefit of creditors, or if any action is taken or
suffered by Licensee under any state or Federal insolvency or bankruptcy act,
then this Agreement and all of the rights and obligations hereunder (except as
otherwise expressly provided by this Agreement) shall immediately, and without
notice or need of any further action by any party hereto, terminate.
20.2 TIME FOR PERFORMANCE. The time for performance of any act required of
either party shall be extended by a period equal to the period during which such
party was reasonably prevented from performance by fire, flood, storm, or other
like casualty beyond such party's control.
ARTICLE 21
LICENSOR'S RIGHTS TO DESIGNS, ETC., UPON TERMINATION
21.1 RIGHTS UPON TERMINATION. In the event this Agreement is terminated for any
reason, or expires according to its terms, Licensee shall assign, transfer and
transmit to Licensor any and ail rights of Licensee in the Trademark, including
associated goodwill, and shall not thereafter manufacture, sell or use the
Trademark in any manner; provided that, Licensee may however, dispose of its
stock of Trademarked Product on hand within [*****] after the termination of
this Agreement; provided, however, all sums due to Licensor have first been
paid; and, further provided, that Licensee shall, prior to the effective date of
said termination, deliver to Licensor a detailed schedule of all inventory of
Trademarked Product in Licensee's possession (constructive or otherwise). After
the expiration of the aforesaid [*****] period, Licensee shall destroy all
Trademarked Product and packaging and promotional material remaining in
Licensee's possession which are identified in any manner by or with the
Trademark. Notwithstanding the above, Licensor shall have the right to purchase
such excess stock of Trademarked Product, in whole or in part, prior to any sale
or offer
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 15--
of sale by Licensee to any third party, for an amount equal to the wholesale
cost of such Trademarked Product. It is specifically understood and agreed that
the Licensee's right to dispose of stock shall be conditioned upon the absence
of harm to the Trademark and/or the reputation of the Licensor arising from the
Licensee's use of the Trademark, as determined by the Licensor in its sole
discretion.
21.2 CONTINUATION OF AGREEMENT TERMS. Licensee shall continue to abide by the
terms of this Agreement with respect to such Trademarked Product during the
period in which disposition pursuant to Article 21.1 of this Agreement is taking
place. Neither Licensee nor any creditor (judgment or otherwise), assignee,
transferee, trustee, or receiver of Licensee, or similar person or officer, or
purchaser other than in the regular course of Licensee's business may sell or
transfer any Trademark Product until and unless all sums due Licensor from
Licensee have been paid. Further, upon termination of this Agreement, all
labels, signs, packages, wrappers, cartons, circulars, advertisements, and other
items bearing or containing any reproduction or representation of any of the
Trademark shall automatically and without cost to Licensor become the property
of Licensor, and Licensee shall immediately deliver the same to Licensor's place
of business or other location designated by Licensor. The reasonable cost of
such delivery shall be paid by the Licensor.
21.3 LICENSEE'S OBLIGATIONS. The termination of this Agreement for any reason
shall not relieve Licensee of any accrued obligations to Licensor nor shall such
action relieve Licensee of any obligation or duty which accrued on or after the
termination or expiration of this Agreement.
21.4 NO RIGHT IN LICENSEE. Except for the right to use the Trademark as
specifically provided for in this Agreement, (i) Licensee shall have no right,
title or interest in or to the Trademark, and (ii) upon and after the
termination of this Agreement, all rights granted to Licensee hereunder,
together with any interest in and to the Trademark that Licensee may acquire,
shall forthwith and without further act or instrument be assigned to and revert
to the Licensor. In addition, Licensee shall execute any instruments requested
by Licensor to accomplish or confirm the foregoing. Any such assignment,
transfer or conveyance shall be without consideration other than the mutual
agreements contained herein.
21.5 SURVIVAL OF TERMS. The provisions of this Article 21 shall survive the
termination (or expiration) of this Agreement.
<PAGE>
Page 16--
ARTICLE 22
ADDITIONAL RIGHTS PRIOR TO TERMINATION
During the final Contract Year of the Term hereof, Licensor shall have the right
to design and manufacture merchandise of the types covered by this Agreement and
to negotiate and conclude such Agreements as it desires pursuant to which it may
grant licenses to any party or parties of any or all of the rights herein
granted to Licensee; provided, however, that no merchandise herein identified as
Trademark Product shall be shipped by Licensor or any third party other than
Licensee prior to the expiration or termination of this Agreement (exclusive of
the additional [*****] period for the disposition of the Trademark Product as
provided in Article 21 hereof).
ARTICLE 23
GOODWILL
Licensee acknowledges and recognizes that the Trademark are of substantial
significance and value to Licensor and that said Trademark have acquired
valuable secondary meaning, value and goodwill. Except as may be otherwise
specified in this Agreement, Licensee shall not use any of the Trademark or any
name or symbol similar thereto as part of its name or symbol or as part of the
name or symbol of any corporation, partnership, joint venture, proprietorship or
other entity or person which it controls or with which it is affiliated.
ARTICLE 24
INSURANCE
Licensee shall at all times carry product liability insurance with respect to
the Trademarked Product with a limit of liability of not less than $[*****] and
Licensor shall be named therein as coinsured as its interests may appear. Such
insurance may be obtained in connection with a policy of product liability
insurance which covers products other than the Trademarked Product and shall
provide for at least thirty (30) days prior written notice to Licensor of the
cancellation or substantial modification thereof. Licensee shall deliver to
Licensor a certificate evidencing the existence of such insurance policies
promptly after their issuance.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 17--
ARTICLE 25
AGENTS, FINDERS AND BROKERS
Each of the parties to this Agreement shall be responsible for the payment of
any and all agent, brokerage and/or finder commissions, fees and related
expenses incurred by it in connection with this Agreement or the transactions
contemplated hereby and shall indemnify the other and hold it harmless from any
and all liability (including, without limitation, reasonable attorney's fees and
disbursements paid or incurred in connection with any such liability) for any
agent, brokerage and/or finder commissions, fees and related expenses claimed by
its agent, broker or finder, if any, in connection with this Agreement or the
transactions contemplated hereby. Licensor's sole agent/finder/broker in
connection with this Agreement is Leveraged Marketing Corporation of America
("LMCA") with offices at 156 West 56th Street, New York, New York 10019. Any and
all commissions, fees and/or other monies due LMCA in connection with this
Agreement shall be borne exclusively by Licensor as per the Agency Agreement of
March 1, 1995.
ARTICLE 26
RESERVED RIGHTS
Rights not herein specifically granted to Licensee are reserved by Licensor and
may be used by Licensor without limitation. Any use by Licensor of such reserved
rights, including but not limited to the use or authorization of the use of any
Trademark in any manner whatsoever not inconsistent with Licensee's right
hereunder, shall not be deemed to be interference with or infringement of any of
Licensee's rights.
ARTICLE 27
APPLICABLE LAW
This Agreement shall be construed and governed, in all respects, by the law of
the State of Ohio applicable to contracts made and to be performed in that state
without reference to any provisions relating to conflicts of law. Any legal
action or proceeding of any sort against Licensor by or on behalf of Licensee,
shall be brought in a court of competent jurisdiction in Cuyahoga County, Ohio.
<PAGE>
Page 18--
ARTICLE 28
NON-AGENCY OF PARTIES
This Agreement does not constitute or appoint Licensee as the agent or legal
representative of Licensor, or Licensor as the agent or legal representative of
Licensee, for any purpose whatsoever. Licensee is not granted any right or
authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of, Licensor or to bind Licensor in any
manner or thing whatsoever; nor is Licensor granted any right or authority to
assume or create any obligation or responsibility, express or implied, on behalf
of or in the name of Licensee, or to bind Licensee in any manner or thing
whatsoever. No joint venture or partnership between the parties hereto is
intended or shall be inferred.
ARTICLE 29
AMENDMENTS AND WAIVERS BY LICENSOR
This Agreement may be amended or modified by Licensorj and Licensor may waive
any of its rights hereunder or performance by Licensee of any of its obligations
hereunder, only by instrument in writing. In the event Licensor shall at any
time waive any of its rights under this Agreement or the performance by Licensee
of any of its obligations hereunder, such waiver shall not be construed as a
continuing waiver of the same rights or obligations, or a waiver of any other
rights or obligations.
ARTICLE 30
ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties as to the
Trademark Products, and supersedes all prior agreements and understandings
relating to this subject matter hereof.
<PAGE>
Page 19--
ARTICLE 31
SEPARABILITY OF PROVISIONS
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provisions shall be fully
severable. The Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provisions had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid or enforceable.
ARTICLE 32
COUNTERPARTS; HEADINGS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. The headings herein are set out for convenience of reference only
and shall not be deemed a part of this Agreement.
ARTICLE 33
BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and, subject to the provisions of Article 16 of this Agreement,
their respective permitted successors and assigns.
<PAGE>
Page 20--
ARTICLE 34
INDEMNIFICATION BY LICENSEE
34.1 INDEMNIFIED PARTIES; Basic Indemnification. For purposes of this paragraph,
"Indemnified Parties" refers to Licensor, and other licensees (not including
Licensee) of rights relating to the Trademark, and officers, directors,
employees, and agents of each of the foregoing, and persons connected with or
employed by them and each of them. Licensee hereby agrees that it shall
indemnify and hold harmless the Indemnified Parties and each of them from and
against the costs and expenses (including, without limitation, reasonable
attorneys fees and costs) of any and all claims, suits, losses, damages, costs,
demands, obligations, investigations, causes of action, and judgments arising
out of:
(a) the actual or alleged unauthorized use in connection with, or arising out
of, a Trademarked Product of any trademark (including, without limitation, the
Trademark), patent, process, method or device; (b) the actual or alleged
infringement in such connection of any copyrights, trade name or patent or any
act held to constitute libel, slander or defamation; (c) the invasion by
Licensee of the right of privacy, publicity, or other property right; (d) the
failure to perform of, or any defect in, or use of, the Trademarked Product,
including without limitation any injuries to the person or to property arising
therefrom; (e) the infringement or breach of other personal or property right of
any person, firm or corporation by Licensee, its officers, employees, agents, or
anyone directly or indirectly acting by, through, on behalf of, or pursuant to
contractual or any other relationship with Licensee; and (f) Licensee's sales
and/or promotional efforts.
34.2 INDEMNIFICATION FOR BREACH. Licensee hereby further agrees that it shall
indemnify and forever hold harmless the Indemnified Parties against and from any
and all claims, suits, losses, damages, costs, obligations, liabilities,
judgments, damages and expenses, including without limitation, reasonable
attorneys' fees arising out of breach or alleged breach by Licensee of any
provision of this Agreement, or any misrepresentation made by Licensee herein or
any act not expressly authorized herein. Licensee further agrees to insulate the
Indemnified Parties from any and ail product liability claims arising from the
use or misuse of the Trademarked Product.
34.3 SURVIVAL OF TERMS. The provisions of this Article 34 shall survive the
termination (or expiration) of this Agreement.
<PAGE>
Page 21-- -
ARTICLE 35
INFORMATION
35.1 CONFIDENTIALITY. Licensor and Licensee may from time to time disclose to
each other sales, engineering, applications, drawing, designs and any other
knowledge, information, techniques, know-how or data pertaining to the
manufacture, use, application, marketing, distribution and sales of the
Trademarked Product or other products of Licensor or Licensee (the
"Information"). Each party hereto shall hold in confidence all such data and
information and shall not disclose such data and information except to such
personnel and employees as are necessary for the effective performance of this
Agreement or as otherwise permitted by this Agreement. Licensor and Licensee
shall cause all data, documents or other written or printed materials embodying
the Information to be plainly marked to indicate the secret and confidential
nature thereof and to prevent unauthorized access thereto, or reproduction or
use thereof. Licensor and Licensee shall take any necessary action, including
court proceedings, to comply and to compel compliance with the provisions of
this Article 35. The obligations undertaken by Licensor and Licensee pursuant to
this Article 35 shall not apply to any such data or information which is or
becomes published or otherwise generally available to the public without fault
of a party hereto or is otherwise lawfully acquired by a party hereto and such
obligations shall, as so limited, survive the expiration or termination of this
Agreement. Upon termination of this Agreement, either Party hereto may request
the prompt return of all written materials received from the other Party
including originals, copies, extractions, translations and reproductions
thereof. This Agreement is not intended to and shall not be construed to give
either Party any vested right, title or interest in the Trademarked Product or
the Information.
35.2 CONFIDENTIALITY OF TERMS OF AGREEMENT. Licensee shall not disclose to any
third party information relating to the terms and conditions of this Agreement,
including royalty rates, the amounts of minimum NIV Sales or minimum royalties
or the amount of the initial royalty payment pursuant to this Agreement.
35.3 SURVIVAL OF TERMS. The provisions of this Article 35 shall survive the
termination of this Agreement.
ARTICLE 36
PUBLIC ANNOUNCEMENTS
36.1 Unless expressly approved in advance in writing by the other party, neither
shall make any public announcement regarding the subject matter or existence of
this Agreement except as required by law. If such announcement is required by
law, the announcing party
<PAGE>
Page 22--
shall give the other party reasonable notice of such announcement and shall
consult with the other party regarding the announcement.
36.2 IMMEDIATE DISCLOSURE OF PUBLIC ANNOUNCEMENTS. Licensee shall include
Licensor, and its agent, LMCA, among its list of recipients for press releases
and all other public announcements regarding its business, and provide such
information to Licensor and its agent simultaneous to its release to any and all
media outlets or other recipients.
ARTICLE 37
ADDRESSES FOR NOTICE
All notices, statements, consents, instructions or other documents required or
authorized to be given hereunder shall be in writing, and shall be delivered
personally to an officer, partner or authorized representative of the other
party or by certified mail, return receipt requested, addressed to the parties
concerned as follows:
to Licensee Newtech, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33169
Facsimile: 305-624-8901
and to Licensor at: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
with copies to: Ms. Sharon Schiller, Trademark Counsel
White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
and Mr. Allan R. Feldman
Leveraged Marketing Corporation of America
156 West 56th Street, Suite 1400
New York, New York 10019
Facsimile: 212-581-1461
and shall be deemed to have been given upon receipt.
<PAGE>
Page 23--
IN WITNESS WHEREOF, this Agreement is executed on the day and year
first written above.
White Consolidated Industries, Inc. (Licensor)
/s/ Stanley R. Miller
- ---------------------
By: Stanley R. Miller
Assistant Secretary
Newtech, Inc. (Licensee)
/s/ Joel Newman
- ----------------
By: Joel Newman
President
<PAGE>
EXHIBIT A
1. Radios
2. Phonographs
3. Tape Decks
4. CD Players
5. Compact Home Stereo Systems (exclude separate amplifiers, receivers,
tuners and speaker systems sold separately and not part of a self-contained
home theater system)
6. Telephones (excludes mobile phones, pager/beepers and other wireless
communications).
7. Telephone Answering Machines
8. Telephone Accessories (excludes facsimile machines)
9. Televisions
10. Videocassette recorders (VCR's)
11. TV/VCR Combinations
<PAGE>
AMENDMENT 1
AGREEMENT BETWEEN NEWTECH, INC.
and
WHITE-WESTINGHOUSE COMPANY,
DIVISION OF WHITE CONSOLIDATED INDUSTRIES, INC.
DATED 1 MAY 1996
THE NAME "Newtech Corporation" is hereby amended to read NEW M-TECH
CORPORATION, having its principal place of business at 16550 N.W. 10th Avenue,
Miami, Florida 33169, as shown in the Articles of Incorporation, organized under
the Laws of the State of Florida, effective October 25, 1990.
Except as hereby amended, the Agreement entered into and effective May
1, 1996 shall remain in full force and effect.
It is hereby agreed that this Amendment shall be effective as of May 1,
1996.
Signed this 5th day of August, 1996.
NEW M-TECH CORPORATION WHITE CONSOLIDATED INDUSTRIES, INC.
/s/ Joel Newman Stanley R. Miller
- --------------- -----------------
By: By: Stanley R. Miller
Its: Its: Assistant Secretary
<PAGE>
AMENDMENT 2
AGREEMENT BETWEEN NEW M-TECH CORPORATION
And
WHITE CONSOLIDATED INDUSTRIES, INC.
Dated May 1, 1996
In paragraph 5.2 Extension Terms, delete the following.
"Either party may terminate this agreement without cause, provided however, at
such termination shall not be permitted within the first 5 (five) years
following the Effective Date of this Agreement Notice of termination must be
given in writing to the other Party hereto 1 (one) year prior to the termination
date. Licensee shall have the right to sell off inventory of Trademarked Product
in accordance with Article 21. Neither Licensor nor Licensee shall be liable for
any compensation or damages by reason of such early termination."
Except as hereby amended, the Agreement entered into and effective May
1, 1996 shall remain in full force and effect.
It is hereby agreed that this Amendment shad1 be effective as of May l,
1996.
Signed this 23 day of May, 1997.
NEW M-TECH CORPORATION WHITE CONSOLIDATED INDUSTRIES, INC.
/s/ Joel Newman Stanley R. Miller
- --------------- -----------------
By: By: Stanley R. Miller
Its: Its: Assistant Secretary
<PAGE>
AMENDMENT 3
AGREEMENT BETWEEN NEW M-TECH CORPORATION
And
WHITE CONSOLIDATED INDUSTRIES, INC.
DATED MAY 1, 1996
In Article 34 INDEMNIFICATION BY LICENSEE, insert the following new
paragraph 34.2.
34.2 LICENSEE INDEMNIFICATION PARTIES; BASIC INDEMNIFICATION. For
purposes of this Section, "Licensee Indemnification Parties" refers to Licensee
and officers, directors, employees and agents of Licensee. Licensor shall
indemnify and hold harmless the Licensee Indemnified Parties and each of them
from and against the cost and expenses (including, without limitation,
reasonable attorneys fees and costs) of any and all claims, suits, losses,
damages, costs, demands, obligations, investigations, causes of action, and
judgements arising out of any assertion or allegation by any persons, entities
of government agencies that any Trademark infringes any trademark, trade name or
any other personal or property right of a third party.
Re-number existing 34.2 as 34.3 re-number existing 34.3 as 34.4.
It is hereby agreed that this Amendment shall be effective as of May 1,
1996.
Signed this 9 day of June, 1997.
NEW M-TECH CORPORATION WHITE CONSOLIDATED INDUSTRIES, INC.
/s/ Joel Newman Stanley R. Miller
- --------------- -----------------
By: By: Stanley R. Miller
Its: Its: Assistant Secretary
EXHIBIT 10.5
TRADEMARKS LICENSE AGREEMENT
AGREEMENT entered into as of September 15, 1997, by and between White
Consolidated Industries, Inc., a Delaware Corporation, having its principal
office at 11770 Berea Road, Cleveland, Ohio 44111 ("Licensor"), New M-Tech
Corporation, a Florida Corporation, having its principal office at 16550 N.W.
10th Avenue, Miami, Florida 33169 (hereinafter referred to as "Licensee").
WHEREAS, Licensor is the owner of the Trademark White-Westinghouse and
associated designs and trade dress, (together, the "Trademarks"), and is using
the Trademarks throughout the World, and
WHEREAS, Licensor has the right to grant Licensee the license, right and
permission to use the Trademarks, and
WHEREAS, Licensee is in the business of manufacturing, distributing and selling
articles described and specified hereinafter (the "Products"), and desires to
secure the license, right and permission to use the Trademarks upon, and in
connection with, the manufacturing, distributing and selling of such Products;
and
WHEREAS, the Products that are the subject of this Agreement have been defined
by the parties as portable consumer microwave oven products listed on Exhibit A
hereto (and any other articles which the parties mutually agree to be subject to
the provisions of this Agreement which, in accordance with the terms of this
Agreement, bear the Trademarks (collectively, the "Trademarked Product").
WHEREAS, Licensor desires to grant to Licensee, and Licensee desires to accept
from Licensor, a license to use the Trademarks in the design, manufacture,
advertising, sale and- promotion of the Products, subject to each of the terms,
provisions and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements,
covenants and provisions contained herein, the parties hereto do hereby agree as
follows:
<PAGE>
Page 2--
ARTICLE 1
GRANT OF LICENSE AND DESIGNATION OF TRADEMARKED PRODUCT
Effective upon the execution of this Agreement, Licensor hereby grants to
Licensee, for the period hereinafter specified and upon the terms, provisions
and conditions of this Agreement, the exclusive right and license to use the
Trademarks within the geographic area described in Article 2 hereof, in the
design, manufacture, advertising, sale and promotion of the Trademarked Product.
Licensor recognizes that Licensee's wholly-owned subsidiary Newtech(HK), Ltd.,
a Hong Kong corporation having its principal offices [orated at Room 909,
Holywood Plaza, 610 Nathan Road, Kowloon, Hong Kong, may from time to time ship
Trademarked Product directly to Licensee's customers.
In the event of any disputes between the parties to this Agreement regarding the
definition of Trademarked Product, the final decision regarding such definition
shall rest in Licensor's sole and absolute discretion. The rights granted to
Licensee herein are limited to use on or in connection with the Trademarked
Product and Licensee specifically agrees not to use the Trademarks in any manner
or on any product, service or item, except as set forth in the Agreement.
ARTICLE 2
GEOGRAPHIC AREA
The rights granted to Licensee hereunder may be exercised by Licensee within the
USA, Canada and Puerto Rico (the "Territory"), and Licensee shall have exclusive
rights with respect to the Trademarked Product. Upon Licensee's request,
Licensor may, in its discretion, extend the areas in which Licensee may exercise
said rights, but any such extension shall, in each instance, be evidenced by a
written and duly executed amendment to this Agreement for such periods and upon
such terms and conditions as shall be determined by Licensor. From time to time
Licensor may wish to purchase Trademarked Product for sale outside the
Territory. Licensee agrees to sell Trademarked Product to Licensor at the same
price Licensee sells Trademarked Product to its best customer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LICENSOR
3.1 Organization and Power. Licensor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Licensor
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder.
<PAGE>
Page 3--
3.2 AUTHORIZATION. The execution, delivery and performance by Licensor of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensor is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
3.3 NO VIOLATION. Licensor is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
3.4 OWNERSHIP OF TRADEMARKS. Licensor is the owner of the Trademarks and, to
Licensor's knowledge, the use of the Trademarks in the design, manufacture,
advertising, sale and promotion of any of the Trademarked Product will not
infringe any intellectual property or any other rights of any third party.
3.5 RIGHT TO GRANT LICENSE. Licensor has the full right, power and authority to
grant the license as set forth in Article 1 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LICENSEE
4.1 ORGANIZATION AND POWER. Licensee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Licensee
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder.
4.2 AUTHORIZATION. The execution, delivery and performance by Licensee of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensee is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
4.3 NO VIOLATION. Licensee is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
<PAGE>
Page 4--
ARTICLE 5
TERM OF AGREEMENT
5.1 CONTRACT TERM. The Contract Term of this Agreement commence of the date
first mentioned above and ending on December 31, 2002 at midnight Eastern
Standard Time, unless sooner terminated pursuant to the terms of this Agreement.
5.2 EXTENSION TERMS. Licensor hereby grants to Licensee the option to extend the
term of this Agreement for up to six (6) two (2) year periods commencing as of
January 1, 20003 and ending on December 31, 2014, at midnight Eastern Standard
Time, unless sooner terminated pursuant to the terms of this Agreement with such
extended terms to be subject to the same terms and must achieve specified levels
of Minimum Sales during the then preceding Contract or Extension Term of this
Agreement as set forth in Article 8 hereof. Such options to extend the term of
this Agreement must be exercised by Licensee, if at all, by giving written
notice to Licensor at least one hundred and twenty (120) days prior to the
expiration of the then preceding Contract Term of this Agreement. Nine months
(270 days) prior to the end of the fourteenth extension, the parties will
negotiate, in good faith, the possibility of extending this Agreement for one or
more extension periods.
ARTICLE 6
ROYALTIES
6.1 EARNED ROYALTIES. Subject to of Article 7 hereof, Lieensee shall pay to
Licensor for the rights granted hereunder a sum equal to [*****] of the Net
Invoice Value of Trademarked Products Sold by Licensee (the "Royalties").
The Royalties shall be remitted in accordance with Section 7.4 of this
Agreement.
6.2 DEFINITION OF NET INVOICE VALUE. As used throughout this Agreement, the
term "Net Invoice Value" shall mean the aggregate of the invoiced amounts of
Trademarked Product sold by Licensee, less (a) returned goods, refunds, credits
and allowances actually made or allowed to customer with respect to Trademarked
Product, (b) freight or handling charges charged to customers or incurred on
returned goods, and (c) sales and excise taxes actually paid ("NIV").
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 5--
ARTICLE 7
MINIMUM ROYALTY PAYMENTS
7.1 MINIMUM ROYALTY PAYMENTS. The Minimum Royalties for the Contract Term shall
be paid [*****] in advance on execution of this Agreement and the balance in
twenty (20) equal installments of $[*****] paid quarterly beginning March 30,
1998 and throughout the remainder of the contract period. Each installment is
due on or before the 30th day of each March, June, September and December. The
Minimum Royalties for each Extension Term as shown below shall be paid in four
(4) equal installments each by the 30th day of March, June, September and
December of the respective term.
7.1A Licensee shall not be in default of this Paragraph if the minimum royalties
paid pursuant to a Trademark Licensee Agreement between White Consolidated
Industries and Electronic Industries of America, Inc., of even date, and the
royalties paid pursuant to this Agreement equal the minimum royalty payments set
forth below.
Term Year(s) Minimum
- ---- ------- Royalties
Contract ---------
Term 1997/2002 [*****]
First Extension Term 2003/2004 [*****]
Second Extension Term 2005/2006 [*****]
Third Extension Term 2007/2008 [*****]
Fourth Extension Term 2009/2010 [*****]
Fifth Extension Term 2011/2012 [*****]
Sixth Extension Term 2013/2014 [*****]
7.2 INITIAL ROYALTY PAYMENT. Licensee shall pay Licensor an initial royalty
payment (the- "Initial Royalty Payment") of [*****] upon execution of this
Agreement. The Initial Royalty Payment shall be applied against the first
Royalties payable pursuant to Section 7.4 of this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 6--
7.3 APPLICATION OF EARNED ROYALTIES. The Earned Royalties to be paid under
Article 6 shall be applied against the Minimum Royalties due under this Article
7, and Licensee shall pay by each due date specified in this Article 7 the sum
of: (i) the Minimum Royalties as specified above; plus (ii) the excess, if any,
of the Earned Royalties (per Article 6) over the Minimum Royalties for the then
current quarter payable by such due date (such sum hereinafter referred to as
the "Royalty Payment").
7.4 QUARTERLY REPORTS OF SALES AND ROYALTY PAYMENTS. On or before the twentieth
(20thj day of each January, April, July and October during the Contract Term and
any Extension Term, Licensee shall deliver to Licensor the following: (i) a
written statement, certified to be true and correct by the Chief Financial
Officer of Licensee, setting forth the Gross an NIV sales for each Trademarked
Product during the preceding calendar quarter and a calculation of the Royalties
payable under Article 6 and 7 of this Agreement for such period, and (ii) a
check payable to Licensor in full payment of the amount due under Article 6 and
7 of this Agreement for such period. Each royalty payment, payable in US
currency, shall be remitted by check at Licensor's address as provide by this
Agreement.
7.5 In the event that during any of the Terms of the Agreement, the aggregate
retail sales of microwave ovens in the United States decreases from the prior
Term (the amount of such reduction of sales of microwave ovens in the United
States is hereinafter express as a percentage and the amount by which such
percentage exceeds [*****]% is hereinafter referred to as the to as the
"Reduction Percentage"), then the Minimum Sales Commitment for the Term
following the Prior Term (the "Adjustment Period") shall be reduced. This
reduction shall be in an amount (the "Reduction Amount") equal to (i) the higher
of (A) the Minimum Sales Commitment for the Adjustment Period or (B) the actual
sales by Newtech of microwave ovens during the Prior Term (the "Actual Prior
Term Sales") multiplied by (ii) the Reduction Percentage. The Reduction amount
will then be subtracted from the higher of (i) the Minimum Sales Commitment for
the Adjustment Period or (ii) the Actual Prior Term Sales, to determine the new
Minimum Sales Commitment for the Adjustment Term; provided, however that if this
computation yields an amount greater than the Minimum Sales Commitment for such
Term, then no adjustment shall be made. For purpose of this section, sales for
microwave ovens in the United States shall be determined by reference to
applicable information published in the most widely-circulated trade publication
containing such information; provided that if Licensor and Licensee are unable
to agree upon the publication from which such information is be derived, then
the applicable information shall be derived by reference to applicable
information shall be derived by reference to a trade publication selected by the
licensor and a trade publication selected by the licensee, and the applicable
sales information shall be determined on the basis of the average of the data
contained on the two publications.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 7--
ARTICLE 8
MINIMUM SALES OF TRADEMARKED PRODUCT
8.1 FAILURE TO MEET REQUIRED MINIMUM SALES. Licensee shall use its best efforts
to advertise and sell Trademarked Product in the Territory during the term of
this Agreement. Should Licensee fail to achieve the NIV sales over any [*****]
consecutive terms as set forth below in this Article 8 then Licensor may, at its
option, elect to terminate this Agreement by written notice delivered to
Licensee with [*****] after the end of any period in which Licensee failed to
achieve such required Minimum Sales Such termination shall be effective upon
delivery of said notice but shall not affect Licensee's outstanding indebtedness
to Licensor or any of the provisions relating thereto.
8.1A. Licensee shall not be in default of this Paragraph if The Minimum Sales
generated pursuant to a Trademark License Agreement between White Consolidated
Industries and Electronic Industries of America, Inc., of even date, and The
minimum sales generated pursuant to this Agreement equal the minimum sales set
forth below.
Contract Term [*****]
First Extension Term [*****]
Second Extension Term [*****]
Third Extension Term [*****]
Fourth Extension Term [*****]
Fifth Extension Term [*****]
Sixth Extension Term [*****]
ARTICLE 9
ADVERTISING AND ART WORK
9.1 ADVANCE SUBMISSION. Licensee shall submit to Licensor for approval all
advertising and promotional items, budgets, programs and materials relating to
the Trademarked Product at least fourteen (14) days prior to intended usage.
Licensor shall provide Licensee with written approval or disapproval within ten
(10) business days after Licensor's receipt thereof. Should Licensor disapprove,
its written notice shall explain in detail the reasons for disapproval so that
Licensee may prepare and submit new advertising and art work.
9.2 Art Work. Licensor shall make available to Licensee any and all necessary
film, photostats, artwork and full color reproductions of its Trademarks,
artwork, designs and other materials necessary for Licensee's use in accordance
with this Agreement.
9.2 ART WORK. Licensor shall make available to Licensee any and all necessary
film, photostats, artwork and full color reproductions of its Trademarks,
artwork, designs and other materials necessary for Licensee's use in accordance
with this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 8--
9.3 EXPENSE REIMBURSEMENT. Licensee shall reimburse Licensor for Licensor's
out-of- pocket expenses, including, reasonable hourly charges for creative
personnel incurred by Licensor in the preparation for Licensee, when and if
required, of new artwork, mechanicals, and film. All charges shall be agreed to
prior to the time such expenses are incurred, and all sums due to Licensor under
this Article 9 shall paid by Licensee upon receipt of an appropriate invoice.
ARTICLE 10
LICENSEE'S RECORDS
Licensee shall keep and maintain at its regular place of business separate and
complete books and records of all business transacted by Licensee in connection
with the Trademarked Product, including, but not limited to, books and records
relating to Gross and NIV of Sales and orders for Trademarked Product. Such
books and records shall be maintained in accordance with generally accepted
accounting procedures and principles consistently applied. Licensor or its duly
authorized agents or representatives shall have the right to inspect said books
and records at Licensee's premises during Licensee's regular business hours.
ARTICLE 11
LICENSEE'S ANNUAL REPORTS AND ANNUAL ROYALTY PAYMENTS
On or before the fifteenth (15th) day of the second (2nd) month following the
end of Licensee's fiscal year, Licensee shall render to Licensor a statement
certified by Licensee's Chief Financial Officer disclosing gross and NIV Value
of sales, Royalties due and Royalties paid for Licensee's preceding fiscal year,
and for any Contract or Extension Term which ended within said fiscal year. If
said statement discloses that the amount of Royalties paid during any period to
which said statement relates was less than the amount required to be- paid under
the provisions of this Agreement, Licensee shall pay said deficiency concurrent
with the delivery of the statement. If said statement discloses the Licensee has
paid Royalties in excess of the amounts required to be paid, Licensor shall
apply said excess to the next Royalty payment.
<PAGE>
Page 9--
ARTICLE 12
AUDIT BY LICENSOR
At all times during the existence of this Agreement and for twelve (12) months
after the last report is rendered hereunder, Licensor, if it so chooses, may
cause its independent accountants to audit all books and records of Licensee
pertaining Trademarked Product. Licensor shall have the further right to engage
an independent certified public accounting firm, to audit the books and records
of Licensee with regards to the Royalties due hereunder. In the event any such
audit shall disclose that the Licensee has understated NIV Sales or underpaid
Royalties for any reporting period, Licensee shall forthwith and upon written
demand of Licensor, pay the amount, if any, by which the Royalties owing exceed
Royalties paid, plus interest of twelve percent (12%) per annum on such
delinquent amounts, accruing from the date on which such amounts became
delinquent to the date on which such delinquent amounts were paid. In the event
that Licensee has understated NIV Sales and consequently has underpaid Royalties
in excess of One Thousand dollars ($1,000) of amount due for any Contract Term,
Licensee shall forthwith and upon written demand also pay all costs, fees and
expenses incurred by Licensor in conducting such audit, including, without
limitation, reasonable travel expenses. Should such audit disclose that the
Royalties paid exceed the Royalties due, any excess revealed by such audit will
be remitted to Licensee.
ARTICLE 13
LICENSEE OBLIGATIONS
13.1 LICENSEE DILIGENCE. Licensee shall design, manufacture, advertise, sell and
ship the Trademarked Product and shall continuously and diligently during the
term hereof procure and maintain facilities and trained personnel sufficient and
adequate to accomplish the foregoing, all to the extent and in a manner no less
thorough, diligent and professional than the same accorded by Licensee for
Licensee's most favored premium products and/or services. A cessation of the
above for a continuous period of ninety (90) days shall be grounds for
termination by Licensor, without notice. The marketing of Trademarked Product
shall be conducted in a manner consistent with enhancing the long-term value of
the Trademarks. It is the interest of the parties that Trademarked Product be
sold simultaneously through a wide range of retailers. Accordingly, Licensee
shall continuously and diligently design, price and promote Trademarked Product
to retailers in all major class of trade including department stores (i.e.,
Macy's, Burdine's, Bloomingdale's, etc.), mass merchants (i.e. Walmart, Kmart,
etc.), regional discounters (i.e., Caldor, Bradlees, etc.), warehouse clubs
(i.e., Target, Sam's, etc.), specialty electronics chains (i.e., The Wiz, etc.)
mail order, premium and television shopping services. Licensee shall exhibit
Trademarked Product in exhibit or booth space at the annual electronics show.
<PAGE>
Page 10--
13.2 LICENSOR INSPECTION RIGHTS. Licensor shall have the right to inspect any of
Licensee's facilities pertaining to the Trademarked Product, during regular
business hours. Licensor shall conduct such inspection in the presence of an
officer, partner or authorized representative of Licensee.
13.3 NO COMPETITION WITH TRADEMARKED PRODUCT. During the term of this Agreement,
Licensee shall not enter another license Agreement for products that would
directly compete with the Trademarkad Product other than the Admiral trade name.
13.4 FORFEITURE OF TRADEMARK FOR NON-USE. Licensee's failure to ship Trademarked
Product Trademark by December 31, 1998 shall be deemed a forfeiture of its grant
to use the Trademarks. Failure of Licensee to ship Trademarked Product for a
period of one (1) year shall be deemed a forfeiture of its grant to use the
Trademarks.
13.5 Financial Standards. Licensee shall provide its financial statements to
Licensor annually or as requested by Licensor, which are to be prepared in
accordance with U.S. GMP. Licensee must promptly notify Licensor of a
termination of any significant line of credit or guarantee of indebtedness by
personal guarantor. Should Licensee's net worth fall below $2,000,000 in the
aggregate, Licensor may at its option terminate this Agreement. Likewise
Licensor may terminate this Agreement immediately if any of the following events
occur:
1) Licensee is in default under the provisions of any line of credit or
debt agreement with financing institution.
2) A sale or transfer of Licensee's assets which, in Licensor's opinion,
may affect the ability of Licensee to operate the business pursuant to
this Agreement, or
3) Licensee incurs net operating losses in the aggregate for three or more
consecutive years.
ARTICLE 14
APPROVALS AND QUALITY STANDARDS
14.1 Advance Approval. Prior to any use of any Trademarks, Licensee shall, at
Licensee's expense' submit to Licensor, for Licensor's written approval, the
following: (a) two (2) specimens of each Product on which the Trademarks is to
appear (the "Specimens"); (b) all artwork which Licensee intends to use in
connection with the Trademarks; and (c) all packaging, advertising and
promotional literature which Licensee intends to use in the marketing or
merchandising of the Trademarked Product. Licensor shall give Licensee written
notice of approval or disapproval within ten t10) business days from its receipt
of the Specimens, and should Licensor disapprove, its written notice shall
<PAGE>
Page 11--
explain in detail the reasons for disapproval so that Licensee may prepare and
submit new Specimens and/or samples.
14.2 STANDARDS. After Licensor has given its written approval of said Specimens,
then the approved product, quality, packaging, advertising and promotional
literature shall be the standard for all Trademarked Product produced thereafter
(the "Approved Quality").
14.3 PERIODIC SAMPLES. Thereafter, consecutively at four (4) month intervals,
Licensee shall, at Licensee's expense; submit to Licensor not less than two (2)
randomly selected production run samples of the Trademarked Product.
14.4 APPROVED QUALITY STANDARDS. Without the prior written approval of Licensor,
Licensee shall not sell or distribute any Trademarked Product which deviates
from the Approved Quality more than the deviation which would occur as a result
of normal deviations in raw material characteristics.
14.5 PRODUCT SERVICING AND REPAIRS. Licensee will propose, prior to the sale of
Trademarked Product at retail, a mechanism by which Licensee will respond to
inquiries from consumers and third party appliance repair vendors regarding the
operation of Trademarked Product and the procedures for obtaining parts for, or
repairs to, Trademarked Product, which mechanism shall be designed to minimize
any confusion with Licensor's existing customer service operations, or the
existing customer service operation of other Licensees of the Trademarks.
14.6 PERIODIC REVIEW MEETINGS. Licensee will conduct periodic meetings with
Licensor to review Licensee's progress and performance under the terms of this
Agreement.
ARTICLE 15
RESTRICTIONS UPON SUBCONTRACTS
Licensee is responsible for the work of any subcontractor and for any debts,
obligations or liabilities incurred by any such subcontractor in connection
with the Trademarked Product. Licensee shall discontinue using any subcontractor
who shall fail to comply with the Approved Quality standards and/or delivery
schedules required by Licensee or Licensor.
<PAGE>
Page 12--
ARTICLE 16
ASSIGNMENT; TRANSFERS; SUBLICENSE
The parties hereby acknowledge the substantial personal service nature of
Licensee's obligations hereunder. Therefore, without the prior written consent
of Licensor, which consent will not be unreasonably be withheld, Licensee shall
not voluntarily or by operation of law assign or transfer this Agreement or any
of Licensee's rights or duties hereunder or any interest of Licensee herein, nor
shall Licensee enter into any sublicense for the use of the Trademarks by
others. Any assignment, transfer or sub-license without Licensor's written
consent shall be void and at the option of the Licensor shall constitute a
default hereunder. For purposes of this Article 16, the failure of Windmere
Corporation, a Florida Corporation, having its principal offices at 5980 Miami
Lakes Drive, Miami Lakes, Florida, 33014, and Joel Newman, President of New
M-Tech Corporation (Licensee) to maintain ownership of at least 51% of the
outstanding voting stock of Licensee an shall be deemed an attempted assignment
of this Agreement, unless Licensee has made a public offering of its voting
stock in which case New M-Tech corporation and Windmere need not retain 51% of
the voting stock.
ARTICLE 17
NO DILUTION OF TRADEMARKS OR ATTACK UPON TRADEMARKS
17.1 LIMIT ON USE. Licensee shall not at any time use, promote, advertise,
display or otherwise publish any Trademarks or any material utilizing or
reproducing any Trademarks in whole or in part, except as specifically provided
in this Agreement, without the prior written consent of Licensor, which consent
shall not be unreasonably withheld.
17.2 NOTICE. Licensee shall cause to appear on all Trademarked Product and on
all materials on, or in connection with which any Trademarks is used, such
legends, markings and notices as may be required by law to give appropriate
notice of all Trademarks, trade name or other rights therein or pertaining
thereto.
17.3 MATERIALS AND DOCUMENTS. Licensee shall provide all materials and execute
all documents required by law incident to the maintenance and/or preservation of
the Trademarks and Licensor's rights therein.
17.4 NO CONTEST OF TRADEMARKS VALIDITY. Licensee shall not contest the validity
of the Trademarks or any rights of Licensor therein, nor shall Licensee
willingly become an adverse party in litigation in which others shall contest
the Trademarks or Licensor's said rights. In addition thereto, Licensee shall
not in any way seek to avoid its obligations hereunder because of the assertion
or allegation by any persons, entities or government agencies, bureaus, or
instrumentalities that any Trademarks is invalid or ineffective or by reason of
any contest concerning the rights of Licensor therein.
<PAGE>
Page 13--
17.5 NO OTHER TRADEMARKS PROTECTION. Licensee agrees not to seek any state,
Federal, foreign or other statutory Trademarks or service mark or other
protection for the Trademarks as they are used in connection with the Licensee's
goods or services and all use of the Trademarks shall be for the sole benefit of
the Licensor.
ARTICLE 18
INFRINGEMENT AND OTHER TRADEMARKS LITIGATION
18.1 TRADEMARKS DEFENSE. Licensee shall apprise Licensor immediately upon
discovery of any possible infringement of the Trademarks which comes to the
attention of the Licensee.
Licensor, at its sole cost and expense, and in its own name, may prosecute and
defend any action or proceeding which Licensor deems necessary or desirable to
protect the Trademarks, including but not limited to actions or proceedings
involving their infringement. Upon written request by Licensor, Licensee shall
join Licensor at Licensor's sole expense in any such action or proceeding.
However, Licensee shall not commence any action or proceeding to protect the
Trademarks or any action or proceeding alleging infringement thereof without the
prior written consent of Licensor. Licensee may prosecute and defend, I at its
sole expense and in its own name, any action or proceeding to protect its
designs or styles. Any and all damages recovered in any action or proceeding
commenced by Licensor shall belong solely and exclusively to Licensor.
18.2 NO LIABILITY FOR VIOLATION. Licensor shall have no liability to Licensee or
any other person, nor shall be there by any right of contribution against
Licensor therefore, for any action or proceeding alleging any violation of any
antitrust, trade regulation, or similar statute, or for unfair competition.
Furthermore, in the event of any threatened or actual action or proceeding in
which Licensee and Licensor are or may be charged with jointly violating any
antitrust, trade regulation or similar statute, or any law pertaining to unfair
competition, Licensee may, at its option, elect to be represented in such
threatened or actual action or proceeding by Licensor's counsel at no cost to
Licensee for fees, costs or- expenses. Should Licensee elect in such event to be
represented by Licensor's counsel, then Licensee shall relinquish any right to
control or direct such threatened or actual action or proceeding, and Licensor
shall maintain full control thereof. Such representation of Licensee shall
continue only so long as Licensor's counsel, in its sole and absolute
discretion, believes that it may properly and ethically represent both Licensor
and Licensee. In the event that Licensor's counsel decides that it may no longer
properly and ethically represent both Licensor and Licensee, then Licensor's
counsel shall continue to represent Licensor only, and Licensee's continued
defense shall be at Licensee's sole expense and shall be conducted by separate
counsel.
<PAGE>
Page 14--
ARTICLE 19
ADDITIONAL RESTRICTIONS UPON USE OF TRADEMARKS
19.1 IDENTIFICATION OF TRADEMARKED PRODUCT. It is the intention of the parties
hereto and the purpose of this Article 19 that all of the Trademarked Product be
identified to the general public by the Trademarks. Licensee shall use a
registration indicator in the form of a circled-R or "TM" symbol in conjunction
with the Trademarks when so instructed by the Licensor. Licensee further agrees
to assist Licensor in obtaining registrations for the Trademarks in the event
any Trademarks is not yet registered for the Trademarked Product. Licensee shall
use notice language in the manufacture, sale, advertising or other promotion of
the Trademarked Product as follows: "White-Westinghouse is a registered
Trademark of White Consolidated Industries, Inc. and is used under license" or
other such language as a Licensor designates in writing.
ARTICLE 20
DEFAULTS BY LICENSEE
20.1 DEFAULTS. Except as otherwise expressly provided in this Agreement, in the
event Licensee shall default in the performance of any of the terms, conditions
or obligations to be performed by Licensee hereunder, and if such default
involves the payment of money and same shall not be cured within [*****] after
Licensor gives written notice to Licensee of such default, or if such default
involves performance other than the payment of money and the same is not cured
within [*****] after Licensor gives written notice to Licensee of such default,
then and in any such event, Licensor may immediately and without prior notice
terminate this Agreement and all of the rights and obligations hereunder (except
as otherwise expressly provided by this Agreement). in the event that a Receiver
is appointed to, or one or more creditors take possession of all, or
substantially all, of the assets of the Licensee, or if Licensee shall make a
general assignment for the benefit of creditors, or if any action is taken or
suffered by Licensee under any state or Federal insolvency or bankruptcy act,
then this Agreement and all of the rights and obligations hereunder (except as
otherwise expressly provided by this Agreement) shall immediately, and without
notice or need of any further action by any party hereto, terminate.
20.2 TIME FOR PERFORMANCE. The time for performance of any act required of
either party shall be extended by a period equal to the period during which such
party was reasonably prevented from performance by fire, flood, storm, or other
like casualty beyond such party's control.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 15--
ARTICLE 21
LICENSOR'S RIGHTS TO DESIGNS, ETC., UPON TERMINATION
21.1 RIGHTS UPON TERMINATION. In the event this Agreement is terminated for any
reason, or expires according to its terms, Licensee shall assign, transfer and
transmit to Licensor any and all rights of Licensee in the Trademarks, including
associated goodwill, and shall not thereafter manufacture, sell or use the
Trademarks in any manner; provided that, Licensee may however, dispose of its
stock of Trademarked Product on hand within [*****] after the termination of
this Agreement; provided, however, all sums due to Licensor have first been
paid; and, further provided, that Licensee shall, prior to the effective date of
said termination, deliver to Licensor a detailed schedule of all inventory of
Trademarked Product in Licensee's possession (constructive or otherwise). After
the expiration of the aforesaid [*****] period, Licensee shall destroy all
Trademarked Product and packaging and promotional material remaining in
Licensee's possession which are identified in any manner by or with the
Trademarks. Notwithstanding the above, Licensor shall have the right to purchase
such excess stock of Trademarked Product, in whole or in part, prior to any sale
or offer of sale by Licensee to any third party, for an amount equal to the
wholesale cost of such Trademarked Product. It is specifically understood and
agreed that the Licensee's right to dispose of stock shall be conditioned upon
the absence of harm to the Trademarks and/or the reputation of the Licensor
arising from the Licensee's use of the Trademarks, as determined by the Licensor
in its sole discretion.
21.2 CONTINUATION OF AGREEMENT TERMS. Licensee shall continue to abide by the
terms of this Agreement with respect to such Trademarked Product during the
period in which disposition pursuant to Article 21.1 of this Agreement is taking
place. Neither Licensee nor any creditor (judgment or otherwise), assignee,
transferee, trustee, or receiver of Licensee, or similar person or officer, or
purchaser other than in the regular course of Licensee's business may sell or
transfer any Trademarked Product until and unless all sums due Licensor from
Licensee have been paid. Further, upon termination of this Agreement, all
labels, signs, packages, wrappers, cartons, circulars, advertisements, and other
items bearing or containing any reproduction or representation of any of the
Trademarks shalL automatically and without cost to Licensor become the property
of Licensor, and Licensee shall immediately deliver the same to Licensor's place
of business or other location designated by Licensor. The reasonable cost of
such delivery shall be paid by the Licensor.
21.3 LICENSEE'S OBLIGATIONS. The termination of this Agreement for any reason
shall not relieve Licensee of any accrued obligations to Licensor nor shall such
action relieve Licensee of any obligation or duty which accrued on or after the
termination or expiration of this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 16--
21.4 NO RIGHT IN LICENSEE. Except for the right to use the Trademarks as
specifically provided for in this Agreement, (i) Licensee shall have no right,
title or interest in or to the Trademarks, and (ii) upon and after the
termination of this Agreement, all rights granted to Licensee hereunder,
together with any interest in and to the Trademarks that Licensee may acquire,
shall forthwith and without further act or instrument be assigned to and revert
to the Licensor. In addition, Licensee shall execute any instruments requested
by Licensor to accomplish or confirm the foregoing. Any such assignment,
transfer or conveyance shall be without consideration other than the mutual
agreements contained herein.
21.5 SURVIVAL OF TERMS. The provisions of this Article 21 shall survive the
termination (or expiration) of this Agreement.
ARTICLE 22
ADDITIONAL RIGHTS PRIOR TO TERMINATION
During the final Contract Year of the Term hereof, Licensor shall have the right
to design and manufacture merchandise of the types covered by this Agreement and
to negotiate and conclude such Agreements as it desires pursuant to which it may
grant licenses to any party or parties of any or all of the rights herein
granted to Licensee; provided, however, that no merchandise herein identified as
Trademarked Product shall be shipped by Licensor or any third party other than
Licensee prior to the expiration or termination of this Agreement (exclusive of
the additional [*****] period for the disposition of the Trademarked Product as
provided in Article 21 hereof).
ARTICLE 23
GOODWILL
Licensee acknowledges and recognizes that the Trademarks are of substantial
significance and value to Licensor and that said Trademarks have acquired
valuable secondary meaning, value and goodwill. Except as may be otherwise
specified in this Agreement,: Licensee shall not use any of the Trademarks or
any name or symbol similar thereto as part of its name or symbol or as part of
the name or symbol of any corporation, partnership, joint venture,
proprietorship or other entity or person which it controls or with which it is
affiliated.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 17--
ARTICLE 24
INSURANCE
Licensee shall at all times carry product liability insurance with respect to
the Trademarked Product with a limit of liability of not less than [*****] and
Licensor shall be named therein as coinsured as its interests may appear. Such
insurance may be obtained in connection with a policy of product liability
insurance which covers products other than the Trademarked Product and shall
provide for at least thirty (30) days prior written notice to Licensor of the
cancellation or substantial modification thereof. Licensee shall deliver to
Licensor a certificate evidencing the existence of such insurance policies
promptly after their issuance.
ARTICLE 25
AGENTS,FINDERS AND BROKERS
Each of the parties to this Agreement shall be responsible for the payment of
any and all agent, brokerage and/or finder commissions, fees and related
expenses incurred by it in connection with this Agreement or the transactions
contemplated hereby and shall indemnify the other and hold it harmless from any
and all liability (including, without limitation, reasonable attorney's fees and
disbursements paid or incurred in connection with any such liability) for any
agent, brokerage and/or finder commissions, fees and related expenses claimed by
its agent, broker or finder, if any, in connection with this Agreement or the
transactions contemplated hereby. Licensor's sole agent/finder/broker in
connection with this Agreement is Leveraged Marketing Corporation of America
("LMCA") with offices at 156 West 56th Street, New York, New York 10019. Any and
all commissions, fees and/or other monies due LMCA in connection with this
Agreement shall be borne exclusively by Licensor as per the Agency Agreement of
March 1, 1995.
ARTICLE 26
RESERVED RIGHTS
Rights not herein specifically granted to Licensee are reserved by Licensor and
may be used by Licensor without limitation. Any use by Licensor of such reserved
rights, including but not limited to the use or authorization of the use of any
Trademarks in any manner whatsoever not inconsistent with Licensee's right
hereunder, shall not be deemed to be interference with or infringement of any of
Licensee's rights.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 18--
ARTICLE 27
APPLICABLE LAW
This Agreement shall be construed and governed, in all respects, by the law of
the State of Ohio applicable to contracts made and to be performed in that state
without reference to any provisions relating to conflicts of law. Any legal
action or proceeding of any sort against Licensor by or on behalf of Licensee,
shall be brought in a court of competent jurisdiction in Cuyahoga County, Ohio.
ARTICLE 28
NON-AGENCY OF PARTIES
This Agreement does not constitute or appoint Licensee as the agent or legal
representative of Licensor, or Licensor as the agent or legal representative of
Licensee, for any purpose whatsoever. Licensee is not granted any right or
authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of, Licensor or to bind Licensor in any
manner or thing whatsoever; nor is Licensor granted any right or authority to
assume or create any obligation or responsibility, express or implied, on behalf
of or in the name of Licensee, or to bind Licensee in any manner or thing
whatsoever. No joint venture or partnership between the parties hereto is
intended or shall be inferred.
ARTICLE 29
AMENDMENTS AND WAIVERS BY LICENSOR
This Agreement may be amended or modified by Licensor, and Licensor may waive
any of its rights hereunder or performance by Licensee of any of its obligations
hereunder! only by instrument in writing. In the event Licensor shall at any
time waive any of its rights under this Agreement or the performance by Licensee
of any of its obligations hereunder, such waiver shall not be construed as a
continuing waiver of the same rights or obligations, or a waiver of any other
rights or obligations.
<PAGE>
Page 19--
ARTICLE 30
ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties as to the
Trademarked Products, and supersedes all prior agreements and understandings
relating to this subject matter hereof.
ARTICLE 31
SEPARABILITY OF PROVISIONS
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provisions shall be fully
severable. The Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provisions had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid or enforceable.
ARTICLE 32
COUNTERPARTS; HEADINGS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. The headings herein are set out for convenience of reference only
and shall not be deemed a part of this Agreement.
ARTICLE 33
BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and, subject to the provisions of Article 16 of this Agreement,
their respective permitted successors and assigns.
<PAGE>
Page 20--
ARTICLE 34
INDEMNIFICATION BY LICENSEE
34.1 INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this paragraph,
"Indemnified Parties" refers to Licensor, and other licensees (not including
Licensee) of rights relating to the Trademarks, and officers, directors,
employees, and agents of each of the foregoing, and persons connected with or
employed by them and each of them. Licensee hereby agrees that it shall
indemnify and hold harmless the Indemnified Parties and each of them from and
against the costs and expenses (including, without limitation, reasonable
attorneys fees and costs) of any and all claims, suits, losses, damages, costs,
demands, obligations, investigations, causes of action, and judgments arising
out of:
(a) the actual or alleged unauthorized use in connection with, or arising out
of, a Trademarked Product of any Trademarks (including, without limitation, the
Trademarks), patent, process, method or device;
(b) the actual or alleged infringement in such connection of any copyrights,
trade name or patent or any act held to constitute libel, slander or defamation;
(c) the invasion by Licensee of the right of privacy, publicity, or other
property right;
(d) the failure to perform of, or any defect in, or use of, the Trademarked
Product, including without limitation any injuries to the person or to property
arising therefrom;
(e) the infringement or breach of other personal or property right of any
person, firm or i corporation by Licensee, its officers, employees, agents, or
anyone directly or indirectly acting by, through, on behalf of, or pursuant to
contractual or any other relationship with Licensee; and
(f) Licensee's sales and/or promotional efforts.
34.2 LICENSEE INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purpose of this
Section, "Licensee Indemnification Parties. refers to Licensee and officers,
directors, employees and agents of Licensee. Licensor shall indemnify and hold
harmless the Licensee Indemnified Parties and each of them from and against the
cost and expenses (including, without limitation, reasonable attorneys fees and
costs) of any and all claims, suits, losses, damages, costs, demands,
obligations, investigations, causes of action, and judgements arising out of any
assertion or allegation by any persons, entities of government agencies that any
Trademark infringes any trademark, trade name or any other personal or property
right of a third party.
34.3 INDEMNIFICATION FOR BREACH. Licensee hereby further agrees that it shall
indemnify and forever hold harmless the Indemnified Parties against and from any
and all claims, suits, losses, damages, costs, obligations, liabilities,
judgments, damages and expenses, including without limitation, reasonable
attorneys' fees arising out of breach or alleged breach by Licensee of any
provision of this Agreement, or any misrepresentation made by Licensee herein or
any act not expressly authorized herein. Licensee further agrees to
<PAGE>
Page 21--
insulate the Indemnified Parties from any and all product liability claims
arising from the use or misuse of the Trademarked Product.
34.4 SURVIVAL OF TERMS. The provisions of this Article 34 shall survive the
termination (or expiration) of this Agreement.
ARTICLE 35
INFORMATION
35.1 CONFIDENTIALITY. Licensor and Licensee may from time to time disclose to
each other sales, engineering, applications, drawing designs and any other
knowledge, information, techniques, know-how or data pertaining to the
manufacture, use, application, marketing, distribution and sales of the
Trademarked Product or other products of Licensor or Licensee (the
"Information"). Each party hereto shall hold in confidence all such data and
information and shall not disclose such data and information except to such
personnel and employees as are necessary for the effective performance of this
Agreement or as otherwise permitted by this Agreement. Licensor and Licensee
shall cause all data, documents or other written or printed materials embodying
the information to be plainly marked to indicate the secret and confidential
nature thereof and to prevent unauthorized access thereto, or reproduction or
use thereof. Licensor and Licensee shall take any necessary action, including
Court proceedings, to comply and to compel compliance with the provisions of
this Article 35. The obligations undertaken by Licensor and Licensee pursuant to
this Article 35 shall not apply to any such data or information which is or
becomes published or otherwise generally available to the public without fault
of a party hereto or is otherwise lawfully acquired by a party hereto and such
obligations shall, as so limited, survive the expiration or termination of this
Agreement. Upon termination of this Agreement, either Party hereto may request
the prompt return, of all written materials received from the other Party
including originals, copies, extractions, translations and reproductions
thereof. This Agreement is not intended to and shall not be construed to give
either Party any vested right, title or interest in the Trademarked Product or
the Information.
35.2 CONFIDENTIALITY OF TERMS OF AGREEMENT. Licensee shall not disclose to any
third party information relating to the terms and conditions of this Agreement,
including royalty rates, the amounts of minimum NIV Sales or minimum royalties
or the amount of the initial royalty payment pursuant to this Agreement.
35.3 SURVIVAL OF TERMS. The provisions of this Article 35 shall survive the
termination of this Agreement.
<PAGE>
Page 22--
ARTICLE 36
PUBLIC ANNOUNCEMENTS
36.1 Unless expressly approved in advance in writing by the other party, neither
shall make any public announcement regarding the subject matter or existence of
this Agreement except as required by law. If such announcement is required by
law, the announcing party shall give the other party reasonable notice of such
announcement and shall consult with the other party regarding the announcement.
36.2 IMMEDIATE DISCLOSURE OF PUBLIC ANNOUNCEMENTS. Licensee shall include
Licensor, and its agent, LMCA, among its list of recipients for press releases
and all other public announcements regarding its business, and provide such
information to Licensor and its agent simultaneous to its release to any and all
media outlets or other recipients.
ARTICLE 37
ADDRESSES FOR NOTICE
All notices, statements, consents, instructions or other documents required or
authorized to be given hereunder shall be in writing, and shall be delivered
personally to an officer, partner or authorized representative of the other
party or by certified mail, return receipt requested, addressed to the parties
concerned as follows:
to Licensee New M-Tech Corporation
16550 N.W. 10th Avenue
Miami, Florida 33169
Facsimile: 305-624-8901
and to Licensor at: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
with copies to: Ms. Sharon Schiller, Trademarks Counsel
White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111 Facsimile: 216-252-8158
and Mr. Allan R. Feldman
Leveraged Marketing Corporation of America
156 West 56th Street, Suite 1400
New York, New York 10019
Facsimile: 212-581-1461
and shall be deemed to have been given upon receipt.
<PAGE>
Page 23--
IN WITNESS WHEREOF, this Agreement is executed on the day and year
first written above.
White Consolidated Industries, Inc. (Licensor)
/S/ STANLEY R. MILLER
- ----------------------
By: Stanley R. Miller
Assistant Secretary
New M-Tech Corporation (Licensee)
/s/ Leonor Schuck
- -----------------
By: Leonor Schuck
Vice President, Finance
<PAGE>
EXHIBIT A
Portable consumer microwave ovens
EXHIBIT 10.6
TRADEMARKS LICENSE AGREEMENT
AGREEMENT entered into as of September 15, 1997, by and between White
Consolidated Industries, Inc., a Delaware Corporation, having its principal
office at 11770 Berea Road, Cleveland, Ohio 44111 ("Licensor"), Electronic
Industries of America, Inc., a Florida Corporation, having its principal office
at 16550 N.W. 10th Avenue, Miami, Florida 33169 (hereinafter referred to as
"Licensee").
WHEREAS, Licensor is the owner of the Trademark Philco and associated designs
and trade dress (together, the "Trademarks"), and is using the Trademarks
throughout the World, and
WHEREAS, Licensor has the right to grant Licensee the license, right and
permission to use the Trademarks, and
WHEREAS, Licensee is in the business of manufacturing, distributing and selling
articles described and specified hereinafter (the "Products"), and desires to
secure the license, right and permission to use the Trademarks upon, and in
connection with, the manufacturing, distributing and selling of such Products;
and
WHEREAS, the Products that are the subject of this Agreement have been defined
by the parties as portable consumer microwave oven products listed on Exhibit A
hereto (and any other articles which the parties mutually agree to be subject to
the provisions of this Agreement which, in accordance with the terms of this
Agreement, bear the Trademarks (collectively, the "Trademarked Product").
WHEREAS, Licensor desires to grant to Licensee, and Licensee desires to accept
from Licensor, a license to use the Trademarks in the design, manufacture,
advertising, sale and promotion of the Products, subject to each of the terms,
provisions and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements,
covenants and provisions contained herein, the parties hereto do hereby agree as
follows:
<PAGE>
Page 2--
ARTICLE 1
GRANT OF LICENSE AND DESIGNATION OF TRADEMARKED PRODUCT
Effective upon the execution of this Agreement, Licensor hereby grants to
Licensee, for the period hereinafter specified and upon the terms, provisions
and conditions of this Agreement, the exclusive right and license to use the
Trademarks within the geographic area described in Article 2 hereof, in the
design, manufacture, advertising, sale and promotion of the Trademarked
Product.
In the event of any disputes between the parties to this Agreement regarding the
definition of Trademarked Product, the final decision regarding such definition
shall rest in Licensor's sole and absolute discretion. The rights granted to
Licensee herein are limited to use on or in connection with the Trademarked
Product and Licensee specifically agrees not to use the Trademarks in any manner
or on any product, service or item, except as set forth in the Agreement.
ARTICLE 2
GEOGRAPHIC AREA
The rights granted to Licensee hereunder may be exercised by Licensee within the
USA, Canada and Puerto Rico (the "Territory"), and Licensee shall have exclusive
rights with respect to the Trademarked Product. Upon Licensee's request,
Licensor may, in its discretion, extend the areas in which Licensee may exercise
said rights, but any such extension shall, in each instance, be evidenced by a
written and duly executed amendment to this Agreement for such periods and upon
such terms and conditions as shall be determined by Licensor. From time to time
Licensor may wish to purchase Trademarked Product for sale outside the
Territory. Licensee agrees to sell Trademarked Product to Licensor at the same
price Licensee sells Trademarked Product to its best customer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LICENSOR
3.1 Organization and Power. Licensor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Licensor
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder.
<PAGE>
Page 3--
3.2 AUTHORIZATION. The execution, delivery and performance by Licensor of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensor is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
3.3 NO VIOLATION. Licensor is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
3.4 OWNERSHIP OF TRADEMARKS. Licensor is the owner of the Trademarks and, to
Licensor's knowledge, the use of the Trademarks in the design, manufacture,
advertising, sale and promotion of any of the Trademarked Product will not
infringe any intellectual property or any other rights of any third party.
3.5 RIGHT TO GRANT LICENSE. Licensor has the full right, power and authority to
grant the license as set forth in Article 1 hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LICENSEE
4.1 ORGANIZATION AND POWER. Licensee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Licensee
has all corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder. - 4.2 Authorization. The execution, delivery
and performance by Licensee of this Agreement and the consummation of the
transaction contemplated hereby has been duly and validly authorized by ail
requisite corporate action, and no other corporate act or proceeding on this
part of Licensee is necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the transaction
contemplated hereby.
4.2 AUTHORIZATION. The execution, delivery and performance by Licensee of this
Agreement and the consummation of the transaction contemplated hereby has been
duly and validly authorized by all requisite corporate action, and no other
corporate act or proceeding on this part of Licensee is necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transaction contemplated hereby.
4.3 NO VIOLATION. Licensee is not subject to nor obligated under its certificate
of incorporation or bylaws, any applicable law, rule or regulation of any
governmental authority, or any agreement, instrument, license or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
<PAGE>
Page 4--
ARTICLE 5
TERM OF AGREEMENT
5.1 CONTRACT TERM. The Contract Term of this Agreement commence of the date
first mentioned above and ending on December 31, 2002 at midnight Eastern
Standard Time, unless sooner terminated pursuant to the terms of this Agreement.
5.2 EXTENSION TERMS. Licensor hereby grants to Licensee the option to extend the
term of this Agreement for up to six (6) two (2) year periods commencing as of
January 1, 2003 and ending on December 31, 2014, at midnight Eastern Standard
Time, unless sooner terminated pursuant to the terms of this Agreement with such
extended terms to be subject to the same terms and must achieve specified levels
of Minimum Sales during the then preceding Contract or Extension Term of this
Agreement as set forth in Article 8 hereof. Such options to extend the term of
this Agreement must be exercised by Licensee, if at all, by giving written
notice to Licensor at least one hundred and twenty (120) days prior to the
expiration of the then preceding Contract Term of this Agreement. Nine months
(270 days) prior to the end of the fourteenth extension, the parties will
negotiate, in good faith, the possibility of extending this Agreement for one or
more extension periods.
ARTICLE 6
ROYALTIES
6.1 EARNED ROYALTIES. Subject to of Article 7 hereof, Licensee shall pay to
Licensor for the rights granted hereunder a sum equal to one and [*****] of the
Net Invoice Value of Trademarked Products Sold by Licensee (the "Royalties").
The Royalties shall be remitted in accordance with Section 7.4 of this
Agreement.
6.2 DEFINITION OF NET INVOICE VALUE. As used throughout this Agreement, the term
"Net Invoice Value" shall mean the aggregate of the invoiced amounts of
Trademarked Product sold by Licensee, less (a) resumed goods, refunds, credits
and allowances actually made or allowed to customer with respect to Trademarked
Product, (b) freight or handling charges charged to customers or incurred on
resumed goods, and (c) sales and excise taxes actually paid ("NIV").
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 5--
ARTICLE 7
MINIMUM ROYALTY PAYMENTS
7.1 MINIMUM ROYALTY PAYMENTS. The Minimum Royalties for the Contract Term shall
be paid [*****] in advance on execution of this Agreement and the balance in
twenty (20) equal installments of $[*****] paid quarterly beginning March 30,
1998 and throughout the remainder of the contract period. Each installment is
due on or before the 30th day of each March, June, September and December. The
Minimum Royalties for each Extension Term as shown below shall be paid in four
(4) equal installments each by the 30th day of March, June, September and
December of the respective term.
7.1A Licensee shall not be in default of this Paragraph if the minimum royalties
paid pursuant to a Trademark Licensee Agreement between White Consolidated
Industries and New M-Tech Corporation, of even date, and the royalties paid
pursuant to this Agreement equal the minimum royalty payments set forth below.
TERM YEAR(S) MINIMUM
- ---- ------- ROYALTIES
Contract ---------
Term 1997/2002 [*****]
First Extension Term 2003/2004 [*****]
Second Extension Term 2005/2006 [*****]
Third Extension Term 2007/2008 [*****]
Fourth Extension Term 2009/2010 [*****]
Fifth Extension Term 2011/2012 [*****]
Sixth Extension Term 2013/2014 [*****]
7.2 INITIAL ROYALTY PAYMENT. Licensee shall pay Licensor an initial royalty
payment (the "Initial Royalty Payment") of [*****] upon execution of this
Agreement. The Initial Royalty Payment shall be applied against the first
Royalties payable pursuant to Section 7.4 of this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 6--
7.3 APPLICATION OF EARNED ROYALTIES. The Earned Royalties to be paid under
Article 6 shall be applied against the Minimum Royalties due under this Article
7, and Licensee shall pay by each due date specified in this Article 7 the sum
of: (i) the Minimum Royalties as specified above; plus (ii) the excess, if any,
of the Earned Royalties (per Article 6) over the Minimum Royalties for the then
current quarter payable by such due date (such sum hereinafter referred to as
the "Royalty Payment").
7.4 QUARTERLY REPORTS OF SALES AND ROYALTY PAYMENTS. On or before the twentieth
(20th) day of each January, April, July and October during the Contract Term and
any Extension Term, Licensee shall deliver to Licensor the following: (i) a
written statement, certified to be true and correct by the Chief Financial
Officer of Licensee, setting forth the Gross an NIV sales for each Trademarked
Product during the preceding calendar quarter and a calculation of the Royalties
payable under Article 6 and 7 of this Agreement for such period, and (ii) a
check payable to Licensor in full payment of the amount due under Article 6 and
7 of this Agreement for such period. Each royalty payment, payable in US
currency, shall be remitted by check at Licensor's address as provide by this
Agreement.
7.5 In the event that during any of the Terms of the Agreement, the aggregate
retail sales of microwave ovens in the United States decreases from the prior
Term (the amount of such reduction of sales of microwave ovens in the United
States is hereinafter express as a percentage and the amount by which such
percentage exceeds [*****]% is hereinafter referred to as the to as the
"Reduction Percentage"), then the Minimum Sales Commitment for the Term
following the Prior Term (the "Adjustment Period") shall be reduced. This
reduction shall be in an amount (the "Reduction Amount") equal to (i) the higher
of (A) the Minimum Sales Commitment for the Adjustment Period or (B) the actual
sales by Newtech of microwave ovens during the Prior Term (the "Actual Prior
Term Sales") multiplied by (ii) the Reduction Percentage. The Reduction amount
will then be subtracted from the higher of (i) the Minimum Sales Commitment for
the Adjustment Period or (ii) the Actual Prior Term Sales, to determine the new
Minimum Sales Commitment for the Adjustment Term; provided, however that if this
computation yields an amount greater than the Minimum Sales Commitment for such
Term, then no adjustment shall be made. For purpose of this section, sales for
microwave ovens in the United States shall be determined by reference to
applicable information published in the most widely-circulated brace publication
containing such information; provided that if Licensor and Licensee are unable
to agree upon the publication from which such information is be derived, then
the applicable information shall be derived by reference to applicable
information shall be derived by reference to a trade publication selected by the
licensor and a trade publication selected by the licensee, and the applicable
sales information shall be determined on the basis of the average of the data
contained on the two publications.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 7--
ARTICLE 8
MINIMUM SALES OF TRADEMARKED PRODUCT
8.1 FAILURE TO MEET REQUIRED MINIMUM SALES. Licensee shall use its best efforts
to advertise and sell Trademarked Product in the Territory during the term of
this Agreement. Should Licensee fail to achieve the NIV sales over any [*****]
consecutive terms as set forth below in this Article 8 then Licensor may, at its
option, elect to terminate this Agreement by written notice delivered to
Licensee with [*****] after the end of any period in which Licensee failed to
achieve such required Minimum Sales. Such termination shall be effective upon
delivery of said notice but shall not affect Licensee's outstanding indebtedness
to Licensor or any of the provisions relating thereto.
8.1A. Licensee shall not be in default of this Paragraph if The Minimum Sales
generated pursuant to a Trademark License Agreement between White- Consolidated
Industries and New M-Tech Corporation, of even date, and the minimum sales
generated pursuant to this Agreement equal the minimum sales set forth below.
Contract Term [*****]
First Extension Term [*****]
Second Extension Term [*****]
Third Extension Term [*****]
Fourth Extension Term [*****]
Fifth Extension Term [*****]
Sixth Extension Term [*****]
ARTICLE 9
ADVERTISING AND ART WORK
9.1 ADVANCE SUBMISSION. Licensee shall submit to Licensor for approval all
advertising and promotional items, budgets, programs and materials relating to
the Trademarked Product at least fourteen (14) days prior to intended usage.
Licensor shall provide Licensee with written approval or disapproval within ten
(10) business days after Licensor's receipt thereof. Should Licensor disapprove,
its written notice shall explain in detail the reasons for disapproval so that
Licensee may prepare and submit new advertising and art work.
9.2 ART WORK. Licensor shall make available to Licensee any and ail necessary
film, photostats, artwork and full color reproductions of its Trademarks,
artwork, designs and other materials necessary for Licensee's use in accordance
with this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 8--
9.3 EXPENSE REIMBURSEMENT. Licensee shall reimburse Licensor for Licensor's
out-of- pocket expenses, including, reasonable hourly charges for creative
personnel incurred by Licensor in the preparation for Licensee, when and if
required, of new artwork, mechanicals, and film. All charges shall be agreed to
prior to the time such expenses are incurred, and all sums due to Licensor under
this Article 9 shall paid by Licensee upon receipt of an appropriate invoice.
ARTICLE 10
LICENSEE'S RECORDS
Licensee shall keep and maintain at its regular place of business separate and
complete books and records of all business transacted by Licensee in connection
with the Trademarked Product, including, but not limited to, books and records
relating to Gross and NIV of Sales and orders for Trademarked Product. Such
books and records shall be maintained in accordance with generally accepted
accounting procedures and principles consistently applied. Licensor or its duly
authorized agents or representatives shall have the right to inspect said books
and records at Licensee's premises during Licensee's regular business hours.
ARTICLE 11
LICENSEE'S ANNUAL REPORTS AND ANNUAL ROYALTY PAYMENTS
On or before the fifteenth (1Sth) day of the second (2nd) month following the
end of Licensee's fiscal year, Licensee shall render to Licensor a statement
certified by Licensee's Chief Financial Officer disclosing gross and NIV Value
of sales, Royalties due and Royalties paid for Licensee's preceding fiscal year,
and for any Contract or Extension Term which ended within said fiscal year. If
said statement discloses that the amount of Royalties paid during any period to
which said statement relates was less than the amount required to be paid under
the provisions of this Agreement, Licensee shall pay said deficiency concurrent
with the delivery of the statement. If said statement discloses the Licensee has
paid Royalties in excess of the amounts required to be paid, Licensor shall
apply said excess to the next Royalty payment.
<PAGE>
Page 9--
ARTICLE 12
AUDIT BY LICENSOR
At all times during the existence of this Agreement and for twelve (12) months
after the last report is rendered hereunder, Licensor, if it so chooses, may
cause its independent accountants to audit all books and records of Licensee
pertaining Trademarked Product. Licensor shall have the further right to engage
an independent certified public accounting firm, to audit the books and records
of Licensee with regards to the Royalties due hereunder. In the event any such
audit shall disclose that the Licensee has understated NIV Sales or underpaid
Royalties for any reporting period, Licensee shall forthwith and upon written
demand of Licensor, pay the amount, if any, by which the Royalties owing exceed
Royalties paid, plus interest of twelve percent (12%) per annum on such
delinquent amounts, accruing from the date on which such amounts became
delinquent to the date on which such delinquent amounts were paid. In the event
that Licensee has understated NIV Sales and consequently has underpaid Royalties
in excess of One Thousand dollars ($1,000) of amount due for any Contract Term,
Licensee shall forthwith and upon written demand also pay all costs, fees and
expenses incurred by Licensor in conducting such audit, including, without
limitation, reasonable travel expenses. Should such audit disclose that the
Royalties paid exceed the Royalties due, any excess revealed by such audit will
be remitted to Licensee.
ARTICLE 13
LICENSEE OBLIGATIONS
13.1 LICENSEE DILIGENCE. Licensee shall design, manufacture, advertise, sell and
ship the Trademarked Product and shall continuously and diligently during the
term hereof procure and maintain facilities and trained personnel sufficient and
adequate to accomplish the foregoing, all to the extent and in a manner no less
thorough, diligent and professional than the same accorded by Licensee for
Licensee's most favored premium products and/or services. A cessation of the
above for a continuous period of ninety (90) days shall be grounds for
termination by Licensor, without notice. The marketing of Trademarked Product
shall be conducted in a manner consistent with enhancing the long-term value of
the Trademarks. It is the interest of the parties that Trademarked Product be
sold simultaneously through a wide range of retailers. Accordingly, Licensee
shall continuously and diligently design, price and promote Trademarked Product
to retailers in all major classes of trade including department stores (i.e.,
Macy's, Burdine's, Bloomingdale's, etc.), mass merchants (i.e., Walmart, Kmart,
etc.), regional discounters (i.e., Caldor, Bradlees, etc.), warehouse clubs
(i.e., Target, Sam's, etc.), specialty electronics chains (i.e., The Wiz, etc.),
mail order, premium and television shopping services. Licensee shall exhibit
Trademarked Product in exhibit or booth space at the annual electronics show.
<PAGE>
Page 10--
13.2 LICENSOR INSPECTION RIGHTS. Licensor shall have the right to inspect any of
Licensee's facilities pertaining to the Trademarked Product during regular
business hours. Licensor shall conduct such inspection in the presence of an
officer, partner or authorized representative of Licensee.
13.3 NO COMPETITION WITH TRADEMARKED PRODUCT. During the term of this Agreement,
Licensee shall not enter another license Agreement for products that would
directly compete with the Trademarked Product other than under the Admiral trade
name.
13.4 FORFEITURE OF TRADEMARK FOR NON-USE. Licensee's failure to ship
Trademarked Product Trademark by December 31, 1998 shall be deemed a forfeiture
of its grant to use the Trademarks. Failure of Licensee to ship Trademarked
Product for a period of one (1) year shall be deemed a forfeiture of its grant
to use the Trademarks.
13.5 FINANCIAL STANDARDS. Licensee shall provide its financial statements to
Licensor annually or as requested by Licensor, which are to be prepared in
accordance with U.S. GAAP. Licensee must promptly notify Licensor of a
termination of any significant line of credit or guarantee of indebtedness by
personal guarantor. Should Licensee's net worth fall below $2,000,000 in the
aggregate, Licensor may at its option terminate this Agreement. Likewise
Licensor may terminate this Agreement immediately if any of the following events
occur
1) Licensee is in default under the provisions of any line of credit or debt
agreement with financing institution.
2) A sale or transfer of Licensee's assets which, in Licensor's opinion, may
affect the ability of Licensee to operate the business pursuant to this
Agreement, or
3) Licensee incurs net operating losses in the aggregate for three or more
consecutive years.
ARTICLE 14
APPROVALS AND QUALITY STANDARDS
14.1. ADVANCE APPROVAL. Prior to any use of any Trademarks, Licensee shall, at
Licensee's expense, submit to Licensor, for Licensor's written approval, the
following: (a) two (2) specimens of each Product on which the Trademarks is to
appear (the "Specimens"); (b) all artwork which Licensee intends to use in
connection with the Trademarks; and (c) all packaging, advertising and
promotional literature which Licensee intends to use in the marketing or
merchandising of the Trademarked Product. Licensor shall give Licensee written
notice of approval or disapproval within ten (10) business days from its receipt
of the Specimens, and should Licensor disapprove, its written notice shall
<PAGE>
Page 11--
explain in detail the reasons for disapproval so that Licensee may prepare and
submit new Specimens and/or samples.
14.2 STANDARDS. After Licensor has given its written approval of said Specimens,
then the approved product, quality, packaging, advertising and promotional
literature shall be the standard for all Trademarked Product produced thereafter
(the "Approved Quality").
14.3 PERIODIC SAMPLES. Thereafter, consecutively at four (4) month intervals,
Licensee shall, at Licensee's expense, submit to Licensor not less than two (2)
randomly selected production run samples of the Trademarked Product.
14.4 APPROVED QUALITY STANDARDS. Without the prior written approval of Licensor,
Licensee shall not sell or distribute any Trademarked Product which deviates
from the Approved Quality more than the deviation which would occur as a result
of normal deviations in raw material characteristics.
14.5 PRODUCT SERVICING AND REPAIRS. Licensee will propose, prior to the sale of
Trademarked Product at retail, a mechanism by which Licensee will respond to
inquiries from consumers and third party appliance repair vendors regarding the
operation of Trademarked Product and the procedures for obtaining parts for, or
repairs to, Trademarked Product, which mechanism shall be designed to minimize
any confusion with Licensor's existing customer service operations, or the
existing customer service operation of other Licensees of the Trademarks.
14.6 PERIODIC REVIEW MEETINGS. Licensee will conduct periodic meetings with
Licensor to review Licensee's progress and performance under the terms of this
Agreement.
ARTICLE 15
RESTRICTIONS UPON SUBCONTRACTS
Licensee is responsible for the work of any subcontractor and for any debts,
obligations or liabilities incurred by any such subcontractor in connection with
the Trademarked Product. Licensee shall discontinue using any subcontractor who
shall fail to comply with the Approved Quality standards and/or delivery
schedules required by Licensee or Licensor.
<PAGE>
Page 12--
ARTICLE 16
ASSIGNMENT; TRANSFERS; SUBLICENSE
The parties hereby acknowledge the substantial personal service nature of
Licensee's obligations hereunder. Therefore, without the prior written consent
of Licensor, which consent will not be unreasonably be withheld, Licensee shall
not voluntarily or by operation of law assign or transfer this Agreement or any
of Licensee's rights or duties hereunder or any interest of Licensee herein, nor
shall Licensee enter into any sublicense for the use of the Trademarks by.
others. Any assignment, transfer or sub-license without Licensor's written
consent shall be void and at the option of the Licensor shall constitute a
default hereunder. For purposes of this Article 16, the failure of Windmere
Corporation, a Florida Corporation, having its principal offices at 5980 Miami
Lakes Drive, Miami Lakes, Florida, 33014, and Joel Newman, President of
Electronic Industries of America, Inc. (Licensee) to maintain ownership of at
least 51% of the outstanding voting stock of Licensee shall be deemed an
attempted assignment of this Agreement, unless Licensee has made a public
offering of its voting stock in which ease Electronic Industries of America,
Inc. and Windmere need not retain 51% of the voting stock.
ARTICLE 17
NO DILUTION OF TRADEMARKS OR ATTACK UPON TRADEMARKS
17.1 LIMIT ON USE. Licensee shall not at any time use, promote, advertise,
display or otherwise publish any Trademarks or any material utilizing or
reproducing any Trademarks in whole or in part, except as specifically provided
in this Agreement, without the prior written consent of Licensor, which consent
shall not be unreasonably withheld,
17.2 NOTICE. Licensee shall cause to appear on all Trademarked Product and on
all materials on, or in connection with which any Trademarks is used, such
legends, markings and notices as may be required by law to give appropriate
notice of all Trademarks, trade name or other rights therein or pertaining
thereto.
17.3 MATERIALS AND DOCUMENTS. Licensee shall provide all materials and execute
all documents required by law incident to the maintenance and/or preservation of
the Trademarks and Licensor's rights therein.
17.4 NO CONTEST OF TRADEMARKS VALIDITY. Licensee shall not contest the validity
of the Trademarks or any rights of Licensor therein, nor shall Licensee
willingly become an adverse party in litigation in which others shall contest
the Trademarks or Licensor's said rights. In addition thereto, Licensee shall
not in any way seek to avoid its obligations hereunder because of the assertion
or allegation by any persons, entities or government agencies, bureaus, or
instrumentalities that any Trademarks is invalid or ineffective or by reason of
any contest concerning the rights of Licensor therein.
<PAGE>
Page 13--
17.5 NO OTHER TRADEMARKS PROTECTION. Licensee agrees not to seek any state,
Federal, foreign or other statutory Trademarks or service mark or other
protection for the Trademarks as they are used in connection with the Licensee's
goods or services and all use of the Trademarks shall be for the sole benefit of
the Licensor.
ARTICLE 18
INFRINGEMENT AND OTHER TRADEMARKS LITIGATION
18.1 TRADEMARKS DEFENSE. Licensee shall apprise Licensor immediately upon
discovery of any possible infringement of the Trademarks which comes to the
attention of the Licensee. Licensor, at its sole cost and expense, and in its
own name, may prosecute and defend any action or proceeding which Licensor deems
necessary or desirable to protect the Trademarks, including but not limited to
actions or proceedings involving their infringement. Upon written request by
Licensor, Licensee shall join Licensor at Licensor's sole expense in any such
action or proceeding. However, Licensee shall not commence any action or
proceeding to protect the Trademarks or any action or proceeding alleging
infringement thereof without the prior written consent of Licensor. Licensee may
prosecute and defend, at its sole expense and in its own name, any action or
proceeding to protect its designs or styles. Any and all damages recovered in
any action or proceeding commenced by Licensor shall belong solely and
exclusively to Licensor.
18.2 NO LIABILITY FOR VIOLATION. Licensor shall have no liability to Licensee or
any other person, nor shall be there by any right of contribution against
Licensor therefore, for any action or proceeding alleging any violation of any
antitrust, trade regulation, or similar statute, or for unfair competition.
Furthermore, in the event of any threatened or actual action or proceeding in
which Licensee and Licensor are or may be charged with jointly violating any
antitrust, trade regulation or similar statute, or any law pertaining to unfair
competition, Licensee may, at its option, elect to be represented in such
threatened or actual action or proceeding by Licensor's counsel at no cost to
Licensee for fees, costs or expenses. Should Licensee elect in such event to be
represented by Licensor's counsel, then Licensee shall relinquish any right to
control or direct such threatened or actual action or proceeding, and Licensor
shall maintain full control thereof. Such representation of Licensee shall
continue only so long as Licensor's counsel, in its sole and absolute
discretion, believes that it may properly and ethically represent both Licensor
and Licensee. In the event that Licensor's counsel decides that it may no longer
properly and ethically represent both Licensor and Licensee, then Licensor's
counsel shall continue to represent Licensor only, and Licensee's continued
defense shall be at Licensee's sole expense and shall be conducted by separate
counsel.
<PAGE>
Page 14--
ARTICLE 19
ADDITIONAL RESTRICTIONS UPON USE OF TRADEMARKS
19.1 IDENTIFICATION OF TRADEMARKED PRODUCT. It is the intention of the parties
hereto and the purpose of this Article 19 that all of the Trademarked Product be
identified to the general public by the Trademarks. Licensee shall use a
registration indicator in the form of a cirded-R or "TM" symbol in conjunction
with the Trademarks when so instructed by the Licensor. Licensee further agrees
to assist Licensor in obtaining registrations for the Trademarks in the event
any Trademarks is not yet registered for the Trademarked Product. Licensee shall
use notice language in the manufacture, sale, advertising or other promotion of
the Trademarked Product as follows: or "Philco is a registered Trademark of
White Consolidated Industries, Inc. and is used under license" or other such
language
as a Licensor designates in writing.
ARTICLE 20
DEFAULTS BY LICENSEE
20.1 DEFAULTS. Except as otherwise expressly provided in this Agreement, in the
event Licensee shall default in the performance of any of the terms, conditions
or obligations to be performed by Licensee hereunder, and if such default
involves the payment of money and same shall not be cured within [*****] after
Licensor gives written notice to Licensee of such default, or if such default
involves performance other than the payment of money and the same is not cured
within [*****] after Licensor gives written notice to Licensee of such default,
then and in any such event, Licensor may immediately and without prior notice
terminate this Agreement and all of the rights and obligations hereunder (except
as otherwise expressly provided by this Agreement). In the event that a Receiver
is appointed to, or one or more auditors take possession of all, or
substantially all, of the assets of the Licensee, or if Licensee shall make a
general assignment for the benefit of creditors, or if any action is taken or
suffered by Licensee under any state or Federal insolvency or bankruptcy act,
then this Agreement and all of the rights and obligations hereunder (except as
otherwise expressly provided by this Agreement) shall immediately, and without
notice or need of any further action by any party hereto, terminate.
20.2 TIME FOR PERFORMANCE. The time for performance of any act required of
either party shall be extended by a period equal to the period during which such
party was reasonably prevented from performance by fire, flood, storm, or other
like casualty beyond such party's control.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 15--
ARTICLE 21
LICENSOR'S RIGHTS TO DESIGNS, ETC., UPON TERMINATION
21.1 RIGHTS UPON TERMINATION. In the event this Agreement is terminated for any
reason, or expires according to its terms, Licensee shall assign, transfer and
transmit to Licensor any and all rights of Licensee in the Trademarks, including
associated goodwill, and shall not thereafter manufacture, sell or use the
Trademarks in any manner; provided that, Licensee may however, dispose of its
stock of Trademarked Product on hand within [*****] after the termination of
this Agreement; provided, however, all sums due to Licensor have first been
paid; and, further provided, that Licensee shall, prior to the effective date of
said termination, deliver to Licensor a detailed schedule of all inventory of
Trademarked Product in Licensee's possession (constructive or otherwise). After
the expiration of the aforesaid [*****] period, Licensee shall destroy all
Trademarked Product and packaging and promotional material remaining in
Licensee's possession which are identified in any manner by or with the
Trademarks. Notwithstanding the above, Licensor shall have the right to purchase
such excess stock of Trademarked Product, in whole or in part, prior to any sale
or offer of sale by Licensee to any third party, for an amount equal to the
wholesale cost of such Trademarked Product. It is specifically understood and
agreed that the Licensee's right to dispose of stock shall be conditioned upon
the absence of harm to the Trademarks and/or the reputation of the Licensor
arising from the Licensee's use of the Trademarks, as determined by the Licensor
in its sole discretion.
21.2 CONTINUATION OF AGREEMENT TERMS. Licensee shall continue to abide by the
terms of this Agreement with respect to such Trademarked Product during the
period in which disposition pursuant to Article 21.1 of this Agreement is taking
place. Neither Licensee nor any creditor judgment or otherwise), assignee,
transferee, trustee, or receiver of Licensee, or similar person or officer, or
purchaser other than in the regular course of Licensee's business may sell or
transfer any Trademarked Product until and unless all sums due Licensor from
Licensee have been paid. Further, upon termination of this Agreement, all
labels, signs, packages, wrappers, cartons, circulars, advertisements, and other
items bearing or containing any reproduction or representation of any of the
Trademarks shall automatically and without cost to Licensor become the property
of Licensor, and Licensee shall immediately deliver the same to Licensor's place
of business or other location designated by Licensor. The reasonable cost of
such delivery shall be paid by the Licensor.
21.3 LICENSEE'S OBLIGATIONS. The termination of this Agreement for any reason
shall not relieve Licensee of any accrued obligations to Licensor nor shall such
action relieve Licensee of any obligation or duty which accrued on or after the
termination or expiration of this Agreement.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 16
21.4 NO RIGHT IN LICENSEE. Except for the right to use the Trademarks as
specifically provided for in this Agreement, (i) Licensee shall have no right,
title or interest in or to the Trademarks, and (ii) upon and after the
termination of this Agreement, all rights granted to Licensee hereunder,
together with any interest in and to the Trademarks that Licensee may acquire,
shall forthwith and without further act or instrument be assigned to and revert
to the Licensor. In addition, Licensee shall execute any instruments requested
by Licensor to accomplish or confirm the foregoing. Any such assignment,
transfer or conveyance shall be without consideration other than the mutual
agreements contained herein.
21.5 SURVIVAL OF TERMS. The provisions of this Article 21 shall survive the
termination (or expiration) of this Agreement.
ARTICLE 22
ADDITIONAL RIGHTS PRIOR TO TERMINATION
During the final Contract Year of the Term, hereof, Licensor shall have the
right to design and manufacture merchandise of the types covered by this
Agreement and to negotiate and conclude such Agreements as it desires pursuant
to which it may grant licenses to any party or parties of any or all of the
rights herein granted to Licensee; provided, however, that no merchandise herein
identified as Trademarked Product shall be shipped by Licensor or any third
party other than Licensee prior to the expiration or termination of this
Agreement (exclusive of the additional [*****] period for the disposition of the
Trademarked Product as provided in Article 21 hereof).
ARTICLE 23
GOODWILL
Licensee acknowledges and recognizes that the Trademarks are of substantial
significance and value to Licensor and that said Trademarks have acquired
valuable secondary meaning, value and goodwill. Except as may be otherwise
specified in this Agreement; Licensee shall not use any of the Trademarks or any
name or symbol similar thereto as part of its name or symbol or as part of the
name or symbol of any corporation, partnership, joint venture, proprietorship or
other entity or person which it controls or with which it is affiliated.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 17--
ARTICLE 24
INSURANCE
Licensee shall at all times carry product liability insurance with respect to
the Trademarked Product with a limit of liability of not less than [*****] and
Licensor shall be named therein as coinsured as its interests may appear. Such
insurance may be obtained in connection with a policy of product liability
insurance which covers products other than the Trademarked Product and shall
provide for at least thirty (30) days prior written notice to Licensor of the
cancellation or substantial modification thereof. Licensee shall deliver to
Licensor a certificate evidencing the existence of such insurance policies
promptly after their issuance.
ARTICLE 25
AGENTS, FINDERS AND BROKERS
Each of the parties to this Agreement shall be responsible for the payment of
any and ail agent, brokerage and/or finder commissions, fees and related
expenses incurred by it in connection with this Agreement or the transactions
contemplated hereby and shall indemnify the other and hold it harmless from any
and all liability (including, without limitation, reasonable attorney's fees and
disbursements paid or incurred in connection with any such liability) for any
agent, brokerage and/or finder commissions, fees and related expenses claimed by
its agent, broker or finder, if any, in connection with this Agreement or the
transactions contemplated hereby. Licensor's sole agent/finder/broker in
connection with this Agreement is Leveraged Marketing Corporation of America
("LMCA") with offices at 156 West 56th Street, New York, New York 10019. Any
and all commissions, fees and/or other monies due LMCA in connection with this
Agreement shall be borne exclusively by Licensor as per the Agency Agreement of
March 1, 1995.
ARTICLE 26
RESERVED RIGHTS
Rights not herein specifically granted to Licensee are reserved by Licensor and
may be used by Licensor without limitation. Any use by Licensor of such reserved
rights, including but not limited to the use or authorization of the use of any
Trademarks in any manner whatsoever not inconsistent with Licensee's right
hereunder, shall not be deemed to be interference with or infringement of any of
Licensee's rights.
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
Page 18--
ARTICLE 27
APPLICABLE LAW
This Agreement shall be construed and governed, in all respects, by the law of
the State of Ohio applicable to contracts made and to be performed in that state
without reference to any provisions relating to conflicts of law. Any legal
action or proceeding of any sort against Licensor by or on behalf of Licensee,
shall be brought in a court of competent jurisdiction in Cuyahoga County, Ohio.
ARTICLE 28
NON-AGENCY OF PARTIES
This Agreement does not constitute or appoint Licensee as the agent or legal
representative of Licensor, or Licensor as the agent or legal representative of
Licensee, for any purpose whatsoever. Licensee is not granted any right or
authority to assume or to create any obligation or responsibility, express or
implied, on behalf of or in the name of, Licensor or to bind Licensor in any
manner or thing whatsoever; nor is Licensor granted any right or authority to
assume or create any obligation or responsibility, express or implied, on behalf
of or in the name of Licensee, or to bind Licensee in any manner or thing
whatsoever. No joint venture or partnership between the parties hereto is
intended or shall be inferred.
ARTICLE 29
AMENDMENTS AND WAIVERS BY LICENSOR
This Agreement may be amended or modified by Licensor, and Licensor may waive
any of its rights hereunder or performance by Licensee of any of its obligations
hereunder, only by instrument in writing. In the event Licensor shall at any
time waive any of its rights under this Agreement or the performance by Licensee
of any of its obligations hereunder, such waiver shall not be construed as a
continuing waiver of the same rights or obligations, or a waiver of any other
rights or obligations.
<PAGE>
Page 19--
ARTICLE 30
ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parses as to the
Trademarked Products, and supersedes all prior agreements and understandings
relating to this subject matter hereof.
ARTICLE 31
SEPARABILITY OF PROVISIONS
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws, such provisions shall be fully
severable. The Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provisions had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of- such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid or enforceable.
ARTICLE 32
COUNTERPARTS; HEADINGS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. The headings herein are set out for convenience of reference only
and shall not be deemed a part of this Agreement.
ARTICLE 33
BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and, subject to the provisions of Article 16 of this Agreement,
their respective permitted successors and assigns.
<PAGE>
Page 20--
ARTICLE 34
INDEMNIFICATION BY LICENSEE
34.1 INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this paragraph,
"Indemnified Parties" refers to Licensor, and other licensees (not including
Licensee) of rights relating to the Trademarks, and officers, directors,
employees, and agents of each of the foregoing, and persons connected with or
employed by them and each of them. Licensee hereby agrees that it shall
indemnify and hold harmless the Indemnified Parties and each of them from and
against the costs and expenses (including, without limitation, reasonable
attorneys fees and costs) of any and all claims, suits, losses, damages, costs,
demands, obligations, investigations, causes of action, and judgments arising
out of:
(a) the actual or alleged unauthorized use in connection with, or arising out
of, a Trademarked Product of any Trademarks (including, without limitation, the
Trademarks), patent, process, method or device;
(b) the actual or alleged infringement in such connection of any copyrights,
trade name or patent or any act held to constitute libel, slander or defamation;
(c) the invasion by Licensee of the right of privacy, publicity, or other
property right;
(d) the failure to perform of, or any defect in, or use of, the Trademarked
Product, including without limitation any injuries to the person or to property
arising therefrom;
(e) the infringement or breach of other personal or property right of any
person, firm or corporation by Licensee, its officers, employees, agents, or
anyone directly or indirectly acting by, through, on behalf of, or pursuant to
contractual or any other relationship with Licensee; and
(f) Licensee's sales and/or promotional efforts.
34.2 LICENSEE INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purpose of this
Section "Licensee Indemnification Parties" refers to Licensee and officers,
directors, employees and agents of Licensee. Licensor shall indemnify and hold
harmless the Licensee Indemnified Parties and each of them from and against the
cost and expenses (including, without limitation, reasonable attorneys fees and
costs) of any and all claims, suits, losses, damages, costs, demands,
obligations, investigations, causes of action, and judgements arising out of any
assertion or allegation by any persons, entities of government agencies that any
Trademark infringes any trademark, trade name or any other personal or property
right of a third parry.
34.3 INDEMNIFICATION FOR BREACH. Licensee hereby further agrees that it shall
indemnify and forever hold harmless the Indemnified Parties against and from any
and all claims, suits, losses, damages, costs, obligations, liabilities,
judgments, damages and expenses, including without limitation, reasonable
attorneys' fees arising out of breach or alleged breach by Licensee of any
provision of this Agreement, or any misrepresentation made by Licensee herein or
any act not expressly authorized herein. Licensee further agrees to
<PAGE>
insulate the Indemnified Parties from any and all product liability claims
arising from the use or misuse of the Trademarked Product.
34.4 SURVIVAL OF TERMS. The provisions of this Article 34 shall survive the
termination (or expiration) of this Agreement.
ARTICLE 35
INFORMATION
35.1 CONFIDENTIALITY. Licensor and Licensee may from time to time disclose to
each other sales, engineering, applications, drawing, designs and any other
knowledge, information, techniques, know-how or data pertaining to the
manufacture, use, application, marketing, distribution and sales of the
Trademarked Product or other products of Licensor or Licensee (the
41nformabon~). Each par~ hereto shall hold in confidence all such data and
information and shall not disclose such data and information except to such
personnel and employees as are necessary for the effective performance of this
Agreement or as otherwise permitted by this Agreement. Licensor and Licensee
shall cause all data, documents or other written or printed materials embodying
the Information to be plainly marked to indicate the secret and confidential
nature thereof and to prevent unauthorized access thereto, or reproduction or
use thereof. Licensor and Licensee shall take any necessary action, including
court proceedings, to comply and to compel compliance with the provisions of
this Article 35. The obligations undertaken by Licensor and Licensee pursuant to
this Article 35 shall not apply to any such data or information which is or
becomes published or otherwise generally available to the public without fault
of a party hereto or is otherwise lawfully acquired by a party hereto and such
obligations shall, as so limited, survive the expiration or termination of this
Agreement. Upon termination of this Agreement, either Party hereto may request
the prompt return of all written materials received from the other Party
including originals, copies, extractions, translations and reproductions
thereof. This Agreement is not intended to and shall not be construed to give
either Party any vested right, title or interest in the Trademarked Product or
the Information.
35.2 CONFIDENTIALITY OF TERMS OF AGREEMENT. Licensee shall not disclose to any
third party information relating to the terms and conditions of this Agreement,
including royalty rates, the amounts of minimum NIV Sales or minimum royalties
or the amount of the initial royalty payment pursuant to this Agreement.
35.3 SURVIVAL OF TERMS. The provisions of this Article 35 shall survive the
termination of this Agreement.
<PAGE>
ARTICLE 36
PUBLIC ANNOUNCEMENTS
36.1 Unless expressly approved in advance in writing by the other party, neither
shall make any public announcement regarding the subject matter or existence of
this Agreement except as required by law. If such announcement is required by
law, the announcing party shall give the other party reasonable notice of such
announcement and shall consult with the other party regarding the announcement.
36.2 IMMEDIATE DISCLOSURE OF PUBLIC ANNOUNCEMENTS. Licensee shall include
Licensor, and its agent, LMCA, among its list of recipients for press releases
and all other public announcements regarding its business, and provide such
information to Licensor and its agent simultaneous to its release to any and all
media outlets or other recipients.
ARTICLE 37
ADDRESSES FOR NOTICE
All notices, statements, consents, instructions or other documents required or
authorized to be given hereunder shall be in writing, and shall be delivered
personally to an officer, partner or authorized representative of the other
party of by certified mail, return receipt requested, addressed to the parties
concerned as follows:
to Licensee Electronic Industries of America, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33168
Facsimile: 305-624-8901
and to Licensor at: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
with copies to: Ms. Sharon Schiller, Trademarks Counsel
White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111 Facsimile: 216-252-8158
and Mr. Allan R. Feldman
Leveraged Marketing Corporation of America
156 West 56th Street, Suite 1400
New York, New York 10019
Facsimile: 212-581-1461
and shall be deemed to have been given upon receipt.
<PAGE>
IN WITNESS WHEREOF, this Agreement is
executed on the day and year first written above.
White Consolidated Industries, Inc. (Licensor)
/s/ Daniel R. Elliott
- ---------------------
By: Daniel R. Elliott
Senior Vice President,
General Counsel
New M-Tech Corporation (Licensee)
/s/ Leonor Schuck
- -------------------
By: Leonor Schuck
Vice President, Finance
<PAGE>
EXHIBIT A
Portable consumer microwave ovens
EXHIBIT 10.7
PURCHASE AND DISTRIBUTION AGREEMENT
This Agreement ("Agreement") is entered into as of January 06, 1997 (the
"Execution Date") by and between New M-Tech Corporation, a Florida Corporation
("NewTech") and AAAA World Import Export, Inc. a Florida Corporation ("AAAA").
WHEREAS, pursuant to a License Agreement by and between Maytag Corporation
("Maytag") and NewTech (the "License Agreement"), NewTech has the exclusive
right and license within the countries listed in Schedule 1.1 hereto (the
"Territory") to use the trademark "Admiral" and all associated designs and trade
dress (together the "Trademark") in connection with the design, manufacture,
advertising, sale and promotion of, among others, the products listed on
Schedule 1.2 hereto, each of which will bear and include the Trademark (such
products bearing the Trademark are hereinafter referred to as the "Products").
WHEREAS, NewTech desires to grant AAAA certain exclusive rights and obligations
to purchase, distribute, sell, market and promote the Products in the Territory
and AAAA desires to accept and exercise these rights and obligations, upon the
terms and subject to the conditions of this Agreement.
Accordingly, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledge, the
parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
1.1 "Contract Year" shall mean each consecutive calendar year beginning January
1 and ending on December 31.
1.2 "Territory" shall mean the countries specified in Schedule 1:1 to this
Agreement and by this reference made a part hereof. "Territory" shall also
include any other geographic territory as may be agreed to in writing by NewTech
from time to time in NewTech's sole discretion.
1.3 "Distributor" shall mean any entity engaged in the sale, promotion and
distribution of consumer electronic products in the covered Territory.
<PAGE>
2. APPOINTMENT
2.l Subject to the provisions of this Agreement, NewTech hereby appoints AAAA as
the sole and exclusive Distributor to purchase, distribute, sell, market and
promote the Products in the Territory and AAAA accepts such appointment. The
rights granted to AAAA under this Agreement shall hereinafter collectively be
referred to as the "Rights". No other Distributor shall have any such Right
during the Term of this Agreement.
2.2 The parties acknowledge and agree that the relationship hereby established
between AAAA and NewTech is solely that of buyer and seller of goods, that each
is an independent contractor engaged in the operation of its own respective
business, that neither party shall be considered to be an agent of the other
party for any purpose whatsoever, except as otherwise expressly indicated in
this Agreement, neither party has any authority to enter into any contract,
assume any obligations or make any warranties or representations on behalf of
the other party. Nothing in this Agreement shall be deemed in any way to
constitute a sublicense by NewTech of its rights under the License Agreement,
and the relationship between the parties hereto shall at all times be as set
forth in this paragraph.
3. REPRESENTATIONS AND WARRANTIES OF NEWTECH
3.l NewTech represents and warrants to AAAA as follows:
3.1.1 It is duly organized and validly existing under the laws of the State
of Florida, has all requisite power and authority to conduct its business
as now, and as proposed to be, conducted and to exercise, deliver and
perform its obligations under this Agreement. This Agreement has been duly
authorized and delivered by NewTech and represents a valid and binding
obligation enforceable against NewTech in accordance with its terms.
3.1.2 Execution and delivery hereof, or performance by NewTech hereunder,
shall not (a) violate or create a default under (i) NewTech's Articles of
Incorporation or by-laws, (ii) any mortgage, indenture, agreement, note or
other instrument to which it is a party or to which its assets are subject
including, without limitation, the License Agreement or (iii) any court
order or decree or other governmental directive or (b) result in the action
of any lien, charge or encumbrance on any material portion of NewTech's
assets, except as contemplated hereby.
<PAGE>
3.1.3 It has the contractual right and authority to use the Trademark for
the Products as provided in this Agreement and to grant to AAAA all rights
which are set forth in this Agreement including but not limited to the
"RIGHT" described in section 2.1 herein. Furthermore, this Agreement as
well as NewTech's performance hereunder shall be in compliance with all
applicable laws, rules and regulations.
4. REPRESENTATIONS AND WARRANTIES OF AAAA
4.1 AAAA represents and warrants to NewTech as follows:
4.1.1 It is duly organized and validly existing under the laws of the State
of Florida, has all requisite power and authority to conduct its business
as now, and as proposed to be, conducted and to exercise, deliver and
perform its obligations under this Agreement. This Agreement has been duly
authorized and delivered by AAAA and represents a valid and binding
obligation enforceable against AAAA in accordance with its terms.
4.1.2 Execution and delivery hereof, or performance by AAAA hereunder,
shall not (a) violate or create a default under (i) AAAA,s Articles of
Incorporation or by-laws, (ii) any mortgage, indenture, agreement, note or
other instrument to which it is a party or to which its assets are subject
or (iii) any court order or decree or other governmental directive or (b)
result in the action of any lien, charge or encumbrance on any material
portion of AAAA's assets, except as contemplated hereby.
4.1.3 This Agreement as well as AAAA's performance hereunder shall be in
compliance with all applicable laws, rules and regulations.
5. MINIMUM ORDERS; OTHER OBLIGATIONS
5.1 During the term of this Agreement AAAA agrees to purchase from NewTech the
following minimum amounts:
CONTRACT YEAR ENDING MINIMUM PURCHASE AMOUNT
-------------------- -----------------------
December 31, 1997 $12,500,000
December 31, 1998 12,500,000
December 31, 1999 16,250,000
December 31, 2000 16,250,000
December 31, 2001 16,250,000
December 31, 2002 16,250,000
December 31, 2003 16,250,000
<PAGE>
Specific Purchase Orders shall be issued by AAAA from time to time for the
products being purchased. The Specific Purchase Orders should be issued at
prices negotiated by AAAA and NewTech and issued at least ninety (90) days prior
to the required delivery date and the minimum order quantity for any particular
item should be the maximum capacity of a 40' container. NewTech shall use its
best effort to fill all Specific Purchase Orders placed by AAAA. For purposes of
this Agreement, in the event that AAAA issues a Specific Purchase Order which is
accepted by NewTech and NewTech fails through no fault of AAAA to timely deliver
conforming products to AAAA, then the Minimum Purchase Amount shall be reduced
by the dollar amount set forth in the Specific Purchase Order(s) related
thereto.
5.2 In the event that AAAA fails to purchase the Minimum Product Orders
specified in Section 5.1 above, the AAAA shall be required to pay NewTech within
thirty (30) days following the end of such period, as NewTech's sole and
exclusive remedy hereunder and upon receipt of an invoice from NewTech therefor,
an amount equal to (i) (A) the Minimum Purchase Amount for such Period less (b)
the Actual Purchases during that period multiplied by (ii) two percent (2%).
5.3 AAAA shall have the sole discretion in setting the sales price for the sale
of the Products to its customers.
6. DELIVERY
6.1 Products shall be shipped in accordance with the Specific Purchase Orders.
NewTech shall use its reasonable best effort to make available to AAAA
sufficient quantities of the Products to satisfy AAAA's Product Orders.
6.2 To assist NewTech in production scheduling for the manufacture of the
Products, AAAA shall provide to NewTech, monthly, a six month rolling forecast
of its requirements for Products. The first forecast shall be provided by AAAA
to NewTech within thirty (30) business days of the Execution Date of this
Agreement (to forecast the requirements for the six months ended June 30, 1997)
and thereafter shall be provided to NewTech on or before the 20th day of each
month (to forecast the requirements of the next six succeeding months). It is
understood and agreed that all forecasts are estimates only and AAAA shall only
be bound to purchase the products pursuant to Specific Purchase Orders issued by
it to NewTech, subject to the satisfaction of the Minimum Product Order
commitment set forth in Section 5.1 hereof; and the Fee on any shortfall in the
Minimum Product Order.
6.3 The shipping arrangements, insurance and risk of loss relating to Products
purchased hereunder shall be specified in each Specific Purchase Order.
<PAGE>
7. PRICE AND PAYMENT TERMS
7.1 Payment for al1 Products purchased hereunder shall be made by wire transfer
within ten (10) business days following the shipment of goods from the Orient as
evidenced by a copy of the invoice and bills of lading which will be fax by
NewTech to AAAA. Once payment has been received NewTech will send original
invoice and bills of lading to AAAA's Miami office.
7.2 AAAA shall open, within ten (10) days of the Execution Date, a transferable
and assignable stand-by irrevocable letter of credit in the sum of $2,000,000 in
favor of NewTech from a financial institution reasonably acceptable to NewTech
"Letter of Credit") which can only be drawn upon for AAAA's failure to pay for
shipments of products as described in Section 7.1 above. NewTech shall have as
its sole and exclusive remedy for AAAA's failure to pay for such Products the
right to draw on the Letter of Credit at any time and from time to time provided
that the following procedures are followed by NewTech and all of the following
conditions are met: (i) AAAA has failed to pay for such products as provided
herein and (ii) NewTech has submitted a statement signed by the Chief Financial
Officer of NewTech stating as follows: "NewTech has timely delivered products to
AAAA, AAAA has taken deliveries of such products and NewTech has invoiced AAAA
therefor. AAAA owes NewTech $______ pursuant to invoices [invoices numbers to be
inserted]. AAAA has failed to pay the amounts owing or provide proof that the
amount is not owing." AAAA's failure to pay any amounts due to NewTech will not
relieve it in any way from its obligations under this Agreement including its
obligation to buy the Minimum Purchase Amounts indicated in Section 5 hereof.
The Letter of Credit shall be in form and substance reasonable satisfactory to
NewTech and shall extend through December 31, 1997. Thereafter, through the term
of this Agreement, the Letter of Credit shall be extended for an additional one
year period and the notice of extension shall be received by Newtech at least
thirty (30) days prior to the expiration of the existing Letter of Credit.
7.3 Prices charged to AAAA and payments made by AAAA to NewTech for the Products
shall be in U.S. dollars.
<PAGE>
8. TERM AND TERMINATION
8.1 The basic term of this Agreement shall be for a seven year period commencing
on January 13, 1997 and terminating on December 31, 2003.
This Agreement shall be subject to renewal for:
(i) an additional term of five (5) years starting January 1, 2004 and
ending on December 31, 2008 provided the average purchases for the
fifth (5th) and sixth (6th) contract years exceeds $50 million and
AAAA provides written notice to NewTech of its intent to renew the
Agreement on or before May 31, 2003; and
(ii) a second additional term of five (5) years starting January 1, 2009
and ending on December 3l, 2013 provided the average purchases for the
tenth (lOth) and eleventh (llth) contract years exceeds $100 million
and AAAA provides written notice to NewTech of its intent to renew the
Agreement on or before May 31, 2008.
At the end of the basic term or the renewal terms, if renewed, this Agreement
shall expire automatically without notice.
8.2 On or after January 1, 2000, AAAA shall have the right to terminate this
Agreement without cause by providing written notice to NewTech of its decision
to terminate this Agreement at least 12 months prior to the termination date.
Example: In order for AAAA to terminate this Agreement on March 31, 2001,
written notice shall be given to NewTech on or before March 31, 2000.
9. CONFIDENTIALITY
Each of AAAA and NewTech agrees to keep the Product Orders, pricing and Terms of
this Agreement strictly confidential, except that each AAAA and NewTech shall be
permitted to disclose any and all information concerning the transactions
contemplated hereby to the extend it is legally required to do so.
10. GENERAL TERMS AND CONDITIONS
10.1 Any notice required or permitted to be given under this Agreement shall be
sufficiently given if in writing and delivered by register or certified mail
(return receipt requested), facsimile (with confirmation of transmittal),
overnight courier (with confirmation of delivery), or hand delivered to the
appropriate party at the address set forth below, or at such other address as
such party may form time to time specify for that purpose in a notice similarly
given:
<PAGE>
If to NewTech: New M-Tech Corporation
16550 NW 10th Avenue
Miami, FL 33169
Att: Joel Newman
Fax: (305) 624-8901
If to AAAA: AAAA World Import Export, Inc.
11400 NW 32nd Avenue
Miami, FL 33167
Att: Orlando Garcia
Fax: (305) 681-6000
10.2 This Agreement shall be deemed to have been executed and delivered in
Miami, Florida and shall be construed, interpreted and enforced under and in
accordance with the internal laws of the State of Florida.
10.3 This Agreement shall be binding upon the parties hereto, and their
respective successors and permitted assigns, whether by operation of law or
otherwise.
10.4 This Agreement contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all
negotiations, prior discussions and agreements relating to the subject of this
Agreement. This Agreement may not be amended or modified except in writing by a
written instrument signed by all of the parties hereto.
10.5 The headings of this Agreement have been inserted for convenience only and
shall not affect the meaning of the language contained in this Agreement.
10.6 The waiver by any party of any breach by another party of any term or
condition of this Agreement shall not constitute a waiver of any subsequent
breach or nullify the effectiveness of that term or condition.
10.7 This Agreement may be executed in identical duplicate copies exchanged by
facsimile transmission. The parties agree to execute two identical original
copies of the Agreement after exchanging signed facsimile versions. Each
identical counterpart shall be deemed an original, but all of which together
shall constitute one and the same instrument.
10.8 If for any reason whatsoever, any term, covenant or condition of this
Agreement or the application thereof to any party or circumstance is to any
extend held or rendered invalid, unenforceable or illegal, that such term,
covenant or condition will be deemed to be independent of the remainder of such
document and to be severable and divisible therefrom and its validity,
unenforceability or illegality will not effect, impair or invalidate the
remainder of such document or any part thereof.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
Execution Date.
NEW M-TECH CORPORATION AAAA WORLD IMPORT EXPORT, INC.
By: /s/ JOE NEWMAN By: /s/ ANIL PATEL
------------------------ ----------------------
Name: Joe Newman Name: Ani1 Patel
Title: President Title: Vice President
<PAGE>
SCHEDULE 1.1
TO
PURCHASE AND DISTRIBUTION AGREEMENT
TERRITORY
- ---------
Argentina
Aruba
Bahamas
Barbados
Belize
Bermuda
Bolivia
Brazil
Chile
Costa Rica
Dominican Republic
El Salvador
French Guiana
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Netherlands Antilles
Nicaragua
Panama
Paraguay
Peru
Puerto Rico
Surinam
Trinidad & Tobago
Uruguay
Venezuela
<PAGE>
SCHEDULE 1.2
TO
PURCHASE AND DISTRIBUTION AGREEMENT
PRODUCTS
Televisions - color, black and white, projection
Radios - portable, clock
Video Cassette/Disc Recorders
Camcorders
Tape Recorders/Cassette Recorders
Audio Equipment - amplifiers, receivers, speakers, tuners, turntables,
headphones, compact disc players
Portable/Compact audio equipment
EXHIBIT 10.8
PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
by and between
NEW M-TECH CORPORATION
and
KMART CORPORATION
------------------------
January 27, 1997
------------------------
1
<PAGE>
PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
This Agreement ("AGREEMENT") is entered into as of January 27, 1997 (the
"EXECUTION DATE") between New M-Tech Corporation, a Florida corporation
("NEWTECH"), and Kmart Corporation, a Michigan corporation ("KMART").
PREAMBLE
WHEREAS, pursuant to License Agreements by and between White
Consolidated Industries, Inc. ("WCI") and NewTech (the "LICENSE AGREEMENTS"),
NewTech has the exclusive right and license within the United States to use the
trademark "WHITE-WESTINGHOUSE" and all associated designs and trade dress
(together, the "TRADEMARK") in connection with the design, manufacture,
advertising, sale and promotion of, among others, the products listed on EXHIBIT
A hereto, each of which will bear and include the Trademark (such products
bearing the Trademark are hereinafter referred to as the "PRODUCTS");
WHEREAS, Kmart is a leading discount retailer of various consumer and
other products, including products similar to the Products; and
WHEREAS, NewTech desires to grant to Kmart certain exclusive rights and
obligations to purchase, distribute, sell, market and promote the Products in
the United States, and Kmart desires to accept and exercise these rights and
obligations, upon the terms and subject to the conditions of this Agreement.
WHEREAS, simultaneously with the execution of this Agreement, Kmart is
executing an agreement with Salton/Maxim Housewares, Inc., an Affiliate of
NewTech, as defined in Section 1.1, below (the "Salton Agreement"), for the use
of the Trademark on Kitchen Housewares, Personal Care products, fans and heaters
and electric air cleaners and humidifiers, as specifically described therein,
which agreement is critical to Kmart's overall program for use of the Trademark
on Products under this Agreement with NewTech, is a primary inducement for
Kmart's entering into, and is a continuing necessary component of and
precondition to Kmart's performance under this Agreement with NewTech.
Accordingly, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning given
to them below:
1.1 "AFFILIATE" means any Person involved in a situation where, directly or
indirectly, one Person controls, or has the power to control, the other
Person or a third party controls, or has the power to control, both
Persons.
1.2 "DISCOUNT DEPARTMENT STORE" shall include, without limitation, the
Persons listed on Schedule 1.2 hereof as well as all department stores
which are similar to Discount Department Stores in terms of market
niche, size and product pricing which now or hereafter may exist.
1.3 "PERSON" shall include any individual, corporation, partnership,
association, cooperative, joint venture, or any other form of business
entity recognized under the law.
1
<PAGE>
1.4 "SALE" shall mean any action involving selling.
1.5 "SELL" shall mean to, directly or indirectly, sell, distribute, supply,
solicit or accept orders for, negotiate for the sale or distribution of,
or take any other action that is in furtherance of, any of the
foregoing. "SELL" also include any other forms of that verb, whether
active or passive, or in the past, present, or future tense.
1.6 "UNITED STATES" shall mean the United States of America, including
Puerto Rico and Guam.
2. APPOINTMENT
2.1 APPOINTMENT BY NEWTECH; ACCEPTANCE BY KMART. Subject to the provisions
of this Agreement, NewTech hereby appoints Kmart as the sole and
exclusive Discount Department Store to purchase, distribute, sell,
market and promote the Products in the United States and Kmart hereby
accepts such appointment. The rights granted to Kmart under this
Agreement shall hereinafter collectively be referred to as the "RIGHT."
No other Discount Department Store shall have any such Right during the
Term of this Agreement and/or any extension or renewal thereof,
regardless of source (I.E. whether from NewTech or any other entity)
subject to Sections 10.4 and 10.5 hereof. Notwithstanding the foregoing,
nothing in this Agreement shall be deemed to preclude the sale of
Products (i) by entities or stores other than Discount Department Stores
including, without limitation, retail department stores, specialty
housewares, gourmet and kitchen stores and national cable television
programs or (ii) by any Person outside the United States. Furthermore,
nothing in this Agreement shall preclude Kmart from purchasing products
of the type listed on EXHIBIT A hereto from any sources other than
NewTech if such products do not bear or include or are not sold under
the Trademark, and no payments shall be due to NewTech hereunder in
respect of such sales.
2.2 TERRITORIAL LIMITATIONS. NewTech covenants and agrees that, during the
term of this Agreement or until this Agreement is terminated in
accordance with the provisions of Article 10 below:
2.2.1 NewTech shall not, directly or indirectly, sell any Product to a
Discount Department Store in the United States, subject to
Sections 10.4 and 10.5 hereof.
2.2.2 Except with the prior written consent of NewTech (which consent
may be refused in the sole, absolute and arbitrary discretion of
NewTech), Kmart shall not sell any Product to any Person outside
the United States. The United States includes Puerto Rico and
Guam.
2.2.3 The parties acknowledge and agree that the relationship hereby
established between Kmart and NewTech is solely that of buyer and
seller of goods that each is an independent contractor engaged in
the operation of its own respective business, that neither party
shall be considered to be the agent of the other party for any
purpose whatsoever, except as otherwise expressly indicated in
this Agreement, and that, except as otherwise expressly indicated
in this Agreement, neither party has any authority to enter into
any contract, assume any obligations or make any warranties or
representations on behalf of the other party. Nothing in this
Agreement shall be construed to establish a partnership or joint
venture relationship between NewTech and Kmart. Nothing in this
Agreement shall be deemed in any way to constitute a sublicense
by NewTech of its rights under the
2
<PAGE>
License Agreement, and the relationship between the parties
hereto shall at all times be as set forth in this paragraph.
3. REPRESENTATIONS AND WARRANTIES OF NEWTECH
3.1 NewTech represents and warrants to Kmart as follows:
3.1.1 ORGANIZATION, POWER AND AUTHORITY. It is duly organized and
validly existing under the laws of the State of Florida, has all
requisite power and authority to conduct its business as now, and
as proposed to be, conducted and to execute, deliver and perform
its obligations under this Agreement. This Agreement has been
duly authorized, executed and delivered by NewTech and represents
a valid and binding obligation enforceable against NewTech in
accordance with its terms.
3.1.2 NO CONFLICTS; CONSENTS. Execution and delivery hereof, or
performance by NewTech hereunder, shall not (a) violate or create
a default under (1) NewTech's Certificate of Incorporation or
by-laws (true and correct copies of which have been delivered to
Kmart), (ii) any mortgage, indenture, agreement, note or other
instrument to which it is a party or to which its assets are
subject including, without limitation, the License Agreement or
(iii) any court order or decree or other governmental directive
or (b) result in the action of any lien, charge or encumbrance on
any material portion of NewTech's assets, except as contemplated
hereby.
3.1.3 BROKERS. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of NewTech.
3.1.4 TRADEMARK/COMPLIANCE WITH LAWS. It has the contractual right and
authority to use the Trademark for all of the Products as
provided in this Agreement and to grant to Kmart all rights which
are set forth in this Agreement including but not limited to the
"RIGHT" described in Section 2.1 herein, and also, including but
not limited to, the right to import all Products into the United
States for the full duration of this Agreement; and NewTech shall
provide U.S. Customs with sufficient proof and documentation to
enable Kmart to do so. (Notwithstanding the foregoing, NewTech
shall have up to ten (10) business days to correct any such U.S.
Customs Problems which do not affect Kmart's ability to use the
Trademark in connection with the sale of any of the Products
pursuant to this Agreement.) In addition, no other Discount
Department Store shall have the right to use the Trademark in
connection with the sale of Products or sell Products bearing the
Trademark or have any of Kmart's rights hereunder during the Term
of this Agreement and any renewal and/or extension hereof.
Furthermore, this Agreement as well as NewTech's performance
hereunder shall be in compliance with all applicable laws, rules
and regulations other than immaterial violations. Any claim which
Kmart reasonably believes impairs or would impair Kmart's ability
to receive the benefits of this Agreement, or any failure under
this Agreement and/or under the Salton Agreement with respect to
this (or the Salton Agreement's) Section 3.1.4 and/or Section
2.1, whether such failure relates to any Of all Products, shall
entitle Kmart, in addition to all other rights and remedies,
without resort to the notice and cure requirements under Section
10.3 herein, to immediately terminate this Agreement and owe
nothing
3
<PAGE>
to NewTech except for payment for Products accepted and sold by
Kmart through the date of termination.
3.1.5 QUALIFICATIONS. Throughout the Term of this Agreement and any
renewal or extension hereof, NewTech shall comply with the
following requirements:
a. New Vendor Packet Compliance. NewTech must have executed and
delivered to Kmart all documents required by Kmart's New
Vendor Packet, including, but not limited to, Kmart's
agreement on standard purchase order terms and conditions
attached as Exhibit B (collectively, the "RELATED DOCUMENTS")
and must currently be in full compliance with the same except
as required by this Agreement. NewTech's execution of this
Agreement shall constitute NewTech's acceptance of and
agreement to the terms and conditions contained in all of the
Related Documents to the extent not inconsistent with the
terms of this Agreement.
b. Kmart Corporation Code of Business Conduct. NewTech must be
in full compliance with the Kmart Code of Business Conduct
and all applicable laws, rules and regulations, including but
not limited to child, forced, and prison labor laws and must
not have violated the Code of Business Conduct or applicable
laws during the twelve calendar months preceding the date of
execution of this Agreement.
c. Continuing Business Conduct with Kmart Foreign Subsidiaries
and Operations. NewTech must not restrict or curtail in any
way its historical business practices and course of dealing
with Kmart's foreign subsidiaries and other foreign
operations if any existed.
d. Industry Performance. NewTech must at a minimum meet normal
industry standards for performance regarding timing and
completion levels of fill rates without substitutions.
e. Electronic Data Interchange. NewTech must accommodate and
participate in Kmart's electronic data interchange program.
4. REPRESENTATIONS AND WARRANTIES OF KMART
4.1 Kmart represents and warrants to NewTech as follows:
4.1.1 ORGANIZATION, POWER AND AUTHORITY. It is duly organized and
validly existing under the laws of the State of Michigan, has all
requisite power and authority to conduct its business as now, and
as proposed to be, conducted and to execute, deliver and perform
its obligations under this Agreement. This Agreement has been
duly authorized, executed and delivered by Kmart and represents a
valid and binding obligation enforceable against Kmart in
accordance with its terms.
4.1.2 NO CONFLICTS; CONSENTS. Execution and delivery hereof, or
performance by Kmart hereunder, shall not (a) violate or create a
default under (i) Kmart's Certificate of Incorporation or by-laws
(true and correct copies of which have been delivered to
NewTech), (ii) any mortgage, indenture, agreement, note or other
instrument to which it is a party or to which its assets are
subject or (iii) any
4
<PAGE>
court order or decree or other governmental directive or (b)
result in the action of any lien, charge or encumbrance on any
material portion of Kmart's assets.
4.1.3 BROKERS. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the
transactions contemplated by this Agreementbased upon
arrangements made by or on behalf of Kmart.
5. MINIMUM ORDERS; OTHER OBLIGATIONS
5.1 MINIMUM PRODUCT ORDERS/SALES AND EXCLUSIVE REMEDY. Subject to Section
5.2 hereof, during the Term of this Agreement, Kmart agrees to place
orders for a minimum U.S. dollar amount of Products within each category
specified below (each, a "CATEGORY") from NewTech [*****](the "MINIMUM
PRODUCT ORDERS") at the purchase prices determined in accordance with
Sections 7.1.1 and 7.1.2 hereof during the periods (each, a "PERIOD,"
and together, the "PERIODS") in each case as specified below ($ in
millions). All Products ordered prior to the date of this Agreement
shall be credited against the Minimum Product Orders for the initial
Period of this Agreement.
<TABLE>
<CAPTION>
UP TO AND
CATEGORY INCLUDING 7/1/98- 7/1/99- 7/1/00- 7/1/01- 7/1/02- 7/1/03-
(IN MILLIONS) 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 6/30/03 6/30/04
- ------------ --------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
VIDEO: $ 55.0 $ 57.2 $ 59.5 $ 61.9 $ 64.3 $ 66.9 $ 69.6
AUDIO: 60.0 62.4 64.9 67.5 70.2 73.0 75.9
TELEPHONES
AND TELEPHONE
ANSWERING
MACHINES: $ 20.0 $ 20.8 $ 21.6 $ 22.5 $ 23.4 $ 24.3 $ 25.3
------ ------ ------ ------ ------ ------ ------
TOTAL $135.0 $140.4 $146.0 $151.9 $157.9 $164.2 $170.8
====== ====== ====== ====== ====== ====== ======
</TABLE>
Specific purchase orders shall be issued by Kmart from time to time for
the Products being purchased "Specific Purchase Orders"). The Specific
Purchase Orders shall be in the form and substance of the form of
purchase order annexed hereto as Exhibit C for domestic orders and
Exhibit D for import orders, both of which are incorporated herein by
this reference ("PURCHASE ORDER FORMS") and shall govern and control the
terms of each purchase by Kmart of Products hereunder; provided, that in
the event of a conflict between the terms set forth in a Specific
Purchase Order and in this Agreement, the terms set forth in this
Agreement shall be determinative of such conflict. Each Specific
Purchase Order may be accepted or rejected by NewTech, provided that: ~
NewTech's failure to provide Kmart with written notice of rejection of
any Specific Purchase Order within five (5) days of Kmart's issuance
thereof shall constitute NewTech's acceptance of such Specific Purchase
Order; and (ii) NewTech is required to accept all Specific Purchase
Orders for which [*****] and all such Orders shall automatically qualify
as accepted by NewTech; and (iii) NewTech is required to accept all
Specific Purchase Orders which NewTech is to fill [*****] ("DIRECT
NEWTECH ORDERS"), provided (a) they are issued at prices negotiated by
Kmart and NewTech or; (b) are consistent with prices quoted by NewTech
to Kmart; and (c) are issued within ninety (90) days of the required
delivery date and; (d) are in an order quantity which is not
inconsistent with the average order quantity on Specific Purchase Orders
issued by Kmart to NewTech [*****]
5
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
over the preceding one hundred twenty (120) days, and all such Orders
placed shall automatically qualify as accepted by NewTech. Notwithstanding
the foregoing, NewTech shall use its best efforts to fill all Specific
Purchase Orders placed by Kmart in less than ninety (90) days from the
required delivery date. For purposes of this Agreement, in the event that
Kmart issues a Specific Purchase Order which is accepted by NewTech as set
forth above and NewTech [*****] fails through no fault of Kmart to timely
deliver conforming Products to or on behalf of Kmart by the required
delivery date specified therein, or if for any reason, but through no fault
of Kmart, NewTech is unable to procure Products from a Third Party
Manufacturer of Kmart's choosing, then (provided such Third Party
Manufacturer is a reputable company or one with which Kmart has done
business in the past), the Minimum Product Orders in the applicable
Category shall be reduced by the dollar amount set forth in the Specific
Purchase Order(s) related thereto, whether or not such Products are
ultimately purchased by Kmart. Kmart's deductions for documented claims
whether under the Specific Purchase Orders or otherwise, shall not reduce
Kmart's fulfillment of the Minimum Product Orders, and for purposes of
determining if Kmart has issued the Minimum Product Orders, Kmart shall be
deemed to have purchased all Products covered by a remittance regardless of
offsets/deductions for claims. If, however, Kmart issues a Specific
Purchaser Order which is accepted by NewTech as set forth above and NewTech
[*****] timely delivers conforming Products to or on behalf of Kmart by the
required delivery date specified therein, and Kmart fails to remit payment
for such conforming Products so delivered, then such Products shall not be
counted for purposes of determining if Kmart has issued the Minimum Product
Orders, unless and until such Products are ultimately paid for by Kmart.
Notwithstanding the foregoing, Kmart shall not be relieved of any
obligation to pay for conforming Products timely delivered to or on behalf
of Kmart in accordance with any Specific Purchase Order.
Subject to Sections 5.1 above and 5.2 below, in the event that Kmart
fails to place the Minimum Product Orders in any of the Categories
specified above within any of the periods specified above, then Kmart
shall be required to pay NewTech within thirty (30) days following the
end of any such period, as NewTech's sole and exclusive remedy hereunder
and upon receipt of an invoice from NewTech therefor, an amount equal to
(i) (A) the Minimum Product Orders in such Category less (B) the Actual
Order Amount in such Category multiplied by (ii) four percent (4%) in
the Video Category and five percent (5%) in all other Categories (the
"FEE(S)"). The "ACTUAL ORDER AMOUNT" for purposes of this Section 5.1
shall mean, subject to Section 5.1 above and Section 5.2 below, the
positive amount, if any, obtained by adding (i) the actual amount of
Products ordered by Kmart in the applicable Category during the
applicable Period (adjusted upwards pursuant to Section 5.1 above and
5.2 below) and (ii) the excess, if any, of (A) the actual amount of
Products ordered by Kmart in the applicable Category during the Period
(adjusted upwards pursuant to Section 5.1 above and 5.2 below)
immediately prior to the applicable Period (the "PRIOR PERIOD") less (B)
the Minimum Product Orders in the applicable Category for the Prior
Period. In no event, however, shall NewTech's Fees (for both ordered and
unordered Products) ever exceed the amount NewTech would have received
in any Category under Section 5.1 herein if Kmart had met all Minimum
Product Order commitments stated therein, and NewTech shall reconcile
and refund all Fees received in excess thereof subject to Section 7.1.2
hereof. For example, assuming all Specific Purchase Orders are performed
by Kmart and NewTech in accordance with their respective terms, if
during the Period from the execution date of this Agreement through June
30, 1998, Kmart's Product Orders in the Video Category are equal to an
aggregate of $60.0 million and if during the period from July 1, 1998
through June 30, 1999, Kmart's Product Orders in the Video Category are
equal to an aggregate of $50.0 million, then Kmart shall pay NewTech an
amount equal to $88,000 on or before July 30, 1999 ([$57.2 million -
$50.0 million] - [$60.0 million - $55.0 million]) x (.04). Kmart shall
6
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
not have the right to offset the amount of Product orders in a
particular Category against Product Orders in any other Category.
5.2 REDUCTION OF MINIMUM PRODUCT ORDERS. In the event that during any Period
aggregate retail sales of Products in the United States for a particular
Category have decreased from the Prior Period (the amount of such
reduction of sales in the United States of Products in any particular
Category is hereinafter expressed as a percentage, and the amount by
which such percentage exceeds 10% is hereinafter referred to as the
"REDUCTION PERCENTAGE"), then the Minimum Product Orders for that
Category for the Period following the Prior Period (the "ADJUSTMENT
PERIOD" shall be reduced. This reduction shall be in an amount (the
"REDUCTION AMOUNT") equal to (i) the higher of (A) the Minimum Product
Order commitment for the applicable Category for the Adjustment Period
or (B) the actual Product Orders by Kmart of the Products in the
applicable Category during the Prior Period (the "ACTUAL PRIOR PERIOD
ORDERS") multiplied by (ii) the Reduction Percentage. The Reduction
Amount will then be subtracted from the higher of (i) the Minimum
Product Order commitment for the applicable Category for the Adjustment
Period or (ii) the Actual Prior Period Orders, to determine the new
Minimum Product Order commitment for the applicable Category for the
Adjustment Period; PROVIDED, HOWEVER, that if this computation yields an
amount greater than the Minimum Product Order commitment for such
Period, then no adjustment shall be made. In addition, an adjustment may
only be made to the extent that it would not reduce the Minimum Product
Order commitment for the Adjustment Period below 80% of the amount
specified for such Period for the applicable Category under Section 5.1.
All computations will be based on prices that do not include any
internal Kmart charges. By way of example only, if sales of products in
the Video Category in the United States decrease by 30% during the
Period from July 1, 1999 to June 30, 2000 and Kmart orders from NewTech
$87.5 million of Products in the Video Category during the Period from
July 1, 1999 to June 30, 2000, then Kmart may reduce the Minimum Product
Orders for Products in the Video Category for the Period from July 1,
2000 to June 30, 2001 from $61.9 million to $54.0 million ([30%-10%] x
$67.5=$13.5 million; $13.5 million subtracted from $67.5 million = $54.0
million; however, the Minimum Product Orders can never be reduced under
this Section 5.2 by more than 30% of $61.9 million (which equals $49.52
million). For purposes of this Section 5.2, Sales of Products in the
United States within a particular Category shall be determined by
reference to applicable information published in the most
widely-circulated trade publication containing such information;
PROVIDED, that if Kmart and NewTech are unable to agree upon the
publication from which such information is to be derived, then the
applicable information shall be derived by reference to a trade
publication selected by Kmart and a trade publication selected by
NewTech, and the applicable sales information shall be determined on the
basis of the average of the data contained in the two publications.
5.3 RETAIL SALES PRICE. Kmart shall have sole discretion in setting the
sales price for the sale of the Products to its customers.
6. DELIVERY
6.1 AVAILABILITY OF PRODUCTS. Products shall be shipped in accordance with
the Specific Purchase Orders. NewTech shall use its reasonable best
efforts to make available to Kmart sufficient quantities of the Products
to satisfy Kmart's Product Orders.
6.2 PRODUCT FORECASTS. To assist NewTech in production scheduling for the
manufacture of the Products, Kmart shall provide to NewTech, monthly, a
six month rolling forecast of its requirements for Products. The first
forecast shall be provided by Kmart to NewTech
7
<PAGE>
within thirty (30) business days of the Execution Date of this Agreement
(to forecast the requirements for the six months ended June 30, 1997 and
for the next five succeeding calendar months) and thereafter shall be
provided to NewTech on or before the 20th day of each month (to forecast
the requirements for the next six succeeding calendar months). It is
understood and agreed that all forecasts are estimates only and Kmart
shall only be bound to purchase the Products pursuant to Specific
Purchase Orders issued by it to NewTech, subject to the satisfaction of
the Minimum Product Order commitment set forth in Section 5.1 hereof;
and the Fee on any shortfall in the Minimum Product Order for any
Category and Kmart's payment for conforming Products ordered and timely
delivered through the date of Termination shall be NewTech's sole and
exclusive remedy hereunder.
6.3 SHIPPING ARRANGEMENTS; RISK OF LOSS. The shipping arrangements,
insurance and risk of loss relating to Products purchased hereunder
shall be specified in each Specific Purchase Order.
7. MANUFACTURE OF PRODUCTS; PRICE AND PAYMENT TERMS
7.1 MANUFACTURE OF PRODUCTS. All Products for which Specific Purchase Orders
have been issued (subject to Section 5.1 of this Agreement) may be
manufactured by or on behalf of NewTech [*****], NewTech acknowledges
and Kmart acknowledges (based upon NewTech's representation) that under
the License Agreement WCI has the right before the initial order of a
new Product within ten (10) days of submission by NewTech, to approve or
reject the Product specimen, related artwork and packaging, which
consent shall not be unreasonably withheld and shall be automatic unless
rejection is communicated in writing to Kmart within the ten (10) day
period. In each such case, NewTech shall be solely responsible for
making timely submission to WCI and timely written communication to
Kmart of any rejection; and Kmart shall have no liability, whatsoever,
for any claim or failure relating to or arising from this Section 7.1
7.1.1 DIRECT NEWTECH ORDERS. In the event that Kmart elects in its sole
and absolute discretion to procure the manufacture of Products
directly by or on behalf of NewTech, then Kmart shall enter into
an agreement with NewTech for such Products as Kmart desires to
purchase and NewTech is willing to manufacture pursuant to a
purchase order identical in all respects to the Purchase Order
Form annexed hereto as Exhibit C for domestic orders and Exhibit
D for import orders (the "DIRECT PURCHASE ORDER"). The price to
Kmart of Products under a Direct Purchase Order, and all other
terms and conditions not specified in this Agreement or in the
Purchase Order Form,, shall be determined by mutual agreement
acceptable to each of Kmart and NewTech in its sole discretion at
or prior to the time the applicable Direct Purchase Order is
issued by Kmart and accepted by NewTech.
7.1.2 ORDERS [*****] pursuant to a purchase order identical in all
respects to the Purchase ; Order Form annexed hereto as Exhibit C
for domestic orders and Exhibit D for
8
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
import orders (the "[*****] PURCHASE ORDER"). Kmart shall make
direct payments to the [*****] of the amounts owed under such
[*****] Purchase Order for conforming Products timely delivered
(the "[*****] PAYMENTS"). NewTech shall remain liable for the
[*****] Payments in the event Kmart fails to make such [*****]
Payments. Kmart shall indemnify and hold harmless NewTech and its
officers, directors, employees and agents from and against any
claim, liability or damages, including related costs and
attorneys' fees, of which it is timely advised in writing
resulting from the failure by Kmart to make [*****] Payments, or
otherwise perform, in accordance with the terms of the [*****]
Purchase Orders unless such failure is caused or construed to by
NewTech, Windmere or WCI. Kmart shall control the defense and
settlement of any claims for which such indemnify is provided.
Nothing in this Agreement shall be construed to limit or restrict
Kmart in any fashion from dealing directly with [*****]. NewTech
shall not be liable for the failure to perform, including
warranties, by any Third Party Manufacturer, unless and except to
the extent that such failure is caused or contributed to by
NewTech, Windmere or WCI.
7.1.3 PURCHASE ORDERS FROM KMART TO NEWTECH RELATING TO [*****]. Kmart
agrees that delivery [*****] of the Products in conformity with
the applicable [*****] Purchase Order shall be deemed, without
any further agreement or instrument, the agreement of Kmart to
purchase such Products from NewTech in the manner set forth in
Section 7.1.2 above and in this Section 7.1.3 on exactly the same
terms and conditions provided [*****] under the [*****] Purchase
Order issued by Kmart at a price equal to the sum of (i) the
[*****] Payment for such Products plus (ii) four percent (4%) in
the Video Category and five percent (5%) in all other Categories
of the "first cost" of such [*****] Payment (the "first cost"
being the price up to the f.o.b. point of shipment, net of any
taxes, freight costs, customs fees, duties, etc.). (The amounts
set forth in (i) and (ii) are collectively referred to herein as
the "NEWTECH PAYMENT"). Upon delivery [*****] of the conforming
Products identified in the [*****] Purchase Order to Kmart,
together with the related invoice, Kmart shall at its sole and
exclusive option either (i) pay the NewTech Payment to NewTech
whereupon NewTech shall pay the [*****] Payment to [*****] or
(ii) pay the [*****] Payment directly to [*****] and remit the
difference between the NewTech Payment and the [*****] Payment
directly to NewTech. Kmart's exercise of either of the preceding
options shall extinguish any and all rights of NewTech to such
payments.
7.1.4 AGGREGATE SALES REPORTS. Within ten (10) days after the end of
each calendar month during the term of this Agreement, Kmart
shall provide NewTech with a written statement (the "KMART
STATEMENT") indicating, with respect to the preceding month, (i)
the aggregate dollar amount of all purchases of Products [*****]
under this Agreement and the quantity and types of Products so
purchased, (ii) the aggregate dollar amount of [*****] Payments
made directly to [*****] upon delivery of the Products, (iii) the
aggregate dollar amount of the NewTech Payments made directly to
NewTech upon delivery of conforming Products. NewTech shall have
the right, upon reasonable notice and at reasonable times, within
six (6) months following its receipt of the Kmart Statement to
review the books and records of Kmart with respect only to (i),
(ii) and (iii) above for the period covered by such Kmart
Statement, to confirm the accuracy of the payments made hereunder
provided that such right of review shall not be exercisable more
than once per year and provided further that if such review
reveals an underpayment of more than one
9
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
percent (1%) of the amount to which NewTech is entitled
hereunder, then NewTech may conduct such review twice per year.
The cost and expenses of such examination shall be paid solely by
NewTech; PROVIDED, that if such examination reveals an
underpayment to either NewTech of more than one percent (1%) of
the amount to which NewTech is entitled hereunder, then the
reasonable out of pocket costs and expenses of such examination
shall be paid by Kmart upon receipt of an invoice therefor with
support documentation attached. Notwithstanding the foregoing,
the first Aggregate Sales Report will not be issued until after
February 15, 1997.
7.1.5 EXAMINATION BY INDEPENDENT AUDITORS. The independent auditors
for each of NewTech and Windmere-Durable Holdings, Inc.
("Windmere") presently Ernst and Young and Grant Thornton L.L.P.,
shall have the right during the term of this Agreement at any
time that either NewTech or Windmere requires audited financial
statements (E.G. in connection with the preparation of their
respective annual reports, bank loans or certain acquisitions) to
review the books and records of Kmart, but in no event more than
twice per year. Any additional audits shall be conducted only
with Kmart's express prior written consent, which shall not be
unreasonably withheld, and shall be only for the purpose of
confirming the accuracy of, and relating only to, the financial
information required to be provided to NewTech hereunder as set
forth in Section 7.1.4 herein, including, all [*****] Purchase
Orders. All information obtained by such auditors in the course
of such review shall be maintained by such auditors as
confidential and shall not be disclosed to any party, including
Windmere and/or NewTech, without the express prior written
consent of Kmart. The cost and expenses of such examination shall
be paid solely by NewTech and/or Windmere, as the case may be;
PROVIDED, that if such examination reveals an underpayment of
more than one percent (1%) of the amount to which NewTech is
entitled hereunder, then the reasonable out of pocket costs and
expenses of such examination shall be paid by Kmart upon receipt
of an invoice therefor with support documentation attached.
7.1.6 ASSIGNMENT OF RIGHTS. In consideration of Kmart entering into
this Agreement and agreeing to pay [*****] directly subject to
and in accordance with the terms hereof, this Agreement shall
constitute the automatic assignment to Kmart of all rights of
NewTech against [*****] with respect to Products purchased from
[*****] pursuant to this Agreement, which rights may not be
enforced by NewTech. NewTech shall have no liability with respect
to any non-performance of [*****] unless NewTech, Windmere or WCI
causes or contributes to such non-performance. This Agreement
shall also constitute the automatic and irrevocable assignment of
the [*****] Payment portion of the NewTech Payment to [*****],
and such payment is not assignable to any other party, including
NewTech.
7.1.7 SOLE AND EXCLUSIVE REMEDY OF NEWTECH. NewTech's sole and
exclusive remedy relating to any [*****] Purchase Order or any
failure under this entire Section 7 shall be against Kmart for
its payment of the difference between the NewTech Payment and the
[*****] Payment or for enforcement of Kmart's indemnification
obligation under Section 7.1.2 hereunder. NewTech shall have no
right to enforce against Kmart, Kmart's payment of the [*****]
Payment portion of the NewTech Payment unless Kmart shall have
wrongfully failed to pay such amount to [*****] upon timely
delivery of conforming Products under a [*****] Purchase Order.
NewTech shall have no right to enforce
10
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
performance or seek any other remedy against [*****]
hereunder or under any [*****] Purchase Order.
7.1.8 INVOICING REQUIREMENTS/PAYMENT TERMS.
A. NewTech will follow the invoicing requirements provided by
Kmart from time to time.
B. Payment for all Direct NewTech Orders of Products f.o.b.
Asia ("IMPORT PRODUCTS") and purchased hereunder shall be as
follows: (i) Direct NewTech Orders shall be made by wire
transfer within five (5) business days following the receipt
of goods ("ROG") provided the International Department has
received (i) the original invoice, (ii) an original signed
bill of lading and (iii) the customary signed Kmart
inspection certificate for goods manufactured overseas.
C. Payment for all domestic DIRECT NEWTECH ORDERS PURCHASED
HEREUNDER shall be made by check issued within ten (10)
business days of receipt of goods ("ROG") provided Kmart has
received the applicable invoice.
D. Payment for all domestic and import [*****]
Orders purchased hereunder shall be made pursuant to Section
7.1.3 herein. If Kmart, in its sole and exclusive discretion
exercises the payment option set forth in (ii) under Section
7.1.3, NewTech shall invoice Kmart for the difference
between the NewTech Payment and the [*****] Payment after
NewTech receives each Aggregate Sales Report described in
Section 7.1.4 herein. NewTech shall prepare and submit 2
invoices covering each Aggregate Sales Report: one for
import orders and one for domestic orders. The invoices
shall be directed to:
FOR DOMESTIC ORDERS: FOR IMPORT ORDERS:
Bryan Atkinson Linda Peterson
Manager, Accounting Operations Director, International Administration
Kmart Corporation Kmart Corporation
3100 West Big Beaver Road 3100 West Big Beaver Road
Troy, Ml 48084 Troy, Ml 48084
Kmart shall pay all such invoices within ten (10) business days of
receipt.
7.1.9 STAND-BY LETTER OF CREDIT. Kmart shall open, within ten (10)
business days of the Execution Date, a transferable and
assignable stand-by irrevocable letter of credit in the sum of
$10,000,000 in favor of NewTech from a financial institution
reasonably acceptable to NewTech ("LETTER OF CREDIT") which can
only be drawn upon for Kmart's failure to pay for Direct NewTech
Orders of conforming Products which are timely shipped f.o.b.
Asia as further described in this Section and for no other reason
(including, but not limited to, any NewTech Payment) NewTech
shall have as its sole and exclusive remedy for Kmart's failure
to pay for such Products, notwithstanding Section 10.3 herein,
the right to draw on the Letter of Credit at any time and from
time to time provided all of the following procedures are
followed by NewTech and all of the following conditions are met:
(i) Kmart has failed to pay for such Products as provided herein
(ii) NewTech has provided Kmart with the required written notice
and opportunity to cure pursuant to Section 10.3 herein and has
submitted an affidavit signed by the Chief Financial Officer of
NewTech as follows: "NewTech has timely delivered conforming
Products f.o.b. Asia to Kmart, Kmart has taken deliveries of such
Products and NewTech has invoiced Kmart therefor. Kmart
Corporation owes NewTech $__________ pursuant to invoices
11
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. ASTERICKS DENOTE SUCH OMMISSIONS.
<PAGE>
[invoice numbers to be inserted] (iii) A copy of such invoices
and the corresponding inspection certificates indicating that the
Products have passed inspection and corresponding original bills
of lading duly signed by an authorized officer of Kmart are
annexed to the affidavit; (iv); Kmart has failed to pay the
amount owing when due after receipt of an invoice therefor and a
notice specifying such amount and describing the obligation
including respective purchase order number(s), (v). Kmart has
received such notice on __________, sixty (60) days have elapsed
(for individual obligations of up to $2 million) or thirty (30)
days have elapsed (for individual obligations of more than $2
million), and Kmart has failed to pay the amount owing or provide
proof that the amount is not owing.
NewTech shall provide Kmart with ten (10) days prior written
notice of its intent to submit such affidavit to draw on the
Letter of Credit and shall not be entitled to submit such
affidavit if Kmart can prove payment of the amount claimed owing
or that the goods were not conforming or timely delivered or
otherwise resolve the dispute within such ten (10) day period.
The Letter of Credit shall be in form and substance reasonably
satisfactory to NewTech and shall terminate on December 15, 1997.
7.1.10 CURRENCY EXCHANGE. Prices charged Kmart and payments made by
Kmart to NewTech for the Products shall be in U.S. dollars.
8. RETURNS, ALLOWANCES AND WARRANTIES
8.1 TERMS OF SPECIFIC PURCHASE ORDER TO CONTROL. The terms and conditions of
this Agreement, including the Purchase Order Forms, as well as the terms
and conditions set forth in each Specific Purchase Order shall determine
the rights and obligations of the parties with respect to returns,
allowances and warranties relating to Products ordered thereunder.
9. DAMAGES, INDEMNIFICATION AND INSURANCE
9.1 INDEMNIFICATION. To the fullest extent permitted by law, NewTech shall
reimburse, indemnify, defend and hold harmless, Kmart, its directors,
officers and employees and subsidiaries and affiliates and each of their
respective directors, officers and employees from and against any
damage, loss, expense or penalty, or any claim or action therefor, by or
on behalf of any person or entity, arising out of the performance or
failure of performance of this Agreement including but not limited, to
any claim or failure with respect to Sections 2 or 3 hereof.
NewTech shall reimburse, indemnify, defend and hold harmless Kmart, its
directors, officers and employees and subsidiaries and affiliates and
each of their respective directors, officers and employees from and
against all third-party claims alleging that any Products and or any
Right furnished under this Agreement infringe any patent, copyright,
trademark or other proprietary right or constitute a misuse of any trade
secret information and shall pay all costs, attoreys fees, settlement
payments and damages arising in connection with any such claims. Kmart
agrees to timely advise NewTech of any such suit, claim or proceeding,
and to extend reasonable cooperation to NewTech in the defense or
settlement of such suit, claim or proceeding, but NewTech shall have
sole control thereof. In the event that an injunction is obtained
against Kmart's use, purchase, distribution, sale, marketing and/or
promotion of any Products and/or any Right in whole or in part, NewTech
shall promptly, at its option either: (a) procure for Kmart the right to
continue using, purchasing, distributing, selling, marketing and/or
12
<PAGE>
promoting such Products enjoined from use, or (b) replace or modify the
same so that Kmart's use, sale or possession is not subject to any such
injunction, or (c) at Kmart's option refund to Kmart all amounts paid to
NewTech for such Products and such Right, including but not limited to
all NewTech Payments.
9.2 INSURANCE. NewTech shall, during the Term of this Agreement, maintain
the following insurance coverages as indicated or as required by law,
whichever shall be greater, with insurers in good standing and
authorized to do business under the laws of the State(s) where
performance hereunder shall occur
(a) Comprehensive General Liability, naming Kmart as an additional
insured including, but not limited to, Contractual Liability and
Products Liability, with broad form property damage and bodily
injury (including Personal Injury) coverage. The minimum limits 0
for each shall be $2,000,000 per occurrence.
(b) All insurance required in Exhibits B and C hereto, as well as that
required under each Purchase Order.
(c) Employee fidelity insurance. workers compensation insurance and
employer's liability insurance as required by all applicable
federal, state or other laws, rules or regulations.
Prior to execution of this Agreement, NewTech shall tender to Kmart
certificates of insurance evidencing the coverage required to be
maintained by NewTech hereunder. The certificates must provide that no
change or cancellation of insurance shall be made without thirty (30)
days prior written notice to Kmart.
9.3 SURVIVAL. The provisions of this Section 9 shall survive the
termination or expiration of this Agreement.
10. TERM AND TERMINATION
10.1 TERM. The Term of this Agreement shall be a period commencing on the
Execution Date and terminating on June 30, 2004, unless earlier
terminated in accordance with this Section 10 of this Agreement.
10.2 EXTENSION OF TERMS. If neither Kmart nor NewTech terminate this
Agreement pursuant to Section 10.3, 10.4 or 10.5, as applicable, Kmart
shall have the right to extend the term of this Agreement for
successive one-year periods through June 30, 2011, by delivering
written notice to NewTech of its desire to so extend this Agreement on
or before May 30 of any year during the Term or any extension period,
as applicable. Upon any such extension, the Minimum Product Orders for
each Category shall be increased at an annual rate of no more than
four percent (4%) from the amount of Minimum Product Orders in the
immediately preceding year during each year in which the Term has been
so extended. Kmart may terminate this Agreement without cause on sixty
(60) days prior written notice at any time during any extension period
without cost or penalty.
10.3 TERMINATION BY EITHER PARTY. The occurrence of one or more of the
following events shall constitute a default of the party responsible
for the occurrence of such event "Default"):
(a) Material breach of the Agreement, including, without limitation,
(i) the failure of NewTech to supply Products and/or provide
services as provided for herein with such diligence as will insure
compliance with all delivery, installation, completion
13
<PAGE>
and other dates specified herein, (ii) the failure of Kmart to pay
or reimburse any material amounts which are due to be paid or
reimbursed hereunder; (iii) any failure relating to Section 2.1,
Section 3.1.4 and/or Section 9 herein; or (iv) Salton's breach of
the Salton Agreement;
(b) Failure or material breach of any material condition, obligation,
covenant, representation or warranty set forth herein; or
(c) Insolvency, or the institution of proceedings by or against a
party under any federal or state bankruptcy or insolvency law or
an assignment for the benefit of all or substantially all
creditors which proceeding is not stayed within sixty (60) days of
filing; or the cessation of operations or doing business for any
reason.
Upon the occurrence of a Default, the non-defaulting party shall
provide written notice (the "NOTICE") to the defaulting party
specifying the nature of the Default and the conduct required to
cure such Default. The defaulting party shall have 60 days
following the date the Notice is received by the non-defaulting
party to cure the Default (30 days for non-payment by Kmart under
a Specific Purchase Order where the amount involved exceeds
$2,000.000). If the Default is not cured by the defaulting party
within such period, the non-defaulting party may elect to either
specifically enforce performance hereof or terminate this
Agreement. If, however, Kmart Defaults, NewTech's remedies shall
not exceed the amount NewTech would have received as its sole and
exclusive remedy under Section 5 herein with respect to Minimum
Product Orders which have not been placed as of the effective date
of the Default or Termination. In the event of NewTech's Default
or wrongful termination of this Agreement, Kmart shall not owe
NewTech any damages under Section 5 of this Agreement.
A party's failure to demand cure of or terminate this Agreement as
a result of a prior Default shall not be deemed a waiver by the
party of the right to demand cure of or to terminate this
Agreement as a result of a subsequent Default. Unless otherwise
indicated to the contrary in this Agreement, the rights set forth
hereinabove are cumulative and in addition to those otherwise
provided by law.
10.4 TERMINATION AT OPTION OF KMART. (a) Kmart shall have the right to
terminate this Agreement without cause in its sole discretion
effective on June 30, 2002, by giving NewTech written notice at any
time up to June 30, 2000. Following delivery of such notice to
NewTech, the parties shall continue to be bound by all of the terms
and conditions of this Agreement through June 30, 2002; PROVIDED, that
the Minimum Product Purchase commitment, for the period of July 1,
2001 through June 30, 2002, as set forth in Section 5.1 hereof, shall
be reduced to 25% of the amounts set forth in said Section 5.1; and
PROVIDED FURTHER, that after June 30, 2000, NewTech may commence
marketing plans for the sale of Products to any other Person,
including other Discount Department Stores, and, after July 31, 2001
NewTech may market and sell Products to any other Person, including
Discount Department Stores, notwithstanding Section 2.1 hereof. If
Kmart does not elect to terminate this Agreement in accordance with
the foregoing sentences of this Section 10.4, then Kmart shall have
the right to terminate this Agreement without cause in its sole
discretion effective June 30, 2003 and on each June 30 thereafter
during the term of this Agreement by giving written notice to NewTech
of its desire to so terminate this Agreement. Upon any such
termination, Kmart shall owe nothing to NewTech beyond payment for
Products accepted by Kmart as of the effective date of termination.
Kmart shall be required to perform all Specific Purchase Orders issued
prior to the effective date of such termination, and Kmart shall have
no further obligation following such termination.
14
<PAGE>
(b) Notwithstanding the foregoing, it is specifically agreed by the
parties hereto that in . the event Kmart terminates the Agreement at
any time and such termination is not in accordance with this Section
10.4(a), or is otherwise in violation or breach of this Agreement,
Kmart's liability hereunder shall not exceed an amount equal to the
Fees specified in Section 5 herein for the Minimum Product Orders
which have not been placed as of the effective date of such
termination and for payment for Orders of conforming Products timely
delivered through the date of such termination; Kmart shall be
required to perform all Specific Purchase Orders issued prior to the
effective date of such termination, and Kmart shall have no further
obligation following such termination.
10.5 TERMINATION AT OPTION OF NEWTECH. NewTech shall have the right to
terminate this Agreement effective on June 30, 2002, by giving Kmart
written notice at any time up to June 30, 2000. Following delivery of
such notice to Kmart, the parties shall continue to be bound by all of
the terms and conditions of this Agreement through June 30, 2002;
PROVIDED, that the Minimum Product Purchase commitment, for the period
of July 1 2001 through June 30, 2002, as set forth in Section 5.1
hereof, shall be reduced to 25% of the amounts set forth in said
Section 5.1; and PROVIDED FURTHER, that after June 30, 2000, NewTech
may commence marketing plans for the sale of Products to any other
Person, including other Discount Department Stores, and, after July
31, 2001 NewTech may market and sell Products to any other Person,
including Discount Department Stores, notwithstanding Section 2.1
hereof. In the event that NewTech does not elect to terminate this
Agreement in accordance with the foregoing sentences of this Section
10.5, then NewTech shall have the right to terminate this Agreement
without cause in Its sole discretion effective June 30, 2003 and on
each June 30 thereafter during the term of this Agreement by giving at
least 12 months prior written notice to Kmart of its desire to so
terminate this Agreement. Upon any such termination, Kmart shall owe
nothing to NewTech beyond payment for Products accepted by Kmart as of
the effective date of such termination.
10.6 DUTIES FOLLOWING TERMINATION. Upon Termination of this Agreement,
neither party shall have any obligation to the other party except as
hereinafter set forth in this Section 10.6. Notwithstanding the
termination or expiration of this Agreement pursuant to this Article
10 or any other provision of this Agreement, unless otherwise
indicated in this Agreement, all rights and obligations which were
incurred or which matured under specific Purchase Orders issued prior
to the effective date of termination or expiration shall survive
termination and be subject to enforcement under the terms of this
Agreement. Termination of this Agreement shall not affect any duty of
Kmart or NewTech under Sections 9.1, 11.1, 11.2, 11.3, 12.1, 12.4,
12.6, 12.11, 12.13 or 12.14 existing prior to the effective date of
termination or expiration, all of which are intended to survive
termination. Kmart shall have the right to distribute, sell, market
and promote all existing inventory of Products ordered pursuant to
Specific Purchase Orders prior to the termination of this Agreement,
and to use all packaging materials, labels, tags, signage, advertising
and promotional materials to effectuate the sale of such Products.
10.7 NON-INTERFERENCE. Except for negotiations involving NewTech or with a
Third Party Manufacturer,, Kmart agrees that, except with NewTech, it
will not, during the Term of this Agreement or any extension or
renewal thereof negotiate, obtain information or discuss with or enter
into any agreement with any person or entity covering the licensing,
purchase, sale, marketing or distribution of the Trademark for any of
the Categories of Product purchased by Kmart from NewTech.
10.8 TERMINATION OF SALTON AGREEMENT. If the Salton Agreement is terminated
at any time for any reason, Kmart may, in its sole option, elect to
terminate this Agreement, and upon
15
<PAGE>
such termination, owe nothing further under this Agreement beyond
payment for Products accepted and sold by Kmart through the date of
termination.
11. CONFIDENTIALITY/PRESS RELEASES
11.1 CONFIDENTIALITY AND NON-DISCLOSURE. NewTech agrees that any and all
information in any form that is provided to NewTech or any of its
representatives as part of this Agreement is provided and received in
confidence, and NewTech, shall at all times preserve and protect the
confidentiality of such information, and of any other proprietary or
non-public information of or relating to Kmart or any of its related
companies of which it or any of its representatives becomes aware or
acquires during the performance of this Agreement (such information is
hereinafter referred to as "CONFIDENTIAL INFORMATION". NewTech also
agrees that it shall take all reasonable steps to ensure that such
Confidential Information will not be disclosed to, or used by any
person, association or entity except its own employees, and then only
to the extent necessary to permit it to perform this Agreement.
Each of NewTech and Kmart agrees to keep the Minimum Product Orders,
pricing, and Term of this Agreement (including rights of extension and
termination) strictly confidential, except that each of NewTech and
Kmart shall be permitted to disclose any and all information
concerning the transactions contemplated hereby to the extent it is
legally required to do so, whether under applicable securities laws or
otherwise, PROVIDED, that NewTech will use its reasonable best efforts
to file with the Securities and Exchange Commission or any other
applicable regulator or court a request for confidential treatment of
the pricing and other business terms set forth in this Agreement.
In the course of performance of this Agreement, NewTech may disclose
certain information to Kmart which NewTech considers proprietary and
confidential. In order to be considered as proprietary and
confidential and, thus, subject to the following restrictions, NewTech
must comply with both of the following requirements prior to
disclosure of the information: (i) the information must be clearly and
conspicuously identified in writing as "PROPRIETARY AND CONFIDENTIAL
INFORMATION OF NEWTECH"; and (ii) NewTech must limit its dissemination
of the information to an authorized representative of Kmart (I.E., one
listed on attached Exhibit E) with a need to know such information in
furtherance of the performance of this Agreement (the "AUTHORIZED
RECIPIENT") Provided NewTech has complied with (i) and (ii) above, the
Authorized Recipient shall maintain the confidentiality of such
information to the same extent Kmart protects its own proprietary
information and shall not disclose it to anyone other than Kmart
employees, agents and/or consultants with a need to know who shall
also be subject to this restriction.
Confidential Information shall not include information that a party
can demonstrate by written evidence:
(i) is in the public domain (provided that information in the public
domain has not and does not come into the public domain as a
result of the disclosure by the receiving party or any of its
Affiliates);
(ii) is known to the receiving party or any of its Affiliates prior to
the disclosure by the other party; or
16
<PAGE>
(iii) becomes available to the party on a non-confidential basis from a
source other than an Affiliate of that party or the disclosing
party.
11.2 Press Releases. NewTech shall not issue any press releases relating to
this Agreement or its relationship with Kmart without the prior
written approval by an authorized representative of either the
Corporate Affairs Department or Investor Relations Department at Kmart
as to the contents hereof.
11.3 The press release, confidentiality and non-disclosure obligations
contained herein shall survive and continue after termination of this
Agreement or any related agreements the parties may execute, and shall
bind each of NewTech's and Kmart's legal representatives, successors
and assigns.
12. GENERAL TERMS AND CONDITIONS
12.1 DISPUTE RESOLUTION. All disputes arising out of, or in relation to,
this Agreement (other than disputes arising out of any claim by a
third party in an action commenced against a party) shall be referred
for decision forthwith to a senior executive of each party who is not
personally involved in the dispute. If no agreement can be reached
through this process within thirty (30) days of request by one party
to the other to nominate a senior executive for dispute resolution,
then either party shall be entitled to pursue any and all available
legal remedies.
12.2 NO ASSIGNMENT. Other than as specifically set forth in this Agreement,
this Agreement may not be assigned nor may the performance of any
duties hereunder be delegated by either party without the prior
written consent of the other party; PROVIDED, that any such attempted
assignment shall be void and shall not relieve the assignor from any
of its obligations hereunder or under any other document or agreement
delivered by such party pursuant to, or delivered (or acknowledged to
have been delivered) contemporaneously with or in connection with the
execution of, this Agreement, which shall continue to be binding upon
such party notwithstanding any such attempted assignment.
12.3 NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficiently given if in writing and delivered by
registered or certified mail (return receipt requested), facsimile
(with confirmation of transmittal), overnight courier (with
confirmation of delivery), or hand delivered to the appropriate party
at the address set forth below, or at such other address as such party
may from time to time specify for that purpose in a notice similarly
given:
If to NewTech: New M-Tech Corporation
16550 N.W. 1Oth Avenue
Miami, Florida 33169
Attn: Joel Newman
Fax: (305) 624-8901
with a copy to (other than regularly Greenberg, Traurig, Hoffman, Lipoff,
prepared notices, reports, etc. Rosen & Quentel, P.A.
required to be delivered hereunder): 1221 Brickell Avenue
Miami, Florida 33131
Attn: Cesar L. Alvarez
Fax: (305) 579-0717
17
<PAGE>
If to Kmart: Kmart Corporation
3100 W. Big Beaver Road
Troy, Michigan 48084
Attn: Divisional Vice President
Home Electronics/Home
Appliances
Fax: (810) 643-1054
with a copy to (other than regularly Kmart Corporation
prepared notices, reports, etc. Legal Department
required to be delivered hereunder): 3100 W. Big Beaver Road
Troy, Michigan 48084
Attn: General Counsel
Any such notice shall be effective (i) if sent by mail, as aforesaid,
three (3) business days after mailing, (ii) if sent by facsimile, as
aforesaid, when sent, and (iii) if sent by courier or hand delivered,
as aforesaid, when received. PROVIDED, that if any such notice shall
have been sent by mail and if on the date of mailing thereof or during
the period prior to the expiry of the third business day following the
date of mailing there shall be a general postal disruption (whether as
a result of rotating strikes or otherwise) in the United States, then
such notice shall not become effective until the third business day -
following the date of resumption of normal mail service.
12.4 GOVERNING LAW AND CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
DEEMED TO HAVE BEEN EXECUTED AND DELIVERED IN TROY, MICHIGAN, AND
SHALL BE CONSTRUED, INTERPRETED AND ENFORCED UNDER AND IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN. NEWTECH AGREES TO
EXERCISE ANY RIGHT OR REMEDY IN CONNECTION WITH THIS AGREEMENT
EXCLUSIVELY IN, AND HEREBY SUBMITS TO THE JURISDICTION OF, THE STATE
OF MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED STATES
DISTRICT COURT IN DETROIT, MICHIGAN.
12.5 BINDING AGREEMENT. This Agreement shall be binding upon the parties
hereto, and their respective successors and permitted assigns, whether
by operation of law or otherwise.
12.6 ENTIRE AGREEMENT. This Agreement and all other documents and
instruments specifically incorporated by reference herein contain the
entire agreement and understanding of the parties with respect to the
subject matter hereof and thereof and supersedes all negotiations,
prior discussions and agreements relating to the subject of this
Agreement. Any terms or conditions in any forms of NewTech used in the
performance of this Agreement which are in conflict with or in
addition to the terms and conditions of this Agreement shall be void.
This Agreement may not be amended or modified except by a written
instrument signed by all of the parties hereto.
12.7 HEADINGS. The headings to the various articles and paragraphs of this
Agreement have been inserted for convenience only and shall not affect
the meaning of the language contained in this Agreement.
12.8 WAIVER. The waiver by any party of any breach by another party of any
term or condition of this Agreement shall not constitute a waiver of
any subsequent breach or nullify the effectiveness of that term or
condition.
12.9 COUNTERPARTS. This Agreement may be executed in identical duplicate
copies exchanged by facsimile transmission. The parties agree to
execute two identical original copies of the Agreement after
exchanging signed facsimile versions. Each identical counterpart
18
<PAGE>
shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.10 SEVERABILITY OF PROVISIONS. If, for any reason whatsoever, any term,
covenant or condition of this Agreement or the application thereof to
any party or circumstance is to any extent held or rendered invalid,
unenforceable or illegal, then such term, covenant or condition:
(i) is deemed to be independent of the remainder of such document
and to be severable and divisible therefrom and its validity,
unenforceability or illegality does not affect, impair or
invalidate the remainder of such document or any part thereof;
and
(ii) continue to be applicable and enforceable to the fullest extent
permitted by law against any party and circumstances other than
those as to which it has been held or rendered invalid,
unenforceable or illegal.
12.11 LIMITATION ON DAMAGES. Except with respect to NewTech's liability
under Section 9 of this Agreement, neither party shall be liable to
the other party for incidental, consequential, punitive or exemplary
damages arising in connection with this Agreement or the performance,
omission of performance or termination hereof, even if said party has
been advised of the possibility of such damages and without regard to
the nature of the claim or the underlying theory or cause of action
(whether in contract, ton or otherwise). In addition, in no event
shall Kmart be liable for direct or any other damages in excess of
the amount to which NewTech is entitled to under Section 5 herein for
Minimum Product Orders which have not been placed as of the effective
date of the Default or Termination plus payment due for Products
accepted by Kmart as of such date, nor shall Kmart's aggregate
liability under this Agreement exceed such amount.
12.12 FORCE MAJEURE. Time is of the essence in the performance of all parts
of this Agreement; PROVIDED, HOWEVER, performance by either party
shall be excused during the period in which such performance is made
reasonably impossible because of a strike, act of God or change in
laws ("FORCE MAJEURE"). NewTech, however, shall use reasonable
diligence to procure substitute performance. If the period during
which performance is excused due to Force Majeure exceeds ten (10)
days, then either party may terminate its obligations under any
Specific Purchase Orders without liability, and such cancelled
Order(s) shall continue to count towards fulfillment of the
commitments set forth in Section 5 herein. If the period of Force
Majeure excusing NewTech's performance exceeds 120 days and such
non-performance relates to more than 20% of the Minimum Product
Orders during any Period, then Kmart may terminate this entire
Agreement without further obligation to NewTech. Upon any such
termination, nothing shall be due from Kmart beyond payment for
Products accepted by Kmart as of the effective date of termination.
12.13 KMART MARKS. NewTech acknowledges Kmart Properties Inc.'s ("KPl")
exclusive right, title and interest in and to all trademarks, trade
names, service marks, logos, assignees, program and event names,
identifications and other proprietary rights and privileges which it
licenses to Kmart with the right to sublicense (the "KMART MARKS").
This Agreement and its various provisions are not a license or
assignment of any fight, title or interest in the Kmart Marks by KPI
or Kmart to NewTech. NewTech shall not in any manner represent that
it has any ownership in the Kmart Marks and shall not do or cause to
be done anything impairing Kmart's exclusive license in the Kmart
Marks. NewTech shall not use, print or duplicate the Kmart Marks
except and only if NewTech has obtained prior approval as provided
herein. NewTech's use of the Kmart Marks is limited
19
<PAGE>
to the Term of this Agreement; upon termination hereof, NewTech shall
immediately cease all use of the Kmart Marks. NewTech shall not
assign or attempt to assign any rights with regard to the Kmart Marks
which arise hereunder; any such attempted assignment shall be void.
12.14 WHITE WESTINGHOUSE MARKS. Kmart acknowledges WCI's exclusive right,
title and interest in and to the Trademarks. This Agreement and its
various provisions are not a license or assignment of any fight,
title or interest in the Trademark or the License Agreement by
NewTech or WCI to Kmart. Kmart shall not do or cause to be done
anything impairing NewTech's exclusive license in the Trademark.
Kmart's use of the Trademark is limited to the terms and conditions
contained in this Agreement; upon termination hereof, Kmart shall
immediately cease all use of the Trademark other than in connection
with the sale, advertising or merchandising of Product inventory and
order commitments (if any) existing at the time of such termination.
Kmart shall not assign or attempt to assign any rights with regard to
the Trademark which arise hereunder; any such attempted assignment
shall be void.
12.15 NO THIRD PARTY BENEFICIARIES. The parties hereto expressly agree that
there shall be no third party beneficiaries to this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the Execution Date.
NEW-M-TECH CORPORATION KMART CORPORATION
By: /s/ JOEL NEWMAN By: /s/ WARREN FLICK
-------------------------- --------------------------
(Signature) (Signature)
Name: Joel Newman Name: Warren Flick
Title: President Title: President
20
<PAGE>
EXHIBIT A
DESCRIPTION OF PRODUCTS
Audio: radios, phonographs, tape decks and tapes, CD
players, compact home stereo systems and home
theater systems and audio accessories.
Video: televisions, videocassette recorders and TV/VCR
combinations and video accessories.
Telephones
Telephone answering machines
Telephone accessories
<PAGE>
SCHEDULE 1.2
DISCOUNT DEPARTMENT STORES
Ames Dept. Stores
Baby Superstore
Best Buy
Best Products Co.
Bradlees
Caldor Corp.
Circuit City Stores
Comp USA
Consolidated Stores
Dayton Hudson/Target
Dollar General
Dollar Tree Stores
Duckwall-ALCO Stores
Family Bargain
Family Dollar
5-0ff Stores
Fred's
Good Guys
Hills
Home Shopping Network
L. Luria & Son
Lechters
Loehmann's Inc.
MacFrugal's Bargains
Melville Corp.
Meyer (Fred)
Montgomery Wards
99 Cents Only
Office Depot
OfficeMax
Pamida
Phar-Mor
Price Costco
Roberds
Ross Stores
S & K Famous Brands
Sears
Service Merchandise
ShopKo Stores
Staples
Tops Appliance City
Toys "R" Us
Tuesday Morning
Value City Dept. Stores
Venture
Waban
Wal-Mart Stores
Woolworth
<PAGE>
EXHIBIT B
PURCHASE ORDER TERMS AND CONDITIONS
Vendor and Kmart Corporation, 3100 West Big Beaver Road, Troy, Michigan
48084-3163, ("Buyer") agree, to the fullest extent permitted by law, to be
bound by all terms and conditions contained or incorporated herein, all of which
are a part of each Purchase Order Issued to Vendor by Buyer ("Order") and should
be carefully read. Any provisions in Vendor's invoices, billing statements,
acknowledgement forms or similar documents which are inconsistent with the
provisions of an Order shall be of no force or effect. The cost price set forth
in such Order includes the cost of manufacturing, packaging, labeling and
shipping unless otherwise specified in the Order.
1. VENDOR'S ACCEPTANCE. Vendor's commencement of or promise of shipment of
the Merchandise shall constitute Vendor's agreement that it shall deliver
the Merchandise in accordance with the terms and conditions of the
applicable Order. Vendor agrees to follow the shipping and invoicing
instructions issued by Buyer's stores, warehouses, buying offices and
Transportation and Accounting Departments, which instructions are
incorporated by reference into the applicable Order.
2. VENDOR'S REPRESENTATIONS AND WARRANTIES. Vendor represents and warrants to
Buyer, in addition to all warranties implied by law, that each item of
merchandise described on the face of an Order (or in an EDI or telephone
Order), together with all related packaging and labeling and other material
furnished by Vendor ("Merchandise"), shall: (a) be free from defects in
design, workmanship and/or materials including, without limitation, such
defects as could create a hazard to life or property; (b) conform in all
respects with all applicable federal, state and local laws, orders and
regulations, including, without limitation, those regarding (i) safety,
(ii) content, (iii) flammability, (iv) weights, measures and sizes, (v)
special use, care, handling, cleaning or laundering instructions or
warnings, (vi) processing, manufacturing, labeling, advertising, selling,
shipping and invoicing, (vii) registration and declaration of
responsibility, and (viii) occupational safety and health; (c) not infringe
or encroach upon Buyer's or any third party's personal, contractual or
proprietary rights, including, without limitation, patents, trademarks,
copyrights, rights of privacy or trade secrets; and (d) conform to all of
Buyer's specifications and to all articles shown to Buyer as Merchandise
samples.
3. VENDOR'S INDEMNIFICATION OF BUYER. Vendor agrees to reimburse, indemnify,
hold harmless and to defend at its expense (or to pay any attorney's fees
incurred by Buyer) Buyer and its subsidiary and affiliate companies
against all damage, loss, expense, claim, liability or penalty, including,
without limitation, claims of infringement of patents, copyrights,
trademarks, unfair competition, bodily injury, property or other damage,
arising out of any use, possession, consumption or sale of said
Merchandise and from any failure of Vendor to properly perform an Order.
Vendor shall not be relieved of the foregoing indemnity and related
obligations by allegations or any claim of negligence on the part of
Buyer; provided, however, Vendor shall not remain or be liable hereunder
to the extent any injury or damage is finally judicially determined to
have been proximately caused by the sole negligence of Buyer. Vendor shall
obtain adequate insurance to cover such liability under each Order and
shall provide copies of the applicable certificate(s) of insurance
annually to Buyer's Vendor Database Department at the above address.
4. DEFECTIVE OR NON-CONFORMING MERCHANDISE. If any Merchandise is defective,
unsuitable, does not conform to all terms hereof and of the Order and all
warranties implied by law, Buyer may at its option return it to Vendor for
full credit or refund of the purchase price or repair it at Vendor's
expense, and may charge Vendor such price or expense and the cost of any
incurred inbound and outbound freight and a handling, storage and
inspection charge of 7-1/2% of the returned Merchandise invoice price.
Buyer shall be under no duty to inspect any Merchandise before resale
thereof, and resale, or repackaging or repacking for the purpose of resale,
shall not constitute a waiver of, or otherwise limit, any of Buyer's rights
resulting from defective or non-conforming Merchandise.
5. BUYER'S RIGHT TO CANCEL. Buyer may without notice cancel, terminate and/or
rescind all or part of an Order in the event Vendor breaches or fails to
perform any of its obligations in any material respect, or in the event
Vendor becomes insolvent or proceedings are instituted by or against
Vendor under any provision of any federal or state bankruptcy or insolvency
laws or Vender ceases its operation. Time is of the essence to each Order,
and Vendor's failure to meet any delivery date shall constitute a material
breach of the Order. Vendor agrees to inform Buyer immediately in writing
of any failure to timely ship all or any part of an Order, and Buyer's
acceptance of any Merchandise after the applicable delivery date shall not
constitute a waiver of, or otherwise limit, any of Buyer's rights resulting
from the late delivery nor obligate Buyer to accept delivery of additional
Merchandise under the Order.
6. SPECIAL FEATURES. All Merchandise designs, patents and trade names which
are supplied by Buyer to Vendor or which are distinctive of Buyer's private
label merchandise ("Special Features") shall be the property of Buyer and
shall be used by Vendor only for Buyer. Buyer may use the Special Features
on or with respect to goods manufactured by others and obtain legal
protection for the Special Features including, without limitation, patents,
patent designs, copyrights and trademarks. Merchandise with Special
Features which is not delivered to Buyer for any reason shall not be sold
or transferred to any third party without written authorization of Buyer
and unless and until all labels, tags, packaging and markings identifying
the Merchandise to Buyer have been removed.
7. DEDUCTIONS AND SET OFF. Any sums payable to Vendor shall be subject to all
claims and defenses of Buyer, whether arising from this or any other
transaction, and Buyer may set off and deduct against any such sums all
present and future indebtedness of Vendor and Buyer. Buyer shall provide
a copy of the deduction voucher(s) for debits taken by Buyer against
Vendor's account as a result of any returns or adjustments. Vendor shall
be deemed to have accepted each such deduction unless Vendor, within 90
days following receipt of the deduction voucher, notifies Buyer in
writing as to why a deduction should not be made and provides documentation
of the reason(s) given. Such written notice shall be directed to Buyer's
Vendor Audit Department at the above address. Buyer shall not be liable to
Vendor for any interest or late charges.
8. MICHIGAN CONTRACT AND JURISDICTION. EACH ORDER, AND ALL OTHER ASPECTS OF
THE BUSINESS RELATIONSHIP BETWEEN BUYER AND VENDOR, SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN.
VENDOR AGREES, WITH RESPECT TO ANY LITIGATION WHICH RELATES TO ANY ORDER OR
WHICH OTHERWISE ARISES DIRECTLY OR INDIRECTLY OUT OF OR IN CONNECTION WITH
SAID BUSINESS RELATIONSHIP OR ANY TRANSACTION OF ANY NATURE BETWEEN BUYER
AND VENDOR. TO COMMENCE SAME: (i) EXCLUSIVELY IN (AND VENDOR HEREBY
CONSENTS TO THE JURISDICTION OF) THE STATE OF MICHIGAN COURTS OF OAKLAND
COUNTY, MICHIGAN OR THE UNITED STATES DISTRICT COURT IN DETROIT, MICHIGAN;
AND (ii) WITHIN 18 MONTHS FROM THE DATE OF BUYER'S LAST ORDER TO VENDOR OR
THE PERIOD PRESCRIBED BY THE APPLICABLE STATUTE OF LIMITATIONS, WHICHEVER
IS SOONER.
9. MISCELLANEOUS. (a) All rights granted to Buyer hereunder shall be in
addition to and not in lieu of Buyer's rights arising by operation of law.
(b) Any provisions of a hard copy Order which are typewritten or
handwritten by Buyer shall supersede any contrary or inconsistent printed
provisions therein. (c) No modification of terms of an Order shall be valid
without the written authorization of Buyer. (d) Should any of the
provisions of an Order be declared by a court of competent jurisdiction to
be invalid, such decision shall not effect the validity of any remaining
provisions.
10. DIRECT TO STORE AND DISTRIBUTION CENTER INVOICE & SHIPPING INSTRUCTIONS.
(a) Each invoice shall include Buyer's Order number, Vendor's stock/style
number, and Buyer's code number of each item on the invoice. No
substitutions of Merchandise shall be made without the written
authorization of Buyer. (b) Each Order must be invoiced separately. (c) An
Order may not be filled at a price higher than that shown on its face or
transmitted without the written authorization of buyer. (d) If freight
costs are to be paid by Buyer, Vendor shall ship via the method and/or
route specified in the instructions provided by Buyer's Transportation
Department, shall make ONE COMPLETE shipment of the Merchandise and shall
NOT make PARTIAL shipments without the written authorization of Buyer. (e)
Vendor shall make NO PACKAGE QUANTITY CHANGE on an Order without the
written authorization of Buyer.
11. ADDITIONAL DISTRIBUTION CENTER SHIPPING INSTRUCTIONS. (a) The applicable
bill of lading must be delivered to the Distribution Center at time of
Merchandise delivery. (b) Vendor shall mark the contents of each
Distribution Center carton clearly on the outside of the carton, or
package. (c) Merchandise not packaged or shipped in quantities ordered by
Buyer shall at Buyer's option be returned to Vendor at Vendor's expenses.
Vendor shall be charged a handling charge of 7-1/2% of the Merchandise
invoice price on all Merchandise not packaged or shipped as ordered.
12. MERCHANDISE TESTING. Merchandise shall, at Buyer's option, be subject to
domestic or overseas testing. Vendor agrees to pay for all fees and costs
associated with such testing (which fees and costs are set forth in
Buyer's current Quality Assurance Manual or other documentation provided
to Vendor). The testing of Vendor's Merchandise by or on behalf of Kmart is
not a substitute for Vendor's own testing and other quality assurance
related obligations in connection with its sale of Merchandise to Buyer,
and such testing shall not limit Buyer's rights, or diminish or remove any
of Vendor's responsibilities, hereunder including, without limitation,
those relating to warranty and indemnification under Paragraphs 2 and 3
above.
13. BUYER INFORMATION/ORDERS. Buyer may at its discretion provide Vendor with
certain confidential or proprietary information relating to Buyer's
purchase and/or sale of Vendor's Merchandise. Vendor acknowledges that
such information, together with any other information of or pertaining to
Buyer provided to Vendor by Buyer or learned by Vendor as a consequence of
the business relationship between Buyer and Vendor (the "Buyer
Information"), is provided and received in confidence, and Vendor shall at
all times preserve and protect the confidentiality thereof. Vendor agrees
to take all necessary steps to ensure that the Buyer Information shall not
be disclosed to, or used by, any person, association or entity except
Vendor's own employees having a need to know. BUYER MAKES NO WARRANTY WITH
RESPECT TO THE BUYER INFORMATION OR THE ACCURACY OR COMPLETENESS THEREOF,
AND IS PROVIDING SAME ON AN "AS IS" BASIS; ALL IMPLIED WARRANTIES WITH
RESPECT TO THE BUYER INFORMATION, INCLUDING THOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED. Vendor acknowledges and
agrees that any sales forecasts, quantity purchase estimates or similar
projections received from Buyer are not purchase commitments of Buyer, but
rather represent estimates for planning purposes only, and that the Buyer
shall have no obligation to purchase or otherwise compensate Vendor for
any of Vendor's finished products, or unfinished raw materials, not covered
by an Order.
14. FOOD VENDORS. The following amendments to the above terms and conditions
shall apply to any food products purchased from vendor by Buyer (any other
Merchandise purchased from Vendor by Buyer shall be governed by the
foregoing, without amendment): (i) Paragraph 4 -- delete "or repair it at
Vendor's expense" in line 3 and delete "and a handling, storage and
inspection charge of 7-1/2% of the returned Merchandise invoice price"
starting in line 4; (ii) Paragraph 10 -- delete the remainder of (d)
starting with ", shall make ONE COMPLETE . . ." staring in line 6; and
(iii) Paragraph 12 -- delete in its entirety.
<PAGE>
EXHIBIT C
PURCHASE ORDER TERMS AND CONDITIONS
Vendor and Kmart Corporation, 3100 West Big Beaver Road, Troy, Michigan
48084-3163, ("Buyer") agree, to the fullest extent permitted by law, to be
bound by all terms and conditions contained or incorporated herein, all of which
are a part of each Purchase Order Issued to Vendor by Buyer ("Order") and should
be carefully read. Any provisions in Vendor's invoices, billing statements,
acknowledgement forms or similar documents which are inconsistent with the
provisions of an Order shall be of no force or effect. The cost price set forth
in such Order includes the cost of manufacturing, packaging, labeling and
shipping unless otherwise specified in the Order.
1. VENDOR'S ACCEPTANCE. Vendor's commencement of or promise of shipment of
the Merchandise shall constitute Vendor's agreement that it shall deliver
the Merchandise in accordance with the terms and conditions of the
applicable Order. Vendor agrees to follow the shipping and invoicing
instructions issued by Buyer's stores, warehouses, buying offices and
Transportation and Accounting Departments, which instructions are
incorporated by reference into the applicable Order.
2. VENDOR'S REPRESENTATIONS AND WARRANTIES. Vendor represents and warrants to
Buyer, in addition to all warranties implied by law, that each item of
merchandise described on the face of an Order (or in an EDI or telephone
Order), together with all related packaging and labeling and other material
furnished by Vendor ("Merchandise"), shall: (a) be free from defects in
design, workmanship and/or materials including, without limitation, such
defects as could create a hazard to life or property; (b) conform in all
respects with all applicable federal, state and local laws, orders and
regulations, including, without limitation, those regarding (i) safety,
(ii) content, (iii) flammability, (iv) weights, measures and sizes, (v)
special use, care, handling, cleaning or laundering instructions or
warnings, (vi) processing, manufacturing, labeling, advertising, selling,
shipping and invoicing, (vii) registration and declaration of
responsibility, and (viii) occupational safety and health; (c) not infringe
or encroach upon Buyer's or any third party's personal, contractual or
proprietary rights, including, without limitation, patents, trademarks,
copyrights, rights of privacy or trade secrets; and (d) conform to all of
Buyer's specifications and to all articles shown to Buyer as Merchandise
samples.
3. VENDOR'S INDEMNIFICATION OF BUYER. Vendor agrees to reimburse, indemnify,
hold harmless and to defend at its expense (or to pay any attorney's fees
incurred by Buyer) Buyer and its subsidiary and affiliate companies
against all damage, loss, expense, claim, liability or penalty, including,
without limitation, claims of infringement of patents, copyrights,
trademarks, unfair competition, bodily injury, property or other damage,
arising out of any use, possession, consumption or sale of said
Merchandise and from any failure of Vendor to properly perform an Order.
Vendor shall not be relieved of the foregoing indemnity and related
obligations by allegations or any claim of negligence on the part of
Buyer; provided, however, Vendor shall not remain or be liable hereunder
to the extent any injury or damage is finally judicially determined to
have been proximately caused by the sole negligence of Buyer. Vendor shall
obtain adequate insurance to cover such liability under each Order and
shall provide copies of the applicable certificate(s) of insurance
annually to Buyer's Vendor Database Department at the above address.
4. DEFECTIVE OR NON-CONFORMING MERCHANDISE. If any Merchandise is defective,
unsuitable, does not conform to all terms hereof and of the Order and all
warranties implied by law, Buyer may at its option return it to Vendor for
full credit or refund of the purchase price or repair it at Vendor's
expense, and may charge Vendor such price or expense and the cost of any
incurred inbound and outbound freight and a handling, storage and
inspection charge of 7-1/2% of the returned Merchandise invoice price.
Buyer shall be under no duty to inspect any Merchandise before resale
thereof, and resale, or repackaging or repacking for the purpose of resale,
shall not constitute a waiver of, or otherwise limit, any of Buyer's rights
resulting from defective or non-conforming Merchandise.
5. BUYER'S RIGHT TO CANCEL. Buyer may without notice cancel, terminate and/or
rescind all or part of an Order in the event Vendor breaches or fails to
perform any of its obligations in any material respect, or in the event
Vendor becomes insolvent or proceedings are instituted by or against
Vendor under any provision of any federal or state bankruptcy or insolvency
laws or Vender ceases its operation. Time is of the essence to each Order,
and Vendor's failure to meet any delivery date shall constitute a material
breach of the Order. Vendor agrees to inform Buyer immediately in writing
of any failure to timely ship all or any part of an Order, and Buyer's
acceptance of any Merchandise after the applicable delivery date shall not
constitute a waiver of, or otherwise limit, any of Buyer's rights resulting
from the late delivery nor obligate Buyer to accept delivery of additional
Merchandise under the Order.
6. SPECIAL FEATURES. All Merchandise designs, patents and trade names which
are supplied by Buyer to Vendor or which are distinctive of Buyer's private
label merchandise ("Special Features") shall be the property of Buyer and
shall be used by Vendor only for Buyer. Buyer may use the Special Features
on or with respect to goods manufactured by others and obtain legal
protection for the Special Features including, without limitation, patents,
patent designs, copyrights and trademarks. Merchandise with Special
Features which is not delivered to Buyer for any reason shall not be sold
or transferred to any third party without written authorization of Buyer
and unless and until all labels, tags, packaging and markings identifying
the Merchandise to Buyer have been removed.
7. DEDUCTIONS AND SET OFF. Any sums payable to Vendor shall be subject to all
claims and defenses of Buyer, whether arising from this or any other
transaction, and Buyer may set off and deduct against any such sums all
present and future indebtedness of Vendor and Buyer. Buyer shall provide
a copy of the deduction voucher(s) for debits taken by Buyer against
Vendor's account as a result of any returns or adjustments. Vendor shall
be deemed to have accepted each such deduction unless Vendor, within 90
days following receipt of the deduction voucher, notifies Buyer in
writing as to why a deduction should not be made and provides documentation
of the reason(s) given. Such written notice shall be directed to Buyer's
Vendor Audit Department at the above address. Buyer shall not be liable to
Vendor for any interest or late charges.
8. MICHIGAN CONTRACT AND JURISDICTION. EACH ORDER, AND ALL OTHER ASPECTS OF
THE BUSINESS RELATIONSHIP BETWEEN BUYER AND VENDOR, SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN.
VENDOR AGREES, WITH RESPECT TO ANY LITIGATION WHICH RELATES TO ANY ORDER OR
WHICH OTHERWISE ARISES DIRECTLY OR INDIRECTLY OUT OF OR IN CONNECTION WITH
SAID BUSINESS RELATIONSHIP OR ANY TRANSACTION OF ANY NATURE BETWEEN BUYER
AND VENDOR. TO COMMENCE SAME: (i) EXCLUSIVELY IN (AND VENDOR HEREBY
CONSENTS TO THE JURISDICTION OF) THE STATE OF MICHIGAN COURTS OF OAKLAND
COUNTY, MICHIGAN OR THE UNITED STATES DISTRICT COURT IN DETROIT, MICHIGAN;
AND (ii) WITHIN 18 MONTHS FROM THE DATE OF BUYER'S LAST ORDER TO VENDOR OR
THE PERIOD PRESCRIBED BY THE APPLICABLE STATUTE OF LIMITATIONS, WHICHEVER
IS SOONER.
9. MISCELLANEOUS. (a) All rights granted to Buyer hereunder shall be in
addition to and not in lieu of Buyer's rights arising by operation of law.
(b) Any provisions of a hard copy Order which are typewritten or
handwritten by Buyer shall supersede any contrary or inconsistent printed
provisions therein. (c) No modification of terms of an Order shall be valid
without the written authorization of Buyer. (d) Should any of the
provisions of an Order be declared by a court of competent jurisdiction to
be invalid, such decision shall not effect the validity of any remaining
provisions.
10. DIRECT TO STORE AND DISTRIBUTION CENTER INVOICE & SHIPPING INSTRUCTIONS.
(a) Each invoice shall include Buyer's Order number, Vendor's stock/style
number, and Buyer's code number of each item on the invoice. No
substitutions of Merchandise shall be made without the written
authorization of Buyer. (b) Each Order must be invoiced separately. (c) An
Order may not be filled at a price higher than that shown on its face or
transmitted without the written authorization of buyer. (d) If freight
costs are to be paid by Buyer, Vendor shall ship via the method and/or
route specified in the instructions provided by Buyer's Transportation
Department, shall make ONE COMPLETE shipment of the Merchandise and shall
NOT make PARTIAL shipments without the written authorization of Buyer. (e)
Vendor shall make NO PACKAGE QUANTITY CHANGE on an Order without the
written authorization of Buyer.
11. ADDITIONAL DISTRIBUTION CENTER SHIPPING INSTRUCTIONS. (a) The applicable
bill of lading must be delivered to the Distribution Center at time of
Merchandise delivery. (b) Vendor shall mark the contents of each
Distribution Center carton clearly on the outside of the carton, or
package. (c) Merchandise not packaged or shipped in quantities ordered by
Buyer shall at Buyer's option be returned to Vendor at Vendor's expenses.
Vendor shall be charged a handling charge of 7-1/2% of the Merchandise
invoice price on all Merchandise not packaged or shipped as ordered.
12. MERCHANDISE TESTING. Merchandise shall, at Buyer's option, be subject to
domestic or overseas testing. Vendor agrees to pay for all fees and costs
associated with such testing (which fees and costs are set forth in
Buyer's current Quality Assurance Manual or other documentation provided
to Vendor). The testing of Vendor's Merchandise by or on behalf of Kmart is
not a substitute for Vendor's own testing and other quality assurance
related obligations in connection with its sale of Merchandise to Buyer,
and such testing shall not limit Buyer's rights, or diminish or remove any
of Vendor's responsibilities, hereunder including, without limitation,
those relating to warranty and indemnification under Paragraphs 2 and 3
above.
13. BUYER INFORMATION/ORDERS. Buyer may at its discretion provide Vendor with
certain confidential or proprietary information relating to Buyer's
purchase and/or sale of Vendor's Merchandise. Vendor acknowledges that
such information, together with any other information of or pertaining to
Buyer provided to Vendor by Buyer or learned by Vendor as a consequence of
the business relationship between Buyer and Vendor (the "Buyer
Information"), is provided and received in confidence, and Vendor shall at
all times preserve and protect the confidentiality thereof. Vendor agrees
to take all necessary steps to ensure that the Buyer Information shall not
be disclosed to, or used by, any person, association or entity except
Vendor's own employees having a need to know. BUYER MAKES NO WARRANTY WITH
RESPECT TO THE BUYER INFORMATION OR THE ACCURACY OR COMPLETENESS THEREOF,
AND IS PROVIDING SAME ON AN "AS IS" BASIS; ALL IMPLIED WARRANTIES WITH
RESPECT TO THE BUYER INFORMATION, INCLUDING THOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED. Vendor acknowledges and
agrees that any sales forecasts, quantity purchase estimates or similar
projections received from Buyer are not purchase commitments of Buyer, but
rather represent estimates for planning purposes only, and that the Buyer
shall have no obligation to purchase or otherwise compensate Vendor for
any of Vendor's finished products, or unfinished raw materials, not covered
by an Order.
14. FOOD VENDORS. The following amendments to the above terms and conditions
shall apply to any food products purchased from vendor by Buyer (any other
Merchandise purchased from Vendor by Buyer shall be governed by the
foregoing, without amendment): (i) Paragraph 4 -- delete "or repair it at
Vendor's expense" in line 3 and delete "and a handling, storage and
inspection charge of 7-1/2% of the returned Merchandise invoice price"
starting in line 4; (ii) Paragraph 10 -- delete the remainder of (d)
starting with ", shall make ONE COMPLETE . . ." staring in line 6; and
(iii) Paragraph 12 -- delete in its entirety.
<PAGE>
KMART CORPORATION
International Headquarters
3100 West Big Beaver Road
Troy, MI 48084-3163
___________________ 19___
Dear Sir/Madam:
This letter will confirm that the Purchase Order Terms and Conditions on the
reverse side hereof (the "Terms") shall apply to all purchase orders issued to
Vendor by Kmart, whether by telephone, hard copy, electronically or otherwise.
Please note that the instructions in item 11 of the Terms are applicable to
Distribution Center.
Receipt of this confirmation is REQUIRED before Vendor will be authorized to
receive purchase orders from Kmart Corporation.
Please have the chairman, president or a vice president of Vendor confirm that
the Terms will apply to all Kmart orders issued to Vendor by signing and
returing one original of this letter (WITH NO CHANGES OF ANY KIND) to the adress
below no later than 7 business days from the above date. Retain the other
original or a copy for your files. This letter must be signed by the Company
which is paid by Kmart.
Very truly yours,
Kmart Corporation
- --------------------------------- ----------------------------------------
Signature Registered Legal Name of Vendor
- --------------------------------- ----------------------------------------
Title Address
----------------------------------------
City State Zip
----------------------------------------
Vendor Officer Signature
(Chairman, President or Vice President only)
----------------------------------------
Print Name
----------------------------------------
Title
RETURN TO:
ATTN
------------------------------
KMART CORPORATION
3100 WEST BIG BEAVER ROAD
TROY MI 48084-3163
<PAGE>
EXHIBIT D
THIS ORDER CONTRACT IS UPON THE FOLLOWING TERMS AND CONDITIONS:
1. Seller's commencement of or promise of shipment of the Merchandise shall
constitute Seller's agreement that it will deliver the Merchandise in
accordance with the terms and conditions contained or incorporated herein,
all of which are a part of the Order Contract and should be carefully read.
Any provisions in Seller's invoices, billing statements, acknowledgement
forms or other documents which are inconsistent with the provisions of this
Order Contract shall be of no force or effect.
2. Seller represents and warrants to Kmart Corporation ("Buyer"), in
addition to all warranties implied by law, that each item of Merchandise
described on the face hereof, together with all retail packaging, labeling
and other material furnished by Seller ("Merchandise"), shall (a) be free
from defects in design, workmanship or materials, including, without
limitation, such defects as could create a hazard to life or property; (b)
conform in all respects with all applicable federal, state and local laws,
orders and regulations, including, without limitation, those concerning
the marking of the country of origin, fiber content, care labeling and
shrinkage, as Merchandise not in compliance and not properly marked is
subject to heavy penalty; (c) not infringe or encroach upon Buyer's or
any third party's personal, contractual or proprietary rights, including,
without limitation, patents, trademarks, trade names, copyrights, rights of
privacy or trade secrets; and (d) conform to all of Buyer's specifications
and to all articles shown to Buyer as Merchandise samples. Seller further
represents and warrants that it has ascertained that no child, forced or
prison labor is utilized in the manufacture of Merchandise.
3. Seller agrees to reimburse, indemnify, hold harmless and defend at Seller's
expense (or pay any attorney's fees incurred by Buyer) Buyer and its
subsidiary and affiliate companies against all damages, loss, expense,
claim, liability, fine, settlement or penalty, including, without
limitation, claims of infringement of patents, copyrights and trademarks,
unfair competition, bodily injury or property or other damage arising out
of any use, possession, consumption or sale of the Merchandise or failure
to provide complete, accurate and acceptable (to U.S. Customs) information
and documentation relating to, without limitation, the country of origin,
or failure of Seller to perform promptly this Order Contract. Seller shall
obtain adequate insurance to cover its liability under this Order Contract
and shall provide copies of the applicable certificate(s) of insurance to
Buyer.
4. Acceptance of Merchandise by Buyer after inspection does not release or
discharge Seller from any liability for damages or from any other remedy of
Buyer for Seller's breach of any promise or warranty, expressed or implied.
This Order Contract may at Buyer's option be deemed cancelled if the
Merchandise ordered herein is not covered by a full set of "Clean" "On
Board" Ocean Bills of Lading and Buyer's Inspection Certificate dated on or
before the shipping date specified on the face hereof. Any such
cancellation shall be without prejudice to all other rights and remedies
accruing to Buyer by reason of Seller's breach, unless a written extension
of shipping date(s) was previously granted in writing to Seller by Buyer.
If any of the terms, conditions or warranties of or underlying this Order
Contract, express or implied, are not strictly complied with by Seller with
respect to any shipment or installment shipment of the Merchandise ordered
herein, Buyer has the right, in addition to all other rights and remedies
accruing to Buyer by reason of Seller's breach, to refuse to accept any
or all deliveries of Merchandise ordered herein, but only acceptance by
Buyer of any such singular shipment or installment shipment shall not be
deemed (whether or not Buyer notifies Seller of its demand for strict
compliance with respect to future shipment installments) a waiver by Buyer
of any of its rights to refuse any future shipments hereunder or of any
other rights or remedies.
5. All Merchandise design, patents and trademarks which are supplied by Buyer
to Seller or which are distinctive of Buyer's private label merchandise
("Special Features") shall be the property of Buyer and shall be used by
Seller only for Buyer. Buyer may use the Special Features on or with
respect to goods manufactured by others and obtain legal protection for the
Special Features including, without limitation, patents, design patents,
copyrights and trademarks. Merchandise which is not delivered to Buyer for
any reason shall not be sold or transferred to any third party without
written authorization of Buyer and unless all labels, tags, packaging and
markings identifying the Merchandise to Buyer have been removed.
6. THIS ORDER CONTRACT SHALL BE CONSTRUED AND ENFORCED UNDER AND IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN. ANY UNSETTLED
DISPUTE HEREUNDER WHERE THE AMOUNT IN CONTROVERSY IS LESS THAN OR EQUALS
$50,000 (U.S.) SHALL BE FINALLY SETTLED BY ARBITRATION, HELD IN THE UNITED
STATES OF AMERICA AT DETROIT, MICHIGAN AND CONDUCTED IN ACCORDANCE WITH
THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION. JUDGMENT UPON ANY
ARBITRATION AWARD RENDERED, IF NOT SATISFIED WITHIN NINETY (90) DAYS, MAY
BE ENTERED IN ANY COURT HAVING JURISDICTION, OR APPLICATION MAY BE MADE TO
ANY SUCH COURT FOR A JUDICIAL RECOGNITION, ACCEPTANCE AND ORDER OF
ENFORCEMENT, AS THE CASE MAY BE. IN ANY UNSETTLED DISPUTE HEREUNDER WHERE
THE AMOUNT IN CONTROVERSY EXCEEDS $50,000 (U.S.), IT IS HEREBY MUTUALLY
AGREED THAT SELLER SHALL EXERCISE ANY RIGHT OR REMEDY EXCLUSIVELY IN, AND
HEREBY CONSENTS TO THE JURISDICTION OF, THE UNITED STATES DISTRICT COURT IN
DETROIT, MICHIGAN.
7. (a) All rights granted to Buyer hereunder shall be in addition to and not
in lieu of Buyer's rights arising by operation of law; (b) any provisions
of this Order Contract which are typewritten or handwritten by Buyer shall
supersede any contrary or inconsistent printed provisions; (c) no
modification of terms of this Order Contract shall be valid, including,
without limitation, price increase, unless in writing and signed by Buyer;
(d) should any of the provisions of this Order Contract be declared by a
court of competent jurisdiction to be invalid, such decision shall not
affect the validity of any remaining provisions; (e) all of the terms
herein shall apply to additional quantities of Merchandise ordered by
Buyer except to the extent covered by a new written agreement; and (f) all
documents prepared in connection with this Order Contract must be written
in the English language and in U.S. currency figures.
8. Neither this Order Contract nor any right, duty or obligation hereunder is
assignable without prior written consent of Buyer, nor shall Buyer be under
any obligation to recognize any assignment of monies payable hereunder.
9. Seller agrees to prepare and produce all documents which are necessary for
the Merchandise to clear U.S. Customs and which are otherwise required by
applicable laws or regulations, the Letter of Credit or instructions set
forth on the face hereof.
10. All shipping cartons are to be marked and packed in accordance with Buyer's
International Department Standard Instructions To Foreign Shippers, which
Standard Instructions are part of and are incorporated in this Order
Contract by this reference. In addition, Seller agrees to follow any
shipping instructions issued directly to Seller by Buyer's International
Department.
11. Without in any way limiting Buyer's other rights and remedies arising
under paragraph 2 above, Seller agrees that any Merchandise, packaging or
component that (1) mis-states the true country of origin, or (2) is made
in whole or in part by child or prison labor, will be a material breach of
this Order Contract resulting in cancellation of this Order Contract and
liability of Seller to Buyer for liquidated damages equal to the total
FOB-factory cost of the Merchandise plus all freight, import/export charges
and other costs incurred for the shipment or return (or destruction at
Buyer's election) of seized or re-delivered Merchandise.
12. Except for the right to receive payment, Seller hereby assigns all of its
rights (expressed and implied) under any purchase order Seller issues to a
manufacturer for Merchandise or any component thereof covered by this Order
Contract including, without limitation, rights of warranty and
indemnification, and Seller shall cooperate fully with Buyer in pursuing
such rights. Buyer is not assuming, nor shall this purchase order be
construed to impose, any obligation on the part of Buyer to a manufacturer
in connection with the Merchandise. This partial assignment shall not act
to limit Buyer's rights and remedies elsewhere under this Order Contract.
13. Merchandise shall, at Buyer's option, be subject to domestic or overseas
testing. Seller agrees to pay for all fees and costs associated with such
testing (which fees and costs are set forth in Buyer's current Quality
Assurance Manual or other documentation provided by Seller). The testing of
Seller's Merchandise by, or on behalf of, Kmart is not a substitute for
Seller's own testing and other quality assurance related obligations in
connection with its sale of Merchandise to Buyer, and such testing shall
not limit Buyer's rights, or diminish or remove any of Seller's
responsibilities, hereunder including, without limitation, those relating
to warranty and indemnification under Paragraphs 2 and 3 above.
Address All Correspondence
Regarding This Order Contract To: Kmart Corporation
International Department
3100 West Big Beaver Road
Troy MI 48084-3163
<PAGE>
KMART CORPORATION
International Headquarters
3100 West Big Beaver Road
Troy, MI 48084-3163
___________________ 19___
Dear Sir/Madam:
This letter will confirm that the Purchase Order Terms and Conditions on the
reverse side hereof (the "Terms") shall apply to all purchase orders issued to
Vendor by Kmart, whether by telephone, hard copy, electronically or otherwise.
Please note that the instructions in item 11 of the Terms are applicable to
Distribution Center.
Receipt of this confirmation is REQUIRED before Vendor will be authorized to
receive purchase orders from Kmart Corporation.
Please have the chairman, president or a vice president of Vendor confirm that
the Terms will apply to all Kmart orders issued to Vendor by signing and
returing one original of this letter (WITH NO CHANGES OF ANY KIND) to the adress
below no later than 7 business days from the above date. Retain the other
original or a copy for your files. This letter must be signed by the Company
which is paid by Kmart.
Very truly yours,
Kmart Corporation
- --------------------------------- ----------------------------------------
Signature Registered Legal Name of Vendor
- --------------------------------- ----------------------------------------
Title Address
----------------------------------------
City State Zip
----------------------------------------
Vendor Officer Signature
(Chairman, President or Vice President only)
----------------------------------------
Print Name
----------------------------------------
Title
RETURN TO:
ATTN
------------------------------
KMART CORPORATION
3100 WEST BIG BEAVER ROAD
TROY MI 48084-3163
<PAGE>
EXHIBIT E
AUTHORIZED REPRESENTATIVES OF KMART
Senior Vice President General Merchandise Manager, Hardlines
Divisional Vice President, Merchandising Hardlines
Buyer, Appliances, Music, Etectronics
EXHIBIT 10.9
GUARANTY
THIS GUARANTY (the "Guaranty") is made and entered into on this 27th
day of January, 1997, by Windmere-Durable Holdings, Inc., a Florida corporation
(together with its successors and assigns, the "Guarantor") and Kmart
Corporation, a Michigan corporation ("Kmart").
Concurrently with the execution and delivery of this Guaranty, New
M-Tech, Inc., a Florida corporation which is 50%-owned by the Guarantor (the
"Company"), and Kmart have entered into a Purchase, Distribution and Marketing
Agreement (the "Agreement").
In order to induce Kmart to enter into the Agreement and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Guarantor hereby agrees as
follows:
1. GUARANTY.
(a) The Guarantor hereby unconditionally and irrevocably
guarantees, as primary obligor and not merely as surety, to Kmart, its
successors and assigns the full, complete and punctual observance, fulfillment
and performance by the Company of all the obligations of the Company under the
Agreement (the "Guaranteed Obligations").
(b) If at any time the Company fails to perform any of the
Guaranteed Obligations when required or due under and in accordance with the
terms of the Agreement, the Guarantor shall forthwith perform on the day any
Guaranteed Obligations are (or would have become) required to be performed, upon
written notice or demand by Kmart that such Guaranteed Obligations have not been
performed in accordance with the terms of the Agreement.
(c) Without limiting the foregoing, the obligations,
covenants, agreements and duties of the Guarantor under this Guaranty shall be
absolute and unconditional, and shall remain in full force and effect, and shall
not be released, discharged, limited, impaired, reduced or terminated in any way
by any circumstance or condition whatsoever.
(d) This Guaranty is a continuing guaranty with respect to
performance. The Guarantor agrees that in the discharge of its obligations
hereunder, no judgment, order or exhaustion need be obtained, and no action,
suit or proceeding need be brought, and no other remedies need be exhausted
against the Company or any other person prior to the demand by Kmart for
performance hereunder.
2. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and
warrants that:
2.1 LEGAL CAPACITY: APPROVALS AND CONSENTS.
(a) The Guarantor has the full legal right and power and all
authority and approvals necessary to execute, deliver and perform this Guaranty.
The Guarantor has duly taken all actions necessary to authorize the execution,
delivery and performance of this Guaranty. This Guaranty has been duly executed
and delivered by the Guarantor and is the valid and binding obligation of the
Guarantor enforceable in accordance with its terms, except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies.
(b) The execution, delivery and performance of this Guaranty
and the consummation of the transactions contemplated hereby does not and will
not (with the passage of time or the giving of notice or both): (x) conflict
with or result in a breach or violation by the Guarantor of, or (y) violate or
result in the breach of any of the terms of, result in a material modification
of or otherwise give any other
<PAGE>
contracting party the right to terminate or constitute a default under, or (z)
result in the acceleration of any performance or any increase in any payment or
benefits required by, any law, judgment, contract, arrangement or understanding
by which the Guarantor or the Company or any of their respective assets, shares
or business is subject or bound or may be affected. No consents or approvals of
any person are required in connection with the execution, delivery and
performance of this Guaranty.
(c) There are no persons (including, without limitation,
governmental authorities, courts and creditors of the Guarantor, and parties to
any other instrument or agreement to which the Guarantor is a party or by which
the Guarantor, the Company, or any of their respective assets are bound) whose
approval or consent, or with whom the filing of any certificate, notice,
application, report or other document, is legally or contractually required or
otherwise is necessary (i) in connection with the execution, delivery or
performance of this Guaranty by the Guarantor, (ii) in order to preclude any
termination, suspension, modification or impairment of any contract or any legal
or contractual right, privilege, permit or franchise in which the Guarantor or
the Company has a right and interest or (iii) in connection with the execution
of the Agreement.
3. COVENANTS AND AGREEMENTS. The Guarantors covenant and agree as
follows:
3.1 DISPUTE RESOLUTION. All disputes arising out of, or in relation to,
this Guaranty (other than disputes arising out of any claim by a third party in
an action commenced against a party), shall be referred for decision forthwith
to a senior executive of each party not involved in the dispute. If no agreement
can be reached through this process within thirty days of request by one party
to the other to nominate a senior executive for dispute resolution, then either
party hereto shall be entitled to pursue any and all available legal remedies.
3.2 ASSIGNMENT. This Guaranty may not be assigned nor may the
performance of any duties hereunder be delegated by either party hereto without
the prior written consent of the other party; provided that any such assignment
shall not relieve the assignor from any of its obligations hereunder or under
any other document or agreement delivered by such party pursuant to, or
delivered (or acknowledged to have been delivered) contemporaneously with or in
connection with the execution of, this Guaranty, which shall continue to be
binding upon such party notwithstanding such assignment.
3.3 NOTICES. Any notice required or permitted to be given under this
Guaranty shall be sufficiently given if in writing and delivered by registered
or certified mail (return receipt requested), facsimile (with confirmation of
transmittal), overnight courier (with confirmation of delivery), or hand
delivery to the appropriate party at the address set forth below, or at such
other address as such party may from time to time specify for that purpose in a
notice similarly given:
If to Guarantor: Windmere-Durable Holdings, Inc.
5980 Miami Lakes Drive
Miami Lakes, Florida 33014
Attn: Harry Schulman
Fax: (305) 364-0502
with a copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Cesar L. Alvarez
Fax: (305) 579-0717
If to Kmart: Kmart Corporation
3100 W. Big Beaver Road
Troy, Michigan 48084
Attn: Divisional Vice President
Home Electronics/Home Appliances
2
<PAGE>
with a copy to: Kmart Corporation
Legal Department
3100 W. Big Beaver Road
Troy Michigan 48084
Attn: General Counsel
Any such notice shall be effective (i) if sent by mail, as aforesaid,
three business days after mailing, (ii) if sent by facsimile, as aforesaid, when
sent, and (iii) if sent by courier or hand delivered, as aforesaid, when
received. Provided that if any such notice shall have been sent by mail and if
on the date of mailing thereof or during the period prior to the expiry of the
third business day following the date of mailing there shall be a general postal
disruption (whether as a result of rotating strikes or otherwise) in the United
States then such notice shall not become effective until the third business day
following the date of resumption of normal mail service.
3.4 GOVERNING LAW AND CONSENT TO JURISDICTION. THIS GUARANTY SHALL BE
DEEMED TO HAVE BEEN EXECUTED AND DELIVERED IN TROY, MICHIGAN, AND SHALL BE
CONSTRUED, INTERPRETED AND ENFORCED UNDER AND IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF MICHIGAN. THE GUARANTOR AGREES TO EXERCISE ANY RIGHT OR
REMEDY IN CONNECTION WITH THIS AGREEMENT EXCLUSIVELY IN, AND HEREBY SUBMITS TO
THE JURISDICTION OF, THE STATE OF MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR
THE UNITED STATES DISTRICT COURT IN DETROIT, MICHIGAN.
3.5 BINDING AGREEMENT. This Guaranty shall be binding upon the parties
hereto, and their respective successors and permitted assigns, whether by
operation of law or otherwise.
3.6 ENTIRE AGREEMENT. This Guaranty and all other documents and
instruments specifically incorporated by reference herein contain the entire
agreement and understanding of the parties with respect to the subject matter
hereof and thereof and supersedes all negotiations, prior discussions and
agreements relating to the subject of this Guaranty.
3.7 HEADINGS. The headings to the various paragraphs of this Guaranty
have been inserted for convenience only and shall not affect the meaning of the
language contained in this Guaranty.
3.8 WAIVER. The waiver by any party of any breach by another party of
any term or condition of this Guaranty shall not constitute a waiver of any
subsequent breach or nullify the effectiveness of that term or condition.
3.9 COUNTERPARTS. This Agreement may be executed in identical duplicate
copies exchanged by facsimile transmission. The parties agree to execute two
identical original copies of the Guaranty after exchanging signed facsimile
versions. Each identical counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.10 SEVERABILITY OF PROVISIONS. If, for any reason whatsoever, any
term, covenant or condition of this Agreement or the application thereof to any
party or circumstance is to any extent held or rendered invalid, unenforceable
or illegal, then such term, covenant or condition:
(i) shall be deemed to be independent of the remainder of
such document and to be severable and divisible
therefrom and its validity, unenforceability or
illegality does not affect, impair or invalidate the
remainder of such document or any part thereof; and
shall continue to be applicable and enforceable to
the fullest extent permitted by law against any party
and circumstances other than those as to which it has
been held or rendered invalid, unenforceable or
illegal.
(ii) shall continue to be applicable and enforceable to
the fullest extent permitted by law against any party
and circumstances other than those as to which it has
been held or rendered invalid, unenforceable or
illegal.
3
<PAGE>
3.11 NO THIRD PARTY BENEFICIARIES. Nothing in this Guaranty, express or
implied, is intended to confer on any person, other than the Guarantor and
Kmart, any rights or remedies under or by reason of this Guaranty.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed on the date first above written.
WINDMERE-DURABLE HOLDINGS, INC.
By: /S/ DAVID FRIEDSON
----------------------------
Name: David Friedson
Title: President & CEO
ACCEPTED:
KMART CORPORATION
By: /S/ [ILLEGIBLE]
-------------------------------
Name:
Title:
4
EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated January 23, 1997, by and among White
Consolidated Industries, Inc., a Delaware corporation ("WCI"), Kmart
Corporation, a Michigan corporation ("Kmart"), and Windmere-Durable Holdings,
Inc., a Florida corporation ("Windmere").
BACKGROUND
Pursuant to (i) License Agreements dated as of February 1, 1996 and May
21, 1996 by and between WCI and Salton Maxim Housewares, Inc., a Delaware
corporation which is 50% owned by Windmere ("Salton") and (ii) a License
Agreement entered into on May 1, 1996 by and between WCI and New M-Tech
Corporation, a Florida corporation which is 50% owned by Windmere ("NewTech"),
WCI granted to each of Salton and NewTech the exclusive right and license to use
the trademark "White-Westinghouse" and associated designs and trade dress
(together, the "Trademark") in connection with the manufacture, distribution and
sale of the products in the territory specified in the respective License
Agreements (collectively, the "Products").
Pursuant to the License Agreements, WCI agreed to indemnify and hold
harmless each of Salton and NewTech and their respective officers, directors,
employees and agents, from and against the cost and expenses (including, without
limitation, reasonable attorneys fees and costs) of any and all claims, suits,
losses, damages, costs, demands, obligations, investigations, causes of action,
and judgments based on or arising out of any assertion or allegation by any
persons, entities or government agencies that the Trademark infringes any
trademark, trade name or any other personal or property right of a third party.
WCI and Westinghouse Electric Corporation ("Westinghouse") are
currently involved in litigation (the "Trademark Dispute") with respect to the
Trademark rights purchased by WCI from Westinghouse under that certain Purchase
and Sale Agreement and a Trademark Agreement entered into between WCI and
Westinghouse on December 31, 1974 and March 1, 1975, respectively. In connection
with the Trademark Dispute, on November 14, 1996, WCI filed a Complaint against
Westinghouse and Catalina Lighting, Inc. ("Catalina") in the United States
District Court, Northern District of Ohio, and on December 18, 1996,
Westinghouse and Catalina filed a Complaint in the United States District Court,
Western District of Pennsylvania, against WCI, AB Electrolux, Steel City Vacuum
Co., Inc., Salton, NewTech and Windmere.
Each of Salton and NewTech expect to enter into a Purchase,
Distribution and Marketing Agreement with Kmart which will be guaranteed by
Windmere (collectively, and including the Windmere Guarantees, the "Kmart
Agreements"), pursuant to which Salton and NewTech will each grant Kmart the
exclusive right throughout the United States to purchase, market and distribute
Products bearing the Trademark. The Kmart Agreements also contain
representations, warranties, indemnification, insurance, termination and other
provisions relating to the subject matter of this Agreement, all of which remain
in full force and effect, unmodified by and in addition to this Agreement.
If the Kmart Agreements are executed, and the parties perform in
accordance therewith, WCI will derive substantial revenues under the License
Agreements. However, as a result of the Trademark Dispute, in order to induce
Kmart, Salton, NewTech and Windmere to enter into the Kmart Agreements, WCI has
agreed to indemnify and hold harmless Kmart and Windmere as provided in this
Indemnification Agreement and to reaffirm its indemnification obligations to
Salton and NewTech under the License Agreements.
Accordingly, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. INDEMNIFICATION
(a) In addition to and not in any way in limitation of any
indemnifications provided to Kmart by Salton, NewTech and/or Windmere under the
Kmart Agreements, to the fullest extent permitted by law, WCI will reimburse,
indemnify, defend and hold harmless Kmart and Windmere and
<PAGE>
each of their respective officers, directors, employees and agents
(collectively, the "Indemnified Parties"), from and against any and all cost and
expenses (including, without limitation, reasonable attorneys' fees and costs)
of and from any and all claims (including but not limited to claims of Third
Party Manufacturers as that term is defined in the Kmart Agreements), suits,
losses, damages, costs, demands, obligations, penalties, investigations, causes
of action and judgments arising directly or indirectly out of any assertion or
allegation by any persons, entities, or government agencies that the use of the
Trademark in connection with the manufacture, sale, importation, or distribution
of Products, whether pursuant to the Kmart Agreements or otherwise, infringes or
violates any trademark, trade name or any other personal, proprietary or
property right of a third party or constitutes a misuse of any trade secret
including, without limitation, any actual or alleged rights of Westinghouse or
Catalina. This indemnity agreement will be in addition to any liability that WCI
might otherwise have to the Indemnified Parties, Salton or New Tech. WCI also
expressly reaffirms to Salton and NewTech and their respective officers,
directors, employees and agents the agreement of WCI to indemnify the
Indemnified Parties as set forth herein, as if such agreement had been set forth
in full in the License Agreements.
(b) If any claim, action, suit or other proceeding shall be
instituted or threatened against any of the Indemnified Parties with respect to
any matter as to which WCI shall have any indemnity obligation under
subparagraph (a) of this paragraph 1, the Indemnified Parties shall promptly
notify WCI of the institution or threat of such action, suit or proceeding (if
WCI is not aware of such action, suit or proceeding) and, WCI shall conduct the
defense of any such action, suit or proceeding by counsel reasonably
satisfactory to the Indemnified Parties and WCI shall timely commence and
diligently continue such defense at the sole expense of WCI; provided, however,
that if defendants in any such action include both Indemnified Party and
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be one or more significant claims or defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, or if in any action any Indemnified Party
shall reasonably conclude that there may be one or more significant claims or
defenses available to it which are different from or in addition to those
available to another Indemnified Party, the Indemnifying Party shall not have
the right to direct the defense of such action on behalf of such Indemnified
Party or parties and such Indemnified Party or parties shall have the right,
after written notice to WCI specifying such claim or defense, to select separate
counsel to defend such action on behalf of such Indemnified Party or parties at
the expense of WCI, to the extent reasonable (which agrees to pay such expense
on a monthly basis). The Indemnified Parties shall also have the mutual right
absent any potential conflict, but not the obligation, to select their own
separate counsel and take all other action as shall be deemed necessary and
appropriate; provided, however, that the costs and expenses of such separate
counsel absent the conflict described above shall be borne by the Indemnified
Parties, and further provided that WCI shall not settle or compromise any such
action, suit or proceeding without the prior written consent of the Indemnified
Parties which shall not be unreasonably withheld. Should any adverse judgment
become final and nonappealable, WCI shall promptly pay the same. In the event
WCI fails to defend diligently any such action, suit or proceeding, the
Indemnified Parties shall have the sole right to defend themselves at the
expense of WCI, to the extent reasonable, and the obligations otherwise imposed
on WCI by this paragraph (b) shall continue in full force and effect and WCI
will reimburse the Indemnified Parties at the end of each month the full amount
of costs and expenses required to be paid by WCI to the Indemnified Parties
hereunder.
(c) In addition to and without limitation of all rights and remedies at
law and equity as well as all of the foregoing indemnification obligations of
WCI to the Indemnified Parties hereunder, in the event that Kmart is enjoined or
otherwise prohibited for a period of more than twenty days from purchasing,
distributing, importing and/or selling any or all of the Products under any of
the Kmart Agreements, WCI shall purchase such Products freight collect from
Kmart within three business days of Kmart's written request to do so at a price
equal to the total cost of such Products, which costs shall include, but are not
limited to, the ex-factory price, freight, commission, duties, insurance,
brokers fee and inland freight, plus a handling charge of ten percent (10%). In
addition and without limiting any other right, in the event that Kmart is
enjoined or otherwise prohibited from ordering, purchasing, distributing,
importing and/or selling any or all of the Products under any or all of the
Kmart Agreements, and regardless of whether such prohibition continues for the
full twenty (20) days, WCI shall compensate Kmart for all costs, damage, loss,
expense or penalty or any claim or action therefor, arising directly or
indirectly from such prohibition, including but not limited to Kmart's lost
profits for each day of such prohibition (not to exceed twenty (20) days
provided WCI has fulfilled its purchase obligation stated
2
<PAGE>
above), based upon Kmart's records for the immediately preceding twenty five
(25) days for the affected Products.
2. AGREEMENT NOT CONCESSION OR ADMISSION. This Indemnification
Agreement is not and shall not be construed as evidence of or an admission by
any party hereto that any claim or fact alleged by any person or entity making a
claim which is subject to any indemnification right under this Agreement is true
and correct. Neither this Indemnification Agreement nor any of its terms are
intended to create any rights in any persons who are not parties to this
Agreement, other than Salton, NewTech, Third Party Manufacturers and their
respective officers, directors, employees and agents.
3. MODIFICATION. This Indemnification Agreement may be modified only by
a writing duly signed by all parties hereto.
4. ENTIRE AGREEMENT. Except as specifically stated to the contrary in
this Agreement, this Indemnification Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof, and supersedes all
previous agreements (other than the Kmart Agreements), promises,
representations, warranties, understandings and negotiations, whether written or
oral, among the parties hereto respecting the matter of indemnification covered
by paragraph 1 hereof. It is further understood and agreed that no agreements,
promises, representations, warranties and understandings have been made or
reached by or among any of the parties hereto respecting the subject matter
hereof other than those which are expressly contained herein. Except as
expressly modified hereby, the License Agreements shall remain in full force and
effect.
5. PARTIES BOUND. This Indemnification Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; except that no party hereby may assign or transfer its
rights or obligations hereunder without the prior written consent of the other
parties hereto.
6. SEVERABILITY. It is intended that each provision of this
Indemnification Agreement shall be viewed as severable, and if any provision
shall be held to be invalid or unenforceable, the remaining provisions shall
remain in full force and effect.
7. HEADINGS. The headings of sections and paragraphs are for
convenience only, and shall not affect the interpretation thereof.
8. COUNTERPARTS. This Indemnification Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9. CHOICE OF LAW. The validity of this Indemnification Agreement, the
construction and enforcement of its terms and the interpretation of the rights
and duties of the parties hereunder shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to any
conflict of law rule or principle that would give effect to the laws of another
jurisdiction.
3
<PAGE>
10. NOTICES
If to WCI: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Attn: Legal Department
If to Kmart: Kmart Corporation
3100 Big Beaver Road
Troy Michigan 48084
Attn: General Counsel, Legal Department
If to Windmere: Windmere-Durable Holdings, Inc.
5980 Miami Lakes Drive
Miami Lakes, Florida 33014
Attn: David M. Friedson, Chairman
11. ATTORNEYS' FEES. In the event any of the parties hereto shall
institute any action or proceeding against any other party or parties hereto
relating to this Indemnification Agreement, the unsuccessful party in such
action or proceeding shall reimburse the successful party or parties for his
reasonable expenses incurred in connection therewith, including his reasonable
attorneys' fees.
12. THIRD PARTY BENEFICIARIES. Salton, NewTech and the Third Party
Manufacturers are intended third party beneficiaries of this Indemnification
Agreement, and shall be entitled to enforce all of the rights and benefits
referred to in this Agreement as if they were parties hereto on the same basis
as any party to this Agreement. The foregoing shall not abrogate or modify
Kmart's rights hereunder; and any rights of Salton, NewTech and the Third Party
Manufacturers are in addition to any rights of Kmart hereunder.
13. CONFIDENTIALITY. WCI agrees to keep the terms of this Agreement and
any information it knows or learns about any of the Kmart Agreements strictly
confidential, except to the extent obligated by law.
* * *
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WHITE CONSOLIDATED INDUSTRIES, INC.
By: /S/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
KMART CORPORATION
By: /S/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
WINDMERE-DURABLE HOLDINGS, INC.
By: /S/ DAVID M. FRIEDSON
-------------------------------------
Name: Chairman & CEO
Title:
EXHIBIT 10.11
DATED AS OF 1 OCTOBER 1997
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED
(2) POMILLO LIMITED
(3) DURABLE ELECTRICAL METAL FACTORY LIMITED
---------------------------------------
DEED OF ASSIGNMENT OF
INDUSTRIAL KNOW-HOW
---------------------------------------
<PAGE>
THIS DEED OF ASSIGNMENT is made as of 1 October 1997.
BETWEEN:
(l) DURABLE ELECTRONICS INDUSTRIES LIMITED, a company incorporated in Hong
Kong (company number: 579568), whose registered office is at 1st Floor
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong (the
"ASSIGNOR"); and
(2) POMILLO LIMITED, a company incorporated in Hong Kong (company number:
595097), whose registered office is at 37th Floor, Wu Chung House, 213
Queen's Road East, Wanchai, Hong Kong (the "ASSIGNEE"); and
(3) DURABLE ELECTRICAL METAL FACTORY LIMITED a company incorporated in Hong
Kong (company number: 35273) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
("DEM").
WHEREAS:
(A) The Assignor is the sole legal and beneficial owner of all intellectual
property rights relating to the know-how, experience, drawings, designs,
initial diagrams, manufacturing instructions, computer programs and all
other technical information which relate to the design, research,
development, manufacture or supply of (i) integrated circuit; (ii) compact
disk mechanism ("CDM"); and (iii) moulds for music centre products
(including but not limited to those with model nos. 318, 328, 3103, 3105,
3205, 5103) (the "Products") in the People's Republic of China (the "PRC")
which include but are not limited to expertise in the PRC for:
(i) design of the feature and mechanism of the Products;
(ii) sourcing the parts for production of the Products (including without
limitation CDM and plastic parts);
(iii) in-house production of certain parts (including without limitation
personal computer boards and parts for silk-screen printing);
(iv) manufacturing the Products; and
(v) implementing a fully integrated computerised management information
system, which is capable of processing information relating to
purchasing, invoicing, costing, engineering, accounting, sales
orders control, warehouse and production scheduling,
("Industrial Know-how").
<PAGE>
(B) The Assignor has agreed to assign to the Assignee the Industrial Know-how
for the consideration and upon the terms and conditions set out in this
Agreement.
NOW THIS DEED WITNESSETH as follows:
1. In consideration of the sum of US$1,977,613 payable by the Assignee to the
Assignor, which obligation to pay the sum shall remain outstanding on the
terms of a loan agreement to be executed by the Assignor as lender, the
Assignee as borrower and New M-Tech Corporation as guarantor
simultaneously with this Agreement, the Assignor, as legal and beneficial
owner, hereby assigns to the Assignee absolutely all its right, title and
interest in the Industrial Know-how and all rights of action, powers and
benefits accruing or belonging to the Assignor in relation thereto to the
intent that the Assignee shall be the legal and beneficial owner thereof
and shall be solely and absolutely entitled thereto to the exclusion of
the Assignor.
2. The Assignor shall at its own cost and at no charge to the Assignee
provide the Assignee with all know-how and other information in its
possession or the possession of its employees and all documents, drawings,
designs, initial diagrams, manufacturing instructions, computer programs,
manuals, files and all other technical information relating thereto to
enable the Assignee fully and effectively to exploit the Industrial
Know-how.
3. Until 31 October 2003, each of the Assignor and DEM, shall make available
free of charge for use by the Assignee for the manufacture of the Products
in connection with the application of the Industrial Know-how, the general
manufacturing operating software programs used by DEM and the Assignor in
manufacturing.
4. The Assignor hereby represents and warrants to the Assignee that:
(i) it is the sole legal and beneficial owner of the Industrial
Know-how, free from any liens, encumbrances, litigation or claims;
(ii) the use of the Industrial Know-how will not infringe the
intellectual property right of any third party;
(iii) the rights relating to the Industrial Know-how have not ceased to
subsist and have not been destroyed or otherwise impaired in any
way;
(iv) the Industrial Know-how has not prior to the date of this Deed been
assigned licensed granted disclosed or in any way dealt with or
encumbered so as to derogate from this Deed;
(v) the Assignor is fully entitled to enter into this Deed and to assign
the Industrial Know-how to the Assignee in a manner contemplated
within this Deed; and
(vi) the Assignor will indemnify and at all times keep the Assignee fully
indemnified from and against all actions claims proceedings costs
damages and expenses
-2-
<PAGE>
(including but not limited to legal expenses) howsoever incurred by
or awarded against the Assignee or any of its associated companies,
agents and/or servants in respect of any consequence of any breach
non-performance or non-observance by the Assignor of all or any of
the representations warranties or obligations by or of the Assignor
contained in this Deed.
5. The Assignor hereby undertakes that:
(i) it will maintain all information relating to the Industrial Know-how
in strict confidence and will not divulge any of the information
relating to the Industrial Know-how to any third party provided that
the Assignor shall not be required to maintain confidentiality on
any portion of the Industrial Know-how which has become public
knowledge through no fault of the Assignor; and
(ii) it will indemnify the Assignee, against all losses, damages, costs,
expenses, claims, demands, or liabilities of whatsoever nature
arising directly or indirectly out of its breach or the breaches by
its employees, agents or advisers or otherwise howsoever of this
Clause.
6. Each party hereby agrees to keep confidential the terms of this Deed save
for disclosure as required by law or relevant regulatory authorities.
7. Each party shall pay its own costs and disbursements of and incidental to
this Deed.
8. If at any time any provision of this Deed is or becomes illegal, invalid
or unenforceable in any respect, the legality, validity and enforceability
of the remaining provisions of this Deed shall not be affected or impaired
thereby.
9. Time shall be of the essence as regards any date or period mentioned in
this Deed and any date or period substituted for the same by agreement of
the parties hereto or otherwise.
10. Each of the parties hereto shall do and execute or procure to be done and
executed all such further acts, deeds, things and documents as may be
necessary or desirable to give effect to the terms of this Deed.
11. This Deed shall be binding on and enure for the benefit of each party's
successors and assigns (as the case may be).
12. This Deed shall be governed by and interpreted in accordance with English
law. The parties hereby submit to the non-exclusive jurisdiction of the
courts of England but this Deed may be enforced in any court of competent
jurisdiction.
13. This Deed may be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF the parties have executed this Deed as of 1 October 1997.
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRONICS )
INDUSTRIES LIMITED )
as its Deed in the presence of )
SEALED with THE COMMON SEAL of )
POMILLO LIMITED ) /S/ ILLEGIBLE
and SIGNED by )
)
)
duly authorized for and on behalf of )
POMILLO LIMITED ) /S/ ILLEGIBLE
in the presence of )
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of )
DURABLE ELECTRICAL METAL ) /S/ ILLEGIBLE
FACTORY LIMITED )
as its Deed in the presence of )
-4-
EXHIBIT 10.12
DATED AS OF 1 OCTOBER 1997
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED
(2) POMILLO LIMITED
(3) NEW M-TECH CORPORATION
-----------------------
LOAN AGREEMENT
-----------------------
<PAGE>
INDEX
Clause Page
1.DEFINITIONS .......................................................... 2
2.THE LOAN ............................................................. 2
3.REPAYMENT ............................................................ 2
4.PAYMENT .............................................................. 3
5.CONDITION PRECEDENT .................................................. 3
6.BORROWER'S REPRESENTATIONS AND WARRANTIES ............................ 3
7.EVENTS OF DEFAULT .................................................... 5
8.GUARANTEE AND INDEMNITY .............................................. 7
9.NOTICES .............................................................. 12
10.GENERAL ............................................................. 13
11.GOVERNING LAW ....................................................... 14
<PAGE>
THIS AGREEMENT is made as of 1 October 1997.
BETWEEN:
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED a company incorporated in Hong Kong
(company number: 579568) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong (the
"LENDER");
(2) POMILLO LIMITED a company incorporated in Hong Kong (company number:
595097) whose registered office is at 37th Floor, Wu Chung House, 213
Queen's Road East, Wanchai, Hong Kong (the "BORROWER"); and
(3) NEW M-TECH CORPORATION a corporation incorporated in the State of Florida
in the United States of America whose main office is at 16550 N.W., 10th
Avenue, Miami, Florida 33169, U.S.A. (the "GUARANTOR").
WHEREAS:
(A) The Lender has agreed to assign to the Borrower certain know-how developed
in the People's Republic of China for a consideration of US$1,977,613 and
to impart such know-how to the Borrower in the People's Republic of China.
(B) Pursuant to a deed dated as of 1 October 1997 made between the Lender as
assignor and the Borrower as assignee (the "Industrial Know-how
Assignment"), the Borrower has acquired all the right, title and interest
in the Industrial Know-how (as defined in the Industrial Know-how
Assignment) and all rights of action, powers and benefits accruing or
belonging to the Lender in relation thereto.
(C) Clause 1 of the Industrial Know-how Assignment provides that in
satisfaction of the obligation of the Borrower to pay the Lender the sum
of US$1,977,613 as consideration for the assignment of the Industrial
Know-how, the parties hereto shall execute this loan agreement
simultaneously with the Industrial Know-how Assignment.
(D) Pursuant to this loan agreement, the Lender will grant a loan in the
principal sum of US$1,977,613 (the "Loan") to the Borrower on the terms
hereinafter appearing.
(E) The Guarantor, being the beneficial owner of the entire issued share
capital of the Borrower, has agreed to guarantee the payment by the
Borrower of the Loan and the interest accrued thereon on the terms and
conditions set out herein.
IT IS AGREED AS FOLLOWS:
<PAGE>
1. DEFINITIONS
In this Agreement:
"BUSINESS DAY" means a day on which banks are open for business in Hong
Kong;
"EVENT OF DEFAULT" means any of the events of default set out in Clause 7;
"GUARANTEE" means the guarantee given by the Guarantor and referred to in
Clause 8.1(a);
"INTERIM PAYMENT DATE" means the last day of March, June, September and
December of each year commencing from 1 October 1997 save for the first of
such payment date which shall fall on 3 March 1998 and the last of such
payment date which shall fall on the Final Repayment Date;
"FINAL REPAYMENT DATE" means 30 September 2003.
2. THE LOAN
The Lender shall make the Loan available in the People's Republic of China
to the Borrower forthwith upon fulfilment of the condition precedent
referred to in Clause 5. The Loan shall be applied solely as payment to the
Lender of the consideration for the assignment of the Industrial Know-how
pursuant to the Industrial Know-how Assignment.
3. REPAYMENT
3.1 On each Interim Payment Date, the Borrower shall pay:
(a) interest on the Loan from and including 1 October 1997 at the rate of
1% above the prime rate per annum as prescribed by Nationsbank, National
Association (South) of the United States of America from time to time; and
(b) US$82,401 of the amount of the principal of the Loan (save for the
Interim Payment Date which falls on the Final Payment Date, when the
principal of the Loan payable shall be US$82,390),
to the Lender.
3.2 Upon the occurrence of any Event of Default, the Lender may require the
Loan to be repaid in whole or in part together with all interest accrued
thereon and other sums payable hereunder provided that the Borrower has
received from the Lender not less than 14 days' written notice to repay.
The Borrower may repay all or part of the Loan together with all interest
accrued thereon at any time.
-2-
<PAGE>
4. PAYMENT
4.1 Each payment by the Borrower under this Agreement shall be made in US
Dollars so as to be received by the Lender in same day funds, free and
clear of any restriction or condition, on the due date. Each payment shall
be made without any deduction or withholding of any kind (whether on
account of tax, by way of set-off or otherwise) except to the extent
required by law.
4.2 All payments shall be made to the following account of the Lender:
USD Cheque Account No.010-116-3534
Nationsbank
National Association (South)
P.O. Box 105713
Atlanta, Georgia 30348-5713
U.S.A.
or such bank account as the Lender may from time to time specify by notice
in writing.
4.3 Any payment which would otherwise be due on a day which is not a
Business Day shall be paid on the immediately preceding Business Day.
4.4 Any sum payable in respect of the Loan which is not paid when due shall
bear interest payable on demand at a rate of 5% above the prime rate per
annum as prescribed by Nationsbank, National Association (South) of the
United States of America from time to time. Such interest shall accrue from
the date such sum was due until its final payment in full.
5. CONDITION PRECEDENT
The Lender shall not be obliged to permit the drawing of the Loan unless
and until it has received the Industrial Know-how Assignment duly executed
by the Borrower.
6. BORROWER'S REPRESENTATIONS AND WARRANTIES
6.1 The Borrower represents and warrants that:
(a) it is a limited liability company duly incorporated and validly
existing under the laws of Hong Kong;
(b) the memorandum and articles of association of the Borrower include
provisions which give the Borrower all necessary corporate power and
authority to enter into and perform this Agreement; and the Borrower
has taken all corporate and other
-3-
<PAGE>
action to authorise the execution, delivery and performance of this
Agreement and the performance of its obligations hereunder;
(c) the obligations expressed to be assumed by the Borrower herein
constitute legal, valid and binding obligations of the Borrower;
(d) all consents, authorisations, approvals, licences, exemptions, filings,
registrations, notarisations and other requirements of governmental,
judicial and public bodies and authorities required or advisable in
connection with the execution, delivery, performance, validity,
admissibility in evidence and enforceability of this Agreement have
been obtained or effected (or, in the case of registrations, will be
effected within any applicable requested period) and (if obtained or
effected) are in full force and effect; all fees and stamp,
registration and similar tax (if any) payable in connection with them
have been paid if due; there has been no default in the performance of
any of their terms or conditions and the Borrower has full authority to
make all payments under this Agreement in accordance with the terms
hereof;
(e) the execution, delivery and performance of this Agreement do not and
will not violate in any respect any provision of (i) any law, or (ii)
the memorandum and articles of association of the Borrower, or (iii)
any agreement or other instrument to which the Borrower is a party or
which is binding on it or any of its assets, and do not and will not
result in the creation or imposition of any encumbrance over all or any
of its present or future assets or revenues, except for the Credit
Agreement entered into among the Guarantor, Newtech (Hong Kong) Limited
("NewTech Hong Kong"), Bank Leumi, Comerica Bank, and National Bank of
Canada, dated as of 23 July 1997, as amended, ("Leumi Credit
Agreement"), and the Indemnification and Guaranty Agreement entered
into among Windmere-Durable Holdings, Inc., the Guarantor and NewTech
Hong Kong, dated as of 18 September 1997 ("Windmere Security
Agreement"), both of which create charges against certain assets of the
Guarantor and for which the Leumi Credit Agreement requires consents
for any new indebtedness to be incurred by or assets to be transferred
to the Guarantor or the Borrower, or guarantees to be made by the
Guarantor, which consents shall be obtained on or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which it is a
party or which is binding on it or any of its assets or revenues to an
extent or in a manner which might have a material adverse effect on its
ability to perform its obligations under this Agreement;
(g) no litigation, arbitration or administrative or other proceeding is at
present current or pending or threatened which, if adversely
determined, either would have a material adverse effect on the assets,
financial condition, prospects or operations of the Borrower or would
materially and adversely affect the Borrower's ability to observe or
perform its obligations under this Agreement;
-4-
<PAGE>
(h) it has made no arrangements or composition with, and no assignment for
the benefit of its creditors; it has not commenced any negotiations
with a view to the general re-adjustment or re-scheduling of all or any
part of its liabilities; no petition has been presented and no meeting
has been convened and no step has been taken for the purpose of its
winding-up or dissolution or for the appointment of a receiver, trustee
or similar or equivalent officer in relation to it or to any or all of
its property or assets; and it is able to pay its debts as they fall
due, and has not suspended or threatened to suspend making payments
with respect to all or any class of its debts;
(i) the Borrower has fully disclosed in writing to the Lender all facts
relating to the Borrower which the Borrower knows or reasonably ought
to know and which are material for disclosure to the Lender in the
context of this Agreement;
(j) all information furnished by the Borrower or any person on its behalf
to the Lender in connection with this Agreement was and remains true
and complete in all respects and there is no other fact or circumstance
relating to the affairs of the Borrower which has not been disclosed to
the Lender, which non-disclosure renders any of that information
misleading, and all expressions of expectation, intention, belief and
opinion contained in any of that information were honestly made on
reasonable grounds after due and careful consideration;
(k) the choice of English law to govern this Agreement and the submission
by the Borrower to the non-exclusive jurisdiction of the courts of
England are valid and binding.
6.2 The representations and warranties in Clause 6.1 will be deemed to be
repeated by the Borrower on each Interim Payment Date with reference to the
facts and circumstances then subsisting.
7. EVENTS OF DEFAULT
The Lender shall be entitled to require the Loan to become immediately due
and repayable in full together with all accrued interest thereon and other
sums payable hereunder upon the occurrence of any of the following events
or any event which with the lapse of time or the giving of notice or the
fulfilment of any condition might become or give rise to such an event:
(a) the Borrower makes default in the payment on the due date of any
principal, interest or other moneys and as the same ought to be paid in
accordance with this Agreement; or
(b) the Borrower shall fail to comply with any other provision of this
Agreement and, if such default is capable of prompt remedy, within
fourteen days after the Borrower shall have received notice in writing
of such default from the Lender the Borrower shall have failed to cure
such default; or
-5-
<PAGE>
(c) any other indebtedness of the Borrower or Guarantor shall become due
and payable or capable of being declared due and payable prior to the
stated maturity thereof as a result of a default thereunder or any such
indebtedness shall not be paid at the maturity thereof or any guarantee
of indebtedness given by the Borrower or Guarantor is not honoured when
due and called upon or any security, interest, charge or other
encumbrance, present or future and created or assumed by the Borrower
or Guarantor shall become enforceable; or
(d) any representation or warranty in this Agreement or in any certificate
or statement delivered hereunder or in writing in connection herewith
shall prove to be untrue in any material respect of the date as of
which it was made or would, if made at any time with reference to the
facts and circumstances then subsisting, be untrue in any material
respect at that time; or
(e) any meeting of creditors of the Borrower and/or the Guarantor being
held or any arrangement, compromise or composition with or for the
benefit of its creditors being proposed or entered into by or in
relation to the Borrower and/or the Guarantor; or
(f) a supervisor, receiver, administrator, administrative receiver or other
encumbrancer taking possession of or being appointed over or in
relation to any distress, execution or other process being levied or
enforced (and not being discharged within twenty one days) upon the
whole or any substantial part of the assets of the Borrower and/or the
Guarantor; or
(g) the Borrower and/or the Guarantor ceasing or threatening to cease to
carry on business or being or becoming unable to pay its debts; or
(h) a petition being presented, or a meeting being convened for the purpose
of considering a resolution, for the making of an administration order,
the winding-up or dissolution of the Borrower and/or the Guarantor; or
(i) Joel Newman becomes the beneficial owner of a smaller percentage of the
issued share capital of the Guarantor than that held by
Windmere-Durable Holdings, Inc. except that it shall not be an event of
default hereunder where,
(i) immediately after the Guarantor makes any initial public offering
for the sale of stock to the public, Joel Newman's ownership
percentage of the issued share capital of the Guarantor is equal
to or greater than that of Windmere-Durable Holdings, Inc.; or
(ii) in the circumstances where Windmere-Durable Holdings, Inc. is
offered the opportunity to sell a specified number of shares in
the Guarantor but does not do so within 14 days of such offer,
and Joel Newman sells a corresponding number of shares in the
Guarantor thus resulting in him becoming the beneficial owner of
a smaller percentage of the issued
-6-
<PAGE>
share capital of the Guarantor than that held by Windmere-Durable
Holdings, Inc.
8. GUARANTEE AND INDEMNITY
8.1 In consideration of the Lender acting under or in connection with this
Agreement, the Guarantor hereby irrevocably and unconditionally:
(a) guarantees to the Lender the due and punctual payment of each and every
sum which from time to time falls due from the Borrower under this
Agreement and which is not paid on the due date therefor and undertakes
to pay to the Lender forthwith upon first written demand by the Lender
all sums from time to time due and payable (but unpaid) by the Borrower
under this Agreement and the Guarantor undertakes to pay any such sum
on demand, together with interest on such sum demanded from the date of
demand to the date of payment at the interest rate specified in this
Agreement, all such payments to be made in US Dollars and in such place
and in such manner as the Lender may by notice in writing to the
Guarantor require; and
(b) indemnify the Lender on demand (and this shall constitute an
independent primary obligation) against all damages, loss, costs and
expenses sustained or incurred by the Lender as a result of any failure
of the Borrower to carry out its obligation or liability under this
Agreement, provided that the Guarantor shall not be responsible for all
indirect or consequential damages so sustained or incurred by the
Lender.
8.2 The obligations of the Guarantor hereunder shall be in addition to and not
in derogation of any security or other surety cover in favour of the Lender
from time to time for the obligations of the Borrower under this Agreement.
8.3 The obligations of the Guarantor hereunder shall be continuing and
accordingly shall not be satisfied by any intermediate payment of any sum
outstanding under this Agreement but shall remain in full force and effect
until all sums which may at any time be outstanding under this Agreement
have been paid in full.
8.4 The Lender shall not be obliged before making any demand of the Guarantor
hereunder (i) to make any demand of the Borrower, (ii) to take any legal
proceedings against the Borrower, (iii) to make or file any claim in a
winding-up of the Borrower or (iv) to exercise any right which the Lender
may have under any security or against any other surety for the obligations
of the Borrower under this Agreement.
8.5 (a) The obligations of the Guarantor hereunder shall not be discharged or
affected by (i) any time (whether as to payment or otherwise) or other
indulgence given by the Lender to the Borrower in respect of any
obligation of the Borrower under this Agreement, (ii) any renewal,
termination, variation or increase of any of the terms and conditions
of, or any facility granted under, this Agreement (whether or not the
Guarantor is a party to or cognisant of the same), (iii) any
dissolution,
-7-
<PAGE>
winding-up, corporate reorganisation or any change in the constitution
of the Borrower and/or the Guarantor, (iv) any transfer or extinction
of any of the liabilities of the Borrower by any law, regulation,
decree, judgment, order or similar instrument or any other discharge,
release or variation of the liability of the Borrower other than
through payment of the Indebtedness or (v) any other act, omission or
thing which, but for this provision, would or might constitute a legal
or equitable discharge or defence of a surety.
(b) In the event that the Lender grants an extension of time to the
Borrower with or without notifying the Guarantor, it is deemed that
the Guarantor unconditionally and automatically agrees to every
extension of time, and shall not take advantage of this as a reason
for the Guarantor to be exonerated from its liabilities or obligations
hereunder.
8.6 So long as any sums are or may become outstanding under this Agreement, any
right which the Guarantor may have by reason of the performance of its
obligations hereunder (a) to be indemnified by the Borrower, (b) to prove
in a winding-up of the Borrower for any other surety for the Borrower's
obligations under this Agreement, (c) to take the benefit, in whole or in
part, of any security held by the Lender for the obligations of the
Borrower under this Agreement or (d) to be subrogated to any of the
Lender's rights under this Agreement shall not be exercisable by it without
the prior written consent of the Lender and then only in such manner and
upon such terms as the Lender reasonably requires, and the Guarantor shall
hold any moneys at any time received or recovered by it as a result of the
exercise of any such right on trust for the Lender for application in or
towards payment of sums from time to time falling due from the Borrower
under this Agreement.
8.7 The Guarantee shall be in addition to and not in substitution for any other
guarantee, indemnity, pledge, assurance, lien, bill, note, mortgage,
charge, debenture or other security now or hereafter held by the Lender.
8.8 (a) Any discharge given to the Guarantor in respect of its obligations
hereunder shall be, and shall be deemed always to have been, void if
any act on the faith of which that discharge was given is subsequently
avoided, or any moneys paid to the Lender is subsequently reduced or
repaid, by or pursuant to any provision of law. If the Lender becomes
liable to repay any moneys previously paid to the Lender hereunder or
under this Agreement or any other documents executed as security for
the obligations of the Borrower under this Agreement on the grounds of
fraudulent preference or otherwise, the liability of the Guarantor
hereunder shall be computed as if such moneys had never been paid to
the Lender and the Lender shall be entitled to enforce the Guarantee
and any security held for the liability of the Guarantor hereunder, if
any, against the Guarantor as if such release, discharge or settlement
had not occurred.
(b) The Lender shall be entitled to retain the Guarantee and any security
held by it in respect of the liability of the Guarantor hereunder for
a period of seven months after the payment, discharge or satisfaction
of all moneys payable to the Lender
-8-
<PAGE>
and all obligations to be performed under this Agreement or, in the
event of the commencement of insolvency, winding up or liquidation of
the Borrower or the Guarantor prior to the termination of such period
of seven months, or such further period as the Lender may determine
and to enforce such security subsequently as if such release,
discharge or settlement had not occurred.
(c) The Lender is hereby authorised to exercise a lien over all the
property of the Guarantor coming into its possession or control for
any reason whatsoever, and whether or not in the ordinary course of
business, with power for the Lender to sell such property, if
necessary, to satisfy any liabilities whatsoever of the Guarantor to
the Lender. Such exercise of lien and/or power to sell are/is
subordinate in all respects, however to the Leumi Credit Agreement and
the Windmere Security Agreement.
8.9 The Guarantor represents and warrants that:
(a) it is a limited liability company duly incorporated and validly
existing under the laws of the State of Florida in the United States
of America;
(b) the Articles of Incorporation and By-Laws of the Guarantor include
provisions which give the Guarantor all necessary corporate power and
authority to enter into and perform the Guarantee; and the Guarantor
has taken all necessary corporate and other action to authorise the
execution, delivery and performance of the Guarantee and the
performance of its obligations hereunder;
(c) the obligations expressed to be assumed by the Guarantor herein
constitutes legal, valid and binding obligations of the Guarantor;
(d) all consents, authorisations, approvals, licences, exemptions,
filings, registrations, notarisations and other requirements of
governmental, judicial and public bodies and authorities required or
advisable in connection with the execution, delivery, performance,
validity, admissibility in evidence and enforceability of the
Guarantee have been obtained or effected (or, in the case of
registrations, will be effected within any applicable requested
period) and (if obtained or effected) are in full force and effect;
all fees and stamp, registration and similar tax (if any) payable in
connection with them have been paid if due; there has been no default
in the performance of any of their terms or conditions and the
Guarantor has full authority to make all payments under the Guarantee
in accordance with the terms hereof;
(e) the execution, delivery and performance of the Guarantee do not and
will not violate in any respect any provision of (i) any law, or (ii)
the Articles of Incorporation and By-Laws of the Guarantor, or (iii)
any agreement or other instrument to which the Guarantor is a party or
which is binding on it or any of its assets, and do not and will not
result in the creation or imposition of any encumbrance over all or
any of its present or future assets or revenues, except for the Leumi
Credit Agreement and the Windmere Security Agreement, both of
-9-
<PAGE>
which create charges against certain assets of the Guarantor and for
which the Leumi Credit Agreement requires consents for any new
indebtedness to be incurred by or assets to be transferred to the
Guarantor or the Borrower, or guarantees to be made by the Guarantor,
which consents shall be obtained on or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which it is a
party or which is binding on it or any of its assets or revenues to an
extent or in a manner which might have a material adverse effect on
its ability to perform its obligations under the Guarantee;
(g) no litigation, arbitration or administrative or other proceeding is at
present current or pending or threatened which, if adversely
determined, either would have a material adverse effect on the assets,
financial condition, prospects or operations of the Guarantor or would
materially and adversely affect the Guarantor's ability to observe or
perform its obligations under the Guarantee, with the exception of the
litigation between Westinghouse Corporation and Guarantor, et al,
concerning the license to the `White-Westinghouse' trade name;
(h) it has made no arrangements or composition with, and no assignment for
the benefit of its creditors; it has not commenced any negotiations
with a view to the general re-adjustment or re-scheduling of all or
any part of its liabilities; no petition has been presented and no
meeting has been convened and no steps has been taken for the purpose
of its winding-up or dissolution or for the appointment of a receiver,
trustee or similar or equivalent officer in relation to it or to any
or all of its property or assets; and it is able to pay its debts as
they fall due, and has not suspended or threatened to suspend making
payments with respect to all or any class of its debts;
(i) the Guarantor has fully disclosed in writing to the Lender all facts
relating to the Guarantor which the Guarantor knows or reasonably
ought to know and which are material for disclosure to the Lender in
the context of the Guarantee including the Leumi Credit Agreement and
the Windmere Security Agreement;
(j) all information furnished by the Guarantor or any person on its behalf
to the Lender in connection with the Guarantee was and remains true
and complete in all respects and there is no other fact or
circumstance relating to the affairs of the Guarantor which has not
been disclosed to the Lender, which non-disclosure renders any of that
information misleading, and all expressions of expectation, intention,
belief and opinion contained in any of that information were honestly
made on reasonable grounds after due and careful consideration;
(k) the choice of English law to govern the Guarantee and the submission
by the Guarantor to the non-exclusive jurisdiction of the courts of
England are valid and binding; and
-10-
<PAGE>
(l) the Guarantor is the beneficial owner of the entire issued share
capital of the Borrower.
8.10 The representations and warranties in Clause 8.9 will be deemed to be
repeated by the Guarantor on each Interim Payment Date with reference to
the facts and circumstances then subsisting.
8.11 The Guarantor shall:
(a) from time to time on the request of the Lender furnish the Lender with
such information about its business and financial condition as the
Lender may reasonably require;
(b) ensure that the Borrower complies with its obligations under this
Agreement;
(c) not claim any set-off or counterclaim against the Borrower or to claim
or procure in competition with the Lender in the liquidation or
winding-up of, or have the benefit of any share in any payment or
composition from, the Borrower or any other person;
(d) promptly inform the Lender of the occurrence of any event which is or
may become (with the passage of time, the giving of notice or the
determination of any persons) an Event of Default and any event which
might adversely affect the ability of the Borrower or the Guarantor to
fully perform their respective obligations under this Agreement and
the Guarantee, and upon receipt of a written request to that effect
from the Lender, confirm to the Lender that, save as previously
notified to the Lender, no such event has occurred;
(e) obtain, maintain in full force and effect and promptly renew from time
to time all consents, licences, exemptions, filings, registrations,
notarisations, approvals and other authorisations of all governmental
or other authorities of which it had the benefit as of 1 October 1997
or as may from time to time be required to enable it to lawfully enter
into its obligations under the Guarantee, or required for the validity
or enforceability of the obligations hereof and will on request
promptly provide the Lender with evidence thereof;
(f) ensure that at all times its indebtedness hereunder ranks at least
pari passu with all its other unsecured and subordinated indebtedness
(except for any indebtedness which is preferred by mandatory
provisions of law);
(g) promptly inform the Lender in writing of any litigation, arbitration,
administration or other proceedings against the Guarantor before or of
any judicial, administrative, governmental or other authority or
arbitrator; and
(h) upon its becoming aware of the same, promptly inform the Lender of the
occurrence of any event which results in, or may reasonably be
expected to result in, (i) any of the representations and warranties
contained in Clause 8.10 being
-11-
<PAGE>
untrue or (ii) any material adverse change in the condition (financial
or otherwise) of the Guarantor and the Borrower.
8.12 With the exception of the Leumi Credit Agreement and the Windmere Security
Agreement, the Guarantor shall not, without the prior written consent of
the Lender:
(a) create or permit to subsist any encumbrance over all or any of its
present or future assets or revenues; nor
(b) other than in connection with normal trade debts, make any loans,
grant any credit or give any guarantee or indemnity (other than the
Guarantee) to or for the benefit of any person or otherwise
voluntarily assume any liability, whether actual or contingent, in
respect of any obligation of any other person or incur any other types
of borrowings or indebtedness;
provided, however, that the Guarantor shall be permitted to incur new
borrowings or indebtedness without such prior consent of the Lender as long
as and to the extent that Bank Leumi, or any new bank which replaces Bank
Leumi under the Leumi Credit Agreement, consents in writing to such new
borrowing or indebtedness, in which case the Lender may then require
security over the Guarantor's assets as collateral for this Loan Agreement
subordinate to the Leumi Credit Agreement or any substitute therefor, the
Windmere Security Agreement and any new security agreement pursuant to such
new borrowing or indebtedness.
8.13 The Guarantor shall indemnify the Lender against any losses, costs, charges
or expenses, including legal fees on a full indemnity basis and
out-of-pocket expenses, which the Lender may sustain or incur in relation
to the Guarantee (including any amendment or extension of or the granting
of any waiver or consent under the Guarantee) or in connection with the
protection, enforcement or preservation of any of the Lender's rights under
the Guarantee, provided that the Guarantor shall not be responsible for any
indirect or consequential losses so incurred.
9. NOTICES
9.1 Any notice or other communication served, given or made under this
Agreement will be in writing and, without prejudice to the validity of any
other method of service, may be delivered personally or by courier or sent
by facsimile transmission, addressed as follows:
(a) if to the Lender, to:
Address: 37th Floor, Wu Chung House
213 Queen's Road East
Wanchai
Hong Kong
Facsimile transmission number: (852) 2770 2160
Attention: Joel Newman
CC: Leo Schuck
-12-
<PAGE>
(b) if to the Borrower, to:
Address: 37th Floor, Wu Chung House
213 Queen's Road East
Wanchai
Hong Kong
Facsimile transmission number: (852) 2770 2160
Attention: Joel Newman
CC: Leo Schuck
(c) If to the Guarantor, to:
Address: 16550 N.W., 10th Avenue
Miami, Florida 33169
U.S.A.
Facsimile transmission number: (305) 624 8901
Attention: Joel Newman
CC: Leo Schuck
or to any other address or facsimile transmission number, or person for
whose attention the communication is to be addressed, as the relevant
addressee may substitute by fourteen days' prior notice in writing to the
other parties to this Agreement.
9.2 Any notice or other communication will be deemed to have been duly served,
given or made (i) in the case of courier, two Business Days after the
envelope containing the notice was delivered to the courier; or (ii) in the
case of delivery, when left at the relevant address; or (iii) in the case
of a facsimile transmission, on receipt by the addressee of the
substantially complete text in legible form.
10. GENERAL
10.1 The Guarantee shall be binding upon and enure to the benefit of each of the
Guarantor and the Lender and its successors and assigns.
10.2 The Lender shall pay its own costs and disbursements of and incidental to
this Agreement. The Borrower shall pay its own as well as the Guarantor's
costs and disbursements of and incidental to this Agreement.
10.3 No failure to exercise and no delay in exercising on the part of the Lender
any right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of
any rights or remedies provided by law.
10.4 If any provision of this Agreement is or becomes invalid, illegal or
unenforceable for any reason, such invalidity, illegality or
unenforceability shall not affect the remainder of this Agreement and the
remainder of this Agreement shall be construed and enforced as if such
invalid, illegal or unenforceable portion were not contained herein,
provided and to the extent that such construction would not materially and
adversely frustrate the original intent of the parties hereto as expressed
herein.
-13-
<PAGE>
10.5 This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
10.6 Time shall be of the essence as regards any date or period mentioned in
this Agreement and any date or period substituted for the same by agreement
of the parties hereto or otherwise.
10.7 Each of the parties hereto shall do and execute or procure to be done and
executed all such further acts, deeds, things and documents as may be
necessary or desirable to give effect to the terms of this Agreement.
10.8 This Agreement shall be assignable by the Lender.
10.9 The waiver by any party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other or subsequent
breach by such other party.
10.10 This Agreement shall enure to the benefit of, and be binding upon, each
party hereto and that party's successors and assigns.
11. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
English law. The parties hereby submit to the non-exclusive jurisdiction of
the courts of England but this Agreement may be enforced in any court of
competent jurisdiction.
-14-
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
1 October 1997.
SIGNED by )
)
for and on behalf of )
DURABLE ELECTRONICS ) /S/ ILLEGIBLE
INDUSTRIES LIMITED )
in the presence of )
SIGNED by )
)
for and on behalf of )
POMILLO LIMITED ) /S/ ILLEGIBLE
in the presence of )
SEALED with the COMMON SEAL of )
NEW M-TECH CORPORATION ) /S/ ILLEGIBLE
and SIGNED by )
)
for and on behalf of )
NEW M-TECH CORPORATION ) /S/ ILLEGIBLE
in the presence of )
-15-
EXHIBIT 10.13
DATED AS OF 1 NOVEMBER 1997
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED
(2) POMILLO LIMITED
------------------------------------------------
AGREEMENT FOR THE
SALE AND PURCHASE OF SHARES
OF
DURABLE ELECTRONICS INDUSTRIES LIMITED
------------------------------------------------
<PAGE>
INDEX
CLAUSE PAGE
- ------ ----
1. INTERPRETATION ..................................................... 2
2. SALE OF SALE SHARES ................................................ 3
3. CONSIDERATION ...................................................... 3
4. COMPLETION ......................................................... 3
5. WARRANTIES AND UNDERTAKINGS BY THE VENDOR .......................... 5
6. OBLIGATIONS PRIOR TO COMPLETION .................................... 8
7. DURATION ........................................................... 9
8. NON-COMPETITION .................................................... 9
9. NON-DISCLOSURE ..................................................... 9
10. TRADENAMES ......................................................... 10
11. CONFIDENTIALITY .................................................... 10
12. MISCELLANEOUS ...................................................... 10
13. GOVERNING LAW AND JURISDICTION ..................................... 12
SCHEDULE THE COMPANY ................................................... 13
<PAGE>
THIS AGREEMENT is made as of 1 November 1997.
BETWEEN:
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED a company incorporated in Hong
Kong (company number: 35273), whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "VENDOR"); and
(2) POMILLO LIMITED a company incorporated in Hong Kong (company number:
595097), whose registered office is at 37th Floor, Wu Chung House, 213
Queen's Road East, Wanchai, Hong Kong (the "PURCHASER").
WHEREAS:
(A) Durable Electronics Industries Limited (the "Company") was incorporated
in Hong Kong on 11 December 1996 (under the name of "Durable
Electronics Factory Limited", which name was changed to the present
name on 19 December 1996 by the passing of a special resolution of the
shareholders of the Company), under the Companies Ordinance with
registered number 579568.
(B) The Company has an authorized share capital of HK$10,000 divided into
10,000 shares of HK$1 each, all of which have been issued and allotted
and are fully paid.
(C) The Vendor is the beneficial owner of all the issued shares of the
Company.
(D) The Company is engaged in the design, research, development and
manufacture of music centres and audio compact disc players in the
People's Republic of China (the "PRC").
(E) Further particulars of the Company are set out in Schedule.
(F) The Vendor is the beneficial owner of the Sale Shares (as defined
below) and has agreed to sell the Sale Shares to the Purchaser and/or
its nominee(s) for the consideration set out in Clause 3 on the terms
and conditions set out in this Agreement.
(G) Pursuant to a deed dated as of 1 October 1997 made between the Company
as the assignor and the Purchaser as the assignee (the "Industrial
Know-how Assignment"), the Purchaser has acquired all the right, title
and interest in the Industrial Know-how (as defined in the Industrial
Know-how Assignment) and all rights of action, powers and benefits
accruing or belonging to the Company in relation thereto.
(H) In satisfaction of the obligation of the Purchaser to pay the Company
the sum of US$1,977,613 as consideration for the assignment of the
Industrial Know-how, a loan agreement (the "DEI Loan Agreement") was
entered into on 1 October 1997 with the Company as lender, the
Purchaser as borrower and New M-Tech Corporation (being the beneficial
owner of the entire issued share capital of the Purchaser) as guarantor
in respect of a loan in the principal sum of US$1,977,613.
<PAGE>
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement, the Schedule and the recitals hereto, unless the
context requires otherwise:
"APPROVALS" means and includes all approvals, sanctions, consents,
permissions, certificates, authorisations, filings and registrations
(whether issued by any national, provincial, municipal, local or
foreign investment approval bodies);
"BUSINESS DAY" means a day (other than Saturday) on which banks in
Hong Kong are open for business;
"COMPANIES ORDINANCE" means the Companies Ordinance (Chapter 32 of the
Laws of Hong Kong);
"COMPLETION" means the performance by the parties hereto of their
respective obligations in accordance with the provisions of Clause
4.1;
"COMPLETION DATE" means 3 March 1998 or such other date as may be
agreed by the parties in writing;
"CONSIDERATION" means the consideration for the sale of the Sale
Shares being HK$10,000;
"ENCUMBRANCE" means any option, right to acquire, mortgage, charge,
pledge, lien, counter-claim, adverse claim, assignment, hypothecation,
title retention, preferential right, trust arrangement or other form
of security or encumbrance or equity and including without limitation
any agreement or commitment to give or create any of the above;
"HK$" means Hong Kong dollars;
"HONG KONG" means the Hong Kong Special Administrative Region of the
People's Republic of China;
"SALE SHARES" means the 10,000 Shares held beneficially by the Vendor,
being the entire issued share capital of the Company;
"SHARE(S)" means share(s) of HK$1.00 each in the share capital of the
Company;
"US$" means United States Dollars, the lawful currency of the United
States of America; and
-2-
<PAGE>
"WARRANTIES" means the representations, warranties and undertakings
made or given by the Vendor as set out in Clause 5.
1.2 References to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is
modified by other provisions (whether before or after 1 November 1997)
from time to time and shall include any provisions of which they are
re-enactments (whether with or without modification).
1.3 References herein to Clauses and the Schedule are to clauses of and
the Schedule to this Agreement unless the context requires otherwise
and the Schedule to this Agreement shall be deemed to form part of
this Agreement.
1.4 The headings are inserted for convenience only and shall not affect
the construction of this Agreement.
1.5 Unless the context requires otherwise, words importing the singular
include the plural and vice versa and words importing a gender include
every gender or the neuter include both genders and the neuter.
2. SALE OF SALE SHARES
Subject to the terms of this Agreement, the Vendor shall sell as
beneficial owner and the Purchaser shall purchase free from all
Encumbrances together with all rights attaching thereto from the
Completion Date (including all dividends and other distributions
declared, made or paid in respect of the Sale Shares on or after the
Completion Date) the Sale Shares and the Purchaser relying on the
Warranties shall purchase the Sale Shares with effect from Completion.
3. CONSIDERATION
The consideration for the sale of the Sale Shares is the sum of
HK$10,000.
4. COMPLETION
Completion shall take place on Completion Date at a place in Florida
of the United States of America as shall be mutually agreed (time
being of the essence) when all (but not part only) of the following
business shall be transacted:
(a) The Vendor will deliver or cause to be delivered to the
Purchaser:-
(i) instruments of transfer in respect of the Sale Shares duly
executed by the Vendor and its nominee, respectively, in
favour of the Purchaser and/or its nominee;
-3-
<PAGE>
(ii) sold notes in respect of the Sale Shares duly executed by
the Vendor in favour of the Purchaser;
(iii) the definitive share certificates in respect of the Sale
Shares;
(iv) the certificate of incorporation, business registration
certificate, all licences required for the operation of
the business of the Company which are issued in the name
of the Company, common seal, all statutory and minute and
other record books and share certificate books of the
Company together with all unused share certificate forms
and all accounting books and records of the Company;
(v) a list of all bank accounts maintained by the Company, a
copy of all existing mandates for the operation of those
bank accounts, together with copies of statements of those
accounts as at a date not earlier than the fifth Business
Day before Completion;
(vi) if so requested by the Purchaser, the written resignations
of all the directors of the Company and/or the Secretary
of the Company in the form satisfactory to the Purchaser
and containing statements by the persons resigning to the
effect that they have no outstanding claim for
compensation for loss of office or any other claim against
the Company from which they are resigning their
position(s);
(vii) any waivers, consents or other documents required to vest
in the Purchaser the full beneficial ownership of the Sale
Shares, and enable the Purchaser to procure the Sale
Shares to be registered in the name of the Purchaser and
its nominee;
(viii) certified true copies of all powers of attorney or other
authorities (if any) under which the instruments of
transfer and/or bought and sold notes in respect of the
Sale Shares and/or any other documents contemplated hereby
to be executed by the Vendor and/or its nominee have been
executed;
(ix) all consents or approvals or notices required under Hong
Kong law in relation to this Agreement as of the
Completion Date; and
(x) certified copies of the minutes of the meeting of the
board of directors of the Vendor approving and authorising
the execution of each of the documents contemplated to be
executed at Completion to which it is a party.
(b) The Vendor will procure that the following business is transacted
at a meeting of the directors of the Company:-
-4-
<PAGE>
(i) the directors of the Company will approve the entry in its
register of members of the Purchaser and its nominee as
the holders of the Sale Shares (subject to stamping) and
entries will be made in the register and definitive share
certificates issued at the direction of the Purchaser;
(ii) if required by the Purchaser, the acceptance of the
resignation of all existing directors and secretary of the
Company pursuant to Clause 4.1(a)(vi) and the appointment
of such persons nominated by the Purchaser as directors
and secretary of the Company; and
(iii) if required by the Purchaser, all existing mandates for
the operation of the bank accounts of the Company will be
revoked and new mandates issued giving authority to such
persons nominated by the Purchaser.
(c) The Purchaser shall deliver to the Vendor (or as it may direct) a
cashier's order (drawn on a licensed bank in Hong Kong or
otherwise in immediately available funds) in the sum of HK$10,000
(receipt of the same shall be a valid discharge of the
Purchaser's obligation under Clause 3).
5. WARRANTIES AND UNDERTAKINGS BY THE VENDOR
5.1 The Vendor hereby represents, warrants and undertakes to the Purchaser
as follows:-
(a) the Vendor is a limited liability company duly incorporated and
validly existing under the laws of Hong Kong;
(b) the memorandum and articles of association of the Vendor include
provisions which give it all necessary corporate power and
authority to enter into and perform this Agreement; and it has
taken all necessary corporate and other action to authorise the
execution, delivery and performance of this Agreement and the
performance of its obligations hereunder;
(c) the obligations expressed to be assumed by the Vendor herein
constitutes legal, valid and binding obligations of it;
(d) the execution, delivery and performance of this Agreement do not
and will not violate in any respect any provision of any
applicable law or its memorandum and articles of association. The
execution and delivery of this Agreement by the Vendor and the
performance by the Vendor of its obligations hereunder will not
violate any judgement, award or decree or any indenture,
agreement or other instrument to which the Vendor is a party, or
by which the Vendor or any of its properties or assets is bound
or affected, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge,
security interest or encumbrance of any nature whatsoever upon
any of its properties or assets, except to the extent that the
violation or
-5-
<PAGE>
breach would not have a material adverse effect on the Company's
business, properties, condition (financial or otherwise), results
of operations or prospects (a "Material Adverse Effect") or
materially impair Vendor's ability to consummate the transaction
contemplated hereby;
(e) the Vendor is the sole beneficial owner of the Sale Shares and
has the requisite power and authority to enter into and perform
this Agreement;
(f) there is no, and will not be as at Completion, any Encumbrance
on, over or affecting any of the Sale Shares;
(g) the Sale Shares are duly issued and fully paid up and rank pari
passu in all respects with all other issued Shares;
(h) the Company is not engaged whether as plaintiff, defendant or
otherwise in any litigation or arbitration, administrative or
criminal or other proceedings and no litigation or arbitration,
administrative or criminal or other proceedings against the
Company is pending, threatened or expected and there is no fact
or circumstance likely to give rise to any such litigation or
arbitration, administrative or criminal or other proceedings or
to any proceedings against any director, officer or employee
(past or present) of the Company in respect of any act or default
for which the Company might be vicariously liable;
(i) all information contained in this Agreement is so far as it
relates to the Company and the Vendor is true and accurate and
there are no facts known or which on reasonable enquiry should
have been known to the Vendor concerning the Company or its
assets, liabilities or prospects which have not been disclosed to
the Purchaser the omission of which is likely to make any
statement misleading or which in the circumstances of this
Agreement is material to the Purchaser for disclosure;
(j) the Company is a corporation duly organised, validly existing and
in good standing under the laws of Hong Kong and has the
corporate power to own, manage, lease and hold its properties and
to carry on its business as such business is presently conducted;
(k) the Company does not (i) have any subsidiaries; (ii) participate
in any partnership or joint venture; or (iii) own any outstanding
capital stock of any other corporation;
(l) the Company's authorised capital stock consists of 10,000 shares
of common stock, par value HK$1.00 per share. The Company has
issued and outstanding all 10,000 shares of common stock. All of
the outstanding shares of the Company's capital stock are duly
authorised, validly issued, fully paid and non-assessable and
were not issued in violation of (i) any pre-emptive or other
rights of any person to acquire securities of the Company, or
(ii) any applicable securities laws. There are no outstanding
subscriptions, options, convertible securities, rights
-6-
<PAGE>
(pre-emptive or other), warrants, calls or agreements relating to
any shares of capital stock of the Company;
(m) neither the execution and delivery of this Agreement nor the
carrying out of any of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions or
provisions of the memorandum and articles of association
of the Company;
(ii) violate any legal requirements applicable to the Company,
the violation of which would have a Material Adverse
Effect on the Company;
(iii) violate, conflict with, result in a breach of, constitute
a default under (whether with or without notice or the
lapse of time or both), or accelerate or permit the
acceleration of the performance required by, or give any
other party the right to terminate, any contract or permit
applicable to the Company, the violation of which would
have a Material Adverse Effect.
(iv) result in the creation of any material lien, charge or
other encumbrance on the shares of capital stock or any
properties of the Company; or
(v) require the Company to obtain or make any waiver, consent,
action, approval or authorisation of, or registration,
declaration, notice or filing with, any governmental
authority;
(n) the Company's audited financial statements for the fiscal year
ended 30 November 1997 shall present fairly the financial
condition, assets, and result of operations of the Company for
the dates or periods indicated thereon;
(o) the Company does not have any material liabilities or obligations
(whether accrued, absolute or contingent and whether or not of a
nature required to be reflected or reserved against in a balance
sheet in accordance with GAAP), other than (i) liabilities
reflected on the Company's 30 November 1997 balance sheet, (ii)
executory contract obligations, and (iii) liabilities incurred by
the Company since inception in the ordinary course of business,
none of which are individually or in the aggregate material to
the Company;
(p) since 30 November 1997 until Completion, the Company has not
engaged in or committed to any one or more material activities or
transactions outside the ordinary course of its business, other
than such activities or transactions which were directed by New
M-Tech Corporation or any of its subsidiaries ("NewTech Group")
or which were approved by the NewTech Group;
(q) the Company is and has been in compliance in all respects with
any and all legal requirements applicable to the Company, other
than failures to so comply that would not have a Material Adverse
Effect. The Company has not received or entered into any
citations, complaints, consent orders, compliance schedules, or
-7-
<PAGE>
other similar enforcement orders or received any written notice
from any governmental authority or any other written notice that
would indicate that there is not currently compliance with all
such legal requirements; and
(r) the Company is not in default under, and no condition exists
(whether covered by insurance or not) that with or without notice
or lapse of time or both would constitute a default under, or
breach or violation of, any legal requirement, permit or contract
applicable to the Company), or accelerate or permit the
acceleration of the performance required under, or give any other
party the right to terminate, any contract applicable to the
Company, other than defaults, breaches, violations or
accelerations that would not have a Material Adverse Effect.
5.2 Each of the Warranties shall be construed as a separate Warranty and
(save as expressly provided to the contrary) shall not be limited or
restricted by reference to or inference from the time of any other
Warranty or any other terms of this Agreement.
5.3 The Vendor represents and warrants to the Purchaser that all
Warranties were and will be true and accurate in all respects as of 1
November 1997 and as at Completion. Warranties set out herein shall be
deemed to be repeated by the Vendor immediately before Completion and
to relate to the facts then existing except otherwise declared in
writing by the Vendor, as the case may be, on or before Completion and
agreed by the Purchaser.
6. OBLIGATIONS PRIOR TO COMPLETION
From the date of this Agreement through Completion:
6.1 The Vendor shall keep the Purchaser advised as to all material
operations and proposed material operations relating to the Company.
In addition, the Vendor and the Company severally agree to (a)
respectively use all reasonable efforts to cause the Company to, (and
the Company shall), conduct its business in the ordinary course, (b)
use all reasonable efforts to keep available the services of present
key employees, (c) use all reasonable efforts to preserve the present
relationships of the Company with persons having significant business
relations therewith, (d) pay or cause to be paid all costs and
expenses (including but not limited to insurance premiums) incurred in
a timely manner, (e) use all reasonable efforts to keep all material
contracts in full force and effect, (f) use all its reasonable efforts
to comply with all of the covenants contained in all such material
contracts, (g) use all its reasonable efforts to comply in all
material respects with all applicable legal requirements, and (h) use
all its reasonable efforts to declare and pay dividends consistent
with past practices.
6.2 The Vendor shall promptly inform the Purchaser in writing of any
change in facts and circumstances that could render any of the
representations and warranties made herein inaccurate or misleading in
any material respect.
-8-
<PAGE>
7. DURATION
All representations and warranties of the parties contained in this
Agreement shall expire, terminate and be of no force and effect (or
provide the basis for any claim) unless written notice of any claim
resulting from any breach of a representation or warranty is received
prior to the first anniversary of the Completion Date.
8. NON-COMPETITION
8.1 For a period commencing on the Completion Date and terminating on 30
September 2003 (the "Restriction Period"), the Vendor shall not,
directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business that is engaged
in the manufacture of audio products, including but not limited to
music centres and audio compact disk players and the integrated
circuits, compact disk mechanisms, and moulds for music centre
products related thereto, anywhere in the world; provided, however,
that this non-compete provision shall not prohibit the Vendor from
owning up to five percent (5%) of the capital stock or partnership
interest of a company or partnership engaged in the manufacture of
audio products, and, provided further, that this non-compete provision
shall not prohibit the Vendor from engaging in the marketing,
distribution and sales of audio products. In addition, the Vendor
acknowledges that it has no right, title or interest in the Industrial
Know-how (as defined in the Industrial Know-how Assignment) previously
assigned and sold by the Company to the Purchaser pursuant to the
Industrial Know-how Assignment.
8.2 While the restriction contained in Clause 8.1 is considered by the
parties to be reasonable in all the circumstances, it is recognised
that restrictions of the nature in question may fail for technical
reasons unforeseen and accordingly it is hereby agreed and declared
that if such restriction shall be adjudged to be void or voidable as
going beyond what is reasonable in all the circumstances for the
protection of the interests of the Purchaser but would be valid if
part of the wording thereof were deleted or the periods thereof
reduced or the range of activities or area dealt with thereby reduced
in scope, the said restriction shall apply with such modifications as
may be necessary to make it valid and effective.
9. NON-DISCLOSURE
9.1 Prior to, during and after the Restriction Period, the Vendor shall
not disclose, divulge, furnish or make accessible to anyone (other
than the Purchaser or the Company or any of their affiliates or
representatives) any Confidential Information in the conduct of any
business that is competitive with the business of the Company;
provided, however, that nothing in this section will prohibit the
disclosure of any Confidential Information which is required to be
disclosed by the Vendor or its representatives in connection with any
court action or any proceeding before any governmental authority. For
purposes hereof, the term "Confidential Information" means information
of any kind concerning the Company, its business, financial condition,
results of operations, prospects, customers, marketing and other
business strategies, sources of leads, methods of obtaining new
business, expansion plans, employees and/or dealings with government
authorities; provided, however, that Confidential Information shall
not include information that is or
-9-
<PAGE>
becomes generally available to the public other than as a result of a
disclosure by the Vendor or its affiliates or any of their employees,
agents, accountants, legal counsel or other representatives or
advisers.
10. TRADENAMES
The Company acknowledges that the Vendor and its parent and affiliates
retain all rights to use of the name "Durable". However, provided that
so long as Joel Newman's ownership percentage of the issued share
capital of New M-Tech Corporation is equal to or greater than that of
Windmere-Durable Holdings, Inc., the Company is granted the right to
use the name "Durable" in combination with the words "Durable
Electronic Industries", free of charge. In the event that the said
ownership percentage of Joel Newman is less than that of
Windmere-Durable Holdings, Inc., except in the circumstances where:
(a) immediately after New M-Tech Corporation makes any initial public
offering for the sale of stock to the public, Joel Newman's
ownership percentage of the issued share capital of New M-Tech
Corporation is equal to or greater than that of Windmere-Durable
Holdings, Inc.; or
(b) Windmere-Durable Holdings, Inc. is offered the opportunity to
sell a specified number of shares in New M-Tech Corporation but
does not do so within 14 days of such offer, and Joel Newman
sells a corresponding number of shares in New M-Tech Corporation
thus resulting in him becoming the beneficial owner of a smaller
percentage of the issued share capital of New M-Tech Corporation
than that held by Windmere-Durable Holdings, Inc.,
the Vendor and/or its parent and affiliates may require the Company to
pay a reasonable royalty for the continuing use of the name, or the
Company must terminate use of such name if it does not agree to such
royalty.
11. CONFIDENTIALITY
The terms contained in this Agreement shall be and remain confidential
save for disclosure to professional advisers or as required by law,
any regulatory body or court of competent jurisdiction.
12. MISCELLANEOUS
12.1 Each party shall pay its own costs and disbursements of and incidental
to this Agreement.
12.2 Each notice, demand or other communication given or made under this
Agreement shall be in writing and delivered or sent to the relevant
party at its address or fax number set
-10-
<PAGE>
out below (or such other address or fax number as the addressee has by
five days' prior written notice specified to the other party):
To the Vendor:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Fax Number: (852) 2352 2355
Attention: Raymond So
CC: Burton A. Honig
To the Purchaser:
Address: 37th Floor, Wu Chung House
213 Queen's Road East
Wanchai
Hong Kong
Fax Number: (852) 2770 2160
Attention: Joel Newman
CC: Leo Schuck
Any notice, demand or other communication so addressed to the relevant
party shall be deemed to have been delivered (a) if given or made by
letter, when actually delivered to the relevant address; and (b) if
given or made by fax, when despatched.
12.3 If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect, the legality, validity and
enforceability of the remaining provisions of this Agreement shall not
be affected or impaired thereby.
12.4 This Agreement shall not be assignable except with the prior consent
in writing of the other parties hereto.
12.5 Each of the parties hereto shall do and execute or procure to be done
and executed all such further acts, deeds, things and documents as may
be necessary or desirable to give effect to the terms of this
Agreement.
12.6 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
12.7 No failure to exercise and no delay in exercising on the part of
either of the parties of any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies
provided by law.
-11-
<PAGE>
12.8 Time shall be of the essence as regards any date or period mentioned
in this Agreement and any date or period substituted for the same by
agreement of the parties hereto or otherwise.
13. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties hereto hereby irrevocably
submit to the non-exclusive jurisdiction of the courts of England but
this Agreement may be enforced in any court of competent jurisdiction.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
1 November 1997.
SIGNED by )
) /S/ ILLEGIBLE
for and on behalf of )
DURABLE ELECTRICAL METAL ) /S/ ILLEGIBLE
FACTORY LIMITED )
in the presence of: )
SIGNED by )
)
for and on behalf of ) /S/ ILLEGIBLE
POMILLO LIMITED )
in the presence of: )
-12-
<PAGE>
SCHEDULE
THE COMPANY
Name of the Company : Durable Electronics Industries Limited
Place of Incorporation : Hong Kong
Authorised share capital : HK$10,000
Issued share capital : HK$10,000
Registered Office : 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Registered shareholders : (i) the Vendor - 9999 Shares
(ii)Durable Electric Limited - 1 Share
(as nominee for the Vendor)
Directors : The Vendor
Shieh John Ching
Lai Kin
So Kwok Keung
Arnold Thaler
Harry David Schulman
Joel Newman
Secretary : BCS Limited
Principal activities : Design, research, development and manufacture
of music centres and audio compact disc
players in the PRC
-13-
EXHIBIT 10.14
DATED AS OF 1 NOVEMBER 1997
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED
(2) DURABLE ELECTRICAL METAL FACTORY LIMITED
(3) POMILLO LIMITED
-----------------------
DEED OF ASSIGNMENT
-----------------------
<PAGE>
THIS DEED OF ASSIGNMENT is made as of 1 November 1997.
BETWEEN:
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED a company incorporated in Hong
Kong (company number: 579568) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Assignor");
(2) DURABLE ELECTRICAL METAL FACTORY LIMITED a company incorporated in Hong
Kong (company number: 35273) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Assignee"); and
(3) POMILLO LIMITED a company incorporated in Hong Kong (company number:
595097) whose registered office is at 37th Floor, Wu Chung House, 213
Queen's Road East, Wanchai, Hong Kong (the "Borrower").
WHEREAS:
(A) Pursuant to a deed dated as of 1 October 1997 and made between the
Assignor as assignor and the Borrower as assignee (the "Industrial
Know-how Assignment"), the Borrower has acquired all the right, title
and interest in the Industrial Know-how (as defined in the Industrial
Know-how Assignment) and all rights of action, powers and benefits
accruing or belonging to the Assignor in relation thereto.
(B) In satisfaction of the obligation of the Borrower to pay the Assignor
the sum of US$1,977,613 as consideration for the assignment of the
Industrial Know-how, a loan agreement (the "Loan Agreement") was
entered into as of 1 October 1997 with the Assignor as lender, the
Borrower as borrower and New M-Tech Corporation (being the beneficial
owner of the entire issued share capital of the Borrower) as guarantor
in respect of a loan in the principal sum of US$1,977,613 with interest
accruing thereon at the rate of 1% above the prime rate per annum as
prescribed by Nationsbank, National Association (South) of the United
States of America (the "Indebtedness").
(C) The Assignor is indebted to the Assignee in the aggregate sum of
US$8,197,125 (the "Company Debt").
(D) The Assignor has agreed to assign the Indebtedness to the Assignee in
satisfaction of part (to the extent of the Indebtedness) of the Company
Debt on the terms and conditions set out herein.
NOW THIS DEED WITNESSETH as follows:
1. In consideration of a sum (the "Consideration") equal to the total
amount due under the Indebtedness (including all interest accrued
thereon), which such Consideration shall be
<PAGE>
payable by the Assignee to the Assignor and shall be set-off against
the Company Debt to the extent of the amount of the Indebtedness, the
Assignor, as beneficial owner, hereby assigns to the Assignee
absolutely all its right, title and interest in the Indebtedness free
from all claims, charges, liens, encumbrances, options, defects and
equities of any kind whatsoever to the intent that the Assignee shall
be the legal and beneficial owner thereof and shall be solely and
absolutely entitled thereto to the exclusion of the Assignor.
2. The Assignor and the Borrower hereby jointly and severally represent,
warrant and confirm to the Assignee that the Indebtedness is repayable
in accordance with the terms and conditions of the Loan Agreement and
is now duly owing without any default thereof by the Borrower.
3. The Borrower hereby acknowledges and confirms that as from 1 November
1997 the Indebtedness has been owed to the Assignee, that the Assignee
is entitled to require repayment in accordance with the terms and
conditions of the Loan Agreement and that it will make any payments due
in respect of the Indebtedness to the Assignee.
4. The Assignor shall pay its own as well as the Borrower's costs and
disbursements of and incidental to this Deed. The Assignee shall pay
its own costs and disbursements of and incidental to this Deed.
5. If at any time any provision of this Deed is or becomes illegal,
invalid or unenforceable in any respect, the legality, validity and
enforceability of the remaining provisions of this Deed shall not be
affected or impaired thereby.
6. Time shall be of the essence as regards any date or period mentioned in
this Deed and any date or period substituted for the same by agreement
of the parties hereto or otherwise.
7. Each of the parties hereto shall do and execute or procure to be done
and executed all such further acts, deeds, things and documents as may
be necessary or desirable to give effect to the terms of this Deed.
8. This Deed shall be binding upon and enure for the benefit of each
party's successors and assigns (as the case may be).
9. This Deed shall be governed by and interpreted in accordance with
English law. The parties hereby submit to the non-exclusive
jurisdiction of the courts of England but this Deed may be enforced in
any court of competent jurisdiction.
10. This Deed may be executed in any number of counterparts, each of which
when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF the parties have executed this Deed as of 1 November 1997.
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRONICS )
INDUSTRIES LIMITED )
as its Deed in the presence of )
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRICAL METAL )
FACTORY LIMITED )
as its Deed in the presence of )
SEALED with the COMMON SEAL of )
POMILLO LIMITED )
and SIGNED by ) /S/ ILLEGIBLE
)
duly authorised for and on behalf of )
POMILLO LIMITED ) /S/ ILLEGIBLE
in the presence of:- )
-3-
DATED AS OF 1 NOVEMBER 1997
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED
(2) DURABLE ELECTRONICS INDUSTRIES LIMITED
(3) NEW M-TECH CORPORATION
---------------------------
US$6,219,512 LOAN AGREEMENT
---------------------------
<PAGE>
INDEX
Clause Page
1. DEFINITIONS...........................................................2
2. THE LOAN..............................................................2
3. INTEREST..............................................................2
4. REPAYMENT.............................................................2
5. PAYMENT...............................................................3
6. CONDITION PRECEDENT...................................................3
7. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKING................3
8. EVENTS OF DEFAULT.....................................................5
9. GUARANTEE AND INDEMNITY...............................................7
10. NOTICES..............................................................12
11. GENERAL..............................................................13
12. GOVERNING LAW........................................................14
<PAGE>
THIS AGREEMENT is made as of 1 November 1997
BETWEEN:
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED a company incorporated in Hong
Kong (company number: 35273) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Lender");
(2) DURABLE ELECTRONICS INDUSTRIES LIMITED a company incorporated in Hong
Kong (company number: 579568) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Borrower"); and
(3) NEW M-TECH CORPORATION a corporation incorporated in the State of
Florida in the United States of America whose main office is at 16550
N.W., 10th Avenue, Miami, Florida 33169, U.S.A. (the "Guarantor").
WHEREAS:
(A) The Borrower is indebted to the Lender in the aggregate sum of
US$8,197,125 (the "Indebtedness").
(B) The Lender and the Borrower have agreed:
(i) to formalise part of the Indebtedness, in the form of a loan
in the principal sum of US$6,219,512 (the "Loan") due from the
Borrower to the Lender on the terms and conditions hereinafter
appearing; and
(ii) that the balance of the Indebtedness in the sum of
US$1,977,613 be set-off by way of an assignment of the benefit
of a loan of the equivalent amount pursuant to a deed of
assignment made between the Borrower as assignor, the Lender
as assignee and Pomillo Limited as borrower as of 1 November
1997.
(C) The Lender and Pomillo Limited have agreed to enter into an agreement
relating to the sale and purchase of all the issued shares of the
Borrower (the "S&P Agreement"). Upon completion of the S&P Agreement,
the Borrower will become an indirect wholly-owned subsidiary of the
Guarantor.
(D) The Guarantor has agreed to guarantee the payment by the Borrower of
the Loan and all interest accrued thereon on the terms and conditions
set out herein.
IT IS AGREED as follows:
<PAGE>
1. DEFINITIONS
In this Agreement:
"BUSINESS DAY" means a day on which banks are open for business in Hong
Kong;
"CHARGE" means the fixed charge of certain fixed assets and inventory
to be given by the Borrower in favour of the Lender;
"EVENT OF DEFAULT" means any of the events of default set out in Clause
8;
"GUARANTEE" means the guarantee given by the Guarantor and referred to
in Clause 9.1(a);
"INTEREST PAYMENT DATE" means the last day of March, June, September
and December of each year commencing from 1 November 1997 save for the
first of such interest payment date which shall fall on 3 March 1998
and the last of such interest payment date which shall fall on the
Repayment Date;
"REPAYMENT DATE" means 31 October 2003.
2. THE LOAN
The Lender shall make the Loan available to the Borrower forthwith upon
fulfilment of the condition precedent referred to in Clause 6.
3. INTEREST
Interest shall be payable on the Loan from and including 1 November
1997 at the rate of 1% above the prime rate per annum as prescribed by
Nationsbank, National Association (South) of the United States of
America from time to time, on each Interest Payment Date.
4. REPAYMENT
Upon the occurrence of any Event of Default, the Lender may require the
Loan to be repaid in whole or in part together with all interest
accrued thereon and other sums payable hereunder provided that the
Borrower has received from the Lender not less than 14 days' written
notice to repay. The Borrower may repay all or part of the Loan
together with all interest accrued thereon at any time. Save as
aforesaid or as otherwise agreed by the Lender, the Borrower shall
repay the Loan in full together with all interest accrued thereon on
the Repayment Date.
-2-
<PAGE>
5. PAYMENT
5.1 Each payment by the Borrower under this Agreement shall be made in US
Dollars so as to be received by the Lender in same day funds, free and
clear of any restriction or condition, on the due date. Each payment
shall be made without any deduction or withholding of any kind (whether
on account of tax, by way of set-off or otherwise) except to the extent
required by law.
5.2 All payments shall be made to such bank account as the Lender may from
time to time specify by notice in writing.
5.3 Any payment which would otherwise be due on a day which is not a
Business Day shall be paid on the immediately preceding Business Day.
5.4 Any sum payable in respect of the Loan which is not paid when due shall
bear interest payable on demand at a rate of 5% above the prime rate
per annum as prescribed by Nationsbank, National Association (South) of
the United States of America from time to time. Such interest shall
accrue from the date such sum was due until its final payment in full.
6. CONDITION PRECEDENT
The liability of the Lender to make available the Loan to the Borrower
is subject to the Lender having received the S&P Agreement duly
executed by all parties thereto (other than the Lender) and all
documents and instruments to be delivered to the Lender pursuant
thereto.
7. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKING
7.1 The Borrower represents and warrants that:
(a) it is a limited liability company duly incorporated and
validly existing under the laws of Hong Kong;
(b) the memorandum and articles of association of the Borrower
include provisions which give the Borrower all necessary
corporate power and authority to enter into and perform this
Agreement; and the Borrower has taken all corporate and other
action to authorise the execution, delivery and performance of
this Agreement and the performance of its obligations
hereunder;
(c) the obligations expressed to be assumed by the Borrower herein
constitute legal, valid and binding obligations of the
Borrower;
(d) all consents, authorisations, approvals, licences, exemptions,
filings, registrations, notarisations and other requirements
of governmental, judicial and public bodies and authorities
required or advisable in connection with the execution,
delivery,
-3-
<PAGE>
performance, validity, admissibility in evidence and
enforceability of this Agreement have been obtained or
effected (or, in the case of registrations, will be effected
within any applicable requested period) and (if obtained or
effected) are in full force and effect; all fees and stamp,
registration and similar tax (if any) payable in connection
with them have been paid if due; there has been no default in
the performance of any of their terms or conditions and the
Borrower has full authority to make all payments under this
Agreement in accordance with the terms hereof;
(e) the execution, delivery and performance of this Agreement do
not and will not violate in any respect any provision of (i)
any law, or (ii) the memorandum and articles of association of
the Borrower, or (iii) any agreement or other instrument to
which the Borrower is a party or which is binding on it or any
of its assets, and do not and will not result in the creation
or imposition of any encumbrance over all or any of its
present or future assets or revenues, except for the Credit
Agreement entered into among the Guarantor, Newtech (Hong
Kong) Limited ("NewTech Hong Kong"), Bank Leumi, Comerica
Bank, and National Bank of Canada, dated as of 23 July 1997,
as amended, ("Leumi Credit Agreement"), and the
Indemnification and Guaranty Agreement entered into among
Windmere-Durable Holdings, Inc., the Guarantor and NewTech
Hong Kong, dated as of 18 September 1997 ("Windmere Security
Agreement"), both of which create charges against certain
assets of the Guarantor and for which the Leumi Credit
Agreement requires consents for any new indebtedness to be
incurred by or assets to be transferred to the Guarantor or
the Borrower, or guarantees to be made by the Guarantor, which
consents shall be obtained on or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which
it is a party or which is binding on it or any of its assets
or revenues to an extent or in a manner which might have a
material adverse effect on its ability to perform its
obligations under this Agreement;
(g) no litigation, arbitration or administrative or other
proceeding is at present current or pending or threatened
which, if adversely determined, either would have a material
adverse effect on the assets, financial condition, prospects
or operations of the Borrower or would materially and
adversely affect the Borrower's ability to observe or perform
its obligations under this Agreement;
(h) it has made no arrangements or composition with, and no
assignment for the benefit of its creditors; it has not
commenced any negotiations with a view to the general
re-adjustment or re-scheduling of all or any part of its
liabilities; no petition has been presented and no meeting has
been convened and no step has been taken for the purpose of
its winding-up or dissolution or for the appointment of a
receiver, trustee or similar or equivalent officer in relation
to it or to any or all of its property or assets; and it is
able to pay its debts as they fall due, and has not suspended
or threatened to suspend making payments with respect to all
or any class of its debts;
-4-
<PAGE>
(i) the Borrower has fully disclosed in writing to the Lender all
facts relating to the Borrower which the Borrower knows or
reasonably ought to know and which are material for disclosure
to the Lender in the context of this Agreement;
(j) all information furnished by the Borrower or any person on its
behalf to the Lender in connection with this Agreement was and
remains true and complete in all respects and there is no
other fact or circumstance relating to the affairs of the
Borrower which has not been disclosed to the Lender, which
non-disclosure renders any of that information misleading, and
all expressions of expectation, intention, belief and opinion
contained in any of that information were honestly made on
reasonable grounds after due and careful consideration;
(k) the choice of English law to govern this Agreement and the
submission by the Borrower to the non-exclusive jurisdiction
of the courts of England are valid and binding.
7.2 The representations and warranties in Clause 7.1 will be deemed to be
repeated by the Borrower on each Interest Payment Date with reference
to the facts and circumstances then subsisting.
7.3 The Borrower hereby undertakes with the Lender that it shall, on or
before 31 March 1998, deliver to the Lender the Charge, in form and
substance satisfactory to the Lender, duly executed by the Borrower and
all documents and instruments to be delivered to the Lender pursuant
thereto.
8. EVENTS OF DEFAULT
The Lender shall be entitled to require the Loan to become immediately
due and repayable in full together with all accrued interest thereon
and other sums payable hereunder upon the occurrence of any of the
following events or any event which with the lapse of time or the
giving of notice or the fulfilment of any condition might become or
give rise to such an event:
(a) the Borrower makes default in the payment on the due date of
any principal, interest or other moneys and as the same ought
to be paid in accordance with this Agreement and/or the
Charge; or
(b) the Borrower shall fail to comply with any other applicable
provision of this Agreement and/or the Charge and, if such
default is capable of prompt remedy, within fourteen days
after the Borrower shall have received notice in writing of
such default from the Lender and the Borrower shall have
failed to cure such default; or
(c) the Guarantor shall fail to comply with any applicable
provision of this Agreement and if such default is capable of
prompt remedy, within fourteen days after the
-5-
<PAGE>
Guarantor shall have received notice in writing of such
default from the Lender and the Guarantor shall have failed to
cure such default; or
(d) any other indebtedness of the Borrower or Guarantor shall
become due and payable or capable of being declared due and
payable prior to the stated maturity thereof as a result of a
default thereunder or any such indebtedness shall not be paid
at the maturity thereof or any guarantee of indebtedness given
by the Borrower or Guarantor is not honoured when due and
called upon or any security, interest, charge or other
encumbrance, present or future and created or assumed by the
Borrower or Guarantor shall become enforceable; or
(e) any representation, warranty or undertaking in this Agreement
and/or the Charge or in any certificate or statement delivered
hereunder or in writing in connection herewith shall prove to
be untrue in any material respect of the date as of which it
was made or would, if made at any time with reference to the
facts and circumstances then subsisting, be untrue in any
material respect at that time; or
(f) any meeting of creditors of the Borrower and/or the Guarantor
being held or any arrangement, compromise or composition with
or for the benefit of its creditors being proposed or entered
into by or in relation to the Borrower and/or the Guarantor;
or
(g) a supervisor, receiver, administrator, administrative receiver
or other encumbrancer taking possession of or being appointed
over or in relation to any distress, execution or other
process being levied or enforced (and not being discharged
within twenty one days) upon the whole or any substantial part
of the assets of the Borrower and/or the Guarantor; or
(h) the Borrower and/or the Guarantor ceasing or threatening to
cease to carry on business or being or becoming unable to pay
its debts; or
(i) a petition being presented, or a meeting being convened for
the purpose of considering a resolution, for the making of an
administration order, the winding-up or dissolution of the
Borrower and/or the Guarantor; or
(i) Joel Newman becomes the beneficial owner of a smaller
percentage of the issued share capital of the Guarantor than
that held by Windmere-Durable Holdings, Inc. except that it
shall not be an event of default hereunder where,
(i) immediately after the Guarantor makes any initial
public offering for the sale of stock to the
public, Joel Newman's ownership percentage of the
issued share capital of the Guarantor is equal to
or greater than that of Windmere-Durable Holdings,
Inc.; or
(ii) in the circumstances where Windmere-Durable
Holdings, Inc. is offered the opportunity to sell a
specified number of shares in the Guarantor but
does not do so within 14 days of such offer, and
Joel Newman sells a
-6-
<PAGE>
corresponding number of shares in the Guarantor thus
resulting in him becoming the beneficial owner of a
smaller percentage of the issued share capital of the
Guarantor than that held by Windmere-Durable
Holdings, Inc.
9. GUARANTEE AND INDEMNITY
9.1 In consideration of the Lender acting under or in connection with this
Agreement, the Guarantor hereby irrevocably and unconditionally:
(a) guarantees to the Lender the due and punctual payment of each
and every sum which from time to time falls due from the
Borrower under this Agreement and/or the Charge and which is
not paid on the due date therefor and undertakes to pay to the
Lender forthwith upon first written demand by the Lender all
sums from time to time due and payable (but unpaid) by the
Borrower under this Agreement and/or the Charge and the
Guarantor undertakes to pay any such sum on demand, together
with interest on such sum demanded from the date of demand to
the date of payment at the interest rate specified in this
Agreement, all such payments to be made in US Dollars and in
such place and in such manner as the Lender may by notice in
writing to the Guarantor require; and
(b) indemnify the Lender on demand (and this shall constitute an
independent primary obligation) against all damages, loss,
costs and expenses sustained or incurred by the Lender as a
result of any failure of the Borrower to carry out its
obligation or liability under this Agreement and/or the
Charge, provided that the Guarantor shall not be responsible
for all indirect or consequential damages so sustained or
incurred by the Lender.
9.2 The obligations of the Guarantor hereunder shall be in addition to and
not in derogation of any security or other surety cover in favour of
the Lender from time to time for the obligations of the Borrower under
this Agreement and/or the Charge.
9.3 The obligations of the Guarantor hereunder shall be continuing and
accordingly shall not be satisfied by any intermediate payment of any
sum outstanding under this Agreement and/or the Charge but shall remain
in full force and effect until all sums which may at any time be
outstanding under this Agreement and/or the Charge have been paid in
full.
9.4 The Lender shall not be obliged before making any demand of the
Guarantor hereunder (i) to make any demand of the Borrower, (ii) to
take any legal proceedings against the Borrower, (iii) to make or file
any claim in a winding-up of the Borrower or (iv) to exercise any right
which the Lender may have under any security or against any other
surety for the obligations of the Borrower under this Agreement and/or
the Charge.
9.5 (a) The obligations of the Guarantor hereunder shall not be
discharged or affected by (i) any time (whether as to payment
or otherwise) or other indulgence given by the Lender to the
Borrower in respect of any obligation of the Borrower under
this
-7-
<PAGE>
Agreement and/or the Charge, (ii) any renewal, termination,
variation or increase of any of the terms and conditions of,
or any facility granted under, this Agreement and/or the
Charge (whether or not the Guarantor is a party to or
cognisant of the same), (iii) any dissolution, winding-up,
corporate reorganisation or any change in the constitution of
the Borrower and/or the Guarantor, (iv) any transfer or
extinction of any of the liabilities of the Borrower by any
law, regulation, decree, judgment, order or similar instrument
or any other discharge, release or variation of the liability
of the Borrower other than through payment of the Indebtedness
or (v) any other act, omission or thing which, but for this
provision, would or might constitute a legal or equitable
discharge or defence of a surety.
(b) In the event that the Lender grants an extension of time to
the Borrower with or without notifying the Guarantor, it is
deemed that the Guarantor unconditionally and automatically
agrees to every extension of time, and shall not take
advantage of this as a reason for the Guarantor to be
exonerated from its liabilities or obligations hereunder.
9.6 So long as any sums are or may become outstanding under this Agreement
and/or the Charge, any right which the Guarantor may have by reason of
the performance of its obligations hereunder (a) to be indemnified by
the Borrower, (b) to prove in a winding-up of the Borrower for any
other surety for the Borrower's obligations under this Agreement, (c)
to take the benefit, in whole or in part, of any security held by the
Lender for the obligations of the Borrower under this Agreement and/or
the Charge, or (d) to be subrogated to any of the Lender's rights under
this Agreement and/or the Charge shall not be exercisable by it without
the prior written consent of the Lender and then only in such manner
and upon such terms as the Lender reasonably requires, and the
Guarantor shall hold any moneys at any time received or recovered by it
as a result of the exercise of any such right on trust for the Lender
for application in or towards payment of sums from time to time falling
due from the Borrower under this Agreement and/or the Charge.
9.7 The Guarantee shall be in addition to and not in substitution for any
other guarantee, indemnity, pledge, assurance, lien, bill, note,
mortgage, charge, debenture or other security now or hereafter held by
the Lender.
9.8 (a) Any discharge given to the Guarantor in respect of its
obligations hereunder shall be, and shall be deemed always to
have been, void if any act on the faith of which that
discharge was given is subsequently avoided, or any moneys
paid to the Lender is subsequently reduced or repaid, by or
pursuant to any provision of law. If the Lender becomes liable
to repay any moneys previously paid to the Lender hereunder or
under this Agreement and/or the Charge or any other documents
executed as security for the obligations of the Borrower under
this Agreement and/or the Charge on the grounds of fraudulent
preference or otherwise, the liability of the Guarantor
hereunder shall be computed as if such moneys had never been
paid to the Lender and the Lender shall be entitled to enforce
the Guarantee and any security held for the liability of the
Guarantor hereunder, if any, against the Guarantor as if such
release, discharge or settlement had not occurred.
-8-
<PAGE>
(b) The Lender shall be entitled to retain the Guarantee and any
security held by it in respect of the liability of the
Guarantor hereunder for a period of seven months after the
payment, discharge or satisfaction of all moneys payable to
the Lender and all obligations to be performed under this
Agreement and/or the Charge, or in the event of the
commencement of insolvency, winding up or liquidation of the
Borrower or the Guarantor prior to the termination of such
period of seven months, or such further period as the Lender
may determine and to enforce such security subsequently as if
such release, discharge or settlement had not occurred.
(c) The Lender is hereby authorised to exercise a lien over all
the property of the Guarantor coming into its possession or
control for any reason whatsoever, and whether or not in the
ordinary course of business, with power for the Lender to sell
such property, if necessary, to satisfy any liabilities
whatsoever of the Guarantor to the Lender. Such exercise of
lien and/or power to sell are/is subordinate in all respects,
however, to the Leumi Credit Agreement and the Windmere
Security Agreement.
9.9 The Guarantor represents and warrants that:
(a) it is a limited liability company duly incorporated and
validly existing under the laws of the State of Florida in the
United States of America;
(b) the Articles of Incorporation and By-Laws of the Guarantor
include provisions which give the Guarantor all necessary
corporate power and authority to enter into and perform the
Guarantee; and the Guarantor has taken all necessary corporate
and other action to authorise the execution, delivery and
performance of the Guarantee and the performance of its
obligations hereunder;
(c) the obligations expressed to be assumed by the Guarantor
herein constitutes legal, valid and binding obligations of the
Guarantor;
(d) all consents, authorisations, approvals, licences, exemptions,
filings, registrations, notarisations and other requirements
of governmental, judicial and public bodies and authorities
required or advisable in connection with the execution,
delivery, performance, validity, admissibility in evidence and
enforceability of the Guarantee have been obtained or effected
(or, in the case of registrations, will be effected within any
applicable requested period) and (if obtained or effected) are
in full force and effect; all fees and stamp, registration and
similar tax (if any) payable in connection with them have been
paid if due; there has been no default in the performance of
any of their terms or conditions and the Guarantor has full
authority to make all payments under the Guarantee in
accordance with the terms hereof;
(e) the execution, delivery and performance of the Guarantee do
not and will not violate in any respect any provision of (i)
any law, or (ii) the Articles of Incorporation and By-Laws of
the Guarantor, or (iii) any agreement or other
-9-
<PAGE>
instrument to which the Guarantor is a party or which is
binding on it or any of its assets, and do not and will not
result in the creation or imposition of any encumbrance over
all or any of its present or future assets or revenues, except
for the Leumi Credit Agreement and the Windmere Security
Agreement, both of which create charges against certain assets
of the Guarantor and for which the Leumi Credit Agreement
requires consents for any new indebtedness to be incurred by
or assets to be transferred to the Guarantor or the Borrower,
or guarantees to be made by the Guarantor, which consents
shall be obtained on or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which
it is a party or which is binding on it or any of its assets
or revenues to an extent or in a manner which might have a
material adverse effect on its ability to perform its
obligations under the Guarantee;
(g) no litigation, arbitration or administrative or other
proceeding is at present current or pending or threatened
which, if adversely determined, either would have a material
adverse effect on the assets, financial condition, prospects
or operations of the Guarantor or would materially and
adversely affect the Guarantor's ability to observe or perform
its obligations under the Guarantee, with the exception of the
litigation between Westinghouse Corporation and the Guarantor,
et al, concerning the license to the `White-Westinghouse'
trade name;
(h) it has made no arrangements or composition with, and no
assignment for the benefit of its creditors; it has not
commenced any negotiations with a view to the general
re-adjustment or re-scheduling of all or any part of its
liabilities; no petition has been presented and no meeting has
been convened and no steps has been taken for the purpose of
its winding-up or dissolution or for the appointment of a
receiver, trustee or similar or equivalent officer in relation
to it or to any or all of its property or assets; and it is
able to pay its debts as they fall due, and has not suspended
or threatened to suspend making payments with respect to all
or any class of its debts;
(i) the Guarantor has fully disclosed in writing to the Lender all
facts relating to the Guarantor which the Guarantor knows or
reasonably ought to know and which are material for disclosure
to the Lender in the context of the Guarantee, including the
Leumi Credit Agreement and the Windmere Security Agreement;
(j) all information furnished by the Guarantor or any person on
its behalf to the Lender in connection with the Guarantee was
and remains true and complete in all respects and there is no
other fact or circumstance relating to the affairs of the
Guarantor which has not been disclosed to the Lender, which
non-disclosure renders any of that information misleading, and
all expressions of expectation, intention, belief and opinion
contained in any of that information were honestly made on
reasonable grounds after due and careful consideration;
-10-
<PAGE>
(k) the choice of English law to govern the Guarantee and the
submission by the Guarantor to the non-exclusive jurisdiction
of the courts of England are valid and binding; and
(l) the Guarantor is the beneficial owner of the entire issued
voting share capital of the Borrower.
9.10 The representations and warranties in Clause 9.9 will be deemed to be
repeated by the Guarantor on each Interest Payment Date with reference
to the facts and circumstances then subsisting.
9.11 The Guarantor shall:
(a) from time to time on the request of the Lender furnish the
Lender with such information about its business and financial
condition as the Lender may reasonably require;
(b) ensure that the Borrower complies with its obligations under
this Agreement;
(c) not claim any set-off or counterclaim against the Borrower or
to claim or procure in competition with the Lender in the
liquidation or winding-up of, or have the benefit of any share
in any payment or composition from, the Borrower or any other
person;
(d) promptly inform the Lender of the occurrence of any event
which is or may become (with the passage of time, the giving
of notice or the determination of any persons) an Event of
Default and any event which might adversely affect the ability
of the Borrower or the Guarantor to fully perform their
respective obligations under this Agreement, the Guarantee
and/or the Charge, and upon receipt of a written request to
that effect from the Lender, confirm to the Lender that, save
as previously notified to the Lender, no such event has
occurred;
(e) obtain, maintain in full force and effect and promptly renew
from time to time all consents, licences, exemptions, filings,
registrations, notarisations, approvals and other
authorisations of all governmental or other authorities of
which it has the benefit as of 1 November 1997 or as may from
time to time be required to enable it to lawfully enter into
its obligations under the Guarantee, or required for the
validity or enforceability of the obligations hereof and will
on request promptly provide the Lender with evidence thereof;
(f) ensure that at all times its indebtedness hereunder ranks at
least pari passu with all its other unsecured and subordinated
indebtedness (except for any indebtedness which is preferred
by mandatory provisions of law);
(g) promptly inform the Lender in writing of any litigation,
arbitration, administration or other proceedings against the
Guarantor before or of any judicial, administrative,
governmental or other authority or arbitrator; and
-11-
<PAGE>
(h) upon its becoming aware of the same, promptly inform the
Lender of the occurrence of any event which results in, or may
reasonably be expected to result in, (i) any of the
representations and warranties contained in Clause 9.10 being
untrue or (ii) any material adverse change in the condition
(financial or otherwise) of the Guarantor and the Borrower.
9.12 With the exception of the Leumi Credit Agreement and the Windmere
Security Agreement, the Guarantor shall not, without the prior written
consent of the Lender:
(a) create or permit to subsist any encumbrance over all or any of
its present or future assets or revenues; nor
(b) other than in connection with normal trade debt, make any
loans, grant any credit or give any guarantee or indemnity
(other than the Guarantee) to or for the benefit of any person
or otherwise voluntarily assume any liability, whether actual
or contingent, in respect of any obligation of any other
person or incur any other types of borrowings or indebtedness.
provided, however, that the Guarantor shall be permitted to incur new
borrowings or indebtedness without such prior consent of the Lender as
long as and to the extent that Bank Leumi, or any new bank which
replaces Bank Leumi under the Leumi Credit Agreement, consents in
writing to such new borrowing or indebtedness, in which case the Lender
may then require security over the Guarantor's assets as collateral for
this Loan Agreement subordinate to the Leumi Credit Agreement or any
substitute therefor, the Windmere Security Agreement and any new
security agreement pursuant to such new borrowing or indebtedness.
9.13 The Guarantor shall indemnify the Lender against any losses, costs,
charges or expenses, including legal fees on a full indemnity basis and
out-of-pocket expenses, which the Lender may sustain or incur in
relation to the Guarantee (including any amendment or extension of or
the granting of any waiver or consent under the Guarantee) or in
connection with the protection, enforcement or preservation of any of
the Lender's rights under the Guarantee, provided that the Guarantor
shall not be responsible for any indirect or consequential losses so
incurred.
10. NOTICES
10.1 Any notice or other communication served, given or made under this
Agreement will be in writing and, without prejudice to the validity of
any other method of service, may be delivered personally or by courier
or sent by facsimile transmission, addressed as follows:
-12-
<PAGE>
(a) if to the Lender, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Raymond So
CC: Burton A. Honig
(b) if to the Borrower, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Joel Newman
CC: Leo Schuck
(c) If to the Guarantor, to:
Address: 16550 N.W., 10th Avenue,
Miami, Florida 33169,
U.S.A.
Facsimile transmission number: (305) 624 8901
Attention: Joel Newman
CC: Leo Schuck
or to any other address or facsimile transmission number, or person for
whose attention the communication is to be addressed, as the relevant
addressee may substitute by fourteen days' prior notice in writing to
the other parties to this Agreement.
10.2 Any notice or other communication will be deemed to have been duly
served, given or made (i) in the case of courier, two Business Days
after the envelope containing the notice was delivered to the courier;
or (ii) in the case of delivery, when left at the relevant address; or
(iii) in the case of a facsimile transmission, on receipt by the
addressee of the substantially complete text in legible form.
11. GENERAL
11.1 The Guarantee shall be binding upon and enure to the benefit of each of
the Guarantor and the Lender and its successors and assigns.
11.2 The Lender shall pay its own costs and disbursements of and incidental
to this Agreement. The Borrower shall pay its own as well as the
Guarantor's costs and disbursements of and incidental to this
Agreement.
-13-
<PAGE>
11.3 No failure to exercise and no delay in exercising on the part of the
Lender any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
11.4 If any provision of this Agreement is or becomes invalid, illegal or
unenforceable for any reason, such invalidity, illegality or
unenforceability shall not affect the remainder of this Agreement and
the remainder of this Agreement shall be construed and enforced as if
such invalid, illegal or unenforceable portion were not contained
herein, provided and to the extent that such construction would not
materially and adversely frustrate the original intent of the parties
hereto as expressed herein.
11.5 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
11.6 Time shall be of the essence as regards any date or period mentioned in
this Agreement and any date or period substituted for the same by
agreement of the parties hereto or otherwise.
11.7 Each of the parties hereto shall do and execute or procure to be done
and executed all such further acts, deeds, things and documents as may
be necessary or desirable to give effect to the terms of this
Agreement.
11.8 This Agreement shall be assignable by the Lender.
11.9 The waiver by any party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other or
subsequent breach by such other party.
11.10 This Agreement shall enure to the benefit of, and be binding upon, each
party hereto and that party's successors and assigns.
12. GOVERNING LAW
12.1 This Agreement shall be governed by and construed in all respects in
accordance with English law and it is irrevocably agreed for the
exclusive benefit of the Chargee that the courts of England are to have
non-exclusive jurisdiction to settle any disputes which may arise out
of or in connection with this Agreement and that accordingly any suit,
action or proceeding arising out of or in connection with this
Agreement (in this Clause referred to as "Proceedings") may be brought
in such courts. Nothing in this Clause shall limit the right of the
Chargee to take the Proceedings against the Company in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one
or more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
-14-
<PAGE>
12.2 The Company hereby appoints__________________________________________of
______________________________________________________________________,
England (marked for the attention of__________________________________)
as its authorised agent for the purpose of accepting service of
process for all purposes in connection with this Agreement.
12.3 To the extent that the Company may be entitled in any jurisdiction to
claim for itself or any of its property or assets immunity in respect
of its obligations under this Agreement from service of process,
jurisdiction, suit, judgment, execution, attachment (whether before
judgment, in aid of execution or otherwise) or legal process or to the
extent that in any jurisdiction there may be attributed to it or all or
any of its property or assets immunity of that kind (whether or not
claimed), the Company irrevocably agrees not to claim and irrevocably
waives that immunity to the fullest extent permitted by the laws of
that jurisdiction.
-15-
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
1 November 1997.
SIGNED by )
)
for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRICAL METAL )
FACTORY LIMITED )
in the presence of )
SIGNED by )
)
for and on behalf of )
DURABLE ELECTRONICS ) /S/ ILLEGIBLE
INDUSTRIES LIMITED )
in the presence of )
SEALED with the COMMON SEAL of )
NEW M-TECH CORPORATION )
and SIGNED by ) /S/ ILLEGIBLE
)
for and on behalf of )
NEW M-TECH CORPORATION ) /S/ ILLEGIBLE
in the presence of )
-16-
EXHIBIT 10.16
DATED AS OF 1 NOVEMBER 1997
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED
(2) DURABLE ELECTRONICS INDUSTRIES LIMITED
(3) NEW M-TECH CORPORATION
-------------------------------------
WORKING CAPITAL LOAN AGREEMENT
-------------------------------------
<PAGE>
INDEX
Clause Page
1. DEFINITIONS .................................................1
2. THE LOAN.....................................................2
3. INTEREST.....................................................3
4. REPAYMENT....................................................3
5. PAYMENT......................................................3
6. CONDITION PRECEDENT..........................................3
7. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKING.......4
8. EVENTS OF DEFAULT............................................6
9. GUARANTEE AND INDEMNITY......................................7
10. NOTICES.....................................................13
11. GENERAL.....................................................14
12. GOVERNING LAW...............................................15
<PAGE>
THIS AGREEMENT is made as of 1 November 1997
BETWEEN:
(1) DURABLE ELECTRICAL METAL FACTORY LIMITED a company incorporated in Hong
Kong (company number: 35273) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Lender");
(2) DURABLE ELECTRONICS INDUSTRIES LIMITED a company incorporated in Hong
Kong (company number: 579568) whose registered office is at 1st Floor,
Efficiency House, 35 Tai Yau Street, San Po Kong, Kowloon, Hong Kong
(the "Borrower"); and
(3) NEW M-TECH CORPORATION a corporation incorporated in the State of
Florida in the United States of America whose main office is at 16550
N.W., 10th Avenue, Miami, Florida 33169, U.S.A. (the "Guarantor").
WHEREAS:
(A) Pursuant to this loan agreement, the Lender has agreed to grant :
(i) an on-demand loan to the Borrower up to a maximum amount of
US$500,000 ("Initial Loan"); and
(ii) a loan facility of such amount at the absolute discretion of
the Lender from time to time after the full amount of the
Initial Loan has been advanced ("Discretionary Loan") (the
Initial Loan and the Discretionary Loan are collectively
referred to as the "Loan").
(B) The Lender and Pomillo Limited have agreed to enter into an agreement
relating to the sale and purchase of all the issued shares of the
Borrower (the "S&P Agreement"). Upon completion of the S&P Agreement,
the Borrower will become an indirect wholly-owned subsidiary of the
Guarantor.
(C) The Guarantor has agreed to guarantee the payment by the Borrower of
the Loan and all interest accrued thereon on the terms and conditions
set out herein.
IT IS AGREED as follows:
1. DEFINITIONS
In this Agreement:
"BUSINESS DAY" means a day on which banks are open for business in Hong
Kong;
<PAGE>
"CHARGE" means the fixed charge of certain fixed assets and inventory
to be given by the Borrower in
favour of the Lender;
"EVENT OF DEFAULT" means any of the events of default set out in Clause
8;
"GUARANTEE" means the guarantee given by the Guarantor and referred to
in Clause 9.1(a);
"INTEREST PAYMENT DATE" means the last day of March, June, September
and December of each year commencing from 31 December 1997 save for the
first of such interest payment date which shall fall on 3 March 1998
and the last of such interest payment date which shall fall on the
Repayment Date;
"REPAYMENT DATE" means 31 October 2003.
2. THE LOAN
2.1 The Lender shall, on or after 1 January 1998, make the Initial Loan
available to the Borrower on the fifth Business Day immediately
following the day of:
(i) fulfilment of the condition precedent referred to in Clause 6;
and
(ii) with respect to any Discretionary Loan, the production of
relevant board resolutions of the Borrower or accounts or
budget prepared for the Borrower confirming the amount(s)
required for the Borrower's relevant operational finance
(including but not limited to equipment purchases and
excluding acquisitions) or peak working capital needs,
whichever is the later.
2.2 Provided that the conditions precedent referred to in Clause 6 is
satisfied and the full amount of the Initial Loan has been advanced,
the Lender shall make the Discretionary Loan available to the Borrower,
at its absolute discretion, on the fifth Business Day immediately
following the day of the production of relevant board resolutions of
the Borrower or accounts or budget prepared for the Borrower confirming
the amount(s) required for the Borrower's relevant operational finance
(including but not limited to equipment purchases and excluding
acquisitions) or peak working capital needs.
The Borrower may drawdown any amount of the Discretionary Loan
available in one or more advances.
2.3 The Loan shall be applied for operational finance (including but not
limited to equipment purchases and excluding acquisitions) or peak
working capital needs of the Borrower.
-2-
<PAGE>
3. INTEREST
Interest shall be payable on the Loan from and including the date
hereof at the rate of 1% above the prime rate per annum as prescribed
by Nationsbank, National Association (South) of the United States of
America from time to time, on each Interest Payment Date.
4. REPAYMENT
Upon the occurrence of any Event of Default or written demand, the
Lender may require the Loan to be repaid in whole or in part together
with all interest accrued thereon and other sums payable hereunder
provided that the Borrower has received from the Lender not less than
14 days' written notice to repay. The Borrower may repay all or part of
the Loan together with all interest accrued thereon at any time. Save
as aforesaid or as otherwise agreed by the Lender, the Borrower shall
repay the Loan in full together with all interest accrued thereon on
the Repayment Date.
5. PAYMENT
5.1 Each payment by the Borrower under this Agreement shall be made in US
Dollars so as to be received by the Lender in same day funds, free and
clear of any restriction or condition, on the due date. Each payment
shall be made without any deduction or withholding of any kind (whether
on account of tax, by way of set-off or otherwise) except to the extent
required by law.
5.2 All payments shall be made to such bank account as the Lender may from
time to time specify by notice in writing.
5.3 Any payment which would otherwise be due on a day which is not a
Business Day shall be paid on the immediately preceding Business Day.
5.4 Any sum payable in respect of the Loan which is not paid when due shall
bear interest payable on demand at a rate of 5% above the prime rate
per annum as prescribed by Nationsbank, National Association (South) of
the United States of America from time to time. Such interest shall
accrue from the date such sum was due until its final payment in full.
6. CONDITION PRECEDENT
The liability of the Lender to make available the Loan to the Borrower
is subject to the Lender having received the S&P Agreement duly
executed by all parties thereto (other than the Lender) and all
documents and instruments to be delivered to the Lender pursuant
thereto.
-3-
<PAGE>
7. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKING
7.1 The Borrower represents and warrants that:
(a) it is a limited liability company duly incorporated and
validly existing under the laws of Hong Kong;
(b) the memorandum and articles of association of the Borrower
include provisions which give the Borrower all necessary
corporate power and authority to enter into and perform this
Agreement; and the Borrower has taken all corporate and other
action to authorise the execution, delivery and performance of
this Agreement and the performance of its obligations
hereunder;
(c) the obligations expressed to be assumed by the Borrower herein
constitute legal, valid and binding obligations of the
Borrower;
(d) all consents, authorisations, approvals, licences, exemptions,
filings, registrations, notarisations and other requirements
of governmental, judicial and public bodies and authorities
required or advisable in connection with the execution,
delivery, performance, validity, admissibility in evidence and
enforceability of this Agreement have been obtained or
effected (or, in the case of registrations, will be effected
within any applicable requested period) and (if obtained or
effected) are in full force and effect; all fees and stamp,
registration and similar tax (if any) payable in connection
with them have been paid if due; there has been no default in
the performance of any of their terms or conditions and the
Borrower has full authority to make all payments under this
Agreement in accordance with the terms hereof;
(e) the execution, delivery and performance of this Agreement do
not and will not violate in any respect any provision of (i)
any law, or (ii) the memorandum and articles of association of
the Borrower, or (iii) any agreement or other instrument to
which the Borrower is a party or which is binding on it or any
of its assets, and do not and will not result in the creation
or imposition of any encumbrance over all or any of its
present or future assets or revenues, except for the Credit
Agreement entered into among the Guarantor, Newtech (Hong
Kong) Limited ("NewTech Hong Kong"), Bank Leumi, Comerica
Bank, and National Bank of Canada, dated as of 23 July 1997,
as amended, ("Leumi Credit Agreement"), and the
Indemnification and Guaranty Agreement entered into among
Windmere-Durable Holdings, Inc., the Guarantor and NewTech
Hong Kong, dated as of 18 September 1997 ("Windmere Security
Agreement"), both of which create charges against certain
assets of the Guarantor and for which the Leumi Credit
Agreement requires consents for any new indebtedness to be
incurred by or assets to be transferred to the Guarantor or
the Borrower, or guarantees to be made by the Guarantor, which
consents shall be obtained on or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which
it is a party or which is binding on it or any of its assets
or revenues to an extent or in a manner which
-4-
<PAGE>
might have a material adverse effect on its ability to perform
its obligations under this Agreement;
(g) no litigation, arbitration or administrative or other
proceeding is at present current or pending or threatened
which, if adversely determined, either would have a material
adverse effect on the assets, financial condition, prospects
or operations of the Borrower or would materially and
adversely affect the Borrower's ability to observe or perform
its obligations under this Agreement;
(h) it has made no arrangements or composition with, and no
assignment for the benefit of its creditors; it has not
commenced any negotiations with a view to the general
re-adjustment or re-scheduling of all or any part of its
liabilities; no petition has been presented and no meeting has
been convened and no step has been taken for the purpose of
its winding-up or dissolution or for the appointment of a
receiver, trustee or similar or equivalent officer in relation
to it or to any or all of its property or assets; and it is
able to pay its debts as they fall due, and has not suspended
or threatened to suspend making payments with respect to all
or any class of its debts;
(i) the Borrower has fully disclosed in writing to the Lender all
facts relating to the Borrower which the Borrower knows or
reasonably ought to know and which are material for disclosure
to the Lender in the context of this Agreement;
(j) all information furnished by the Borrower or any person on its
behalf to the Lender in connection with this Agreement was and
remains true and complete in all respects and there is no
other fact or circumstance relating to the affairs of the
Borrower which has not been disclosed to the Lender, which
non-disclosure renders any of that information misleading, and
all expressions of expectation, intention, belief and opinion
contained in any of that information were honestly made on
reasonable grounds after due and careful consideration;
(k) the choice of English law to govern this Agreement and the
submission by the Borrower to the non-exclusive jurisdiction
of the courts of England are valid and binding.
7.2 The representations and warranties in Clause 7.1 will be deemed to be
repeated by the Borrower on each Interest Payment Date with reference
to the facts and circumstances then subsisting.
7.3 The Borrower hereby undertakes with the Lender that it shall, on or
before 31 March 1998, deliver to the Lender the Charge, in form and
substance satisfactory to the Lender, duly executed by the Borrower and
all documents and instruments to be delivered to the Lender pursuant
thereto.
-5-
<PAGE>
8. EVENTS OF DEFAULT
The Lender shall be entitled to require the Loan to become immediately
due and repayable in full together with all accrued interest thereon
and other sums payable hereunder upon the occurrence of any of the
following events or any event which with the lapse of time or the
giving of notice or the fulfilment of any condition might become or
give rise to such an event:
(a) the Borrower makes default in the payment on the due date of
any principal, interest or other moneys and as the same ought
to be paid in accordance with this Agreement and/or the
Charge; or
(b) the Borrower shall fail to comply with any other applicable
provision of this Agreement and/or the Charge and, if such
default is capable of prompt remedy, within fourteen days
after the Borrower shall have received notice in writing of
such default from the Lender and the Borrower shall have
failed to cure such default; or
(c) the Guarantor shall fail to comply with any applicable
provision of this Agreement and if such default is capable of
prompt remedy, within fourteen days after the Guarantor shall
have received notice in writing of such default from the
Lender and the Guarantor shall have failed to cure such
default; or
(d) any other indebtedness of the Borrower or Guarantor shall
become due and payable or capable of being declared due and
payable prior to the stated maturity thereof as a result of a
default thereunder or any such indebtedness shall not be paid
at the maturity thereof or any guarantee of indebtedness given
by the Borrower or Guarantor is not honoured when due and
called upon or any security, interest, charge or other
encumbrance, present or future and created or assumed by the
Borrower or Guarantor shall become enforceable; or
(e) any representation, warranty or undertaking in this Agreement
and/or the Charge or in any certificate or statement delivered
hereunder or in writing in connection herewith shall prove to
be untrue in any material respect of the date as of which it
was made or would, if made at any time with reference to the
facts and circumstances then subsisting, be untrue in any
material respect at that time; or
(f) any meeting of creditors of the Borrower and/or the Guarantor
being held or any arrangement, compromise or composition with
or for the benefit of its creditors being proposed or entered
into by or in relation to the Borrower and/or the Guarantor;
or
(g) a supervisor, receiver, administrator, administrative receiver
or other encumbrancer taking possession of or being appointed
over or in relation to any distress, execution or other
process being levied or enforced (and not being discharged
within twenty one days) upon the whole or any substantial part
of the assets of the Borrower and/or the Guarantor; or
-6-
<PAGE>
(h) the Borrower and/or the Guarantor ceasing or threatening to
cease to carry on business or being or becoming unable to pay
its debts; or
(i) a petition being presented, or a meeting being convened for
the purpose of considering a resolution, for the making of an
administration order, the winding-up or dissolution of the
Borrower and/or the Guarantor; or
(i) Joel Newman becomes the beneficial owner of a smaller
percentage of the issued share capital of the Guarantor than
that held by Windmere-Durable Holdings, Inc. except that it
shall not be an event of default hereunder where,
(i) immediately after the Guarantor makes any initial
public offering for the sale of stock to the
public, Joel Newman's ownership percentage of the
issued share capital of the Guarantor is equal to
or greater than that of Windmere-Durable Holdings,
Inc.; or
(ii) in the circumstances where Windmere-Durable
Holdings, Inc. is offered the opportunity to sell a
specified number of shares in the Guarantor but
does not do so within 14 days of such offer, and
Joel Newman sells a corresponding number of shares
in the Guarantor thus resulting in him becoming the
beneficial owner of a smaller percentage of the
issued share capital of the Guarantor than that
held by Windmere-Durable Holdings, Inc.
9. GUARANTEE AND INDEMNITY
9.1 In consideration of the Lender acting under or in connection with this
Agreement, the Guarantor hereby irrevocably and unconditionally:
(a) guarantees to the Lender the due and punctual payment of each
and every sum which from time to time falls due from the
Borrower under this Agreement and/or the Charge and which is
not paid on the due date therefor and undertakes to pay to the
Lender forthwith upon first written demand by the Lender all
sums from time to time due and payable (but unpaid) by the
Borrower under this Agreement and/or the Charge and the
Guarantor undertakes to pay any such sum on demand, together
with interest on such sum demanded from the date of demand to
the date of payment at the interest rate specified in this
Agreement, all such payments to be made in US Dollars and in
such place and in such manner as the Lender may by notice in
writing to the Guarantor require; and
(b) indemnify the Lender on demand (and this shall constitute an
independent primary obligation) against all damages, loss,
costs and expenses sustained or incurred by the Lender as a
result of any failure of the Borrower to carry out its
obligation or liability under this Agreement and/or the
Charge, provided that the Guarantor shall
-7-
<PAGE>
not be responsible for all indirect or consequential damages
so sustained or incurred by the Lender.
9.2 The obligations of the Guarantor hereunder shall be in addition to and
not in derogation of any security or other surety cover in favour of
the Lender from time to time for the obligations of the Borrower under
this Agreement and/or the Charge.
9.3 The obligations of the Guarantor hereunder shall be continuing and
accordingly shall not be satisfied by any intermediate payment of any
sum outstanding under this Agreement and/or the Charge but shall remain
in full force and effect until all sums which may at any time be
outstanding under this Agreement and/or the Charge have been paid in
full.
9.4 The Lender shall not be obliged before making any demand of the
Guarantor hereunder (i) to make any demand of the Borrower, (ii) to
take any legal proceedings against the Borrower, (iii) to make or file
any claim in a winding-up of the Borrower or (iv) to exercise any right
which the Lender may have under any security or against any other
surety for the obligations of the Borrower under this Agreement and/or
the Charge.
9.5 (a) The obligations of the Guarantor hereunder shall not be
discharged or affected by (i) any time (whether as to payment
or otherwise) or other indulgence given by the Lender to the
Borrower in respect of any obligation of the Borrower under
this Agreement and/or the Charge, (ii) any renewal,
termination, variation or increase of any of the terms and
conditions of, or any facility granted under, this Agreement
and/or the Charge (whether or not the Guarantor is a party to
or cognisant of the same), (iii) any dissolution, winding-up,
corporate reorganisation or any change in the constitution of
the Borrower and/or the Guarantor, (iv) any transfer or
extinction of any of the liabilities of the Borrower by any
law, regulation, decree, judgment, order or similar instrument
or any other discharge, release or variation of the liability
of the Borrower other than through payment of the Indebtedness
or (v) any other act, omission or thing which, but for this
provision, would or might constitute a legal or equitable
discharge or defence of a surety.
(b) In the event that the Lender grants an extension of time to
the Borrower with or without notifying the Guarantor, it is
deemed that the Guarantor unconditionally and automatically
agrees to every extension of time, and shall not take
advantage of this as a reason for the Guarantor to be
exonerated from its liabilities or obligations hereunder.
9.6 So long as any sums are or may become outstanding under this Agreement
and/or the Charge, any right which the Guarantor may have by reason of
the performance of its obligations hereunder (a) to be indemnified by
the Borrower, (b) to prove in a winding-up of the Borrower for any
other surety for the Borrower's obligations under this Agreement, (c)
to take the benefit, in whole or in part, of any security held by the
Lender for the obligations of the Borrower under this Agreement and/or
the Charge, or (d) to be subrogated to any of the Lender's rights under
this Agreement and/or the Charge shall not be exercisable by it without
the prior written consent of the Lender and then only in such
-8-
<PAGE>
manner and upon such terms as the Lender reasonably requires, and the
Guarantor shall hold any moneys at any time received or recovered by it
as a result of the exercise of any such right on trust for the Lender
for application in or towards payment of sums from time to time falling
due from the Borrower under this Agreement and/or the Charge.
9.7 The Guarantee shall be in addition to and not in substitution for any
other guarantee, indemnity, pledge, assurance, lien, bill, note,
mortgage, charge, debenture or other security now or hereafter held by
the Lender.
9.8 (a) Any discharge given to the Guarantor in respect of its
obligations hereunder shall be, and shall be deemed always to
have been, void if any act on the faith of which that
discharge was given is subsequently avoided, or any moneys
paid to the Lender is subsequently reduced or repaid, by or
pursuant to any provision of law. If the Lender becomes liable
to repay any moneys previously paid to the Lender hereunder or
under this Agreement and/or the Charge or any other documents
executed as security for the obligations of the Borrower under
this Agreement and/or the Charge on the grounds of fraudulent
preference or otherwise, the liability of the Guarantor
hereunder shall be computed as if such moneys had never been
paid to the Lender and the Lender shall be entitled to enforce
the Guarantee and any security held for the liability of the
Guarantor hereunder, if any, against the Guarantor as if such
release, discharge or settlement had not occurred.
(b) The Lender shall be entitled to retain the Guarantee and any
security held by it in respect of the liability of the
Guarantor hereunder for a period of seven months after the
payment, discharge or satisfaction of all moneys payable to
the Lender and all obligations to be performed under this
Agreement and/or the Charge, or in the event of the
commencement of insolvency, winding up or liquidation of the
Borrower or the Guarantor prior to the termination of such
period of seven months, or such further period as the Lender
may determine and to enforce such security subsequently as if
such release, discharge or settlement had not occurred.
(c) The Lender is hereby authorised to exercise a lien over all
the property of the Guarantor coming into its possession or
control for any reason whatsoever, and whether or not in the
ordinary course of business, with power for the Lender to sell
such property, if necessary, to satisfy any liabilities
whatsoever of the Guarantor to the Lender. Such exercise of
lien and/or power to sell are/is subordinate in all respects,
however, to the Leumi Credit Agreement and the Windmere
Security Agreement.
9.9 The Guarantor represents and warrants that:
(a) it is a limited liability company duly incorporated and
validly existing under the laws of the State of Florida in the
United States of America;
(b) the Articles of Incorporation and By-Laws of the Guarantor
include provisions which give the Guarantor all necessary
corporate power and authority to enter into and perform the
Guarantee; and the Guarantor has taken all necessary
-9-
<PAGE>
corporate and other action to authorise the execution,
delivery and performance of the Guarantee and the performance
of its obligations hereunder;
(c) the obligations expressed to be assumed by the Guarantor
herein constitutes legal, valid and binding obligations of the
Guarantor;
(d) all consents, authorisations, approvals, licences, exemptions,
filings, registrations, notarisations and other requirements
of governmental, judicial and public bodies and authorities
required or advisable in connection with the execution,
delivery, performance, validity, admissibility in evidence and
enforceability of the Guarantee have been obtained or effected
(or, in the case of registrations, will be effected within any
applicable requested period) and (if obtained or effected) are
in full force and effect; all fees and stamp, registration and
similar tax (if any) payable in connection with them have been
paid if due; there has been no default in the performance of
any of their terms or conditions and the Guarantor has full
authority to make all payments under the Guarantee in
accordance with the terms hereof;
(e) the execution, delivery and performance of the Guarantee do
not and will not violate in any respect any provision of (i)
any law, or (ii) the Articles of Incorporation and By-Laws of
the Guarantor, or (iii) any agreement or other instrument to
which the Guarantor is a party or which is binding on it or
any of its assets, and do not and will not result in the
creation or imposition of any encumbrance over all or any of
its present or future assets or revenues, except for the Leumi
Credit Agreement and the Windmere Security Agreement, both of
which create charges against certain assets of the Guarantor
and for which the Leumi Credit Agreement requires consents for
any new indebtedness to be incurred by or assets to be
transferred to the Guarantor or the Borrower, or guarantees to
be made by the Guarantor, which consents shall be obtained on
or before 3 March 1998;
(f) it is not in breach of or default under any agreement to which
it is a party or which is binding on it or any of its assets
or revenues to an extent or in a manner which might have a
material adverse effect on its ability to perform its
obligations under the Guarantee;
(g) no litigation, arbitration or administrative or other
proceeding is at present current or pending or threatened
which, if adversely determined, either would have a material
adverse effect on the assets, financial condition, prospects
or operations of the Guarantor or would materially and
adversely affect the Guarantor's ability to observe or perform
its obligations under the Guarantee, with the exception of the
litigation between Westinghouse Corporation and the Guarantor,
et al, concerning the license to the `White-Westinghouse'
trade name;
(h) it has made no arrangements or composition with, and no
assignment for the benefit of its creditors; it has not
commenced any negotiations with a view to the general
re-adjustment or re-scheduling of all or any part of its
liabilities; no
-10-
<PAGE>
petition has been presented and no meeting has been convened
and no steps has been taken for the purpose of its winding-up
or dissolution or for the appointment of a receiver, trustee
or similar or equivalent officer in relation to it or to any
or all of its property or assets; and it is able to pay its
debts as they fall due, and has not suspended or threatened to
suspend making payments with respect to all or any class of
its debts;
(i) the Guarantor has fully disclosed in writing to the Lender all
facts relating to the Guarantor which the Guarantor knows or
reasonably ought to know and which are material for disclosure
to the Lender in the context of the Guarantee, including the
Leumi Credit Agreement and the Windmere Security Agreement;
(j) all information furnished by the Guarantor or any person on
its behalf to the Lender in connection with the Guarantee was
and remains true and complete in all respects and there is no
other fact or circumstance relating to the affairs of the
Guarantor which has not been disclosed to the Lender, which
non-disclosure renders any of that information misleading, and
all expressions of expectation, intention, belief and opinion
contained in any of that information were honestly made on
reasonable grounds after due and careful consideration;
(k) the choice of English law to govern the Guarantee and the
submission by the Guarantor to the non-exclusive jurisdiction
of the courts of England are valid and binding; and
(l) the Guarantor is the beneficial owner of the entire issued
voting share capital of the Borrower.
9.10 The representations and warranties in Clause 9.9 will be deemed to be
repeated by the Guarantor on each Interest Payment Date with reference
to the facts and circumstances then subsisting.
9.11 The Guarantor shall:
(a) from time to time on the request of the Lender furnish the
Lender with such information about its business and financial
condition as the Lender may reasonably require;
(b) ensure that the Borrower complies with its obligations under
this Agreement;
(c) not claim any set-off or counterclaim against the Borrower or
to claim or procure in competition with the Lender in the
liquidation or winding-up of, or have the benefit of any share
in any payment or composition from, the Borrower or any other
person;
(d) promptly inform the Lender of the occurrence of any event
which is or may become (with the passage of time, the giving
of notice or the determination of any persons) an Event of
Default and any event which might adversely affect the
-11-
<PAGE>
ability of the Borrower or the Guarantor to fully perform
their respective obligations under this Agreement, the
Guarantee and/or the Charge, and upon receipt of a written
request to that effect from the Lender, confirm to the Lender
that, save as previously notified to the Lender, no such event
has occurred;
(e) obtain, maintain in full force and effect and promptly renew
from time to time all consents, licences, exemptions, filings,
registrations, notarisations, approvals and other
authorisations of all governmental or other authorities of
which it has the benefit at the date of the Guarantee or as
may from time to time be required to enable it to lawfully
enter into its obligations under the Guarantee, or required
for the validity or enforceability of the obligations hereof
and will on request promptly provide the Lender with evidence
thereof;
(f) ensure that at all times its indebtedness hereunder ranks at
least pari passu with all its other unsecured and subordinated
indebtedness (except for any indebtedness which is preferred
by mandatory provisions of law);
(g) promptly inform the Lender in writing of any litigation,
arbitration, administration or other proceedings against the
Guarantor before or of any judicial, administrative,
governmental or other authority or arbitrator; and
(h) upon its becoming aware of the same, promptly inform the
Lender of the occurrence of any event which results in, or may
reasonably be expected to result in, (i) any of the
representations and warranties contained in Clause 9.10 being
untrue or (ii) any material adverse change in the condition
(financial or otherwise) of the Guarantor and the Borrower.
9.12 With the exception of the Leumi Credit Agreement and the Windmere
Security Agreement, the Guarantor shall not, without the prior written
consent of the Lender:
(a) create or permit to subsist any encumbrance over all or any of
its present or future assets or revenues; nor
(b) other than in connection with normal trade debt, make any
loans, grant any credit or give any guarantee or indemnity
(other than the Guarantee) to or for the benefit of any person
or otherwise voluntarily assume any liability, whether actual
or contingent, in respect of any obligation of any other
person or incur any other types of borrowings or indebtedness;
provided, however, that the Guarantor shall be permitted to incur new
borrowings or indebtedness without such prior consent of the Lender as
long as and to the extent that Bank Leumi, or any new bank which
replaces Bank Leumi under the Leumi Credit Agreement, consents in
writing to such new borrowing or indebtedness, in which case the Lender
may then require security over the Guarantor's assets as collateral for
this Loan Agreement subordinate to the Leumi Credit Agreement or any
substitute therefor, the Windmere Security Agreement and any new
security agreement pursuant to such new borrowing or indebtedness.
-12-
<PAGE>
9.13 The Guarantor shall indemnify the Lender against any losses, costs,
charges or expenses, including legal fees on a full indemnity basis and
out-of-pocket expenses, which the Lender may sustain or incur in
relation to the Guarantee (including any amendment or extension of or
the granting of any waiver or consent under the Guarantee) or in
connection with the protection, enforcement or preservation of any of
the Lender's rights under the Guarantee, provided that the Guarantor
shall not be responsible for any indirect or consequential losses so
incurred..
10. NOTICES
10.1 Any notice or other communication served, given or made under this
Agreement will be in writing and, without prejudice to the validity of
any other method of service, may be delivered personally or by courier
or sent by facsimile transmission, addressed as follows:
(a) if to the Lender, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Raymond So
CC: Burton A. Honig
(b) if to the Borrower, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Joel Newman
CC: Leo Schuck
(c) If to the Guarantor, to:
Address: 16550 N.W., 10th Avenue
Miami, Florida 33169 U.S.A.
Facsimile transmission number: (305) 624 8901
Attention: Joel Newman
CC: Leo Schuck
or to any other address or facsimile transmission number, or person for
whose attention the communication is to be addressed, as the relevant
addressee may substitute by fourteen days' prior notice in writing to
the other parties to this Agreement.
-13-
<PAGE>
10.2 Any notice or other communication will be deemed to have been duly
served, given or made (i) in the case of courier, two Business Days
after the envelope containing the notice was delivered to the courier;
or (ii) in the case of delivery, when left at the relevant address; or
(iii) in the case of a facsimile transmission, on receipt by the
addressee of the substantially complete text in legible form.
11. GENERAL
11.1 The Guarantee shall be binding upon and enure to the benefit of each of
the Guarantor and the Lender and its successors and assigns.
11.2 The Lender shall pay its own costs and disbursements of and incidental
to this Agreement. The Borrower shall pay its own as well as the
Guarantor's costs and disbursements of and incidental to this
Agreement.
11.3 No failure to exercise and no delay in exercising on the part of the
Lender any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or privilege. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
11.4 If any provision of this Agreement is or becomes invalid, illegal or
unenforceable for any reason, such invalidity, illegality or
unenforceability shall not affect the remainder of this Agreement and
the remainder of this Agreement shall be construed and enforced as if
such invalid, illegal or unenforceable portion were not contained
herein, provided and to the extent that such construction would not
materially and adversely frustrate the original intent of the parties
hereto as expressed herein.
11.5 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
11.6 Time shall be of the essence as regards any date or period mentioned in
this Agreement and any date or period substituted for the same by
agreement of the parties hereto or otherwise.
11.7 Each of the parties hereto shall do and execute or procure to be done
and executed all such further acts, deeds, things and documents as may
be necessary or desirable to give effect to the terms of this
Agreement.
11.8 This Agreement shall be assignable by the Lender.
11.9 The waiver by any party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other or
subsequent breach by such other party.
11.10 This Agreement shall enure to the benefit of, and be binding upon, each
party hereto and that party's successors and assigns.
-14-
<PAGE>
12. GOVERNING LAW
12.1 This Agreement shall be governed by and construed in all respects in
accordance with English law and it is irrevocably agreed for the
exclusive benefit of the Chargee that the courts of England are to have
non-exclusive jurisdiction to settle any disputes which may arise out
of or in connection with this Agreement and that accordingly any suit,
action or proceeding arising out of or in connection with this
Agreement (in this Clause referred to as "Proceedings") may be brought
in such courts. Nothing in this Clause shall limit the right of the
Chargee to take the Proceedings against the Company in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one
or more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
12.2 The Company hereby appoints_________________________________________ of
______________________________________________________________________,
England (marked for the attention of)_________________________________)
as its authorised agent for the purpose of accepting service of process
for all purposes in connection with this Agreement.
12.3 To the extent that the Company may be entitled in any jurisdiction to
claim for itself or any of its property or assets immunity in respect
of its obligations under this Agreement from service of process,
jurisdiction, suit, judgment, execution, attachment (whether before
judgment, in aid of execution or otherwise) or legal process or to the
extent that in any jurisdiction there may be attributed to it or all or
any of its property or assets immunity of that kind (whether or not
claimed), the Company irrevocably agrees not to claim and irrevocably
waives that immunity to the fullest extent permitted by the laws of
that jurisdiction.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of
1 November 1997 first above written.
SIGNED by )
)
for and on behalf of )
DURABLE ELECTRICAL METAL ) /S/ ILLEGIBLE
FACTORY LIMITED )
in the presence of )
-15-
<PAGE>
SIGNED by )
)
for and on behalf of )
DURABLE ELECTRONICS ) /S/ ILLEGIBLE
INDUSTRIES LIMITED )
in the presence of )
SEALED with the COMMON SEAL of )
NEW M-TECH CORPORATION )
and SIGNED by ) /S/ ILLEGIBLE
)
for and on behalf of )
NEW M-TECH CORPORATION )
in the presence of ) /S/ ILLEGIBLE
-16-
EXHIBIT 10.17
BT COMMERCIAL CORPORATION
TO
NEW M-TECH CORPORATION
OF CERTAIN ASSETS OF
CRAIG CONSUMER ELECTRONICS, INC.
December 18, 1997
<PAGE>
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into as of
the 8th day of December, 1997, by and between BT COMMERCIAL CORPORATION, as
agent for the Lenders (as defined below) ("Seller"), and NEW M-TECH CORPORATION,
a Florida corporation ("Purchaser").
RECITALS
A. A Credit Agreement, dated as of August 5, 1994, was entered into
among Seller, as agent (the "Agent") for the financial institutions that are
signatories thereto (collectively, the "Lenders"), the Lenders and Berel
Industries, Inc., a Delaware corporation, now known as Craig Consumer
Electronics, Inc., a Delaware corporation ("Borrower"), as amended by an
Amendment Number One to Credit Agreement and Consent to Joint Venture, dated as
of September 29, 1995, a Waiver and Second Amendment to Credit Agreement, dated
as of March 29, 1996, a Waiver and Third Amendment to Credit Agreement, dated as
of December 30, 1996, and a Waiver and Fourth Amendment to Credit Agreement,
dated as of December 31, 1996 (collectively, the "Credit Agreement"). Borrower
also entered into a Security Agreement and a Trademark Security Agreement, each
as of August 5, 1994, between Borrower and Agent (collectively, the "Security
Agreement") pursuant to which Borrower granted Agent a security interest in the
collateral (the "Collateral") described in the Security Agreement.
B. On August 1, 1997, Borrower commenced a voluntary case under Chapter
11 of Title 11 of the United States Code in the Bankruptcy Court for the Central
District of California (the "Court"), Case No. LA 97-39551-KM.
C. Borrower is in default under the Credit Agreement and the Security
Agreement, and Seller, as Agent, entered into a Stipulation for Relief from the
Automatic Stay, dated November 20, 1997 (the "Stipulation") with Borrower to,
among other things, permit Seller, as Agent, to enforce any and all of its
rights and remedies under contract, order, and/or applicable law with respect to
the Collateral. On November 20, 1997, Seller, as Agent, and Borrower filed a
Joint Motion Requesting Approval of the Stipulation (the "Motion") with the
Court. On November 25, 1997, the Court entered an order in the bankruptcy
proceeding approving the Stipulation and granting relief to Agent from the
automatic stay to exercise its rights against such of the collateral as Agent
deems appropriate.
D. Seller, as Agent, intends to foreclose its security interest in
those items of the Collateral listed on Schedule A attached hereto (the
"Purchased Assets") at a private foreclosure sale.
E. Purchaser desires to purchase from Seller, and Seller desires to
sell to Purchaser, the Purchased Assets.
-1-
<PAGE>
F. Purchaser and Seller desire to effect such purchase and such sale on
the terms and subject to the conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
the adequacy of which are hereby acknowledged, Purchaser and Seller hereby agree
as follows:
AGREEMENT
1. INCORPORATION OF RECITALS. The Recitals set forth above are a
material part of this Agreement and are incorporated herein by reference.
2. PURCHASE AND SALE OF PURCHASED ASSETS
2.1 AGREEMENT TO SELL AND PURCHASE. On the terms and subject to the
conditions contained herein, Seller shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase the Purchased Assets at the
time and place set forth in Section 5. Seller shall convey all of Borrower's
right, title and interest in and to the Purchased Assets to Purchaser pursuant
to California Uniform Commercial Code Section 9504(4). Seller agrees to take all
action and execute all documents which in the reasonable opinion of Purchaser
and its counsel are necessary to effectuate the transfer of Borrower's interest
in and title to the Purchased Assets and to record the transfer of title from
Borrower to Purchaser in the United States Patent and Trademark Office and in
the trademark offices of the foreign countries in which the Purchased Assets are
filed or registered.
2.2 REPRESENTATIONS OR WARRANTIES. The Purchased Assets shall be
conveyed to Purchaser in such condition as held by Borrower on an as-is,
where-is basis. Seller makes no warranty of title, merchantability or fitness
for intended purpose with respect to the Purchased Assets other than expressly
set forth below in Section 2.2.1. Other than such express warranties and
representations, the Purchased Assets are sold to Purchaser without
representations or warranties of any kind or nature, express or implied.
2.2.1 EXPRESS REPRESENTATIONS. Seller hereby represents to
Purchaser that:
(a) Seller has a perfected security interest in the
Purchased Assets to the extent such perfection can be effected under federal or
California state law, and Seller has the right to foreclose and sell to
Purchaser the Purchased Assets free and clear of any right, lien or claims by
Borrower.
(b) Purchaser is acquiring the Purchased Assets pursuant
to a properly conducted private foreclosure sale under Uniform Commercial Code
Section 9504
-2-
<PAGE>
and, consequently, as provided in Section 9504(4), Purchaser is acquiring all of
Borrower's right, title and interest in and to the Purchased Assets free and
clear of the security interest, liens and claims of Seller, Agent and Lenders
(the "Lenders' Lien"), and any security interest or lien subordinate to the
Lenders' Lien.
(c) From and after August 1, 1997, no lien or security
interest has attached to the Purchased Assets which is senior to the Lenders'
Lien.
(d) Seller has paid or has made arrangement for payment of
any and all storage charges or like charges due to warehousemen or other bailees
respecting the storage or shipping of the Purchased Assets.
(e) Seller has provided Purchaser with copies of online
and other official and unofficial lien searches which do not disclose any
security interest or lien senior to the Lenders' Lien for such jurisdictions as
Seller has reasonably requested, including the United States Patent and
Trademark Otfice.
(f) Seller has no actual notice of any lien or security
interest asserted as senior to the Lenders' Lien against any of the Purchased
Assets.
(g) Lenders and Agent have not assigned, transferred,
conveyed or granted any right, claim or interest in and to the Purchased Assets
or the Lenders' Lien other than the license rights in certain of the Purchased
Assets granted to Starlight, which license expires on January 31, 1998 and has
not been, and will not be, renewed or extended.
(h) Other than the bankruptcy proceedings described in the
recitals to this Agreement, to the actual knowledge of Seller, there is no
litigation, suit, proceeding, action, claim or investigation, at law or in
equity, pending or threatened against the Borrower contesting Borrower's right
to own or to use any of the Purchased Assets.
2.3 NON-REFUNDABLE DEPOSIT. Upon the execution of this Agreement by
the parties hereto, Purchaser shall pay to Seller the sum of Two Hundred Fify
Thousand Dollars ($250,000) as a non-refundable deposit (the " Deposit"), which
Deposit shall be applied against the purchase price of the Purchased Assets as
set forth in Section 2.4 below The Deposit shall be paid to Seller in lawful
money of the United States by wire transfer to such account(s) of Seller as
Seller shall designate in written wire instructions provided to Purchaser.
Notwithstanding the foregoing, if the Closing shall fail to occur due to the
fault of Seller or Borrower, then the Deposit shall be refundable and shall be
promptly refunded by Seller to Purchaser.
2.4 PURCHASE PRICE.
(a) In consideration of the sale, transfer, conveyance,
assignment and delivery of the Purchased Assets by Seller to Purchaser,
Purchaser shall pay Seller at the Closing (as hereinafter defined) the sum of
One Million Two Hundred Thousand Dollars
-3-
<PAGE>
($1,200,000) in lawful money of the United States by wire transfer to such
account(s) of Seller as Seller shall designate in written wire instructions
provided to Purchaser. The Deposit shall be applied against the purchase price
of the Purchased Assets set forth in this Section 2.4(a).
2.5 TERMINATION AND RELEASE OF LIENS. Seller agrees to execute all
documents effecting and evidencing the release of its security interest and any
rights (including the security interest and rights of Lenders and Agent)
whatsoever in and to the Purchased Assets as may be requested by Purchaser in
order to allow Purchaser to take good title to and to record with the applicable
governmental agency, Purchaser's title to the Purchased Assets unencumbered by
any lien or security interest of Borrower, Seller, Lenders or Agent.
3. REMOVAL OF PURCHASED ASSETS. Such of the Purchased Assets as
constitute tangible assets are located at the addresses set forth on Schedule B
attached hereto. Purchaser shall remove, or arrange for the removal of, such
Purchased Assets from such premises on or before the tenth (lOth) day (the
"Removal Date") following the Closing. All expenses and costs incurred in
connection with such removal, including transportation and insurance, shall be
the responsibility of Purchaser; provided that Borrower or Seller, as
applicable, shall pay, or cause to be paid, all storage charges and other
warehouse expenses that are outstanding with respect to the Purchased Assets to
and including the Removal Date.
4. REPRESENTATIONS AND WARRANTIES BY PURCHASER AND SELLER. Each of
Seller and Purchaser represents and warrants to the other party hereto as
follows:
4.1 ORGANIZATION STANDING AND QUALLIFICATION. It is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORITY. It has the full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder and all corporate proceedings required to be
taken to duly authorize the execution, delivery and performance of this
Agreement have been properly taken.
4.3 VALID AND BINDING OBLIGATION. Each of this Agreement and any
other documents to be executed and delivered in connection herewith constitute
the valid and binding obligation of such party, enforceable against such party
in accordance with its respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, relating to or affecting the
enforcement of creditors' rights generally, and except that the remedy of
specific performance and other equitable remedies are subject to judicial
discretion.
-4-
<PAGE>
5. CLOSING.
5.1 DATES AND TIMES OF CLOSING. The sale by Seller and the purchase
by Purchaser of the Purchased Assets (the "Closing") shall occur on such date
and at such time as the Seller and Purchaser may agree, provided that the
Closing shall not be held later than December 12, 1997.
5.2 LOCATION OF THE CLOSINGS. The Closing shall take place at
Buchalter, Nemer, Fields & Younger, 601 South Figueroa Street, Suite 2400, Los
Angeles, California 99017-5704, or at such other place as Seller and Purchaser
may agree.
5.3 DELIVERIES AT AND AFTER CLOSING. The following items shall be
delivered at each Closing:
(a) BILL OF SALE. A Bill of Sale duly executed by Seller
substantially in the form of Exhibit A;
(b) PAYMENT. The payment required by Section 2.4 in immediately
available funds;
(c) EVIDENCE OF BORROWER'S ASSIGNMENT TO PURCHASER. All such
deeds of absolute assignment and transfer to Purchaser as are prepared and
delivered on or before the Closing by Purchaser's counsel, which deeds shall be
executed by Borrower in favor of Purchaser respecting all of Borrower's right,
title and interest in and to the Purchased Assets as deemed suitable by
Purchaser's counsel (as drafters thereof) for recording in the United States
Patent and Trademark Office and each other domestic and foreign trademark office
in which Purchased Assets are filed or registered.
(d) BEREL NAME CHANGE FILING. Evidence satisfactory to Purchaser
of Borrower's recordation in the United States Patent and Trademark Office of a
certified copy of Borrower's change of corporate name from "Berel Industries,
Inc." to "Craig Consumer Electronics, Inc." with respect to all of the Purchased
Assets currently of record as owned by "Berel Industries, Inc."
(e) BORROWER NAME CHANGE. Evidence satisfactory to Purchaser of
Borrower's name change within 30 days following execution of this Purchase
Agreement from "Craig Consumer Electronics, Inc." to a name which is not
included in any form in any of the Purchased Assets and is not confusingly
similar to the designation "Craig Consumer Electronics, Inc."
(f) TRADEMARK DOCUMENTATION. All original documents,
applications, trademark files and certificates of trademark registration
relating to or concerning the Purchased Assets as is held or possessed by, or is
otherwise available from, Seller, Borrower and Borrower's counsel, Squire,
Sanders & Dempsey, L.L.P.
-5-
<PAGE>
(g) OTHER REQUIRED DOCUMENTS. (i) All assignments, powers of
attorney (including, without, limitation, from Seller to Purchaser, from
Borrower to Purchaser, and from Borrower to Richard Williamson personally),
releases and other instruments and documents as Purchaser may reasonably
request, in form satisfactory to Purchaser and its counsel, and (ii) all other
documents and instruments required to be delivered by Seller necessary to
consummate the transaction contemplated herein.
5.4 DELIVERIES AFTER CLOSING. Seller agrees to take all action and
execute all documents which in the reasonable opinion of Purchaser and its
counsel are necessary to effectuate the transfer of Borrower's interest in and
title to the Purchased Assets and to record the transfer of title from Borrower
to Purchaser in the United States Patent and Trademark Office and in the
trademark offices of the foreign countries in which the Purchased Assets are
filed or registered.
6. CONDITIONS PRECEDENT TO THE CLOSINGS.
6.1 The obligations of Purchaser to purchase the Purchased Assets
and of Seller to sell the same are subject to the fulfillment of each of the
following conditions at or prior to the Closing:
(a) All representations and all warranties of Seller and
Purchaser herein or in any document executed and delivered in connection
herewith shall be accurate and correct in all material respects when made or
when deemed to have been made. All representations and all warranties shall be
deemed to be made again at and as of the Closing.
(b) Seller shall have received all consents/waivers necessary to
consummate the private foreclosure sale contemplated hereby.
7. GENERAL PROVISIONS.
7.1 PAYMENT BY DEFAULTING PARTY. In the event that any party
("Defaulting Party") defaults in its obligations under this Agreement and, as a
result thereof, the other party ("Non-Defaulting Party") seeks to legally
enforce its rights hereunder against the Defaulting Party, then, in addition to
all damages and other remedies to which the Non-Defaulting Party is entitled by
reason of such default, the Defaulting Party shall promptly pay to the
Non-Detaulting Party an amount equal to all costs and all expenses (including
reasonable attorneys' fees) paid or incurred by the Non-Defaulting Party in
connection with such enforcement.
7.2 NOTICES. Any and all notices or other communications required or
permitted to be given hereunder shall be deemed to have been duly given when (i)
personally delivered, (ii) mailed by first class registered mail, return receipt
requested, addressed to the party to which such notice or such communication is
addressed at the address set forth in this Section 7.2 or (iii) sent by telecopy
to the party to which such notice or such communication is addressed at the
telecopy number set forth in this Section 7.2. Any party may specify such
-6-
<PAGE>
other address or telecopy number by notice to all other parties given as
provided in this Section 7.2.
If to Purchaser:
New M-Tech Corporation
16550 N. W. 10th Avenue
Miami, Florida 33169
Attn: Joel Newman, President
Telecopy: 305.624.8901
Phone: 305.624.0019
If to Seller:
BT Commercial Corporation
300 South Grand Avenue, 41st Floor
Los Angeles, California 90071
Attn: Richard Faulkner
Telecopy: 213.620.8394
Phone: 213.620.8103
7.3 INTEGRATION: AMENDMENT. This Agreement and the other documents
referred to herein constitute the entire agreement of Purchaser and Seller with
respect to the subject matter hereof. This Agreement may not be modified,
amended or terminated except by a written agreement specifically referring to
this Agreement signed by Purchaser and Seller.
7.4 WAIVER. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
7.5 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of each party and its permitted successors and
assigns. No party may assign this Agreement or any of its rights hereunder
without the prior written approval of the other parties. There are no intended
third party beneficiaries of this Agreement and this Agreement does not confer
any right or any remedy on any person other than Purchaser and Seller.
7.6 CAPTIONS. The section headings contained herein are for the
purposes of convenience only and are not intended to affect the construction
hereof.
7.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
-7-
<PAGE>
7.8 GOVERNING LAW. This Agreement and all amendments thereof shall
be governed by, and construed in accordance with, the law of the State of
California applicable to contracts made and to be performed therein, without
reference to its conflict of laws provisions.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement
to be duly executed and delivered as of the date first above written.
BT COMMERCIAL CORPORATION,
as Agent
By: /s/ [ILLEGIBLE]
----------------------------------
Its:
NEW M-TECH CORPORATION
By: /s/ [ILLEGIBLE]
----------------------------------
Its:
-8-
<PAGE>
SCHEDULE A
PURCHASED ASSETS
All trademarks, service marks, copyrights, trade names, patents and all
statutory common law trademarks and service marks and trade names rights used in
Borrower's business and in which, as of the Closing, Borrower had any rights,
domestic and foreign, all registrations (including without limitation the state,
federal and foreign registrations listed immediately below or attached to this
Schedule "A"), all pending applications, all variants thereof and all goodwill
and reputation associated therewith and benefits and rights appurtenant thereto.
Seller shall deliver the tangible manifestations of the Purchased Assets to the
extent held or possessed by, or otherwise available from, Seller, Borrower or
Borrower's counsel, Squire, Sanders & Dempsey, L.L.P.
In addition, the Purchased Assets shall include the Consumer Electronics Show
Trade Show Booth located at Tandem Design, 1846 Sequoia, Orange, CA 92868.
-9-
<PAGE>
Squire, Sanders and Dempsey L.L.P.
19-Nov-97 Craig Consumer Electronics
- --------------------------------------------------------------------------------
Australia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 506596
Registration Date: 10-Mar-96
Classes:
Next Renewal Date: lO-Mar-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
Austria
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 160638
Registration Date: 25-Oct-95
Classes:
Next Renewal Date: 31-Oct-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 160639
Registration Date: 25-Oct-95
Classes:
Next Renewal Date: 31-Oct-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Bahrain
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 17503
Registration Date: 27-Aug-04
Classes:
Next Renewal Date: 27-Aug-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 17504
Registration Date: 27-Aug-04
Classes:
Next Renewal Date: 27-Aug-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Benelux
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 355.130
Registration Date: 09-Nov-88
Classes:
Next Renewal Date: 09-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 355.131
Registration Date: 09-Nov-88
Classes:
Next Renewal Date: 09-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Bolivia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Brazil
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date: 15-Apr-92
Registration Number: 816665982
Registration Date: 23-Nov-93
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number:
Filing Date: 15-Apr-92
Registration Number: 816664966
Registration Date: 23-Nov-93
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number:
Filing Date: 15-Apr-92
Registration Number: 816666008
Registration Date: 23-Jul-96
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Brazil
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG STYLIZED
Application Number:
Filing Date: 15-Apr-92
Registration Number: 816665990
Registration Date: 23-Nov-93
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number:
Filing Date: 15-Apr-92
Registration Number: 81666597
Registration Date: 23-Nov-93
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number:
Filing Date: 15-Apr-92
Registration Number: 816666105
Registration Date: 23-Nov-11
Classes:
Next Renewal Date: 23-Nov-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Canada
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 247,844
Registration Date: 11-Jul-80
Classes:
Next Renewal Date: 11-Jul-10
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG MARATHON SPORTS and Desi
Application Number:
Filing Date: 16-Jul-97
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 247,845
Registration Date: 11-Jul-80
Classes:
Next Renewal Date: 11-Jul-10
Status: Mark has been Registered
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Canada
Trademark Report
- --------------------------------------------------------------------------------
Trademark: ELECTRONIC NOTEBOOK
Application Number:
Filing Date:
Registration Number: 400,022
Registration Date: 10-Jul-07
Classes:
Next Renewal Date: 10-Jul-07
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: MICRO ELECTRONIC NOTEBOOK
Application Number:
Filing Date:
Registration Number: 396,157
Registration Date: 27-Mar-92
Classes:
Next Renewal Date: 27-Mar-07
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: POWERPLAY
Application Number:
Filing Date:
Registration Number: 393,843
Registration Date: 07-Feb-92
Classes:
Next Renewal Date: 07-Feb-07
Status: Mark has been Registered
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
Canada
Trademark Report
- --------------------------------------------------------------------------------
Trademark: POWERPLAY PLUS
Application Number:
Filing Date:
Registration Number: 426,404
Registration Date: 22-Apr-09
Classes:
Next Renewal Date: 22-Apr-09
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: ROAD RATED
Application Number:
Filing Date:
Registration Number: 393,050
Registration Date: 24-Jan-95
Classes:
Next Renewal Date: 24-Jan-07
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: ROAD-RATED
Application Number:
Filing Date:
Registration Number: 391,950
Registration Date: 20-Dec-91
Classes:
Next Renewal Date: 20-Dec-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Chile
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 261,753
Registration Date: 31-May-82
Classes:
Next Renewal Date: 13-Jul-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 263,991
Registration Date: 13-Jul-82
Classes:
Next Renewal Date: 13-Jul-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Chile
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 950118302
Filing Date: 18-Sep-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 950118303
Filing Date: 18-Sep-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Colombia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
Costa Rica
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
Cuba
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1014/96
Filing Date: 11-Jun-96
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1015/96
Filing Date: 11-Jun-96
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Cyprus
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 40245
Filing Date: 09-May-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 40246
Filing Date: 09-May-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
Czech Republic
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 108988
Filing Date: 09-May-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 114800
Filing Date: 09-May-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
Denmark
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 169,743
Filing Date: 23-Oct-78
Registration Number: 3774/80
Registration Date: 03-Oct-80
Classes:
Next Renewal Date: 03-Oct-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 169,942
Filing Date: 23-Oct-78
Registration Number: 1901/81
Registration Date: 29-May-81
Classes:
Next Renewal Date: 29-May-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
Ecuador
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 68395-96
Filing Date: 07-May-96
Registration Number:
Registration Date:
Classes:
Next Renewal Date: Filed, not yet registered
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 71913-96
Filing Date: 16-Sep-96
Registration Number: 1901/81
Registration Date: 29-May-81
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Egypt
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 100827
Filing Date: 24-Apr-96
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 100828
Filing Date: 24-Apr-96
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
El Salvador
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1553/95
Filing Date: 29-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App Has Been Published
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1553/95
Filing Date: 29-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App Has Been Published
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
European Community TMK
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 464339
Filing Date: 14-Feb-97
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
Fed. Republic of Germany
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 169,743
Filing Date: 09-Nov-78
Registration Number: 992,027
Registration Date: 18-Oct-97
Classes:
Next Renewal Date: 30-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 169,942
Filing Date:
Registration Number: 992,028
Registration Date: 09-Nov-78
Classes:
Next Renewal Date: 09-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
Finland
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 5189/94
Filing Date: 19-Oct-94
Registration Number: 138,630
Registration Date: 05-Jul-95
Classes:
Next Renewal Date: 05-Jul-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 5188/94
Filing Date: 19-Oct-94
Registration Number: 138,629
Registration Date: 05-Jul-95
Classes:
Next Renewal Date: 05-Jul-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
France
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 300,035
Filing Date:
Registration Number: 1,583,068
Registration Date: 21-Oct-78
Classes:
Next Renewal Date: 21-Oct-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 300,036
Filing Date:
Registration Number: 1,583,067
Registration Date: 21-Oct-78
Classes:
Next Renewal Date: 21-Oct-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
Greece
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 5186/91
Filing Date:
Registration Number: 65,212
Registration Date: 06-Dec-79
Classes:
Next Renewal Date: 06-Dec-99
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 5187/91
Filing Date:
Registration Number: 65,213
Registration Date: 06-Dec-79
Classes:
Next Renewal Date: 06-Dec-99
Status: Mark has been Registered
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
Guatemala
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 2522-95
Filing Date: 04-Apr-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 2523-95
Filing Date: 04-Apr-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
Hong Kong
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 00131/90
Filing Date:
Registration Number: 00131/95
Registration Date: 12-Dec-90
Classes:
Next Renewal Date: 12-Dec-97
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 00132/90
Filing Date:
Registration Number: 00132/95
Registration Date: 12-Dec-90
Classes:
Next Renewal Date: 12-Dec-97
Status: Mark has been Registered
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
Hungary
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: M9500717
Filing Date: 10-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: M9500718
Filing Date: 10-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
India
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 643,908
Filing Date: 02-Dec-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 643,907
Filing Date: 02-Dec-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
Indonesia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1201/91
Filing Date: 04-Jul-91
Registration Number: 323458
Registration Date: 06-Jan-95
Classes:
Next Renewal Date: 04-Jul-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 2145
Filing Date: 08-Aug-90
Registration Number: 282317
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
Iran
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 7306397
Filing Date: 19-Sep-94
Registration Number: 74845
Registration Date: 07-Feb-95
Classes:
Next Renewal Date: 19-Sep-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 7306398
Filing Date: 19-Sep-94
Registration Number: 74711
Registration Date: 16-Jan-95
Classes:
Next Renewal Date: 19-Sep-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
Israel
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 92693
Filing Date: 24-May-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 92692
Filing Date: 24-May-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
Italy
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 21124C78
Filing Date: 11-Mar-78
Registration Number: 361532
Registration Date: 03-Nov-78
Classes: 9
Next Renewal Date: 03-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 21125C/78
Filing Date:
Registration Number: 361533
Registration Date: 03-Nov-78
Classes:
Next Renewal Date: 03-Nov-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
34
<PAGE>
- --------------------------------------------------------------------------------
Japan
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 6-126299
Filing Date: 14-Dec-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 6-126300
Filing Date: 14-Dec-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
Jordon
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 36699
Registration Date: 03-Jan-95
Classes:
Next Renewal Date: 03-Jan-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 36700
Registration Date: 03-Jan-95
Classes:
Next Renewal Date: 03-Jan-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
Korea (South)
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1994-45382
Filing Date: 15-Nov-94
Registration Number: 338014
Registration Date: 24-Apr-96
Classes:
Next Renewal Date: 24-Apr-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1994-45381
Filing Date: 15-Nov-94
Registration Number: 338015
Registration Date: 24-Apr-96
Classes:
Next Renewal Date: 24-Apr-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
Kuwait
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 31771
Filing Date: 26-Aug-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 31772
Filing Date: 26-Aug-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
Lebanon
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 69053
Registration Date: 06-Jun-96
Classes:
Next Renewal Date: 06-Jun-11
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 69054
Registration Date: 06-Jun-96
Classes:
Next Renewal Date: 06-Jun-11
Status: Mark has been Registered
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
Liberia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
40
<PAGE>
- --------------------------------------------------------------------------------
Malaya
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 90/03755
Filing Date: 12-Jun-90
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 90/03756
Filing Date: 12-Jun-90
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
Mexico
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 100.489
Filing Date:
Registration Number: 393,049
Registration Date: 07-Nov-90
Classes:
Next Renewal Date: 07-Nov-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 100.490
Filing Date:
Registration Number: 394,157
Registration Date: 07-Nov-90
Classes:
Next Renewal Date: 07-Nov-05
Status: Mark has been Registered
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
New Zealand
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 249.252
Filing Date: 18-May-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 249.253
Filing Date: 18-May-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
43
<PAGE>
- --------------------------------------------------------------------------------
Norway
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 792.791
Filing Date:
Registration Number: 107.286
Registration Date: 22-Jan-81
Classes:
Next Renewal Date: 22-Jan-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 792.792
Filing Date:
Registration Number: 108.871
Registration Date: 23-Jul-81
Classes:
Next Renewal Date: 23-Jul-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: POWERPLAY
Application Number: 772.555
Filing Date:
Registration Number: 105.114
Registration Date: 22-May-80
Classes:
Next Renewal Date: 22-May-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
Oman
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 15216
Filing Date: 22-Feb-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 15217
Filing Date: 22-Feb-97
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
45
<PAGE>
- --------------------------------------------------------------------------------
Panama
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 072819
Filing Date: 29-Sep-94
Registration Number: 72819
Registration Date: 07-Feb-96
Classes:
Next Renewal Date: 07-Feb-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 072820
Filing Date: 29-Sep-94
Registration Number: 72820
Registration Date: 07-Feb-96
Classes:
Next Renewal Date: 07-Feb-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
46
<PAGE>
- --------------------------------------------------------------------------------
Peru
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
47
<PAGE>
- --------------------------------------------------------------------------------
Poland
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 2-144590
Filing Date: 13-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 2-144589
Filing Date: 13-Mar-95
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
48
<PAGE>
- --------------------------------------------------------------------------------
Portugal
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 13282
Filing Date: 16-Mar-95
Registration Number: 308313
Registration Date: 12-Mar-96
Classes:
Next Renewal Date: 12-Mar-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 13283
Filing Date: 16-Mar-95
Registration Number: 308314
Registration Date: 12-Mar-96
Classes:
Next Renewal Date: 12-Mar-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
49
<PAGE>
- --------------------------------------------------------------------------------
Romania
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
50
<PAGE>
- --------------------------------------------------------------------------------
Saudi Arabia
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 330/91
Registration Date: 06-Feb-95
Classes:
Next Renewal Date: 17-Jan-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: 330/90
Registration Date: 06-Feb-95
Classes:
Next Renewal Date: 17-Jan-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
51
<PAGE>
- --------------------------------------------------------------------------------
Singapore
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 5921/91
Filing Date:
Registration Number:
Registration Date: 19-Jun-91
Classes:
Next Renewal Date:
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 5922/91
Filing Date: 19-Jun-91
Registration Number: B5922/91
Registration Date: 19-Jun-91
Classes:
Next Renewal Date: 19-Jun-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
52
<PAGE>
- --------------------------------------------------------------------------------
South Africa
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: B80/2519
Registration Date: 24-Apr-80
Classes:
Next Renewal Date: 24-Apr-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number: B80/2520
Registration Date: 24-Apr-80
Classes:
Next Renewal Date: 24-Apr-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
53
<PAGE>
- --------------------------------------------------------------------------------
Spain
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1929679
Filing Date: 07-Nov-94
Registration Number: 1929679
Registration Date: 05-Jan-96
Classes:
Next Renewal Date: 07-Nov-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1929716
Filing Date: 07-Nov-94
Registration Number: 1929716
Registration Date: 05-Jun-95
Classes:
Next Renewal Date: 07-Nov-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
54
<PAGE>
- --------------------------------------------------------------------------------
Sri Lanka
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
55
<PAGE>
- --------------------------------------------------------------------------------
Sweden
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1979-2064
Filing Date: 11-Apr-79
Registration Number: 175,363
Registration Date: 20-Feb-81
Classes:
Next Renewal Date: 20-Feb-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
56
<PAGE>
- --------------------------------------------------------------------------------
Switzerland
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 8674/1994.7
Filing Date: 06-Dec-94
Registration Number: 429080
Registration Date: 06-Dec-94
Classes:
Next Renewal Date: 06-Dec-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 8675/1994.9
Filing Date: 06-Dec-94
Registration Number: 428835
Registration Date: 06-Dec-94
Classes:
Next Renewal Date: 06-Dec-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
57
<PAGE>
- --------------------------------------------------------------------------------
Taiwan
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 17,172
Filing Date:
Registration Number: 116,774
Registration Date: 16-Jun-79
Classes:
Next Renewal Date: 16-Jun-99
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 17,173
Filing Date:
Registration Number: 116,775
Registration Date: 16-Jun-79
Classes:
Next Renewal Date: 16-Jun-99
Status: Mark has been Registered
- --------------------------------------------------------------------------------
58
<PAGE>
- --------------------------------------------------------------------------------
Thailand
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 179,773
Filing Date:
Registration Number: 127,176
Registration Date: 17-Aug-88
Classes:
Next Renewal Date: 17-Aug-98
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number: 204,185
Filing Date:
Registration Number: 163,915
Registration Date: 05-Jul-90
Classes:
Next Renewal Date: 05-Jul-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 204,184
Filing Date:
Registration Number: 164,075
Registration Date: 05-Jul-90
Classes:
Next Renewal Date: 05-Jul-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
59
<PAGE>
- --------------------------------------------------------------------------------
Turkey
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 96/5973
Filing Date:
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
60
<PAGE>
- --------------------------------------------------------------------------------
United Arab Emirates
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 12753
Filing Date: 01-Jan-97
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App Has Been Published
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 12754
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
61
<PAGE>
- --------------------------------------------------------------------------------
United Kingdom
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1585723
Filing Date: 21-Sep-94
Registration Number: 1585723
Registration Date: 31-Oct-94
Classes:
Next Renewal Date: 31-Oct-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1585754
Filing Date: 31-Oct-94
Registration Number: 1585754
Registration Date: 31-Oct-94
Classes: 9
Next Renewal Date: 31-Oct-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
62
<PAGE>
- --------------------------------------------------------------------------------
United States of America
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 75/226,330
Filing Date: 16-Jan-97
Registration Number:
Registration Date:
Classes: 11
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Application Number: 169,743
Filing Date: 09-May-78
Registration Number: 1,115,990
Registration Date: 03-Apr-79
Classes:
Next Renewal Date: 03-Apr-89
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG HOME THEATER...THE BEST
Application Number: 75/247,702
Filing Date: 27-Jan-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
63
<PAGE>
- --------------------------------------------------------------------------------
United States of America
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG MARATHON SPORTS
Application Number: 75/201,679
Filing Date: 21-Nov-96
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG MARATHON SPORTS and Desi
Application Number: 75/226,333
Filing Date: 16-Jan-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
64
<PAGE>
- --------------------------------------------------------------------------------
United States of America
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG STYLIZED
Application Number:
Filing Date:
Registration Number: 1,133,531
Registration Date: 22-Apr-80
Classes:
Next Renewal Date: 22-Apr-00
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number: 75/226,329
Filing Date: 16-Jan-97
Registration Number:
Registration Date:
Classes: 11
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: ELECTRONIC NOTEBOOK
Application Number:
Filing Date:
Registration Number: 762,353
Registration Date: 31-Dec-63
Classes:
Next Renewal Date: 31-Dec-03
Status: Mark has been Registered
- --------------------------------------------------------------------------------
65
<PAGE>
- --------------------------------------------------------------------------------
United States of America
Trademark Report
- --------------------------------------------------------------------------------
Trademark: POWERPLAY
Application Number: 459,724
Filing Date: 08-Jun-73
Registration Number: 985,837
Registration Date: 11-Jun-74
Classes: 21
Next Renewal Date: 11-Jun-04
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Application Number: 35,927
Filing Date: 30-Oct-74
Registration Number: 1,037,805
Registration Date: 13-Apr-76
Classes: 21, 36
Next Renewal Date: 13-Apr-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: POWERPLAY PLUS
Application Number: 75/045,966
Filing Date: 05-Apr-90
Registration Number: 1,675,718
Registration Date: 18-Feb-92
Classes: 9
Next Renewal Date: 18-Feb-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
67
<PAGE>
- --------------------------------------------------------------------------------
United States of America
Trademark Report
- --------------------------------------------------------------------------------
Trademark: ROAD RATED
Application Number: 74/106,210
Filing Date: 15-Oct-90
Registration Number: 1,659,574
Registration Date: 08-Oct-91
Classes:
Next Renewal Date: 08-Oct-01
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: ROAD-RATED
Application Number: 74/113,627
Filing Date: 15-Oct-90
Registration Number: 1,695,834
Registration Date: 23-Jun-92
Classes:
Next Renewal Date: 23-Jun-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: SUPER BASS SYSTEM
Application Number: 74/059,938
Filing Date: 17-May-90
Registration Number: 1,735,839
Registration Date: 24-Nov-92
Classes: 9
Next Renewal Date: 24-Nov-02
Status: Mark has been Registered
- --------------------------------------------------------------------------------
68
<PAGE>
- --------------------------------------------------------------------------------
Denmark
Trademark Report
- --------------------------------------------------------------------------------
Trademark: THE BEST SOUND AROUND
Application Number: 75/254,614
Filing Date: 10-Mar-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: WHEN YOU'RE SERIOUS ABOUNT MUS
Application Number: 75/226,334
Filing Date: 16-Jan-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
69
<PAGE>
- --------------------------------------------------------------------------------
Uruguay
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number:
Filing Date:
Registration Number: 242,098
Registration Date: 01-Feb-91
Classes:
Next Renewal Date: 26-Jan-06
Status: Mark has been Registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 271,870
Filing Date: 10-Aug-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date: 06-Aug-06
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: Opposition
Application Number:
Filing Date:
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: App has not been filed
- --------------------------------------------------------------------------------
70
<PAGE>
- --------------------------------------------------------------------------------
Venezuela
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: 1743/94
Filing Date: 11-Feb-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: 1853/94
Filing Date: 11-Feb-94
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
71
<PAGE>
- --------------------------------------------------------------------------------
Vietnam
Trademark Report
- --------------------------------------------------------------------------------
Trademark: CRAIG
Application Number: N-0245/97
Filing Date: 17-Jan-97
Registration Number:
Registration Date:
Classes: 9
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
Trademark: CRAIG Stylized
Application Number: N-0246/97
Filing Date: 17-Jan-97
Registration Number:
Registration Date:
Classes:
Next Renewal Date:
Status: Filed, not yet registered
- --------------------------------------------------------------------------------
72
<PAGE>
SCHEDULE B
LOCATION OF TANGIBLE PURCHASED ASSETS
1. Craig Consumer Electronics, Inc.
13845 Artesia Boulevard
Cerritos, California 90703-9000
2. Consumer Electronics Show Trade Show Booth located at:
Tandem Design
1846 Sequoia
Orange, CA 92868
-10-
<PAGE>
BILL OF SALE
For good and valuable consideration, receipt of which is hereby
acknowledged, and pursuant to and in accordance with the private foreclosure
sale by BT COMMERCIAL CORPORATION ("Seller"), as agent for the Lenders (under as
defined in the Credit Agreement, dated as of August 5, 1994, entered into among
Seller, as agent for the Lender's, the Lenders and Craig Consumer Electronics,
Inc., a Delaware corporation), held on the date hereof, Seller does hereby
unconditionally and irrevocably sell, convey, assign, transfer and deliver to
NEW M-TECH CORPORATION ("Buyer"), its successors and assigns, all of the legal,
beneficial and other right, title and interest in and to the assets described in
the Purchase Agreement between Buyer and Seller, dated on or about the date
hereof (the "Purchase Agreement")(collectively, the "Assets") as, when and
subject to the terms and conditions of the Purchase Agreement and may be
conveyed pursuant to California Commercial Code Section 9504(4).
Seller, for itself and its successors and assigns, hereby covenants and
agrees that, without further consideration, at any time and from time to time
after the date hereof upon the request of Buyer, it will execute and deliver to
Buyer such further instruments of sale, conveyance, assignment and transfer, and
take such other action as Buyer may request in order to effectively sell,
convey, assign, transfer and deliver all of the Assets.
Seller makes no representations or warranty with respect to the Assets
other than those expressly set forth on the Purchase Agreement
IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of
December 18, 1997.
"Seller"
BT COMMERCIAL CORPORATION,
as Agent
By: /s/ [ILLEGIBLE]
-------------------------------
Title: Associate
<PAGE>
ACCEPTED AND AGREED:
"Buyer"
NEW M-TECH CORPORATION
By: /s/ [ILLEGIBLE]
---------------------
Its:
Date: December 1O, 1998
-2-
EXHIBIT 10.18
PRODUCT SUPPORT AGREEMENT
BETWEEN
VAC SERVICE CORP. AND NEW TECH CORPORATION
AGREEMENT made this _____ day of October 1996 between VAC SERVICE CORP.
(hereinafter referred to as "VAC"), a New York corporation with its principal
offices at 99 Tower Drive, Middletown, New York 10940 and NEW M-TECH
CORPORATION, with its principal offices at 16550 NW 10th Avenue, Miami, Florida
33169 (hereinafter referred to as "NEWTECH").
R E C I T A L S
VAC is an administrator of the manufacturer's, distributor's and
dealer's warranty programs. NEWTECH desires to retain the services of VAC to
assist in the administration of any warranty product claims, as well as out of
warranty assistance to consumers who purchase NEWTECH products and is desirous
of entering into an arrangement whereby VAC will provide certain warranty
service advice and assistance and out of warranty product assistance on behalf
of NEWTECH.
NOW, THEREFORE, it is agreed between the parties as follows:
1. PURPOSE OF AGREEMENT. This agreement is intended to define certain
obligations to be assumed by VAC for the consideration hereinafter set forth
with regard to NEWTECH's products. It is the intent of this agreement to have
VAC set up a national network of servicers to service and repair NEWTECH
products in and out of warranty; to establish and recommend service rates for
NEWTECH products and negotiate these rates with VAC
<PAGE>
approved service centers; provide product assistance to customers; provide
consumer affairs services on behalf of NEWTECH and to provide technical support
for VAC authorized service centers.
2. ESTABLISHMENT OF A NATIONAL SERVICE NETWORK FOR REPAIR OF NEWTECH
PRODUCTS. VAC agrees to establish and maintain a national network of service
centers to service and repair NEWTECH products which are subject to this
agreement. VAC shall also research and recommend service rates for NEWTECH
products. After VAC has performed its research, it shall communicate its
recommended service rates to NEWTECH, and upon approval, VAC will negotiate
these rates with VAC approved service centers. Additionally, VAC shall provide a
T-1 800 number, which will be dedicated to NEWTECH'S needs pursuant to this
agreement. VAC shall also develop and establish scripts, training and customized
programming for loading of data files in order to establish the reports
hereinafter contemplated. For this initial set-up service as described in this
clause, NEWTECH agrees to pay to VAC, upon the execution of this agreement, the
sum of TWO THOUSAND AND 00/100 ($2,000.00) DOLLARS as a one-time charge. Upon
completion of the establishment of the program set forth in this paragraph, any
updates will be performed by VAC at no additional charge.
3. SPECIFIC SERVICES TO BE RENDERED BY VAC. At NEWTECH's specific
instance and request, VAC hereby agrees to assume the following customer service
responsibilities with regard to product support for NEWTECH products covered by
this agreement. Those products that are covered by this agreement are set forth
in
2
<PAGE>
Schedule "A" annexed hereto and made a part hereof. Such call center services
shall be designated as options, and those options shall be defined as follows:
(a) OPTION 1--PRODUCT WARRANTY CALLS FOR PRODUCT PURCHASED WITHIN
NINETY (90) DAYS FROM K-MART OR OTHER RETAIL OUTLETS AS
DESIGNATED BY NEWTECH.
(b) OPTION 2--WARRANTY SERVICE CALLS FOR PRODUCTS PURCHASED MORE THAN
NINETY (90) DAYS FROM THE DATE OF PURCHASE.
(c) OPTION 3--CALLS FOR PART ORDERS.
(d) OPTION 4--CUSTOMER PRODUCT ASSISTANCE. A VAC employee will
provide live service for basic troubleshooting and product
assistance to the customer.
(e) OPTION 5--CONSUMER AFFAIRS. VAC will handle consumer affairs
calls and complaints concerning products. VAC will respond to
complaints or issues raised by customers in writing by stock
letters to be provided by NEWTECH for VAC to send to customers.
Scripting for Options 1 through 5 will be reviewed and approved by
NEWTECH.
In addition to the five options available, to product consumers, VAC
will also establish a technical support line for servicers that call for
technical information. In order to fulfill its obligation, NEWTECH shall supply
VAC with those technical manuals necessary in order to adequately respond to
servicers. It shall be NEWTECH's responsibility to update these manuals as
needed.
3
<PAGE>
4. VAC ESTABLISHED CALL RESPONSE ROUTINE. VAC shall establish an
automatic call response system to answer consumer inquiries at the 800 number to
be established for NEWTECH pursuant to this agreement. The initial response on
the automated call service shall state: "Thank you for calling White
Westinghouse Service". Thereafter, the response system shall direct the caller
to press 1 for VCR service; 2 for TV service; 3 for car stereo service and 4 for
audio equipment. Thereafter, the automated call system shall direct the customer
to the five options set forth in the preceding paragraph and upon selection of
one of the defined options, VAC shall supply a live operator to respond directly
to the caller and respond to the caller's needs as required in Option 4 and 5.
5. PRICING AND CHARGES FOR VAC SERVICES.
(a) VAC agrees to set up the automated voice response system with
client options as set forth in the preceding paragraph. In order to establish
said system, NEWTECH will pay to VAC a one-time set-up fee upon the execution of
this agreement in the sum of ONE THOUSAND FIVE HUNDRED and 00/100 ($1,500.00)
DOLLARS.
(b) Each call received by VAC shall generate a specific fee depending
upon the option used by the consumer. Accordingly, each call received by VAC
shall be billed to NEWTECH pursuant to the following schedule:
(i) Option 1--$.30 per call
(ii) Option 2--$.35 per call
(iii) Option 3--$.30 per call
4
<PAGE>
(iv) Option 4--$2.45 per call
(v) Option 5--$2.75 per call
All costs as quoted are complete, including the 800 number telephone
charge expense.
Additionally, NEWTECH shall provide the necessary letters, envelopes
and postage for VAC's use in processing Option (v). If VAC advances the postage
costs, said costs shall be reimbursed to VAC by NEWTECH as part of the monthly
billing hereinafter provided.
(c) In addition to the five options set forth above, VAC will provide
technical support service to its staff for VAC authorized service centers.
Technical support calls from servicers shall be billed to NEWTECH at the rate of
$3.00 per call.
6. PROCESSING OF WARRANTY CLAIMS. VAC shall provide and facilitate the
repair of in warranty products through its authorized service center network to
be established in accordance with ss.2 above. It is understood and agreed that
all service costs and charges are to be borne solely by NEWTECH, but paid
through a repair account to be established on behalf of NEWTECH. The purpose of
this account shall be to provide funds in order to pay service centers for
repairs made on in warranty products. With respect to any out of warranty
products serviced, VAC's sole responsibility shall be to provide the customer
with the nearest available service center or regional service center, and the
customer shall be responsible to negotiate and pay for any out of warranty
repair service directly to the service center. VAC agrees that it will set up a
bank account as a depository for payment of in warranty
5
<PAGE>
and administrative services to be performed by VAC authorized service centers
for repairing in warranty products. Said account shall be in the nature of a
trust account and shall be segregated from VAC's general funds. This account
shall be used to pay for administrative service provided by VAC in accordance
with ss.3 and service repairs on in warranty products which are serviced by VAC
authorized service centers. NEWTECH agrees to fund this special account with an
initial deposit of $5,000.00. At the commencement of this agreement, VAC shall
have the right to make reasonable requests for additions to this fund by NEWTECH
based upon reasonable projections concerning the expenditures to be incurred
over a thirty (30) day period. In no event shall the fund initially fall below
$1,000.00. When the fund falls to a level of $2,000.00, VAC shall notify NEWTECH
to replenish the fund to the original amount of $5,000.00. Additionally, each
warranty claim for in warranty products shall generate a fee of $2.75 per
warranty claim payable to VAC. The services to be provided by VAC will include
issuance of referrals for service; receipt of claims; insurance of their
accuracy; approval of claims; issuance of payments to servicers on VAC stock
checks (drawing on advance deposits made by NEWTECH) and forwarding of monthly
summaries of completed service claims paid on their behalf. VAC will also
include, as part of this summary report, the actual documentation for each
claim. VAC will also provide NEWTECH with the terms and conditions of the
services to be rendered (Schedule A) when the model numbers are provided to VAC
by NEWTECH.
6
<PAGE>
7. INVOICING AND PAYMENT OF FEES. Those fees that are not payable in
advance pursuant to the preceding paragraph shall be invoiced on or about the
first day of each month by VAC to NEWTECH. The invoicing shall be in the form
and content sufficient for NEWTECH to determine the calculated amount to be paid
in accordance with the monthly invoice. The invoiced amount shall be paid to VAC
within thirty (30) days from the date of invoice. Any invoices not paid within
thirty (30) days from the date of issuance shall carry a service charge of one
and one-half (l l/2%) per cent per month, which service charge shall accumulate
for each thirty (30) day cycle after the first thirty (30) day net invoice
payment is due. In the event any invoice rendered by VAC to NEWTECH is not paid
within forty-five (45) days from the date of its issuance and receipt by
NEWTECH, VAC shall have the right, upon 15 days written notice as hereinafter
provided, to suspend the service set forth in this agreement until such time as
payment is made. If NEWTECH disputes a portion of any bill, any such dispute
shall be transmitted to VAC with sufficient explanation for VAC to understand
the nature of the claimed dispute by NEWTECH. The parties shall then mutually
work together to try to resolve such disputed billing, but any portion of the
bill that is undisputed shall be paid by NEWTECH pending resolution of the
disputed portion. For the purposes of suspension of services, any unresolved,
legitimately disputed portion of any invoice and the lack of payment of the
amount in such dispute shall not constitute grounds for suspension by VAC of the
services contemplated by this
7
<PAGE>
agreement.
8. GOOD FAITH ABSOLUTION OF DISPUTES. In the event any of the
operational provisions contained in this agreement concerning VAC's services and
NEWTECH's obligations to VAC for payment of services become a subject of this
agreement between the parties, the parties agree that each shall use their best
efforts to resolve such good faith disputes. Each party shall appoint one senior
management person to participate in resolution of disputes concerning payment
and operational issues as contemplated pursuant to this agreement. NEWTECH
hereby designates Stuart Slugh and VAC hereby designates Vince Romano as the
persons who shall be responsible for negotiating good faith disputes concerning
payment and operational issues. Any issues that are incapable of being resolved
on an operational level between the parties shall be referred to the persons set
forth in this paragraph. Notification of a dispute to be discussed shall be sent
by telefax, regular mail or overnight mail between the parties who shall
endeavor to arrange for discussions to resolve the issues as quickly as
possible. If either party shall change the designated person for this dispute
resolution mechanism, the party making the change shall notify the other by
telefax, regular mail or overnight mail of such change. Any disputes not capable
of being resolved in this manner or any other issues that may arise concerning
the interpretation of this agreement shall thereafter be subject to and
interpreted under the laws of the State of New York and the parties hereby
designate Supreme Court of Orange County as the venue of any legal action
8
<PAGE>
commenced pursuant to this agreement.
9. MANAGEMENT REPORTS. As part of VAC's service to NEWTECH, VAC shall
generate the following management reports based upon the selection of services
that NEWTECH chooses:
(a) PRODUCT SUPPORT SUMMARY. This report will indicate by SKU,
significant customer inquiries of problems related to NEWTECH's
products. The data will be provided to NEWTECH based upon a
troubleshooting grid to be provided by NEWTECH. Frequency of reports
will range from daily (EDI) to monthly, depending upon NEWTECH's
requirements.
(b) ADDITIONAL REPORTS. Additional reports may require software
programming. If NEWTECH requests the production of additional
reports, which require development or modification of software, the
cost will be billed at SIXTY FIVE AND 00/100 ($65.00) DOLLARS per
man hour.
10. INDEMNIFICATION AND NOTICE OF SUIT.
(a) VAC shall indemnify and save harmless NEWTECH and its employees and
assigns from any and all lawsuits, losses, damages, claims, complaints or
demands incurred in connection with the failure by VAC to adequately perform its
technical service responsibility in accordance with the terms hereunder; which
may arise out of any claim or representation implied or made by VAC with regard
to its technical support obligations pursuant to this agreement and which may
arise out of any defect in performance or negligence by VAC as a result of the
improper performance of its
9
<PAGE>
technical service responsibilities to NEWTECH's customers pursuant to this
agreement, excepting therefrom any damages resulting from NEWTECH's failure to
provide adequate or current technical data.
(b) Each party shall provide notice to the other party of any demand,
suit or threat of suit and shall be given the opportunity to defend same. Except
with respect to any claim, complaint, demand or litigation which one party might
institute against the other, the parties shall coordinate with each other with
regard to any claim, complaint or demand which might subsequently lead to
litigation. Each party shall be responsible to reimburse the other as a result
of any expense the other party may incur, including reasonable attorney's fees,
which may be incurred by the indemnity.
(c) The provisions of this paragraph are intended to survive the
termination of this agreement.
11. MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS: NEWTECH deems
that its business dealings, customer lists and vendors' lists, parts lists and
methods of doing business are confidential and a trade secret of NEWTECH. VAC
deems the names and addresses of its service centers, its computer software
programs and business methods used in establishing its telephone network and
staffing of same are confidential and a trade secret of VAC. Each party
acknowledges that the above are valuable assets to them and that said interests
are proprietary in nature. Each party could suffer injury if its customers or
competitors were able to use the resources of VAC or NEWTECH in order to learn
confidential information. Therefore, NEWTECH agrees that if this agreement is
10
<PAGE>
terminated, NEWTECH shall not thereafter seek to solicit, for its own use or the
use of third parties, the service of any VAC service centers that NEWTECH learns
of as a result of its association or affiliation with VAC. VAC shall not, for
its own use or third parties, use NEWTECH's customers or vendors' lists and
shall not use knowledge of NEWTECH's business dealings for the benefit of VAC or
others. The parties agree that for a period of two (2) years from the date of
the termination of this agreement, this confidentiality agreement shall remain
in full force and effect. NEWTECH shall not for itself or cause any third party
on its behalf to contact any of the VAC authorized service centers for the
purposes of establishing network or repair facilities in order to use such
facilities for warranty service repairs or extended service contract repairs.
VAC shall not use NEWTECH's customers' lists or vendors' lists to solicit
NEWTECH's customers or vendors in any way and shall not use knowledge of
NEWTECH's business dealings to its advantage. This prohibition shall not bar
NEWTECH from making legitimate inquiries to the repair and service centers with
regard to any warranty repair work that is being performed or, if a complaint
has been lodged by a customer. The parties acknowledge that it would be
difficult or impossible to ascertain damages in the event of a breach of this
clause. Thereafter, in the event either party shall breach the provisions
contained herein regarding non-solicitation and confidentiality, the parties
agree that the appropriate remedy would be for injunctive relief. The parties
agree that with respect thereto, the laws of the State of
11
<PAGE>
New York shall be binding on the parties and the parties hereby designate the
Supreme Court of the State of New York, County of Orange as venue for any action
that may be brought for injunctive relief as a result of the breach of this
clause. The provisions contained in this clause concerning non-solicitation and
confidentiality shall not apply to those service centers that NEWTECH had
previously done business with or is affiliated with and those names are provided
by NEWTECH to VAC in order to invite service centers to become a part of the VAC
service network.
12. ADDITIONAL PROVISIONS:
(a) GENERAL LIABILITY AND PRODUCT LIABILITY INSURANCE: VAC shall name
NEWTECH as a named insured on its general liability and product liability
insurance policy with a minimum coverage amount of $1,000,000.00 per occurrence.
VAC represents that it makes an effort to have its authorized service centers
maintain product liability insurance with minimum coverage of $1,000,000.00 per
occurrence. However, because of the difficulty in enforcing and tracking this
insurance requirement from its service centers, VAC does not guaranty that its
service centers will maintain insurance in force and effect. VAC's only
representation with respect to these service centers is that it requests that
such service centers maintain the aforementioned product liability insurance,
but VAC shall not act as a guarantor that such service centers will maintain
such insurance and no liability shall attach to VAC if a service center fails to
maintain such insurance.
(b) TRADEMARKS, SERVICE MARKS, PROPRIETARY RIGHTS: Neither
12
<PAGE>
party shall use the registered trademark, service marks, logos, names or any
other proprietary designations of the other party or any of its parents or
subsidiaries without the prior consent of the other party. Each party
acknowledges the other's proprietary interest in their work product, manuals and
trade secrets. However, each party grants the other the limited right to use
trademarks and service marks for the limited purpose of performing the functions
required hereunder. Therefore, VAC shall have the right to identify itself as a
service representative of NEWTECH when receiving telephone calls contemplated by
this agreement.
(c) WAIVER: The observation or performance of any condition or
obligation imposed on either party herein may be waived only upon the written
consent of the other party. Any such waiver shall be limited to the terms
thereof and shall not constitute a waiver of any other conduct, condition or
obligation of the parties hereunder. A failure to enforce any contract provision
contained herein shall not be deemed a waiver of the right to object to and
contest any subsequent breach.
(d) NOTIFICATIONS: All notifications pursuant to this agreement shall
be made by certified mail, return receipt requested or overnight express mail or
telefax in the following manner:
1. If to VAC SERVICE CORP. to: VAC SERVICE CORP., 99 Tower Drive, P.O.
Box 730, Middletown, New York 10940. Fax number (914) 692-3620.
2. If to NEWTECH APPLIANCE INC., 16550 NW 10th Avenue, Miami, Florida
33169. Fax number 305-624-8901
13
<PAGE>
(e) INDEPENDENT CONTRACTORS: The parties agree that they are in a
position of independent contractors to one another. Nothing contained herein
shall be construed to indicate that either party legally bind the other party or
that either party has any relationship or contractual liabilities other than
those set forth in this agreement.
13. RELATIONSHIP OF PARTIES: NON-EXCLUSIVITY. This agreement is
intended to be non-exclusive. VAC may contract with any third party to offer the
same or similar services it provides to NEWTECH herein and NEWTECH shall be free
to contract with any third party in order to obtain the same or similar services
as provided for herein provided that such services do not affect the ability of
VAC to carry on its obligations in accordance with the terms of this agreement.
The parties hereby declare their relationship to each other to be that of
independent contractors and neither party shall in any way hold themselves out
to third parties as agents with authority to bind the other to any contract or
agreement except as may be specifically set forth pursuant to the terms of this
agreement.
14. TERM AND TERMINATION.
(a) This agreement shall become effective only when accepted and
executed by both parties and shall remain in force and effect for a period of
two (2) years from the date of execution. Each party may, without terminating
this agreement, serve notice prior to the end of each term of their desire to
review and modify the pricing structure set forth in this agreement. If such
14
<PAGE>
notification is given, the pricing then in effect shall remain controlling,
subject to negotiation between the parties. If, in either parties' judgment, it
is determined that pricing is unacceptable and cannot be agreed upon, then
either party may, thereafter, give notice of termination which shall be
effective sixty (60) days after notification thereof to the other party. Other
than reservation of rights for price negotiations, this agreement shall
automatically be renewed for successive one year terms, unless one of the
parties notifies the other in writing of non-renewal prior to the expiration of
each annual term.
(b) After termination, this agreement shall remain in effect with
respect to those obligations remaining unfulfilled. Any notice of non-renewal
shall be served thirty (30) days prior to the expiration of the annual term.
(c) Notwithstanding the provisions contained above, either party may
terminate this agreement, if:
(i) the other party makes a material misrepresentation of facts in
this agreement;
(ii) the other party materially fails to perform the terms,
conditions, and obligations reserved to them pursuant to the
terms of this agreement.
15. MODIFICATIONS AND CHANGES. This agreement incorporates the entire
understanding and agreement between the parties. Any prior discussions,
conversations or agreements are merged in this
15
<PAGE>
agreement and shall not be modified except by written instrument executed by
both parties or by the party against whom said written instrument is being
enforced.
16. WAIVER. The observation or performance of any condition or
obligation imposed by either party hereunder may be waived only upon the written
consent of the other party. Any waiver shall be limited to the terms hereof and
shall not constitute a waiver of any other condition or obligation of the
parties hereunder.
17. COUNTERPARTS. This agreement may be signed in any number of
counterparts and each such fully executed counterpart shall be deemed an
original agreement.
18. PARAGRAPH HEADINGS. The headings contained herein are for
convenience or reference purposes only and are not intended to define, limit,
expand and describe the scope or intent of any provision of this agreement.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date first above written.
VAC SERVICE CORP.
By: /s/ JAMES R. TUCKER
--------------------------
JAMES R. TUCKER, President
NEW M-TECH CORPORATION
By: /s/ STUART SLUGH
---------------------------
STUART SLUGH, Vice President
Engineering & After Service
Sales
16
<PAGE>
SCHEDULE A
PRODUCT MODEL NUMBERS AND DESCRIPTIONS
MODEL # MANUFACTURER DESCRIPTION
WT 3500 WHITE WESTINGHOUSE 5" B/W TV
WPDC1325CD WHITE WESTINGHOUSE C/D BOOM BOX DUAL CASSETTE
WVCP8000 WHITE WESTINGHOUSE VIDEO CASSETTE PLAYER
WPDC1324 WHITE WESTINGHOUSE DUAL CASSETTE BOOM BOX W/O CD
WPDC1322 WHITE WESTINGHOUSE MINI CASSETTE BOOM BOX W/O CD
WPDD1506 WHITE WESTINGHOUSE A/M F/M STEREO W/DETACHABLE
CASSETTE PLAYER
WT2520 WHITE WESTINGHOUSE 25" COLOR TV
MC3103CD WHITE WESTINGHOUSE CD A/M F/M STEREO SHELF SYSTEM
PDC325CD NEWTECH CD BOOM BOX DUAL CASSETTE
MC3103CD NEWTECH CD A/M F/M STEREO SHELF UNIT
POD506 NEWTECH A/M STEREO W/DETACHABLE CASSETTE
PLAYER
CR1244 NEWTECH CLOCK RADIO
EXHIBIT 10.19
LEASE
THIS INDENTURE, made this nineteenth day of December, in the year one
thousand nine hundred ninety-seven, between H. JOEL RAHN, (hereinafter called
the LESSOR, which expression shall include its executors, administrators and
assigns where the context so admits) of the one part, and NEWTECH, INC.
(hereinafter called the LESSEE, which expression shall include its successors
and assigns where the context so admits) of the other part;
WITNESSETH, that in consideration of the rent and covenants herein
reserved and contained on the part of the LESSEE to be paid, performed and
observed, the LESSOR does hereby demise and lease unto the LESSEE;
The office building and warehouse and its associated parking area
located at 16550 N.W. 10th Avenue, Miami, Florida 33169 more particularly
designated as those portions of Lots 16 and South 170 ft. of Lot 13, Block 1,
according to the plat thereof as recorded in Plat Book 76, at Page 75 of the
Public Records of Dade County, Florida, which contain a building of
approximately Thirteen Thousand Seven Hundred (13,700) square feet of building
space. Lessor specifically excludes from this Lease all vacant space around the
structure not associated with direct access to the building and the current
parking area.
TO HAVE AND TO HOLD the premises hereby demised unto the LESSEE for the
term beginning with the first day of January, in the year one thousand nine
hundred and ninety-eight and terminating December 31, 1999. At the option of
lessee the term can be extended for 2 consecutive terms of one year each
terminating on December 31, 2000 and December 31, 2001, respectively.
Monthly rent for the lease year commencing January 1, 1998 shall be
EIGHT THOUSAND ($8000.00) DOLLARS commencing on the first day of January, 1998,
and on the first day of each month thereafter, and also at the legal termination
of this lease a proportionate part of the said rent for any part of a month then
unexpired.
And the LESSEE does hereby covenant with the LESSOR that the LESSEE
during the said term and for such further time as he or any other person or
persons claiming under him shall hold the said premises or any part thereof,
will pay unto the LESSOR the said rent at the times and in the manner aforesaid
(except as hereinafter provided), and will keep all and singular the said
premises in such repair, order and condition as the same are in at the
commencement of said term, or may be put in during the continuance thereof,
damage by fire, wear and tear, or other unavoidable casualty only excepted; and
will not assign this Lease nor sublet the whole or any part of the said premises
without first obtaining on each occasion the consent in writing of the LESSOR,
which consent shall not be unreasonable withheld or delayed. Lessee will not
permit any hole to be drilled or made in the stone or brickwork of said building
or any placard or sign to
<PAGE>
be placed upon the building, except such and in place and manner as shall have
first been approved in writing by the LESSOR, and will keep good, with glass of
the same kind and quality as that which may be injured or broken, all the glass
now or hereafter in the premises, acknowledging that the glass is now whole; and
at the expiration of the said term will remove his goods and effects and those
of all persons claiming under it, and will peaceably yield up to the LESSOR said
premises, and all erections and additions which are fixtures made to or upon the
same, in good repair, order and conditions in all respects, damage by fire, wear
and tear, or other unavoidable casualty excepted; and during the said term, and
such further time as aforesaid, the said premises shall not be overloaded,
damaged or defaced; and no trade or occupation shall be carried on upon the said
premises or use made thereof which shall be unlawful, improper, noisy or
offensive, or contrary to any law of the State of Florida or ordinance or by-law
for the time being in force or the City or Town in which the premises are
situated, or injurious to any person or property; and no act or thing shall be
done upon the said premises which may make void or voidable any insurance of the
said premises or building against fire, or may render any increased or extra
premium payable for any such insurance; and no addition or alteration to
or upon the said premises shall be made without the consent in writing of the
Lessor, and the Lessor or his agents may during the said term, at reasonable
times, and so as to not unreasonable interfere with Lessee's business
activities, enter to view the said premises, and may remove placards and signs
not approved and affixed as herein provided, and may make repairs and
alterations if he should elect so to do, and may show the said premises and
building to other, and at any time within three (3) months next before the
expiration of the said term, may affix to any suitable part of the said premises
a notice for letting or selling the said premises or building, and keep the same
so affixed without hindrance or molestation; and any notice from the Lessor to
the Lessee relating to the demised premises, or the occupancy thereof, shall be
deemed duly served if left at the demised premises addressed to the Lessee and
any notice from Lessee to Lessor relating to the demised premises shall be
deemed duly served if mailed to the Lessor at the following address; H. JOEL
RAHN, c/o Attorney Jeffrey A. Rahn, 95 State Street, Springfield, MA, 01103
PROVIDED ALWAYS, that in case the said premises, or any part thereof or
the whole or any part of the building of which they are a part, shall be taken
for any street or other public use, or shall be destroyed or damaged by fires or
other unavoidable casualty, or by the action of the city or other authorities,
or shall receive any direct or consequential damage for which the Lessor or the
Lessee shall be entitled to compensation by reason of anything lawfully done in
pursuance of any public authority, after the execution hereof and before the
expiration of the said term; then this Lease and the said term shall terminate
at the election of either party, and such election may be in case of any such
taking, notwithstanding the entire interest of the Lessor may have been divested
by such taking, and if it shall not so elect, then in case of any such taking or
destruction of, or damage to the demised premises, rendering the same or any
part thereof unfit for use and occupation, a just proportion of the rent
hereinbefore reserved, according to the nature and extent of the injury
sustained by the demised premises, shall be suspended or abated until the
demised premises, or in such taking, what may remain thereof, shall have been
put in proper condition for use and occupation. Nothing contained herein shall
prevent the Lessee from pursuing its own
2
<PAGE>
action against said authority for any damages sustained by it for interruption
of is business.
PROVIDED ALSO, and these presents are upon this condition, that if the
Lessee shall neglect or fail to perform or observe any of the covenants
contained in these presents, and on his part to be perform or observed within
thirty days receipt of written notice by Lessor identifying Lessee's neglect or
failure to perform or observe any of the covenants of this Lease, or if the
estate hereby created shall be taken on execution, or by the other process of
law, or if the Lessee shall be declared bankrupt or insolvent according to law,
or if any assignment shall be made of its property for the benefit of creditors,
then, and in any of the said cases (notwithstanding any license of any former
breach of covenant or waiver of the benefit hereof or consent in a former
instance), the Lessor fully may, immediately, or any time thereafter, and
without demand or notice, enter into and upon the said premises or any part
thereof in the name of the whole and repossess the same as of its former estate,
and expel the Lessee and those claiming through or under him and remove his
effects (in any lawful manner) without being deemed guilty of any manner of
trespass, and without prejudice to any remedies which might otherwise be used
for arrears of rent or preceding breach of covenant, and upon entry as aforesaid
this Lease shall terminate; and the Lessee covenants that in case of such
termination it will indemnify the Lessor against all loss of rent and other
payment including reasonable attorney's fees which it may incur by reason of
such termination during the residue of the time first above specified for the
duration of the said term.
ADDITIONAL TERMS AND CONDITIONS
1. The Lessee agrees to carry public liability insurance written on a
Comprehensive policy form on the demised premises for limits of at least One
Million ($1,000,000.00) Dollars single limit bodily injury or property damage
combined, and to name the Lessors an additional insured on such policies.
Endorsements and/or Certificates of Insurance showing such coverage and naming
Lessor as an insured shall be forwarded to the Lessor prior the commencement of
this term, and within thirty (30) days prior to the expiration date of said
policies. All of said policies shall contain a clause requiring the insurer to
give Lessor ten (10) days written notice prior to cancellation.
The Lessee shall hold the Lessor harmless against any and all claims,
damages or causes of action for damages arising during the term hereof and any
orders, decrees or judgments which may be entered therein, brought for damages
or alleged damages resulting from any injury to person or property of from loss
of life sustained in or about the said demised premises arising out of Lessee's
use and occupancy of the premises, except in no circumstance wherein such
claims, damaged or causes of action for damages are attributable to Lessor's
negligence.
2. Lessor agrees that it shall be responsible for the integrity of the
roof and existing
3
<PAGE>
plumbing, electrical, air conditioning and other structural components of the
building. Lessee shall be responsible for all repairs to the building, including
but not limited to structural components, which are the result of Lessee's
negligent use and operation of the demised premises.
Lessee shall at its sole cost maintain a service contract for the air
conditioning system for maintaining and keeping in good operating condition the
air conditioning system on a regular service contract of at lease once a month.
Lessee shall be responsible for maintaining all electrical, plumbing
and other systems installed by Lessee.
Lessee warrants and represents that all existing plumbing and
electrical systems were in operating condition at the time of the execution of
this Lease.
Lessee shall be responsible for cleaning the demised premises and
disposing of its refuse in containers supplied by the Lessee. Lessee shall
maintain at its cost the current landscaping as well as the irrigation system,
and Lessor shall maintain the exterior of the building and the parking lot in
its current condition and Lessee shall be responsible for day-to-day maintenance
thereof, and all costs associated thereto.
Lessee shall be responsible for all utilities, including but not
limited to electricity, gas water and sewer fees, to the demised premises.
3. This Lease and all of the rights of Lessee hereunder are and shall
be subject and subordinate to the lien of any mortgage or mortgages hereinafter
placed on the demised premises or any part thereof, except the Lessee's personal
property or trade fixtures, and to any and all renewals, modifications,
consolidations, replacements, extensions or substitutions of any such mortgage
or mortgages (all of which are hereinafter termed the mortgage or mortgages)
provided, that the holder of such mortgages shall enter into a written agreement
with the Lessee that so long as the Lessee is not in default under the Lease, or
any renewal thereof no foreclosure of the lien of said mortgage or any other
proceeding in respect thereof shall divest, impair, modify, abrogate or
otherwise adversely affect any interest or rights whatsoever of the Lessee under
the said Lease. Upon execution of this Lease, Lessor shall obtain a
non-disturbance agreement from the existing mortgagee or its assignee.
Such subordination shall be automatic, without the execution of any
further subordination agreement by Lessee. If, however, a written subordination
agreement, consistent with the provision, is required by a mortgagee, Lessee
agrees to execute, acknowledge and deliver the same and in the event of failure
so to do, Lessor may, in addition to any other remedies for breach of covenant
hereunder, execute, acknowledge and deliver the same as agent or attorney in
fact of Lessee, and Lessee hereby irrevocably constitutes Lessor its attorney in
fact for that purpose only.
4
<PAGE>
4. Lessee will pay in the first instance all real property taxes which may
be levied or assessed by any government authority against the land and building
and improvements owned by the Lessor which the demised premises form a part. For
purposes of the Article, "real property taxes" means all taxes and assessments,
incurred by the Lessor in its operation and ownership interest in the said land
and building improvements of which the demised premised form a part.
Lessee shall pay lessor each month one-twelth the amount of the total real
property taxes in a separate check labled "Real Property Taxes" as payment for
Lessee's share of the real property taxes.
Notwithstanding the foregoing, in the event that Lessee improves the
demised premises such that Lessor receives a revised real estate tax bill for
increases in such taxes attributable to such improvements, then in such instance
Lessee shall be responsible for the amount of any such increase in the real
estate taxes.
Such payments shall be considered as additional rent for the lease year in
which such date occurs, and Lessor's remedies for nonpayment will be the same as
if Lessee did not Pay his basic rent installment.
5. The term "Lessor", as used in this Lease, means only the owner for the
time being of the demised premises, so that the event of any sale of said
demised premises, the Lessor shall be and hereby is entirely freed and relieved
of all liabilities and obligations of the Lessor hereunder which accrue from or
after the date of such sale, and it shall be deemed and construed, without
further agreement between the parties or between the parties and the purchaser
of the demised premises, that such purchaser has assumed and agreed to carry out
any and all covenants and obligations of the Lessor hereunder from and after
such date. Notwithstanding anything to the contrary contained in this Lease, it
is specifically understood and agreed that the monetary liability of any Lessor
hereunder shall be limited to the equity the Lessor in the demised property in
the event of breach by the Lessor, as the case may be, of any of the terms,
covenants and conditions of this Lease be to performed by the Lessor. In
furtherance of the foregoing, the Lessee hereby agrees that any of the terms,
covenants or conditions hereof by the Lessor shall be enforceable solely against
the Lessor's fee interest in the demised premises.
6. Lessor and Lessee each hereby waive all claims, causes of action and
rights of recovery against the other, and their respective agents, officers, and
employees, for any damages to or destruction of persons, property or business,
including but not limited to Lessor's and/or Lessee's improvements, which shall
occur on or about the demised premises and shall result from any of the perils
insured under any and all policies of insurance maintained by Lessor and Lessee,
regardless of cause, including the negligence and intentional wrongdoing of
either party and their
5
<PAGE>
respective agents, officers and employees, but only to the extent of recovery,
if any, under such policy or policies of insurance. Each party agrees that their
fire and extended coverage insurance policies will include such a clause to the
effect that this waiver shall not affect the right of the insured to recover
under such policies. If extra cost is chargeable for such a clause, the insured
party will inform the other party of the additional expense thereof, and the
other party will have the option of paying the same, but shall not be obligated
to do so. This waiver shall be in effect only so long as said clauses exist in
the insurance policies. Nothing in this paragraph shall be construed to impose
any other or greater liability upon either the Lessor or the Lease than would
have existed in the absence of this paragraph.
7. In addition to the base rent required herein, Lessee shall pay as
additional rent to the Lessor all sales taxes required by law, including but not
limited to the current Florida sales tax of six and one-half (6.5%) percent.
8. It is understood that Lessee shall allow Lessor and/or its assigns
the ability to park up to ten (10) vehicles in the parking lot, with Lessee
having the right to designate the location of said ten spaces within the parking
lot.
9. In the event Lessee is not then in default under any of the terms,
covenants or conditions of this Lease beyond the applicable grace periods
contained herein, then Lessor hereby grants to the Lessee the first right of
refusal to purchase the property. Lessor shall be free to marker the proper, and
in the event that a bonafide offer to purchase the property form a third party
has been received, then in such instance Lessee shall have the right to purchase
the property under the same terms and conditions offered by said third party.
Lessee must exercise the aforesaid option to purchase within ten (10) days of
receipt of notice that the third party's offer to purchase.
10. Lessee shall be required to become a dues paying member of the
Sunshine State Industrial Park Association, to promptly pay all dues and/or
assessments thereof, and to abide by all rules and regulations promulgated by
said Association.
11. Lessee shall not make or permit to be made any alterations,
improvements and/or additions of any kind or nature to the demised premises or
any part thereof except by and with the prior consent of the Lessor, which
consent shall not be unreasonable withheld. Said alterations, improvements and
additions shall be done pursuant to plans and specifications submitted to Lessor
and all work to be done by Lessee shall be performed in strict accordance with
said approved plans and specifications without any deviation therefrom unless
first approved in writing by Lessor, which approval shall not be unreasonably
withheld or delayed. All alterations, improvements and additions to the demised
premises shall be made in accordance with all applicable laws and shall become
the property of the Lessor at the end of the term or other expiration of this
Lease; provided, however, if prior to the termination of this Lease or within
6
<PAGE>
fifteen (15) days thereafter, Lessor so directs, Lessee shall, at Lessee's sole
cost, promptly remove the additions, improvements, fixtures and installations
which were place in the demised premises by Lessee and which are designated in
said notice and repair any damage occasioned by such removal and in default
thereof Lessor may effect said removals and repairs at Lessee's expense.
Notwithstanding the foregoing, Lessee retains the right to remove any equipment
installed on the demised premises, provided that any damage occasioned by said
removal is repaired by Lessee.
In the event of making such alterations, improvements and/or additions
as herein provided, Lessee shall indemnify and save harmless Lessor from all
expenses, liens, claims or damages to either persons or property arising out of
or resulting from the undertaking or making of said alterations, additions and
improvements.
Lessee shall be solely responsible for any costs related to providing
handicapped access, if required by law, to the demised premises.
12. Lessee shall be sole responsible for the erection, licensing and
maintenance of any sign affixed to the facade of the building. No signs shall be
erected without the prior written approval of the Lessor, which shall not be
unreasonably withheld or delayed. It is expressly understood that any approved
sign erected on the facade of the building shall not necessarily have a term
running concurrent with the term of the Lease, and the Lessor expressly reserves
the right to require Lessee to remove said sign at any time within fifteen (15)
days prior written notice for reasonable cause. Lessee shall be responsible for
applying for all licenses and/or permits required for the erection of any sign,
if applicable, and for all costs associated therewith.
13. Lessee shall make all repairs to the Premises which are necessary
or desirable to keep the premises in the same condition as the premises were in
at the commencement of the Lease, reasonable wear and tear and damage or loss
caused by fire or casualty or other loss or those specific obligations
enumerated in this Lease which are the responsibility of Lessor, excepted.
Without limiting the generality of the foregoing, Lessee is specifically
required to replace or make repairs;
a) to the portion of any pipes, lines, ducts, wires or conduits
contained within the Premises that are installed by Lessee.
b) to windows, plate glass, doors and any fixtures or appurrenances
composed of glass;
c) To Lessee's sign;
d) to any heating or air conditioning equipment installed in the
Premises by Lessee;
7
<PAGE>
e) to the Premises or the building when repairs to the same are
necessitated by any act or omission of Lessee, or the failure of
Lessee to perform its obligations under this Lease, reasonable
wear and tear and damage or loss caused by fire or casualty or
other loss, excepted and which in any case is not covered by
insurance. Lessee shall keep the Premises in a clean and sanitary
condition, free from vermin and escaping offensive odors.
14. Lessee intends to conduct office operations and a distribution
warehouse within the demised premises, but such use does not constitute a
representation or guaranty by the Lessor that such use may be conducted in the
demised premises, or its lawful or permissible under the certificate or
occupancy issued for the building of which the demise premises form a part, or
is otherwise permitted by law.
The lessee shall comply with all laws and regulations of the federal,
state, county, and municipal authorities applicable to the business to be
conducted by the Lessee in the demised premises. Lessee shall obtain all
licenses necessary for the operation of said business prior to occupying the
premises, and shall evidence such to the Lessor.
The Lessee shall conduct its business in such a manner, both as regards
noise and other nuisances, and will not interfere with, annoy, or disturb any
other tenant in the conduct of its business, or the Lessee in its management of
the building and/or land.
Lessee shall not allow the use of the demised premises to interfere
with the use and enjoyment of adjacent landowners.
The Lessee shall not keep on the demised premises any article of
dangerous, flammable, or explosive character which increases the danger of fire
upon the property, or which would be deemed hazardous by any responsible
insurance company.
The sidewalks, entrances, passages, courts, vestibules, stairways,
corridors, and halls shall not be obstructed or encumbered by the Lessee or used
for any purpose other than access to the demises premises.
15. Lessee shall pay as an additional charge the amount of eighteen
(18%) interest on any payment of fixed rent and/or additional rent which is made
more than ten (10) days after the due date.
In the event Lessee fails or refuses to pay rent or any additional
charge legally due Lessor hereunder and Lessor institutes suit for collection of
same, Lessee agrees to reimburse Lessor for all reasonable expenses in
connection therewith, including but not limited to, court costs and attorney's
fees.
8
<PAGE>
All payments required under this Agreement shall be paid by Lessee,
without notice or demand, (unless specifically required herein) and without
abatement, deduction or set-off.
16. Lessor covenants and agrees with Lessee that so long as the Lessee
keeps and performs all of the covenants and conditions by the Lessee to be kept
and performed, the Lessee shall have quiet and undisturbed possession and use of
the premises, free from any claims or interference by Lessor and all persons
claiming by or through Lessor.
17. The parties further expressly agree as follows:
(a) The acts or omissions of the servants and agents of the Lessee, and
of all persons who are upon the demised premises during the term, or any
extensions hereof, shall be construed to be the acts and omissions of the
Lessee.
(b) It shall not be necessary that the Lessor demand the performance of
this Lease by the Lessee; nor shall it be necessary for the Lessor to notify the
Lessee of any breach hereunder.
(c) Time shall be construed to be of the essence hereof, wherever any
act hereunder is required to be done at a certain time, or without a prescribed
period of time.
(d) This Lease, and any amendments which the parties may execute
hereto, sets forth all of the promises, agreements, conditions and
understandings between lessor and Lessee relative to the demised premises and
there are not other promises, agreements, conditions and understanding, either
oral or written between them.
(e) No subsequent alteration, amendment, change or addition to this
Lease shall be binding upon Lessor and Lessee unless the same has been reduced
to writing and executed by Lessor and Lessee.
(f) If any provisions of this Lease or any application thereof shall be
invalid or unenforceable, the remainder of this Lease and any other application
of such provision shall not be affected thereby.
(g) All terms used in this Lease, regardless of the number or gender in
which they are used, shall be deemed and construed to include any other number,
singular or plural, and by other gender, masculine, feminine, or neuter, as the
context or sense of this Lease or any section, subsection, or clause herein may
require as if such terms has been fully and properly written in such number or
gender.
(h) This Lease is executed under and pursuant to the laws of the State
of Florida.
9
<PAGE>
18. It is the intent of the parties to give the Lessors for each year
after the first of the lease term a total net rent equal to the purchasing power
of the net rent during November, 1997. It is stipulated and agreed that the rent
for the initial year of the term hereunder was computed on the basis of the
dollar value as set forth in November, 1997 Consumer Price index published for
Urban Wage Earners and Clerical Workers U.S. Workers U.S. City Average by the
Bureau of Labor Statistics of the U.S. Department of Labor (1967-100). If the
November 1998 dollar value as set forth in said Consumer Price Index has
increase over the November 1997 dollar value, then the rent for the second year
of the term shall be increased in the same proportion over the initial rent as
the November 1998 dollar value has increased over the November, 1997 dollar
value. Viz: If the dollar value in November 1997 is 100, and the dollar value in
November 1998 is 115, then the rent for the option period shall be increased by
fifteen (15%) over the initial rent. If there is no increase in the dollar
value, then the rent for the second year of the term shall be the same as the
rent for the initial period hereunder. In no event shall the rent for the second
year of the term be less than the base rent set forth in the Lease. It is agreed
that in the event publication of the Consumer Price Index of the United States
Bureau of Labor Statistics is discontinued, the parties shall thereafter accept
comparable statistics on the purchasing power of the consumer dollar, as
published by a responsible financial periodical of recognized authority to be
then chosen by the parties, or in the event they cannot agree, by their
arbitrators, selected by the two so chosen.
19. For purposes of Lessee's financing of any personal property, Lessor
waives any landlord's lien and other lien rights arising under Florida upon
Lessee's property contained within the demised premises.
IN WITNESS WHEREOF, the Lessor and Lessee have hereunto caused this
Lease Agreement to be executed on the day and year first written above.
H. JOEL RAHN, Lessor
By /s/ H. JOEL RAHN
----------------------
H. JOEL RAHN
NEWTECH, INC., Lessee
By /s/ JOEL NEWMAN
------------------------
Joel Newman, Its President
10
EXHIBIT 10.20
DATED THE 19TH DAY OF NOVEMBER 1997
LAI SUN DEVELOPMENT COMPANY LIMITED
AND
NEWTECH (HONG KONG) LIMITED
- --------------------------------------------------------------------------------
TENANCY AGREEMENT
- --------------------------------------------------------------------------------
Premises : Unit 1102 on the 11th Floor of Tower 11 of Cheung Sha
Wan Plaza, No. 833 Cheung Sha Wan Road erected on
New Kowloon Inland Lot No. 5955
Term : From 13/10/1997 to 12/10/1999
Rent : HK$ 42,200.00
M/F & A/C : HK$ 7,385.00
Deposit : HK$ 156,435.00
Rent-free : 31 days
- --------------------------------------------------------------------------------
REGISTERED in the Land Registry
by Memorial No. 7369172
on 17 December 1997
- --------------------------------------------------------------------------------
LO AND LO
SOLICITORS &c.
HONG KONG
<PAGE>
1 PREMISES, TERM AND RENT................................................. 1
/bullet/ THE SAID PREMISES
/bullet/ THE SAID BUILDING
/bullet/ THE SAID TERM
2 DEPOSIT ................................................................ 2
2.1 Payment of deposit......................................... 2
/bullet/ THE SAID DEPOSIT
2.2 Increase in deposit........................................ 3
3 TENANT'S OBLIGATIONS.................................................... 3
3.1 Payment of rent............................................ 3
/bullet/ THE SAID RENT
/bullet/ THE SAID MANAGEMENT AND AIR-CONDITIONING FEES
3.2 Payment of rates etc....................................... 4
3.3 Payment of government rent................................. 4
3.4 Payment of outgoings....................................... 4
3.5 Autopay ................................................... 5
3.6 Fitting out................................................ 5
3.7 Good repair of interior.................................... 5
3.8 Cleansing of drains........................................ 7
3.9 Removal of garbage......................................... 7
3.10 Directory board........................................... 8
3.11 Good repair of fire fighting and security equipment....... 8
3.12 Protection from typhoon................................... 8
3.13 Air-conditioning of premises.............................. 8
3.14 Security system........................................... 9
3.15 Entry on premises......................................... 9
3.16 Execution of repairs...................................... 9
3.17 Keep premises open for business........................... 10
/bullet/ THE SAID NORMAL BUSINESS HOURS
3.18 Loading of food........................................... 10
3.19 Damage & defects.......................................... 10
3.20 Comply with regulations................................... 11
/bullet/ THE REGULATIONS
3.21 Comply with Ordinances etc ............................... 11
3.22 Default of agents etc .................................... 11
3.23 Building rules............................................ 11
/bullet/ THE MANAGER
/bullet/ THE SAID DEED OF MUTUAL COVENANT
3.24 User...................................................... 11
/bullet/ THE SAID USER
3.25 Preparation of food....................................... 12
3.26 Goods..................................................... 12
3.27 Noise..................................................... 13
3.28 Nuisance.................................................. 13
3.29 Compliance with Crown lease............................... 13
/bullet/ THE LAND
<PAGE>
/bullet/ THE CROWN LEASE
3.30 Guns and ammunition...................................... 13
3.31 Alterations.............................................. 13
3.32 Installation of electrical wiring........................ 14
3.33 Use of toilet facilities................................. 14
3.34 Damage to installations.................................. 15
3.35 Signs.................................................... 15
3.36 Locks.................................................... 16
3.37 Obstruction of passages.................................. 16
3.38 Cables and wiring ....................................... 16
3.39 Assignment .............................................. 16
3.40 Animals.................................................. 17
3.41 Touting.................................................. 17
3.42 Heavy machinery ......................................... 17
3.43 Fire grilles ............................................ 18
3.44 Yield up premises........................................ 18
3.45 Electrical and telephone wiring ......................... 19
3.46 Aerials.................................................. 19
3.47 Prohibited names......................................... 19
3.48 Auctions & sale.......................................... 19
3.49 Breach of insurance policy............................... 19
4 LANDLORD'S OBLIGATIONS.................................................. 19
4.1 Property tax.............................................. 20
4.2 Quiet enjoyment........................................... 20
4.3 Air-conditioning.......................................... 20
5 OTHER TERMS AND CONDITIONS.............................................. 20
5.1 Sale and redevelopment.................................... 21
5.2 Interest and disconnection of electricity etc............. 21
5.3 Alterations to systems.................................... 22
5.4 Default in payment of rent................................ 22
5.5 Re-entry.................................................. 22
5.6 Acceptance of rent........................................ 23
5.7 Overflow of water......................................... 23
5.8 Abatement of rent......................................... 23
5.9 Landlord not liable for breakdown......................... 24
5.10 Deemed default of Tenant................................. 24
5.11 Distress of rent......................................... 24
5.12 Condoning not a waiver................................... 24
5.13 Permission to enter and view ............................ 25
5.14 Notices.................................................. 25
5.15 Insurance ................................................25
5.16 Additional air-conditioning ............................. 26
5.17 Change of name of building .............................. 26
5.18 Alterations to building ................................. 26
5.19 Functions ~ display ..................................... 27
5.20 Public address system ................................... 27
ii
<PAGE>
5.21 Wilful suspension etc.................................... 27
5.22 Indemnity................................................ 27
5.23 Regulations.............................................. 28
5.24 Security................................................. 28
5.25 Interpretation........................................... 28
6 SPECIAL CONDITIONS ..................................................... 28
7 COSTS................................................................... 29
8 HEADINGS & INDEXES...................................................... 29
9 KEY MONEY............................................................... 29
10 NO WARRANTY ........................................................... 29
FIRST SCHEDULE............................................................ 30
Particulars and Special Conditions
/bullet/ THE LANDLORD
/bullet/ THE TENANT
/bullet/ THE SAID PREMISES
/bullet/ THE SAID TERM
/bullet/ THE SAID RENT
/bullet/ THE SAID MANAGEMENT AND AIR-CONDITIONING FEES
/bullet/ THE SAID DEPOSIT
/bullet/ THE SAID USER
/bullet/ THE SAID NORMAL BUSINESS HOURS
/bullet/ SPECIAL CONDITIONS
SECOND SCHEDULE........................................................... 33
Fitting Out Regulations
/bullet/ THE WORKS
/bullet/ THE TENANT'S PLANS
/bullet/ THE VETTING FEES
iii
<PAGE>
THIS AGREEMENT is made the day of 199
BETWEEN
(1) the party detailed as the Landlord in Part 1 of First Schedule (hereinafter
called "the Landlord" which expression shall where the context permits
include its successors and assigns) of the one part and
(2) the party detailed as the Tenant in Part 2 of First Schedule (hereinafter
called "the Tenant") of the other part.
WHEREBY IT IS AGREED as follows:
1 PREMISES, TERM AND RENT
The Landlord shall let and the Tenant shall take ALL THOSE premises
(hereinafter referred to as "the said premises") forming part of all that
building (hereinafter referred to as "the said building") which said
premises and said building are more particularly described and set out in
Part 3 of First Schedule TOGETHER with the use in common with the Landlord
and all others having the like right of the entrances, staircases,
landings, passages and lavatories in the said building in so far as the
same are necessary for the proper use and enjoyment of the said premises
and except in so far as the Landlord may from time to time restrict such
use And Together Also with the use in common as aforesaid of the escalators
and lifts in the said building (if any and whenever the same shall be
operating) for the term set out in Part 4 of First Schedule (hereinafter
referred to as "the said term") YIELDING AND PAYING therefor throughout
such rent per calendar month and other charges as are from time to time
payable in accordance with the provisions set out below which sums shall be
payable exclusive of rates in advance clear of all deductions and right to
set off (whether legal or equitable), the first payment to be made in full
by the Tenant on his signing of this Agreement notwithstanding the
rent-free period (if any) granted hereunder, and all subsequent payments to
be made on the first (1st) day of each and every calendar month in respect
of which such sums are payable Provided that the second and the last of
such payments shall be apportioned according to the number of days in the
month included in the said term and remaining unpaid.
1
<PAGE>
2 DEPOSIT
2.1 PAYMENT OF DEPOSIT
The Tenant shall on the signing of this Agreement pay to the Landlord
the deposit as set out in Part 7 of First Schedule (hereinafter
referred to as "the said deposit"). The said deposit is paid to the
Landlord to secure the due observance and performance by the Tenant of
the agreements obligations stipulations terms and conditions herein
contained and on the Tenant's part to be observed and performed. In
the event the Tenant shall commit or suffer to be committed a breach
of any of the terms and conditions herein or if the Tenant or another
person in whom for the time being the said term shall be vested shall
become bankrupt or enter into any arrangements with creditors or
suffer any prosecution in respect of the non-payment of any money due
to the Hong Kong Government then and in any of the said cases it shall
be lawful for the Landlord at any time thereafter to re-enter upon the
said premises or any part thereof in the name of the whole and
thereupon this Agreement shall absolutely determine on which event the
said deposit shall be absolutely forfeited to the Landlord but without
prejudice to any other right or remedy hereunder of the Landlord in
respect of any breach of the terms and conditions herein contained and
on the part of the Tenant to be observed and performed.
Notwithstanding the foregoing the Landlord may in any such event at
its option elect not to terminate this Agreement but to deduct from
the said deposit the amount of any rent, management and
air-conditioning fees, rates and other charges payable hereunder and
any costs expenses loss or damage sustained by the Landlord as a
result of any non-observance or non-performance by the Tenant of any
of the said agreements obligations stipulations terms or conditions.
In the event of any deduction being made by the Landlord from the said
deposit in accordance herewith during the currency of this Agreement
the Tenant shall forthwith on demand by the Landlord make a further
deposit or deposits equal to the amount so deducted and failure by the
Tenant so to do shall entitle the Landlord forthwith to re-enter upon
the said premises and to determine this Agreement as hereinbefore
provided. Subject as aforesaid, and provided that the Tenant shall
fully and faithfully comply with all his obligations hereunder, the
said deposit without interest thereon shall be refunded to the Tenant
by the Landlord within thirty (30) working days after the expiration
or sooner determination of this Agreement and the delivery of vacant
possession to the Landlord OR within thirty (30) working days of the
settlement of the last outstanding claim by the Landlord against the
Tenant in respect of any breach,
2
<PAGE>
non-observance or non-performance of any of the said agreements
obligations stipulations terms or conditions on the part of the Tenant
to be observed and performed whichever is the later PROVIDED that if
any of the fixtures partitions fittings or fire fighting equipment on
the said premises shall be found to be damaged or destroyed upon the
termination of this Agreement they shall forthwith be repaired or
replaced (as the case may require) by the Tenant failing which the
Landlord shall be entitled to repair or replace the same (as the case
may require) and deduct the expense therefor from the said deposit
before returning the balance to the Tenant and if the said deposit
shall be insufficient then the deficit shall forthwith be made good by
the Tenant to the Landlord.
2.2 INCREASE IN DEPOSIT
During the said term the Tenant shall maintain the said deposit at the
sum equal to three (3) months' rent and management and
air-conditioning fees and one (1) quarter's rates (as estimated by the
Landlord or as assessed by the Government, as the case may be) in the
event that the rent or the management and air-conditioning fees or the
rates shall be increased the Tenant shall forthwith on demand pay to
the Landlord the additional amount to make up the said deposit.
3 TENANT'S OBLIGATIONS
The Tenant to the intent that the obligations hereunder shall continue
throughout the said term hereby agrees with the Landlord as follows:
3.1 PAYMENT OF RENT
To pay on the days and in the manner hereinbefore provided without any
deduction:
3.1.1 the rent (exclusive of rates and all other outgoings) set
out in Part 5 of First Schedule (hereinafter referred to as
"the said rent"); and
3.1.2 the management and air-conditioning fees from time to time
payable in respect of the said premises (hereinafter
referred to as "the said management and air-conditioning
fees") and all other charges. At the commencement of the
said term, the said management and air-conditioning fees is
determined to be such sum as set out in Part 6 of First
Schedule. Should the said management and air-conditioning
fees be increased or other charges legitimately be imposed
in respect of the said premises, such
3
<PAGE>
amount of the said management and air-conditioning fees as
increased or other charges so imposed shall be payable by
the Tenant.
3.2 PAYMENT OF RATES ETC.
To pay and discharge punctually all rates, taxes, assessments, duties,
charges, impositions and outgoings of an annual or recurring nature
now or at any time hereafter to be assessed, imposed levied or charged
by the Hong Hong Government or other lawful authority upon the said
premises or upon the owner or occupier thereof property tax only
excepted). Without prejudice to the generality of this Clause the
Tenant shall pay all rates imposed on the said premises in the first
place to the Landlord who shall settle the same with the Hong Kong
Government and in the event of the said premises not yet having been
assessed to rates the Tenant shall pay to the Landlord a sum equal to
the rates which would be charged by the Hong Kong Government on the
basis of a rateable value equal to twelve (12) months' rent payable by
the Tenant on account of the Tenant's liability under this C1ause.
3.3 PAYMENT OF GOVERNMENT RENT
To pay to the Landlord in advance quarterly all government rent
(hereinafter referred to as "the said government rent") as determined
by the government or be due proportion (as may be determined by the
Landlord in its absolute discretion) of the aggregate government rent
payable in respect of the land or portion thereof, the first payment
of the said government rent be made on the signing of this Agreement
and all subsequent quarterly payments to be made on the first day of
each and every succeeding quarter. Without prejudice to the generality
of this condition, the Tenant shall pay the said government rent in
the first place to the Landlord who shall settle the same with the
Kong Government and in the event of the said premises not yet having
been assessed to government rent the Tenant shall pay to the Landlord
a sum equal to the rates payable by the Tenant in respect of the said
premises Provided that the deficiency or overpayment (if any) shall be
settled by the parties forthwith upon assessment of government rent.
3.4 PAYMENT OF OUTGOINGS
To pay and discharge punctually during the said term all charges for
gas, water, electricity, telephone rental and other outgoings now or
at any time hereafter consumed by the Tenant and chargeable in respect
of the said premises and to
4
<PAGE>
pay all necessary deposits for the supply of electricity and other
services to the said premises.
3.5 AUTOPAY
To, if so required by the Landlord, settle and effect payments of the
said rent, the said management and air-conditioning fees, the rates
and all other charges payable hereunder in respect of the said
premises by way of autopay to such bank(s) and account(s) as the
Landlord may direct from time to time.
3.6 FITTING OUT
3.6.1 To fit out the interior of the said premises in accordance
with such plans and specifications as shall have been first
submitted by the Tenant to and approved in writing by the
Landlord in the manner set out in Second Schedule in a good
and proper workmanlike fashion using good quality materials
and in all respects in a style appropriate to a first class
office.
3.6.2 The Tenant shall employ, at his own expense, only the
Landlord's nominated consultants or contractors for the
purpose of design appraisal, carrying out, installing and
maintaining all such works associated with the connection of
all electrical and mechanical engineering works and
arrangements including but not confined to sprinkler system,
security system, plumbing and drainage system,
air-conditioning system and all their ducting and control
units in the said premises or from the said premises to the
relevant main systems in the said building.
3.6.3 In carrying out any approved work hereunder, the Tenant
shall and shall cause his servants agents contractors and
workmen to cooperate fully with the Landlord and with other
tenants or contractors carrying out any work in the said
building. The Tenant shall obey and cause his servants
agents contractors and workmen to obey and comply with all
instructions and directions which may be given by the
Landlord its servants agents or other authorized
representatives in connection with the carrying out of such
work.
3.7 GOOD REPAIR OF INTERIOR
To keep all the interior of the said premises including the flooring,
interior plaster or other finishes or rendering to walls, floors,
ceilings and the shop fronts (if any) of the said premises and the
Landlord's fixtures fittings and
5
<PAGE>
additions therein (if any) including all doors, windows, sprinkler
system, electrical and/or gas or other utility installations and
wiring plant and ducting and internal decorations in good, clean and
tenantable repair and condition and as may be appropriate from time to
time properly painted and decorated and so to maintain the same at the
expense of the Tenant and to deliver up the same to the Landlord at
the expiration or sooner determination of the said term in like
condition. In particular, but without in any way limiting the
foregoing:
3.7.1 Replacement of windows
To reimburse to the Landlord the cost of replacing all
broken and damaged windows of the said premises (or
elsewhere if used exclusively by the Tenant) whether the
same be broken or damaged by the negligence of the Tenant or
by circumstances beyond the control of the Tenant.
3.7.2 Repair of electrical installations
To repair or replace, if so required by the appropriate
supply company, statutory undertaker or authority as the
case may be under the terms of any Electricity Supply or
similar Ordinance for the time being in force or any Orders
in Council or Regulations made thereunder, all electrical
wiring installations and fittings within the said premises
from the Tenant's meter(s) to and within the same.
3.7.3 Good repair of lavatories
To, at the expense of the Tenant, keep the lavatories and
water apparatus as are located within the said premises or
elsewhere if used exclusively by the Tenant his servants
agents and licensees in good, clean, hygienic and tenantable
state and in proper repair and condition at all times during
the said term to the satisfaction of the Landlord and in
accordance with the Regulations or bye-laws of all Public
Health and other Government authorities concerned.
3.7.4 Cleaning of windows
To keep the said premises including all external windows and
lights at all times in a clean and sanitary state and
condition.
3.7.5 Replacement of damaged bulbs
6
<PAGE>
To reimburse to the Landlord the cost of replacing any
damaged, broken, defective or burned out electric light
bulbs, tubes and globes in the said premises which may be
provided by the Landlord.
3.7.6 Indemnification of Landlord
To be wholly responsible for any loss, damage or injury
caused to any other person whomsoever directly or indirectly
through the defective or damaged condition of any part of
the interior of the said premises or any fixtures or
fittings therein for the repair of which the Tenant is
responsible hereunder or in any way owing to the spread of
fire or smoke or overflow of water from the said premises or
any part thereof or through the act or default of the Tenant
his servants agents licensees or customers, and to make good
the same by payment or otherwise, and to indemnify the
Landlord against all actions, proceedings, claims and
demands whatsoever made upon the Landlord by any person in
respect of any such loss, damage or injury and all costs and
expenses incidental thereto, and to effect adequate
insurance cover in respect of such risks at the discretion
of the Landlord.
3.7.7 Cleaning contractor
To employ a cleaning contractor at his sole expense for
cleaning the said premises as may be approved by the
Landlord.
3.8 CLEANSING OF DRAINS
To keep in good order and condition all the drains and pipes
in the said premises and to pay on demand to the Landlord or
its agent the cost incurred by the Landlord in cleansing,
clearing, repairing or replacing any of the drains piping or
other plumbing choked or stopped up owing to careless or
improper use by the Tenant, his servants, agents,
assistants, licensees, customers, workmen, visitor or any
persons authorized by him.
3.9 REMOVAL OF GARBAGE
3.9.1 To be responsible at his own expense for the removal of
garbage and refuse from the said premises to such location
as shall be specified by the Landlord or its agents from
time to time and to use only that type of refuse container
as is specified by the Landlord or its agents from time to
time.
7
<PAGE>
3.9.2 In the event of the Landlord providing a collection services
for refuse and garbage the same shall be used by the Tenant
to the exclusion of any other similar service and the use of
such service provided by the Landlord shall be at the sole
cost of the Tenant.
3.9.3 To render full co-operation to the cleaning contractors and
the neighbouring tenants with a view to keeping the whole of
the said building at all times in a neat and tidy condition.
3.10 DIRECTORY BOARD
To pay the Landlord or its agents immediately upon demand the cost of
affixing, repairing, altering or replacing as necessary the Tenant's
name on the Directory Board (if any) provided by the Landlord. The
Tenant's name to appear on the Directory Board shall strictly be in
accordance with that appearing in this Agreement unless prior written
consent to name otherwise has first been obtained from the Landlord.
3.11 GOOD REPAIR OF FIRE FIGHTING AND SECURITY EQUIPMENT
To ensure at all times that all fire alarms, fire fighting equipment,
roller shutters (if any) and other equipment for security purposes (if
any) provided by the Landlord shall not be disrupted, interrupted,
damaged or caused to be defective through the act, default or neglect
of the Tenant, his servants, agents, licensees or customers.
3.12 PROTECTION FROM TYPHOON
To take all reasonable precautions to protect the interior of the said
premises from storm or typhoon damage.
3.13 AIR-CONDITIONING OF PREMISES
Where any plant machinery or equipment for cooling or circulating air
is installed in or about the said premises the Tenant will to the
extent of the Tenant's control over the same at all times use and
regulate the same to ensure that the air-conditioning plant is
employed to best advantage in the conditions from time to time and
without prejudice to the generality of the foregoing will operate and
maintain such air-conditioning plant within the said premises as the
Landlord may reasonably determine to ensure a reasonably uniform
standard of air cooling or conditioning throughout the said building.
8
<PAGE>
3.14 SECURITY SYSTEM
To ensure that his own security system within and at the entrance of
the said premises is at all times compatible with and linked up to the
security system for the said building provided and operated by the
Landlord (if any).
3.15 ENTRY ON PREMISES
3.15.1 To permit the Landlord, its agents and all persons
authorized by it with or without tools and workmen or others
and with or without appliances at all reasonable times to
enter and view the state of repair of the said premises, to
take inventories of the fixtures therein, to carry out any
works or repairs which are required to be done provided that
in the event of emergency the Landlord, its servants or
agents and all persons authorized by it may enter without
notice and forcibly if need be and, during the last three
(3) months of the said term, to show the said premises or
any part thereof to prospective tenants or purchasers.
3.15.2 To permit the Landlord and its other tenants and all persons
authorized by the Landlord to have the free and
uninterrupted use (in common with the Tenant) of all gas and
water pipes electricity and other wires flues and drains in
through and under the said premises.
3.16 EXECUTION OF REPAIRS
3.16.1 On receipt of any notice from the Landlord or its authorized
representatives specifying any works or repairs which are
required to be done by the Tenant and/or which are the
responsibilities of the Tenant hereunder, forthwith to put
in hand and execute the same with all possible dispatch and
without any delay.
3.16.2 If the Tenant shall at any time make default in the
performance of any of the agreements herein contained for or
relating to the repair decoration treatment preservation
protection or condition of the said premises then to permit
the Landlord and all persons authorized by the Landlord to
enter upon the said premises and repair decorate treat
preserve protect and make good the same at the expense of
the Tenant (but no such entry repair decoration treatment
preservation protection and marring good shall prejudice the
right of re-entry under the provisions hereinafter
contained) and to repay to the Landlord on demand the cost
of such repair
9
<PAGE>
decoration treatment preservation protection and making good
including surveyor's and solicitor's fees and charges
reasonably incurred by the Landlord in respect thereto.
3.17 KEEP PREMISES OPEN FOR BUSINESS
To keep the said premises open for business at all reasonable times of
the year (except Sundays and public holidays) during the normal
business hours (as defined in Part 9 of First Schedule under the
designation "the said normal business hours") Provided that the said
normal business hours may be altered from time to time by the Landlord
at its discretion. Without prejudice to the generality of the
foregoing any suspension of the Tenant's business for a period of more
than seven (7) days without the prior consent of the Landlord shall
constitute a material breach of this provision entitling the Landlord
to determine this Agreement and to regain possession of the said
premises.
3.18 LOADING OF FOOD
To load and unload goods, food and food containers only at such times
and through such entrances and by such service lifts (if any) as shall
be designated by the Landlord for this purpose from time to time.
3.19 DAMAGE & DEFECTS
3.19.1 Notice of damage
To give notice to the Landlord or its agents of any damage
that may be suffered to the said premises and of any
accident to or defects in the water pipes, gas pipes (if
any), electrical wiring or fixtures or other facilities
provided by the Landlord provided always that the said
facilities of and in the said premises shall be maintained
at the Tenant's costs.
3.19.2 Common areas
To pay to or reimburse to the Landlord the cost of any
damage caused to any part of the common areas of the said
building occasioned by the Tenant his licensees employees
agents or contractors or any other person claiming through
or under the Tenant.
3.20 COMPLY WITH REGULATIONS
To observe and comply with the regulations or requirements
(hereinafter referred to as "the Regulations") stated in notices or
announcements from time
10
<PAGE>
to time made or issued by the Landlord or its agent for the
maintenance and management of the said building including the time and
arrangement for operating the equipment, escalators, lighting and the
use of the entrance and passageways.
3.21 COMPLY WITH ORDINANCES ETC.
To obey and comply with and to indemnify the Landlord against the
breach of all ordinances, regulations, bye-laws, rules and
requirements of any Governmental or other competent authority relating
to the use and occupation of the said premises and the conduct and
carrying on of the Tenant's business on the said premises or to any
other act, deed, matter or thing done, permitted, suffered or omitted
therein or thereon by the Tenant or any employee, agent or licensee of
the Tenant.
3.22 DEFAULT OF AGENTS ETC.
To be responsible to the Landlord for the act, neglect, default or
omission of any contractor, servant, agent, visitor, customer and
licensee of the Tenant as if they were the acts, neglects, defaults or
omission of the Tenant himself and to indemnify the Landlord against
all costs claims demands expenses or liability to any third party in
connection therewith and for the purposes of this Agreement "licensee"
shal1 include any person present in, using or visiting the said
premises with the consent of the Tenant whether express or implied.
3.23 BUILDING RULES
To obey and comply strictly with the Regulations from time to time
adopted by the Landlord or the manager appointed (hereinafter called
"the Manager") in accordance with the Deed of Mutual Covenant and
Management Agreement and the Sub-Deed of Mutual Covenant relating to
the said building (if any), (hereinafter collectively called "the said
Deed of Mutual Covenant") so far as the same relate to the said
premises, and to conduct the business of the Tenant so as not to
prejudice the goodwill and reputation of the said building in which
the said premises are located as a first class commercial centre.
3.24 USER
3.24.1 User of premises
To use the whole of the said premises only for the purpose
set forth in Part 8 of First Schedule (hereinafter referred
to as "the said user") and not to use or permit the said
premises or any part thereof to be used for any purpose
other than as an office only and without
11
<PAGE>
prejudice to the foregoing to obtain any licence approval or
permit required by the Government or any other competent
authority in connection with the Tenant's use or occupation
of the $aid premises prior to the commencement of the
Tenant's business and to maintain the same in force during
the currency of this tenancy and to indemnify the Landlord
against the consequences of a breach of this provision.
3.24.2 Illegal or immoral use
Not to use or permit or suffer the said premises to be used
for the purpose of gambling or for any improper, illegal or
immoral purpose or in any way so as to cause nuisance
annoyance inconvenience or damage to the Landlord or other
tenants or occupiers of the said building.
3.24.3 Sleeping on premises
Not to use or permit or suffer the said premises or any part
thereof to be used as sleeping quarters or as domestic
premises within the meaning of the Landlord and Tenant
(Consolidation) Ordinance (Cap. 7) or other similar
legislation for the time being in force nor to allow any
person to remain in the said premises overnight.
3.25 PREPARATION OF FOOD
Save and except where the permitted use of the said premises is
specifically for restaurant purposes not to prepare or permit or
suffer to be prepared any food in the said premises and not to cause
or permit any offensive or unusual odours to be produced upon, or to
permeate through or emanate from the said premises.
3.26 GOODS
Not to use or permit or suffer the said premises or any part thereof
to be used for the purpose of the manufacture of goods and merchandise
or for the storage of goods and merchandise other than in normal
quantities consistent with the nature of the Tenant's trade or
business carried on therein.
3.27 NOISE
Not to produce or permit or suffer to be produced any music or noise
(including sound produced by broadcasting or any apparatus or
equipment capable of producing, reproducing, receiving or recording
sound) so as to be audible outside
12
<PAGE>
the said premises which may be a nuisance or annoyance to the tenants
or occupiers of other premises in the said building.
3.28 NUISANCE
Not to do or permit or suffer to be done any act or thing which may be
or become a nuisance annoyance damage or disturbance to the Landlord
or to the tenants or occupiers of other premises in the said building
or in any adjoining or neighbouring building.
3.29 COMPLIANCE WITH CROWN LEASE
Not to do or permit or suffer to be done any act, deed, matter or
thing whatsoever which amounts to a breach of any of the terms and
conditions under which the Land (as defined in Part 3 of First
Schedule under the designation "the Land") is held from the Crown
(hereinafter referred to as "the Grown lease") or of the said Deed of
Mutual Covenant or whereby any insurance of the said building against
loss or damage by fire and/or claims by third parties for the time
being in force may be rendered void or voidable or whereby the premium
thereof may be increased Provided that if as a result of any act,
deed, matter or thing done permitted or suffered to be done by the
Tenant, the premium on any such policy of insurance shall be
increased, the Landlord shall be entitled at its option either to
terminate this Agreement or to continue the same upon payment by the
Tenant of the increased premium and upon such other terms and
conditions as the Landlord may, at its discretion, think fit to
impose. The Tenant shall indemnify the Landlord against any breach,
non-observance or non-performance of any terms of the Crown lease or
the said Deed of Mutual Covenant.
3.30 GUNS AND AMMUNITION
Not to keep or store or cause or permit or suffer to be kept or stored
in the said premises any arms, ammunition, gun-powder, salt-petre,
kerosene or other explosive or combustible substance or goods of a
hazardous nature.
3.31 ALTERATIONS
3.31.1 Not to make or permit any alterations or additions nor to
put up any fixtures, partition or other erection on any part
of the said premises nor to pull down, alter or remove any
portions of the doors windows partitions fixtures and
fittings thereof nor to make any alterations in the
architectural features of facing or to the electrical
installation or wiring thereof nor to install any
air-conditioning
13
<PAGE>
unit, plant, apparatus or machinery nor to cut maim or
injure or suffer to be cut maimed or injured any doors
windows walls partitions fixtures or fittings thereof
without the previous consent in writing of the Landlord or
its agents in accordance with the provisions hereof. At the
expiration or sooner determination of this Agreement the
Tenant shall at his own expense remove all alterations,
decoration or partitions so erected or installed by the
Tenant and restore the said premises to their original
tenantable state upon being required so to do by the
Landlord.
3.31.2 In carrying out any approved work in accordance with the
provisions of this Clause the Tenant, his servants agents
contractors and workmen shall obey and comply with all
instructions and directions which may be given by the
Landlord or other authorised representatives in connection
with the carrying out of such work.
3.31.3 Any fees or expenses incurred by the Landlord in connection
with the giving of consents hereunder shall be borne by the
Tenant.
3.32 INSTALLATION OF ELECTRICAL WIRING
Not to install any electrical wiring in the said premises or any part
thereof ( without the previous written consent of the Landlord and in
accordance with the provisions hereof and in carrying out any work to
the electrical installation and/or wiring, the Tenant shall use only a
contractor previously approved by the Landlord in writing for the
purpose.
3.33 USE OF TOILET FACILITIES
Not to use or permit or suffer the toilet facilities provided by the
Landlord to be used for any purpose other than that for which they are
intended and not to throw or permit or suffer to be thrown therein any
foreign substance of any kind and the Tenant shall pay to the Landlord
on demand the whole expense of any o breakage, blockage or damage
resulting from a violation of this Clause.
3.34 DAMAGE TO INSTALLATIONS
3.34.1 Not to damage mark or deface or permit or suffer to be
damaged marked or defaced any structures, fixtures,
decorations, installations, outside the said premises
including air-conditioning units, cloakroom, service
pantries, halls, passages, staircases, drainage wells,
walls, ceilings, and to pay on demand to the
14
<PAGE>
Landlord the cost and expenses incurred by the Landlord In
repairing making good such damage or cleaning the same.
3.34.2 Not without the consent of the Landlord to drive or insert
or permit or suffer to be driven or inserted any nails,
screws, hooks, brackets or similar articles into the
ceiling, doors, walls, window beams or floor of the said
premises.
3.34.3 To reimburse to the Landlord or its agent the cost of making
good replacing or removing any air-conditioning units or
sprinkler system or other part of such apparatus or
installation within the said premises which is damaged or
rendered defective by the Tenant.
3.35 SIGNS
Not to exhibit display erect put up or affix within or on the exterior
of the said premises or to or through any windows thereof or in any
common area of the said building any advertising sign, signboard,
notice, decoration placard, neon light of any kind or other thing
whatsoever whether illuminated or not which may be visible from
outside the said premises unless the size and design are first
approved in writing by the Landlord and the Director of Buildings and
Lands if such approval is necessary under special condition no. 21 of
New Grant No. 11878 and provided the same does not extend beyond the
exterior boundary of the said premises. The Tenant shall not display
any name-plate or signboard other than that of the Tenant only at the
entrance to the said premises, the size and position of such
name-plate or signboard shall be subject to the approval of the
Landlord and any approval to be granted shall be subject to such
conditions as the Landlord may think fit and the Landlord shall have
right to remove at the cost and expense of the Tenant any signboard,
sign decoration or thing which shall be affixed put up exhibited or
displayed without the prior approval of the Landlord.
3.36 LOCKS
Not without the previous written consent of the Landlord, to alter the
existing locks, bolts and fittings on the entrance door(s) to the said
premises, nor to install any additional locks, bolts or fittings
thereon.
3.37 OBSTRUCTION OF PASSAGES
Not to encumber or obstruct or permit to be encumbered or obstructed
with any boxes packaging or other obstruction of any kind or nature
any of the
15
<PAGE>
entrances, staircases, landings, passageways, lifts, lobbies or other
parts of the said building in common use and not to leave rubbish or
any other article or thing in any part of the said building not in the
exclusive occupation of the
3.38 CABLES AND WIRING
Not to lay install affix or attach any wiring, cables or other article
or thing in or upon any of the entrances, staircases, landings,
passageways, lobbies or public areas.
3.39 ASSIGNMENT
Not to assign underlet or otherwise part with the possession of the
said premises or any part thereof in any way whether by way of
subletting lending sharing or other means whereby any person or
persons not a party to this Agreement obtains or obtains the use or
possession of the said premises or any part thereof irrespective of
whether any rental or other consideration is given for such use or
possession, and in the event of any such transfer sub-letting sharing
assignment or parting with the possession of the said premises
(whether for monetary consideration or not) this Agreement shall at
the option of the Landlord absolutely determine and the Tenant shall
forthwith surrender and vacate the said premises on notice to that
effect from the Landlord. The tenancy hereby created shall be personal
to the Tenant named in Part 2 of First Schedule and without in any way
limiting the generality of the foregoing the following acts and events
shall, unless approved in writing by the Landlord, be deemed to be
breaches of this Clause:
3.39.1 In the case of the Tenant being a partnership the taking in
of one or more new partner(s) whether on the death or
retirement of an existing partner or otherwise.
3.39.2 In the case of the Tenant being an individual (including a
sole surviving partner or a partnership tenant) the death
insanity or disability of that individual to the intent that
no right to use possess occupy or enjoy the said premises or
any part thereof shall vest in the executors administrators
personal representatives next of kin trustee or committee of
any such individual.
3.39.3 In the case of the Tenant being a corporation any take-over
reconstruction amalgamation merger voluntary liquidation or
16
<PAGE>
voting shares or who otherwise has or have effective control
general.
3.39.4 The giving by the Tenant of a Power of Attorney or similar
authority whereby the donee of the Power obtains the right
to use possess occupy or enjoy the said premises or any part
thereof or does in fact use possess occupy or enjoy the
same.
3.39.5 The change of the Tenant's business name without the
previous written consent of the Landlord which consent shall
not be unreasonably withheld or delayed.
3.40 ANIMALS
Not to keep or permit or suffer to be kept any animals or pets inside
the said premises and to take all such steps and precautions to the
satisfaction of the Landlord to prevent the said premises or any part
thereof from becoming infested by termites, rats, mice, cockroaches or
any other pest or vermin and for better observance of this provision
the Landlord may require the Tenant to employ at the Tenant's cost
such pest extermination contractors as the Landlord may nominate and
at such intervals as the Landlord may direct.
3.41 TOUTING
Not to permit any touting or soliciting for business or distributing
of any pamphlets, notices or advertising matter to be conducted
outside or near the said premises or in any part of the said building
by any of the Tenant's servants, agents or licensees
3.42 HEAVY MACHINERY
Not to move any safe, heavy machinery, equipment or fixtures in and
out of the said building or install or permit or suffer to be
installed in the said premises any such safe, heavy machinery,
equipment or fixtures without first obtaining the Landlord's written
consent. The intention being that no weight shall be imposed on any
part of the flooring in excess of that for which it was designed. The
Landlord shall be entitled to prescribe the maximum weight and
permitted location of such safe, heavy machinery, equipment or
fixtures. The Tenant shall keep the Landlord indemnified against all
damages sustained by any person or property and of any damages or
moneys paid out by the Landlord in settlement of any claim or
judgement as well as legal costs incurred in connection therewith and
all costs incurred in repairing any damage to the said premises or
17
<PAGE>
the said building and its appurtenances resulting from movement of any
safe, heavy machinery, equipment or fixtures.
3.43 FIRE GRILLES
Not to erect affix install or attach in/on/at the door(s) or
entrance(s) of the said premises any metal grille or shutter or gate
which shall in any way contravene the regulations of the Fire Services
Department or other competent authority concerned from time to time in
force and/or which may in any way impede the free and uninterrupted
passage over through and along any of the entrances, staircases,
landings, passageways, lifts, lobbies or other parts of the said
building in common use. The design colour and installation of any
metal grille or shutter or gate shall be subject to the prior written
approval of the Landlord.
3.44 YIELD UP PREMISES
To quietly yield up the said premises together with all fixtures,
fittings and additions therein and thereto at the expiration or sooner
determination of this Agreement in good, clean and tenantable repair
and condition in accordance with the stipulations herein contained and
to the satisfaction of the Landlord or the Landlord's representatives
notwithstanding any rule of law or equity to the contrary Provided
That all personal property, trade fixtures and fittings alterations
and additions therein and thereto of the Tenant of a non-structural
nature with or without the Landlord's written consent shall, if so
required by the Landlord, be removed by and at the expense of the
Tenant at the expiration or sooner determination of this tenancy and
in such event the Tenant shall reinstate remove or do away with such
personal property, trade fixtures and fittings alterations and
additions and make good and repair in a good and workmanlike manner
all damage caused by such removal And thereupon to surrender to the
Landlord all keys giving access to all parts of the said premises held
by the Tenant and to remove at the Tenant's expense all lettering and
characters from all the doors, walls or windows of the said premises
and make good any damage caused by such removal.
3.45 ELECTRICAL AND TELEPHONE WIRING
To be responsible for all electrical wiring to the light fittings and
to the other electrical outlets installation in the said premises and
the connection thereof to the Electricity Authority meters, and to
make his own arrangements with The Hong Kong Telephone Company Limited
with regard to the installation of the telephones in the said
premises, but the installation of lines therefor outside the said
premises must be in accordance with the Landlord's directions. All
18
<PAGE>
mechanic and electrical works must be carried out by the Landlord's
contractor only at the Tenant's own expense.
3.46 AERIALS
Not to affix to the external part of the said premises or to the said
building or any part thereof any aerial or similar apparatus.
3.47 PROHIBITED NAMES
Not to name or include in the name of the business or company operated
by the Tenant the name "Cheung Sha Wan Plaza" or any name similar
thereto and not at any time to change the name of the business or
company to include any such name as aforesaid.
3.48 AUCTIONS & SALE
Not to conduct or permit any auction fare bankruptcy close out or
similar sale of things or properties of any kind to take place on the
said premises Provided that this provision shall not preclude the
conduct of genuine periodic seasonal or promotional sales.
3.49 BREACH OF INSURANCE POLICY
Not to cause or suffer or permit to be done any act or thing whereby
the policy or policies of insurance on the said building and/or
premises against damage by fire or liability to Third Parties for the
time being subsisting may become void or voidable or whereby the rate
of premium or premia thereon may be increased, and to repay to the
Landlord on demand all sums paid by the Landlord by way of increased
premium or premia thereon and all expenses incurred by the Landlord in
and about any renewal of such policy or policies arising from or
rendered necessary by a breach of this Clause.
4 LANDLORD'S OBLIGATIONS
The Landlord hereby agrees with the Tenant as follows:
4.1 PROPERTY TAX
To pay the Property Tax payable in respect of the said building during
the said term.
4.2 QUIET ENJOYMENT
That the Tenant on paying the said rent, management and
air-conditioning fees, rates and other outgoings hereby agreed to be
paid on the days and in manner herein provided for payment of the same
and observing and performing the agreements, stipulations and
conditions herein contained and on the Tenant's
19
<PAGE>
part to be observed and performed shall peaceably hold and enjoy the
said premises during the said term without any interruption by the
Landlord or any person lawfully claiming under or in trust for the
Landlord.
4.3 AIR-CONDITIONING
4.3.1 The Landlord shall provide and maintain air-conditioning but
the Landlord shall not be liable to the Tenant nor shall the
Tenant have any claim against the Landlord in respect of any
interruption in any of the services hereinbefore mentioned
by reason of the necessary repair or maintenance of any
installation or apparatus or any damage thereto or
destruction thereof by fire water act of God or other cause
beyond the Landlord's control or by reason of electrical
mechanical or other defect or breakdown or faults or other
inclement conditions or unavoidable shortage of fuel
material water or labour or any act omission or negligence
of any contractor attendants watchmen or servants of the
Manager or the Tenant in or about the performance or
purported performance of any duty relating to the provision
of such services by any of them.
4.3.2 The Landlord reserves the right to change the days and hours
during which the central air-conditioning system is operated
in the said building. Unless and until otherwise changed,
the daily operating hours of the central air-conditioning
system in respect of the said premises are between the hours
of 8:00 a.m. and 6:00 p.m. from Mondays through Fridays
(both days inclusive) and between the hours of 8:00 a.m. and
1:00 p.m. on Saturdays and no air-conditioning on Sundays
and public holidays.
5 OTHER TERMS AND CONDITIONS
It is hereby further expressly agreed and declared as follows:
5.1 SALE AND REDEVELOPMENT
If at any time during the said term the Landlord shall resolve to
redevelop the said building or any part thereof whether wholly by
demolition and rebuilding or otherwise, or partially by renovation,
refurbishment or otherwise (which intention to redevelop shall be
sufficiently evidenced by a copy of a resolution of its Board of
Directors certified to be true and correct by its Secretary) or shall
have entered into any agreement for sale and purchase of the said
building or any part thereof which shall include the said premises,
then in any of such
20
<PAGE>
events the Landlord shall be entitled to give not less than six (6)
months' notice in writing to terminate this Agreement. Immediately
upon the expiration of such notice, this Agreement shall be terminated
absolutely and neither party shall have any claim against the other in
respect thereof but without prejudice to the rights and remedies of
either party against the other in respect of any antecedent claim or
breach nor to the Tenant's right to the refund of deposit paid
hereunder.
5.2 INTEREST AND DISCONNECTION OF ELECTRICITY, ETC.
That if the Tenant shall have failed to pay the said rent on the date
specified in Clause 1 or shall have failed to pay the said management
and air-conditioning fees, rates and all outgoings in respect of the
said premises within fourteen (14) days after the same shall have
become payable (whether formally demanded or not) the Landlord shall
without prejudice to its other rights and remedies hereunder, be
entitled to charge and the Tenant shall pay interest on the arrears of
the said rent or the outstanding amount of the said management and
air-conditioning fees, rates and all outgoings thereof at the rate of
two and a half percent (2.5%) per month from the date the same are due
until payment together with all solicitor's costs and disbursements on
a solicitor and client basis incurred for demanding and enforcing
payment of the said arrears or outstanding sums in Court or otherwise
on demand and until payment the same shall be deemed a debt due and
payable by the Tenant to the Landlord Provided always that the
Landlord shall, in addition to the interest above, be entitled to
disconnect or cause to disconnect electricity and/or water supp1y to
the said premises in the event that any payment to be made to the
Landlord hereunder shall be more than fourteen (14) days in arrears
and the Tenant shall pay or indemnify the Landlord against al1 charges
and expenses for reconnecting such electricity and/or water supply to
the said premises.
5.3 ALTERATIONS TO SYSTEMS
The Tenant shall not make any alterations or additions to the
electrical and mechanical installation, air-conditioning ducting, the
plumbing and drainage system and sprinkler system of the said premises
unless and until the same shall first be approved by the Landlord. The
Tenant shall bear such consultation fees as may be charged by the
Landlord's consultants in respect of such approval and further the
Tenant shall at his sole expense employ the consultants and the
contractors as specified by the Landlord to carry out such approved
alterations or additions and upon determination of the tenancy hereby
21
<PAGE>
created if upon being required by the Landlord the Tenant shal1
forthwith also employ such consultants and contractors at his own
expense to remove all such alterations and additions.
5.4 DEFAULT IN PAYMENT OF RENT
If the rent hereby agreed to be paid or any part thereof shall be
unpaid for fourteen (14) days after the same shall become payable
(whether legally or formally demanded or not) or if the Tenant shall
fail or neglect to observe or perform any of the agreements
stipulations or conditions herein contained and on the Tenant's part
to be observed and performed or if the Tenant shall become bankrupt,
or being a corporation shall go into liquidation (whether compulsory
or voluntary) for bankruptcy, or if any petition shall have been filed
against the Tenant or if any petition for the winding up of the Tenant
in case of a limited company shall have been filed, or if the Tenant
shall otherwise become insolvent or make any composition or
arrangement with creditors or shall suffer any execution to be levied
on the said premises or otherwise on the Tenant's goods, then and in
any of the said cases it shall be lawful for the Landlord at any time
thereafter to re-enter on the said premises or any part thereof in the
name of the whole whereupon this Agreement shall absolutely cease and
determine but without prejudice to any right of action by the Landlord
in respect of any breach or non-observance or non-performance of any
of the agreements, stipulations or conditions herein contained and on
the Tenant's part to be observed and performed and to the Landlord's
right to deduct all loss and damage thereby incurred from the said
deposit paid by the Tenant in accordance with Clause 2.
5.5 RE-ENTRY
A written notice served by the Landlord on the Tenant in manner
hereinafter mentioned to the effect that the Landlord thereby
exercises the power of re-entry and/or determination herein contained
shall be a full and sufficient exercise of such power without actual
entry on the part of the Landlord.
5.6 ACCEPTANCE OF RENT
Acceptance of rent by the Landlord shall not be deemed to operate as
a waiver by the Landlord of any right to proceed against the Tenant
in respect of any breach non-observance or non-performance by the
Tenant of any of the agreements, terms, stipulations and conditions
herein contained and on the Tenant's part to be observed and
performed.
22
<PAGE>
5.7 OVERFLOW OF WATER
The Landlord shall not be under any liability whatsoever to the Tenant
or to any other person whomsoever in respect of any loss damage or
injury to person or property sustained by the Tenant or any such other
person caused by or through or in any way owing to the overflow of
water from anywhere within the said building. The Tenant shall fully
and effectually indemnify the Landlord from and against all claims
demands actions and legal proceedings whatsoever, made against the
Landlord by any person in respect of any loss, damage or injury caused
by or through or in any way owing to the overflow of water from the
said premises or to the neglect or default of the Tenant, his
servants, agents or licensees or to the defective or damaged condition
of the interior of the said premises or any fixtures or fittings for
the repair of which the Tenant is responsible hereunder and against
all costs and expenses incurred by the Landlord in respect of any such
claim, demand, action and legal proceedings.
5.8 ABATEMENT OF RENT
If the said premises or the said building or any part thereof at any
time shall be destroyed or so damaged by fire, (not attributable to
the act or default of the Tenant), water, storm, wind, typhoon, Act of
God, force majeure or any other cause beyond the control of the
Landlord not attributable to the act or default of the Tenant as to
render the said premises unfit for commercial use and the policy or
policies of insurance effected by the Landlord shall not have been
vitiated on payment of policy moneys or refused in whole or in part in
consequence of any act or default of the Tenant or if at any time
during the continuance of this Agreement the said premises and/or
building shall be condemned as a dangerous structure or a demolition
or closure order shall become operative in respect of the said
premises and/or building or the said premises is entirely inaccessible
due to any cause whatsoever, the said rent or a fair proportion
thereof according to the nature and extent of the damage sustained or
order made shall cease to be payable until the said premises and/or
building or part thereof shall have been restored or reinstated and
shall be again rendered fit for occupation and use Provided Always
that the Landlord shall be under no obligation to repair or reinstate
the said premises and/or building or part thereof And Provided further
that should the said premises and/or building or part thereof not have
been repaired or reinstated in the meantime either the Landlord or the
Tenant may after six (6) months of the occurrence of the destruction
or damage or order give to the other of them notice in writing to
determine the tenancy hereby created and thereupon the same and
23
<PAGE>
everything herein contained shall cease and be of no further effect
and the Landlord shall return to the Tenant the said deposit but
without everything herein contained shall cease and be of no further
effect and the prejudice to the rights and remedies of either party
against the other in respect of any antecedent claim or breach of the
agreements stipulations terms and conditions herein contained or of
the Landlord in respect of the said rent prior to such notice.
5.9 LANDLORD NOT LIABLE FOR BREAKDOWN
The Landlord shall not under any circumstance be liable to the Tenant
for any defect in or breakdown of the lifts escalators or ventilation
system air-conditioning system condenser water supply system (if any)
electric power and water supplies nor shall the said rent or the said
management and air-conditioning fees abate or cease to be payable on
account thereof.
5.10 DEEMED DEFAULT OF TENANT
For the purpose of this Agreement, any act, default, neglect or
omission of any servant, agent or licensee (as hereinbefore defined)
of the Tenant shall be deemed to be the act, default, neglect or
omission of the Tenant.
5.11 DISTRESS OF RENT
For the purposes of Part III of the Landlord and Tenant
(Consolidation) Ordinance (Cap. 7) and any amendments thereto and of
this Agreement, the said rent payable in respect of the said premises
shall be and be deemed to be in arrears if not paid in advance at the
time and in manner hereinbefore provided for payment thereof.
5.12 CONDONING NOT A WAIVER
No condoning, excusing or overlooking by the Landlord of any default,
breach, non-observance or non-performance by the Tenant at any time or
times of any of the Tenant's obligations herein contained shall
operate as a waiver of the Landlord's rights hereunder in respect of
any continuing or subsequent default, breach, non-observance or
non-performance, or so as to defeat or affect in any way the rights
and remedies of the Landlord hereunder in respect of any such
continuing or subsequent default or breach, and no waiver by the
Landlord shall be inferred from, or implied by, anything done or
omitted by the Landlord unless expressed in writing, and signed by the
Landlord. Any consent given by the Landlord shall operate as a consent
only for the particular matter to which it relates and in no way shall
be considered as a waiver or release of any of the provisions hereof
nor shall it be construed as dispensing with the necessity of
24
<PAGE>
obtaining the specific written consent of the Landlord in the future,
unless expressly so provided.
5.13 PERMISSION TO ENTER AND VIEW
During the three (3) months immediately preceding the expiration or
sooner determination of the said term the Tenant shall permit all
persons having written authority from the Landlord to enter and view
the said premises and every part thereof at all reasonable times and
the Landlord shall be at liberty to affix and maintain without
interference upon any external part of the said premises a notice
stating that the said premises are to be let or to be sold and such
other information in connection therewith as the Landlord shall
reasonably require during the said period of three (3) months.
5.14 NOTICES
Any notice required to be served hereunder shall, if to be served on
the Tenant, be sufficiently served if addressed to the Tenant and sent
by prepaid post to or delivered at the said premises or the Tenant's
fact known place of business or residence in Hong Kong and, if to be
served on the Landlord and sent by prepaid post to or delivered at the
Landlord's registered office.
5.15 INSURANCE
The Tenant shall effect and maintain during the currency of the
tenancy hereby created insurance cover in respect of third party
liability for loss injury or damage to any person or property
whatsoever caused through or by any act default or neglect of the
Tenant which might give rise to a claim for indemnity pursuant to
Clause 3.7.6. The policy of insurance shall be effected with an
insurance company nominated by the Landlord and shall be endorsed to
show the Landlord as registered owner of the said premises and shall
be in an amount of not less than Hong Kong Dollars Five Million Only
(HK$5,000,000.00) for any one claim and shall contain a clause to the
effect that the insurance cover thereby effected and the terms and
conditions thereof shall not be cancelled modified or restricted
without the prior consent of the Landlord. The Tenant hereby further
undertakes to produce to the Landlord as and when required by the
Landlord such policy of insurance together with a receipt for the last
payment of premium and a certificate from the insurance company that
the policy is fully paid up and in all respect valid and subsisting.
25
<PAGE>
5.16 ADDITIONAL AIR-CONDITIONING
If the Tenant shall require additional air-conditioning services
outside the said normal business hours of the said premises, the
Tenant shall give to the Landlord not less than one (l) day's prior
notice in writing stipulating at what times the Tenant shall require
additional air-conditioning supply. All costs and expenses 60 incurred
shall be on the Tenant's account payable at the rate of HK$105.00 per
additional supply per day or HK$0.03 per hour per square foot (subject
to variation from time to time at the Landlord's reasonable
discretion), whichever is the higher Provided Always that a minimum
charge at the said rate calculated for two (2) hours per day shall be
paid by the Tenant on each time the said premises shall receive
additional air-conditioning supply. The terms of the deviation and
additional air-conditioning supply shall be at Landlord's discretion
and the Tenant shall be required to sign the necessary undertaking
before the provision of such additional air-conditioning.
5.17 CHANGE OF NAME OF BUILDING
The Landlord shall at any time and from time to time during the said
term be entitled to name the said building with any such name or style
or names or styles as it in its sole discretion may determine and at
any time and from time to time to change, alter, substitute or abandon
any such name(s) Provided that the Landlord shall give not less than
three (3) months' notice to the Tenant to that effect and in respect
thereof the Landlord shall not be liable in damages to the Tenant or
be made a party to any other proceedings or for costs or expenses of
whatsoever nature incurred by the Tenant as a result of such change.
5.18 ALTERATIONS TO BUILDING
The Landlord reserves the right from time to time to improve extend
add to or reduce the said building or in any manner whatsoever alter
or deal with the said building (other than the said premises)
including but not limited to increasing or reducing the number of
shops and units in each floor of the said building to such numbers as
the Landlord may in its absolute discretion think fit and the
creation, alteration and extinguishment of any right of way to and
from or along the said premises, the layout of the shop units and any
other units in each floor of the said building and any other right of
way, corridors and common areas in the said building and the Landlord
shall not be liable for and the Tenant shall have no claim whatsoever
against the Landlord in any event for any loss, damages or
compensation whatsoever resulting directly or indirectly from the
Landlord exercising such right.
26
<PAGE>
5.19 FUNCTIONS & DISPLAY
Notwithstanding anything herein contained or implied to the contrary
the Landlord may permit any person or organisation to hold any
function or exhibition, or display any merchandise in any part or
parts of the common areas at such times and upon such terms and
conditions as the Landlord may in its absolute discretion think fit.
5.20 PUBLIC ADDRESS SYSTEM
Notwithstanding anything herein contained or implied to the contrary
the Landlord may provide and install a public address system
throughout the common areas and may play, relay or broadcast or permit
any other person to play, relay or broadcast recorded music or public
announcement thereon.
5.21 WILFUL SUSPENSION ETC.
The Tenant shall not do or suffer anything to be done on the said
premises which may injure the image of the said building as first
class commercial centre and without limiting the generality of the
foregoing any wilful suspension of business (whether acting alone or
in concert with some other tenants of the said building) shall
constitute a material breach of this Clause and entitling the Landlord
to determine this Agreement forthwith and to regain possession of the
said premises in which case the Landlord may, apart from forfeiting
the said deposit under Clause 2, also claim damages which may be
caused to the goodwill of its business or to the image of the said
building as a result of the Tenant's breach aforesaid.
5.22 INDEMNITY
The Tenant shall fully indemnify the Landlord against all claims
demands actions and legal proceedings whatsoever made upon the
Landlord in respect of any loss and damage by fire to any person
whomsoever caused by or in any way owing to the negligence of the
Tenant.
5.23 REGULATIONS
5.23.1 Conflict
The Regulations hereinbefore mentioned in Clause 3.20 shall
be supplementary to the terms and conditions contained in
this Agreement and shall not in any way derogate from such
terms and conditions. In the event of conflict between the
Regulations and the terms and conditions of this Agreement
the terms and conditions of this Agreement shall prevail.
27
<PAGE>
5.23.2 Exclusion of inability
The Landlord shall not be liable for any loss or damage
however caused arising from any non-enforcement of the
Regulations or non-observance thereof by any third party.
5.24 SECURITY
The Landlord shall not in any circumstances be liable to the Tenant or
any other person whomsoever for the security or safekeeping of the
said premises or any contents therein and in particular but without
prejudice to the generality of the foregoing the provision by the
Landlord of watchmen and caretakers or any mechanical or electrical
systems of alarm of whatever nature shall not create any obligation on
the part of the Landlord as to the security of the said premises or
any contents therein and the responsibility for the safety of the said
premises and the contents thereof shall at all times rest with the
Tenant nor shall the rent and other charges hereinbefore mentioned or
any part thereof abate or cease to be payable on account of any of the
foregoing.
5.25 INTERPRETATION
Unless the context otherwise requires, words herein importing the
masculine gender shall include the feminine and neuter and words
herein in the singular shall include the plural and vice versa.
6 SPECIAL CONDITIONS
The parties hereto further agree that they shall respectively be bound by
and entitled to the benefit of the Special Conditions (if any) set out in
Part 10 of First Schedule Provided that if there is any inconsistency or
conflict between the provisions of the above Clauses and the provisions of
the Special Conditions, the latter shall prevail.
7 COSTS
All costs of Messrs. Lo and Lo of and incidental to the preparation,
completion, stamping and registration of this Agreement and the stamp duty,
registration fee and other expenses on the same and its counterpart shall
be borne and paid by the parties hereto in equal shares. If the Tenant
employs his own solicitors, the Tenant shall pay as well half the
Landlord's solicitors' full costs (at 75% of scale charges) plus half of
the stamp duty, registration fee and other expenses payable on this
Agreement and its counterpart as his own legal costs and expenses.
28
<PAGE>
8 HEADINGS & INDEXES
The headings and indexes are intended for guidance only and do not form
part of this Agreement nor shall any of the provisions in this Agreement be
construed or interpreted by reference thereto or be in any way affected or
limited thereby.
9 KEY MONEY
The Tenant hereby expressly declares that for the grant of the said term no
key money or other premium or consideration has been paid to the Landlord
or to any person.
10 NO WARRANTY
This Agreement sets out the full agreement reached between the parties and
supersedes all previous agreements whether parol or in writing express or
implied between the parties hereto and no other representations have been
made or warranties given relating to the said building or the said
premises.
AS WITNESS whereof the hands of the parties hereto the day and year
first above written.
29
<PAGE>
FIRST SCHEDULE
PARTICULARS AND SPECIAL CONDITIONS
PART 1
THE LANDLORD
LAI SUN DEVELOPMENT COMPANY LIMITED (Company No.5532) whose registered office is
situate at 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road,
Kowloon.
PART 2
THE TENANT
NEWTECH (HONG KONG) LIMITED (Company No.72447) whose registered office is
situate at Units 1112-1113, 11th Floor, Tower II, Cheung Sha Wan Plaza, 833
Cheung Sha Wan Road, Kowloon.
PART 3
THE SAID PREMISES
All That Unit 1102 on the 11th Floor of Tower II of Cheung Sha Wan Plaza, No.833
Cheung Sha Wan Road ("the said building") erected on All That piece or parcel of
ground registered in I the Land Registry as New Kowloon Inland Lot No.5955 ("the
Land") as for the purpose of identification only shown on the plan(s) hereto
annexed and thereon coloured Pink.
PART 4
THE SAID TERM
Twenty Four (24) months commencing on the 13th day of October 1997 and expiring
on the 12th day of October 1999 (both days inclusive).
PART 5
THE SAID RENT
Dollars Forty Two Thousand Two Hundred Only (HK$42,200.00) Hong Kong Currency
per month (exclusive of rates).
30
<PAGE>
PART 6
THE SAID MANAGEMENT AND AIR-CONDITIONING FEES
Dollars Seven Thousand Three Hundred And Eighty Five Only (HK$7,38O.00) Hong
Kong Currency per month subject to review from time to time.
PART 7
THE SAID DEPOSIT
Dollars One Hundred And Fifty Six Thousand Four Hundred And Thirty Five Only
(HK$156,435.00) Hong Kong Currency, which is made up of as follows:
1. The sum of HK$126,600.00 by way of rental deposit; and
2. The sum of HK$22,155.00 by way of management and air-conditioning deposit;
and
3. The sum of HK$7,680.00 by way of rates and government rent deposit.
PART 8
THE SAID USER
Restricted to an office use only and for no other purpose whatsoever.
PART 9
THE SAID NORMAL BUSINESS HOURS
Between the hours of 9:00 am and 6:00 pm from Mondays through Fridays (both days
inclusive). Between the hours of 9:00 am and 1:00 pm on Saturdays.
PART 10
SPECIAL CONDITIONS
1. Notwithstanding anything hereinbefore contained, the first Thirty One (31)
days of the said term shall be rent-free. For the avoidance of doubt, it is
expressly agreed that, notwithstanding the said rent-free period, the
Tenant shall pay and discharge punctually the rates, the said management
and air-conditioning fees and all other outgoings chargeable in respect of
the said premises at all times during the said term, inclusive of the said
rent-free period.
2. The said premises are let to the Tenant on an "as is" basis. The Tenant
hereby declares that he has inspected and is fully satisfied with and
accepts in all respects the existing state, condition, finishes and repair
of the said premises and shall raise no objection
31
<PAGE>
FIRST SCHEDULE
whatsoever in relation thereto. The Landlord shall not be required to do
any work or repair to such state and condition of the said premises.
3. Notwithstanding that the said premises are to be delivered to the Tenant on
an "as is" basis the Tenant hereby agrees that
(a) in addition to the Tenant's obligation to yield up as hereinbefore
provided, the Tenant shall at his own cost and expense reinstate the
said premises to a "bare shell" condition at the expiration or sooner
determination of the term hereby created Provided that the Landlord's
fixtures and fittings within the said premises not intended to be
destroyed or removed by the Landlord shall be kept in place intact;
and
(b) the Tenant shall for the purpose of such reinstatement allow
sufficient time for the reinstatement work to be carried out to ensure
that it can be completed on or before the said expiration or
determination; and
(c) the Tenant shall be responsible to make good any damages caused by
such reinstatement work to the said premises and the Landlord's
fixtures and fittings.
32
<PAGE>
SECOND SCHEDULE
FITTING OUT REGULATIONS
1. Prior to the commencement of fitting out works (hereinafter called "the
Works") to the said premises the Tenant shall at his own cost prepare and
submit the Landlord suitable drawing and specifications of the Works to be
carried out by the Tenant together with schematic sketches showing intent
of the Tenant's design and layout proposal (hereinafter collectively called
"the Tenant's Plans") to enable the said premises to be fitted out and
completed for the purposes specified in this Agreement.
2. The Tenant's Plans shall, without limitation:
(a) Include detailed drawing, plans and specifications for all
partitioning.
(b) Include detailed drawing, plans and specifications of all electrical
installations which shall be connected to the electrical systems
installed by the Landlord.
(c) Include details of any proposed amendments, additions or alterations
to any electrical mechanical or other building services.
(d) Comply with all relevant Ordinance, Regulations and Bye-laws from time
to time issued by the Hong Kong Government.
3. When the Tenants's Plans are submitted to the Landlord the Tenant shall
also deposit with the Landlord:
(a) A sum of HK$3,000.00 (or such sum as may be determined by the
Landlord) to secure the due performance and observance of the Tenant's
obligations during the fitting out period; and
(b) A further sum of HK$1,240.00 (or such sum as may be determined by the
Landlord) as deposit for provision of temporary electricity
hereinbelow referred to.
Provided that the said sum(s) shall be refunded to the Tenant without
interest within thirty (30) days after the completion of the Works.
4. Notwithstanding the grant of rent-free period (if any) as aforesaid, the
Tenant shall during the fitting out period pay to the Landlord a sum of
HK$40.00 per day for 31 days as charge for provision of temporary
electricity to the said premises during the fitting out period and the
Landlord shall be at liberty to deduct any arrears of such payments from
the deposit(s) paid by the Tenant under Regulation 3 of this Schedule.
5. In order to enable the building services of the said building to be
effectively coordinated and controlled the Tenant agrees that all
electrical wiring and other electrical works and approved alterations to
the building services in or for the said premises shall
33
<PAGE>
be carried out at the tenant's expense only by contractors approved by the
Landlord (such approval not to be unreasonably withheld).
6. The Landlord will consider the Tenant's Plans and may in its discretion
accept or reject the Tenant's Plans or any part of them as it thinks fit
within twenty-one (21) days after submission Provided That if the Tenant
does not hear to the contrary from the Landlord as regards the Tenant's
Plans within the said period of twenty-one (21) days the Tenant's Plans
shall be deemed to have been accepted in total by the Landlord.
7. The Tenant shall pay and discharge all mechanical engineering and
structural engineering consultant's fees and expenses (hereinafter called
"the Vetting Fees") in connection with the consideration and approval of
the Tenant's Plans or any modifications or amendments thereof and shall
keep the Landlord fully indemnified against such fees and expenses. The
Vetting Fees payable by the Tenant to the Landlord upon the signing of this
Agreement is HK$NIL.
8. The Tenant shall also at his own expense arrange to remove the decoration
waste and debris from the said premises and the said building to the
outside dumping area or in such manner as the Landlord may direct from time
to time. Any expenses incurred by the Landlord as a result of the Tenant's
breach herein shall entitle the Landlord to deduct such expenses from the
deposit(s) paid by the Tenant under this Schedule.
9. The Tenant hereby acknowledges that any delay howsoever occasioned either
on the Tenant's part in submitting or resubmitting the Tenant's Plans or on
the Landlord's part in approving the same will not entitle him to any
extension of the said rent-free period.
34
<PAGE>
SIGNED BY /s/ TAN LUP WAI FRANKY )
- -------------------------------- )
Franky, the director ) LAI SUN DEVELOPMENT CO., LTD.
for and on behalf of the Landlord )
whose signature(s) is/are verified by: ) /s/ ILLEGIBLE
------------------------------
AUTHORIZED SIGNATURE
NG PONG YIN FRANK
Solicitor,
Hong Kong SAR.
SIGNED by /s/ MR. OKAMOTO ICHIRO, )
- --------------------------------- )
The Director ) FOR AND ON BEHALF OF
for and on behalf of the Tenant ) NEWTECH (HONG KONG) LIMITED
in the presence of: )
/s/ ICHIRO OKAMOTO
-----------------------------
Ichiro Okamoto
AUTHORIZED SIGNATURE
[LLEGIBLE]
SZE SAU HAN.
G694838(2)
RECEIVED on or before the day and year first above written of and from the
Tenant the sum of Dollars One Hundred And Fifty Six Thousand Four Hundred
And Thirty Five Only (HI$156,435.00) Hong Kong Currency being the deposit
paid by the Tenant to the Landlord.
ACKNOWLEDGED by the Landlord ) LAI SUN DEVELOPMENT CO., LTD.
whose signature(s) is/are verified by:- )
/s/ ILLEGIBLE
-----------------------------
NG PONG YIN FRANK
Solicitor,
Hong Kong SAR.
35
<PAGE>
FOR IDENTIFICATION ONLY
CHEUNG SHA WAN PLAZA
[GRAPHIC OMITTED]
11TH FLOOR PLAN TOWER 2
EXHIBIT 10.21
AIRCRAFT LEASE
THIS AIRCRAFT LEASE (this "Lease") dated as of June 1, 1997 between F
Fifty Holdings, Inc., a Delaware corporation (the "Lessor"), and New M-Tech
Corporation, a Florida corporation (the "Lessee").
RECITALS
WHEREAS, the Lessor owns that certain Aircraft as defined in Section
1(a) hereof.
WHEREAS, the Lessor and the Lessee desire to enter into a lease with
respect to the Aircraft.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledge, the
parties agree as follows:
AGREEMENT
1. LEASE. The Lessor hereby agrees to lease to the Lessee hereunder and
the Lessee hereby agrees to lease from the Lessor hereunder, the following
described aircraft (the "Aircraft"):
Raytheon Corporate Jets Inc. BAE 125 700B bearing MSN 757031 and U.S.
Registration N703TS together with two Garret Model TFE-731-3R-1H
aircraft engines bearing MSNs P80162 and P76199.
2. TERM. The term of this Lease shall begin on June 1, 1997, and shall
end on June 30, 2007, unless this Lease shall have been earlier terminated in
accordance with the terms hereof.
3. PAYMENTS. The Lessee agrees to pay the Lessor as follows:
(a) The Lessee shall pay the Lessor an annual fee of $150,000
for making the Aircraft available during the initial Term of the Lease (the
"Annual Payment"). The Annual Payment shall be due and payable in equal monthly
installments on the last day of each month (or if such day is not a business
day, on the next succeeding business day).
(b) The Lessee shall pay the Lessor, for each flight of the
Aircraft, including the provision by the Lessor of all of the services and items
set forth in Section 4(a)(ii), an amount per block/hour of actual flight time
that is the customary market rate for such services and items, as determined
from time to time by either (i) a majority of the Company's non-
<PAGE>
employee directors (as such term is defined in Rule 16b-3 of the Securities
Exchange Act of 1934, as amended) or (ii) all of the Company's directors (the
"Hourly Payment"). The Hourly Payment with respect to each flight shall be due
and payable within fifteen (15) business days after the completion of such
flight.
4. OBLIGATIONS OF THE LESSEE AND THE LESSOR; AIRCRAFT AND CREW.
(a) OBLIGATIONS OF THE LESSEE AND THE LESSOR.
(i) OBLIGATIONS OF THE LESSEE. Except for the
Lessee's obligation to make the Annual Payment and the Hourly Payment
pursuant to Section 3 hereof, the Lessee shall not have any obligation
to pay any costs or expenses arising from or incurred in connection
with the operation or ownership of the Aircraft.
(ii) OBLIGATIONS OF THE LESSOR. The Lessor shall pay
or cause to be paid all costs and expenses arising from or incurred in
the operation and ownership of the Aircraft, including, without
limitation, costs and expenses incurred with respect to flight crews,
maintenance, insurance, airport charges and any and all other costs and
expenses of any kind or nature, arising directly or indirectly in
connection with or related to the use, movement, operation, storage and
location of the Aircraft during, before or after a flight, and
specifically, with respect to each flight:
(A) The Aircraft (including all expenses
associated with the ownership and/or use of such
Aircraft for the flight).
(B) A complete flight crew, all members of
which shall possess such qualifications,
certifications and licenses as may be required by the
FAA and all other relevant governmental authorities
to conduct the flight.
(C) All maintenance, lubricants and
hydraulic fluids necessary for the proper and
efficient operation of the Aircraft during such
flight.
(D) Insurance with respect to the Aircraft
and the flight crew, in form and substance
satisfactory to the Lessee and in the amounts and as
otherwise set forth in Section 5 hereof.
(E) Aircraft fuel necessary for such flight.
(F) Landing charges associated with such
flight.
(G) Overflights and navigational rights
charges associated with such flight.
(H) Hotels, meals and transportation for the
flight crew if such crew is required to remain
overnight at any location other than Miami, Florida.
2
<PAGE>
(I) Ground support equipment with respect to
such flight.
(J) State, federal and local sales or use
taxes imposed upon any of the items listed in the
items under this Section 4(a)(ii).
The obligations, covenants and liabilities of the Lessor under this
Agreement arising in respect of any flight of the Aircraft shall
continue in full force and effect, notwithstanding any termination of
this Agreement and shall be enforceable by the Lessee or its successors
and assigns.
(iii) AIRCRAFT AND CREWS. The crews furnished to the
Lessee pursuant to this Agreement shall not be considered to
be employees of the Lessee and for all purposes shall be
considered to be employees of the entity with which the Lessor
contracts for the provision of crews (such entity, a "Crew
Provider"). Accordingly, the Lessor shall cause such Crew
Provider to be responsible (i) for all wages, salary, health
and welfare benefits, social security, unemployment and
workers' compensation and state disability insurance, if any,
to which crews are entitled by reason of their employment or
the provision of their services hereunder, and (ii) all
federal, state and local taxes required to be withheld and
paid as a result of the wages or other compensation paid to
such crews. The Lessor shall cause the Crew Provider to
provide the Lessee, upon request, with evidence satisfactory
to the Lessee that the Crew Provider and each crew member has
all licenses, permits, franchises, registrations and operating
authority as shall be necessary to operate the Aircraft on
flights for the Lessee hereunder.
5. INSURANCE.
(a) The Lessor shall maintain with respect to the Aircraft, at
all times during the term of this Agreement and at the Lessor's sole cost and
expense and with any reputable insurance company or insurance broker whose
identity, together with any other information regarding such entity requested by
the Lessee, shall have been approved by the Lessee (which approval shall not be
unreasonably withheld) for purposes of providing or confirming the existence of
any insurance required hereunder (an "Approved Insurer"), comprehensive general
liability insurance (including, without limitation, third-party aircraft,
passenger and contractual liability insurance) with respect to the Aircraft,
with coverage through any geographical area at any time traversed by the
Aircraft, which is (i) at least of the type usually carried by prudent companies
owning or operating the same or comparable aircraft and engines, and which
covers risks of the kind customarily insured against by such prudent companies,
and (ii) in an amount not less than $25,000,000 per occurrence. The insurance
carried in accordance with this Section 5 shall not be subject to any deductible
or self-insurance; and the insurers thereunder shall insure the indemnity
provisions of Section 6 of this Agreement to the extent of the risks covered by
the policy. In addition to the foregoing, the Lessor shall maintain with respect
to any crews utilized for flights hereunder, or shall cause the Crew Provider to
maintain, general liability and workers compensation insurance with respect to
such crews at the Lessor's or such Crew Provider's sole cost and expense.
3
<PAGE>
(b) Any policies of insurance carried in accordance with this
Agreement and any policies taken out in substitution or replacement for any such
policies and any policies of reinsurance thereof:
(i) shall name the Lessee and/or any other person
designated by the Lessee, their respective successors and assigns, and
the respective affiliates, agents, officers, directors and employees of
each of the foregoing (hereinafter, the "Additional Insureds") as
additional named insureds (including, without limitation, with respect
to reinsurance policies taken with respect to the insurance required by
this Agreement, the Additional Insureds to have the right to make
demand for any and all protection and defense afforded by such
reinsurance directly against the reinsurers), as their interests may
appear, but warranted no operational interest and without imposing on
Additional Insureds or their assigns any obligation imposed upon the
Lessor as insured (including, without limitation, liability to pay any
premiums for any such policies);
(ii) by means of an endorsement (other than Lloyd's
Aviation Underwriters' Association Standard Policy Form AVN 28)
submitted to and approved by the Lessee prior to the use of the
Aircraft for any flight hereunder, shall provide that in respect of the
interests of Additional Insureds in such policies the insurance shall
not be invalidated or impaired by any action or inaction of the
Additional Insureds, the Lessor or any other person (including, without
limitation, illegal use or any other use or operation of the Aircraft
in a manner which is specifically excluded from coverage or is not
otherwise permitted by such coverage or subjection of the Aircraft to
any conditions, use or operation not permitted by the terms of such
coverage) and shall insure the Additional Insureds regardless of any
breach or violation of any representation, warranty, declaration or
condition contained in such policies by the Lessor or any other person
(whether occurring before or after the date of this Agreement and
whether before or after any loss or payment under such insurance);
(iii) shall provide that if the insurers cancel such
insurance for any reason whatever, or the scope of coverage thereof is
changed in any way adverse to the interests of the Additional Insureds,
or the same is suspended or allowed to lapse for nonpayment of premium,
such cancellation, adverse change, suspension or lapse shall not be
effective as to the Additional Insureds for thirty (30) calendar days
(or, in the case of such cancellation, change, suspension or lapse
relating to war and allied risk, seven (7) calendar days or such lesser
period as may be available in accordance with the policy conditions)
after receipt by the Lessee and the Additional Insureds of written
notice by such insurers of such cancellation, change, suspension or
lapse;
(iv) shall provide that, as against each Additional
Insured, the insurer waives any rights of set-off (including for unpaid
premiums), recoupment, counterclaim or other deduction, whether by
attachment or otherwise;
(v) shall be primary without right of contribution
from any other insurance which is carried by any Additional Insured;
4
<PAGE>
(vi) shall expressly provide that all of the
provisions thereof, except the limits of liability, shall operate in
the same manner as if there were a separate policy covering each party
insured thereunder;
(vii) shall apply in favor of the Additional Insureds
irrespective of (i) war, invasion, acts of foreign enemies, hostilities
(whether war be declared or not), civil war, rebellion, revolution,
insurrection, martial law, military or usurped power or attempts at
usurpation of power, (ii) strikes, riots, civil commotions or labor
disturbances, (iii) any act of one or more persons, whether or not
agents of a sovereign power, for political or terrorist purposes and
whether the loss or damage resulting therefrom is accidental or
intentional, (iv) any malicious act or act of sabotage, (v)
confiscation, nationalization, seizure, restraint, detention,
appropriation, requisition for title or use by or under the order of
any government (whether civil, military or de facto) or public or local
authority, (vi) hijacking or any unlawful seizure or wrongful exercise
of control of the Aircraft or crew in flight (including any attempt at
such seizure or control) made by any person or persons on board the
Aircraft, and (vii) any detonation of any weapon of war employing
atomic or nuclear fission and/or fusion, or other like reaction or
radioactive force or matter, whether hostile or otherwise, or any
losses, damage or occurrences while the Aircraft is outside of the
control of the Lessor by reason of any such peril (for the purposes
hereof, the Aircraft shall be deemed to have been restored to the
control of the Lessor on the safe return of the Aircraft to the Lessor
at Miami International Airport (such safe return shall require that the
Aircraft be parked with engines shut down and under no duress));
(viii) shall waive any right of subrogation against
any Additional Insured, PROVIDED, that the existence or nonexistence of
such subrogation rights shall not in any way delay payment of any claim
that would otherwise be payable by such insurers but for the existence
of such rights of subrogation or entitle such insurers to exercise any
set-off, recoupment, counterclaim or other deduction in respect of any
amounts payable under such policies;
(ix) shall, in the case of reinsurance, comply with
all of the terms and conditions for insurance required hereunder,
contain a provision entitling the Lessee and any other Additional
Insured to initiate a claim under any reinsurance policy in the event
of the refusal or failure of the Lessor or the original insurance
company to do so, and expressly provide that a cut-through clause be
incorporated providing that in the event of any claim arising under the
reinsurances, the reinsurers thereunder shall, in lieu of payment to
the original insurer or its successors and assigns, pay to the person
(including the Lessee and the other Additional Insureds) otherwise
entitled to indemnification and/or defense under the original insurance
policy that portion of any loss due for which the reinsurers thereunder
would, but for this cut-through clause, be liable to pay the original
insurer or its successors and assigns, it being understood and agreed
(and the Lessor to obtain the agreement of its original insurer for the
benefit of the Lessee, the Additional Insureds and the reinsurers) that
any such payment by the reinsurers shall
5
<PAGE>
fully discharge and release the reinsurers thereunder from any and all
further liability in connection therewith; and
(x) shall otherwise be reasonably satisfactory in all
respects to the Lessee.
(c) The Lessor shall furnish to the Lessee, upon request, (i)
a report, signed by a firm of independent aircraft insurance brokers reasonably
acceptable to the Lessee (an "Insurance Broker"), stating that in the opinion of
such firm the insurance then carried and maintained on the Aircraft complies in
all respects with the terms hereof and (ii) a certificate of insurance signed by
an Approved Insurer or the Insurance Broker describing such insurance in
reasonable detail (including the identity of the insurers or reinsurers and
their respective interests therein). The Lessor shall cause each Insurance
Broker to agree in writing with the Lessee and any Additional Insureds (i) to
advise the Lessee and any Additional Insureds in writing promptly of any default
in the payment of any premium, of any other act or omission on the part of the
Lessor of which such firm has knowledge and which might invalidate or render
unenforceable, in whole or in part, any insurance on the Aircraft, and (ii) to
advise the Lessee and any Additional Insureds in writing at least thirty (30)
days (seven (7) days in the case of any war risk and allied perils coverage)
prior to the non-renewal, cancellation, expiration or termination for any reason
(including, without limitation, failure to pay the premium therefor) of any
insurance carried and maintained on the Aircraft.
(d) Nothing contained in this Agreement shall prevent the
Lessee or any Additional Insured, each at its own expense and for its exclusive
benefit, from carrying insurance with respect to any flights of the Aircraft
hereunder in addition to the insurance required hereunder, PROVIDED that such
additional insurance does not prevent the Lessor from maintaining or causing to
be maintained the insurance required by this Agreement. Any insurance payments
received from policies maintained by the Lessee or an Additional Insured shall
be retained by the Lessee or such Additional Insured, as the case may be,
without reducing or otherwise affecting the Lessor's obligations hereunder.
6. INDEMNIFICATION.
(a) The Lessor hereby assumes liability for, and hereby agrees
to, indemnify, protect, save and hold harmless the Lessee, its officers,
directors, employees, representatives and affiliates and the respective
successors and assigns of each of the foregoing (each, an "Indemnitee") from and
against, and on written demand to pay, or to reimburse each Indemnitee for the
payment of, as the case may be, any and all claims (whether fraudulent,
groundless, false or not), damages, losses, liabilities, demands, suits,
judgments, causes of action, legal proceedings (whether civil or criminal),
penalties, fines or other sanctions and any costs, expenses and disbursements in
connection therewith (including, without limitation, legal fees and expenses and
costs of investigation), of whatsoever kind and nature (including, without
limitation, any liability or obligation for loss of use or other incidental or
consequential damages, and any liability, obligation or claim arising in tort,
whether or not arising from the negligence, actual, implied, active or passive,
or strict liability of an Indemnitee or any other
6
<PAGE>
person) (each of the foregoing being herein referred to individually as a
"Claim" and collectively as "Claims") which may from time to time be imposed on,
incurred by, asserted against, charged to or recoverable from any Indemnitee, in
any way relating to or arising out of (i) this Agreement or any flight
hereunder, or any breach by the Lessor of any covenant or agreement contained
herein; and (ii) the Aircraft, whether or not arising out of the manufacture,
purchase, ownership, design, fitness for use, merchantability, registration,
documentation, possession, lease, sublease, modification, maintenance, overhaul,
repair, presence, occupancy, location, storage, use or non-use, operation,
airworthiness, condition, or other application or disposition thereof
(including, without limitation, latent and other defects, whether or not
discovered or discoverable, and any claim for patent, trademark or copyright
infringement).
(b) The Lessor hereby waives, and releases each Indemnitee
from, any Claims (whether now existing or hereafter arising) for or on account
of or arising from or in any way connected with injury to or death of personnel
utilized by the Lessor in connection with flights hereunder, loss or damage to
property of the Lessor or the loss of use of any property which may result from
or arise in any manner out of or in relation to the ownership, leasing,
condition or use of the Aircraft, either in the air or on the ground, or which
may be caused by any defect (whether known or unknown, exterior or interior,
apparent or concealed) in the Aircraft from any material or other article used
therein or from the design or testing thereof, or use thereof or from any
maintenance, service, repair, overhaul or testing of the Aircraft, regardless of
when such defect may be discovered, whether or not the Aircraft is at the time
being utilized in connection with a flight hereunder, and regardless of the
location of the Aircraft at any such time.
7. OPERATION AND MAINTENANCE.
(a) The Lessor, at its own cost and expense, shall obtain and
maintain, or cause to be obtained and maintained, in full force and effect, such
authorizations, licenses, permits, franchises, registrations and operating
authority as shall be necessary to operate the Aircraft during the term of this
Agreement on flights hereunder, and all permits, licenses, authorizations and
approvals required in connection with the operation of the Aircraft under this
Agreement or otherwise.
(b) With respect to each flight of the Aircraft hereunder, the
Lessor shall maintain, use and operate the Aircraft, or cause the Aircraft to be
maintained, used and operated, in full compliance with the laws of every
governmental entity having jurisdiction, any manufacturer's operating manuals
and instructions and any airworthiness certificate, license, permit,
registration, authorization or approval relating to the Aircraft or the routes
on which any such Aircraft is flown hereunder. Without limiting the generality
of the foregoing, the Lessor shall not use or suffer the Aircraft to be used in
any business which is prohibited by law or for the carriage of illegal drugs,
controlled substances or any other goods or materials which are prohibited by
law, the Lessee's sole responsibility with respect to the foregoing being to
screen and manifest any cargo or baggage in accordance with the Lessee's normal
security procedures. The Lessor has been provided a copy of the Air Carrier
Initiative Agreement between the Lessee
7
<PAGE>
and the United States Customs Service, and the Lessor agrees to comply with the
terms of such Air Carrier Initiative Agreement with respect to all flights
conducted hereunder.
(c) The Lessor, at its own cost and expense, shall (i)
maintain, inspect, service, repair, overhaul and test the Aircraft in accordance
with an FAA approved maintenance program, (ii) cause the Aircraft to be timely
serviced, repaired and maintained in accordance with all FAA or other
governmental regulations applicable to the Aircraft, and all airworthiness
directives and manufacturers' service bulletins, so as to maintain the Aircraft
in an airworthy and good operating condition and in such condition as may be
necessary to enable the Aircraft to be operated in accordance with Section 7(a),
above, and (iii) not maintain, use or operate the Aircraft in violation of any
license, permit, registration, authorization or approval relating thereto issued
by any authority.
(d) The Lessee, at its cost and expense, shall obtain and
maintain in full force and effect such permits, licenses, authorizations and
approvals necessary for the Lessee to conduct its operations and as may be
required of the Lessee by the laws of its country and foreign laws as they apply
to the Lessee.
8. EVENTS OF DEFAULT. Each of the following events shall constitute an
"Event of Default":
(a) the Lessee shall default in the payment when due of any
Annual Payment (or any installment thereof) or Hourly Payment pursuant to
Section 3 hereof, and such default shall continue unremedied for more than five
(5) business days;
(b) the Lessee shall default in the observance or performance
of any other covenant required to be observed or performed under the terms of
this Lease and such default shall continue unremedied for a period of twenty
(20) business days after written notice thereof to the Lessee by the Lessor; or
(c) the Lessee shall commence a voluntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
itself under any bankruptcy, insolvency or any other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or similar official of it or any substantial part of its
property or shall consent to any such relief or to the appointment of or taking
possession by in such official in a voluntary case or other proceeding commenced
against it or shall make a general assignment for the benefit of creditors or
shall fail generally to pay its debts as they become due; or if an involuntary
case or other proceeding shall be commenced against the Lessee seeking
liquidation, reorganization or other relief with respect to its debts under
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
sixty (60) days.
8
<PAGE>
9. REMEDIES. When an Event of Default has occurred and is continuing,
the Lessor may, at its option, declare this Lease to be in default and exercise
any one or more of the following remedies with respect to the Aircraft:
(a) The Lessor may proceed by appropriate court action or
actions either at law or in equity to enforce performance by the Lessee of the
applicable covenants and terms of this Lease or to recover damages for the
breach thereof.
(b) The Lessor may demand that the Lessee, and the Lessee
shall upon written demand of the Lessor, return the Aircraft promptly to the
Lessor or the Lessor at its option may enter upon the premises where the
Aircraft is located and take immediate possession of and remove the same by
summary proceedings or otherwise all without liability to the Lessor for or by
reason of such entry or taking of possession whether for the restoration of
damage to such property caused by such taking or otherwise.
(c) The Lessor may hold, keep or lease to others the Aircraft
at its sole discretion free and clear of any rights of the Lessee without any
duty to account to the Lessee with respect to such action or inaction, and the
Annual Payment due subsequent to the date upon which the Lessee shall have been
deprived of the use of the Aircraft shall be reduced by the net proceeds
received by the Lessor from such leasing of the Aircraft to any other person
other than the Lessee, provided that the Lessor shall have no obligation to
lease the Aircraft.
(d) The Lessor may demand, and the Lessee shall pay as
liquidated damages, and not as a penalty the present value of all Annual
Payments due from the date of the Event of Default until the end of the Term,
such present value to be computed on a basis of an 8% per annum discount
compounded annually.
(e) In addition, the Lessee shall be liable for any and all
unpaid Annual Payments or Hourly Payments due hereunder before or during the
exercise of any of the foregoing remedies and for all court costs and reasonable
attorneys' fees (including any such reasonable attorneys' fees incurred on
appeal) and other costs and expenses incurred by reason of the occurrence of any
Event of Default or the exercise of the Lessor's remedies with respect thereto,
including all costs and expenses incurred in connection with the return of the
Aircraft and placing the Aircraft in suitable condition for return.
The Lessee acknowledges and agrees that upon the occurrence of an Event
of Default, the Lessor is and shall remain entitled to immediate possession of
the Aircraft. Accordingly, the Lessee hereby waives to the fullest extent
permitted by applicable law, any and all rights the Lessee or the Lessee's
successors may have under any bankruptcy, or similar laws, rules or regulations
with respect to the continued possession of the Aircraft.
All of remedies provided herein shall be cumulative and in addition to
any other remedies available to the Lessor at law or equity.
10. FURTHER ASSURANCES. The Lessee will act at its own expense to
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, transfers and
9
<PAGE>
assurances as the Lessor may reasonably request or to protect the right, title
and interest of the Lessor hereunder or the perfection of any security interest
granted by the Lessor.
11. BINDING AGREEMENT. This Lease shall be binding upon and inure to
the benefit of the Lessor and the Lessee and their respective assigns and
successors.
12. SEVERABILITY. The unenforceability or invalidity of any provision
or provisions of this Lease shall not render any other provision or provisions
herein contained unenforceable or invalid.
13. SECTION HEADINGS. All headings are inserted for convenience only
and shall not affect any construction or interpretation of this Agreement.
14. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Florida without consideration of the
conflict of law principles thereof.
15. NOTICE. Any notice provided for in this Lease shall be in writing
and shall be deemed to have been duly given when delivered personally or by
reputable overnight courier with receipt acknowledged, addressed as follows:
For the Lessor: F Fifty Holdings, Inc.
c/o Joel Newman
355 Ocean Boulevard
Golden Beach, Florida 33161
For the Lessee: New M-Tech Corporation
16550 NW 10th Avenue
Miami, Florida 33169
Attention: President
16. NO WAIVER. No delay or omission to exercise any right, power or
remedy accruing to the Lessor upon any breach of default by the Lessee under
this Lease shall impair any such right, power or remedy of the Lessor nor shall
any such delay or omission be construed as a waiver of any breach or default,
nor shall any waiver of a single breach or default be deemed a waiver of any
subsequent breach or default.
17. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties and shall not be amended, modified or altered
except by writing executed by all the parties hereto.
18. ASSIGNMENT. Lessee may not sublease the Aircraft or assign,
transfer or convey any of its rights, duties or interests under this Agreement.
19. COUNTERPARTS. This Lease may be executed in one or more
counterparts, with each counterpart constituting an original, but all together
one and the same instrument.
10
<PAGE>
20. SUBORDINATION OF INTEREST. The Lessee hereby agrees and
acknowledges that all of the interests of the Lessee in the Aircraft pursuant to
this Lease or otherwise are in all respects subject and subordinate to all of
the rights and interests of General Electric Capital Corporation, a New York
corporation, pursuant to the terms of that certain Aircraft Security Agreement
between the Lessee and General Electric Capital Corporation.
* * * *
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
11
<PAGE>
IN WITNESS WHEREOF, this Lease was executed as of the day and year
first written above.
NEW M-TECH CORPORATION,
as Lessee
By:/S/ JOEL NEWMAN
--------------------------------------
Name: Joel Newman
Title: President
F FIFTY HOLDINGS, INC., as Lessor
By:/S/ JOEL NEWMAN
-------------------------------------------
Name: Joel Newman
Title: President
12
EXHIBIT 10.22
DATED AS OF NOVEMBER 1, 1997
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED
(AS COMPANY)
AND
(2) DURABLE ELECTRICAL METAL FACTORY LIMITED
(AS CHARGEE)
--------------------------------
CHARGE
--------------------------------
<PAGE>
CONTENTS
CLAUSE HEADING PAGE
1. INTERPRETATION..................................................1
2. CHARGE AND ASSIGNMENT...........................................3
3. PERFECTION OF SECURITY AND FURTHER ASSURANCE....................4
4. REPRESENTATIONS BY THE COMPANY..................................4
5. OBLIGATIONS OF THE COMPANY......................................5
6. EVENTS OF DEFAULT...............................................7
7. ENFORCEMENT.....................................................7
8. CHARGEE'S ADDITIONAL POWERS AND RIGHTS.........................14
9. APPLICATION OF RECEIPTS........................................14
10. INDEMNITY......................................................15
11. APPLICABLE RATE OF EXCHANGE....................................15
12. COSTS AND EXPENSES.............................................15
13. GENERAL........................................................16
14. NOTICES........................................................17
15. GOVERNING LAW..................................................18
Schedule The Assets.....................................................20
<PAGE>
THIS CHARGE is made as of the 1st day of November 1997.
BETWEEN:
(1) DURABLE ELECTRONICS INDUSTRIES LIMITED (the "COMPANY"), a company duly
incorporated under the laws of Hong Kong (Company No.: 35273) whose
registered office is at 1st Floor, Efficiency House, 35 Tai Yau Street,
San Po Kong, Kowloon, Hong Kong; and
(2) DURABLE ELECTRICAL METAL FACTORY LIMITED (the "CHARGEE") whose
registered office is at 1st Floor, Efficiency House, 35 Tai Yau Street,
San Po Kong, Kowloon, Hong Kong.
WHEREAS:
(A) Pursuant to a working capital loan agreement and a US$6,219,512 loan
agreement both dated as of 1 November 1997 (collectively the
"AGREEMENTS", which expression shall include such Agreements as may
from time to time be supplemented, amended, modified or replaced, and
"AGREEMENT" shall mean either of them) and made between the Company, as
borrower, the Chargee, as lender, and New M-Tech Corporation, as
guarantor, the Chargee agreed to provide certain loan facilities to the
Company upon the terms and conditions therein mentioned.
(B) The Company has undertaken with the Chargee under each of the
Agreements that the Company execute this Charge, and this Charge is
accordingly supplemental to each of the Agreements.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.1 Except as otherwise defined or redefined herein or the context
otherwise requires, all expressions defined in the Agreements shall
have the same meanings in this Charge.
1.2 In this Charge the following words and expressions shall have the
following meanings:
"CHARGED ASSETS": the property and assets charged under this Charge in
favour of the Chargee and all other property and assets which at any
time are or are required to be charged in favour of the Chargee under
this Charge;
1.
<PAGE>
"ENCUMBRANCE": any mortgage, charge, pledge, hypothecation, lien,
assignment, title retention, option, right of set off, security
interest, trust arrangement and any other preferential right or
agreement to confer security and any transaction which, in legal terms,
is not a secured borrowing but which has an economic or financial
effect similar to that of a secured borrowing;
"FLOATING CHARGE ASSETS": the assets of such company from time to time
expressed to be charged by this Charge by way of floating charge;
"INTEREST": interest computed at the rate stated in clause 5.4 of each
of the Agreements for overdue sums and compounded according to the
usual practice from time to time of the Chargee in respect of all or
any of the Secured Indebtedness;
"LOAN": the aggregate principal amount from time to time borrowed or
outstanding under the Agreements;
"MINIMUM RISKS": the risks in respect of loss or damage by fire, storm,
tempest, flood, lightning, civil commotion, riot, explosion, malicious
damage, aircraft and other aerial devices and articles dropped
therefrom, burst pipes and impact damage;
"ORDINANCE": the Conveyancing and Property Ordinance, Chapter 219 of
the Laws of Hong Kong;
"RECEIVER": a receiver or receivers appointed in accordance with the
provisions of this Charge;
"SECURED INDEBTEDNESS": the Loan and all interest thereon and all other
moneys which are now or may at any time hereafter be due, owing or
incurred by the Company, the Guarantor or any other security party to
the Chargee in respect of or in connection with the Loan whether
actually or contingently, alone or jointly with any other person, and
whether as principal debtor or surety or otherwise howsoever, and in
whatever name, form or style under or pursuant to the Agreements, this
Charge and any other securities issued or guaranteed by the Company,
the Guarantor or any other security party and now or hereafter held by
the Chargee;
this "SECURITY": the security constituted by this Charge;
"SENIOR DEBT": all present and future sums, liabilities and obligations
from time to time owing or incurred (actually or contingently) under,
pursuant to or in connection with the Leumi Credit Agreement and/or the
Senior Security;
"SENIOR SECURITY": the security granted under, pursuant to or in
connection with the Leumi Credit Agreement to secure the Senior Debt or
any part thereof, including any alterations or supplements to the
security, novations of the security or replacement of the security;
1.3 References in this Charge to statutes shall include any other statute,
bye-law, regulation or delegated legislation in force whether before or
after the date of this Charge modifying, re-enacting, extending or made
pursuant to the first-mentioned statute.
2.
<PAGE>
1.4 References in this Charge to Clauses, Sub-clauses, Recitals and the
Schedule are references to those contained in this Charge.
1.5 Clause headings are for ease of reference only and shall not affect the
construction of this Charge.
1.6 Words importing the singular number only shall include the plural and
vice versa and words importing the masculine gender shall include the
feminine and neuter genders and vice versa.
1.7 The expression "CHARGEE" shall include its successors, assigns and
transferees and this Charge shall enure to the benefit of and be
enforceable by the Chargee notwithstanding any change in its
constitution or its absorption into or amalgamation with any other
person or the acquisition of all or part of its undertaking by any
other person.
2. CHARGE AND ASSIGNMENT
2.1 (a) Subject always to the Senior Security, the Company HEREBY
CHARGES in favour of the Chargee as security for the payment
and discharge of the Secured Indebtedness:
(i) by way of fixed charge all present and future
fixtures, plant, machinery, vehicles, furniture,
furnishings, fixtures, goods, assets, merchandise,
consumables, products computers, and other office
tools, equipment and appliances and the benefit of
all contracts and warranties relating to the same in
which the Company now or at any time during the
continuance of this Security has an interest
(including but not limited to those listed on the
Schedule); and
(ii) by way of floating charge all raw materials, stock-
in-trade, work-in-progress and inventory of the
Company from time to time and all other undertaking,
property and assets, both present and future of the
Company, including those comprised in the property,
assets and undertaking of the Company described in
Sub-clause (i) above if and insofar as the charge on
such property, assets and undertaking or on any part
or parts thereof shall for any reason be ineffective
as a fixed charge.
(b) The Charges may at any time by notice to the Company convert
the floating charge hereby created into a fixed charge as
regards such Charged Assets as may be specified (whether
generally or specifically) in such notice.
2.2 This Security is a continuing security and shall remain in force
notwithstanding any intermediate payment or settlement of account or
other matter whatsoever and is in addition to and shall not merge into
or otherwise prejudice or affect any guarantee, Encumbrance or other
right or remedy now or hereafter held by or available to the Chargee
and shall not be in any way prejudiced or affected thereby or by the
invalidity
3.
<PAGE>
thereof or by the Chargee now or hereafter dealing with exchanging
releasing modifying or abstaining from perfecting or enforcing any of
the same or any right which the Chargee may now or hereafter have or
giving time for payment or indulgence or compounding with any other
person.
2.3 The Company shall not without the prior written consent of the Chargee
create or permit to arise or to subsist any Encumbrance upon the whole
or any part of the Charged Assets other than this Security and the
Senior Security and, without prejudice to the foregoing, any mortgage,
charge, lien, pledge or other Encumbrance hereafter created by the
Company (otherwise than in favour of the Chargee) shall be, and be
expressed to be, subject to and rank behind this Security.
2.4 The Company shall not, without the prior written consent of the
Chargee, part with, sell or dispose of the whole of the Charged Assets
or any part thereof except in the case of Floating Charge Assets
which may, subject to the other provisions of this Charge, be
disposed of in the ordinary course of business.
3. PERFECTION OF SECURITY AND FURTHER ASSURANCE
3.1 The Company shall, when required by the Chargee (whether before or
after this Security shall have become enforceable), execute and do all
such mortgages, charges, transfers, assignments, assurances,
instruments, notices, documents, acts and things in such form or
otherwise as the Chargee may require for maintaining, perfecting or
protecting the security intended to be hereby constituted, for further
charging the Charged Assets in order to further secure the Secured
Indebtedness, for converting any floating charge forming part of this
Security into a fixed charge, for protecting the Chargee's interest in
the Charged Assets or for effecting or facilitating the exercise by the
Chargee of its powers, authorities and discretions conferred on it or
any Receiver hereby or by statute. For the purposes of this Clause, a
certificate in writing signed by or on behalf of the Chargee to the
effect that any particular transfer, assignment, assurance, act or
thing required by the Chargee is reasonably required shall be
conclusive evidence of the fact.
3.2 The Company shall from time to time when so required by the Chargee
produce to and/or deposit with the Chargee, during the continuance of
this Security, all deeds and documents of title relating to the Charged
Assets or any of them.
4. REPRESENTATIONS BY THE COMPANY
The Company hereby represents and warrants that:
(a) the Company is and will, at all times during the subsistence
of this Security, be the sole lawful and beneficial owner of
all of the Charged Assets and has the right to charge the
Charged Assets in the manner herein free from any lien,
mortgage, charge or other Encumbrances (save for this Security
and the Senior Security).
(b) it has not sold or granted any rights of pre-emption over or
agreed to sell or grant any right of pre-emption over or
otherwise disposed of or agreed to dispose of,
4.
<PAGE>
the benefit of all or any of its rights, title and interest in
and to the Charged Assets or any part thereof (save for the
Senior Security);
(c) the Company is not and is not deemed to be unable to pay its
debts within the meaning of Section 178 of the Companies
Ordinance nor will it be so deemed in consequence of its
entering into this Charge or any of the transactions
contemplated hereby or by the Agreements; and
(d) the execution of this Charge and the creation of this
Security are within the corporate powers of the Company and
the directors of the Company have taken all necessary action
to authorise such execution and creation and the
implementation of this Charge.
5. OBLIGATIONS OF THE COMPANY
5.1 The Company shall take all such action as is available to it:-
(a) to perfect and protect the security intended to be conferred
on the Chargee by or pursuant to this Charge;
(b) to maintain the security hereby intended to be created; and
(c) to make all such filings and registrations, and to take all
such other steps, as may be necessary in connection with the
creation, perfection or protection of any security which it
may, or may be required to, create in connection herewith.
5.2 During the continuance of this Security, the Company covenants that it
shall:-
(a) not without the prior written consent of the Chargee grant or
agree to grant any lease or licence affecting all or any of
the Charged Assets or accept or agree to accept any surrender
of any lease or licence thereof or agree, accept, suffer or
permit any alteration, variation or addition to the terms of
such lease or licence;
(b) at all times give to the Chargee such information as the
Chargee may reasonably require for the purpose of the
discharge of the powers, rights, duties, trusts, authorities
and discretions vested in it hereunder or by operation of law;
(c) ensure that it is and remains the sole, lawful and beneficial
owner of all of the Charged Assets free from any lien,
mortgage, charge or other Encumbrances (save for this Security
and the Senior Security and as otherwise permitted hereunder
or under the Agreements);
(d) indemnify the Chargee and, as a separate covenant, any
Receiver or Receivers appointed by it hereunder against all
existing and future Taxes, duties, charges, assessments,
impositions and outgoings whatever (whether imposed by deed or
statute or otherwise and whether in the nature of capital or
revenue and even
5.
<PAGE>
though of a wholly novel character) now or at any time during
the continuance of this Security payable in respect of the
Charged Assets or any part thereof and, if any such sums shall
be paid or incurred by the Chargee or any such Receiver or
Receivers, the same shall be repaid by the Company on demand
together with Interest as if such sums were unpaid sums from
the time or respective times of the same having been paid or
incurred by the Chargee or such Receiver or Receivers, as the
case may be, to the date of such repayment;
(e) insure and keep insured all of the Charged Assets with such
insurer and against such risks (including, in any event, the
Minimum Risks) and in such amounts and otherwise upon such
terms as the Chargee may from time to time require in each
case in the name of the Chargee or with the interest of the
Chargee noted on the policy, as the Chargee may require, and
with a clause to ensure payment of any loss to the Chargee in
the full replacement value thereof, and maintain such other
insurances as are normally maintained by a prudent company
carrying on similar business, and duly pay and discharge all
premiums and other moneys necessary for effecting and keeping
up such insurances, and produce to and deposit with the
Chargee the policies of such insurance and all premium
receipts in respect thereof forthwith upon receipt of the
same, failing which the Chargee may take out or renew such
insurances in any sum which the Chargee may think expedient,
and all moneys expended by the Chargee under this Clause shall
be reimbursed by the Company on demand and bear Interest from
the time of the same having been expended and, until such
payment, the same shall be deemed part of the Secured
Indebtedness and shall be recoverable accordingly. Prior to
the occurrence of an Event of Default, all moneys to be
received by virtue of any of the aforesaid insurances shall,
at the option of the Chargee, be applied either in replacing,
restoring or reinstating the undertaking, property and assets
or part thereof destroyed or damaged or in prepayment and/or
reduction of the Secured Indebtedness (and pending such
application, the proceeds may be placed by the Chargee in a
suspense account). Upon and after the occurrence of an Event
of Default, all moneys to be received by virtue of any of the
aforesaid insurances shall be applied by the Chargee in
prepayment and/or reduction of the Secured Indebtedness (and
pending such application, the proceeds may be placed by the
Chargee in a suspense account);
(f) in the event that a deficiency exists after all moneys to be
received by virtue of any insurances referred to in Sub-clause
(e) above have been applied towards replacing restoring or
reinstating the Charged Assets or part thereof as referred to
in Sub-clause (e) above, the Company shall forthwith make good
or cause to be made good such deficiency;
(g) do all such things and execute all such documents as the
Chargee may reasonably require for the purpose of perfecting
the Chargee's security or assuring to the Chargee that the
assets of the Company will not be lost or dissipated;
(h) carry on its business in a proper and efficient manner and
shall not, without the prior written consent of the Chargee,
make any material alteration in the nature
6.
<PAGE>
of that business or incur any expenditure or liabilities of an
exceptional or unusual nature; and
(i) promptly afford such facilities as the Chargee shall require
to enable the Chargee or its duly authorised agent to
investigate to its or their satisfaction the matters
aforesaid.
5.3 Save for and subject to the Senior Security, the Company shall not,
without the prior written consent of the Chargee:
(a) sell, assign, transfer, mortgage, charge (including a charge
by way of floating charge) create or permit to arise any other
Encumbrance thereon, sub-divide, let, lease or otherwise
dispose, part with the use, occupation or possession or make
any arrangement for the sharing of or otherwise deal with the
Charged Assets or any part thereof (or any interest or
undivided share or shares therein) or agree to do any of the
above whereby any person other than the Company obtains the
use, occupation or possession of the Charged Assets or any
part thereof (irrespective of whether any rental or other
consideration is given) or cause or permit any second or
further charge to be effected of the Charged Assets or in any
way encumber the equity of redemption therein or diminish
jeopardise or prejudice the security hereby afforded to the
Chargee or permit the same to be done without the prior
written consent of the Chargee; and
(b) without prejudice to the generality of the foregoing, permit
any person to be or become entitled to assert any proprietary
or other like right or interest which might adversely affect
the value of the Charged Assets.
6. EVENTS OF DEFAULT
This Security shall become enforceable by the Chargee immediately upon
the happening of any Event of Default.
7. ENFORCEMENT
7.1 At any time after this Security shall have become enforceable, the
Chargee may (subject always to the Senior Debt and the Senior Security)
without prejudice to any other rights it may have and without prior
notice to the Company:
(a) sell, call in, collect, convert into money or otherwise deal
with or dispose of the Charged Assets or any part thereof on
an instalment basis or otherwise and generally in such manner
and upon such terms whatever as the Chargee may think fit and
the provisions of the Ordinance relating to and regulating the
exercise of the said power of sale shall, so far as they
relate to this Security, be varied and extended accordingly
and, in particular, paragraph 11 of the Fourth Schedule to
7.
<PAGE>
the Ordinance shall not restrict the exercise by the Chargee
of the statutory power of sale conferred on it by the
Ordinance;
(b) exercise any and all powers which a Receiver could exercise;
and
(c) appoint by writing any person or persons to be a Receiver of
all or any part of the Charged Assets, from time to time
determine the remuneration of the Receiver and remove the
Receiver (except where an order of the Court is required
therefor) and appoint another in place of any Receiver,
whether he is removed by the Chargee or an order of the Court
or otherwise ceases to be the Receiver or one of two or more
Receivers. Every such appointment or removal, and every
delegation, appointment or removal by the Chargee in the
exercise of any right to delegate its powers or to remove
delegates herein contained, may be made either by deed or by
instrument in writing under the hand of any officer of the
Chargee or any person authorised in writing in that behalf by
any such officer.
7.2 Every Receiver for the time being holding office by virtue of an
appointment made by the Chargee hereunder shall (subject to any
limitations or restrictions expressed in the deed or other instrument
appointing him but notwithstanding any winding-up or dissolution of the
Company) have, in relation to the Charged Assets, or as the case may
be, that part of the Charged Assets in respect of which he was
appointed:
(a) all the powers (as varied and extended by the provisions
hereof) conferred by the Ordinance or otherwise by law on
mortgagees (whether or not in possession) and receivers
appointed under the Ordinance; and
(b) power in the name or on behalf and at the cost of the Company
which is the beneficial owner of such Charged Assets to
exercise all the powers and rights of an absolute owner and do
or omit to do anything which the Company itself could do.
7.3 The Receiver shall be the agent of the Company (which shall alone be
personally liable for the Receiver's acts, defaults and remuneration)
and in particular by way of addition to but with prejudice to any of
the foregoing, such Receiver shall have the following additional
powers:
(a) power to take possession of, collect and get in the Charged
Assets;
(b) power to sell (by public auction, private contract or
otherwise), lease or otherwise dispose of or concur in
selling, leasing, accepting surrenders or otherwise disposing
of the whole or any part of the Charged Assets in such manner
and generally upon such terms and subject to such covenants
and conditions granted or undertaken in the name of the
Company as he shall think fit, and in making any sale or other
disposal of any of the Charged Assets in the exercise of their
respective powers the Receiver or the Chargee may accept, as
and by way of consideration for such sale or other disposal,
cash, shares, loan capital or other obligations, including
without limitation consideration fluctuating according to or
8.
<PAGE>
dependent upon profit or turnover and consideration the amount
whereof is to be determined by a third party. Any such
consideration may be receivable in a lump sum or by
instalments and upon receipt by the Receiver shall ipso facto
be and become charged with the payment of the Secured
Indebtedness. Any contract for any such sale or other disposal
by the Receiver or the Chargee may contain conditions
excluding or restricting the personal liability of the
Receiver or the Chargee (save for gross negligence, fraud or
wilful misconduct);
(c) power to demand and recover all the income in respect of any
of the Charged Assets by action, distress or otherwise in the
name of either of the Company or the Chargee to the full
extent of the estate or interest which the Company could
dispose of and to give effectual receipts accordingly for the
same;
(d) power to borrow from the Chargee or others on such terms
(with or without security) as he or the Chargee shall think
fit and so that, with the prior written consent of the
Chargee, any such security may be or include a charge on the
whole or any part of the Charged Assets ranking wholly or
partly in priority to or pari passu with this Security;
(e) power to make any arrangement or compromise of claims or enter
into any contracts in respect of the Charged Assets as he
shall think fit;
(f) power to effect and renew insurances relating to the Charged
Assets;
(g) power to employ, engage and appoint such managers and other
employees and professional advisers on such terms as he shall
think fit including without limitation power to engage his own
firm in the conduct of the receivership;
(h) power to carry out all repairs, developments, improvements and
other things which he or the Chargee shall consider necessary
or appropriate in respect of the Charged Assets;
(i) .power to sever any fixtures and fittings from any real
property include the Property or any part thereof, and sell
the same separately without the consent of the Company being
obtained thereto;
(j) power to make to the exclusion of the directors' power in that
behalf, calls conditionally or unconditionally in respect of
the uncalled capital of the Company and to enforce the same;
(k) power to exercise all voting and other rights attaching to
stocks, shares and other securities owned by the Company;
(l) power to grant any option or licence over all or any part of
the Charged Assets;
(m) power to carry on or authorise or concur in carrying on the
business of the Company in relation to the Charged Assets or
any part thereof and to manage and
9.
<PAGE>
conduct the same and for such purposes to raise money on the
security of the Charged Assets or part thereof or interest
thereon in priority to this Security or otherwise and at such
rate of interest and generally on such terms and conditions as
he may think fit and no person lending any such money shall be
concerned to enquire as to the propriety or purpose of the
exercise of this power or see to the application of any moneys
so raised or borrowed provided that a Receiver shall not
exercise this power without first obtaining the written
consent of the Chargee;
(n) power to promote the formation of companies with a view to the
same purchasing all or any of the Charged Assets or otherwise;
(o) power to retain out of any money received by him his
remuneration and all cost, charges and expenses properly
incurred by him as Receiver;
(p) power to do all such other things as may seem to him to be
incidental or conducive to any other power vested in him or to
any of the matters or powers aforesaid; and
(q) power to exercise any of the above powers on behalf of and in
the name of the Company (notwithstanding any liquidation of
the Company) or on his own behalf.
7.4 The following provisions as to the appointment, powers, rights and
duties of a Receiver shall have effect in the event of the Chargee
appointing a Receiver pursuant to Clause 7.1:
(a) such appointment may be made either before or after the
Chargee shall have entered into or taken possession of the
Charged Assets or any part thereof;
(b) such Receiver may (at the absolute discretion of the Chargee)
be appointed either receiver of all the Charged Assets or of
such part or parts thereof as may be specified in the
appointment and in such latter event the powers hereinbefore
conferred on a Receiver shall have effect as though every
reference therein to the Charged Assets were limited to the
part or parts of the Charged Assets so specified;
(c) such Receiver or Receivers may be vested by the Chargee with
such powers and discretions, including powers of management,
as the Chargee may think expedient;
(d) unless otherwise directed by the Chargee, any Receiver may
exercise all the powers and authorities vested in the Chargee
hereunder;
(e) such Receiver shall in the exercise of his powers,
authorities and discretions conform to any regulations and
directions from time to time made and given by the Chargee
provided that no person dealing with such Receiver shall be
concerned to enquire whether such Receiver has so conformed to
such regulations or directions;
10.
<PAGE>
(f) the Chargee may from time to time and at any time require any
such Receiver to give security for the due performance of his
duties as a receiver and may fix the nature and amount of the
security to be so given, but the Chargee shall not be bound in
any case to require any such security;
(g) save so far as otherwise directed by the Chargee, all monies
from time to time received by such Receiver shall be paid over
to the Chargee to be held by the Chargee on the trusts herein
declared of and concerning moneys which arise from any
letting, leasing, sale, calling in, collection, conversion or
other dealing with the Charged Assets;
(h) the Chargee may pay over to such Receiver any moneys
constituting part of the Charged Assets or the income thereof
to the intent that the same may be applied for the purposes
hereof by such Receiver, and the Chargee may from time to time
determine what funds the Receiver shall be at liberty to keep
in hand with a view to the performance of his duties as a
receiver;
(i) every such Receiver shall be the agent of the Company for all
purposes and the Company alone shall be responsible for his
acts and defaults, loss or misconduct (save in the case of
gross negligence, fraud or wilful misconduct) and for the
payment of his remuneration, and the Chargee shall not incur
any liability therefor by reason of the Chargee appointing him
as a receiver or otherwise;
(j) any Receiver may act in his own name or in the name of the
Chargee;
(k) every Receiver, attorney, manager, agent or other person
appointed by the Chargee hereunder shall be entitled to be
indemnified out of the Charged Assets and the income thereof
in respect of all liabilities and expenses incurred by him in
the execution or purported execution of the terms and
conditions of this Charge and against all actions,
proceedings, claims and demands in respect of any matter or
thing done or omitted in any way relating to the Charged
Assets and the Chargee may retain and pay out of any money in
its hands arising from the terms and conditions of this Charge
all sums necessary to effect such indemnity and all such sums
shall be a charge on the Charged Assets;
(l) where more than one Receiver is appointed in accordance with
the provisions herein contained any reference in this Charge
to a Receiver shall apply to both or all of the Receivers so
appointed, and the appointment of the Receivers shall be
deemed to be a joint and several appointment to the intent
that the rights, powers, duties and discretions vested in the
Receivers may be exercised jointly by the Receivers so
appointed or severally by each of them; and
(m) the foregoing powers of appointment of a Receiver shall be
and remain exercisable by the Chargee in respect of any part
of the Charged Assets in respect of which no appointment of a
Receiver by the Chargee shall from time to time be subsisting
and notwithstanding that an appointment under the provisions
of this Clause shall
11.
<PAGE>
have subsisted and been withdrawn in respect of that property
or shall be subsisting in respect of any other part of the
Charged Assets.
7.5 At any time after this Security becomes enforceable, the Chargee or
the Receiver may sever the fixtures and fittings from any real property
and sell the same separately without the consent of the Company being
obtained thereto.
7.6 Neither the Chargee nor any Receiver shall by reason of entering into
possession of the Charged Assets or any part thereof be liable to
account as mortgagee in possession or for any default or omission of
any nature whatsoever for which a mortgagee in possession might be
liable, or be liable for any loss or damage occasioned by or upon
realisation or for any diminution in value happening in or about the
exercise of any power conferred hereby or by statute and the Company
shall not have any right or action or claim against the Chargee or any
Receiver on the grounds that a better price could or might have been
obtained on any such realisation, sale or disposal or for any default
or omission of any nature whatsoever for which a mortgagee in
possession might be liable. The Company agrees with the Chargee that it
will not sue the Receiver in respect of any of the matters referred to
above.
7.7 No person dealing with the Chargee or its agent or any Receiver
appointed hereunder or with its or his attorneys or agents shall be
concerned to enquire whether any event has occurred to authorise the
Receiver to act or the security hereby constituted has become
enforceable or be concerned with notice to the contrary, or whether the
power exercised or purported to be exercised has become exercisable or
whether any moneys remain due upon this Security or as to the necessity
or expediency of the stipulations and conditions subject to which any
sale shall be made, or otherwise as to the propriety or regularity of
any sale, calling in, dealing, collection, conversion or power
exercised or to see to the application of any money paid to the Chargee
or to any Receiver or its or his attorneys or agents, and in the
absence of fraud on the part of such person such dealing shall be
deemed so far as regards the safety and protection of such person to be
within the powers hereby conferred and to be valid and effectual
accordingly and the remedy of the Company in respect of any
irregularity or impropriety whatsoever in the exercise of such powers
shall be in damages only.
7.8 Upon any such letting, leasing, sale, calling in, collection or
conversion as aforesaid and upon any other dealing or transaction under
the provisions herein contained the receipt of the Chargee or any
Receiver for the rent or proceeds thereof and for any other moneys paid
to it or him shall effectually discharge the tenant, lessee, purchaser
or person paying the same therefrom and from being concerned to see to
the application or being answerable for the loss or misapplication
thereof.
7.9 The Chargee or any Receiver so appointed shall hold the moneys arising
from any such letting, leasing, sale, calling in, collection,
conversion or dealing under the powers herein contained and all moneys
received under any powers hereby conferred upon the Chargee or upon any
Receiver after the security hereby created has become enforceable upon
trust to be applied (subject to the payment of any claims having
priority to this Charge) in the following order:
12.
<PAGE>
(a) unless the Charged Assets is sold subject to a prior
incumbrance, in discharge of that prior incumbrance;
(b) in payment of the Receiver's lawful remuneration, costs,
charges and expenses and all lawful costs and expenses
properly incurred in the sale or other dealing;
(c) in payment of the Secured Indebtedness, and any residue shall
be paid to the person who immediately before any sale or other
dealing was entitled to the Charged Assets or authorised to
give a receipt for the proceeds of the sale of the Charged
Assets.
7.10 The Company hereby irrevocably and by way of security appoints the
Chargee and any Receiver jointly and each of them severally to be the
Company's attorney (with full power of substitution) and in its name
and on its behalf and as its act and deed to sign, seal, execute,
deliver, perfect and do all deeds, instruments, acts and things
whatsoever which shall in the opinion of the Chargee (whose opinion
shall be conclusive and binding upon the Company) be necessary or
expedient that the Company should do or which the Chargee or a Receiver
is empowered to do under this Charge for the purpose of carrying out
any obligation hereby declared or imposed upon the Company or for
giving to the Chargee the full benefit of any of the provisions hereof
and generally to use the Company's name in the exercise of all or any
of the powers hereby conferred on the Chargee or any Receiver appointed
by the Chargee hereunder. The Chargee shall have full power to delegate
the power conferred on it by this Clause, but no such delegation shall
preclude the subsequent exercise of such power by the Chargee itself or
preclude the Chargee from making a subsequent delegation thereof to
some other person; and any such delegation may be revoked by the
Chargee at any time. The Company covenants that it will ratify and
confirm all that the attorney shall lawfully do or cause to be done by
virtue of these presents.
7.11 The power to appoint a Receiver conferred herein or by statute shall
be and remain exercisable by the Chargee notwithstanding any prior
appointment in respect of all or any part of the Charged Assets.
7.12 The Company declares that as and when this Security becomes
enforceable it will hold the Charged Assets (subject to the Company's
right of redemption) upon trust to convey, assign or otherwise deal
with the same in such manner and to such person as the Chargee shall
direct and declares that it shall be lawful for the Chargee by an
instrument under its common seal to appoint a new trustee or trustees
of the Charged Assets and in particular but without limitation at any
time or times to appoint a new trustee or trustees thereof in place of
the Company.
13.
<PAGE>
8. CHARGEE'S ADDITIONAL POWERS AND RIGHTS
8.1 At any time after this Security shall have become enforceable the
Chargee or a Receiver may (but shall not be obliged to), subject always
to the Senior Security, do any such thing and incur any such
expenditure as the Chargee or such Receiver shall in its sole
discretion consider necessary or desirable to remedy each or any
default by the Company and to protect or realise this Security or its
interests under this Charge and in particular (but without limitation)
may enter upon the Company's property and may pay any moneys which may
be payable in respect of any of the Charged Assets and any moneys
expended in so doing by the Chargee or Receiver shall be deemed an
expense properly incurred and paid by the Chargee and the Company shall
reimburse the same on demand to the Chargee.
8.2 If the Company shall without the prior written agreement of the
Chargee create or permit to arise or subsist any Encumbrance (save for
this Security and the Senior Security) affecting the Charged Assets,
the Chargee may open a new account for the Company, and if the Chargee
does not in fact open such new account it shall nevertheless be treated
as if it had done so at the time when it received notice of such
Encumbrance and as from that time all payments made by or on behalf of
the Company to the Chargee shall be credited or be treated as having
been credited to the new account and such payments shall not operate to
reduce the amount due from the Company to the Chargee at the said time
(but this Clause shall not prejudice any security which apart from this
Clause the Chargee would have had for the discharge by the Company of
liabilities or obligations incurred after that time).
8.3 All moneys received, recovered or realised by the Chargee under this
Security may at the sole discretion of the Chargee be credited by the
Chargee to any suspense or impersonal account pending the application
from time to time of such moneys and accrued interest thereon at the
rate if any agreed in writing between the Company and the Chargee from
time to time (as the Chargee shall be entitled to do in its discretion)
in or towards the discharge of any of the Secured Indebtedness.
9 APPLICATION OF RECEIPTS
Subject to the Senior Security, any moneys received by or on behalf of
a Receiver or the Chargee under the powers hereby conferred shall
(subject to the repayment of any claims having priority to this Charge)
be paid or applied in the following order of priority:
(a) first, in satisfaction of all costs, charges and expenses
properly incurred and payments properly made by the Chargee or
any Receiver and of the remuneration of any Receiver;
(b) secondly, in or towards satisfaction of the Secured
Indebtedness in such order as the Chargee in its absolute
discretion shall decide; and
(c) thirdly, to the person or persons entitled thereto.
14.
<PAGE>
10. INDEMNITY
The Company hereby agrees to indemnify and hold harmless the Chargee
and any Receiver from and against all actions, claims, expenses,
demands and liabilities now or hereafter brought against or incurred by
either or both of them, or against or by any person for whose act or
omission either or both of them may be liable, resulting directly or
indirectly from any breach or non-observance by the Company of any of
the provisions of this Charge or any payment in respect of provisions
of this Charge or any payment in respect of the Secured Indebtedness
(whether made by the Company or a third party) being set aside or
declared void for any reason. The Chargee shall be entitled so to
indemnify and hold harmless the Receiver on behalf of the Company which
shall re-imburse the Chargee accordingly. The Company's liability to
the Chargee under the first or second sentences hereof shall form part
of the Secured Indebtedness and Interest shall accrue thereon
accordingly.
11. APPLICABLE RATE OF EXCHANGE
All moneys received or held by the Chargee or by a Receiver under this
Charge may from time to time be converted into such other currency as
the Chargee considers necessary or desirable to cover the Secured
Indebtedness in that currency at the then prevailing spot or other
appropriate rate of exchange of the Chargee (as conclusively determined
by the Chargee) for the currency acquired against the currency in which
such moneys were received or held.
12. COSTS AND EXPENSES
The Company shall pay or reimburse to the Chargee or the Receiver (as
the case may be), on demand all costs, charges and expenses incurred
and all other money paid by the Chargee in connection with the
preparation and execution of this Charge and the exercise by the
Chargee or any Receiver of its or his rights, powers and discretions
under this Charge, the administration of this Charge, the protection
and the enforcement of this Security and the payment of the Secured
Indebtedness or any other sum due from the Company to the Chargee
including without limitation all remuneration and expenses payable to
the Chargee or Receiver, and all stamp and other duties and taxes (if
any) to which this Charge and any other document executed in connection
herewith may be subject; and all of the foregoing shall be deemed
expenses properly incurred and paid by the Chargee hereunder and may be
debited to any account of the Company and shall form part of the
Secured Indebtedness and Interest shall accrue thereon accordingly.
15.
<PAGE>
13. GENERAL
13.1 No failure or delay by the Chargee in exercising any right, power or
privilege under this Charge shall operate as a waiver thereof, nor
shall any single or partial exercise by the Chargee of any right, power
or privilege preclude any further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies
provided by law.
13.2 Any release, settlement or discharge between the Company and the
Chargee shall be conditional upon no security or payment made or given
to the Chargee being avoided, reduced, set aside or rendered
unenforceable by virtue of any provision or enactment now or hereafter
in force relating to bankruptcy, insolvency or liquidation and if any
such security or payment shall be avoided, reduced, set aside or
rendered unenforceable the Chargee shall be entitled to recover the
full amount or value of any such security or payment from the Company
and otherwise to enforce this Charge as if such release, settlement or
discharge had not taken place.
13.3 The benefit of this Charge shall be transferable by the Chargee,
without regard to any set-off, counterclaim or equities between the
Company and the Chargee or any intermediate holder.
13.4 A certificate signed by an officer of the Chargee as to the amount at
any time of the Secured Indebtedness or any part thereof or any
Interest accrued thereon shall be binding and conclusive on the
Company.
13.5 This Security:
(a) shall be a continuing security and shall not be considered
satisfied by any intermediate payment or settlement of account
or otherwise but shall remain in force until all the Secured
Indebtedness shall have been paid or discharged in full;
(b) shall not prejudice or be prejudiced by any other security
held by the Chargee at any time or any right the Chargee might
have against any other person in respect of the Secured
Indebtedness or any part thereof; and
(c) shall not be affected or discharged by the taking, holding,
varying, non-enforcement or release by the Chargee of any
other security for all or any of the sums payment of which is
hereby covenanted to be made or is hereby secured, or by any
other thing done or omitted or neglected to be done by the
Chargee in relation to any such other security, and is in
addition to and not in substitution for any other security
which the Chargee may at any time hold for the payment of such
moneys or any of them and may be enforced without first having
recourse to any such other security.
13.6 If any one or more of the provisions contained in this Charge shall be
invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16.
<PAGE>
13.7 No provisions hereof may be amended, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against whom enforcement of the amendment, waiver, discharge or
termination is sought.
13.8 This Charge shall be binding upon and enure to the benefit of each
party hereto and its permitted assigns, except that the Company may not
assign or transfer any of its rights or benefits hereunder.
14. NOTICES
14.1 Any notice or other communication served, given or made under this
Charge will be in writing and, without prejudice to the validity of any
other method of service, may be delivered personally or by courier or
sent by facsimile transmission, addressed as follows:
(a) if to the Chargee, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Mr. Raymond So
C.C.: Mr. Burton A. Honig;
(b) if to the Company, to:
Address: 1st Floor, Efficiency House
35 Tai Yau Street
San Po Kong
Kowloon
Hong Kong
Facsimile transmission number: (852) 2352 2355
Attention: Mr. Joel Newman
C.C.: Mr. Leo Schuck;
or to any other address or facsimile transmission number, or person for
whose attention the communication is to be addressed, as the relevant
addressee may substitute by fourteen days' prior notice in writing to
the other party to this Charge.
14.2 Any notice or other communication will be deemed to have been duly
served, given or made (i) in the case of posting, two Business Days
after the envelope containing the notice was delivered to the courier;
or (ii) in the case of delivery, when left at the relevant address; or
(iii) in the case of a facsimile transmission, on receipt by the
addressee of the substantially complete text in legible form.
17.
<PAGE>
14.3 All notices, certificates and other documents and communications given
or made under or in connection with this Charge will be in the English
language.
15. GOVERNING LAW
15.1 This Charge shall be governed by and construed in all respects in
accordance with English law and it is irrevocably agreed for the
exclusive benefit of the Chargee that the courts of England are to have
non-exclusive jurisdiction to settle any disputes which may arise out
of or in connection with this Charge and that accordingly any suit,
action or proceeding arising out of or in connection with this Charge
(in this Clause referred to as "PROCEEDINGS") may be brought in such
courts. Nothing in this Clause shall limit the right of the Chargee to
take the Proceedings against the Company in any other court of
competent jurisdiction, nor shall the taking of Proceedings in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction, whether concurrently or not.
15.2 The Company hereby appoints_________________________________________ of
______________________________________________________________________,
England (marked for the attention of _________________________________)
as its authorised agent for the purpose of accepting service of process
for all purposes in connection with this Charge.
15.3 To the extent that the Company may be entitled in any jurisdiction to
claim for itself or any of its property or assets immunity in respect
of its obligations under this Charge from service of process,
jurisdiction, suit, judgment, execution, attachment (whether before
judgment, in aid of execution or otherwise) or legal process or to the
extent that in any jurisdiction there may be attributed to it or all or
any of its property or assets immunity of that kind (whether or not
claimed), the Company irrevocably agrees not to claim and irrevocably
waives that immunity to the fullest extent permitted by the laws of
that jurisdiction.
IN WITNESS WHEREOF this Charge has been duly executed by all the parties hereto
the day and year first above written.
THE COMPANY
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRONICS )
INDUSTRIES LIMITED )
as its Deed in the presence of )
18.
<PAGE>
THE CHARGEE
SIGNED, SEALED and DELIVERED )
by )
as attorney for and on behalf of ) /S/ ILLEGIBLE
DURABLE ELECTRICAL METAL )
FACTORY LIMITED )
as its Deed in the presence of )
19.
<PAGE>
SCHEDULE
THE ASSETS
20.
CREDIT AGREEMENT
Dated as of July 23, 1997
By and Among
NEW M-TECH CORPORATION
and NEWTECH (HONG KONG) LIMITED,
as the Borrowers
and
BANK LEUMI LE-ISRAEL B.M., COMERICA BANK and
NATIONAL BANK OF CANADA,
as the Banks
and
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
TABLE OF CONTENTS..................................................................i-v
/section/1. DEFINITIONS AND INTERPRETATION....................................................1
/section/ 1.01 Definitions........................................................1
(a) Capitalized Terms..................................................1
(b) Other Definitional and Interpretive Provisions....................12
/section/ 1.02 Accounting Matters..................................................13
/section/ 1.03 Representations and Warranties......................................13
/section/ 1.04 Captions. ........................................................13
/section/ 1.05 Neutral Interpretation..............................................13
/section/2 COMMITMENTS; LOANS, LETTERS OF CREDIT AND
ACCEPTANCES.........................................................13
/section/ 2.01 Overall Commitments.................................................13
/section/ 2.02 Loans...............................................................14
/section/ 2.03 Manner of Borrowings and Fundings...................................14
(a) Direct and Convesion Borrowings...................................14
(b) Refinancing Borrowings............................................15
(c) Agent May Assume Funding. .......................................15
(d) Banks' Obligations Independent....................................16
/section/ 2.04 Interest and Servicing Fees on Loans................................16
(a) Interest Rates....................................................16
(b) Loan Servicing Fees...............................................16
(c) Post-Default Interest.............................................16
(d) Time of Payment. ................................................16
(e) Maximum Interest Rate.............................................16
(f) Computation of Interest...........................................17
(g) Selection of Interest Periods.....................................17
/section/ 2.05 Mandatory Repayment of Loans........................................17
(a) At Maturity.......................................................17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(b) Prior to Maturity.................................................17
/section/ 2.06 Optional Prepayments of Loans.......................................17
/section/ 2.07 Evidence of Indebtedne/section/.....................................18
/section/ 2.08 Letters of Credit...................................................18
(a) Trade Letters of Credit...........................................18
(b) Standby Letters of Credit.........................................18
/section/ 2.09 Letter of Credit Requests. ........................................18
/section/ 2.10 Drawings Under Letters of Credit; Payments Under Acceptances........18
/section/ 2.11 Letter of Credit and Acceptance Fees and Commissions and
Servicing Fees....................................................19
(a) Trade Letters of Credit...........................................19
(b) Standby Letters of Credit.........................................20
(c) Acceptances. ....................................................20
(d) Administrative Fees...............................................21
(e) Source of Fees....................................................21
/section/ 2.12 General Provisions as to Letters of Credit..........................21
(a) Limitation on Agent's Duty to Issue...............................21
(b) Borrowers' Obligations Absolute...................................21
(c) Limitation of Liability With Respect To Letters of Credit.........22
(d) Exculpation.......................................................23
/section/ 2.13 Letter of Credit and Acceptance Participations......................23
/section/ 2.14 Manner and Allocation of Payments...................................25
/section/ 2.15 Payment by Agent to Banks, Etc......................................25
/section/ 2.16 Withholding Taxes...................................................26
/section/ 2.17 Weekly Reconciliation...............................................26
/section/ 2.18 Concerning Joint and Several Liability of the Borrowers.............27
/section/3 CONDITIONS TO EXTENSIONS OF CREDIT................................................28
/section/ 3.01 Conditions to Initial Extension of Credit...........................28
/section/ 3.02 Conditions to Each Extension of Credit. ...........................30
/section/4 CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWERS...............................31
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
/section/ 4.01 Organization; Power; Qualification:...............................31
/section/ 4.02 Authorization and Compliance of Agreement, Notes and Extensions
of Credit.........................................................32
/section/ 4.03 Litigation........................................................32
/section/ 4.04 Burdensome Provisions.............................................32
/section/ 4.05 No Adverse Change or Event........................................33
/section/ 4.06 No Adverse Fact...................................................33
/section/ 4.07 Title to Properties...............................................33
/section/ 4.08 Environmental Matters.............................................33
/section/ 4.09 Debt..............................................................33
/section/ 4.10 Patents, Trademarks, Etc..........................................33
/section/ 4.11 Solvency..........................................................34
/section/ 4.12 Security Interests................................................34
/section/ 4.13 Certain Contracts.................................................34
/section/5 COVENANTS.........................................................................34
A. Affirmative Covenants. ............................................................34
/section/ 5.01 Preservation of Existence and Properties, Scope of Business,
Compliance with Law, Payment of Taxes and Claims....................34
/section/ 5.02 Insurance...........................................................35
/section/ 5.03 Use of Proceeds.....................................................35
B. Negative Covenants. ...............................................................35
/section/ 5.04 Guaranties..........................................................35
/section/ 5.05 Liens...............................................................35
/section/ 5.06 Merger and Consolidation............................................35
/section/ 5.07 Transactions with Affiliates. .....................................35
/section/ 5.08 Taxes of Other Persons..............................................35
/section/ 5.09 Limitation on Restrictive Covenants.................................36
/section/ 5.10 Change of Control or Management.....................................36
/section/ 5.11 Debt................................................................36
/section/ 5.12 Minimum Consolidated Tangible Net Worth.............................36
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
/section/ 5.13 Environmental Matters...............................................36
/section/ 5.14 Limitation on Investments...........................................36
/section/ 5.15 Remittance of Overseas Receipts.....................................36
/section/ 5.16 Fictitious Names....................................................37
/section/6 INFORMATION.......................................................................37
/section/ 6.01 Financial Statements and Information to be Furnished. ...........37
(a) Monthly Financial Statements; Officer's Certificate...............37
(b) Year-End Statement; Accountants' and Officer's Certificates.......37
(c) Additional Materials..............................................38
(d) Notice of Defaults, Litigation and other Matters..................39
/section/ 6.02 Accuracy of Financial Statements and Information..................39
(a) Historical Financial Statements...................................39
(b) Future Financial Statements.......................................39
(c) Historical Information............................................40
(d) Future Information................................................40
(e) Change in Fiscal Year.............................................40
/section/ 6.03 Additional Covenants Relating to Disclosure.......................40
(a) Accounting Methods and Financial Records..........................40
(b) Visits and Inspections............................................41
/section/ 7 DEFAULT..........................................................................41
/section/ 7.01 Events of Default.................................................41
/section/ 7.02 Remedies Upon Event of Default....................................44
/section/8 CHANGES IN CIRCUMSTANCES..........................................................44
/section/ 8.01 Mandatory Suspension and Conversion of Loans......................44
/section/ 8.02 Regulatory Changes................................................45
/section/ 8.03 Change of Lending Office..........................................45
/section/ 8.04 Funding Losses....................................................46
/section/ 8.05 Determinations. .................................................46
/section/9 THE AGENT.........................................................................46
/section/ 9.01 Appointment and Authorization.....................................46
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
/section/ 9.02 Agent and Affiliates..............................................47
/section/ 9.03 Action by Agent...................................................47
/section/ 9.04 Consultation with Experts. ......................................47
/section/ 9.05 Liability of Agent................................................47
/section/ 9.06 Indemnification...................................................48
/section/ 9.07 Credit Decision...................................................48
/section/ 9.08 Successor Agent...................................................48
/section/ 9.09 Security Documents, Etc...........................................48
/section/ 9.10 Obtaining Consent of Required Banks...............................49
/section/10 MISCELLANEOUS....................................................................49
/section/10.01 Notices...........................................................49
(a) Manner of Delivery................................................49
(b) Addresses.........................................................49
(c) Effectivene/section/..............................................50
/section/10.02 Expenses: Indemnification.........................................50
/section/10.03 Rights Cumulative. ...............................................51
/section/10.04 Waivers; Amendments...............................................51
/section/10.05 Set-Off. ........................................................52
/section/10.06 Assignment and Participation......................................52
(a) Assignments by Borrowers..........................................52
(b) Assignment by Banks. ............................................52
(c) Participations....................................................52
/section/10.07 Determinations by Agent...........................................53
/section/10.08 Severability of Provisions. .....................................53
/section/10.09 Counterparts......................................................53
/section/10.10 Survival of Obligations...........................................53
/section/10.11 No Joint Venture..................................................53
/section/10.12 Further Assurances; Power of Attorney.............................53
/section/10.13 No Representations Regarding Renewal..............................54
/section/10.14 Successors and Assigns............................................54
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
/section/10.15 Limitation of Liability; Acknowledgment...........................54
/section/10.16 Governing Law.....................................................54
/section/10.17 Judicial Proceedings. ...........................................54
/section/10.18 Waiver of Jury Trial..............................................55
</TABLE>
Exhibits:
Exhibit A-1 Form of Security Agreement
Exhibit A-2 Form of Debenture
Exhibit B-1 Form of Newman Guaranty Agreement
Exhibit B-2 Form of Windmere Guaranty Agreement
Exhibit C Form of Borrowing Base Certificate
Exhibit D-1 Form of Monthly Officer's Certificate
Exhibit D-2 Form of Annual Officer's Certificate
Schedules:
2.13(b) Pre-Existing Acceptances, Standby Letters of Credit and Trade
Letters of Credit
4.03 Litigation
4.08 Environmental Matters
4.09 Debt
vi
<PAGE>
CREDIT AGREEMENT
----------------
Dated as of July 23, 1997
This CREDIT AGREEMENT is made as of the date set forth above by and
among (a) NEW M-TECH CORPORATION, a Florida corporation, ("New M-Tech") and
NEWTECH (HONG KONG) LIMITED, a Hong Kong limited liability company, ("NewTech
Hong Kong," and, collectively with New M-Tech, the "Borrowers," each a
"Borrower"), (b) BANK LEUMI LE-ISRAEL B.M., an Israeli banking corporation
("Leumi"), COMERICA BANK, a Michigan banking corporation, and NATIONAL BANK OF
CANADA, a Canadian-chartered bank, (collectively, the "Banks," each a "Bank"),
and (c) BANK LEUMI LE-ISRAEL B.M., as agent for the Banks (the "Agent").
/section/1. DEFINITIONS AND INTERPRETATION
/section/1.01 DEFINITIONS.
(a) CAPITALIZED TERMS. For the purposes of this Agreement:
"AAAA WORLD SBLC" means the standby letter of credit no. 919650, dated
February 7, 1997, issued by NationsBank, N.A. (South) for the account of AAAA
World Import-Export, Inc. and for the benefit of New M-Tech, in the face amount
of $2,000,000, as amended.
"ACCEPTANCE" means an acceptance created by the Agent pursuant to a
Trade Letter of Credit.
"ACCEPTANCE OBLIGATIONS" means the aggregate outstanding face amount of
all Acceptances (whether matured or unmatured) plus the aggregate amount of all
unreimbursed payments in respect of Acceptances.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed to that term
in Section 302 of ERISA.
"ADJUSTED LIBOR RATE" means for any Interest Period a rate per annum
(rounded upward, if necessary, to the next higher 1/16 of 1.00%) equal to the
rate obtained by dividing (a) the LIBOR Rate (similarly rounded) for such
Interest Period by (b) a percentage equal to one minus the Reserve Requirement
in effect from time to time during such Interest Period.
"AFFILIATE" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person; unless
otherwise specified, "Affiliate" means an affiliate of one of the Borrowers.
"AGENT'S OFFICE" means the office of the Agent in Miami, Florida.
"AGREEMENT" means this Agreement, as amended from time to time.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
<PAGE>
"APPLICABLE LAW" means (i) all applicable common law and principles of
equity and (ii) all applicable provisions of all (A) constitutions, statutes,
rules, regulations and orders of governmental bodies, (B) Governmental Approvals
and (C) orders, decisions, judgments and decrees of all courts and arbitrators.
"BENEFICIAL OWNER" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Securities and Exchange Act
of 1934, as in effect on the date hereof.
"BORROWING" means all Loans made on the same day (a) pursuant to the
same Notice of Borrowing or (b) to refinance the same Reimbursement Obligation.
"BORROWING BASE" means, at any time, the sum (without duplication) of
(i) 80% of the Eligible Accounts Amount at that time attributable to Eligible
Domestic Accounts, plus (ii) the lesser of (A) 40% of the Eligible Accounts
Amount at that time attributable to Eligible Foreign Accounts or (B) $1,000,000,
plus (iii) (A) the lesser of (1) 90% of the Eligible Accounts Amount at that
time attributable to Eligible Kmart Accounts that are secured by the Kmart SBLC
or (2) the amount then available under the Kmart SBLC plus (B) 80% of any
portion of the Eligible Accounts Amount at that time attributable to Eligible
Kmart Accounts that exceeds 111% of the amount referred to in clause (1) of the
immediately preceding clause (A), plus (iv) (A) the lesser of (1) 90% of the
Eligible Accounts Amount at that time attributable to Eligible AAAA World
Accounts that are secured by the AAAA World SBLC or (2) the amount then
available under the AAAA World SBLC plus (B) the lesser of (i) 80% of any
portion of the Eligible Accounts Amount at that time attributable to Eligible
AAAA World Accounts that exceeds 111% of the amount referred to in clause (1) of
the immediately preceding clause (A) or (ii) $1,000,000, plus (v) the lesser of
(A) 40% of the Eligible Inventory Amount at that time or (B) $1,500,000, plus
(vi) 70% of the Eligible Letters of Credit Amount at that time, plus (vii) 70%
of the lesser of the cost or fair market value of the Eligible In-Transit Kmart
Inventory at that time, plus (viii) 95% of the Eligible Securities Value at that
time. For purposes of this Agreement, an account is considered to be "secured"
by a particular letter of credit if the Borrower owning such account may draw
upon the letter of credit to obtain payment of such account.
"BORROWING BASE CERTIFICATE" means a certificate of an authorized
officer of each of the Borrowers substantially in the form of Exhibit C.
"BUSINESS DAY" means any day on which most banks in Miami, Florida are
open for commercial business and, if the day relates to a Loan, on which most
banks are open for international business (including dealings in Dollar
deposits) in London.
"CAPITAL SECURITIES" means, with respect to any Person, any shares of
capital stock of such Person or any security convertible into, or any option,
warrant or other right to acquire, any shares of capital stock of such Person.
2
<PAGE>
"CASH COLLATERAL ACCOUNTS" means the two restricted, non-interest
bearing cash collateral accounts established by the Borrowers with the Agent,
one in the name of New M-Tech and the other in the name of NewTech Hong Kong.
"CHANGE OF CONTROL" means (a) any Person or group of Persons (as
defined under Section 13(d)(3) of the Securities and Exchange Act of 1934),
other than Windmere or Joel Newman, being or becoming a Beneficial Owner of any
of the capital stock or other interests having ordinary power for the election
of directors (or others performing similar functions) of New M-Tech or (b) New
M-Tech's ceasing to own 100% of such stock or other interests of NewTech Hong
Kong.
"CHANGE OF MANAGEMENT" means Joel Newman's ceasing to be the chief
executive officer of New M-Tech, his ceasing to be the chief executive officer
of NewTech Hong Kong, or any other significant (in the Agent's or the Required
Banks' reasonable judgment) change in the senior management of either Borrower.
"CLOSING DATE" means the date on which the initial Extension of Credit
is made.
"COLLATERAL" has the meaning ascribed to it in the Security Agreement.
"COMMITMENT" of any Bank means the obligation of such Bank to make
Loans, to purchase participations in Acceptances, and to purchase participations
in Letters of Credit, such that the sum of the outstanding principal amount of
its Loans plus its participation in Acceptance Obligations and Letter of Credit
Obligations does not exceed the amount set forth opposite its name on the
signature pages hereof.
"CONSOLIDATED TANGIBLE NET WORTH" means at any time the consolidated
stockholders' equity of the Borrowers less their Intangible Assets (to the
extent included in determining such consolidated stockholders' equity) and less
the aggregate amount of the Windmere Notes and any other amounts owing by
Affiliates (other than each other) to either Borrower (to the extent included in
determining such consolidated stockholders' equity), in each case, as of such
time. For purposes of this definition, "Intangible Assets" means the amounts of
intangible assets (including, without limitation, goodwill, licenses, patents,
trademarks, trademark licenses, trade names, copyrights and franchises)
determined in accordance with Generally Accepted Accounting Principles.
"CONTRACT" means an indenture, agreement (other than this Agreement and
any other Loan Document), other contractual restriction, lease, instrument
(other than the Notes), certificate of incorporation or charter, or bylaw.
"DEBENTURE" means the Debenture in the form of Exhibit A-2, executed by
NewTech Hong Kong in favor of the Agent as of the Agreement Date.
"DEBT" of any Person means at any time, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of
3
<PAGE>
property or services, except trade accounts payable that arise in the ordinary
course of business but only if and so long as the same are payable on customary
trade terms, (iv) capitalized lease obligations of such Person, (v) all
obligations of such Person to reimburse any other Person in respect of amounts
paid under a letter of credit or similar instrument, (vi) all obligations with
respect to interest rate and currency swaps and similar obligations obligating
such Person to make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such obligations provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the net
amount thereof, (vii) all of the foregoing of others secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to be
secured by) a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, and (viii) all of the foregoing of others guaranteed by
such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DIRECT BORROWING" means any Borrowing other than a Refinancing
Borrowing.
"DIRECT LOAN" means a Loan that is part of a Direct Borrowing.
"DOLLARS" and the sign "$" mean lawful money of the United States of
America.
"ELIGIBLE AAAA WORLD ACCOUNTS" means Eligible Accounts which are owed
by AAAA World Import-Export, Inc.
"ELIGIBLE ACCOUNTS" means the Borrowers' trade accounts receivable for
goods sold by a Borrower in the ordinary course of such Borrower's business and
shipped or delivered by it to the applicable account debtor, each of which is
evidenced by an invoice or other similar written billing, each of which is a
valid, legally enforceable obligation of the account debtor thereunder, each of
which represents an arms-length, bona fide transaction completed in accordance
with the terms and provisions contained in any documents related thereto, and in
each of which the Agent as agent for the Banks has a valid, perfected,
first-priority security interest securing the Obligations, excluding (1)
accounts receivable that are outstanding 90 days (or 150 days in the case of
accounts receivable secured to the Agent's satisfaction by an irrevocable letter
of credit issued or confirmed by a prime United States bank) or more from their
respective invoice dates and all accounts receivable not secured to the Agent's
satisfaction by an irrevocable letter of credit issued or confirmed by a prime
United States Bank (and regardless of how long outstanding) that are owed by an
obligor if more than 25% of the accounts receivable owed by that obligor to
either Borrower are outstanding 90 (or 150 days in the case of accounts
receivable secured to the Agent's satisfaction by an irrevocable letter of
credit issued or confirmed by a prime United States bank) days or more from
their respective invoice dates, (2) accounts receivable that are outstanding
against customers who are also employees or Affiliates of either Borrower, (3)
accounts receivable that are subject to asserted setoff, credit (other than
customary discount for prompt payment) or dispute, and (4) accounts receivable
that the Agent
4
<PAGE>
determines in its reasonable judgment to be uncollectible, difficult to collect,
or otherwise unsatisfactory for any reason (which determination shall be
conclusive and binding on the Borrowers) (it being understood that an account
receivable that initially is an Eligible Account shall cease to be such if and
when it ceases to meet any of the foregoing criteria).
"ELIGIBLE ACCOUNTS AMOUNT" means, at any time and with respect to a
particular category of Eligible Accounts, (i) the total amount owed to either of
the Borrowers with respect to those Eligible Accounts at that time, less (ii)
the total amount owed by either of the Borrowers to the obligors of those
Eligible Accounts at that time.
"ELIGIBLE DOMESTIC ACCOUNT" means an Eligible Account (other than an
Eligible Kmart Account or Eligible AAAA World Account) that either (a) is owed
by an obligor whose principal place of business is in the United States or (b)
is secured by a letter of credit which is issued or confirmed by a bank
acceptable to the Agent located in the United States and the proceeds of which
are assigned to the Agent in a manner satisfactory to it.
"ELIGIBLE FOREIGN ACCOUNT" means an Eligible Account which is not an
Eligible Domestic Account.
"ELIGIBLE INVENTORY" means inventory owned by either Borrower which is
saleable in the ordinary course of such Borrower's business, which is brand new
and not refurbished, which the Agent determines is not obsolete, which is
located in a public warehouse located in the State of Florida, the State of
California or the State of Tennessee, which is subject to a valid, perfected,
first-priority security interest in favor of the Agent as agent for the Banks
securing the Obligations, and which is otherwise acceptable to the Agent.
"ELIGIBLE IN-TRANSIT KMART INVENTORY" means inventory which bears the
White-Westinghouse or Double W trademark or logo, which is in transit to the
United States, which a Borrower has paid for and is not the subject of an open
Trade Letter of Credit, which is earmarked to be sold to Kmart Corporation
pursuant to the Kmart Contract but has not yet been converted into Eligible
Kmart Accounts (or other accounts receivable) and in which (together with the
documents covering which) the Agent as agent for the Banks has a valid,
perfected, purchase-money, first-priority security interest in favor of the
Agent as agent for the Banks securing the Obligations.
"ELIGIBLE INVENTORY AMOUNT" means, at any time, an amount equal to the
lower of fair market value or cost of the Borrowers' then existing Eligible
Inventory.
"ELIGIBLE KMART ACCOUNTS" means Eligible Accounts which are owed by
Kmart Corporation.
"ELIGIBLE LETTERS OF CREDIT AMOUNT" means, at any time, the sum of the
then aggregate undrawn amount of open Trade Letters of Credit issued to finance
a Borrower's purchase of goods in which (together with the documents covering
which) the Agent as agent for the Banks then has a valid, perfected,
first-priority security interest securing the Obligations.
5
<PAGE>
"ELIGIBLE SECURITY" means a U.S. Treasury bill or note, a Federal
National Mortgage Association note or a Federal Farm Credit Bank note which in
each case is owned by New M-Tech and held in an account with Merrill Lynch
Pierce Fenner & Smith Incorporated's office in Aventura, Florida and in which in
each case the Agent as agent for the Banks has a valid, perfected,
first-priority security interest securing the Obligations.
"ELIGIBLE SECURITIES VALUE" means, at any time, the aggregate fair
market value (as reasonably determined by the Agent) of the Eligible Securities
at that time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"EVENT OF DEFAULT" means any of the events specified in /section/7.01.
"EXTENSION OF CREDIT" means the making of a Loan, the conversion of a
Loan of one type into a Loan of another type, the creation of an Acceptance or
the issuance of a Letter of Credit.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means the generally accepted
accounting principles as in effect in the United States of America from time to
time.
"GOVERNMENTAL APPROVALS" means an authorization, consent, approval,
license or exemption of, registration or filing with, or report or notice to,
any governmental unit, including, without limitation, any such approval required
under ERISA or by the PBGC.
"GUARANTIES" means the Newman Guaranty and the Windmere Guaranty.
"GUARANTORS" means Joel Newman and Windmere.
"HIGH SEASON" means the period May 1st through October 31st of each
year.
"INFORMATION" means written data, services, reports, statements
(including, but not limited to, financial statements delivered pursuant to or
referred to in /section//section/6.01 and 6.02), opinions of counsel, documents
and other information, whether, in the case of any such in writing, it was
prepared by either Borrower, either Guarantor or any other Person on behalf of
either Borrower or either Guarantor.
6
<PAGE>
"INTEREST PAYMENT DATE" means (a), with respect to each LIBOR Rate
Loan, the last day of each Interest Period for that Loan and each and any day
that falls one month or two months after the first day of an Interest Period for
that Loan but before the end of that Interest Period, and (b), with respect to
each Reference Rate Loan, the first Business Day of each month .
"INTEREST PERIOD" means, with respect to each LIBOR Rate Loan, a period
commencing, in the case of the first Interest Period applicable to such Loan, on
the date of the making of, or conversion into, such Loan, and, in the case of
each subsequent, successive Interest Period applicable thereto, on the last day
of the immediately preceding Interest Period, and ending, at the Borrowers'
election, one month, two months or three months thereafter on the same day,
except that (a) any Interest Period which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (b) any Interest Period
which begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month in which such
Interest Period ends) shall end on the last Business Day of a calendar month,
and (c) no Interest Period shall extend past the Termination Date.
"KMART CONTRACT" means the Purchase, Distribution and Marketing
Agreement between New M-Tech and Kmart Corporation, dated as of January 27,
1997, including all supplements and amendments thereto.
"KMART SBLC" means the standby letter of credit no. P-268797, dated
April 14, 1997, issued by Chase Manhattan Bank for the account of Kmart
Corporation and for the benefit of New M-Tech, in the face amount of
$10,000,000.
"LENDING OFFICE" of a Bank means the branch or office designated by
such Bank, from time to time, as the branch or office of such Bank at which
Loans are to be made and maintained. Each Bank's initial Lending Office is set
forth on the signature pages hereof.
"LETTER OF CREDIT" means a Standby Letter of Credit or Trade Letter of
Credit.
"LETTER OF CREDIT APPLICATION" means an application to the Agent for
the issuance of a Letter of Credit in a form approved by the Agent.
"LETTER OF CREDIT OBLIGATION" means, in respect of each Letter of
Credit, the undrawn face amount of such Letter of Credit, plus the aggregate
amount of all unreimbursed draws in respect of such Letter of Credit.
"LETTER OF CREDIT OBLIGATIONS" means the sum of all Letter of Credit
Obligations.
"LIBOR RATE" means, with respect to any Interest Period for a LIBOR
Rate Loan, the rate which the Agent determines to be the prevailing rate per
annum (rounded upward, if necessary, to the next higher 1/16 of 1.00%) at which
deposits in Dollars are or would be offered to the Agent in
7
<PAGE>
the London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of such LIBOR Rate Loan to which
such Interest Period is to apply and for a period of time comparable to such
Interest Period.
"LIBOR RATE LOAN" means a Loan the interest on which is, or is to be,
as the context may require, computed on the basis of the Adjusted LIBOR Rate.
"LIEN", as applied to the property or assets (or the income or profits
therefrom) of any Person, means (in each case, whether the same is consensual or
nonconsensual or arises by Contract, operation of law, legal process or
otherwise): any mortgage, lien, pledge, attachment, levy, charge, or other
security interest or encumbrance of any kind in respect of any property or
assets of such Person, or upon the income or profits therefrom.
"LOAN" means an amount advanced pursuant to /section/2.02.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Agreement, the Debenture, the Guaranties, the Letters of Credit Applications,
each Schedule to this Agreement and each document, instrument, certificate, and
opinion executed and delivered in connection with any of the foregoing, each as
amended or modified from time to time.
"LOW SEASON" means the period November 1st through April 30th of each
year.
"MARKS" means trademarks, trademark rights or licenses, logos, trade
names, trade name rights or licences, copyrights, patents, patent rights or
licenses, and any right with respect to any of the foregoing.
"MATERIALLY ADVERSE EFFECT" means, (i) with respect to any Person, a
materially adverse effect on such Person's business, assets, liabilities,
financial condition, results of operations or business prospects, (ii) with
respect to a group of Persons "taken as a whole", a materially adverse effect on
such Persons' business, assets, liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where appropriate, a
consolidated basis in accordance with Generally Accepted Accounting Principles
and (iii) with respect to any Contract or any other obligation (other than the
Loan Documents), a materially adverse effect, as to either Borrower or either
Guarantor, upon the binding nature, validity or enforceability thereof, and with
respect to this Agreement and the other Loan Documents, an adverse effect,
whether or not material, upon the binding nature, validity or enforceability of
any material provision thereof or on the obligations of either Borrower or
either Guarantor for the payment of money thereunder.
"MAXIMUM PERMISSIBLE RATE" means, with respect to interest payable on
any amount, the rate of interest on such amount that, if exceeded, could, under
Applicable Law, result in (i) civil or criminal penalties being imposed on any
Bank or (ii) any Bank being unable to enforce payment of (or if collected, to
retain) all or part of such amount or the interest payable thereon.
8
<PAGE>
"NEWMAN GUARANTY" means a Guaranty Agreement, in the form of Exhibit
B-1, executed by Joel Newman in favor of the Agent and the Banks as of the
Agreement Date.
"NOTES" means each Revolving Note of the Borrowers payable to the order
of a Bank, evidencing such Bank's Loans and executed by the Borrowers as of the
Agreement Date.
"NOTICE OF BORROWING" has the meaning given it in /section/2.03.
"OBLIGATIONS" means all loans, fees, indebtedness, liabilities,
obligations, Acceptance Obligations, Letter of Credit Obligations, covenants and
duties of each Borrower and each Guarantor to the Banks and/or the Agent of
every kind, nature and description, direct or indirect, absolute or contingent,
due or not due, in contract or tort, liquidated or unliquidated, arising under
this Agreement, or under the other Loan Documents, by operation of law or
otherwise, now existing or hereafter arising, and whether or not for the payment
of money or the performance or non-performance of any act, including, but not
limited to, all damages which either Borrower or either Guarantor may owe to the
Agent and/or the Banks by reason of any breach by either Borrower or either
Guarantor of any representation, warranty, covenant, agreement or other
provision of this Agreement or any of the other Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, corporation, partnership, trust or
unincorporated organization or a government or any agency or political
subdivision thereof.
"PLAN" means, at any time, any employee benefit plan (including a
multiemployer plan), the funding requirements of which (under Section 302 of
ERISA or Section 412 of the Code) are, or at any time within six years
immediately preceding the time in question were, in whole or in part, the
responsibility of the Borrower, any Guarantor or an ERISA Affiliate.
"POST-DEFAULT RATE" means a rate per annum equal to the Reference Rate
as in effect from time to time plus 4.00%; PROVIDED that, if, in the case of a
particular LIBOR Rate Loan in default, the due date is a day prior to the last
day of an Interest Period therefor, the "Post-Default Rate" for such Loan shall
be (x), from such day through the last day of such Interest Period, the rate
applicable to such Loan for such Interest Period as provided in /section/2.04
plus 6.50%, and (y) thereafter the Reference Rate as in effect from time to time
plus 4.00%.
"PROHIBITED TRANSACTION" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA.
"PROPORTIONATE SHARE" means, in respect of a particular Bank and a
particular amount, the product obtained by multiplying such amount by a fraction
the numerator of which is such Bank's Commitment and the denominator of which is
the Total Commitment.
9
<PAGE>
"REFERENCE RATE" means the higher of (a) the per annum rate of interest
publicly announced or otherwise established by the Agent as its "Reference Rate"
(which rate is a discretionary benchmark and may not be the lowest rate of
interest offered by the Agent to its customers), and (b) the Federal Funds Rate
plus 2.50%.
"REFERENCE RATE LOAN" means a Loan the interest on which is, or is to
be, as the context may require, computed on the basis of the Reference Rate.
"REFINANCING BORROWING" means a Borrowing used to pay a Reimbursement
Obligation.
"REFINANCING LOAN" means a Loan that is part of a Refinancing
Borrowing.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, and any regulation
successor thereto.
"REGULATORY CHANGE" means (i) any new, or any change in any existing
Applicable Law, interpretation, directive or request (whether or not having the
force of law) and (ii) any change in the administration or enforcement of any
such Applicable Law, interpretation, directive or request, in each case, that
becomes effective after the Agreement Date, whether as a result of an enactment
by a government or any agency or political subdivision thereof, a determination
of a court or a regulatory authority, or otherwise.
"REIMBURSEMENT OBLIGATION" means an obligation of the Borrowers set
forth in /section/2.10.
"REPORTABLE EVENT" means, to the extent the same relates to or affects
a Plan, (i) any of the events set forth in ERISA Sections 4043(b) (other than a
Reportable Event as to which the provision of 30 days, notice to the PBGC is
waived under applicable regulations), 4068(f) or 4063(a) or the regulations
thereunder, (ii) any event requiring the Borrower, any Guarantor or any ERISA
Affiliate to provide security to a Plan under Code Section 401(a)(29) and (iii)
any failure to make a payment required by Code Section 412(m).
"REPORTING PERIOD" means each period beginning at the start of business
on a Friday and ending on the close of business on the following Thursday.
"REPRESENTATION AND WARRANTY" means each representation and warranty
made pursuant to or under (i) /section/3.02, /section/4, /section/6.02 or any
other provision of this Agreement or any other Loan Document, (ii) any amendment
of or waiver or consent under this Agreement, (iii) any Schedule to this
Agreement or any such amendment, waiver or consent, or (iv) any statement
contained in any certificate, financial statement, legal opinion or other
instrument or document delivered by or on behalf of either Borrower or either
Guarantor pursuant to any Loan Document, whether or not (except as expressly
provided to the contrary herein), in the case of any representation or warranty
10
<PAGE>
referred to in clause (i), (ii), (iii) or (iv) of this definition, the
information that is the subject matter thereof is within the knowledge of either
Borrower or either Guarantor.
"REQUIRED BANKS" means, at any time, the Banks holding at least 60% of
the then aggregate unpaid principal amount of the Loans and the interests and
participations in Acceptance Obligations and Letter of Credit Obligations, or,
if no such Loans or Acceptance Obligations or Letter of Credit Obligations are
outstanding, the Banks having at least 60% of the Banks' Commitments.
"RESERVE REQUIREMENT" means at any time the then current maximum rate
at which reserves (including any marginal, supplemental or emergency reserve)
are required to be maintained under Regulation D by member banks of the Federal
Reserve System in Miami with deposits comparable in amount to those of the Agent
against "Eurocurrency liabilities", as that term is used in Regulation D. The
Adjusted LIBOR Rates shall be adjusted automatically on and as of the effective
date of any change in the Reserve Requirement.
"SECURITY AGREEMENT" means the Security Agreement in the form of
Exhibit B-1, executed by the Borrowers and NewTech International Corporation in
favor of the Agent as of the Agreement Date.
"SECURITY DOCUMENTS" means the Security Agreement, the Debenture and
each other guaranty agreement, mortgage, deed of trust, security agreement,
pledge agreement, assignment of proceeds agreement or other security or
collateral document securing any or all of the Obligations.
"SECURITY INTERESTS" means the security interests, liens, charges,
pledges and collateral assignments created by the Security Documents.
"STANDBY LETTER OF CREDIT" means a standby letter of credit issued by
the Agent for the account of one or both of the Borrowers.
"SUBSIDIARY", when used to determine the relationship of a Person to
another Person, means any Person of which (a) securities having ordinary voting
power to elect a majority of the board of directors (or other persons having
similar functions), or (b) other ownership interests ordinarily constituting a
majority voting interest, in each case, are at the time, directly or indirectly,
owned or controlled by such other Person, or by one or more other Subsidiaries
of such other Person, or by such other Person and one or more of its
Subsidiaries. Unless otherwise specified "Subsidiary" means a Subsidiary of a
Borrower.
"TAX" means any federal, state or foreign tax, assessment or other
governmental charge or levy (including any withholding tax) upon a Person or
upon its assets, revenues, income or profits other than income and franchise
taxes imposed upon a Bank by the jurisdiction (or any political subdivision
thereof) in which such Bank has its head office.
"TERMINATION DATE" means the earlier of (i) June 30, 1998 and (ii) the
date of termination in whole of the Banks' Commitments pursuant to/section/7.02.
11
<PAGE>
"TERMINATION EVENT" means (i) a Reportable Event, (ii) the termination
of a Plan, or the filing of a notice of intent to terminate a Plan, or the
treatment of a Plan amendment as a termination under Section 4041(c) of ERISA,
(iii) the institution of proceedings to terminate a Plan under Section 4042(a)
of ERISA, or (iv) the appointment of a trustee to administer any Plan under
Section 4042(b) of ERISA.
"TOTAL COMMITMENT" means the sum of the Banks' Commitments.
"TRADE LETTER OF CREDIT" means a commercial letter of credit issued by
the Agent for the account of either or both of the Borrowers.
"UNFUNDED BENEFIT LIABILITIES" means, with respect to any Plan at any
time, the amount of unfunded benefit liabilities of such Plan at such time as
determined under Section 4001(18) of ERISA.
"VOTING STOCK" means, with respect to any Person, Capital Securities of
such Person entitling the holder thereof to vote in the election of directors of
such Person.
"WCI LICENSE AGREEMENT" means the License Agreement between White
Consolidated Industries, Inc. and New M-Tech (or "NewTech Corporation"), dated
as of May 1, 1996, including all supplements and amendments thereto.
"WINDMERE" means Windmere Durable-Holdings, Inc., a Florida
corporation.
"WINDMERE GUARANTY" means a Guaranty Agreement, in the form of Exhibit
B-2, executed by Windmere in favor of the Agent and the Banks as of the
Agreement Date.
"WINDMERE NOTES" means the two promissory notes, each dated April 16,
1996, made by Windmere Corporation (k/n/a Windmere Durable-Holdings, Inc.) to
the order of New M-Tech as agent for itself, NewTech Hong Kong and New Tech
International Corporation, in the principal amounts of $3,000,000 and
$2,000,000, respectively.
(b) OTHER DEFINITIONAL AND INTERPRETIVE PROVISIONS.
(i) Except as otherwise specified herein, all
references herein (A) to any Person, other than either Borrower or either
Guarantor, shall be deemed to include such Person's successors, transferees and
assignees, but only, in the case of transferees and assignees of the Banks, to
the extent the applicable transfer or assignment complies with the provisions of
this Agreement, (B) to either Borrower or either Guarantor shall be deemed to
include such Person's successors, (C) to any Applicable Law specifically defined
or referred to herein shall be deemed references to such Applicable Law as the
same may be amended or supplemented from time to time, and (D) to any Contract
defined or referred to herein shall be deemed references to such Contract (and,
in the case of any instrument, any other instrument issued in substitution
therefor) as the terms thereof may have been or may be amended, supplemented,
waived or otherwise modified from time to time.
12
<PAGE>
(ii) When used in this Agreement, the words "herein",
"hereof" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular section or subsection of this
Agreement, and "Schedule" and "Exhibit" shall refer to sections and subsections
of, and Schedules and Exhibits to, this Agreement unless otherwise specified.
(iii) Whenever the context so requires, when used in
this Agreement the neuter gender includes the masculine or feminine, and the
singular number includes the plural, and vice versa.
(iv) The words "includes" and "including" when used
herein are not limiting.
/section/1.02 ACCOUNTING MATTERS. Unless otherwise specified herein,
all accounting determinations hereunder and all computations utilized by the
Borrowers in complying with the covenants contained herein shall be made, all
accounting terms used herein shall be interpreted, and all financial statements
requested to be delivered hereunder shall be prepared, in accordance with
Generally Accepted Accounting Principles, except, in the case of such financial
statements, for departures from Generally Accepted Accounting Principles that
may from time to time be approved in writing by the independent certified public
accountants who are at the time, in accordance with /section/6.01(b), reporting
on the financial statements of the Borrowers.
/section/1.03 REPRESENTATIONS AND WARRANTIES. All Representations and
Warranties shall be made at and as of the Agreement Date, at and as of the time
of each Extension of Credit, and, in addition, in the case of any particular
Representation and Warranty, at such other time or times as such Representation
and Warranty is made or deemed made in accordance with the provisions of this
Agreement or the document pursuant to, under, or in connection with which such
Representation and Warranty is made or deemed made, except to the extent that
any such Representation or Warranty expressly states that it relates to a
different specified date.
/section/1.04 CAPTIONS. Section and subsection captions in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
/section/1.05 NEUTRAL INTERPRETATION. This Agreement and each other
Loan Document has been thoroughly reviewed by counsel for the Borrowers and the
Guarantors. No provision of this Agreement or other Loan Document shall be
construed less favorably to the Agent or the Banks because it was drafted by the
Agent's counsel.
/section/2 COMMITMENTS; LOANS, LETTERS OF CREDIT AND ACCEPTANCES
/section/2.01 OVERALL COMMITMENTS. Upon the terms and subject to the
conditions set forth herein, from the Agreement Date to but excluding the
Termination Date, each of the Banks severally, and not jointly, agrees (i) to
make Loans, (ii) to purchase participations in Acceptances created by the Agent,
and (iii) to purchase participations in Standby Letters of Credit and Trade
Letters of Credit issued by the Agent. The sum of (i) the aggregate unpaid
principal amount of any Bank's Loans, plus
13
<PAGE>
(ii) the aggregate amount of such Bank's participations in Acceptance
Obligations plus (iii) the aggregate amount of such Bank's participations in
Letter of Credit Obligations, shall not exceed at any time such Bank's
Commitment. The sum of (i) the aggregate unpaid principal amount of all Loans,
plus (ii) the aggregate amount of all Acceptance Obligations, plus (iii) the
aggregate amount of all Letter of Credit Obligations shall not exceed at any
time the Borrowing Base at that time and shall not exceed $32,000,000 at any
time during the High Season or $14,000,000 at any time during the Low Season.
Moreover, the sum of the aggregate unpaid principal amount of all Loans plus the
aggregate amount of all Acceptance Obligations shall not exceed $10,000,000 at
any time during the High Season or $5,000,000 at any time during the Low Season;
the aggregate amount of all Letter of Credit Obligations with respect to Standby
Letters of Credit shall not exceed $1,000,000 at any time; and there shall be no
Loans outstanding or Acceptance Obligations in existence for a period of 30
consecutive days between the Closing Date and the Termination Date.
/section/2.02 LOANS. Upon the terms and subject to the conditions of
this Agreement, each Bank shall, from time to time from the Agreement Date to
but excluding the Termination Date, make one or more Loans to the Borrowers each
in an amount equal to its Proportionate Share of a Borrowing. On any Business
Day, Loans, at the option of the Borrowers, may be made as, or may from time to
time be converted into, Reference Rate Loans or LIBOR Rate Loans, or any
combination thereof; PROVIDED, that LIBOR Rate Loans may be converted only on
the last day of an applicable Interest Period, only conversions to Reference
Rate Loans shall be made so long as a Default shall have occurred and be
continuing and each Refinancing Loan shall initially for at least two Business
Days be a Reference Rate Loan. Each Borrowing of LIBOR Rate Loans shall be in a
minimum amount of $1,000,000 and in greater whole multiples of $1,000,000. There
shall at no time be in effect more than six Borrowings with respect to LIBOR
Rate Loans.
/section/2.03 MANNER OF BORROWINGS AND FUNDINGS.
(a) DIRECT AND CONVERSION BORROWINGS. Whenever a Borrower
wishes to incur a Direct Borrowing or to convert Borrowings consisting of
Reference Rate Loans into Borrowings consisting of LIBOR Rate Loans or vice
versa, it shall give the Agent notice of such Borrowing or conversion in a form
approved by the Agent (a "Notice of Borrowing"), in the case of the incurrence
of or conversion into a Reference Rate Loan, one Business Day, and, in the case
of the incurrence of or conversion into a LIBOR Rate Loan, two Business Days,
before the requested date of such Borrowing, specifying (a) the requested date
of the Borrowing, (b) the amount of the Borrowing to be incurred or converted
into, (c) whether the Borrowing to be incurred or converted into is to consist
of Reference Rate Loans or LIBOR Rate Loans, (d) in the case of the incurrence
of, or conversion into, a Borrowing consisting of LIBOR Rate Loans, the duration
of the initial Interest Period and (e) which Borrower is to receive the proceeds
of the Borrowing. If a request for the conversion of Loans of one type into a
Borrowing consisting of Loans of another type is not made in accordance with
this /section/2.03, such Borrowing shall be converted into a Borrowing
consisting of Reference Rate Loans. Any Notice of Borrowing received after 11:00
a.m. (Miami time) shall be deemed received on the following Business Day. On the
Business Day it receives a Notice of Borrowing, the Agent shall notify each
Bank, by 1:00 p.m. (Miami time) on such Business Day, by telefax or by telephone
confirmed by telefax, of the contents of such Notice of Borrowing and of such
14
<PAGE>
Bank's Proportionate Share of such Borrowing and, in the case of a Borrowing
consisting of LIBOR Rate Loans, the applicable initial interest rate. Prior to
4:00 p.m. (Miami time) on the Business Day requested for such Borrowing, each
Bank shall make available to the Agent, at the Agent's office, its Proportionate
Share of such Borrowing in lawful money of the United States of America in same
day funds. The Agent shall, subject to the satisfaction of the conditions set
forth in /section/3, on such day credit the amounts so received by it in like
funds to an account of the applicable Borrower maintained with the Agent at the
Agent's Office (PROVIDED that the amounts so received in respect of the initial
Borrowing shall be used to repay indebtedness owed by the Borrowers to Leumi). A
Notice of Borrowing, once given, shall be irrevocable. Unless the Required Banks
consent in writing otherwise, Direct Borrowings shall be used only to pay
vendors of either Borrower, to otherwise finance such normal operations of
either Borrower as are conducted as of the Agreement Date and as qualify as
"international banking transactions" and to repay indebtedness owed by either
Borrower to Leumi as of the Closing Date.
(b) REFINANCING BORROWINGS. Subject to satisfaction of the
conditions set forth in /section/3, whenever a Reimbursement Obligation becomes
due, the Banks shall, without any need for a request from or notice to the
Borrowers, make Reference Rate Loans in an aggregate amount equal to the amount
of such Reimbursement Obligation, and the Borrowers irrevocably authorize the
Agent to apply the proceeds of any such Loans to repay the corresponding
Reimbursement Obligation. After paying an Acceptance or a draw under a Letter of
Credit the Reimbursement Obligation with respect to which is to be paid with a
Refinancing Borrowing, the Agent shall notify each Bank, by 1:00 p.m. (Miami
time) on the Business Day on which payment of the Acceptance or draw is made, by
telefax or by telephone confirmed by telefax, of such Banks' Proportionate Share
of the resulting Reimbursement Obligation. Prior to 4:00 p.m. (Miami time) on
the Business Day on which the payment of an Acceptance or draw under a Letter of
Credit is made or to be made, each Bank shall make available to the Agent, at
the Agent's Office, its Proportionate Share of the amount of the resulting
Reimbursement Obligation in lawful money of the United States in same day funds
and, subject to satisfaction of the conditions set forth in /section/3, the
Agent shall (and the Borrowers hereby irrevocably authorize it to) apply the
amounts so received to pay such Reimbursement Obligation.
(c) AGENT MAY ASSUME FUNDING. Unless the Agent shall have
received notice from a Bank prior to the date of any Borrowing that such Bank
will not make available to the Agent such Bank's Proportionate Share of such
Borrowing, the Agent may assume that such Bank has made such amount available to
the Agent on the date of such Borrowing in accordance with /section/2.03(a) or
/section/2.03(b) (as applicable) and the Agent may, in reliance upon such
assumption, make available on such date a corresponding amount. If and to the
extent that such Bank shall not have so made such Proportionate Share available
to the Agent, such Bank shall pay to the Agent, forthwith on demand, such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is paid
to the Agent, at the Federal Funds Rate. If such Bank shall pay to the Agent
such corresponding amount, such amount so paid shall constitute such Bank's Loan
as part of such Borrowing for purposes of this Agreement. If such Bank shall
fail to pay such corresponding amount upon such demand, the Borrowers shall,
forthwith on demand, repay to the Agent such corresponding amount, together with
interest thereon for each
15
<PAGE>
day from the date such amount is made available to a Borrower until the date
such amount is paid to the Agent, at the interest rate applicable at the time to
the Loans comprising such Borrowing.
(d) BANKS' OBLIGATIONS INDEPENDENT. The failure of any Bank to
make a Loan to be made by it as part of any Borrowing shall not relieve any
other Bank of its obligation hereunder to make its Loan on the date of such
Borrowing, but no Bank shall be responsible for the failure of any other Bank to
make the Loan to be made by such other Bank on the date of any Borrowing.
/section/2.04 INTEREST AND SERVICING FEES ON LOANS.
(a) INTEREST RATES. Each Loan shall bear interest on the
outstanding principal amount thereof until due at a rate per annum equal to, (i)
so long as it is a Reference Rate Loan, the Reference Rate as in effect from
time to time, and (ii), so long as it is a LIBOR Rate Loan, the applicable
Adjusted LIBOR Rate plus 2.50%. The interest rate applicable to each Reference
Loan shall change simultaneously with each change in the Reference Rate.
(b) LOAN SERVICING FEES. Each Bank shall, with respect to each
Loan, pay to the Agent, for the Agent's account and by way of compensation for
its services hereunder, a fee (a "Loan Servicing Fee") equal to 0.25% per annum
on the outstanding principal amount of such Loan until such Loan is paid in
full. Each Loan Servicing Fee owed by a Bank shall be payable only from amounts
distributable by the Agent to such Bank. The Agent is irrevocably authorized to
deduct each Loan Servicing Fee owed it by a Bank from any amounts distributable
by the Agent to such Bank.
(c) POST-DEFAULT INTEREST. If all or any part of a Loan or
other amount owed by the Borrowers to the Banks or the Agent hereunder is not
paid when due (whether at maturity, by reason of prepayment or acceleration or
otherwise), such unpaid amount shall bear interest for each day during the
period from the date such amount became so due until it shall be paid in full
(whether before or after judgment) at a rate per annum equal to the Post-Default
Rate.
(d) TIME OF PAYMENT. Interest and Loan Servicing Fees with
respect to each Loan shall be due and payable monthly in arrears on the Interest
Payment Dates for such Loan and when such Loan shall be due (whether at
maturity, by reason of prepayment or acceleration, or otherwise). Interest at
the Post-Default Rate on each Loan and Loan Servicing Fees applicable to any
period after the maturity of each Loan shall be due and payable on demand.
(e) MAXIMUM INTEREST RATE. Nothing contained in this Agreement
or any Note shall require either Borrower or either Guarantor to pay interest at
a rate exceeding the Maximum Permissible Rate. If amounts payable to the Agent
or the Banks on any date would be treated as interest in excess of the Maximum
Permissible Rate, such amounts shall be automatically reduced to the Maximum
Permissible Rate, and, if allowed by Applicable Law, payments for any subsequent
period, to the extent less than the Maximum Permissible Rate, shall, to that
extent, be increased by the amount of such reduction.
16
<PAGE>
(f) COMPUTATION OF INTEREST. Interest and Loan Servicing Fees
payable pursuant to this /section/2.04 or any Note shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first but excluding the last day, which, in the case of any
Interest Period, means from and including the first day of such Interest Period
to but excluding the last day thereof). If the date for any payment of principal
is extended (whether by operation of this Agreement, any provision of law or
otherwise), the Loan Servicing Fees payable pursuant to /section/2.04(b), as
well as interest, shall be payable for such extended time.
(g) SELECTION OF INTEREST PERIODS. The initial Interest Period
applicable to each LIBOR Rate Loan shall be as specified in the Notice of
Borrowing therefor delivered pursuant to /section/ 2.03(a). Each subsequent,
successive Interest Period applicable to such Loan, subject to /section/ 2.02,
shall be as specified by the Borrowers in a notice to the Agent (captioned
"Notice of Selection of Interest Period") at least two Business Days prior to
the end of the current Interest Period. If the Agent shall not have received
such notice prior to 11:00 a.m. (Miami time) on the Business Day by which such
notice is required to be delivered, such LIBOR Rate Loan shall continue after
the current Interest Period as a LIBOR Rate Loan with an Interest Period of the
same duration as that of the current Interest Period. No such notice shall be
effective under this /section/ 2.04(g) so long as a Default shall have occurred
and be continuing.
/section/2.05 MANDATORY REPAYMENT OF LOANS.
(a) MATURITY. All Loans then outstanding shall mature and
become immediately due and payable in full on the Termination Date.
(b) PRIOR TO MATURITY. If at any time any of the limitations
set forth in /section/2.01 are exceeded, the Borrowers shall immediately prepay
the Loans in the amount of the exce/section/ If after repayment of all the Loans
any limitation set forth in /section/2.01 is still exceeded, the Borrowers shall
pay to the Agent an amount equal to the remaining excess, to be retained by the
Agent in one or both Cash Collateral Accounts as collateral security for the
Letter of Credit Obligations and Acceptance Obligations (as well as any other
Obligations). Nothing in this /section/2.05(b) shall be construed to restrict
the Agent's right to accelerate the Obligations or pursue its other remedies
under /section/7 based on a limitation in /section/2.01 being exceeded.
/section/2.06 OPTIONAL PREPAYMENTS OF LOANS. The Borrowers may at any
time and from time to time, upon two Business Days' advance notice, prepay the
Loans in whole or in part without premium or penalty, except that any prepayment
shall be in an aggregate principal amount of at least $100,000 or an integral
multiple thereof, and except that any prepayment of a LIBOR Rate Loan shall be
made only on the last day of an Interest Period for such Loan. Amounts to be
prepaid shall irrevocably be due and payable on the date specified in the
applicable notice of prepayment, together with interest thereon as provided in
/section/2.04(d). Amounts prepaid in respect of Loans may be reborrowed, subject
to the terms and conditions hereof. Notwithstanding anything herein to the
contrary, the Agent is hereby irrevocably authorized, at its option, on each
Business Day, to apply any funds in either or both Cash Collateral Accounts on
that day to the prepayment of Reference Rate Loans.
17
<PAGE>
/section/2.07 EVIDENCE OF INDEBTEDNESS. The Loans by each Bank to the
Borrowers and the Borrowers' obligations to repay such Loans and other
indebtedness of the Borrowers under this Agreement, with interest in accordance
with the terms of this Agreement, (without duplication) shall be evidenced by
this Agreement, the Acceptances, the Letters of Credit and drafts drawn
thereunder, the records of the Agent and such Bank, and a single Note for each
Bank. The records of the Agent and each Bank shall be prima facie evidence of
the Loans by such Bank and the other indebtedness of the Borrowers under this
Agreement, of accrued interest thereon, of accrued fees, and of all payments
made in respect of any thereof.
/section/2.08 LETTERS OF CREDIT. Upon the terms and subject to the
conditions of this Agreement, from the Agreement Date to but excluding the
Termination Date, the Agent shall issue and amend Trade Letters of Credit and
Standby Letters of Credit for the joint account of the Borrowers and shall
create Acceptances pursuant to Trade Letters of Credit providing for
presentation of time drafts. Each Bank shall, upon the issuance of any Letter of
Credit, be deemed to have purchased a participation in each such Letter of
Credit as provided in /section/2.13, and shall, upon the creation of any
Acceptance, be deemed to have purchased a participation in such Acceptance as
provided in /section/2.13.
(a) TRADE LETTERS OF CREDIT. Each Trade Letter of Credit shall
(i) require presentation of either a sight draft or a time draft with a maturity
no later than 30 days after its date, a bill of lading and whatever other
documents the Agent considers necessary or desirable to give it control over and
a perfected security interest in the related goods, (ii) have an expiration date
no later than 90 days after the date of issuance of such Letter of Credit, (iii)
be used only for the shipment or importation of inventory of a Borrower and the
payment of the purchase price thereof (inclusive, at the election of the
Borrowers, of freight and insurance charges), (iv) may indicate only the
Borrower requesting it as the account party on the face of the Letter of Credit,
and (v) be otherwise reasonably acceptable to the Agent in form and content.
(b) STANDY LETTERS OF CREDIT. Each Standby Letter of Credit
shall (i) have an expiration date not later than the earlier of (A) 180 days
after the date of issuance of such Letter of Credit (not including any
provision, consented to by all the Banks, providing for the automatic extension
of the term of such Letter of Credit for an additional period of time upon
notice from the Agent), and (B) the Termination Date, and (ii) be used only to
secure (A) bid, tender, customs, surety, payment, performance or similar bonds
needed by a Borrower in the ordinary course of business, and (B), with the
consent of the Required Banks, for other general corporate purposes.
/secition/2.09 LETTER OF CREDIT REQUESTS. Whenever a Borrower wishes to
have a Letter of Credit issued, it shall submit to the Agent a Letter of Credit
Application prior to 11:00 a.m. (Miami time) at least two Business Days before
the requested date of issuance of a Letter of Credit. The Agent shall give each
Bank a written (which may be by telecopier) report of all Letters of Credit
outstanding hereunder on a weekly basis.
/section/2.10 DRAWINGS UNDER LETTERS OF CREDIT; PAYMENTS UNDER
ACCEPTANCES.
18
<PAGE>
(a) Upon receipt by the Agent of any draft upon, or other
notice of drawing under, a Letter of Credit, the Agent shall promptly give the
Borrowers written or telephone notice of the amount of such draft or drawing, of
the Letter of Credit against which it is drawn and of the date upon which the
Agent proposes to honor such draft. Upon presentation to the Agent of an
Acceptance for payment, the Agent shall promptly give the Borrowers written or
telephone notice of such presentation.
(b) The Borrowers shall pay to the Agent for the ratable
account of the Banks the amount of each drawing under a Letter of Credit on the
date of such drawing.
(c) The Borrowers shall pay to the Agent for the ratable
account of the Banks the face amount of each Acceptance on the maturity date
thereof.
(d) Any amount required to be paid by the Borrowers pursuant
to this /section/2.10 that is not paid when due shall bear interest, payable on
demand, from the date of such drawing until paid, at a rate per annum equal to
the Post-Default Rate.
(e) The Borrowers agree that they shall be jointly and
severally indebted to each Bank for an amount equal to the amount paid by the
Agent for the account of such Bank with respect to any Letter of Credit or
Acceptance together with interest on such amount.
/section/2.11 LETTER OF CREDIT AND ACCEPTANCE FEES AND COMMISSIONS AND
SERVICING FEES.
(a) TRADE LETTERS OF CREDIT.
(i) Upon the issuance of each Trade Letter of Credit
(and, if such Trade Letter of Credit's term extends for more than 90 days, every
90 days after its issuance), the Borrowers shall pay the Agent, for the ratable
account of each Bank, a fee equal to .1875% of such Bank's Proportionate Share
of the face amount of such Trade Letter of Credit (or, if more, such Bank's
Proportionate Share of the Agent's minimum commercial letter of credit issuance
commission then in effect).
(ii) Upon each drawing under a Trade Letter of
Credit, the Borrowers shall pay to the Agent, for the ratable account of each
Bank, a fee equal to .1875% of such Bank's Proportionate Share of such drawing
(or, if more, such Bank's Proportionate Share of the Agent's minimum commercial
letter of credit negotiation fee then in effect).
(iii) Upon the issuance of each Trade Letter of
Credit (and, if the Trade Letter of Credit's term extends for more than 90 days,
every 90 days after its issuance) and upon each drawing under a Trade Letter of
Credit, each Bank shall pay to the Agent, for the Agent's account and by way of
compensation for the Agent's services hereunder, a fee (a "Trade Letter of
Credit Servicing Fee") equal to such Bank's Proportionate Share of .0375% of the
face amount of such Trade Letter of Credit or of the amount of such drawing (as
the case may be). The Agent is
19
<PAGE>
irrevocably authorized to deduct each Trade Letter of Credit Servicing Fee owed
to it by a Bank from any amount distributable by the Agent to such Bank.
(b) STANDBY LETTERS OF CREDIT.
(i) When each Standby Letter of Credit is issued or
renewed, the Borrowers shall pay the Agent, for the ratable account of each
Bank, a fee equal to 1.50% per annum on such Bank's Proportionate Share of the
face amount of such Letter of Credit. Each such fee shall be based on a year of
360 days and computed for the actual number of days to elapse in the initial
term or renewal term (as the case may be) of the applicable Standby Letter of
Credit, and shall, for each Standby Letter of Credit, be payable in full in
advance on the date such Standby Letter of Credit is issued or renewed (as the
case may be) based on the face amount of such Standby Letter of Credit.
(ii) Upon each drawing under a Standby Letter of
Credit, the Borrowers shall pay to the Agent, for the ratable account of each
Bank, a fee equal to .1875% of such Bank's Proportionate Share of such drawing
(or, if more, such Bank's Proportionate Share of the Agent's minimum standby
letter of credit negotiation fee then in effect).
(iii) When each Standby Letter of Credit is issued
or renewed, each Bank shall pay to the Agent, for the Agent's account and by way
of compensation for its services hereunder, a fee (an "SBLC Issuance Servicing
Fee") equal to 0.25% per annum on the face amount of such Standby Letter of
Credit. Each such SBLC Issuance Servicing Fee shall be based on a year of 360
days and computed for the actual number of days to elapse in the initial term or
renewal term (as the case may be) of the applicable Standby Letter of Credit,
and shall for each Standby Letter of Credit be payable in full in advance on the
date such Standby Letter of Credit is issued or renewed (as the case be) based
on the face amount of such Standby Letter of Credit. In addition, upon each
drawing under a Standby Letter of Credit, each Bank shall pay to the Agent, for
the Agent's account and by way of compensation for its services hereunder, a fee
(an "SBLC Drawing Servicing Fee") equal to such Bank's Proportionate Share of
.0375% of the amount of such drawing. The Agent is irrevocably authorized to
deduct each SBLC Issuance Servicing Fee and each SBLC Drawing Servicing Fee owed
to it by a Bank from any amount distributable by the Agent to such Bank.
(c) ACCEPTANCES. (i) Upon the creation of each Acceptance, the
Borrowers shall pay the Agent, for the ratable account of each Bank, a
non-refundable commission thereon calculated on a daily basis on the face amount
of such Bank's Proportionate Share of such Acceptance for each day from and
including the date of the creation thereof to and excluding the stated maturity
date thereon at a per annum rate of 1.50%.
(ii) Upon the creation of each Acceptance, each Bank
shall pay the Agent, for the Agent's account and by way of compensation for its
services hereunder, a fee (an "Acceptance Servicing Fee") calculated on a daily
basis on such Bank's Proportionate Share of the face amount of such Acceptance
for each day from and including the date of creation thereof to and excluding
the stated maturity date thereon at a per annum rate of 0.25%. The Agent is
hereby authorized to deduct
20
<PAGE>
each Acceptance Servicing Fee owed to it by a Bank from any amount distributable
by the Agent to such Bank.
(iii) All commissions and fees due pursuant to this
/section/2.11(c) shall be based on a year of 360 days and computed for the
actual number of days from creation of the relevant Acceptance to the stated
maturity thereof.
(d) ADMININSTRATIVE FEES. In addition to the foregoing fees
payable to the Banks and the Agent, the Borrowers shall pay to the Agent, for
the Agent's account, such other administrative fees as the Agent customarily
charges in respect of Letter of Credit and Acceptance transactions (which fees
are subject to change from time to time by the Agent) together with all
telecommunication fees and other expenses incurred by the Agent in connection
with the issuance, amendment, honoring or payment of any Letter of Credit or
Acceptance.
(e) SOURCE OF FEES. Each fee owed by a Bank to the Agent
pursuant to this /section/2.11 shall be payable only from amounts distributable
by the Agent to such Bank.
/section/2.12 GENERAL PROVISIONS AS TO LETTERS OF CREDIT.
(a) LIMITATION ON AGENT'S DUTY TO ISSUE. The Agent shall have
no obligation to issue any Letter of Credit if the aggregate undrawn face amount
of Letters of Credit outstanding, after giving effect to the issuance of such
Letter of Credit, would exceed any limit imposed on the Agent or any Bank by, or
if the issuance of such Letter of Credit would otherwise cause a violation of,
Applicable Law or any regulatory directive, interpretation or request, to which
the Agent or any Bank is subject.
(b) BORROWERS' OBLIGATIONS ABSOLUTE. The obligation of the
Borrowers to reimburse the Agent for the account of the Banks for each drawing
under a Letter of Credit and each payment under an Acceptance shall be
irrevocable, shall not be subject to any qualification or exception whatsoever
and shall be binding in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or
right which either Borrower may have at any time against a beneficiary of any
Letter of Credit or a payee of any Acceptance or any transferee of any Letter of
Credit or Acceptance (or any person for whom any such transferee may be acting),
the Agent, the Banks or any other Person, whether in connection with this
Agreement, any Letter of Credit, any Acceptance, the transactions contemplated
herein or any unrelated transactions;
21
<PAGE>
(iii) any draft, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient (unless, in each case, manifestly so) in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of this Agreement or the other
Loan Documents;
(v) any failure of the Agent to provide notice to the
Borrowers of any drawing under any Letter of Credit or any presentation of any
Acceptance; or
(vi) the occurrence or continuance of any Default or
Event of Default.
(c) LIMITATION OF LIABILITY WITH RESPECT TO LETTER OF CREDIT.
As among the Borrowers the Guarantors, the Banks, and the Agent, the Borrowers
and the Guarantors assume all risks of the acts and omissions of, or misuse of
any Letter of Credit by the beneficiaries of such Letter of Credit. Without
limiting the foregoing, the Agent and the Banks shall not be responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any draft, demand, application or other documents
submitted by any party in connection with any Letter of Credit (but not
including the Letter of Credit itself), even if such document should in fact
prove to be in any and all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(ii) the validity, genuineness or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part which may prove to be invalid or ineffective for any reason;
(iii) failure of the beneficiary of a Letter of
Credit to comply fully with the conditions required in order to draw upon such
Letter of Credit to the extent that the documents presented in connection with a
drawing manifestly comply with the terms of the Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher;
(v) errors in interpretations of technical terms;
(vi) any loss or delay in the transmission or
otherwise of any document required to make a drawing under any Letter of Credit
or with respect to the proceeds thereof;
(vii) the misapplication by the beneficiary of a
Letter of Credit or of the proceeds of any drawing or Acceptance under such
Letter of Credit; or
(viii) any consequences arising from causes beyond
the control of Agent or the Banks, including, without limitation, any act or
omission, rightfully or wrongfully of any present or future governmental
authority.
22
<PAGE>
None of the above circumstances shall affect, impair or prevent the vesting of
any of the Agent's and the Banks' rights or powers under this /section/2.12.
(d) EXCULPATION. In furtherance and extension, and not in
limitation, of the specified provisions set forth above, any action taken or
omitted by the Agent under or in connection with any Letter of Credit, any
Acceptance or any related documents, if taken or omitted in good faith, shall
not expose the Agent or any Bank to any liability to either Borrower or either
Guarantor or relieve either Borrower or either Guarantor of any of its
obligations hereunder. The rights of the Agent set forth in this /section/2.12
are in addition to, and not exclusive of, the rights of the Agent set forth in
any Letter of Credit Application.
/section/2.13 LETTER OF CREDIT AND ACCEPTANCE PARTICIPATIONS.
(a) Simultaneously with the issuance by the Agent of any
Letter of Credit or the creation by the Agent of any Acceptance, each Bank shall
be deemed to have irrevocably and unconditionally purchased and received from
the Agent, without recourse or warranty, an undivided interest and participation
in such Letter of Credit or Acceptance, as the case may be, (including, without
limitation, all obligations of the Borrowers with respect thereto) and any
security therefor or Guaranty pertaining thereto, equal to such Bank's
Proportionate Share of such Letter of Credit or Acceptance.
(b) Each of the Banks hereby irrevocably and unconditionally
purchases and receives from the Agent, without recourse or warranty, an
undivided interest and participation in the acceptances described on Schedule
2.13(b) (the "Pre-Existing Acceptances"), in the standby letters of credit
described on Schedule 2.13(b) (the "Pre-Existing Standby Letters of Credit") and
in the commercial letters of credit described on Schedule 2.13(b) (the
"Pre-Existing Trade Letters of Credit"). On the Closing Date, Leumi shall pay to
each Bank, such Bank's Proportionate Share of an Acceptance Commission in
respect of each Pre-Existing Acceptance created by Leumi, calculated at a rate
of 1.25% per annum for each day from and including the Closing Date to and
excluding the stated maturity date of such Pre-Existing Acceptance. Each Bank
shall be entitled to share in the fees payable pursuant to /section/2.11(b), and
shall be liable to the Agent for the SBLC Issuance Servicing Fees, with respect
to the Pre-Existing Standby Letters of Credit to the extent (but only to the
extent) that such fees accrue on and after the Closing Date. On the Closing
Date, the Agent shall pay to each Bank, such Bank's Proportionate Share of a fee
equal to .150% of the aggregate undrawn face amount of the Pre-Existing Trade
Letters of Credit, which shall serve as such Bank's share of any issuance fee
with respect to the Pre-Existing Trade Letters of Credit. On and after the
Agreement Date, the Pre-Existing Acceptances shall constitute Acceptances
hereunder, including for purposes of /section/2.01, and the Pre-Existing Standby
Letters of Credit and the Pre-Existing Trade Letters of Credit shall constitute
Standby Letters of Credit hereunder and Trade Letters of Credit hereunder,
respectively, including for purposes of /section/2.01. In the event of any
conflict between the terms of this Agreement, on the one hand, and the terms of
any acceptance request with respect to the Pre-Existing Acceptances or any
letter of credit application or reimbursement agreement with respect to any of
23
<PAGE>
the Pre-Existing Standby Letters of Credit or any of the Pre-Existing Trade
Letters of Credit, on the other hand, the terms of this Agreement shall control.
(c) Each Bank hereby agrees that it shall pay to the Agent,
prior to 4:00 p.m. (Miami time) on the maturity date of each Acceptance or on
the date of each Letter of Credit drawing, as the case may be, such Bank's
Proportionate Share of such Letter of Credit drawing or Acceptance; PROVIDED,
that if the Borrowers should pay in full or in part any Acceptance on its
maturity date or any Letter of Credit drawing on the date thereof with its own
funds or the proceeds of a Loan, the obligation of each Bank to pay to the Agent
pursuant to this /section/2.13 with respect to such drawing or Acceptance shall
be reduced by an amount equal to such Bank's Proportionate Share of such payment
by the Borrowers that is received by the Agent. Amounts paid in excess of the
net amount so owed shall promptly be refunded by the Agent to such Bank.
(d) The obligation of each Bank to pay to the Agent its
Proportionate Share of each Acceptance payment or Letter of Credit drawing, or
of the amount thereof not repaid by the Borrowers as described above, shall be
irrevocable and unconditional, shall not be subject to any qualification or
exception whatsoever and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or other Loan Document;
(ii) the existence of any claim, set-off, defense or
other right which either Borrower or any Bank may have at any time against the
other, any transferee of any Acceptance (or any Person for whom any such
transferee may be acting), the Agent, any Bank or any other Person, whether in
connection with this Agreement, any Acceptance, the transactions contemplated
herein or any unrelated transactions;
(iii) any draft or any other document presented under
this Agreement proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of this Agreement (provided
that nothing herein shall be construed to allow the Agent to surrender
Collateral in violation of this Agreement without the consent of all the Banks);
or
(v) the occurrence or continuance of any Default or
Event of Default.
(e) If any Bank shall fail to pay the amount of its
participation in an Acceptance or Letter of Credit drawing on the date such
amount is due in accordance with this /section/2.13, the Agent shall be deemed
to have advanced funds in that amount on behalf of such Bank. Each such advance
shall be secured by such Bank's participation interest, and the Agent shall be
subrogated to such
24
<PAGE>
Bank's rights hereunder in respect thereof. Such advance may be repaid by
application by the Agent of any payment which such Bank is otherwise entitled to
receive under this Agreement. Any amount not paid by such Bank to the Agent
hereunder shall bear interest for each day from the day such payment was due
until such payment shall be paid in full at a rate per annum equal to the
Federal Funds Rate then in effect.
/section/2.14 MANNER AND ALLOCATION OF PAYMENTS.
(a) Unless otherwise provided herein, all payments and
deposits due by the Borrowers to the Banks or the Agent hereunder or under or
with respect to the Notes, Acceptances or Letters of Credit, shall be made not
later than 12:00 noon (Miami time) (or, in the case of payments by the Banks to
the Agent, 4:00 p.m. (Miami time)), on the due date thereof, in Dollars and in
funds immediately available to the Agent at the Agent's Office, for the account
of, (a) in the case of amounts due to the Agent, the Agent, and (b) in the case
of all other payments hereunder, the Banks' respective Lending Offices, without
any deduction whatsoever, including, but not limited to, any deduction for any
set-off, recoupment, counterclaim or Tax. Whenever any payment hereunder shall
be due on a day which is not a Business Day, the date of such payment shall be
extended to the next succeeding Business Day and any extension shall be included
in computing interest and fees, if any, in connection with such payment. All
payments received from the Borrowers shall be applied first against fees,
commissions and other charges (other than interest) then due, next against
interest then due and the remainder, if any, against outstanding principal.
(b) Each Borrower hereby irrevocably authorizes the Agent --
if and to the extent any payment is not made to the Agent when due hereunder or
under any other agreement relating to any Extension of Credit, and any
applicable grace period has expired -- to charge from time to time against a
demand credit balance account in such Borrower's name (which such Borrower
hereby agrees to maintain with the Agent) any amount so due even if doing so
creates an overdraft. Any overdraft so created shall (to the extent permitted by
applicable law) bear interest until paid in full at the Post-Default Rate and
shall be due and payable, together with any accrued interest, immediately after
being created.
/section/2.15 PAYMENT BY AGENT TO BANKS, ETC.
(a) Except as otherwise expressly stated in this Agreement,
each payment received by the Agent from the Borrowers shall (before any
distribution to any Bank) be allocated and applied by the Agent against any and
all Obligations of any types (and any interest hereon) which are then due or
past due hereunder to the Agent itself (in its capacity as Agent and not as a
Bank hereunder) and, by way of deduction, any and all obligations of the Banks
to the Agent (in such capacity) and shall then be distributed by the Agent by
4:00 p.m. (Miami time) on the day received in good funds by the Banks. The Agent
shall give notice of any payment to be distributed to the Banks on a particular
Business Day by 1:00 p.m. (Miami time) on such Business Day. All such
distributions shall be paid by the Agent to or to the credit of each Bank in
such manner as is reasonably requested in written instructions from such Bank.
25
<PAGE>
(b) If any payment by or recovery whatsoever against the
Borrowers (or either Borrower) hereunder or under any Note is made directly to
or recovered directly by any Bank (rather than made to or recovered by the
Agent), such Bank shall receive such payment or recovery in trust for all the
Banks and shall immediately (without receiving any demand therefor) pay the full
amount of such recovery or payment to the Agent to be allocated and distributed
by the Agent (and applied by the Banks) as provided in /section/2.15(a).
Notwithstanding any other provisions of this Agreement or of any Notes, the
Borrowers hereby expressly acknowledge and agree that: (i) the recoveries
against the Borrowers referred to in this /section/2.15(b) shall include all
recoveries by any means whatsoever against either of the Borrowers or any assets
of either of the Borrowers (including without limitation any recoveries by
setoff against bank deposits, by settlement of lawsuits or by enforcement of
judgments obtained by suit hereunder or under any Note); and (ii) for all
purposes under this Agreement or any Note, any payment to or recovery by any
Bank hereunder or under any Note shall effectively reduce the amounts (of
principal, interest and other Obligations) otherwise owing or payable to such
Bank hereunder (and/or under any Note) to the extent, and only to the extent,
that the amounts owing or payable to such Bank are or would be reduced after
such payment or recovery is remitted in full by such Bank to the Agent, as
provided above in this /section/2.15, and is allocated by the Agent and
distributed by it among the Banks as provided in /section/2.15. Notwithstanding
any other provisions of this Agreement or of any Notes, all of the parties to
this Agreement hereby expressly agree that any Bank receiving any payment from
or making any recovery against either of the Borrowers or either of the
Guarantors (or any asset of either of the Borrowers or either of the Guarantors)
hereunder or under any Note shall be deemed to purchase (or, if necessary, shall
in fact purchase) from any or all of the other Banks such participation, and
only such participation (if any), in the Notes and participations payable to or
held by such Banks as may be necessary, under Applicable Law, to give full
effect to clause (ii) of this /section/2.15(b).
(c) If the Agent shall be required by any court, trustee or
debtor-in-possession or other person to return any amount previously received by
it in respect of the Obligations, each Bank shall, upon receipt of notice from
the Agent, immediately pay over to the Agent such Bank's Proportionate Share of
the amount to be returned.
/section/2.16 WITHHOLDING TAXES. All payments provided for in this
Agreement, any Note or any other Loan Document shall be made free and clear of
any deductions for any present or future Taxes. If any Taxes are imposed or
required to be withheld from any payment, the Borrowers shall (a) increase the
amount of such payment so that each Bank will receive a net amount (after
deduction of all Taxes) equal to the amount due to it hereunder and (b) pay all
Taxes to the appropriate taxing authority for the account of the Banks and, as
promptly as possible thereafter, send the Agent an original receipt showing
payment thereof, together with such additional documentary evidence as the Agent
may from time to time require. The Borrowers shall jointly and severally
indemnify each Bank from and against any and all Taxes (irrespective of when
imposed) and any related interest and penalties that may become payable by Bank
as a consequence of the Borrowers' failure to perform any of its obligations
under the preceding sentence.
/section/2.17 WEEKLY RECONCILIATION. Notwithstanding the provisions of
/section/2.15(a), until further notice from the Agent to the Banks, all payments
of interest, fees or commissions received by the
26
<PAGE>
Agent from the Borrowers during a particular Reporting Period shall be
distributed to the Banks (after deduction of all Servicing Fees and other
amounts then owing to the Agent) on the Business Day following the last day of
such Reporting Period. Each such payment by the Agent to a Bank shall be made by
electronically transferring the amount to be paid to such Bank's Lending Office.
/section/2.18 CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Banks under this Agreement, for the mutual
benefit, directly and indirectly, of each of the Borrowers and in consideration
of the undertakings of each other Borrower to accept joint and several liability
for the Obligations.
(b) Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrower with respect to the payment and
performance of all the Obligations, it being the intention of the parties hereto
that all of the Obligations shall be joint and several Obligations of both of
the Borrowers without preferences or distinction among them.
(c) If and to the extent that either Borrower shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrower will make such payment with respect to, or perform, such
Obligation.
(d) The Obligations of each of the Borrowers hereunder and under the
other Loan Documents constitute full recourse Obligations of such Borrower
enforceable against it to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstances whatsoever.
(e) Except as otherwise expressly provided in this Agreement, each of
the Borrowers hereby waives notice of acceptance of its joint and several
liability, notice of any Extensions of Credit made under this Agreement, notice
of any action at any time taken or omitted by the Agent or the Banks under or in
respect of any of the Obligations, and, generally, to the extent permitted by
Applicable Law, all demands, notices and other formalities of every kind in
connection with this Agreement. Each of the Borrowers hereby assents to, and
waives notice of, any extension or postponement of the time for the payment of
any of the Obligations, the acceptance of any payment of any of the Obligations,
the acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by the Banks at any time or times in respect of any
default by either of the Borrowers in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by the Banks in respect of any of the Obligations, and
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of either of the Borrowers.
Without limiting the generality of the foregoing, each of the Borrowers assents
to any other action or delay in acting or failure to act on the part of the
Banks with
27
<PAGE>
respect to the failure by any of the Borrowers to comply with any of its
respective Obligations, including, without limitation, any failure strictly or
diligently to assert any right or to pursue any remedy or to comply fully with
any Applicable Law which might, but for the provisions of this /section/2.18,
afford grounds for terminating, discharging or relieving either Borrower, in
whole or in part, from any of its Obligations, it being the intent of each
Borrower that so long as any of its Obligations remain unsatisfied, the
Obligations of such Borrower shall not be discharged except by performance and
then only to the extent of such performance. The Obligations of each of the
Borrowers shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, re-construction or similar proceeding
with respect to either of the Borrowers or the Banks. The joint and several
liability of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of either
of the Borrowers or the Banks.
(f) The provisions of this /section/2.18 are made for the benefit of
the Banks and their successors and assigns, and may be enforced in good faith by
them (or by the Agent on their behalf) from time to time against each Borrower
as often as the occasion therefor may arise and without requirement on the part
of the Banks first to marshall any of their claims or to exercise any of their
rights against the other Borrower or to exhaust any remedies available to them
against the other Borrower or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this /section/2.18 shall remain in effect until all of
the Obligations shall have been paid in full or otherwise fully satisfied and
the commitments terminated. If at any time, any payment, or any part thereof,
made in respect of any of the Obligations, is rescinded or must otherwise be
restored or returned by the Banks upon insolvency, bankruptcy or reorganization
of either of the Borrowers, or otherwise, the provisions of this /section/2.18
will forthwith be reinstated in effect, as though such payment had not been
made.
/section/3 CONDITIONS TO EXTENSIONS OF CREDIT
/section/3.01 CONDITIONS TO INITIAL EXTENSION OF CREDIT. The obligation
of each Bank and the Agent to make the initial Extension of Credit is subject to
the receipt by the Agent of each of the following in form and substance
satisfactory to the Agent:
(a) a certificate of the Secretary or an Assistant Secretary
of each Borrower confirming the identity of the officers of such Borrower
authorized to execute and deliver this Agreement, the Notes and the other
documents required or contemplated hereunder to be executed or delivered by such
Borrower, to which shall be attached copies of the resolutions and bylaws
referred to in such certificate;
(b) a certificate of the Secretary or an Assistant Secretary
of Windmere confirming the identity of the officers of Windmere authorized to
execute and deliver the Windmere Guaranty and the other documents required or
contemplated hereunder to be executed or delivered by Windmere, to which shall
be attached copies of the resolutions and bylaws referred to in such
certificate;
28
<PAGE>
(c) a copy of the articles of incorporation of each Borrower
and Windmere, certified (if possible) by the Secretary of State or other
appropriate official of such Borrower's or Windmere's jurisdiction of
incorporation;
(d) a good standing certificate with respect to New M-Tech
Corporation and Windmere, issued as of a recent date by the Secretary of State
or other appropriate official of the jurisdiction of such Borrower's or
Windmere's incorporation;
(e) a favorable written opinion (addressed to the Agent and
the Banks) of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami,
Florida, counsel for the Borrowers and the Guarantors, dated the Agreement Date
or the Closing Date and covering such matters as the Agent or any Bank may
request;
(f) a favorable written opinion (addressed to the Agent and
the Banks) of Coudert Brothers, Hong Kong, counsel for Agent and the Banks,
dated the Agreement Date or the Closing Date and covering such matters as the
Agent or any Bank may request (including perfection of the Security Interests in
accounts receivable owed to NewTech Hong Kong);
(g) a copy of each Governmental Approval;
(h) The Notes, each duly executed by the Borrowers and payable
to the order of a Bank in a principal amount equal to such Bank's Proportionate
Share of $10,000,000;
(i) a duly executed counterpart of this Agreement;
(j) a duly executed counterpart of the Security Agreement and
a duly executed counterpart of the Debenture;
(k) a duly executed counterpart of the Newman Guaranty and a
duly executed counterpart of the Windmere Guaranty;
(l) a duly executed counterpart of whatever agreement with
Merrill Lynch Pierce Fenner & Smith the Agent requests to establish the Agent's
control over the account in which the Eligible Securities are contained and
confirmation that there exist Eligible Securities having an Eligible Securities
Value of at least $1,200,000;
(m) the agreements of Kmart and Windmere required by the
Security Agreement;
(n) an appointment by each of NewTech Hong Kong and Joel
Newman of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., as its
agent to receive service of process on its behalf in any State or Federal court
located in the State of Florida and an acceptance by Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, P.A. of each such appointment;
29
<PAGE>
(o) evidence of the issuance of all insurance policies
required by the terms of the Loan Documents and of endorsements thereto naming
the Agent as lender loss payee;
(p) duly executed assignments in favor of the Agent as agent
for the Banks of the proceeds of the AAAA World SBLC and the proceeds of the
Kmart SBLC, both duly acknowledged by the issuer of the applicable SBLC;
(q) the originals of the Windmere Notes, each duly endorsed to
the Agent;
(r) executed copies of UCC-1 financing statements (or the
equivalent) to be filed in each office necessary or, in the Agent's judgment,
desirable to perfect the Security Interests and evidence of the payment of all
taxes and fees required to be paid in connection with the filing thereof;
(s) evidence that whatever filings or other actions required
to perfect the Security Interests under the law of Hong Kong have been made or
taken;
(t) certified UCC-11, lien, judgment and tax search reports
for each jurisdiction in which either Borrower is located or has inventory,
showing no Liens or financing statements of record against either Borrower;
(u) a Borrowing Base Certificate as of a date not more than
two Business Days prior to the Closing Date;
(v) whatever certificates and affidavits the Agent requests to
establish that no Florida documentary stamp tax or intangible tax is or will be
owing in connection with the Loan Documents and a Tax Indemnity Agreement
executed by the Borrowers in favor of the Bank covering any liability for any
such Tax;
(w) such other certificates, documents, instruments and
opinions as the Agent shall reasonably request.
/section/3.02 CONDITIONS TO EACH EXTENSION OF CREDIT. The obligation of
each Bank and the Agent to make each Extension of Credit, including the initial
Extension of Credit, is subject to the fulfillment of each of the following
conditions to the reasonable satisfaction of the Banks:
(a) each of the Representations and Warranties shall, in the
determination of the Banks in their reasonable discretion, be true and correct
at and as of the time of such Extension of Credit, with and without giving
effect to such Extension of Credit and to the application of the proceeds
thereof, except those expressly stated to be made as of a particular date which
shall be true and correct as of such date;
(b) no Default shall have occurred and be continuing at the
time of such Extension of Credit, with or without giving effect to such
Extension of Credit and to the application of the proceeds thereof;
30
<PAGE>
(c) receipt by the Agent within a reasonable time after
request by the Agent of such materials as may have been requested pursuant to
/section/6.01(c);
(d) such Extension of Credit will not contravene any
Applicable Law applicable to any of the Banks or the Agent;
(e) all legal matters incident to such Extension of Credit and
the other transactions contemplated by this Agreement shall be reasonably
satisfactory to counsel for the Agent;
(f) no Federal tax liens or other Liens (besides the Security
Interests) shall have been filed against the property of either Borrower;
(g) no limitation set forth in /section/2.01 will be exceeded
after such Extension of Credit is made; and
(h) the Agent shall have received such other approvals,
consents and documents as it may reasonably request.
Each Notice of Borrowing under /section/2.03 and Letter of Credit
Application under /section/2.09 shall constitute a Representation and Warranty
by the Borrowers, made as of the time of the making of such Extension of Credit,
that the conditions specified in clauses (a) and (b) have been fulfilled as of
such time, unless a notice to the contrary specifically captioned "Disclosure
Statement" is received by the Agent from the Borrowers prior to 5:00 p.m. (Miami
time), on the Business Day preceding the date of the requested Extension of
Credit. To the extent that the Banks agree to make any Extension of Credit after
receipt of a Disclosure Statement in accordance with the preceding sentence, the
Representations and Warranties pursuant to the preceding sentence will be deemed
made as modified by the contents of such statement and repeated at the time of
the making of such Extension of Credit as so modified. Any such modification
shall be effective only for the occasion on which the Banks elect to make such
Extension of Credit, and unless expressly agreed by the Banks in writing to the
contrary, shall not be deemed a waiver or modification of any condition to any
future Extension of Credit.
/section/4 CERTAIN REPRESENTATIONS AND WARRANTIES OF BORROWERS
In order to induce the Banks and the Agent to enter into this Agreement
and to make Extensions of Credit, each Borrower represents and warrants to the
Agent and the Banks as follows:
/section/4.01 ORGANIZATION: POWER; QUALIFICATION: The Borrowers are
corporations duly organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, have the corporate
power and authority to own their respective properties and to carry on their
respective businesses as now being and proposed to be conducted hereafter and
are duly qualified and are in good standing, and are authorized to do business,
in all jurisdictions in which the character of their respective properties or
the nature of their respective businesses requires such qualification or
31
<PAGE>
authorization, except for qualifications and authorizations the lack of which,
singly or in the aggregate, has not had and is not reasonably likely to have a
Materially Adverse Effect upon the Borrowers taken as a whole. New M-Tech owns
100% of the outstanding Capital Securities of NewTech Hong Kong and has the
unrestricted right to vote, and (subject to limitations imposed by Applicable
Law) to receive dividends and distributions on, all of the issued and
outstanding shares of the Capital Securities of New Tech Hong Kong, and all such
shares of Capital Securities have been duly authorized and issued and are fully
paid and nonassessable. The Guarantors each own 50% of the Capital Securities of
New M-Tech. NewTech International Corporation, whose stock is wholly owned by
Joel Newman, is inactive and has no assets. Other than each other, New Tech
International Corporation and the Guarantors, neither Borrower has any
Affiliates.
/section/4.02 AUTHORIZATION AND COMPLIANCE OF AGREEMENT, NOTES AND
EXTENSIONS OF CREDIT. Such Borrower has the corporate power, and has taken all
necessary corporate (including stockholder, if necessary) action to authorize it
to execute, deliver and perform this Agreement and each of the other Loan
Documents to which it is a party in accordance with their respective terms, to
borrow hereunder, to request the issuance of Letters of Credit hereunder, and to
incur its other obligations under this Agreement and each of the other Loan
Documents to which it is a party. Each of this Agreement and the other Loan
Documents delivered on the Agreement Date has been duly executed and delivered
by such Borrower and is, and each Letter of Credit Application when executed and
delivered by such Borrower will be, a legal, valid and binding obligation of
such Borrower enforceable against such Borrower in accordance with its terms.
The execution, delivery and performance of this Agreement and the other Loan
Documents by such Borrower in accordance with their respective terms, and the
incurring of obligations thereunder by such Borrower, do not and will not (a)
require (i) any Governmental Approval or (ii) any consent or approval of the
stockholders of such Borrower that has not been obtained, (b) violate or
conflict with, result in a breach of, or constitute a default under, (i) any
Contract to which such Borrower or any Subsidiary is a party or by which any of
them or any of their respective properties may be bound, (ii) any Applicable Law
or (iii) such Borrower's charter or bylaws, or (c) result in or require the
creation of any Lien upon any assets of such Borrower or any Subsidiary.
/section/4.3 LITIGATION. Except as set forth on Schedule 4.03, there
are not, in any court or before any arbitrator of any kind or before or by any
governmental or non-governmental body, any actions, suits or proceedings,
pending or probable (nor, to the knowledge of such Borrower, is there any basis
therefor) against or in any other way relating to or affecting (a) such
Borrower, any Subsidiary or the business or any property of such Borrower or any
Subsidiary, except actions, suits or proceedings that, if adversely determined,
would not, (i) singly result in liability more than $250,000 above the amount of
insurance coverage in effect with respect thereto or (ii) in the aggregate for
the Borrowers result in liability more than $250,000 above the amount of
insurance coverage in effect with respect thereto or (iii) singly or in the
aggregate otherwise have a Materially Adverse Effect on (a) the Borrowers taken
as a whole or (b) the validity or enforceability of this Agreement or any of the
other Loan Documents.
/section/4.04 BURDENSOME PROVISIONS. Such Borrower is not a party to or
bound by any Contract or Applicable Law that could have a Materially Adverse
Effect on (i) such Borrower or such
32
<PAGE>
Borrower and its Subsidiaries, taken as a whole, or (ii) this Agreement or any
of the other Loan Documents.
/section/4.05 NO ADVERSE CHANGE OR EVENT. Since March 31, 1997, no
change in the business, assets, liabilities, financial condition, results of
operations or business prospects of such Borrower or any Subsidiary has
occurred, and no event has occurred or failed to occur, which has had or might
have, either alone or in conjunction with all other such changes, events and
failures, a Materially Adverse Effect on (a) such Borrower or such Borrower and
its Subsidiaries, taken as a whole, or (b) this Agreement or any other Loan
Document. (In determining whether an adverse change has occurred, it is
understood that such an adverse change may have occurred, and such an event may
have occurred or failed to occur, at any particular time notwithstanding the
fact that at such time no Default shall have occurred and be continuing.)
/section/4.06 NO ADVERSE FACT. No fact or circumstance is known to such
Borrower as of the Agreement Date which, either alone or in conjunction with all
other such facts and circumstances, has had or might in the future have (so far
as such Borrower can foresee) a Materially Adverse Effect upon such Borrower or
on this Agreement or any other Loan Documents, that has not been set forth or
referred to in the financial statements referred to in /section/6.02(a) or in a
writing specifically captioned "Disclosure Statement" and delivered to the Agent
prior to the Agreement Date. If a fact or circumstance disclosed in such
financial statements or Disclosure Statement, or if an action, suit or
proceeding disclosed in Schedule 4.03, should in the future have a Materially
Adverse Effect upon such Borrower or upon this Agreement or any other Loan
Documents, such Materially Adverse Effect shall be a change or event subject to
/section/4.05 notwithstanding such disclosure.
/section/4.07 TITLE TO PROPERTIES. Such Borrower has title to its
respective properties reflected on the financial statements referred to in
/section/6.02(a) subject to no Liens or adverse claims except as disclosed
thereon.
/section/4.08 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
4.08, such Borrower has not received notice to the effect that its respective
operations are (a) not in material compliance with any of the requirements of
any applicable federal, state or local environmental, health and safety statute
or regulation or (b) the subject of any federal, state or local investigation
evaluating whether any remedial action is needed to respond to a release of any
toxic or hazardous waste or substance into the environment or the workplace or
the use of any such substance in any of its products or manufacturing
operations, which noncompliance or remedial action could have a Materially
Adverse Effect on such Borrower or such Borrower and its Subsidiaries, taken as
a whole.
/section/4.09 DEBT. All agreements relating to Debt of such Borrower,
or commitments or agreements to permit such Borrower to incur Debt (other than
any Loan Document), are listed on Schedule 4.09.
/section/4.10 PATENTS, TRADEMARKS, ETC. Such Borrower owns, or is
licensed or otherwise has the lawful right to use, all Marks, technology,
know-how and processes ("Intellectual Property") used
33
<PAGE>
in or necessary for the conduct of its business as currently, or contemplated to
be, conducted. The use of such Intellectual Property by such Borrower does not
infringe on the rights of any Person.
/section/4.11 SOLVENCY. Such Borrower hereby (i) acknowledges receipt
of fair consideration and reasonably equivalent value for the incurrence of its
obligations hereunder, in each case for the benefit of the Agent and the Banks,
(ii) represents and warrants that, after giving effect to the incurrence of such
obligations and the acquisition of the rights obtained hereunder, the present
fair saleable value of its assets exceeds its liabilities and that it retains
sufficient capital to meet the reasonably anticipated needs and risks of its
ongoing business, and (iii) represents and warrants that, after giving effect to
the incurrence of such obligations and the acquisition of such rights, it has
not incurred, nor is it obligated for, debts beyond its ability to pay such
debts as they mature, and that the present fair saleable value of its assets is
greater than that needed to pay its probable existing debts as they become due.
/section/4.12 SECURITY INTERESTS. The Security Interests are all valid,
perfected, first-priority security interests securing all the Obligations.
/section/4.13 CERTAIN CONTRACTS. The Kmart Contract, the WCI License
Agreement, the AAAA World SBLC, and the Kmart SBLC are in full force and effect
and no default has occurred under any of them on the part of either Borrower
nor, to such Borrower's knowledge, by any other party thereto. Such Borrower is
in full compliance with all agreements and conditions of the Kmart Contract and
the WCI License Agreement. To such Borrower's knowledge, no default has occurred
under either Windmere Note. No prepayment of principal has been made under
either Windmere Note.
/section/5 COVENANTS
So long as (i) any Acceptance Obligation or Letter of Credit Obligation
is outstanding (ii) any indebtedness or obligation is outstanding under this
Agreement or any Loan Document or (iii) the Banks or the Agent shall have any
obligation to make any Extension of Credit,
A. AFFIRMATIVE COVENANTS. Each Borrower shall:
/section/5.01 PRESERVATION OF EXISTENCE AND PROPERTIES, SCOPE OF
BUSINESS, COMPLIANCE WITH LAW, PAYMENT OF TAXES AND CLAIMS. (a) Preserve and
maintain its corporate existence and all of its other franchises, licenses,
rights and privileges, (b) preserve, protect and obtain all Marks, and preserve
and maintain in good repair, working order and condition all other properties,
required for the conduct of its business, (c) engage only in the manufacture,
importation, distribution (within the same distribution network) and warehousing
of consumer electronics products and appliances and other consumer products, (d)
comply with all Applicable Laws, (e) pay or discharge when due (or as permitted
by the Security Agreement) all Taxes owing by it or imposed upon its property
(for the purposes of this clause, such Taxes shall be deemed to be due on the
date after which they become delinquent), and all liabilities which might become
a Lien on any of its properties and (f) take all
34
<PAGE>
action and obtain all consents and Governmental Approvals required so that its
obligations hereunder will at all times be valid and binding and enforceable in
accordance with their respective terms.
/section/5.02 INSURANCE. Maintain insurance with responsible insurance
companies against such risks and in such amounts as iS customarily maintained by
similar businesses, as may be required by the Security Documents or by
Applicable Law, or as may be reasonably requested by the Agent.
/section/5.03 USE OF PROCEEDS. Use any Extension of Credit only for the
manufacture, purchase, importation or shipment in or froM abroad of inventory,
for refinancing indebtedness of the Borrowers to Leumi existing as of the
Closing Date and for paying Reimbursement Obligations. None of the proceeds of
any of the Extensions of Credit shall be used to purchase or carry, or to reduce
or retire or refinance any credit incurred to purchase or carry, any margin
stock (within the meaning of Regulations U and X) or to extend credit to others
for the purpose of purchasing or carrying any margin stock. If requested by the
Agent, the Borrowers shall furnish to the Agent statements in conformity with
the requirements of Federal Reserve Form U-1 referred to in Regulation U.
B. NEGATIVE COMMENTS Each Borrower shall not, directly or indirectly:
/section/5.04 GUARANTIES. Become or remain liable with respect to any
guaranty of any liability of any other Person excepT pursuant to this Agreement.
/section/5.05 LIENS. Create, assume or incur, or permit or suffer to
exist or to be created, assumed or incurred, any LieN upon any of its properties
or assets of any character, whether now owned or hereafter acquired, or upon any
income or profits therefrom, except for the security interests created by the
Security Documents.
/section/5.06 MERGER AND CONSOLIDATION. Merge into or consolidate with
any Person, PROVIDED that, with the approval of the Required Banks (whicH will
not be unreasonably withheld) such Borrower may merge into Windmere or a
Subsidiary of Windmere provided that, in conjunction therewith, the Loan
Documents are modified as reasonably requested by the Required Banks to take
account of the merger, there are taken whatever steps the Required Banks
consider necessary or advisable to continue perfection of the Security Interests
and otherwise protect the value thereof, and, if the merger is into a Subsidiary
of Windmere and the Banks all agree to release the Newman Guaranty, the
limitation of liability contained in the Windmere Guaranty is doubled.
/section/5.07 TRANSACTIONS WITH AFFILIATES. Effect any transaction
with any Affiliate (except for transactions among the Borrowers involvinG
inventory at not less than cost) on a basis less favorable to such Borrower than
would at the time be obtainable for a comparable transaction in arms-length
dealing with an unrelated third party.
/section/5.08 TAXES OF OTHER PERSONS. (a) File a consolidated tax
return with any other Person other than the other Borrower, or (b) except aS
required by Applicable Law pay any Taxes owing by any Person other than the
Borrowers.
35
<PAGE>
/section/5.09 LIMITATION ON RESTRICTIVE COVENANTS. Enter into any
Contract, or otherwise create or cause or permit to exist or become effective
anY consensual restriction, limiting the ability (whether by covenant, event of
default or otherwise) of any of its Subsidiaries to (a) pay dividends or make
any other distributions on shares of its capital stock held by such Borrower or
any of its Subsidiaries, (b) pay any obligation owed to such Borrower or any of
its Subsidiaries, (c) make any loans or advances to or investments in such
Borrower or in any of its Subsidiaries, (d) transfer any of its property or
assets to such Borrower or any of its Subsidiaries, or (e) create any Lien upon
its property or assets whether now owned or hereafter acquired or upon any
income or profits therefrom.
/section/5.10 CHANGE OF CONTROL OR MANAGEMENT. Permit any Change of
Control or Change of Management.
/section/5.11 DEBT. Create, incur, assume or suffer to exist any Debt,
other than:
(a) Debt arising under this Agreement or the other Loan
Documents,
(b) Capital leases in an aggregate amount not exceeding
$250,000 for both of the Borrowers together,
(c) Trade debt incurred in the ordinary course of its
business as conducted as of the Agreement Date, and
(d) Debt incurred to purchase equipment in an aggregate
amount not exceeding $250,000 for both of the
Borrowers together.
/section/5.12 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Without the
prior written consent of the Required Banks, permit Consolidated Tangible Net
Worth to bE less than $6,500,000 at any time before December 31, 1997 or
$14,000,000 at any time on or after December 31, 1997.
/section/5.13 ENVIRONMENTAL MATTERS. (a) Fail to be in material
compliance with all requirements of applicable federal, state or locaL
environmental, health and safety statutes and regulations or (b) be the subject
of any federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment or the workplace or the use of any such substance
in any of its products or manufacturing operations, which noncompliance or
remedial action could have a Materially Adverse Effect on such Borrower and its
Subsidiaries, taken as a whole.
/section/5.14 LIMITATION ON INVESTMENTS. Without the prior written
consent of the Required Banks, make any advances, loans or other extensionS of
credit to, or equity or other investments in, any Person or Persons that exceed
the aggregate amount of $500,000.
/section/5.15 REMITTANCE OF OVERSEAS RECEIPTS. Promptly transfer to an
account of such Borrower maintained with a commercial bank in the United StateS
all amounts collected by it outside the United
36
<PAGE>
States on accounts receivable other than, in the case of NewTech Hong Kong, an
amount (not to exceed $200,000 at any time) required from time to time to
operate its Hong Kong office.
/section/ 5.16 FICTITIOUS NAMES. Issue invoices for its accounts and
otherwise do business in or under any fictitious name.
/section/6 INFORMATION
/section/6.01 FINANCIAL STATEMENTS AND INFORMATION TO BE FURNISHED. So
long as (i) any Loan, Acceptance Obligation or Letter of Credit Obligation is
outstanding, (ii) anY other indebtedness or obligation is outstanding under this
Agreement or any of the other Loan Documents or (iii) the Banks or the Agent
shall have any obligation to make an Extension of Credit, the Borrowers shall
furnish to each Bank:
(a) MONTHLY FINANCIAL STATEMENTS; OFFICER'S CERTIFICATE. As
soon as available and in any event within 30 days after the end of each month in
each fiscal year of the Borrowers:
(i) consolidated balance sheets of the Borrowers as
at the end of such month and an individual statement of income and retained
earnings of each Borrower for such month and the elapsed portion of the year
ended with the last day of such month, setting forth in each case in comparative
form the figures for the corresponding period of the previous fiscal year;
(ii) a certificate of an authorized officer of the
Borrower in the form of Exhibit D-1.
(b) YEAR-END STATEMENT; ACCOUNTANTS' AND OFFICER'S
CERTIFICATES. As soon as available and in any event within 90 days after the end
of each fiscal year of the Borrowers:
(i) consolidated and consolidating balance sheets of
the Borrowers and the as at the end of such fiscal year and related consolidated
and consolidating statements of income, retained earnings and cash flows of the
Borrowers for such fiscal year, setting forth in comparative form the figures as
at the end of and for the previous fiscal year;
(ii) a report of Ernst & Young, or other independent
certified public accountants of recognized standing satisfactory to the Agent,
on such of the consolidated financial statements referred to in clause (i) as
are consolidated financial statements, which report shall be unqualified as to
scope of audit and shall state that, based upon an audit conducted in accordance
with generally accepted auditing standards, such consolidated financial
statements present fairly, in all material respects, the consolidated financial
condition of the Borrowers as at the end of such fiscal year, and the
consolidated results of operations and cash flows of the Borrowers for such
fiscal year in accordance with Generally Accepted Accounting Principles
consistently applied since the date of the financial statements referred to in
/section/6.02(a);
37
<PAGE>
(iii) a certificate of such accountants addressed and
in form and substance satisfactory to the Agent (A) confirming that (1) the
Borrowers are authorized to deliver the report referred to in clause (ii) to the
Banks pursuant to this Agreement and (2) it is their understanding that the
Banks are relying on such report and such certificate, and (B) stating they have
caused this Agreement and the other Loan Documents to be reviewed and that, in
making the examination necessary for their report on such consolidated financial
statements, nothing came to their attention that caused them to believe that, as
of the date of such financial statements, any Default exists or, if such is not
the case, specifying such Default and its nature, when it occurred and whether
it is continuing; and
(iv) a certificate of the president or chief
financial officer of the Borrowers in the form of Exhibit D-2.
(c) ADDITIONAL MATERIALS.
(i) Promptly upon receipt thereof, copies of any
management letters submitted to either Borrower, or the Board of Directors of
either Borrower, by its independent certified public accountants;
(ii) Promptly upon the sending thereof, copies of all
notices, reports and other communications from either Borrower to any of its
shareholders or securities holders;
(iii) Promptly upon the filing thereof, copies of all
registration statements and all annual, quarterly, monthly and other reports
which either Borrower may file with the Securities and Exchange Commission;
(iv) Promptly upon either Borrower's becoming aware
thereof, notice of each federal statutory Lien, tax or other state or local
government Lien or other Lien (other than the Security Interests) filed against
the property of either Borrower;
(V) Within 10 Business Days after the end of every
month, a schedule of each Borrower's inventory certified by an authorized
officer of such Borrower and indicating, with respect to any such inventory, the
location thereof (whether in a warehouse specified in the schedule, or in
transit);
(vi) Within 10 Business Days after the end of every
month, a report of each Borrower's receivable agings certified by an authorized
officer of such Borrower;
(vii) On the 10th day of each month (or, if the Agent
or the Required Banks so request, on a more frequent basis) a Borrowing Base
Certificate;
(viii) With the financial statements referred to in
/section/6.01(b), projections for eacH Borrower's balance sheet and profit and
loss statement for the next fiscal year, with monthly details;
38
<PAGE>
(ix) On the dates indicated in the Guaranties,
whatever financial statements and information the Guarantors are required to
furnish to the Agent or the Banks;
(x) From time to time and within a reasonable time
after request of the Agent or any Bank, such data, certificates, reports,
statements, opinions of counsel, documents or further information regarding this
Agreement, any Extension of Credit or any Loan Document or any transaction
contemplated thereby, or the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrowers or the Guarantors,
as the Agent or the Required Banks may reasonably request, in each case in form
and substance and certified in a manner reasonably satisfactory to the Required
Banks.
(d) NOTICE OF DEFAULTS, LITIGATION AND OTHER MATTERS. Prompt
notice of: (i) any Default; (ii) any change or event referred to in /section/
4.05; (iii) anY event or condition referred to in clauses (i) through and
including (vii) of /section/7.01(h), whether or not such evenT or condition
shall constitute an Event of Default; (iv) the commencement of any action, suit
or proceeding or investigation in any court or before any arbitrator of any kind
or by or before any governmental or non-governmental body against or in any
other way relating adversely to or affecting (A) either Borrower, either
Guarantor or any of their respective businesses or properties, that, if
adversely determined, (1) singly would result in liability more than $250,000
or, in the case of Windmere or any of its Subsidiaries, $1,000,000, not covered
by insurance; or (2) in the aggregate for the Borrowers and the Guarantors and
their respective Subsidiaries, taken as a whole, would result in liability more
than $500,000 (or $1,500,000 not covered by insurance if liability of Windmere
is involved) or (3) otherwise might, singly or in the aggregate, have a
Materially Adverse Effect on either Borrower, or (B) this Agreement or the other
Loan Documents or any transaction contemplated hereby or thereby; (v) any
amendment of the certificate of incorporation or bylaws of either Borrower or
Windmere; (vi) any default by New M-Tech or the other party thereto under the
Kmart Contract or the WCI License Agreement; (vii) any default by Windmere under
either Windmere Note; and (viii) any significant development in the lawsuits
described in Schedule 4.03.
/section/6.02 ACCURACY OF FINANCIAL STATEMENTS AND INFORMATION.
(a) HISTORICAL FINANCIAL STATEMENTS. Each Borrower hereby
represents and warrants to the Banks and the Agent: (i) that the financial
statements listed on /section/6.02, are complete and correct and present fairly,
in accordance with GenerallY Accepted Accounting Principles consistently applied
throughout the periods involved, the consolidated financial position of the
Borrowers as at their respective dates and the consolidated results of
operations, retained earnings and, as applicable, the changes in financial
position or cash flows of the Borrowers for the respective periods to which such
statements relate, and (ii) that, except as disclosed or reflected in such
financial statements or in Schedule 4.03, as at March 31, 1997, neither Borrower
has any liabilities, contingent or otherwise, nor any unrealized or anticipated
losses, that, singly or in the aggregate, have had or might have a Materially
Adverse Effect on either Borrower.
(b) FUTURE FINANCIAL STATEMENTS. All financial statements
delivered pursuant to /section/6.01(a) or (b), shall be complete and correct and
present fairly, in accordance with Generally
39
<PAGE>
Accepted Accounting Principles consistently applied, the consolidated financial
position of the Borrowers, as at their respective dates and the consolidated
results of operations, retained earnings, and consolidated cash flows of the
Borrowers for the respective periods to which such statements relate, and the
furnishing of the same to the Banks shall constitute a representation and
warranty by each Borrower made on the date the same are furnished to the Banks
to that effect and to the further effect that, except as disclosed or reflected
in such financial statements, as at the respective dates thereof, neither
Borrower had any liability, contingent or otherwise, nor any unrealized or
anticipated loss, that, singly or in aggregate, has had or might have a
Materially Adverse Effect on either Borrower.
(c) HISTORICAL INFORMATION. Each Borrower hereby represent and
warrants to the Banks and the Agent that all Information furnished to the Banks
or the Agent by or on behalf of either Borrower prior to the Agreement Date in
connection with or pursuant to this Agreement and the relationship established
hereunder, at the time the same was so furnished, but in the case of Information
dated as of a prior date, as of such date, (i) in the case of any such prepared
in the ordinary course of business, was complete and correct in the light of the
purpose prepared, and, in the case of any such the preparation of which was
requested by the Agent, was complete and correct in all material respects to the
extent necessary to give the Banks true and accurate knowledge of the subject
matter thereof, (ii) did not contain any untrue statement of a material fact,
and (iii) did not omit to state a material fact necessary in order to make the
statements contained therein not misleading in the light of the circumstances
under which they were made.
(d) FUTURE INFORMATION. All Information furnished to the Banks
or the Agent by or on behalf of the Borrowers, on and after the Agreement Date
in connection with or pursuant to this Agreement or in connection with or
pursuant to any amendment or modification of, or waiver under, this Agreement,
shall, at the time the same is so furnished, but in the case of Information
dated as of a prior date, as of such date, (i) in the case of any such prepared
in the ordinary course of business, be complete and correct in the light of the
purpose prepared, and, in the case of any such required by the terms of this
Agreement or the preparation of which was requested by the Banks, or the Agent,
be complete and correct in all material respects to the extent necessary to give
the Banks true and accurate knowledge of the subject matter thereof, (ii) not
contain any untrue statement of a material fact, and (iii) not omit to state a
material fact necessary in order to make the statements contained therein not
misleading, and the furnishing of the same to the Banks or the Agent shall
constitute a representation and warranty by each Borrower made on the date the
same are furnished to the Banks or the Agent to the effect specified in clauses
(i), (ii) and (iii).
(e) CHANGE IN FISCAL YEAR. Neither Borrower shall change its
fiscal year without the consent of the Agent and the Required Banks.
/section/6.03 ADDITIONAL COVENANTS RELATING TO DISCLOSURE. From the
Agreement Date until the Termination Date, each Borrower shall:
(a) ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required
40
<PAGE>
or necessary to permit (i) the preparation of financial statements required to
be delivered pursuant to /section/6.01(a) and (b) and (ii) the determination of
such Borrower's compliancE with the terms of this Agreement and the other Loan
Documents.
(b) VISITS AND INSPECTIONS. Permit representatives (whether or
not officers or employees) of the Agent or any of the Banks, from time to time,
as often as may be reasonably requested, but only during normal business hours,
to (i) visit and inspect any properties of such Borrower, (ii) inspect and make
extracts from their books and records, including but not limited to management
letters prepared by such Borrower's independent accountants, (iii) discuss with
their principal officers and their independent accountants their respective
businesses, assets, liabilities, financial conditions, results of operations and
business prospects and (iv) inspect and audit the Collateral and the premises
upon which any of the Collateral is located, and verify the amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral. In the event that any of the Collateral is under the exclusive
control of any third party, such Borrower shall cause such parties to make such
inspection rights available to the Agent.
/section/7 DEFAULT
/section/7.01 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for sucH event and whether it shall be
voluntary or involuntary, or within or without the control of the Borrowers or
the Guarantors, or be effected by operation of law or pursuant to any judgment
or order of any court or any order, rule or regulation of any governmental or
quasi-governmental body:
(a) The Borrowers shall fail to pay any amount (i) in respect
of principal when and as due (whether at maturity, by reason of notice of
prepayment, acceleration or otherwise) in accordance with the terms of this
Agreement and the Notes; or (ii) in respect of interest, discount, commitment or
other fee, commission, or other charge due under this Agreement or any other
Loan Document when and as due (whether at maturity, by reason of notice of
prepayment or acceleration or otherwise) in accordance with the terms of this
Agreement or such other Loan Documents, and such failure shall continue for five
Business Days; or
(b) Any Representation and Warranty shall at any time prove to
have been incorrect or misleading in any material respect when made; or
(c) Either Borrower or either Guarantor shall default in the
performance or observance of:
(i) any term, covenant, condition or Agreement
contained in /section/ 5.01(a) (insofar as such Section requires the
preservation of the corporate existence of each Borrower), /section/5.02 through
/section/5.14, or /section/6.01(d) or /section/6.03(b); or
(ii) any term, covenant, condition or agreement
contained in this Agreement (other than a term, covenant, condition or agreement
a default in the performance or
41
<PAGE>
observance of which is elsewhere in this /section/7.01 specifically dealt with)
or any other Loan Document and such default shall continue unremedied for a
perioD of 20 days after it initially occurs; or
(d) Either Borrower shall fail to pay, in accordance with its
terms and when due and payable, the principal of or interest on any Debt having
an aggregate outstanding balance in excess of $100,000 (other than the
Obligations), or the maturity of any such Debt, in whole or in part, shall have
been accelerated, or any such Debt, in whole or in part, shall have been
required to be prepaid prior to the stated maturity thereof, in accordance with
the provisions of any Contract evidencing, providing for the creation of or
concerning such Debt or, if any event shall have occurred and be continuing
that, with the passage of time or the giving of notice or both, would permit any
holder or holders of such Debt, any trustee or agent acting on behalf of such
holder or holders or any other Person so to accelerate such maturity or require
any such prepayment; or
(e) A default shall occur and be continuing under any Contract
(other than a Contract relating to Debt to which clause (d) of this
/section/7.01 is applicable) binding upon either Borrower, except such a default
that, together with all other such defaults, has not had and will not have a
Materially Adverse Effect on (i) either Borrower or the Borrowers taken as a
whole or (ii) the Loan Documents or the Obligations; or
(f) (i) Either Borrower or either Guarantor shall (A) commence
a voluntary case under the Federal bankruptcy laws (as now or hereafter in
effect) or under any other bankruptcy or insolvency law of any jurisdiction ,
(B) file a petition seeking to take advantage of any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, (C) consent to, or fail to contest in a
timely and appropriate manner, any petition filed against it in an involuntary
case under such bankruptcy laws or other laws, (D) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of a substantial part of its assets, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its debts (other than
those that are the subject of bona fide disputes) as they become due, (F) make a
general assignment for the benefit of creditors, or (G) take any corporate
action for the purpose of effecting any of the foregoing; or
(ii) A case or other proceeding shall be commenced
against either Borrower or either Guarantor in any court of competent
jurisdiction seeking (A) relief under the Federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or
(B) the appointment of a trustee, receiver, custodian, liquidator or the like of
either Borrower or either Guarantor of all or any substantial part of the
assets, domestic or foreign, of either Borrower or either Guarantor or, and, in
each case, such case or proceeding shall continue undismissed or unstayed for a
period of 60 days, or an order granting the relief requested in such case or
proceeding against either Borrower or either Guarantor (including, but not
limited to, an order for relief under such Federal bankruptcy laws) shall be
entered; or
42
<PAGE>
(g) (i) A judgment or order for the payment of money in an
amount that (A) individually, exceeds by $100,000 (or, in the case of one
against Windmere, $1,500,000) or (B) when aggregated with all other unpaid
judgments outstanding against either Borrower or either Guarantor, exceeds by
$200,000 (or, if one against Windmere is included, $1,600,000) the amount of
insurance coverage applicable thereto shall be entered against either Borrower,
either Guarantor or any Subsidiary of any of them by any court, and (ii) either
(A) such judgment or order shall continue undischarged and/or unbonded or
unstayed for a period of 30 days or (B) enforcement proceedings shall have been
commenced upon such judgment or order; or
(h) (i) Any Termination Event shall occur, (ii) any Person
shall engage in any Prohibited Transaction involving any Plan, (iii) any
Accumulated Funding Deficiency, whether or not waived, shall exist with respect
to any Plan, (iv) either Borrower or any ERISA Affiliate of either Borrower
shall be in "default" (as defined in ERISA Section 4219(c)(5)) with respect to
payments owing to a multi-employer plan (as defined in ERISA Section 4001(a)(3))
as a result of such Borrower's or such Affiliate's complete or partial
withdrawal (as described in ERISA Section 4203 or 4205) from such Plan, (v) such
Borrower or any ERISA Affiliate shall fail to pay when due any amount that is
payable by it to the PBGC or to a Plan under Title IV of ERISA, (vi) a
proceeding shall be instituted by a fiduciary of any Plan against either
Borrower or any ERISA Affiliate to enforce ERISA Section 515 and such proceeding
shall not have been dismissed within 30 days thereafter, or (vii) any other
event or condition shall occur with respect to a Plan, except that no event or
condition referred to in any of the clauses (i) through (vii) shall constitute
an Event of Default if it, together with all other events or conditions at the
time existing, has not subjected, or in the reasonable determination of the
Required Banks would not subject, either Borrower or any of its Subsidiaries to
any liability that, alone or in the aggregate with all such liabilities, would
have a Materially Adverse Effect on either Borrower or the Borrowers and their
Subsidiaries taken as a whole; or
(i) Any Security Interest shall fail or cease to be fully
perfected, enforceable in accordance with its terms, and prior to the rights of
all third parties; or
(j) Any material provision of any Loan Document, or any
portion of any obligation for the payment of money under any Loan Document,
shall fail or cease to be in full force and effect, or either Borrower or either
Guarantor shall make any written statement or bring any action challenging the
enforceability or binding effect of any of the Loan Documents or any of the
Security Interests; or
(k) Any other event which is likely to have a Materially
Adverse Effect on either Borrower or either Guarantor, or on this Agreement, the
other Loan Documents or the Obligations shall occur; or
(l) The death or dissolution of either Borrower or either
Guarantor shall occur; or
(m) Any Change of Control or Change of Management shall occur;
or
43
<PAGE>
(n) The Kmart Contract or the WCI License Agreement shall fail
or cease to be in full force and effect or the Borrowers shall be prevented from
using the White-Westinghouse or Double W trademarks; or
(o) Either Borrower shall engage in any conduct or activity
that is illegal.
/section/7.02 REMEDIES UPON EVENT OF DEFAULT.Upon and at any time after
occurrence of any Event of Default (other than one specified in
/section/7.01(f)) And in every such event, the Agent may and, if requested by
the Required Banks, shall do any or all of the following: (a) declare, in whole
or, from time to time, in part, the principal of, interest on and any other
components of the Obligations to be, and the same shall thereupon become, due
and payable to the Banks, (b) demand in writing that the Borrowers deposit with
the Agent, at once and in full, an amount sufficient to reimburse the Agent and
the Banks for all outstanding Acceptance Obligations and Letter of Credit
Obligations, which amount shall be immediately due and payable by the Borrowers,
and to the extent paid by the Borrowers shall constitute a prepayment under this
Agreement, and (c) terminate, in whole or, from time to time, in part, each
Bank's Commitment and the Agent's obligations hereunder. Upon the occurrence of
an Event of Default specified in /section/7.01(f), automatically and without any
notice, (a) the Obligations shall be due and payable in full, including, without
limitation, all outstanding Acceptance Obligations and Letter of Credit
Obligations, (b) each Bank's Commitment shall terminate, and (c) the Agent's
obligations hereunder shall terminate. Presentment, demand, protest, notice of
intent to accelerate and all other notices of any kind are hereby expressly
waived. The remedies specified in this /section/7.02 shall be in addition to and
not in limitation of the remedies set fortH elsewhere herein and in the other
Loan Documents.
/section/8 CHANGES IN CIRCUMSTANCES
/section/8.01 MANDATORY SUSPENSION AND CONVERSION OF LOANS. Any Bank's
obligations to make or maintain Loans or convert into LIBOR Rate Loans shall be
suspended, all outstanding LIBOR Rate Loans shall be converted on the last day
of their applicable Interest Periods (or, if earlier, in the case of clause (b)
below, on the last day such Bank may lawfully continue to maintain Loans of that
type or, in the case of clause (c) below, the day determined by such Bank to be
the last Business Day before the effective date of the applicable restriction)
into, and all pending requests for the making of or conversion into Loans of
that type shall be deemed requests for, Reference Rate Loans, if:
(a) on or prior to the determination of an interest rate for a
LIBOR Rate Loan for any Interest Period, the Agent determines that for any
reason appropriate quotations are not available to it in the London interbank
market for purposes of determining the LIBOR Rate, or that such Rate would not
accurately reflect the cost to such Bank of making, maintaining or converting
into a LIBOR Rate Loan for such Interest Period;
(b) at any time such Bank determines that any Regulatory
Change makes it unlawful or impracticable for such Bank to make or maintain any
LIBOR Rate Loan, or to comply with its obligations hereunder in respect thereof;
or
44
<PAGE>
(c) such Bank determines that by reason of any Regulatory
Change it is restricted, directly or indirectly, in the amount which it may hold
of (1) a category of liabilities that includes deposits by reference to which,
or on the basis of which, the interest rate applicable to LIBOR Rate Loans is
directly or indirectly determined, or (2) the category of assets which includes
LIBOR Rate Loans.
The Agent or any such Bank, as the case may be, shall promptly notify
the Borrowers and the other parties to this Agreement of any circumstances that
would make the provisions of this /section/8.01 applicable, but the failurE to
give any such notice shall not affect such Bank's rights hereunder.
/section/8.02 REGULATORY CHANGES. If any Regulatory Change:
(a) shall subject the Agent or any Bank to any Tax, duty or
other charge determined by the Agent, or such Bank, as the case may be, to be
applicable to any Extension of Credit, to its obligation to make or maintain any
such Extension of Credit, or to this Agreement, any Note or any other Loan
Document, or shall, in the determination of the Agent or such Bank, change the
basis of taxation of payments to such Bank or the Agent or the principal of or
interest on any Loan or of any other amounts payable under this Agreement in
respect of any Loan or its obligation to make or maintain any Loan; or
(b) shall impose, increase, modify or deem applicable any
reserve, special deposit, assessment, capital adequacy or other requirement or
condition against assets of, deposits with or to the account of, Extensions of
Credit by, or the Commitment or obligations of, any Bank, or the Agent, or shall
impose on the Agent or such Bank or on any relevant interbank market for
Dollars, any condition; and the result of the foregoing, in the determination of
the Agent or such Bank, as the case may be, is (x) to reduce the amount of any
sum received or receivable by such Bank with respect to any Loan or the return
to be earned by the Agent or such Bank on any Extension of Credit, (y) to impose
a cost or increase any existing cost on the Agent or such Bank, as the case may
be, or any parent company of the Agent or such Bank, that is attributable to the
making or maintaining of any Extension of Credit or its Commitment or its
obligation to make any Extension of Credit, or (z) to require the Agent or such
Bank, or any parent company of the Agent or such Bank, to make any payment on or
calculated by reference to the gross amount of any amount received by it
hereunder or under any Note, then, within 15 days after request by the Agent or
such Bank, the Borrowers shall pay to the Agent or such Bank such additional
amount or amounts as the Agent or such Bank determines will compensate it for
such reduction, increased cost or payment. The Agent or any such Bank, as the
case may be, will promptly notify the Borrowers of any Regulatory Change of
which it has knowledge which will entitle the Agent or such Bank to compensation
pursuant to this /section/8.02, but the failure to give such notice shall not
affect the Agent or such Bank's right tO such compensation.
/section/8.03 CHANGE OF LENDING OFFICE. Any Bank will, if an event
occurs with respect to a Lending Office that makes /section/8.01 or 8.02
applicabLe, and if requested by the Borrowers, use reasonable efforts to
designate another Lending Office or Offices, provided that such designation
would not, in the sole and absolute discretion of any such Bank, be
disadvantageous to such Bank in any manner or contrary to such Bank's policy.
Any Bank may at any time and from time to time
45
<PAGE>
change any Lending Office and shall give notice of any such change to the
Borrowers. Except in the case of a change in Lending Offices made at the request
of the Borrowers, the designation of a new Lending Office by a Bank shall not
make operable the provisions of /section/8.01 or entitle such Bank to make a
claim under /section/8.02 if The operability of such clause or such claim
results solely from such designation and not from a subsequent Regulatory
Change.
/section/8.04 FUNDING LOSSES. The Borrowers shall pay to the Agent and
each Bank, upon request, such amount or amounts as such BanK determines are
necessary to compensate it for any loss, cost or expense incurred by it as a
result of (a) any payment or prepayment of a LIBOR Rate Loan on a date other
than the last day of an Interest Period for such LIBOR Rate Loan, (b) a Loan for
any reason not being made after the Borrowers shall have given a Notice of
Borrowing, or any payment of principal of or interest thereon not being made on
the date therefor determined in accordance with the applicable provisions of
this Agreement or (c) any payment of any Acceptance on a date other than the
date therefor determined in accordance with this Agreement or any prepayment
thereof. In the case of a LIBOR Rate Loan, at the election of such Bank, and
without limiting the generality of the foregoing, but without duplication, such
compensation on account of losses referred to in (a) and (b) above may include
an amount equal to the excess of (a) the interest that would have been received
from the Borrowers under this Agreement on any amounts to be reemployed during
an Interest Period or its remaining portion over (b) the interest component of
the return which such Bank determines it could have obtained had it placed such
amount on deposit in the London interbank market for a period equal to such
Interest Period or its remaining portion.
/section/8.05 DETERMINATIONS. In making the determinations contemplated
by /section//section/8.01, 8.02 and 8.04, the Agent and the Banks may make such
reasonable estimates, assumptions, allocations and the like that they, in good
faith, reasonably determine to be appropriate, but a Bank's or the Agent's
selection thereof in accordance with this /section/ 8.05, and thE determinations
made by a Bank or the Agent on the basis thereof, shall be final, binding and
conclusive upon the Borrowers, except, in the case of such determinations, for
manifest errors in computation or transmission. Any such Bank or the Agent, as
the case may be, shall furnish to the Borrowers upon request a certificate
outlining in reasonable detail the computation of any amounts claimed by it
under this /section/8 and the assumptions underlyinG such computations.
/section/9 THE AGENT
/section/9.01 APPOINTMENT AND AUTHORIZATION.
(a) Each Bank irrevocably appoints and authorizes the Agent to
take such action as Agent on its behalf and to exercise such powers under this
Agreement, the Notes, the Acceptances and the Letters of Credit as are delegated
to the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto. For purposes of this /section/9, the term
"Agent" shall include Leumi in its capacity as Agent undeR the Security
Documents.
46
<PAGE>
(b) Each Bank irrevocably authorizes the Agent to issue, amend
and make on its behalf Letters of Credit and Acceptances as provided in this
Agreement, and to take all other actions specifically delegated to it under this
Agreement and reasonably incidental thereto.
(c) The Agent may perform any of its duties hereunder by or
through its agents or employees.
/section/9.02 AGENTS AND AFFILIATES. Leumi shall have the same rights
and powers under this Agreement as any other Bank and may exercise oR refrain
from exercising the same as though it were not the Agent, and Leumi and its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrowers, the Guarantors or any Subsidiary or
Affiliate of Borrowers or Guarantors as if it were not the Agent hereunder.
/section/9.03 ACTION BY AGENT. The obligations hereunder of the Agent
are only those expressly set forth herein. Without limiting thE generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default or Event of Default, except as expressly provided in
/section/7.02. The Agent shall in all cases be fully protected iN acting or in
refraining from acting hereunder in accordance with the written instructions
signed by the Required Banks and each such instruction and any action taken or
any failure to act pursuant thereto shall be binding on all of the Banks, their
successors and assigns. The Agent shall have no duty to exercise any right or
power or remedy hereunder or to take any affirmative action hereunder unless
directed to do so in writing by the Required Banks and unless first indemnified
by the Banks to its satisfaction against the costs and expenses of taking such
action.
/section/9.04 CONSULTATION WITH EXPERTS. The Agent may consult with
legal counsel (who may be counsel for the Borrowers and the Guarantors),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
/section/9.05 LIABILITY OF AGENT. Neither the Agent nor any of its
directors, officers, agents, or employees shall be liable for takinG or omitting
to take any action in connection herewith (i) if it does so with the consent or
at the request of the Required Banks or (ii) to the extent its doing so does not
constitute its own gross negligence or willful misconduct. Neither the Agent,
nor any of its respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement,
any of the other Loan Documents or any Extension of Credit hereunder; (ii) the
performance or observance of any of the covenants or agreements of either
Borrower or either Guarantor; (iii) the satisfaction of any condition specified
in /section/3, except the receipt (but not the execution, genuineness or
sufficiency) of documents required to be delivered to the Agent; or (iv) the
validity, effectiveness, enforceability, or genuineness of this Agreement, the
Notes, the other Loan Documents, the Acceptances, the Letters of Credit or any
other instrument or writing furnished in connection herewith or therewith. The
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement or other writing (which may be a bank wire,
telex, telecopy or similar writing) believed by it to be genuine or to be signed
by the proper party or parties.
47
<PAGE>
/section/9.06 INDEMNIFICATION. Each Bank shall, ratably in accordance
with its Commitment, indemnify and hold harmless the Agent (tO the extent it is
not reimbursed by the Borrowers or the Guarantors) against any reasonable cost
or expense (including counsel fees and disbursements) (provided that any Bank
asserting that a cost or expense is unreasonable shall have the burden of
proving that it is) and any claim, demand, action, loss or liability (except to
the extent resulting from the Agent's gross negligence or willful misconduct)
that the Agent may suffer or incur in connection with this Agreement or any
action taken or omitted hereunder by the Agent.
/section/9.07 CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and its own decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement. Except as expressly
provided herein, the Agent shall have no duty to provide any Bank with any
credit or other information with respect to either Borrower, either Guarantor or
any Collateral.
/section/9.08 SUCCESSOR AGENT. The Agent may resign at any time by
giving written notice thereof to the Banks and the Borrowers. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent, (which may be Comerica Bank or National Bank of Canada) which successor
shall be a bank having a combined capital and surplus of at least $250,000,000
(or the equivalent in another currency). If no such successor shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Agent's giving of notice of resignation, then the
retiring Agent, may, on behalf of the Banks, appoint a successor meeting the
requirements set forth in the immediately preceding sentence. Upon the
acceptance of its appointment hereunder, such successor shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's or resignation hereunder, the provisions
of this /section/9 shall inure to its benefit as tO any actions taken or omitted
to be taken by it while it was the Agent.
/section/9.09 SECURITY DOCUMENTS, ETC.
(a) Each Bank hereby authorizes the Agent to enter into each
of the Security Documents and to take all action contemplated thereby. All
rights and remedies under the Security Documents may be exercised by the Agent
for the benefit of the Banks and the other beneficiaries thereof upon the terms
thereof. The Agent may assign its rights and obligations as Agent under any of
the Security Documents to any Affiliate of the Agent or to any trustee, which
assignee in each such case shall be entitled to all the rights of the Agent
under the applicable Security Document and all rights hereunder of the Agent
with respect to the applicable Security Document.
(b) In each circumstance where, under any provision of any
Security Document, the Agent shall have the right to grant or withhold any
consent, exercise any remedy, make any determination or direct any action by the
Agent under such Security Document, the Agent shall act
48
<PAGE>
in respect of such consent, exercise or remedies, determination or action, as
the case may be, with consent of and at the direction of the Required Banks;
provided, HOWEVER, that no such consent of the Required Banks shall be required
with respect to any consent, determination or other matter that is, in the
Agent's judgment, ministerial or administrative in nature; and PROVIDED,
FURTHER, that the Agent shall not expressly release any Collateral (except
inventory (and related documents) and equipment sold by a Borrower as permitted
by the Security Agreement) without the consent of the Required Banks.
/section/9.10 OBTAINING CONSENT OF REQUIRED BANKS. In each circumstance
where any consent or approval of or direction from the Required Banks iS
required, the Agent shall send to the Banks a written notice setting forth a
description in reasonable detail of the matter as to which consent, approval or
direction is required and the Agent's proposed course of action with respect
thereto. In the event the Agent shall not have received a response from any Bank
within five Business Days after receipt of such written notice, such Bank shall
be deemed to have agreed to the course of action proposed by the Agent.
/section/10 MISCELLANEOUS
/section/10.01 NOTICES.
(a) All notices and other communications under this Agreement,
including but not limited to materials delivered pursuant to /section/6, shall,
except in those cases where a telephone notice is expressly permitted, be in
writing (which shall include communications by telefax). All written notices and
communications shall be sent by registered or certified mail, postage prepaid,
return receipt requested, by prepaid telefax, reputable overnight courier,
freight prepaid, or delivered by hand.
(b) All notices and other communications under this Agreement
shall be given at the following respective addresses and telex, telefax and
telephone numbers and to the attention of the following Persons:
(i) If to either Borrower:
16550 N.W. 10th Avenue
Miami, Florida 33169
Telefax No.: (305) 624-8901
Telephone No.: (305) 624-0019
(ii) If to the Agent:
Bank Leumi Le-Israel B.M., Miami Agency
800 Brickell Avenue
Suite 1400
49
<PAGE>
Miami, FL 33131
Telefax No.: (305) 377-6542
Telephone No.: (305) 377-6572
(ii) if to the Banks, at their respective address and
telex, telefax and telephone numbers set forth on the signature pages hereto (as
the same may be amended from time to time); or at such other address or telex,
telefax or telephone number or to the attention of such other person as the
party to whom such information pertains may hereafter specify for the purpose in
a notice to the other specifically captioned "Notice of Change of Address".
(c) EFFECTIVENESS. Each notice and other communication under
this Agreement shall be effective or deemed delivered or furnished (i) if given
by mail, on the third Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by telex or telefax, when such
communication is transmitted to the appropriate number determined as above
provided in this /section/10.01 and the appropriate answer-back is receiveD or
receipt is otherwise acknowledged, (iii) if given by hand delivery or overnight
courier, when left at the address of the addressee addressed as above provided,
and (iv) if given by telephone, when communicated to the Person or to the holder
of the office specified as the Person or officeholder to whose attention
communications are to be given, except that notices of a change of address,
telex, telefax or telephone number, and notices to the Agent shall not be
effective, and materials furnished to the Banks pursuant to /section/6 shall not
be deemeD furnished until received, and in the case of the Agent, such notices
and materials shall not be deemed received until physically received by a
responsible officer at the Agent's Office not later than 12:00 noon (Miami time)
on any day if such day is to count as a Business Day for the purpose of
determining the adequacy of any notice to the Agent hereunder. Where expressly
permitted by other provisions of this Agreement, notices may be by telephone,
promptly confirmed in writing (which shall include communications by telex and
telefax). The failure to give written confirmation of any such notice shall not
effect the validity thereof. In the event of a discrepancy between telephonic
notice and the written confirmation thereof, or in the event written
confirmation of such notice is not furnished, the telephonic notice as
understood by the Agent will be deemed the effective notice.
/section/10.02 EXPENSES: INDEMNIFICATION. Whether or not any Extension
of Credit is made hereunder, the Borrowers shall, on demand, pay oR reimburse
the Banks and the Agent for (a) all transfer, documentary stamp and similar
taxes, and all recording and filing fees, if any, payable in connection with,
arising out of or in any way related to the negotiation, preparation, execution,
delivery and performance of this Agreement, the other Loan Documents or the
Extensions of Credit, and (b) all reasonable costs and expenses (including fees
and disbursements of legal counsel and other experts) incurred, and all payments
made, (and shall indemnify and hold the Banks and the Agent harmless from and
against all losses suffered) in connection with, arising out of, or in any way
related to (i) the negotiation, syndication, preparation, execution and delivery
of (A) this Agreement and the other Loan Documents, and (B) (whether or not
executed) any waiver, amendment or consent hereunder or thereunder, or hereto or
thereto, (ii) the administration of operations under this
50
<PAGE>
Agreement and the other Loan Documents, including without limitation the matters
set forth in /section/6.03(b), (iii) consulting with respect to any matter in
any way arising out of, relating to, or connected with, this Agreement or any of
the other Loan Documents, including, but not limited to, the enforcement by the
Banks or the Agent of any of their rights hereunder or any of the other Loan
Documents, or the performance by the Banks or the Agent of any of their
obligations hereunder, (iv) protecting, preserving, exercising or enforcing any
of the rights of the Banks or the Agent hereunder or any of the other Loan
Documents, (v) any claim (whether asserted by the Banks, the Agent, the
Borrowers, the Guarantors or any other Person and whether asserted before or
after the payment, performance and observance in full of the Borrower's
obligations hereunder and under the other Loan Documents) and the prosecution or
defense thereof, in any way arising under, related to, or connected with, this
Agreement, or any of the other Loan Documents or the relationship established
hereunder, and (vi) any governmental investigation arising out of, relating to,
or in any way connected with this Agreement or any of the other Loan Documents,
PROVIDED that the foregoing indemnity shall not be applicable to any loss
suffered by any Bank or the Agent to the extent such loss is determined by a
judgment of a court that is binding on such Bank or the Agent, final and not
subject to review on appeal, to be the result of acts or omissions of such Bank
or the Agent, constituting gross negligence or willful misconduct. The Agent is
hereby irrevocably authorized to debit any account of either Borrower with the
Agent to pay any amount referred to in this /section/10.02 and the Banks are
hereby irrevocably authorized, at the instance of the Agent and whether or noT
requested by the Borrowers, to make Loans to pay any such amount.
/section/10.03 RIGHTS CUMULATIVE. The rights and remedies of the Banks
and the Agent under this Agreement and the other Loan DocumentS shall be
cumulative and not exclusive of nor limiting upon any rights or remedies that
they would otherwise have, and no failure or delay by any Bank or the Agent in
exercising any right shall operate as a waiver of it, nor shall any single or
partial exercise of any power or right preclude its other or further exercise or
any other power or right.
/section/10.04 WAIVERS; AMENDMENTS. Any term, covenant, agreement or
condition of this Agreement may be amended in writing with the consenT of the
Borrowers and the Required Banks, or compliance therewith may be waived in
writing by the Required Banks, or by the Agent when authorized by the Required
Banks, and in any such event, the failure to observe, perform or discharge any
such covenant, condition or obligation (whether such amendment is executed or
such consent or waiver is given before or after such failure) shall not be
construed as a breach of such covenant, condition or obligation or an Event of
Default, provided that no such amendment, consent or waiver shall:
(a) affect the amount or extend the time of the Commitment of
any Bank, of the obligation of the Agent to create Acceptances or to issue
Letters of Credit, or of the obligation of the Agent or any Bank to pay amounts
on account of Loans, Acceptances or Letters of Credit, and thereby extend credit
to the Borrowers, without the prior written consent of all the Banks;
(b) alter the time or times of payment of the principal of or
interest on any Obligation held by a Bank or with respect to any Bank's
participation in an Acceptance or Letter of Credit or the amount of the
principal of any Note, Acceptance or Letter of Credit, or the rate of
51
<PAGE>
interest, commission or fees thereon or permit any subordination of the
principal of or interest on any Obligation without the prior written consent of
such Bank as to its interest in such Obligation;
(c) alter any provision of /section/8 or any provision
requiring the ratable application of amountS received by the Agent in payment
of, or for application on, indebtedness under this Agreement or under any of the
Notes or any Acceptance Obligation or Letter of Credit Obligation, or change the
percentage required to authorize or direct the taking of any action under this
Agreement, without the prior written consent of all the Banks; or
(d) expressly release Collateral except as contemplated by the
Security Documents or/section/9.09(b).
Unless otherwise specified in such waiver or consent, a waiver or consent given
hereunder shall be effective only in the specific instance and for the specific
purpose for which given. Notwithstanding the foregoing, the Banks may, without
either Borrower's agreement, amend, between themselves, any provision of the
Loan Documents if the amendment has no effect on the Borrowers.
/section/10.05 SET-OFF. Upon the occurrence and during the continuance
of any Event of Default, each of the Agent and each Bank, and each of its
branches and offices, is hereby authorized by the Borrowers, at any time and
from time to time, (i) to set off against, and to appropriate and apply to the
payment of the obligations (whether matured or unmatured, fixed or contingent or
liquidated or unliquidated) any and all amounts owing by the Agent, or such
Bank, or any such office or branch, to either Borrower (whether payable in
Dollars or any other currency, whether matured or unmatured, and, in the case of
deposits, whether general or special time or demand and however evidenced) and
(ii) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such Obligations and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
such Bank in its sole discretion may elect. The Borrowers agree, to the fullest
extent they may effectively do so under Applicable Law, that any holder of a
participation in any Extension of Credit may exercise rights of set-off and
counterclaim and other rights with respect to such participation as fully as if
such holder of a participation were a direct creditor of the Borrowers in the
amount of such participation.
/section/10.06 ASSIGNMENT AND PARTICIPATION
(a) ASSIGNMENTS BY BORROWERS. The Borrowers may not assign or
transfer any of their rights or obligations under this Agreement without the
prior written consent of the Agent and all the Banks, and any such attempted
assignment or transfer shall be null and void.
(b) ASSIGNMENT BY BANKS. A Bank may assign its rights and
delegate its obligations under this Agreement only with the prior written
consent of the Agent and the other Banks.
(c) PARTICIPATIONS. Any Bank may transfer participation
interests in its Commitment, the Note held by it, its participations in
Acceptance Obligations and Letter of Credit
52
<PAGE>
Obligations, and any of its other rights and obligations hereunder PROVIDED that
the Agent and the Borrowers may continue to deal only with such Bank, the
purchaser of any such participation shall not be deemed a "Bank" and the
purchaser of any such participation shall have no right to vote on or approve
any matter hereunder and no right to contact, negotiate with or seek information
from the Borrowers or to enforce such Note or this Agreement. Each Borrower
hereby authorizes each Bank at its sole discretion to divulge any and all
information which such Bank may have acquired by any means or from any Person,
including such Borrower, regarding such Borrower or its property, books and
accounts, to any potential or prospective assignee of or participant in
Extensions of Credit and agrees to hold such Bank harmless under all
circumstances from any and all liability, cost or expense arising from any such
disclosure under any Applicable Law.
/section/10.07 DETERMINATIONS BY AGENT. Each determination by the Agent
with regard to the subject matter of this Agreement shall, in the absence of
manifest error, be conclusive and binding on all parties.
/section/10.08 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
sucH jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, each of the Borrowers
hereby waives any provision of law that renders any provision hereof prohibited
or unenforceable in any respect.
/section/10.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be aN original and
shall be binding upon all parties, their successors and permitted assigns.
/section/10.10 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly
provided herein, the representations, warranties, rights and obligationS
(including indemnity obligations) of the parties hereunder shall survive the
execution of this Agreement, any investigation of any matter by the Agent or any
Bank and the extension and repayment of the Loans, Letters of Credit Obligations
and Acceptance Obligations and termination of this Agreement.
/section/10.11 NO JOINT VENTURE. Nothing contained in any Loan Document
shall be deemed or construed by the parties hereto or by anY third person to
create the relationship of principal and agent or of partnership or joint
venture or of any association between the Banks and the Borrowers other than the
relationship of creditors and debtors.
/section/10.12 FURTHER ASSURANCES; POWER OF ATTORNEY. Each Borrower
agrees, upon the request of the Agent, to execute and deliver such further acts
as thE Agent may reasonably request in order to fully effectuate the purposes of
any Loan Document. Each Borrower hereby irrevocably appoints the Agent as its
true and lawful attorney-in-fact (such appointment being coupled with an
interest) with full power (in the name of such Borrower or otherwise) to execute
and deliver such documents and do such acts as the Agent may reasonably deem
necessary in order to fully effectuate the purposes of this Agreement.
53
<PAGE>
/section/10.13 NO REPRESENTATIONS REGARDING RENEWAL. Each Borrower
acknowledges that neither the Agent nor any of the Banks has agreed with or
representeD to such Borrower that the credit facility created hereby will be
renewed or extended past the Termination Date or that any Extensions of Credit
will be made after the Termination Date.
/section/10.14 SUCCESSORS AND ASSIGNS. Subject to the provisions of
/section/10.06, all of the provisions of this Agreement shall be binding upon
And inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
/section/10.15 LIMITATION OF LIABILITY; ACKNOWLEDGEMENT. NEITHER THE
BANKS, THE AGENT, NOR ANY AFFILIATE THEREOF SHALL HAVE ANY LIABILITY WITH
RESPECT TO, AND EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, EACH OF THE
BORROWERS HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY CLAIM FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY EITHER BORROWER IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT, OR
THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH. EACH
BORROWER ACKNOWLEDGES THAT IT HAS NO RIGHT OF OFFSET AGAINST OR CLAIM OR DEFENSE
IN RESPECT TO ITS OBLIGATIONS TO LEUMI EXISTING AS OF THE AGREEMENT DATE AND
HEREBY WAIVES ANY THAT IT MAY HAVE.
/section/10.16 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
THE STATE OF FLORIDA WITHOUT REGARD TO ANY CONFLICTS- OF- LAW PRINCIPLE OR RULE
THAT WOULD GIVE EFFECT TO THE LAW OF ANY OTHER JURISDICTION.
/section/10.17 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING BROUGHT
AGAINST EITHER BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF
FLORIDA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS
(A) ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
SUCH COURTS AND ANY RELATED APPELLATE COURTS AND IRREVOCABLY AGREES (WITHOUT
WAIVING ANY RIGHT TO APPEAL) TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND (B) IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. EACH OF THE BORROWERS HEREBY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, (WITH A COPY BY OVERNIGHT COURIER),
AT ITS ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
/section/10.01, AND SERVICE
54
<PAGE>
SO MADE SHALL BE DEEMED COMPLETED ON THE THIRD DAY AFTER SUCH SERVICE IS
DEPOSITED IN THE MAIL. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
BANK TO BRING PROCEEDINGS AGAINST EITHER BORROWER OR EITHER GUARANTOR IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY EITHER BORROWER
AGAINST ANY BANK OR THE AGENT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DADE COUNTY IN
THE STATE OF FLORIDA.
/section/10.18 WAIVER OF JURY TRIAL. EACH BORROWER, THE AGENT, AND EACH
BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY OF THEM
ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER AND WHETHER ARISING OR ASSERTED BEFORE OR AFTER THE
AGREEMENT DATE OR BEFORE OR AFTER PAYMENT, OBSERVANCE AND PERFORMANCE IN FULL OF
THE BORROWERS' OBLIGATIONS HEREUNDER OR THEREUNDER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers all as of the day and year first
written above.
NEW M-TECH CORPORATION,
as a Borrower
By: /S/ JOEL NEWMAN
------------------------------------
Name: JOEL NEWMAN
------------------------------------
Title: PRESIDENT
------------------------------------
NEWTECH (HONG KONG) LIMITED,
as a Borrower
By: /S/ JOEL NEWMAN
------------------------------------
Name: JOEL NEWMAN
------------------------------------
Title: PRESIDENT
------------------------------------
55
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
By: /S/ JOSEPH F. REALINI
------------------------------------
Name: JOSEPH F. REALINI
------------------------------------
Title: VICE PRESIDENT
------------------------------------
Amount of
Commitment: $15,000,000 BANK LEUMI LE-ISRAEL B.M., as a Bank
By: /S/ JOSEPH F. REALINI
------------------------------------
Name: JOSEPH F. REALINI
------------------------------------
Title: VICE PRESIDENT
------------------------------------
Lending Office:
800 Brickell Avenue, Suite 1400
Miami, Florida 33131
Address for Notices:
800 Brickell Avenue, Suite 1400
Miami, Florida 33131
Attention:
Ms. Caridad Errazquin
Telefax No.:
(305) 377-6542
Telephone No.:
(305) 377-6572
56
<PAGE>
Amount of
Commitment: $12,000,000 COMERICA BANK, as a Bank
By: /S/ SHERYL METCALFE
------------------------------------
Name: SHERYL METCALFE
------------------------------------
Title: VICE PRESIDENT
------------------------------------
Lending Office:
100 N.E. 3rd Avenue, Suite 200
Fort Lauderdale, Florida 33301
Address for Notices:
100 N.E. 3rd Avenue, Suite 200
Fort Lauderdale, Florida 33301
Attention: Ms. Sheryl Metcalfe
Telefax No.: (954) 468-0641
Telephone No.: (954) 468-0643
57
<PAGE>
Amount of
Commitment: $5,000,000 NATIONAL BANK OF CANADA, as a Bank
By: /S/ MICHAEL BLOOMENFELD
------------------------------------
Name: MICHAEL BLOOMENFELD
------------------------------------
Title: VICE PRESIDENT
------------------------------------
Lending Office:
5100 Town Center Circle, Suite 430
Boca Raton, Florida 33486
Address for Notices:
5100 Town Center Circle, Suite 430
Boca Raton, Florida 33486
Attention: Ms. Jean E. Page
Telefax No.: (561) 367-1705
Telephone No.: (561) 367-1700
58
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT ("this Amendment") is made as of
September 8, 1997 and amends that certain Credit Agreement, dated as of July
23, 1997, by and among NEW M-TECH CORPORATION and NEWTECH (HONG KONG) LIMITED
(collectively the "Borrowers," each a "Borrower"), BANK LEUMI LE-ISRAEL B.M.,
COMERICA BANK and NATIONAL BANK OF CANADA (collectively the "Banks," each a
"Bank") and BANK LEUMI LE-ISRAEL B.M., as the Agent (the "Agent") (the "Credit
Agreement," the capitalized terms used but not otherwise defined herein being
used herein as therein defined).
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrowers, the Banks and the
Agent hereby agree as follows:
1. The following definitions in /section/1.01(a) of the Credit Agreement are
hereby amended as follows:
"NOTES" means each Revolving Note of the Borrowers payable to the order
of a Bank, evidencing such Bank's Loans and executed by the Borrowers
in September, 1997.
"WINDMERE GUARANTY" means the Guaranty Agreement executed by Windmere
in favor of the Agent and the Banks as of the Agreement Date, as
amended by an Amendment to Guaranty Agreement, dated in September,
1997.
2. The last sentence of /section/2.01 of the Credit Agreement is hereby amended
to read as follows:
Moreover, the sum of the aggregate unpaid principal amount of all Loans
plus the aggregate amount of all Acceptance Obligations shall not
exceed $20,000,000 at any time prior to November 15, 1997 or
$10,000,000 on or at any time after November 15, 1997; the aggregate
amount of all Acceptance Obligations shall not exceed $10,000,000 at
any time prior to November 15, 1997 or $5,000,000 on or at any time
after November 15, 1997; the aggregate amount of all Letter of Credit
Obligations with respect to Standby Letters of Credit shall not exceed
$1,000,000 at any time; and there shall be no Loans outstanding or
Acceptance Obligations in existence for a period of 30 consecutive days
between the Closing Date and the Termination Date.
3. The last sentence of /section/2.02 of the Credit Agreement is hereby amended
to read as follows:
There shall at no time be in effect more than six Borrowings with
respect to LIBOR Rate Loans, and at no time shall the
<PAGE>
aggregate outstanding principal balance of LIBOR Rate Loans exceed
$10,000,000.
4. /section/2.04(a) of the Credit Agreement is hereby amended (effective as of
August 13, 1997) to read as follows:
INTEREST RATES. Each Loan shall bear interest on the outstanding
principal amount thereof until due at a per annum rate equal to, (i) so
long as it is a Reference Rate Loan, the Reference Rate as in effect
from time to time; and (ii), so long as it is a LIBOR Rate Loan, the
applicable Adjusted LIBOR Rate plus 2.50%; provided, however, that, on
any day after August 12, 1997 on which the outstanding principal
balance of all the Loans exceeds $10,000,000, a portion of each Bank's
then outstanding Reference Rate Loans equal to its Proportionate Share
of such excess shall bear interest on that day at a per annum rate
equal to the Reference Rate in effect on that day plus 1.00%. The
interest rate applicable to each Reference Loan shall change
simultaneously with each change in the Reference Rate.
5. The total commission payable by the Borrowers pursuant to /section/2.11(c)(i)
with respect to each Acceptance shall not be less than the Agent's minimum
acceptance commission.
6. In connection with /section/5.05 of the Credit Agreement and /section/19(b)
of the Security Agreement, the Banks hereby consent to the Borrowers' granting
to Windmere a security interest in the Borrowers' assets to secure indebtedness
of one or both of the Borrowers to Windmere in the approximate principal amount
of $3,000,000 stemming from Windmere's obtaining (and making reimbursements with
respect to) certain letters of credit for the Borrowers' benefit and to secure
indemnity or reimbursement obligations of one or both of the Borrowers to
Windmere with respect to Windmere's payment of a total amount in excess of
$3,000,000 (plus interest thereon and collection costs) under the Windmere
Guaranty. Said security interest shall be subordinate and inferior to the
Security Interests in all respects and shall terminate when the aforesaid
indebtedness and indemnity or reimbursement obligations are repaid in full.
Borrowers shall repay the aforesaid indebtedness and indemnity or reimbursement
obligations in full before repaying any other indebtedness of either or both of
the Borrowers to Windmere.
7. When it executes this Amendment and as a condition precedent to the
effectiveness of the amendment hereby of /section/2.01 of the Credit Agreement,
the Borrowers shall deliver to the Agent the following in form and substance
satisfactory to the Agent:
(a) A certificate of the Secretary and Assistant Secretary of each
Borrower authorizing this Amendment and the Notes;
-2-
<PAGE>
(b) A certificate of the Secretary and Assistant Secretary of
Windmere authorizing Windmere's Amendment to Guaranty
Agreement referred to below and its Subordination Agreement
referred to below;
(c) The Notes (as redefined hereby) duly executed by the
Borrowers;
(d) Whatever supplemental debentures or amendments to debentures
and filings are recommended by Coudert Brothers, Hong Kong,
counsel for Agent and the Banks, to take account of the
substitution of the Notes (as redefined hereby) for the Notes
(as originally defined in the Credit Agreement);
(e) A Subordination Agreement duly executed by Joel Newman as of
the date of this Amendment and a Subordination Agreement duly
executed by Windmere as of the date of this Amendment;
(f) A Confirmation of Guaranty Agreement duly executed by Joel
Newman and an Amendment to Guaranty Agreement duly executed by
Windmere;
(g) A favorable, written opinion (addressed to the Agent and the
Banks) of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., counsel for the Borrowers and the Guarantors,
dated the date of this Amendment and covering such matters as
the Agent or any Bank may request and a favorable, written
opinion (addressed to the Agent and the Banks) of Coudert
Brothers, counsel for the Banks, dated the date of this
Amendment and covering such matters as the Agent or any Bank
may request; and
(h) Such other certificates, documents, instruments and opinions
as the Agent shall reasonably request.
8. The term "the Obligations" as used in the Security Agreement shall include
all obligations and liabilities of the Borrowers now or hereafter existing under
the Credit Agreement as amended hereby or any or all of the Notes (as redefined
hereby). The term "the Notes" as used in the Tax Indemnity Agreement among the
Borrowers and the Banks means both the Notes as originally defined in the Credit
Agreement and the Notes as redefined hereby. The term "Loan Documents" as used
in the Appointment of Process Agent made by NewTech (Hong Kong) Limited shall
include the Notes (as redefined hereby).
9. As amended hereby, the Credit Agreement shall remain in full force and effect
and is hereby confirmed. The Borrowers acknowledge that neither of them has any
right of offset against or claim or defense in respect of the Obligations, waive
any such
-3-
<PAGE>
defense that either of them may have and represent to the Agent and the Banks
that no Event of Default (or event or circumstance which, with the passage of
time, the giving of notice, or both, would constitute an Event of Default)
exists as of the date hereof. The Banks hereby accept the Subordination
Agreements, of approximately even date herewith, made in their favor by Joel
Newman and Windmere.
10. On or before their execution hereof, the Borrowers shall pay to the Agent a
restructuring fee of $5,000, to be shared by the Banks PRO RATA in proportion to
their Commitments.
11. Each Borrower jointly and severally agrees to pay (or, if appropriate,
reimburse) the Agent on demand the amount of any and all attorneys' fees,
documentary stamp taxes and other costs and expenses relating to this Amendment
and any documents executed in connection herewith and hereby authorizes the
Banks to make one or more Loans to pay any such costs and expenses.
12. THE BORROWERS, THE BANKS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
HEREUNDER OR RELATING HERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date indicated at the head of it.
NEW M-TECH CORPORATION,
as a Borrower
By: /s/ Leonor Schuck
-------------------------
Name: Lenor Schuck
-------------------------
Title: Vice President, Finance
------------------------------
NEWTECH (HONG KONG) LIMITED,
as a Borrower
By: /s/ Leonor Schuck
-------------------------
Name: Lenor Schuck
-------------------------
Title: Vice President, Finance
------------------------------
Additional Signatures Appear On Pages 6, 7 and 8
-4-
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
By: /s/ Caridad Errazquin
-------------------------
Name: Caridad Errazquin
-------------------------
Title: Vice President
-------------------------
BANK LEUMI LE-ISRAEL B.M.,
as a Bank
By: /s/ Caridad Errazquin
-------------------------
Name: Caridad Errazquin
-------------------------
Title: Vice President
-------------------------
-5-
<PAGE>
COMERICA BANK, as a Bank
By: /s/ Sheryl Metcalfe
-------------------------
Name: Sheryl Metcalfe
-------------------------
Title: Vice President
-------------------------
-6-
<PAGE>
NATIONAL BANK OF CANADA, as a Bank
By: /s/ Jean Page
-------------------------
Name: Jean Page
-------------------------
Title: Vice President
-------------------------
-7-
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT ("this Amendment") is made as of
November 5, 1997 (the "Effective Date") and amends that certain Credit
Agreement, dated as of July 23, 1997, by and among NEW M-TECH CORPORATION and
NEWTECH (HONG KONG) LIMITED (collectively the "Borrowers," each a "Borrower"),
BANK LEUMI LE-ISRAEL B.M., COMERICA BANK and NATIONAL BANK OF CANADA
(collectively the "Banks," each a "Bank") and BANK LEUMI LE-ISRAEL B.M., as the
Agent (the "Agent"), as previously amended (the "Credit Agreement," the
capitalized terms used but not otherwise defined herein being used herein as
therein defined).
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrowers, the Banks and the
Agent hereby agree as follows:
1. The following definitions in /section/1.01(a) of the Credit Agreement are
hereby amended as follows effective as of the Effective Date:
"NOTES" means each Revolving Note of the Borrowers payable to the order
of a Bank, evidencing such Bank's Loans and executed by the Borrowers
in November, 1997.
"COMMITMENT" of any Bank means the obligation of such Bank to make
Loans, to purchase participations in Acceptances, and to purchase
participations in Letters of Credit, such that the sum of the
outstanding principal amount of its Loans plus its participations in
Acceptance Obligations and Letter of Credit Obligations does not exceed
the amount set forth below opposite its name:
Bank Leumi le-Israel B.M. $15,000,000
Comerica Bank $13,000,000
National Bank of Canada $ 9,000,000
2. The last two sentences of /section/2.01 of the Credit Agreement are hereby
amended to read as follows:
The sum of (i) the aggregate unpaid principal amount of all Loans, plus
(ii) the aggregate amount of all Acceptance Obligations, plus (iii) the
aggregate amount of all Letter of Credit Obligations shall not exceed
at any time the Borrowing Base at that time and shall not exceed
$32,000,000 at any time during the High Season or $14,000,000 at any
time during the Low Season (except the month of November, 1997 during
which such sum shall not exceed $37,000,000). Moreover, the sum of the
aggregate unpaid principal amount of all Loans plus the aggregate
amount of all Acceptance Obligations shall not exceed $20,000,000 at
any time during the High Season or $10,000,000 at any time during the
Low Season (except the
<PAGE>
month of November, 1997 during which such sum shall not exceed
$30,000,000), and shall not exceed $4,000,000 during a period of 30
consecutive days between the Closing Date and the Termination Date; the
aggregate amount of all Acceptance Obligations shall not exceed
$10,000,000 at any time during the High Season or $5,000,000 at any
time during the Low Season (except the month of November, 1997 during
which such aggregate amount shall not exceed $10,000,000); and the
aggregate amount of all Letter of Credit Obligations with respect to
Standby Letters of Credit shall not exceed $1,000,000 at any time.
3. On the Effective Date, the Banks shall make whatever sales to and purchases
from one another of the then existing Extensions of Credit and participations
therein as are necessary so that immediately thereafter the outstanding
Extensions of Credit and participations therein are owned by the Banks in
proportion to their respective Commitments (as redefined by this Amendment).
4. When it executes this Amendment and as a condition precedent to the
effectiveness of the amendment hereby of /section/2.01 of the Credit Agreement,
the Borrowers shall deliver to the Agent the following in form and substance
satisfactory to the Agent:
(a) A certificate of the Secretary (and, if required by the Agent,
the Assistant Secretary) of each Borrower authorizing this
Amendment and the Notes (as redefined by this Amendment);
(b) The Notes (as redefined by this Amendment) duly executed by
the Borrowers;
(c) Whatever supplemental debentures or amendments to debentures
and filings are recommended by Coudert Brothers, Hong Kong,
counsel for Agent and the Banks, to take account of the
substitution of the Notes (as redefined by this Amendment) for
the Notes (as originally defined in the Credit Agreement) or
the Notes (as defined in the previous Amendment to Credit
Agreement among the Borrowers and the Banks));
(d) A Confirmation of Guaranty Agreement duly executed by Joel
Newman and a Confirmation of Guaranty Agreement duly executed
by Windmere;
(e) A favorable, written opinion (addressed to the Agent and the
Banks) of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., counsel for the Borrowers and the Guarantors,
dated the date of this Amendment and covering such matters as
the Agent or any Bank may request and a favorable, written
opinion (addressed to the Agent and the Banks) of Coudert
Brothers, counsel for the Banks,
-2-
<PAGE>
dated the date of this Amendment and covering such matters as
the Agent or any Bank may request; and
(f) Such other certificates, documents, instruments and opinions
as the Agent or any Bank shall reasonably request.
5. The term "the Obligations" as used in the Security Agreement shall include
all obligations and liabilities of the Borrowers now or hereafter existing under
the Credit Agreement as amended by this Amendment or any or all of the Notes (as
redefined by this Amendment). The term "the Notes" as used in the Tax Indemnity
Agreement among the Borrowers and the Banks means both the Notes as originally
defined in the Credit Agreement, the Notes as defined in the previous Amendment
to Credit Agreement among the Borrowers and the Banks and the Notes as redefined
by this Amendment. The term "Loan Documents" as used in the Appointment of
Process Agent made by NewTech (Hong Kong) Limited shall include the Notes (as
redefined by this Amendment).
6. As amended hereby, the Credit Agreement shall remain in full force and
effect. The Borrowers acknowledge that neither of them has any right of offset
against or claim or defense in respect of the Obligations, waive any such
defense that either of them may have and represent to the Agent and the Banks
that no Event of Default (or event or circumstance which, with the passage of
time, the giving of notice, or both, would constitute an Event of Default)
exists as of the date hereof.
7. On or before their execution hereof, the Borrowers shall pay to the Agent a
restructuring fee of $15,000, to be shared by the Banks PRO RATA in proportion
to their Commitments as they existed prior to the Effective Date.
8. The Borrowers jointly and severally agree to pay (or, if appropriate,
reimburse) the Agent on demand the amount of any and all attorneys' fees,
documentary stamp taxes and other costs and expenses relating to this Amendment
and any documents executed in connection with this Amendment and hereby
authorize the Banks to make one or more Loans to pay any such costs and
expenses.
9. THE BORROWERS, THE BANKS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING UNDER
OR RELATING TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date indicated at the head of it.
NEW M-TECH CORPORATION,
as a Borrower
-3-
<PAGE>
By: /s/ Leonor Schuck
-------------------------
Name: Leonor Schuck
-------------------------
Title: Vice President, Finance
------------------------------
NEWTECH (HONG KONG) LIMITED,
as a Borrower
By: /s/ Leonor Schuck
-------------------------
Name: Leonor Schuck
-------------------------
Title: Vice President, Finance
------------------------------
Additional Signatures Appear On Pages 5, 6 and 7
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
By: /s/ Caridad Errazquin
-------------------------
Name: Caridad Errazquin
-------------------------
Title: Vice President
-------------------------
BANK LEUMI LE-ISRAEL B.M.,
as a Bank
By: /s/ Caridad Errazquin
-------------------------
Name: Caridad Errazquin
-------------------------
Title: Vice President
-------------------------
-4-
<PAGE>
COMERICA BANK, as a Bank
By: /s/ Sheryl Metcalfe
-------------------------
Name: Sheryl Metcalfe
-------------------------
Title: Vice President
-------------------------
-5-
<PAGE>
NATIONAL BANK OF CANADA, as a Bank
By: /s/ Jean Page
-------------------------
Name: Jean Page
-------------------------
Title: Vice President
-------------------------
-6-
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT ("this Amendment") is made as of
December 30, 1997 (the "Effective Date") and amends that certain Credit
Agreement, dated as of July 23, 1997, by and among NEW M-TECH CORPORATION and
NEWTECH (HONG KONG) LIMITED (collectively the "Borrowers," each a "Borrower"),
BANK LEUMI LE-ISRAEL B.M., COMERICA BANK and NATIONAL BANK OF CANADA
(collectively the "Banks," each a "Bank") and BANK LEUMI LE-ISRAEL B.M., as the
Agent (the "Agent"), as previously amended (the "Credit Agreement," the
capitalized terms used but not otherwise defined herein being used herein as
therein defined).
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrowers, the Banks and the
Agent hereby agree as follows:
1. The last two sentences of /section/2.01 of the Credit Agreement are hereby
amended to read as follows:
The sum of (i) the aggregate unpaid principal amount of all Loans, plus
(ii) the aggregate amount of all Acceptance Obligations, plus (iii) the
aggregate amount of all Letter of Credit Obligations shall not exceed
at any time the Borrowing Base at that time and shall not exceed
$32,000,000 at any time during the High Season or $14,000,000 at any
time during the Low Season (except the months of November and December,
1997 and January, 1998 during which such sum shall not exceed
$37,000,000). Moreover, the sum of the aggregate unpaid principal
amount of all Loans plus the aggregate amount of all Acceptance
Obligations shall not exceed $20,000,000 at any time during the High
Season or $10,000,000 at any time during the Low Season (except the
months of November and December, 1997 and January, 1998 during which
such sum shall not exceed $30,000,000); the aggregate amount of all
Acceptance Obligations shall not exceed $10,000,000 at any time during
the High Season or $5,000,000 at any time during the Low Season (except
the months of November and December, 1997 and January, 1998 during
which such aggregate amount shall not exceed $10,000,000); and the
aggregate amount of all Letter of Credit Obligations with respect to
Standby Letters of Credit shall not exceed $1,000,000 at any time.
2. When it executes this Amendment and as a condition precedent to the
effectiveness of the amendment hereby of /section/2.01 of the Credit Agreement,
the Borrowers shall deliver to the Agent the following in form and substance
satisfactory to the Agent:
(a) A certificate of the Secretary (and, if required by the Agent,
the Assistant Secretary) of each Borrower authorizing this
Amendment;
<PAGE>
(b) A consent to this Amendment duly executed by each Guarantor;
and
(c) Such other certificates, documents, instruments and opinions
as the Agent or any Bank shall reasonably request.
3. The term "the Obligations" as used in the Security Agreement shall include
all obligations and liabilities of the Borrowers now or hereafter existing under
the Credit Agreement as amended by this Amendment or any or all of the Notes.
4. As amended hereby, the Credit Agreement shall remain in full force and
effect. The Borrowers acknowledge that neither of them has any right of offset
against or claim or defense in respect of the Obligations, waive any such
defense that either of them may have and represent to the Agent and the Banks
that no Event of Default (or event or circumstance which, with the passage of
time, the giving of notice, or both, would constitute an Event of Default)
exists as of the date hereof.
5. The Borrowers jointly and severally agree to pay (or, if appropriate,
reimburse) the Agent on demand the amount of any and all attorneys' fees,
documentary stamp taxes and other costs and expenses relating to this Amendment
and any documents executed in connection with this Amendment and hereby
authorize the Banks to make one or more Loans to pay any such costs and
expenses.
6. This Amendment may be executed in one or more counterparts.
7. THE BORROWERS, THE BANKS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING UNDER
OR RELATING TO THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date indicated at the head of it.
NEW M-TECH CORPORATION,
as a Borrower
By: /S/ LEONOR SCHUCK
------------------------------
Name: LEONOR SCHUCK
------------------------------
Title: VICE PRESIDENT, FINANCE
------------------------------
NEWTECH (HONG KONG) LIMITED,
as a Borrower
By: /S/ LEONOR SCHUCK
------------------------------
Name: LEONOR SCHUCK
------------------------------
Title: VICE PRESIDENT, FINANCE
------------------------------
Additional Signatures Appear On Pages 4, 5 and 6
-2-
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
By: /S/ CARIDAD ERRAZQUIN
------------------------------
Name: CARIDAD ERRAZQUIN
------------------------------
Title: VICE PRESIDENT
------------------------------
BANK LEUMI LE-ISRAEL B.M.,
as a Bank
By: /S/ CARIDAD ERRAZQUIN
------------------------------
Name: CARIDAD ERRAZQUIN
------------------------------
Title: VICE PRESIDENT
------------------------------
-4-
<PAGE>
COMERICA BANK, as a Bank
By: /S/ SHERYL METCALFE
------------------------------
Name: SHERYL METCALFE
------------------------------
Title: VICE PRESIDENT
------------------------------
-5-
<PAGE>
NATIONAL BANK OF CANADA, as a Bank
By: /S/ MICHAEL BLOOMENFELD
------------------------------
Name: MICHAEL BLOOMENFELD
------------------------------
Title: VICE PRESIDENT
------------------------------
-6-
<PAGE>
AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT ("this Amendment") is made as of
March 18, 1998 (the "Effective Date") by and among NEW M-TECH CORPORATION, a
Florida corporation, NEWTECH (HONG KONG) LIMITED, a Hong Kong limited liability
company, DURABLE ELECTRONICS INDUSTRIES LIMITED, a Hong Kong limited liability
company, ("DEI") and NEWTECH ELECTRONICS INDUSTRIES LIMITED (formerly known as
Pomillo Limited), a Hong Kong limited liability company, ("NEIL") (collectively
the "Borrowers", each a "Borrower") BANK LEUMI LE-ISRAEL B.M., COMERICA BANK and
NATIONAL BANK OF CANADA (collectively the "Banks", each a "Bank") and BANK LEUMI
LE-ISRAEL B.M., as the Agent for the Banks (the "Agent").
BACKGROUND
A. New M-Tech Corporation, Newtech (Hong Kong) Limited, the Banks and the Agent
are parties to a Credit Agreement, dated as of July 23, 1997 (as previously
amended, the "Credit Agreement", the capitalized terms used but not otherwise
defined herein being used herein as therein defined).
B. New M-Tech Corporation and Newtech (Hong Kong) Limited have requested that
DEI and NEIL become parties to the Credit Agreement, being jointly and severally
entitled to the rights of the Borrowers thereunder and liable for the
obligations of the Borrowers thereunder, and have also requested that the
duration of certain sub-limits for extensions of credit set forth in
/section/2.01 of the Credit Agreement be extended.
C. The Banks and the Agent have agreed to the foregoing requests on the terms
and conditions set forth in this Amendment.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrowers, the Banks and the
Agent hereby agree as follows:
1. From and after the Effective Date, the term "the Borrowers" , as used in the
Credit Agreement, shall mean and refer to New M-Tech, Newtech Hong Kong, DEI and
NEIL,
<PAGE>
collectively; all references to "either Borrower" or "either of the Borrowers"
in the Credit Agreement shall be read as references to "any Borrower" or "any of
the Borrowers"; and DEI and NEIL (in addition to New M-Tech and Newtech Hong
Kong) shall be entitled to all the benefits of being a Borrower under the Credit
Agreement (as revised by this Amendment) and shall be jointly and severally
liable for all the Obligations. DEI and NEIL each hereby agrees to be bound by
all the terms and conditions of the Credit Agreement (as revised by this
Amendment).
2. The following definitions in /section/1.01(a) of the Credit Agreement are
hereby amended or added as follows effective as of the Effective Date:
"DEBENTURES" means the Debenture executed by Newtech (Hong Kong) in
favor of the Agent as of the Agreement Date (as amended, supplemented
or restated from time to time), the Debenture executed by DEI in favor
of the Agent in March, 1998 and the Debenture executed by NEIL in favor
of the Agent in March, 1998.
"NOTES" means each Revolving Note of the Borrowers payable to the order
of a Bank, evidencing such Bank's Loans and executed by the Borrowers
in March, 1998.
"SECURITY AGREEMENTS" means the Security Agreement executed by New
M-Tech, Newtech (Hong Kong) and NewTech International Corporation in
favor of the Agent as of the Agreement Date (as amended, supplemented
or restated from time to time), the Security Agreement executed by DEI
in favor of the Agent in March, 1998 (as amended, supplemented or
restated from time to time), and the Security Agreement executed by
NEIL in favor of the Agent in March, 1998 (as amended, supplemented or
restated from time to time).
"SECURITY DOCUMENTS" means the Security Agreements, the Debentures and
each other guaranty agreement, mortgage, deed of trust, security
agreement, pledge agreement, assignment of proceeds agreement or other
security or collateral document securing any or all of the Obligations.
From and after the Effective Date, all references in the Credit Agreement to
"the Security Agreement" shall be read as "the Security Agreements" and all
references to "the Debenture" shall be read as "the Debentures".
3. The last two sentences of /section/2.01 of the Credit Agreement are hereby
amended to read as follows:
The sum of (i) the aggregate unpaid principal amount of all Loans, plus
(ii) the aggregate amount of
-2-
<PAGE>
all Acceptance Obligations, plus (iii) the aggregate amount of all
Letter of Credit Obligations shall not exceed at any time the Borrowing
Base at that time and shall not exceed $32,000,000 at any time during
the High Season or $14,000,000 at any time during the Low Season
(except the months of November and December, 1997 and January through
April, 1998 during which such sum shall not exceed $37,000,000).
Moreover, the sum of the aggregate unpaid principal amount of all Loans
plus the aggregate amount of all Acceptance Obligations shall not
exceed $20,000,000 at any time during the High Season or $10,000,000 at
any time during the Low Season (except the months of November and
December, 1997 and January through April, 1998 during which such sum
shall not exceed $30,000,000); the aggregate amount of all Acceptance
Obligations shall not exceed $10,000,000 at any time during the High
Season or $5,000,000 at any time during the Low Season (except the
months of November and December, 1997 and January through April, 1998
during which such aggregate amount shall not exceed $10,000,000); and
the aggregate amount of all Letter of Credit Obligations with respect
to Standby Letters of Credit shall not exceed $1,000,000 at any time.
4. When it executes this Amendment and as a condition precedent to DEI's and
NEIL's being entitled to request Extensions of Credit, the Borrowers shall
deliver to the Agent the following in form and substance satisfactory to the
Agent:
(a) Three Notes, each duly executed by the Borrowers and payable
to the order of a Bank in a principal amount equal to such
Bank's Proportionate Share of $37,000,000;
(b) A Security Agreement in favor of the Agent duly executed by
DEI and a Security Agreement in favor of the Agent duly
executed by NEIL;
(c) A Debenture in favor of the Agent duly executed by DEI and a
Debenture in favor of the Agent duly executed by NEIL (both
governed by Hong Kong law and suitable for recordation in the
appropriate registries in Hong Kong as deemed necessary or
desirable by the Agent);
(d) A certificate of the Secretary (and, if required by the Agent,
the Assistant Secretary) or, as the case may be, resolutions
duly passed by the Directors and (if applicable) Shareholders
of each Borrower authorizing this Amendment, the Notes (as
redefined by this Amendment) and, in the case of each of DEI
and NEIL, the Security Agreement and Debenture to which it is
a party;
(e) Copies of the up-to-date memorandum and articles of
association or equivalent document of each of DEI, NEIL and
Durable Electrical Metal Factory Limited, certified as sure
and correct by its Director;
-3-
<PAGE>
(f) A Confirmation of Guaranty Agreement duly executed by Joel
Newman and a Confirmation of Guaranty Agreement duly executed
by Windmere;
(g) A Subordination Agreement duly executed by Durable Electrical
Metal Factory Limited ("DEM") in favor of the Banks with
respect to obligations owed by DEI and NEIL to DEM, together
with the resolutions duly passed by the Directors and (if
applicable) the Shareholders of DEM approving and authorizing
such Subordination Agreement;
(h) A favorable, written opinion (addressed to the Agent and the
Banks) of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., Florida counsel for the Borrowers and the
Guarantors, dated the date of this Amendment and covering such
matters as the Agent or any Bank may request and a favorable,
written opinion (addressed to the Agent and the Banks) of
Coudert Brothers, Hong Kong counsel for the Banks, dated the
date of this Amendment and covering such matters as the Agent
or any Bank may request;
(i) An appointment by each of DEI, NEIL and DEM of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as its agent
to receive service of process on its behalf in any state or
federal court located in the State of Florida and an
acceptance of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A. of such appointment;
(j) Certified UCC-11, lien, judgment and tax search reports for
each jurisdiction in which any Borrower is located or has
inventory, showing no Liens or financing statements of record
against any Borrower except those permitted by the Credit
Agreement;
(k) Whatever certificates and affidavits the Agent requests to
establish that no Florida documentary stamp tax or intangible
tax is or will be owing in connection with the Loan Documents;
(l) Executed copies of UCC financing statements (and the
equivalent to be filed in each office necessary and in the
Agent's judgment desirable to perfect the Security Interests
created by the Security Agreements referred to above) and
evidence of the payment of all taxes and fees required to be
paid in connection with the filing thereof and also evidence
that whatever filings or other actions required to perfect the
Security Interests under the law of Hong Kong have been made
or taken; and
(m) Such other certificates, documents, instruments and opinions
as the Agent or any Bank shall reasonably request.
-4-
<PAGE>
Any failure to comply with this section 4 shall constitute an Event of Default.
5. /section/5.05 of the Credit Agreement is hereby amended to read as follows:
LIENS. Create, assume or incur, or permit or suffer to exist or to be
created, assumed or incurred, any Lien upon any of its properties or
assets of any character, whether now owned or hereafter acquired, or
upon any income or profits therefrom, except for the Security Interests
created by the Security Documents and, in the case of Durable
Electronics Industries Limited ("DEI"), liens in favor of Durable
Electrical Metal Factory Limited ("DEM") on equipment and machinery
owned by DEI as of March 18, 1998 and on all DEI's inventory (now owned
or hereafter acquired) securing Debt of DEI to DEM in an amount not
exceeding $6,700,000, provided such liens are subordinate to the
Security Interests.
6. The term "the Obligations" as used in the Security Agreements and the term
"Secured Liabilities" as used in the Debentures shall include all obligations
and liabilities of the Borrowers now or hereafter existing under the Credit
Agreement as amended by this Amendment or any or all of the Notes (as redefined
by this Amendment). The term "the Notes" as used in the Tax Indemnity Agreement
among the Borrowers (except DEI and NEIL) and the Banks means all of the Notes
as originally defined in the Credit Agreement, the Notes as defined in the
previous Amendments to Credit Agreement among the Borrowers (except DEI and
NEIL) and the Banks and the Notes as redefined by this Amendment. The term "Loan
Documents" as used in the Appointment of Process Agent made by Newtech (Hong
Kong) Limited shall include without limitation the Notes (as redefined by this
Amendment) and the Tax Indemnity Agreement, of even date herewith, made by the
Borrowers in favor of the Banks.
7. DEI shall fully comply with /section/11(a) of the Security Agreement, of even
date herewith, made by it in favor of the Agent as soon as reasonably
practicable and in any event no later than May 20, 1998. In the meantime, DEI
shall keep in full force and effect the Deed of Assignment, dated as of November
1, 1997, made by Durable Electrical Metal Factory Limited in DEI's favor
relating to the insuring of DEI's plant, equipment and inventory and shall cause
Durable Electrical Metal Factory Limited to pay over any insurance proceeds
covered thereby directly to the Agent.
8. As amended hereby, the Credit Agreement shall remain in full force and
effect. The Borrowers acknowledge that none of them has any right of offset
against or claim or defense in respect of the Obligations, waive any such
defense that any of them may have and represent to the Agent and the Banks that
no Event of Default or Default exists as of the date hereof.
-5-
<PAGE>
9. The Borrowers jointly and severally agree to pay (or, if appropriate,
reimburse) the Agent on demand the amount of any and all attorneys' fees,
documentary stamp taxes and other costs and expenses relating to this Amendment
and any documents executed in connection with this Amendment and hereby
authorize the Banks to make one or more Loans to pay any such costs and expenses
or to debit any account of any Borrower with the Agent or any Bank to do so.
10. This Amendment may be executed in any number of counterparts, each of which
shall be deemed to be an original, and shall be binding upon and inure to the
benefit of all parties and their successors and permitted assigns.
11. ANY JUDICIAL PROCEEDING BROUGHT AGAINST ANY BORROWER WITH RESPECT TO THE
CREDIT AGREEMENT AS AMENDED HEREBY O R ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF FLORIDA, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS (A) ACCEPTS, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY RELATED
APPELLATE COURTS AND IRREVOCABLY AGREES (WITHOUT WAIVING ANY RIGHT TO APPEAL) TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND (B) IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
EACH OF THE BORROWERS HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS
THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, (WITH A COPY BY OVERNIGHT COURIER), AT ITS ADDRESS
SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF /section/10.01 OF
THE CREDIT AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED ON THE THIRD
DAY AFTER SUCH SERVICE IS DEPOSITED IN THE MAIL. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER
AGAINST ANY BANK OR THE AGENT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE CREDIT AGREEMENT OR
THE OTHER LOAN DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT LOCATED IN MIAMI-DADE
COUNTY IN THE STATE OF FLORIDA.
-6-
<PAGE>
12. This Amendment shall be governed by and construed in accordance with the
laws of the State of Florida, U.S.A.
13. THE BORROWERS, THE BANKS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING UNDER
OR RELATING TO THIS AMENDMENT OR ANY LOAN DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date indicated at the head of it.
NEW M-TECH CORPORATION,
as a Borrower
By: /s/ Leonor Schuck
-----------------------------
Name: Leonor Schuck
-----------------------------
Title: Vice President
-----------------------------
NEWTECH (HONG KONG) LIMITED,
as a Borrower
By: /s/ Leonor Schuck
-----------------------------
Name: Leonor Schuck
-----------------------------
Title: Vice President
-----------------------------
DURABLE ELECTRONICS INDUSTRIES LIMITED,
as a Borrower
By: [ILLEGIBLE]
-----------------------
Name: [ILLEGIBLE]
-----------------------
Title: [ILLEGIBLE]
-----------------------
NEWTECH ELECTRONICS INDUSTRIES LIMITED
formerly known as Pomillo Limited), as a Borrower
By: [ILLEGIBLE]
-----------------------
Name: [ILLEGIBLE]
-----------------------
Title: [ILLEGIBLE]
-----------------------
-7-
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as the Agent
By: /s/ Caridad Errazquin
----------------------------------
Name: Caridad Errazquin
----------------------------------
Title: Vice President
----------------------------------
BANK LEUMI LE-ISRAEL B.M.,
as a Bank
By: /s/ Caridad Errazquin
----------------------------------
Name: Caridad Errazquin
----------------------------------
Title: Vice President
----------------------------------
-8-
<PAGE>
COMERICA BANK, as a Bank
By: /s/ Sheryl Metcalfe
--------------------------------
Name: Sheryl Metcalfe
--------------------------------
Title: Vice President
--------------------------------
-9-
<PAGE>
NATIONAL BANK OF CANADA, as a Bank
By: /s/ Jean Page
---------------------------
Name: Jean Page
---------------------------
Title: Vice President
---------------------------
-10-
EXHIBIT 10.24
INDEMNIFICATION AND SECURITY AGREEMENT
Dated as of September 18, 1997
This INDEMNIFICATION AND SECURITY AGREEMENT (the "Agreement") is made
as of the date set forth above by NEW M-TECH CORPORATION, a Florida corporation
having an address at 16550 N.W. 10th Avenue, Miami, Florida 33169, ("Newtech")
and NEWTECH HONG KONG, LTD, a Hong Kong corporation having an address at Room
909, Hollywood Plaza, 610 Nathan Road, Kowloon, Hong Kong, (collectively with
New M-Tech, the "Grantors", each a "Grantor"), in favor of Windmere
Durable-Holdings, Inc., a Florida corporation having an office in Miami Lakes,
Florida as guarantor (the "Guarantor").
BACKGROUND
A. The Guarantor has furnished to Bank Leumi le-Israel B.M., Comerica
Bank and the National Bank of Canada (collectively, the "Banks") a guarantee
pursuant to a Guaranty Agreement dated July 23, 1997 ("Guaranty Agreement") and
an Amendment to Guaranty Agreement ("Amendment to Guaranty") dated as of
September 8, 1997 on behalf of Grantors for an extension of a credit
facility provided to Grantors ("Credit Facility") by the Banks.
B. The Grantors have entered into a Revolving Note dated September 18,
1997 ("Revolving Note") to Guarantor in the approximate principal amount of
$3,000,000 in exchange for Guarantor's obtaining (and making reimbursements with
respect to) certain letters of credit for the Grantors' benefit.
C. It is a condition to the Guarantor making the Amendment to Guaranty
and obtaining the letters of credit that the Grantors shall have executed and
delivered to the Guarantor this Agreement, which includes indemnification of
Guarantor by Grantors for obligations assumed by Guarantor under the Amendment
to Guaranty.
D. The Banks have consented to this Agreement and accepted the
Subordination Agreement dated September 8, 1997 in the Amendment to Credit
Agreement dated September 8, 1997 ("Amendment to Credit Agreement").
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and adequacy of which are hereby
acknowledged) and in order to induce the Guarantor to make the Guarantee, the
Grantors hereby agree as follows:
Section 1. GRANT OF SECURITY INTEREST SUBORDINATE TO THE BANKS. Each
Grantor hereby assigns and pledges to the Guarantor, and hereby grants to the
Guarantor a security interest in, all of such Grantor's right, title and
interest in and to the following, in all cases whether now or hereafter existing
and whether now owned or hereafter acquired (the "Collateral"), subject and
subordinate
<PAGE>
to the Banks' security interest in the Collateral as set forth in the Security
Agreement dated July 23, 1997 entered into among Grantors and the Banks ("First
Security Agreement").
(a) All inventory in all of its forms, wherever located,
(including, but not limited to, (i) all raw materials and work in process
therefor, all finished goods thereof, and all materials used or consumed in the
production thereof, (ii) all goods in which such Grantor has a joint or other
interest or right of any kind (including, without limitation, goods in which
such Grantor has an interest or right as consignee), and (iii) all goods which
are returned to or repossessed by such Grantor), and all accessions thereto,
products thereof and documents therefor (collectively, the "Inventory" or
"Inventory");
(b) The Kmart Contract and all other contracts and contract
rights, the AAAA World SBLC, the Kmart SBLC and all other letters of credit, all
accounts, all chattel paper, all general intangibles and all other obligations
and rights of any kind, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services (collectively, the
"Receivables"), and all rights now or hereafter existing in and to all security
agreements, leases, and other contracts securing or otherwise relating to any of
the foregoing (collectively, the "Related Contracts");
(c) The Windmere Notes and all other notes, trade acceptances
and other instruments (collectively, the "Instruments"), which in the case of
the Windmere Notes shall include the right to set-off any amounts due and owing
by Guarantor under the Windmere Notes;
(d) All securities including without limitation the United
States Treasury bills described in Schedule A attached to the First Security
Agreement (collectively, the "Securities");
(e) All equipment, machines, motor vehicles, furnishings and
fixtures, all parts thereof, all accessories thereto and all replacements
thereof (collectively, the "Equipment");
(f) The trademark license created by the WCI License Agreement
and all other trademarks, trademark licenses, trade names, service marks, logos,
patents, and copyrights and the goodwill symbolized by any of the foregoing
(collectively, the "Marks" );
(g) The Cash Collateral Account;
(h) All books, records, programs and software relating to any
of the foregoing Collateral;
(i) All other tangible or intangible personal property; and
(j) All cash and non-cash proceeds of any and all of the
foregoing Collateral (including, without limitation, proceeds which constitute
property of the types described in clauses (a), (b), (c), (d), (e), (f) and (g)
of this section 1) and, to the extent not otherwise included, all payments under
insurance (whether or not the Guarantor is the loss payee thereof), or any
indemnity, warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral.
2
<PAGE>
Section 2. SECURITY FOR OBLIGATIONS. This Agreement acknowledges and
confirms the obligations and liabilities of each and either Grantor to indemnify
and reimburse the Guarantor for Guarantor's payment of any amounts (plus
interest thereon and collection costs) under the Guaranty Agreement and
Amendment to Guaranty, whether for principal, interest, fees, expenses or
otherwise, whether now or hereafter existing or arising, whether direct or
indirect, whether absolute or contingent, whether joint or several and whether
acquired directly or by assignment. This Agreement also acknowledges and
confirms the obligations of Grantors' under the Revolving Note. This Agreement
secures the Collateral for payment of the obligations of each and either Grantor
to the Guarantor for only that portion of such obligation in excess of
$3,000,000. This Agreement further secures the payment of the obligations of
each and either Grantor of the Revolving Note. This Agreement shall not secure
the $2 million note from New M-Tech to Guarantor dated June 26, 1997. The
obligations referred to in this Section 2 as being secured by the Agreement are
referred to as the "Obligations." It is the intent of the Grantors that the
assets of each Grantor shall secure not only the Obligations owed by such
Grantor but also the Obligations owed by the other Grantor.
Section 3. GRANTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to which such Grantor is a party to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise
by the Guarantor of any of the rights hereunder shall not release either Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) the Guarantor shall not have any obligation
or liability under the contracts and agreements included in the Collateral by
reason of this Agreement (except for the Windmere Notes), nor shall the
Guarantor be obligated to perform any of the obligations or duties of either
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
Section 4. REPRESENTATIONS AND WARRANTIES Each Grantor represents and
warrants (and, as long as any of the Obligations are unpaid or the Guarantee is
in effect, shall be deemed continuously to do so) as follows:
(a) All of the Inventory and Equipment of such Grantor is
located at the address specified in Schedule B attached to the First Security
Agreement. The chief place of business and chief executive office of such
Grantor and the office where such Grantor keeps its records concerning the
Receivables, and all originals of all chattel paper which evidence Receivables,
are located at such Grantor's address specified in Schedule B attached to the
First Security Agreement. All copies of all chattel paper which evidence
Receivables have been delivered to the Guarantor. None of the Receivables is
evidenced by a promissory note or other instrument except such instruments as
have been delivered and endorsed to the Bank with a copy delivered to Guarantor,
and all of the Receivables consisting of accounts arose out of bona fide sales
of goods that have been delivered by a Grantor.
(b) Such Grantor owns all the Collateral free and clear of
any lien, security interest, charge or encumbrance except the First Security
Agreement and the security interests created hereby. Other than pursuant to the
First Security Agreement, no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral owned by
3
<PAGE>
such Grantor is on file in any recording office except such as may have been
filed in favor of the Guarantor relating to this Agreement. Such Grantor has no
trade name and has never had, nor done business under, another name.
(c) Such Grantor has exclusive possession and control of the
Inventory and Equipment.
(d) The Kmart Contract, the WCI License Agreement and the
Windmere Notes are all valid obligations of the parties thereto enforceable in
accordance with their terms, and no material default has occurred with respect
to any of them. No prepayment has been made on any of the Windmere Notes.
(e) Subject and subordinate to the First Security Agreement
and filings thereunder, this Agreement creates a valid and perfected second
priority security interest in the Collateral owned by such Grantor securing the
payment of the Obligations to the Guarantor, and all filings and any other
actions necessary or desirable to perfect and protect such security interest
have been duly taken.
(f) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the grant by such Grantor of the security interest
granted hereby or for the execution, delivery or performance of this Agreement
by such Grantor or (ii) for the perfection of or the exercise by the Guarantor
of its rights and remedies hereunder.
(g) Each Grantor has received adequate consideration and
reasonably equivalent value for entering into this Agreement and, in any event,
will not be rendered insolvent by it or left with unreasonably small capital to
conduct such Grantor's businesses.
Section 5. FURTHER ASSURANCES.
(a) Each Grantor agrees that from time to time and subject to
the Banks' priority rights under the First Security Agreement, at the expense of
such Grantor, such Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Guarantor may request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Guarantor to exercise and enforce its rights and remedies hereunder with respect
to any of the Collateral. Without limiting the generality of the foregoing, each
Grantor will, upon reasonable notification by the Guarantor: (i) mark
conspicuously each document included in the Inventory and each chattel paper
included in the Receivables and each Related Contract and, at the request of the
Guarantor, each of its records pertaining to the Collateral, with a legend, in
form and substance satisfactory to the Guarantor, indicating that such document,
chattel paper, Related Contract or Collateral is subject to the security
interest granted hereby; (ii) if any Receivable shall be evidenced by a
promissory note or other instrument or chattel paper, deliver and pledge to the
Guarantor hereunder such note, instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Guarantor; and (iii) execute and file such
financing or continuation statements (or amendments
4
<PAGE>
thereto), notices of lien and other instruments or notices, as may be necessary
or desirable, or as the Guarantor may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Guarantor to file one
or more financing or continuation statements (and amendments thereto) and
notices of Liens and make such other filings and registrations relative to all
or any part of the Collateral owned by such Grantor without the signature of
such Grantor where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement.
(c) Each Grantor shall furnish to the Guarantor from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Guarantor may
request, all in a form and with a degree of detail satisfactory to the
Guarantor.
Section 6. AS TO INVENTORY. Each Grantor shall:
(a) Keep the Inventory owned by it at the place therefor
specified in Schedule B attached to the First Security Agreement (or in direct
transit thereto);
(b) Keep the Inventory owned by such Grantors in good
condition, in compliance with all government requirements for its sale, and
salable in the ordinary course of such Grantor's business;
(c) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Inventory,
except to the extent the validity thereof is being contested in good faith and
without jeopardizing the value of the Inventory as security hereunder;
(d) Permit the Guarantor and its agents to make inspections
and audits of the Inventory when and as often as the Guarantor considers
necessary or desirable; and
(e) Not sell any Inventory except in the ordinary course of
its business substantially in the same manner as now conducted and in accordance
with Applicable Law.
Section 7. AS TO RECEIVABLES.
(a) Each Grantor shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning the
Receivables, and all originals of all chattel paper which evidence Receivables,
at the location therefor specified in Schedule B. Each Grantor shall hold and
preserve such records and chattel paper and shall permit representatives of the
Guarantor at any time during normal business hours to inspect and make abstracts
from such records and chattel paper, to test the Receivables and to make
inquiries of the obligors of the Receivables.
5
<PAGE>
(b) Except as otherwise provided in this section 7(b), each
Grantor shall continue to collect, at its own expense, all amounts due or to
become due such Grantor under the Receivables. In connection with such
collections, each Grantor may take (and, at the Guarantor's direction, shall
take) such action as such Grantor or the Guarantor may deem necessary or
advisable to enforce collection of the Receivables; provided, however, that the
Guarantor shall have the right at any time after occurrence of a Default
(regardless of whether the Obligations have been accelerated), upon written
notice to such Grantor of its intention to do so, to, subject to the consent of
the Banks and generally to the First Security Agreement, notify the account
debtors or obligors under any Receivables of the assignment of such Receivables
to the Guarantor and to direct such account debtors or obligors to make payment
of all amounts due or to become due to such Grantor thereunder directly to the
Guarantor and, upon such notification and at the expense of such Grantor, to
enforce collection of any such Receivables, and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as such
Grantor might have done. After receipt by either Grantor of the notice from the
Guarantor referred to in the proviso to the preceding sentence, and subject to
consent of the Banks and the First Security Agreement, (i) all amounts and
proceeds (including instruments) received by such Grantor in respect of the
Receivables shall be received in trust for the benefit of the Guarantor
hereunder, shall be segregated from other funds of such Grantor and shall be
forthwith paid over to Guarantor in the same form as so received (with any
necessary endorsement) to be held as cash collateral in the Cash Collateral
Account and applied as provided by section 16(b), and (ii) such Grantor shall
not adjust, settle or compromise the amount or payment of any Receivable, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon that is material or outside the ordinary course of
such Grantor's business. No account party or obligor under a Receivable
shall have any duty to inquire whether a Default has occurred before making
payments directly to the Guarantor. After the occurrence of a Default or an
Event of Default, the Guarantor may settle or adjust disputes and claims
directly with the obligors of the Receivables for amounts and on terms which the
Guarantor considers advisable and in all such cases only the net amounts
received by the Guarantor in payment of such amounts (after deduction of any
amounts payable under section 17) need be applied to the Obligations. Each
Grantor shall fully cooperate with the Guarantor's efforts to collect the
Receivables including notifying and instructing the parties obligated on them to
make payment to the Guarantor rather than either Grantor.
(c) New M-Tech shall comply fully with its obligations under
the Kmart Contract, the WCI License Agreement and any other agreements included
in the Receivables or Related Contracts and shall refrain from any act or
omission that would interfere with, or in any manner prevent, the Guarantor's
obtaining the full benefits of any of the Receivables and Related Contracts.
Without the prior written consent of the Guarantor, New M-Tech shall not modify
or amend the Kmart Contract or the WCI License Agreement (or any other material
agreement included in the Receivables or Related Contracts) and shall not
release any party liable thereunder.
Section 8. AS TO EQUIPMENT. Each Grantor shall:
(a) At all times keep the Equipment owned by it at the address
for such Grantor specified in Schedule B;
6
<PAGE>
(b) Not sell or otherwise dispose of any of the Equipment
except that such Grantor may make normal replacement of Equipment in the
ordinary course of business provided the new Equipment is at least equal in
value to the replaced Equipment and is free and clear of all liens except ones
in favor of the Guarantor;
(c) Cause the Equipment owned by it to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual, and
shall forthwith, or in the case of any loss or damage to any of the Equipment as
quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end, and shall promptly furnish to the
Guarantor a statement respecting any loss or damage to any of the Equipment;
(d) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment
except to the extent the validity thereof is being contested in good faith and
without jeopardizing the value of the Equipment as security hereunder.
Section 9. AS TO INSTRUMENTS.
(a) Upon satisfaction and cancellation of the First Security
Agreement, each Grantor shall deliver to the Guarantor each Instrument
(including but not limited to each Windmere Note) held by it, with whatever
endorsements and instruments of transfer the Guarantor requires, to be held by
the Guarantor as long as this Agreement is in effect. For purposes of perfecting
the Guarantor's security interest therein, possession of an Instrument by an
agent of the Guarantor shall constitute possession thereof by the Guarantor and
any possession thereof by either Grantor shall be construed as possession by a
custodial agent for the Guarantor.
(b) The Guarantor is hereby irrevocably authorized (but not in
any manner obligated), in its sole discretion, and whether or not a Default or
an Event of Default shall have occurred, to collect any and all Instruments and
to apply the proceeds thereof against any of the Obligations (whether or not
then due). Nothing in this Agreement shall impose on the Guarantor any greater
responsibility with respect to any Instruments than it would have under the
International Chamber of Commerce Uniform Rules for Collections. The assignments
and authorizations contained in this section 9 (or elsewhere herein) shall not
in any way release either Grantor of its obligations to pay the Obligations in
full, and each Grantor shall be fully liable for any deficiencies. Each Grantor
shall fully cooperate with the Guarantor's efforts to collect the Instruments
including notifying and instructing the parties obligated on them to make
payment to the Guarantor rather than either Grantor.
(c) Nothing in this section 9 shall be construed or operate so
as to impose any obligation or duties on the Guarantor. The powers conferred on
the Guarantor hereunder are subject to the Banks' rights under the First
Security Agreement and are solely to protect Guarantor's interest in the
Instruments and shall not impose any duty on it to exercise any such powers,
except to use reasonable care in the custody of any Instruments which the
Guarantor has physical possession of itself (as distinguished, for instance,
from possession through an agent) and
7
<PAGE>
accounting for monies actually received by it hereunder (as distinguished, for
instance, for monies received by an agent but not remitted to the Guarantor)
without limiting the generality of the foregoing, the Guarantor shall not have
liability to either Grantor in connection with any misfeasance, malfeasance or
negligence on the part of any institutional agent whom the Guarantor has
selected in good faith, and no payment shall be considered to have been received
by the Guarantor merely by virtue of its having been received by such an agent
unless the Guarantor has directed that such payment be paid to such custodian or
Guarantor.
(d) No Grantor shall release any party liable under an
Instrument or do or agree to do anything that would impair any Instrument's
value as security hereunder.
Section 10. AS TO SECURITIES.
(a) New M-Tech represents and warrants to the Guarantor that,
subject to the First Security Agreement, the Securities described in Schedule A
are all beneficially owned solely by it, and have an Eligible Securities Value
of $1,200,000 or more.
(b) Subject to the full satisfaction and cancellation of the
First Security Agreement, if New M-Tech receives any increase, principal or
redemption payment or distribution in connection with the Securities, New M-Tech
shall receive and retain it in trust for the benefit of the Guarantor.
(c) If during the term of this Agreement, any dividend,
reclassification, readjustment, or other change is declared or made in the
capital structure of the issuer of any of the Securities, all new, substituted,
and additional securities issued by reason of any such change shall be held by
New M-Tech in trust for the benefit of the Guarantor.
(d) So long as no Event of Default has occurred, all dividends
and interest on the Securities shall be received by or remitted to New M-Tech.
At any time after and during the continuance of an Event of Default, (i) all
interest and dividends on the Securities shall be received by or remitted to the
Guarantor (subject to the First Security Agreement), and applied by it to the
Obligations, and (ii) New M-Tech shall not demand or receive any interest or
dividends from the Securities, and, if New M-Tech receives any such interest or
dividends, New M-Tech shall receive the same in trust for the benefit of the
Guarantor and shall, immediately and without the Guarantor's request, pay the
same to the Guarantor.
(e) Upon the satisfaction and cancellation of the First
Security Agreement, at any time after and during the continuance of an Event of
Default, the Guarantor shall have the right, in its discretion and without
notice to either Grantor, to transfer to or to register in the name of the
Guarantor or any of its nominees any or all of the Securities and New M-Tech
shall fully cooperate with any such transfer or registration.
Section 11. As to Marks
(a) The Grantors represent and warrant that one or the other
of them is the true and lawful owner or licensee of the Marks listed in Schedule
C attached to the First Security Agreement and that those Marks constitute all
the Marks registered in the United States Patent
8
<PAGE>
and Trademark Office that either Grantor now owns or uses in connection with its
business. Each Grantor represents and warrants that it owns or is licensed
to use all Marks that it uses. Each Grantor further warrants that it is aware of
no third party claim that any aspect of such Grantor's present or contemplated
business operations infringes or will infringe any Mark other than the claims of
Westinghouse Electric Corporation made in certain lawsuits pending as of the
date of this Agreement.
(b) Each Grantor hereby agrees not to divest itself of any
right under a Mark without the prior written consent of the Guarantor.
(c) Each Grantor agrees, promptly upon learning thereof, to
notify the Guarantor in writing of the name and address of, and to furnish such
pertinent information that may be available with respect to, any party who may
be infringing or otherwise violating any of such Grantors' rights in and to any
significant Mark, or with respect to any party claiming that such Grantor's use
of any significant Mark violates any property right of that party. Each Grantor
further agrees, unless otherwise directed by the Guarantor, diligently to
prosecute any person infringing any significant Mark.
(d) Each Grantor agrees to use its significant Marks in
interstate commerce during the time in which this Agreement is in effect,
sufficiently to preserve such Marks as trademarks or service marks registered
under the laws of the United States.
(e) Each Grantor shall, at its own expense, diligently process
all documents required by the Trademark Act of 1946, 15 U.S.C. section section
1051 et seq. to maintain trademark registration, including but not limited to
affidavits of use and applications for renewals of registration in the United
States Patent and Trademark Office for all of its Marks pursuant to 15 U.S.C.
section section 1058(a), 1059 and 1065, and shall pay all fees and disbursements
in connection therewith, and shall not abandon any such filing of affidavit of
use or any such application of renewal prior to the exhaustion of all
administrative and judicial remedies without prior written consent of the
Guarantor. Each Grantor agrees to notify the Guarantor six months prior to the
dates on which the affidavits of use or the applications for renewal
registration are due that the affidavit of use or the renewal is being
processed.
(f) If any Mark registration issues hereafter to either
Grantor as a result of any application now or hereafter pending before the
United States Patent and Trademark Office, within 30 days of receipt of such
certificate such Grantor shall deliver a copy of such certificate, and a grant
of security in such mark to the Guarantor, confirming the grant thereof
hereunder, in form and substance satisfactory to the Guarantor.
(g) If an Event of Default shall occur, the Guarantor, subject
to the consent of the Banks under the First Security Agreement for so as long as
it remains in effect, by written notice to the Grantors, may take any or all of
the following actions: (i) declare the entire right, title and interest of the
Grantors in and to each of the Marks, together with all trademark rights and
rights of protection to the same, vested, in which event such rights, title and
interest shall immediately vest, in the Guarantor, in which case each Grantor
agrees to execute an assignment, in form and substance satisfactory to the
Guarantor, of all its rights, title and interest in and to the
9
<PAGE>
Marks to the Guarantor; (ii) take and use or sell the Marks and the goodwill of
each Grantor's business symbolized by the Marks and the right to carry on the
business and use the assets of such Grantor in connection with which the Marks
have been used; and (iii) direct each Grantor to refrain, in which event such
Grantor shall refrain, from using the Marks in any manner whatsoever, directly
or indirectly, and, if requested by the Guarantor, change such Grantor's
corporate name to eliminate therefrom any use of any Mark and execute such
request to further confirm this and to transfer ownership of the Marks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Guarantor.
Section 12. INSURANCE.
(a) Each Grantor shall, at its own expense, maintain insurance
with respect to the Inventory and the Equipment in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory to the
Guarantor from time to time. Upon or after any Event of Default hereunder, each
policy for property damage insurance shall be amended (i) to provide for all
losses (except for losses of less than $15,000 per occurrence) to be paid
directly to the Guarantor subject to the First Security Agreement, (ii) to name
such Grantor and the Guarantor as insured parties thereunder (without any
representation or warranty by or obligation upon the Guarantor) as their
interests may appear, (iii) to contain the agreement by the insurer that any
loss thereunder shall be payable to the Guarantor notwithstanding any action,
inaction or breach of representation or warranty by such Grantor, (iv) to
provide that there shall be no recourse against the Guarantor for payment of
premiums or other amounts with respect thereto and (v) to provide that at least
ten days' prior written notice of cancellation or of lapse shall be given to the
Guarantor by the insurer. Each Grantor shall, if so requested by the Guarantor,
deliver to the Guarantor original or duplicate policies of such insurance and,
as often as the Guarantor may reasonably request a report of reputable insurance
broker with respect to such insurance. Further, each Grantor shall, at the
request of the Guarantor, duly execute and deliver instruments of assignment of
such insurance policies to comply with the requirements of this section 12 and
cause the respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
either Grantor pursuant to this section 12 may be paid directly to the person
who shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this section
12 is not applicable, the Grantor which owned such Equipment or Inventory shall
make or cause to be made the necessary repairs to or replacements of such
Equipment or Inventory, and any proceeds of insurance maintained by such Grantor
pursuant to this section 12 shall be paid to such Grantor as reimbursement for
the costs of such repairs or replacements.
(c) Upon the occurrence and during the continuance of any
Default, all insurance payments in respect of the actual and constructive total
loss (in excess of $15,000 per occurrence) of such Inventory or Equipment shall
be paid to and applied by the Guarantor as specified in section 16(b), subject
to the satisfaction and cancellation of the First Security Agreement.
Section 13. GUARANTOR APPOINTED ATTORNEY-IN-FACT. Upon the satisfaction
and cancellation of the First Security Agreement, each Grantor shall irrevocably
appoint the Guarantor such Grantor's
10
<PAGE>
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor, the Guarantor or otherwise, from time to time in
the Guarantor's discretion, to take any action and to execute any instrument
which the Guarantor may deem necessary or advisable to accomplish the purposes
of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Guarantor pursuant to section 12,
(b) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral,
(c) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i) or (ii)
above, and
(d) to file any claims or take any action or institute any
proceedings which the Guarantor may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of the
Guarantor with respect to any of the Collateral.
Section 14. GUARANTOR MAY PERFORM. Subject to that First Security
Agreement, if either Grantor fails to perform any agreement contained herein,
the Guarantor may itself perform, or cause performance of, such agreement, and
the expenses of the Guarantor incurred in connection therewith shall be payable
by such Grantor under section 17(b). The Grantors assume all liability and
responsibility in connection with the Collateral, and the liability of the
Grantors to pay the Obligations shall not be diminished or otherwise affected by
reason of any Collateral being lost, destroyed, stolen, damaged or otherwise
unavailable for any reason.
Section 15. THE GUARANTOR'S DUTIES. The powers conferred on the
Guarantor hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Guarantor shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
Section 16. REMEDIES. If any Event of Default shall have occurred as
that term is defined in the First Security Agreement and the Banks have notified
Guarantor that the Grantors are in default under the First Security Agreement
and have sought payment from Guarantor under the Guaranty and Amendment to
Guaranty, and subject to the priority rights of the Banks under the First
Security Agreement,
(a) The Guarantor may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code in effect in the State of Florida (the "Code")
(whether or not the Code applies to the affected Collateral) and also may (i)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Guarantor forthwith, assemble all or part of the
Collateral owned by such Grantor
11
<PAGE>
as directed by the Guarantor and make it available to the Guarantor at a place
to be designated by the Guarantor which is reasonably convenient to both parties
and (ii) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of the
Guarantor's offices or else where, for cash, on credit or for future delivery,
and upon such other terms as the Guarantor may deem commercially reasonable.
Each Grantor agrees that to the extent notice of sale shall be required by law,
at least ten days' notice to such Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Guarantor shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Guarantor may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(b) All cash proceeds received by the Guarantor in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Guarantor, be held by the Guarantor in
the Cash Collateral Account (or otherwise) as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts payable to the
Guarantor pursuant to section 17) in whole or in part by the Guarantor against,
all or any part of the Obligations in such order as the Guarantor shall elect.
The Grantors shall be jointly and severally liable for any deficiency.
(c) If Newtech is in default of any payment due under the
Revolving Note, Guarantor may seek to enforce the remedies set forth in (a) and
(b) of this section 16 and otherwise in accordance with this Agreement only if
Newtech does not make the required payment to Guarantor within fifteen (15) days
after notice of default. In the event that the fifteen (15) day period has
expired, but the Credit Facility is still in effect to the extent of the amount
required to make the payment and Grantors are not in default of the Credit
Facility, Newtech shall have thirty (30) days from receipt of the notice of
default to make the payment and Guarantor shall cooperate with Newtech to obtain
payment through the Credit Facility. If payment is not made within such 30 day
period, however, Guarantor may thereafter enforce such remedies, subject and
subordinate to the rights of the Banks under the First Security Agreement.
Section 17. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify the Guarantor and hold it
harmless from and against any and all claims, losses and liabilities growing out
of or resulting from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting from the
Guarantor's gross negligence or willful misconduct.
(b) Each Grantor shall upon demand pay to the Guarantor the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Guarantor
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Guarantor hereunder or (iv) the failure by such
Grantor to perform or observe any of the provisions hereof.
12
<PAGE>
Section 18. TRANSFERS AND OTHER LIENS. Neither Grantor shall, without
the Guarantor's prior written consent:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral except Inventory as provided by
section 6(e);
(b) Create or suffer to exist any lien, security interest,
charge or other encumbrance upon or with respect to any of the Collateral to
secure Debt of any person or entity, except for security interests in favor of
the Guarantor and except as provided under the First Security Agreement and the
Credit Facility.
Section 19. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by either Grantor herefrom shall in
any event be effective unless it shall be in writing and signed by the
Guarantor, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 20. NOTICES. All notices and other communications provided for
hereunder shall be in writing (which shall include communications by telefax).
All written notices and communications shall be sent by registered or certified
mail, postage prepaid, return receipt requested, by prepaid telefax, reputable
overnight courier, freight prepaid, or delivered by hand, at the following
addresses and numbers:
(i) to either Grantor:
16550 N.W. 10 Avenue
Miami, Florida 33169
Attn: President or CFO
Telefax No. (305) 367-1705
Telefax No. (305) 367-1700
(ii) to the Guarantor:
Windmere Corporation
5980 Miami Lakes Drive
Miami Lakes, FL 33014-9897
Attn: President
Telefax No. (305) 364-0502
Telephone No. (305) 362-2611
with a copy to:
Greenberg Traurig Hoffman Lipoff
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, FL 33131
Attn: Cesar Alvarez, Esq.
Section 21. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until terminated in writing by
13
<PAGE>
the Guarantor, (ii) be binding upon each Grantor, its successors and assigns and
(iii) inure to the benefit of the Guarantor, the Banks and their respective
successors, transferees and assigns.
Section 22. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Uniform Commercial Code in the State of Florida are used herein as therein
defined.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer "hereunto duly authorized as of the date
first above written.
NEW M-TECH CORPORATION
By: /s/ JOEL NEWMAN
--------------------------------------
Name: JOEL NEWMAN
Title: PRESIDENT
NEWTECH HONG KONG, LTD
By: /s/ JOEL NEWMAN
---------------------------------------
Name: JOEL NEWMAN
Title: PRESIDENT
EXHIBIT 10.25
NEWTECH
September 16, 1997
VIA FAX
Mr. Harry Schulman
Executive Vice President
Windmere-Durable Holdings, Inc.
5980 Miami Lakes Drive
Miami Lakes, Florida 33014-2467
Re: Guarantees for Bank Leumi Facility/Revolving Note
Dear Harry:
This letter agreement sets forth our understanding regarding the
guarantee provided to Bank Leumi, Comercia Bank and National Bank of Canada
(together, the "Banks") by Windmere-Durable Holdings, Inc. ("Windmere") in the
Amendment to Guaranty Agreement dated as of September 9, 1997 (the "Amendment").
Under the Amendment, Windmere increased the limit of its guarantee under the
Guarantee Agreement dated as of July 23, 1997 ("Guarantee Agreement") to $9
million, from $3 million. The $9 million limit will be reduced back to $3
million if certain loans and obligations of Newtech and Newtech Hong Kong are
reduced to certain levels by November 15, 1997, as set forth in the Amendment.
As consideration for providing the increased guarantee under the Amendment,
Newtech and Newtech Hong Kong have executed an Indemnification and Security
Agreement dated as of September 9, 1997 ("Indemnification/Security Agreement"),
in which they have pledged their assets to Windmere as collateral for the
guarantee and the Revolving Note (as described below), subject and subordinate
to the Security Agreement dated July 23, 1997 entered into by Newtech and
Newtech Hong Kong, in favor of the Banks. Further, the Banks accepted a
Subordination Agreement dated as of September 9, 1997 ("Subordination
Agreement") and consented to the Indemnification Agreement.
Newtech and Newtech Hong Kong have also entered into a Revolving Note
dated September 18, 1997 in the approximate amount of $3 million, in exchange
for Windmere obtaining (and making reimbursements with respect to) certain trade
letters of credit. The Indemnification/Security Agreement also furnishes
collateral for the Revolving Note.
Windmere and the undersigned ("Newman"), hereby agree that Newman may
at his option provide a new guarantee of $3 million ("New Guarantee") in the
form attached hereto, to the
<PAGE>
Banks in substitution for $3 million of the guarantee now provided by Windmere
under the Amendment and under the Guaranty Agreement. In the event that Newman
provides the New Guarantee, Windmere's guarantee to the Banks will be reduced by
$3 million, and the Indemnification/Security Agreement will be terminated with
respect to the subordinated pledge of assets of Newtech and Newtech Hong Kong to
Windmere, but not with respect to the indemnification and the right of Windmere
to offset any default under the Revolving Note by reduction of principal and
interest due from the $3 million and $2 million notes from Windmere to Newtech
("Windmere Notes"). Windmere shall provide notice in writing to Newtech of any
default under the Revolving Note and Newtech shall have fifteen (15) days from
receipt of such notice to cure the default. The New Guarantee and the other
actions contemplated herein are subject to consents by the Banks.
In the event that Newtech defaults in making principal and interest
payments due under the Revolving Note, Newman may at his option pay one-half of
such amount due. Upon payment by Newman of such amount, Windmere's security
interest in any collateral of Newtech and Newtech Hong Kong will terminate,
provided, however, that (1) either the New Guarantee, has also been provided by
Newman, or (2) the Credit Facility with the Banks has been paid down to the
extent that the $9 million limit under the Amendment to Guarantee has been
reduced back to the $3 million limit, or the guarantees of Windmere and Newman
to the Banks have been terminated in full due to the full repayment and
termination of the Credit Facility.
If this correctly represents our understanding, please execute below.
/S/ JOEL NEWMAN
--------------------------------
Joel Newman
Agreed to and accepted by:
WINDMERE DURABLE-HOLDINGS, INC.
By: /S/ ILLEGIBLE
---------------------------
NEW M-TECH CORPORATION
By: /S/ JOEL NEWMAN
---------------------------
NEWTECH HONG KONG LTD.
By: /S/ JOEL NEWMAN
---------------------------
-2-
<PAGE>
FORM
AMENDMENT TO GUARANTY AGREEMENT
DATED AS OF ________, 1997
This AMENDMENT TO GUARANTY AGREEMENT ("this Amendment") is made by and
among JOEL NEWMAN, an individual currently residing at 355 Ocean Boulevard,
Golden Beach, Florida 33160 (the "Guarantor"), BANK LEUMI LE-ISRAEL B.M.,
COMERICA BANK and NATIONAL BANK OF CANADA (the "Banks") and BANK LEUMI LE-ISRAEL
B.M., as Agent (the "Agent") and amends that certain Guaranty Agreement, dated
as of July 23, 1997, made by the Guarantor in favor of the Banks and the Agent
(the "Guaranty", the capitalized terms used but not otherwise defined herein
being used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor, the Banks and the Agent hereby agree as
follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated
September 9, 1997, between the Borrowers, the Banks and the Agent and to the
issuance by the Borrowers of Revolving Notes in the principal amounts of
$9,375,000, $7,500,000 and $3,125,000 in favor of Bank Leumi le-Israel B.M.,
Comerica Bank and National Bank of Canada, respectively, and acknowledges and
agrees that the Obligations as referred to and defined in the Guaranty include
all obligations and liabilities arising under the Credit Agreement, as amended
by the aforesaid Amendment to Credit Agreement, and/or any or all of the
aforesaid Revolving Notes.
2. The first sentence of ss.1(b) of the Guaranty is hereby amended to
read as follows:
The liability of Guarantor under this Guaranty shall not exceed the
following sum the "Maximum Amount"): (i) $6,000,000 (which amount shall
be reduced to $3,000,000 on November 15, 1997 if, but only if, the sum
of the aggregate unpaid principal amount of all Loans plus the
aggregate amount of all Acceptance Obligations does not exceed
$10,000,000 at that time, the aggregate amount of all Acceptance
Obligations does not exceed $5,000,000 at that time and no Event of
Default has theretofore occurred and is then continuing), plus (ii)
interest accrued under the Credit Agreement or the Notes with respect
to the amount referred to in clause (i), plus (iii) the Collection
Costs.
3. As amended hereby, the Guaranty shall remain in full force and
effect and is hereby confirmed. The Guarantor acknowledges that it has no
defenses, counterclaims or rights of offset with respect to its obligations
under the Guaranty and waives any that it may have.
<PAGE>
4. The Guarantor, the Banks and the Agent each hereby waive any right
they may have to a trial by jury in any action, proceeding or counterclaim
arising hereunder or relating hereto.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Amendment as of the date first above written.
------------------------------------------
Joel Newman
BANK LEUMI LE-ISRAEL B.M.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
COMERICA BANK
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
NATIONAL BANK OF CANADA
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
-2-
EXHIBIT 10.26
GUARANTY AGREEMENT
Dated as of July 23, 1997
This GUARANTY AGREEMENT ("this Guaranty") is made as of the date set
forth above by JOEL NEWMAN, an individual currently residing at 355 Ocean
Boulevard, Golden Beach, FL 33160 (the "Guarantor") in favor of the banks party
to the Credit Agreement referred to below (the "Banks") and BANK LEUMI LE-ISRAEL
B.M., as agent for the Banks under said Credit Agreement (the "Agent").
BACKGROUND
A. New M-Tech Corporation, a Florida corporation, ("New M-Tech") and
Newtech Hong Kong Ltd., a Hong Kong limited liability company ("Newtech Hong
Kong", and collectively with New M-Tech, the "Borrowers", each a "Borrower"),
the Banks and the Agent are parties to a Credit Agreement dated as of July 23,
1997 (as modified and supplemented and in effect from time to time, the "Credit
Agreement", the capitalized terms used but not otherwise defined herein being
used herein as therein defined), providing, subject to the terms and conditions
thereof, for Extensions of Credit.
B. The Guarantor owns 50% of the voting stock of New M-Tech, and New
M-Tech owns all the voting stock of Newtech Hong Kong. Accordingly, the
Guarantor will benefit substantially from Extensions of Credit to either or both
of the Borrowers.
C. It is a condition precedent to the Banks' making Extensions of
Credit to the Borrowers that the Guarantor shall have executed and delivered
this Guaranty.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and adequacy of which are hereby
acknowledged) and in order to induce the Banks to make Extensions of Credit to
the Borrowers, the Guarantor agrees as follows:
/section/1. GUARANTY.
(a) The Guarantor hereby absolutely and unconditionally
guarantees the punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of the Obligations and all other
obligations and liabilities of either or both of the Borrowers to each
and any Bank and/or the Agent now or hereafter existing under,
evidenced by or in any way relating to the Credit Agreement, any Note
and/or any other Loan Document, whether for principal, interest,
overdrafts, fees, commissions, expenses or otherwise (the Obligations
and such other obligations and liabilities referred to in this
/section/1 being collectively, the "Obligations"). This is a guaranty
of payment and not of collection and it shall not be affected in any
way by the absence of any action to obtain payment from the Borrowers.
In addition, the Guarantor agrees to pay any and all expenses
(including counsel fees and expenses at all
<PAGE>
levels) incurred by each Bank and the Agent in enforcing any rights
under this Guaranty (the "Collection Costs").
(b) The liability of Guarantor under this Guaranty shall not
exceed the following sum (the "Maximum Amount"): (i) $3,000,000, plus
(ii) interest accrued under the Credit Agreement or the Notes with
respect to the principal amount of $3,000,000, plus (iii) the
Collection Costs. The Maximum Amount shall not be affected by the total
amount of credit extended at any time by the Banks or the Agent to the
Borrowers, by the amount recovered from or the maximum liability set
forth in any other guaranties of the Obligations or by the amount
realized from the Collateral or any collateral for any such other
guaranties (by way of illustration, if $3,000,000 were paid by or
recovered from another guarantor of the Obligations, the Guarantor
would still be liable for any remaining Obligations up to the Maximum
Amount).
/section/2. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid strictly in accordance with the terms of the documents
governing them, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the each
Bank and the Agent with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any payment
provisions of any agreements or instruments relating to or securing any
of the Obligations or any instrument by which the Guarantor has granted
the Agent or any Bank or Banks a security interest or lien as security
here for or for any of the Obligations (said agreements and instruments
being collectively the "Loan Documents");
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from any of the Loan
Documents;
(c) any exchange, release, or nonperfection of a security
interest in, any collateral for any of the Obligations, any limitation
as to the amount of the Obligations secured by any of the Loan
Documents, any invalidity of, release, amendment or waiver of or
consent to departure from, any other guaranty for all or any of the
Obligations or any failure to obtain any guaranty contemplated by the
Loan Documents or any related commitment or proposal letter;
(d) the voluntary or involuntary bankruptcy of either
Borrower, or any assignment for the benefit of creditors,
reorganization, receivership, liquidation or other similar proceedings
affecting either Borrower or any of its assets;
(e) any present or future action of any governmental authority
amending, varying, reducing or otherwise affecting, or purporting to
amend, vary, reduce or otherwise affect, any of the Obligations, any of
the Loan Documents or this Guaranty;
-2-
<PAGE>
(f) any other event or circumstance which might otherwise
constitute a defense available to, or a discharge of, either Borrower
or a guarantor.
Nothing herein to the contrary withstanding, this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Agent
or any Bank upon the insolvency, bankruptcy or reorganization of either Borrower
or otherwise, all as though such payments had not been made.
/section/3. WAIVER. The Guarantor hereby unconditionally waives:
(a) promptness, diligence, notice of acceptance and all other
notices with respect to any of the Obligations, this Guaranty or any
disposition of collateral;
(b) any requirement that the Agent or any Bank protect,
secure, perfect or insure any security interest or lien on any property
subject thereto or exhaust any right or take any action against either
Borrower or any other person or entity or any collateral;
(c) any defense based on any event or circumstances described
in /section/2; and
(d) any duty of the Agent or any Bank to advise the Guarantor
of any information known to the Agent or such Bank regarding the
financial condition of either Borrower or any other circumstance
affecting either Borrower's ability to perform its obligations to the
Banks, it being agreed that the Guarantor assumes responsibility for
being and keeping informed regarding such condition or any such
circumstance.
/section/4. SUBROGATION. The Guarantor shall not exercise any rights
which he may acquire by way of subrogation under this Guaranty, by any payment
made hereunder or otherwise, until all the Obligations shall have been paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of the Agent and the
Banks and shall forthwith be paid to the Agent for the account of the Banks to
be credited and applied upon the Obligations, whether matured or unmatured.
/section/5. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to the Agent and the Banks as follows:
(a) The execution, delivery and performance by the Guarantor
of this Guaranty do not contravene law or any contractual restriction
binding on or affecting the Guarantor.
(b) No authorization or approval or other action by, and no
notice to or filing with, any person or any governmental authority or
regulatory body, is required for the due execution, delivery and
performance by the Guarantor of this Guaranty.
(c) The Guarantor has received adequate consideration and
equivalent value for executing and delivering this Guaranty and will
not be rendered insolvent thereby. This
-3-
<PAGE>
Guaranty is the legal, valid and binding obligation of the Guarantor
enforceable against him in accordance with its terms.
(d) There is no pending or threatened action or proceeding
affecting the Guarantor before any court, governmental agency or
arbitrator, which may materially adversely affect the Guarantor's
financial condition.
/section/6. ADDITIONAL COVENANTS. As long as this Guaranty is in
effect, the Guarantor shall, unless the Agent and the Required Banks shall
otherwise consent in writing:
(a) Comply in all material respects with all applicable laws,
rules, regulations and orders (such compliance to include, without
limitation, paying before the same become delinquent all taxes,
assessments and governmental charges) imposed upon him or upon his
property non-compliance with which would have a material adverse effect
on the financial condition or business of the Guarantor).
(b) Furnish to each Bank the following:
(i) as soon as available and in any event within 90
days after the end of each calendar year, a balance sheet of
the Guarantor as of the end of such year, a statement of
income and retained earnings of the Guarantor for such year
and a projection of the Guarantor's income for the following
year, each prepared in a form acceptable to the Agent and
certified by the Guarantor;
(ii) as soon as available and in any event within 90
days after the end of each calendar year, a copy of the
Guarantor's federal income tax return;
(iii) as soon as possible and in any event within 10
days of the Guarantor's discovery thereof, notice of any event
or circumstance which has or may have a material adverse
effect upon the financial condition of the Guarantor;
(iv) as soon as possible and in any event within 10
days after the commencement thereof or any adverse
determination therein, notice of all actions, suits and
proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality
materially affecting the Guarantor;
(v) promptly, such other information respecting the
condition or operations, financial or otherwise, of the
Guarantor as the Agent may from time to time reasonably
request.
(c) Except for this Guaranty, not create or incur any debt
(except to the Agent and the Banks) or assume, guarantee or endorse any
indebtedness the result of which would be to significantly impair the
Guarantor's ability to perform his obligations hereunder.
-4-
<PAGE>
(d) Not sell, transfer or otherwise dispose of any of his
assets or properties and not create or suffer to exist any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of his assets or
properties, if the result would be to decrease significantly the
Guarantor's net worth or to impair the ability of a judgment creditor
of the Guarantor to attach or garnish such assets or properties.
/section/7. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom shall in
any event be effective unless it shall be in writing and signed by the Agent and
the Required Banks, and then any such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
/section/8. NOTICES. All notices, requests, demands, directions or
other communications provided for hereunder shall be in writing and mailed
(certified, return receipt requested, if practicable), telegraphed or telexed to
the applicable party at the addresses indicated below:
If to the Agent:
Bank Leumi Le-Israel B.M., Miami Agency
800 Brickell Avenue
Suite 1400
Miami, FL 33131
If to the Guarantor:
the address set forth at the
head of this Guaranty
(or, if no address is set forth there, whatever address of the Guarantor appears
on the Agent's books.) Notices mailed to the Guarantor shall be deemed given
three days after being mailed or, if telecopied or telexed, when received, and
notices mailed to the Agent shall be deemed given when actually received by it.
/section/9. NO WAIVER; REMEDIES. No failure on the part of the Agent or
any Bank to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
/section/10. RIGHT OF SETOFF. Upon the occurrence of any Event of
Default (as defined in any note evidencing any of the Obligations), any Bank is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the Guarantor
against any and all of the obligations of the Guarantor now or hereafter
existing under this Guaranty, irrespective of whether or not such Bank shall
have made any demand under this Guaranty and although such obligations may be
-5-
<PAGE>
contingent and unmatured. The rights of any Bank under this /section/10 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
/section/11. CONTINUING GUARANTY. This Guaranty is a continuing
guaranty and shall (i) remain in full force and effect until payment in full of
the Obligations and written notice is given by the Agent to the Guarantor that
this Guaranty has been terminated (and thereafter with respect to any indemnity
obligations of either Borrower that survive cancellation or termination of the
Loan Documents and thereafter as long as any payment of or recovery against or
with respect to the Obligations might be rescinded or otherwise required to be
returned by the Agent or any Bank for any reason, including the bankruptcy,
insolvency or reorganization of either Borrower ), (ii) be binding upon the
Guarantor and his heirs, personal representatives, successors and assigns (even
as to Obligations incurred after his death or incompetency), and (iii) inure to
the benefit of and be enforceable by the Agent and each Bank and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), if any Bank assigns or otherwise transfers any Note held by it to any
other person or entity, such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to such Bank herein or
otherwise.
/section/12. DEFAULT. Upon the occurrence of an Event of Default (as
defined in the Credit Agreement or any note evidencing any of the Obligations),
all the Guarantor's obligations hereunder shall immediately be due and payable
in full without notice.
/section/13. GOVERNING LAW. This Guaranty shall be governed by, and
construed in accordance with, the law of the State of Florida without regard to
any conflicts-of-law principle or rule that would give effect to the law of any
other jurisdiction.
/section/14. TERMINOLOGY. As used herein, "hereof," "hereunder,"
"hereby" and "herein" refer to this Guaranty as a whole and not merely the
paragraph in which they appear. As used herein, masculine pronouns shall be read
as feminine or neuter pronouns if appropriate.
/section/15. SEVERABILITY. If any provision of this Guaranty shall be
held invalid under any applicable law, such invalidity shall not affect any
other provision of this Guaranty that can be given effect without the invalid
provision, and, to that end, the provisions hereof are severable.
/section/16. SUBORDINATION. The Guarantor hereby subordinates payment
of all debts now or hereafter owing by either Borrower to the Guarantor to any
and all Obligations. The Guarantor shall ensure that every note evidencing any
part of the subordinated debt and every ledger page relating thereto bears a
legend which indicates this subordination. The Guarantor shall not request or
accept payment of all or any security for any part of the subordinated debt,
and, if all of any part of it should be paid to the Guarantor, through error or
otherwise, the Guarantor shall immediately forward such payment to the Agent in
the form received, properly endorsed to the order of the Agent, to be applied
against the Obligations.
/section/17. MANNER AND ALLOCATION OF PAYMENTS. All payments hereunder
shall be made to the Agent at the Agent's Office. Each payment received by the
Agent hereunder with respect to the Obligations shall be made to the Agent for
the benefit of the Banks and shall be applied and
-6-
<PAGE>
distributed by the Agent in the same manner as payments received from the
Borrowers under the Credit Agreement.
/section/18. SUBMISSION TO JURISDICTION. The Guarantor hereby
irrevocably (a) submits, in any legal proceeding relating to this Guaranty, to
the non-exclusive IN PERSONAM jurisdiction of any state or United States court
of competent jurisdiction sitting in the State of Florida and agrees to suit
being brought in any such court; (b) waives any objection that he may now or
hereafter have to the venue of such proceeding in any such court located in Dade
County, Florida or that such proceeding was brought in an inconvenient court;
(c) agrees that service of process in any such proceeding may be made by
certified mail, return receipt requested, to the address set forth at the head
of this Agreement; and (d) agrees that nothing herein shall affect the right of
the Bank to effect service of process in any manner permitted by law and that
the Bank shall have the right to bring any legal proceedings (including a
proceeding for enforcement of a judgment entered by any of the aforementioned
courts) against the Guarantor in any other court or jurisdiction in accordance
with applicable law.
/section/19. WAIVER OF JURY TRIAL. THE GUARANTOR AND (BY ACCEPTANCE
HEREOF) THE AGENT AND THE BANKS EACH WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING HEREUNDER OR RELATING
HERETO.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date first above written.
/S/ JOEL NEWMAN
-------------------------------------------
JOEL NEWMAN
STATE OF FLORIDA )
) SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this __ day of
July, 1997 by Joel Newman, who is personally known to me or who has produced
______________________________________________ as identification.
__________________________________________
Notary Public, State of Florida
Print Name:_______________________________
My commission expires: (SEAL)
-7-
<PAGE>
CONFIRMATION OF GUARANTY AGREEMENT
DATED AS OF SEPTEMBER 8, 1997
This CONFIRMATION OF GUARANTY AGREEMENT ("this Confirmation") is made
by and among JOEL NEWMAN (the "Guarantor"), BANK LEUMI LE-ISRAEL B.M., COMERICA
BANK and NATIONAL BANK OF CANADA (the "Banks") and BANK LEUMI LE-ISRAEL B.M., as
Agent (the "Agent") and relates to that certain Guaranty Agreement, dated as of
July 23, 1997, made by the Guarantor in favor of the Banks and the Agent (the
"Guaranty," the capitalized terms used but not otherwise defined herein being
used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in
September, 1997, between the Borrowers, the Banks and the Agent and to the
issuance by the Borrowers of Revolving Notes in the principal amounts of
$9,375,000, $7,500,000 and $3,125,000 in favor of Bank Leumi le-Israel B.M.,
Comerica Bank and National Bank of Canada, respectively, and acknowledges and
agrees that the Obligations as referred to and defined in the Guaranty include
all obligations and liabilities arising under the Credit Agreement, as amended
by the aforesaid Amendment to Credit Agreement, and/or any or all of the
aforesaid Revolving Notes.
2. As amended hereby, the Guaranty shall remain in full force and effect and is
hereby confirmed. The Guarantor acknowledges that he has no defenses,
counterclaims or rights of offset with respect to his obligations under the
Guaranty and waives any that he may have.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Confirmation as of the date first above written.
/s/ Joel Newman
-------------------------------
JOEL NEWMAN
<PAGE>
CONFIRMATION OF GUARANTY AGREEMENT
DATED AS OF NOVEMBER 1, 1997
This AMENDMENT TO GUARANTY AGREEMENT ("this Amendment") is made by JOEL
NEWMAN (the "Guarantor") in favor of BANK LEUMI LE-ISRAEL B.M., COMERICA BANK
and NATIONAL BANK OF CANADA (the "Banks") and BANK LEUMI LE-ISRAEL B.M., as
Agent (the "Agent") and relates to that certain Guaranty Agreement, dated as of
July 23, 1997, made by the Guarantor in favor of the Banks and the Agent (the
"Guaranty," the capitalized terms used but not otherwise defined herein being
used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor hereby confirms and agrees as follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in
November, 1997, between the Borrowers, the Banks and the Agent and to the
issuance by the Borrowers of Revolving Notes in the principal amounts of
$15,000,000, $13,000,000 and $9,000,000 in favor of Bank Leumi le-Israel B.M.,
Comerica Bank and National Bank of Canada, respectively, and acknowledges and
agrees that the Obligations as referred to and defined in the Guaranty include
without limitation all obligations and liabilities arising under the Credit
Agreement, as amended by the aforesaid Amendment to Credit Agreement, and/or any
or all of the aforesaid Revolving Notes.
2. The Guaranty shall remain in full force and effect and is hereby confirmed.
The Guarantor acknowledges that he has no defenses, counterclaims or rights of
offset with respect to his obligations under the Guaranty and waives any that he
may have.
3. THE GUARANTOR HEREBY WAIVES ANY RIGHT HE MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING HEREUNDER OR RELATING HERETO.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Amendment as of the date first above written.
/s/ Joel Newman
-------------------------------
JOEL NEWMAN
<PAGE>
CONFIRMATION OF GUARANTY AGREEMENT
DATED AS OF MARCH 19, 1998
This CONFIRMATION OF GUARANTY AGREEMENT ("this Confirmation") is made
by and among JOEL NEWMAN (the "Guarantor"), BANK LEUMI LE-ISRAEL B.M., COMERICA
BANK and NATIONAL BANK OF CANADA (the "Banks") and BANK LEUMI LE-ISRAEL B.M., as
Agent (the "Agent") and relates to that certain Guaranty Agreement, dated as of
July 23, 1997, made by the Guarantor in favor of the Banks and the Agent (as
heretofore amended, the "Guaranty," the capitalized terms used but not otherwise
defined herein being used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in March,
1998, between the Borrowers (as redefined by said Amendment to Credit
Agreement), the Banks and the Agent and to the issuance by the Borrowers (as
redefined by said Amendment to Credit Agreement) of Revolving Notes in the
principal amounts of $15,000,000, $13,000,000 and $9,000,000 in favor of Bank
Leumi le-Israel B.M., Comerica Bank and National Bank of Canada, respectively,
and acknowledges and agrees that the Obligations as referred to and defined in
the Guaranty include all obligations and liabilities of any and all of the
Borrowers (as redefined by said Amendment to Credit Agreement) arising under the
Credit Agreement, as amended by the aforesaid Amendment to Credit Agreement and
any previous amendments thereto, and/or any or all of the aforesaid Revolving
Notes.
2. As amended hereby, the Guaranty shall remain in full force and effect and is
hereby confirmed. The Guarantor acknowledges that he has no defenses,
counterclaims or rights of offset with respect to his obligations under the
Guaranty and waives any that he may have.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Confirmation as of the date first above written.
/s/ Joel Newman
-------------------------------
JOEL NEWMAN
EXHIBIT 10.27
GUARANTY AGREEMENT
Dated as of July 23, 1997
This GUARANTY AGREEMENT ("this Guaranty") is made as of the date set
forth above by WINDMERE DURABLE-HOLDINGS, INC., a Florida corporation having its
principal place of business at 5980 East Miami Lakes Drive, Miami Lakes, Florida
33014 (the "Guarantor") in favor of the banks party to the Credit Agreement
referred to below (the "Banks") and BANK LEUMI LE-ISRAEL B.M., as agent for the
Banks under said Credit Agreement (the "Agent").
BACKGROUND
A. New M-Tech Corporation, a Florida corporation, ("New M-Tech") and
Newtech Hong Kong Ltd., a Hong Kong limited liability company ("Newtech Hong
Kong", and collectively with New M-Tech, the "Borrowers", each a "Borrower"),
the Banks and the Agent are parties to a Credit Agreement dated as of July 23,
1997 (as modified and supplemented and in effect from time to time, the "Credit
Agreement", the capitalized terms used but not otherwise defined herein being
used herein as therein defined), providing, subject to the terms and conditions
thereof, for Extensions of Credit.
B. The Guarantor owns 50% of the voting stock of New M-Tech, and New
M-Tech owns all the voting stock of Newtech Hong Kong. Accordingly, the
Guarantor will benefit substantially from Extensions of Credit to either or both
of the Borrowers.
C. It is a condition precedent to the Banks' making Extensions of
Credit to the Borrowers that the Guarantor shall have executed and delivered
this Guaranty.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and adequacy of which are hereby
acknowledged) and in order to induce the Banks to make Extensions of Credit to
the Borrowers, the Guarantor agrees as follows:
/section/1. GUARANTY.
(a) The Guarantor hereby absolutely and unconditionally
guarantees the punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of the Obligations and all other
obligations and liabilities of either or both of the Borrowers to each
and any Bank and/or the Agent now or hereafter existing under,
evidenced by or in any way relating to the Credit Agreement, any Note
and/or any other Loan Document, whether for principal, interest,
overdrafts, fees, commissions, expenses or otherwise (the Obligations
and such other obligations and liabilities referred to in this
/section/1 beinG collectively, the "Obligations"). This is a guaranty
of payment and not of collection and it shall not be affected
<PAGE>
in any way by the absence of any action to obtain payment from the
Borrowers. In addition, the Guarantor agrees to pay any and all
expenses (including counsel fees and expenses at all levels) incurred
by any Bank and/or the Agent in enforcing any rights under this
Guaranty (the "Collection Costs").
(b) The liability of Guarantor under this Guaranty shall not
exceed the following sum (the "Maximum Amount"): (i) $3,000,000, plus
(ii) interest accrued under the Credit Agreement or the Notes with
respect to the principal amount of $3,000,000, plus (iii) the
Collection Costs. The Maximum Amount shall not be affected by the total
amount of credit extended at any time by the Banks or the Agent to the
Borrowers, by the amount recovered from or the maximum liability set
forth in any other guaranties of the Obligations or by the amount
realized from the Collateral or any collateral for any such other
guaranties (by way of illustration, if $3,000,000 were paid by or
recovered from another guarantor of the Obligations, the Guarantor
would still be liable for any remaining Obligations up to the Maximum
Amount).
/section/2. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Obligations will be paid strictly iN accordance with the terms of the documents
governing them, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the each
Bank and the Agent with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any payment
provisions of any agreements or instruments relating to or securing any
of the Obligations or any instrument by which the Guarantor has granted
the Agent or any Bank or Banks a security interest or lien as security
here for or for any of the Obligations (said agreements and instruments
being collectively the "Loan Documents");
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from any of the Loan
Documents;
(c) any exchange, release, or nonperfection of a security
interest in, any collateral for any of the Obligations, any limitation
as to the amount of the Obligations secured by any of the Loan
Documents, any invalidity of, release, amendment or waiver of or
consent to departure from, any other guaranty for all or any of the
Obligations or any failure to obtain any guaranty contemplated by the
Loan Documents or any related commitment or proposal letter;
(d) the voluntary or involuntary bankruptcy of either
Borrower, or any assignment for the benefit of creditors,
reorganization, receivership, liquidation or other similar proceedings
affecting either Borrower or any of its assets;
-2-
<PAGE>
(e) any present or future action of any governmental authority
amending, varying, reducing or otherwise affecting, or purporting to
amend, vary, reduce or otherwise affect, any of the Obligations, any of
the Loan Documents or this Guaranty;
(f) any other event or circumstance which might otherwise
constitute a defense available to, or a discharge of, either Borrower
or a guarantor.
Nothing herein to the contrary withstanding, this Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Agent
or any Bank upon the insolvency, bankruptcy or reorganization of either Borrower
or otherwise, all as though such payments had not been made.
/section/3. WAIVER. The Guarantor hereby unconditionally waives:
(a) promptness, diligence, notice of acceptance and all other
notices with respect to any of the Obligations, this Guaranty or any
disposition of collateral;
(b) any requirement that the Agent or any Bank protect,
secure, perfect or insure any security interest or lien on any property
subject thereto or exhaust any right or take any action against either
Borrower or any other person or entity or any collateral;
(c) any defense based on any event or circumstances described
in /section/2; and
(d) any duty of the Agent or any Bank to advise the Guarantor
of any information known to the Agent or such Bank regarding the
financial condition of either Borrower or any other circumstance
affecting either Borrower's ability to perform its obligations to the
Banks, it being agreed that the Guarantor assumes responsibility for
being and keeping informed regarding such condition or any such
circumstance.
/section/4. SUBROGATION. The Guarantor shall not exercise any rights
which he may acquire by way oF subrogation under this Guaranty, by any payment
made hereunder or otherwise, until all the Obligations shall have been paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of the Agent and the
Banks and shall forthwith be paid to the Agent for the account of the Banks to
be credited and applied upon the Obligations, whether matured or unmatured.
/section/5. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to the Agent anD the Banks as follows:
(a) The execution, delivery and performance by the Guarantor
of this Guaranty do not contravene or conflict with law, the
Guarantor's articles of incorporation or by-laws or any contractual
restriction binding on or affecting the Guarantor.
-3-
<PAGE>
(b) No authorization or approval or other action by, and no
notice to or filing with, any person or any governmental authority or
regulatory body, is required for the due execution, delivery and
performance by the Guarantor of this Guaranty.
(c) The Guarantor has received adequate consideration and
equivalent value for executing and delivering this Guaranty and will
not be rendered insolvent thereby. This Guaranty is the legal, valid
and binding obligation of the Guarantor enforceable against it in
accordance with its terms.
(d) There is no pending or threatened action or proceeding
affecting the Guarantor before any court, governmental agency or
arbitrator, which may materially adversely affect the Guarantor's
financial condition.
(e) The Guarantor is a corporation validly existing and in
good standing under the laws of the State of Florida.
(f) Any and all corporate and shareholder actions required to
authorize the execution, delivery and performance of this Guaranty have
been taken.
/section/6. ADDITIONAL COVENANTS. As long as this Guaranty is in
effect, the Guarantor shall, unless thE Agent and the Required Banks shall
otherwise consent in writing:
(a) Comply in all material respects with all applicable laws,
rules, regulations and orders (such compliance to include, without
limitation, paying before the same become delinquent all taxes,
assessments and governmental charges) imposed upon it or upon it
property non-compliance with which would have a material adverse effect
on the financial condition or business of the Guarantor).
(b) Furnish to each Bank the following:
(i) as soon as available and in any event within 45
days after the end of the first three quarterly fiscal periods
of each fiscal year of the Guarantor, a copy of the
Guarantor's Report on Form 10-Q filed with the Securities and
Exchange Commission (or any governmental agency substituted
therefor) for such fiscal year;
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Guarantor, a
copy of the Guarantor's Report on Form 10-K filed with the
Securities and Exchange Commission (or any governmental agency
substituted therefor) for such fiscal year;
(iii) as soon as available and in any event within 90
days after the end of each fiscal year of the Guarantor, a
copy of the Guarantor's Annual Report to Shareholders;
-4-
<PAGE>
(iv) promptly upon their becoming available, copies
of all registration statements and regular periodic reports,
if any (excluding the items delivered by the Guarantor
pursuant to the preceding paragraphs (i), (ii) and (iii)),
that the Guarantor shall have filed with the Security and
Exchange Commission (or any governmental agency substituted
therefor) or any national securities exchange;
(v) promptly upon the mailing thereof to the
shareholders of the Guarantor generally, copies of all
financial statements, reports and proxy statements so mailed
excluding the items delivered by the Guarantor pursuant to the
preceding paragraphs (i), (ii) and (iii);
(vi) promptly upon the public dissemination to news
agencies and wires, all press releases;
(vii) as soon as possible and in any event within 10
days of the Guarantor's discovery thereof, notice of any event
or circumstance which has or may have a material adverse
effect upon the financial condition of the Guarantor;
(viii) as soon as possible and in any event within 10
days after the commencement thereof or any adverse
determination therein, notice of all actions, suits and
proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality
materially affecting the Guarantor;
(ix) promptly, such other information respecting the
condition or operations, financial or otherwise, of the
Guarantor as the Agent may from time to time reasonably
request.
(c) Except for this Guaranty, not create or incur any debt
(except to the Agent and the Banks) or assume, guarantee or endorse any
indebtedness the result of which would be to significantly impair the
Guarantor's ability to perform it obligations hereunder.
(d) Not sell, transfer or otherwise dispose of any of its
assets or properties and not create or suffer to exist any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of its assets or
properties, if the result would be to decrease significantly the
Guarantor's net worth or to impair the ability of a judgment creditor
of the Guarantor to attach or garnish such assets or properties.
/section/7. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor therefrom shall in
any event be effective unless it shall be
-5-
<PAGE>
in writing and signed by the Agent and the Required Banks, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
/section/8. NOTICES. All notices, requests, demands, directions or
other communications provided foR hereunder shall be in writing and mailed
(certified, return receipt requested, if practicable), telegraphed or telexed to
the applicable party at the addresses indicated below:
If to the Agent:
Bank Leumi Le-Israel B.M., Miami Agency
800 Brickell Avenue
Suite 1400
Miami, FL 33131
If to the Guarantor:
the address set forth at the
head of this Guaranty
(or, if no address is set forth there, whatever address of the Guarantor appears
on the Agent's books.) Notices mailed to the Guarantor shall be deemed given
three days after being mailed or, if telecopied or telexed, when received, and
notices mailed to the Agent shall be deemed given when actually received by it.
/section/9. NO WAIVER; REMEDIES. No failure on the part of the Agent or
any Bank to exercise, and no delaY in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
/section/10. RIGHT OF SETOFF. Upon the occurrence of any Event of
Default (as defined in any notE evidencing any of the Obligations), any Bank is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the Guarantor
against any and all of the obligations of the Guarantor now or hereafter
existing under this Guaranty, irrespective of whether or not such Bank shall
have made any demand under this Guaranty and although such obligations may be
contingent and unmatured. The rights of any Bank under this /section/10 are in
additioN to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
/section/11. CONTINUING GUARANTY. This Guaranty is a continuing
guaranty and shall (i) remain in full forcE and effect until payment in full of
the Obligations and written notice is given by the Agent to the Guarantor that
this Guaranty has been terminated (and thereafter with respect to any indemnity
obligations of either Borrower that survive cancellation or termination of the
Loan Documents and thereafter as long as any payment of or recovery against or
with respect to the Obligations might be
-6-
<PAGE>
rescinded or otherwise required to be returned by the Agent or any Bank for any
reason, including the bankruptcy, insolvency or reorganization of either
Borrower ), (ii) be binding upon the Guarantor and it heirs, personal
representatives, successors and assigns (even as to Obligations incurred after
it death or incompetency), and (iii) inure to the benefit of and be enforceable
by the Agent and each Bank and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Bank may assign or
otherwise transfer any note evidencing any of the Obligations to any other
person or entity, and such other person or entity shall thereupon become vested
with all the rights in respect thereof granted to such Bank herein or otherwise.
/section/12. DEFAULT. Upon the occurrence of an Event of Default (as
defined in the Credit Agreement or anY note evidencing any of the Obligations),
all the Guarantor's obligations hereunder shall immediately be due and payable
in full without notice.
/section/13. GOVERNING LAW. This Guaranty shall be governed by, and
construed in accordance with, the laW of the State of Florida without regard to
any conflicts-of-law principle or rule that would give effect to the law of any
other jurisdiction.
/section/14. TERMINOLOGY. As used herein, "hereof," "hereunder,"
"hereby" and "herein" refer to thiS Guaranty as a whole and not merely the
paragraph in which they appear. As used herein, masculine pronouns shall be read
as feminine or neuter pronouns if appropriate.
/section/15. SEVERABILITY. If any provision of this Guaranty shall be
held invalid under any applicablE law, such invalidity shall not affect any
other provision of this Guaranty that can be given effect without the invalid
provision, and, to that end, the provisions hereof are severable.
/section/16. SUBORDINATION. The Guarantor hereby subordinates payment
of all debts now or hereafter owinG by either Borrower to the Guarantor to any
and all Obligations. The Guarantor shall ensure that every note evidencing any
part of the subordinated debt and every ledger page relating thereto bears a
legend which indicates this subordination. The Guarantor shall not request or
accept payment of all or any security for any part of the subordinated debt,
and, if all of any part of it should be paid to the Guarantor, through error or
otherwise, the Guarantor shall immediately forward such payment to the Agent in
the form received, properly endorsed to the order of the Agent, to be applied
against the Obligations.
/section/17. MANNER AND ALLOCATION OF PAYMENTS. All payments hereunder
shall be made to the Agent at thE Agent's Office. Each payment received by the
Agent hereunder with respect to the Obligations shall be made to the Agent for
the benefit of the Banks and shall be applied and distributed by the Agent in
the same manner as payments received from the Borrowers under the Credit
Agreement.
/section/18. SUBMISSION TO JURISDICTION. The Guarantor hereby
irrevocably (a) submits, in any legaL proceeding relating to this Guaranty, to
the non-exclusive IN PERSONAM jurisdiction of any state or United States court
of competent jurisdiction sitting in the State of Florida and agrees to suit
being brought in any such court; (b) waives any objection that he may now or
hereafter have to the venue of such proceeding in any such court located in Dade
County, Florida or that such proceeding was
-7-
<PAGE>
brought in an inconvenient court; (c) agrees that service of process in any such
proceeding may be made by certified mail, return receipt requested, to the
address set forth at the head of this Agreement; and (d) agrees that nothing
herein shall affect the right of the Bank to effect service of process in any
manner permitted by law and that the Bank shall have the right to bring any
legal proceedings (including a proceeding for enforcement of a judgment entered
by any of the aforementioned courts) against the Guarantor in any other court or
jurisdiction in accordance with applicable law.
/section/19. WAIVER OF JURY TRIAL. THE GUARANTOR AND (BY ACCEPTANCE
HEREOF) THE AGENT AND THE BANKS EACH WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING HEREUNDER OR RELATING
HERETO.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date first above written.
WINDMERE DURABLE-HOLDINGS, INC
By /S/ HARRY D. SCHULMAN
------------------------------------------
Name: HARRY D. SCHULMAN
---------------------------------------
Title: SENIOR VICE PRESIDENT
---------------------------------------
STATE OF FLORIDA )
) SS:
COUNTY OF DADE )
The foregoing instrument was acknowledged before me this day
of _______________, 1997 by _______________________, ________________ of
Windmere Durable-Holdings, Inc., a Florida corporation, on behalf of the
corporation, who is personally known to me or who has produced
______________________________________________ as identification.
_________________________________________________
Notary Public, State of _________________________
Print Name:______________________________________
My commission expires: (SEAL)
-8-
<PAGE>
AMENDMENT TO GUARANTY AGREEMENT
DATED AS OF SEPTEMBER 15, 1997
This AMENDMENT TO GUARANTY AGREEMENT ("this Amendment") is made by and
among WINDMERE DURABLE-HOLDINGS, INC. (the "Guarantor"), BANK LEUMI LE-ISRAEL
B.M., COMERICA BANK and NATIONAL BANK OF CANADA (the "Banks") and BANK LEUMI
LE-ISRAEL B.M., as Agent (the "Agent") and amends that certain Guaranty
Agreement, dated as of July 23, 1997, made by the Guarantor in favor of the
Banks and the Agent (the "Guaranty," the capitalized terms used but not
otherwise defined herein being used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor, the Banks and the Agent hereby agree as
follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in
September, 1997, between the Borrowers, the Banks and the Agent and to the
issuance by the Borrowers of Revolving Notes in the principal amounts of
$9,375,000, $7,500,000 and $3,125,000 in favor of Bank Leumi le-Israel B.M.,
Comerica Bank and National Bank of Canada, respectively, and acknowledges and
agrees that the Obligations as referred to and defined in the Guaranty include
all obligations and liabilities arising under the Credit Agreement, as amended
by the aforesaid Amendment to Credit Agreement, and/or any or all of the
aforesaid Revolving Notes.
2. The first sentence of ss.1(b) of the Guaranty is hereby amendeD to read as
follows:
The liability of Guarantor under this Guaranty shall not exceed the
following sum (the "Maximum Amount"): (i) $9,000,000 (which amount
shall be reduced to $3,000,000 on November 15, 1997 if, but only if,
the sum of the aggregate unpaid principal amount of all Loans plus the
aggregate amount of all Acceptance Obligations does not exceed
$10,000,000 at that time, the aggregate amount of all Acceptance
Obligations does not exceed $5,000,000 at that time and no Event of
Default has theretofore occurred and is then continuing), plus (ii)
interest accrued under the Credit Agreement or the Notes with respect
to the amount referred to in clause (i), plus (iii) the Collection
Costs.
3. As long as the Credit Agreement is in effect or any Obligations remain
outstanding, the Guarantor shall not realize on any security interest it now or
hereafter has in assets of either Borrower and shall not exercise any right it
may have to set off against its obligations to the Borrowers under the Windmere
Notes (as defined in the Credit Agreement) to pay any obligations of either
Borrower to it.
4. As amended hereby, the Guaranty shall remain in full force and effect and is
hereby confirmed. The Guarantor acknowledges that it has no defenses,
counterclaims or rights of offset with respect to its obligations under the
Guaranty and waives any that it may have.
<PAGE>
5. THE GUARANTOR, THE BANKS AND THE AGENT EACH HEREBY WAIVE ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
HEREUNDER OR RELATING HERETO.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Amendment as of the date first above written.
WINDMERE DURABLE-HOLDINGS, INC.
By: /S/ ILLEGIBLE
--------------------------
Name: ________________________
Title: _______________________
BANK LEUMI LE-ISRAEL B.M.
By: /S/ ILLEGIBLE
--------------------------
Name: ________________________
Title: _______________________
COMERICA BANK
By: /S/ ILLEGIBLE
--------------------------
Name: ________________________
Title: _______________________
NATIONAL BANK OF CANADA
By: /S/ ILLEGIBLE
--------------------------
Name: ________________________
Title: ________________________
BANK LEUMI LE-ISRAEL B.M.,
as Agent
By: /S/ ILLEGIBLE
--------------------------
Name: ________________________
Title: _______________________
-2-
<PAGE>
CONFIRMATION OF GUARANTY AGREEMENT
DATED AS OF NOVEMBER 1, 1997
This AMENDMENT TO GUARANTY AGREEMENT ("this Amendment") is made by
WINDMERE DURABLE-HOLDINGS, INC. (the "Guarantor") in favor of BANK LEUMI
LE-ISRAEL B.M., COMERICA BANK and NATIONAL BANK OF CANADA (the "Banks") and BANK
LEUMI LE-ISRAEL B.M., as Agent (the "Agent") and relates to that certain
Guaranty Agreement, dated as of July 23, 1997, made by the Guarantor in favor of
the Banks and the Agent, as previously amended (the "Guaranty," the capitalized
terms used but not otherwise defined herein being used herein as therein
defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor hereby confirms and agrees as follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in
November, 1997, between the Borrowers, the Banks and the Agent and to the
issuance by the Borrowers of Revolving Notes in the principal amounts of
$15,000,000, $13,000,000 and $9,000,000 in favor of Bank Leumi le-Israel B.M.,
Comerica Bank and National Bank of Canada, respectively, and acknowledges and
agrees that the Obligations as referred to and defined in the Guaranty include
without limitation all obligations and liabilities arising under the Credit
Agreement, as amended by the aforesaid Amendment to Credit Agreement, and/or any
or all of the aforesaid Revolving Notes.
2. The Guaranty shall remain in full force and effect and is hereby confirmed.
The Guarantor acknowledges that it has no defenses, counterclaims or rights of
offset with respect to its obligations under the Guaranty and waives any that it
may have.
3. THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING HEREUNDER OR RELATING HERETO.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Amendment as of the date first above written.
WINDMERE DURABLE-HOLDINGS, INC.
By: /S/ ILLEGIBLE
---------------------------
Name: ________________________
Title: _______________________
<PAGE>
CONFIRMATION OF GUARANTY AGREEMENT
DATED AS OF MARCH 19, 1998
This CONFIRMATION OF GUARANTY AGREEMENT ("this Confirmation") is made
by and among WINDMERE DURABLE-HOLDINGS, INC., a Florida corporation (the
"Guarantor"), BANK LEUMI LE-ISRAEL B.M., COMERICA BANK and NATIONAL BANK OF
CANADA (the "Banks") and BANK LEUMI LE-ISRAEL B.M., as Agent (the "Agent") and
relates to that certain Guaranty Agreement, dated as of July 23, 1997, made by
the Guarantor in favor of the Banks and the Agent (as heretofore amended, the
"Guaranty," the capitalized terms used but not otherwise defined herein being
used herein as therein defined).
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor consents to the Amendment to Credit Agreement, dated in March,
1998, between the Borrowers (as redefined by said Amendment to Credit
Agreement), the Banks and the Agent and to the issuance by the Borrowers (as
redefined by said Amendment to Credit Agreement) of Revolving Notes in the
principal amounts of $15,000,000, $13,000,000 and $9,000,000 in favor of Bank
Leumi le-Israel B.M., Comerica Bank and National Bank of Canada, respectively,
and acknowledges and agrees that the Obligations as referred to and defined in
the Guaranty include all obligations and liabilities of any and all of the
Borrowers (as redefined by said Amendment to Credit Agreement) arising under the
Credit Agreement, as amended by the aforesaid Amendment to Credit Agreement and
any previous amendments thereto, and/or any or all of the aforesaid Revolving
Notes.
2. As amended hereby, the Guaranty shall remain in full force and effect and is
hereby confirmed. The Guarantor acknowledges that it has no defenses,
counterclaims or rights of offset with respect to its obligations under the
Guaranty and waives any that it may have.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Confirmation as of the date first above written.
WINDMERE DURABLE HOLDINGS, INC.
By: /S/ ILLEGIBLE
---------------------------------
Name: _________________________________
Title: _________________________________
EXHIBIT 10.28
PROMISSORY NOTE:
$2,000,000 June 6, 1997
FOR VALUE RECEIVED, New M-Tech Corporation, a Florida corporation (the
"Borrower"), does hereby promise to pay to Windmere Corporation, a Florida
corporation (the "Company"), or prior, the principal sum of Two Million Dollars
($2,000,000) the "Principal Balance"), together with interest on the Principal
Balance from and after date hereof until paid at the rate specified below The
Principal Balance shall bear interest at an annue1 rate prior to maturity or
default equal to the rate publicly announced by NATIONSBANK, N.A. (South), as
its "prime rate" (the "Prime Rate"), plus 2% with the Prime Rate in effect on
the first day of a month being applicable to the entire month. All sums payable
hereunder shall be payable at the offices of the Company, 5980 Miami Lakes
Drive, Miami Lakes, Florida 33014, or at such other place or places as the
holder hereof may from time to time otherwise direct in writing, in such coin
and currency as shall be at the time of payment legal tender for the payment of
public and private debts in the United States of America.
The entire Principal Balance of this Note shal1 be payable upon demand
of the Company, upon five (5) days prior written notice to the Borrower.
Accrued interest on this Note shall be paid monthly, commencing on the
first day of each month subsequent to the date of issuance of this Note and
continuing monthly on the first day of each month until this Note is paid in
full, and at maturity (which by acceleration or otherwise). Interest on this
Note shall be computed on basis of the "actual number of days elapsed over a 365
day year.
Payments under this Note are subordinated to repayment of all Senior
Indebtedness (as defined in the next sentence). "Senior Indebtedness" sha11 mean
all indebtedness owed by the Borrower to Bank Le-Israel B.M. and/or other banks
providing borrowing facilities to the Borrower (the "Banks").
(a) Upon any payment or distribution of the assets of the Borrower,
whether in cash, property or securities, from any source whatsoever, to
creditors upon any dissolution, winding up, total or partial liquidation,
reorganization, composition, arrangement, or adjustment of the Borrower or its
securities (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation or ownership proceedings, or upon assignment for the
benefit of creditors, or any other marshalling of the assets and liabilities of
Newtech or otherwise), the Banks shall be entitled to receive payment in full in
cash of all amounts due or to become due in respect of the Senior Indebtedness
before any payment is made on account of or applied on this Note.
(b) For a period commencing on the business day following the day the
Borrower received from Bank Leumi or other banks notice that an "Event of
Default" (as defined in the Bank facilities) has occurred and ending on the date
on which the Event of Default has been cured (a "Payment Blockage Period"), no
payment shall be made to Windmere pursuant to this Note.
(c) Windmere or a subsequent holder of this Note, by its acceptance of
this Note,
<PAGE>
agrees that during any Payment Blockage Period, it will not ask, demand, sue
for, take or receive from the Borrower, by set-off or in any other manner, any
money which may now or hereafter be owing by the Borrower under this Note.
This Note and the indebtedness evidenced hereby may be prepaid, in
whole or in part, without notice, penalty or premium at any time and from time
to time. Any prepayment shall first be applied to unpaid interest and the
remainder, if any, to the unpaid Principal Balance.
The Company shall have the right to declare the amount of the total
unpaid Principal Balance, together with all accrued and unpaid interest thereon,
immediately due and payable upon the failure of the borrower to make any payment
principal or interest hereunder within five (5) days after its due; upon the
voluntary or involuntary disso1ution of the Borrower; or upon the adjudication
of the Borrower as bankrupt, or upon the taking of any voluntary action by the
Borrower or any involuntary action against the Borrower seeking an adjudication
of the Borrower as bankrupt, or seeking relief by or against the Borrower under
any provision of the Bankruptcy Code. Any payment of principal or interest under
this Note which is not made within five (5) days of its due date shall bear
interest from the due date at the highest rate of interest permitted under
Florida law.
The Borrower agrees to pay all costs, fees and expenses incurred by a
holder hereof, including attorneys' fees (including those for appellate
proceedings) incurred in connection with the collection or attempted collection
or enforcement hereof, whether or not legal proceedings may have been
instituted. The Borrower shall pay all Florida document stamp taxes, if any, due
in connection with the execution and delivery of this Note.
In the event that the Borrower makes any percent of interest, fees or
other charges, however denominated, pursuant to this Note, which payment causes
the interest paid to the Company to exceed maximum rate of interest permitted
under Florida law any excess over such sum shall be applied in reduction of the
Principal Balance owed to the Company as of the date of such payment, or such
excess exceeds the amount of the Principal Balance owed to the Company as of the
date of such payment, the difference shall be paid by the Company to the
Borrower.
THE BORROWER HEREBY AND THE COMPANY BY ACCEPTANCE OF ITS THIS NOTICE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREOF, OR ARISING OUT OF,
UNDER OR BY CONNECTION WITH THIS NOTE, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE COMPANY MAKING THE LOAN EVIDENCED BY THIS NOTE.
Time shall be of the essence with respect to the terms of this Note.
This Note cannot be changed or modified other then pursuant to a written
instrument signed by the parties hereto. This Note cannot be assigned by the
Borrower, in whole or in part unless the Company shall consent in writing prior
to such assignment. This Note may be assigned or pledged by Windmere to any
direct or indirect subsidiary or affiliate of Windmere. This Note may not be
assigned by Borrower.
All past due and delinquent sums hereunder, both principal and
interest, shall bear
<PAGE>
interest at the rate determined above until such sums have been paid.
The Borrower hereby waives demand, presentment for payment, protest,
notice of protest, filing of suit and diligence in collecting this Note, and
consents that the time of all payments or any part thereof may be extended,
rearranged, renewed or postponed by the Company. The Borrower shall pay all
amounts owing under this Note without set-off, counterclaim deduction or
withholding for any reason whatsoever.
This Note shall be governed by and consented in accordance with the
laws of the State of Florida, without regard to any conflict of law rule or
principle that would give effect to the laws of another jurisdiction.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as
of the date first above written.
New M-Tech Corporation, a Florida corporation
Attest:
/S/ ILLEGIBLE By: /S/ JOEL NEWMAN
- ---------------------------- ----------------------------------------
Its: PRESIDENT
---------------------------------------
Signed at: LOS ANGELES, CA
on AUG 14 1997
EXHIBIT 10.29
REVOLVING NOTE
$3,091,352.00 Miami, Florida
September 18, 1997
1. Payment. FOR VALUE RECEIVED, New M-Tech Corporation ("Newtech")
hereby promises to pay on demand, at any time, on or after December 31, 1997; to
the order of Windmere Corporation ("Windmere") the principal sum of THREE
MILLION NINETY ONE THOUSAND AND THREE HUNDRED FIFTY TWO do11ars ($3, 091,352),
or, if less, the aggregate unpaid principal amount of the Loans pursuant to
amounts drawn down by or on behalf of Newtech under the following letters of
credit opened by Windmere on behalf of Newtech: Letters of Credit Nos. IM36188,
Issue Date 15 August 97; IM36186, Issue Date 15 August 97; IM36l93, Issue Date
15 August 97; IM36190, Issue Date 15 August 97, Issuing Bank: NationsBank, N.A.
for each, and to per interest at the Prime Rate (as hereinafter defined) plus
20% per annum (calculated on the basis of a 365-day year and actual days
elapsed) on the outstanding principal amount from time to time outstanding from
the date of each draw down under each of the above-referenced Letters of Credit
to the date of payment of this Note. Upon the occurrence and during the
continuation of an Event of Default (as defined below), the principal amount
then outstanding shall, without limiting the rights of Windmere hereunder, bear
interest at a rate per annum which is equal to the lesser of (i) 5% over the
rate which would otherwise be applicable thereto, or (ii) the highest amount
permitted by law. Both principal and interest are payable in lawful money of the
United States of America and in immediately available funds to Windmere at 5980
Miami Lakes Drive, Miami Lakes, Florida 33014-2467. The payment of the
principal hereof and interest thereon is subject to the subordination provisions
set forth below. The "Prime Rate" shall mean the rate of interest established,
announced or published by NationsBank on the last business day preceding the
first day of any calendar month as its prime rate, reference rate or comparable
or equivalent rate for loans made in Miami, Florida.
2. Events of Default. Notwithstanding the maturity date for the demand
set forth above, the maturity of this Note may be accelerated by Windmere upon
the occurrence of any of the following events ("Events of Default"):
a) Nonpayment of principal or interest hereunder when and as the
same shall become due hereunder; or (b) Newtech enters into
any merger, consolidation, reorganization, or liquidates,
winds up, or dissolves itself (or suffers any liquidation or
dissolution), or conveys, sells, assigns, leases, transfers,
or otherwise disposes of, in one transaction or a series of
transactions, substantially all of its business, property or
assets, whether now owned or hereafter acquired, other than a
merger in which Newtech is the surviving entity; or
(b) Newtech enters into any merger, consolidation, reorganization,
or liquidates, winds up, or dissolves itself (or suffers any
liquidation or dissolution), or conveys, sells, assigns,
leases, transfers, or otherwise disposes of, in one
transaction or a series of transactions, substantially all of
its business, property or assets, whether now owned or
hereafter acquired, other than a merger in which Newtech is
the surviving entity; or
<PAGE>
(c) Voluntary or involuntary bankruptcy, reorganization,
insolvency, arrangement, receivership or similar proceedings
are commenced by or against Newtech, and such proceedings
continue undismissed for 60 days; or
(d) One or more final judgments (for which no appeal may be taken)
for the payment of money in excess of $1,000,000 in the
aggregate are outstanding against Newtech or against any of
its property or assets, and any such judgment has remained
unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 30 days from the date of its entry;
or
(e) Newtech fails to pay principal, interest or premium with
respect to any Indebtedness of Newtech in an aggregate
principal amount greater than $500,000 or fails to perform,
observe or fulfill any term or covenant contained in any
agreement or instrument under or pursuant to which any such
indebtedness may have been issued, created, assumed,
guaranteed or secured by Newtech, and such default continues
beyond the period of grace, if any, specified therein and
permits the holder of such indebtedness to accelerate the
maturity thereof.
Windmere shall provide notice in writing to Newtech of an Event of
Default and Newtech shall have fifteen (15) days from the receipt of such notice
to cure the Event of Default. No acceleration of the Note shall occur during
such period or if the Event of Default has been cured during such period.
3. Subordination. Payments under this Note are subordinated to
repayment of all Senior Indebtedness (as defined in the next sentence), but only
to the extent and in the manner provided in this Section 3. "Senior
Indebtedness" shall mean all indebtedness owed by Newtech and Newtech (Hong
Kong) Limited to Bank Leumi.
(a) Upon any payment or distribution of the assets of Newtech and
Newtech (Hong Kong), whether in cash, property or securities,
from any source whatsoever, to creditors upon any dissolution,
winding-up, total or partial liquidation, reorganization,
composition, arrangement, or adjustment of Newtech or Newtech
(Hong Kong) or their securities (whether voluntary or
involuntary, or in bankruptcy, insolvency, reorganization,
liquidation or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the
assets and liabilities of Newtech or Newtech Hong Kong) or
otherwise), Bank Leumi shall be entitled to receive payment
in full in cash of all amounts due or to become due in
respect of the Senior Indebtedness before any payment is made
on account of or applied on this Note.
(b) For a period commencing on the business day following the day
Newtech or Newtech (Hong Kong) received from Bank Leumi
notice that an "Event of Default" (as defined in the Bank
Leumi Facility) has occurred and ending on the date on which
the Event of Default has been cured (a "Payment Blockage
Period"), no payment shall be made to Windmere pursuant to
this Note.
2
<PAGE>
(c) Windmere or and subsequent holder of this Note, by its
acceptance of this Note, agrees that during any Payment
Blockage Period, it will not ask, demand, sue for, take or
receive from Newtech, by set-off or in any other manner, any
money which may now or hereafter be owing by Newtech under
this Note,
4. Set-Off. Subject to the provisions of Section 3, which subordinates
payments hereunder to the Senior Indebtedness, in the event that Newtech fails
to pay any amounts due under this Note, Windmere shall be entitled to offset any
such amounts by reduction of a like amount of outstanding principal under either
or both of the Windmere Corporation 8% Promissory Note in the amount of $3
million dated April 16, 1996 payable to Newtech or the Windmere Corporation 8%
Promissory Note in the amount of $2 million dated April 16, 1996 payable to
Newtech (collectively "the Windmere Notes"), so that each such offset shall
Operate as a payment or prepayment of the Windmere Notes, provided, however,
that Windmere shall not be entitled to any such offset unless and until the
pledge of the Windmere Notes in connection with the Credit Agreement and
Security Agreement, dated as of July 23, 1997, as amended, by and between
Newtech, Newtech (Hong Kong) and Bank Leumi Le-Israel B.M., Comerica and
National Bank of Canada ("Bank Leumi Facility") has been fully satisfied.
Further, Newtech agrees that it shall not pledge the Windmere Notes to any
additional party other than the existing pledge under the Bank Leumi Facility,
or undertake any action to impair Windmere's right to offset under this Section
4.
5. Prepayment. This Note may be prepaid at any time without penalty or
premium.
6. Assignment. This Note may be assigned or pledged by Windmere to
any person or entity. This Note may not be assigned by Newtech.
7. Amendment Waiver. No failure or delay on the part of the holder of
this Note to exercise any power or right under this Note shall operate as a
waiver of such power or right or preclude other or further exercise thereof or
the exercise of any subsequent condition or obligation. Newtech hereby waives
diligence, presentment, demand for payment, notice of dishonor or acceleration,
protest and notice of protest, and any and all other notices or demands in
connection with delivery, acceptance, performance, default or enforcement of
this Note.
8. Governing Law; Legal Fees. This Note shall be governed by and
construed in accordance with the laws of the State of Florida, and Newtech
agrees to pay the reasonable legal fees and disbursements of counsel in
connection with the enforcement of this Note.
NEW M-TECH CORPORATION
By: /S/ LEONOR SCHUCK
---------------------------------------
Title: VICE PRESIDENT, FINANCE
Address: 16550 NW 10th AVE, MIAMI, FL 33169
3
<PAGE>
OUT-OF-STATE CLOSING AFFIDAVIT (BORROWERS)
STATE OF MICHIGAN )
) SS:
CITY OF TROY )
BEFORE ME, the undersigned authority personally appeared Leonor Schuck,
who, by me being first duly sworn, deposes and says that:
1. She is Vice President of Finance and Chief Financial Officer of New
M-Tech Corporation, a Florida corporation, (the "Borrower").
2. The Borrower is a party to the revolving note in favor of Windmere
Corporation ("Windmere") listed on Schedule "A" hereto (the "Credit Document").
3. The Credit Document has been signed by the Borrower in the City of
Troy, all in the presence of KITTY R. DIXON, a notary public of the State
of Michigan.
4. She is familiar with the nature of an oath and with the penalties
which are provided by law for falsely swearing to statements made in an
instrument of this nature.
FURTHER AFFIANT SAYETH NOT.
LEONOR K. SCHUCK
---------------------------------
Leonor E. Schuck
<PAGE>
The Foregoing Affidavit was acknowledged, sworn to and subscribed
before me, by the undersigned authority, duly authorized to administer oaths and
take acknowledgments, by Leonor Schuck, as Vice President of Finance and Chief
Financial Officer of New M-Tech Corporation, a Florida corporation, on behalf
of the corporation. She is personally known to me or has produced the following
type of identification FLORIDA DRIVERS LICENSE.
KITTY R. DIXON
-----------------------------------
Notary Public
State of Michigan
Print Name: Kitty R. Dixon
My commission expires 07-12-00 (SEAL)
<PAGE>
SCHEDULE "A"
1. Revolving Note in the principal amount of $3,091,352.00.
EXHIBIT 10.30
PROMISSORY NOTE
$2,000,000 June 26, 1997
FOR VALUE RECEIVED:), New M-Tech Corporation, a Florida corporation
(the "Borrower"), does hereby promise to pay to Joel Newman ("Newman"), or
order, the principal sum of Two Million Dollars ($2,000,000) (the "Principal
Balance"), together with interest on the Principal Balance from and after date
hereof until paid at the rate specified below. The Principal Balance shall bear
interest at an annual rate prior to maturity or default equal to the rate
publicly announced by NATIONSBANK, N.A. (South), as its "prime rate" (the "Prime
Rate"), plus 2% with Prime Rate in effect on the first day of month being
applicable to the entire month. A11 sums payable hereunder shall be payable in
such coin and currency as sha11 be at the time of payment legal tender for the
payment of public and private debts in the United States of America.
The entire Principal Balance of this Note shall be payable upon demand
of Newman, upon five (5) days prior written notice to the Borrower.
Accrued interest on this Note shall be paid monthly, commencing on the
first day of each month subsequent to the date of issuance of this Note and
continuing monthly on the first day of each month until this Note is paid in
full, and at maturity (whether by acceleration or otherwise). Interest on this
Note shall be computed on basis of the actual number of days elapsed over a 365-
day year.
Payments under this Note are subordinated to repayment of all Senior
Indebtedness (as defined in the next sentence). "Senior Indebtedness" shall mean
all indebtedness owed by the Borrower to Bank Leumi Le-Israel B.M. and/or other
banks providing borrowing facilities to the Borrower (the "Banks").
(a) (Upon any payment or distribution of the assets of the Borrower,
whether in cash, property or securities, from any source whatsoever, to
creditors upon any dissolution, winding up, total or partial liquidation,
reorganization, composition, arrangement, or adjustment of the Borrower or its
securities (Whether voluntary or involuntary, of bankruptcy, insolvency,
reorganization, liquidation or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the assets and
liabilities of Newtech or otherwise), the Banks shall be entitled to receive
payment in fu11 in cash of al1 amounts due or to become due in respect of the
Senior Indebtedness before any payment is made on account of or applied on this
Note.
<PAGE>
(B) For a period commencing on the business day following the day the
Borrower received from Bank Leumi or the other banks notice that an "Event of
Default" (as defined in the Bank Facilities) has occurred and ending on the date
on which the Event of default has been cured (a "Payment Blockage period"), no
payment shall be made to Newman pursuant to this Note.
(C) New or a subsequent holder of this Note, by its acceptance of this
Note, agrees that during any, Payment Blockage Period, it will not ask, demand,
sue for, take or receive from the Borrower, by set-off or in any other manner,
any money which may now or hereafter be owing by the Borrower under this Note.
This note and the indebtedness evidenced hereby may be prepaid, in
whole or in part, without notice, penalty or premium at any time and from time
to time. Any prepayment shall first be applied to unpaid interest and the
remainder, if any, to the unpaid principal balance.
Newman shall have the right to declare the amount of the total unpaid
Principal Balance, together with all accrued and unpaid interest thereon,
immediately due and payable upon the failure of the Borrower to make any payment
of principal or interest hereunder within five (5) days after its due date; upon
the voluntary or involuntary dissolution of the Borrower, or upon the
adjudication for the Borrower as bankrupt, or upon the taking of any voluntary
action by the Borrower or any Involuntary action against the Borrower seeking an
adjudication of the Borrower as bankrupt, or seeking relief by or against the
Borrower under any provision of the Bankruptcy Code. Any payment of principal or
interest under this Note which is not made within five (5) days of its due date
shall bear interest from the due date at the highest rate of interest permitted
under Florida Law.
The borrower agrees to pay all costs, fees and expenses incurred by
holder hereof, including attorneys' fees (including those for appellate
proceedings) incurred in connection with the collection or attempted collection
or enforcement hereof, whether or not legal proceedings may have been
instituted. The Borrower shall pay all Florida documentary stamp taxes, if any,
due in connection with the execution and delivery of this Note.
In the event that the Borrower makes any payment of interest, fees or
other charges, however denominated, pursuant to this Note, which payment causes
the interest paid to Newman to exceed the maximum rate of interest permitted
under Florida law, any excess over such maximum shall be applied in reduction of
the Principal Balance owed to the Newman as of the date of such payment, or if
such excess exceeds the amount of the Principal Balance owed to Newman as of the
date of such payment) the difference shall be paid by Newman to the Borrower.
<PAGE>
THE BORROWER HEREBY AND NEWMAN BY ACCEPTANCE OF THIS NOTE, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREOF, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS NOTE, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
NEWMAN MAKING THE LOAN EVIDENCED BY THIS NOTE.
Time shall be of the essence with respect to the terms of this Note.
This Note cannot be changed or modified other than pursuant to a written
instrument signed by the parties hereto. This Note cannot be assigned by the
Borrower, in whole or in part, unless Newman shall consent in writing prior to
such assignment. This Note may not be assigned by Borrower.
All past due and delinquent sums hereunder, both principal and
interest, shall bear interest at the rate determined above until such sums have
been paid.
The Borrower hereby waives demand, presentment for payment, protest,
notice of protest, filing of suit and diligence in collecting this Note, and
consents that the time of all payments of any part thereof may be extended,
rearranged, renewed or postponed by Newman. The Borrower shall pay all amounts
owing under this Note without set-off counterclaim, deduction or withholding for
any reason whatsoever.
This Note shall be governed by and construed in accordance with the
laws of the State of Florida, without regard to any conflict of law rule or
principle that would give effect to the laws of another jurisdiction.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as
of the date first above written.
New M-Tech Corporation, a Florida corporation
Attest:
/S/ ILLEGIBLE By: /S/ JOEL NEWMAN
- ------------------------------- -------------------------------------
Joel Newman - President
Sign at LOS ANGELES CA.
on AUG 14 1997
EXHIBIT 10.31
WINDMERE CORPORATION
8% PROMISSORY NOTE
$3,000,000 April 16, 1996
WINDMERE CORPORATION, a Florida corporation (the "Company"), for value
received, hereby promises to pay to NEW M-TECH CORPORATION, a Florida
corporation (the "Holder"), as escrow agent for itself, NewTech International
Corporation and NewTech Hong Kong Ltd., the principal sum of three million
dollars ($3,000,000) (the "Principal Amount"), on April 15, 1998 (the "Maturity
Date") together with any unpaid interest accruing thereon as provided in Section
1 hereof. All payments hereunder will be in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Upon payment in full of the Principal
Amount, interest and other amounts due hereunder, Holder shall surrender this
Note to the Company at its principal place of business.
1. INTEREST PAYMENTS. Interest on the principal amounts from time to
time outstanding under this Note shall accrue from the date hereof through the
Maturity Date at a per annum rate equal, for each respective Interest Period
hereunder, to eight percent (8%), computed on the basis of the actual number of
days elapsed over a 365-day year. Except as otherwise provided herein, interest
on the outstanding Principal Amount shall be due and payable semi-annually in
arrears on the first Business Day (as defined below) of each Interest Period (as
defined below) commencing October 15, 1996, with a final payment due and payable
on the Maturity Date in an amount equal to the Principal Amount and all accrued
and unpaid interest on the Principal Amount as of such date.
As used in this Note:
(i) "Business Day" shall mean any day other than a
Saturday, Sunday or day on which commercial banking institutions are authorized
by law to be closed in Miami, Florida.
(ii) "Interest Period" shall mean a period consisting of
six calendar months or portion thereof, with the first Interest Period
commencing on (and including) the date hereof and ending on October 15, 1996.
2. PAYMENT TERMS. All payments of principal and interest
(including all prepayments) with respect to this Note shall be made on the due
date thereof to Holder at the following address:
New M-Tech Corporation
16550 N.W. 10th Avenue
Miami, Florida 33169
or at such other place within the continental United States as Holder may from
time to time designate in writing to the Company. Payments (including all
prepayments) received by Holder from the Company on this Note shall be applied
first to the payment of accrued and unpaid interest hereunder and only
thereafter to the outstanding Principal Amount.
The Company agrees that to the extent the Company makes a payment or
payments to Holder which payment or payments, or any part thereof, are
subsequently invalidated, declared to be fraudulent
<PAGE>
or preferential, set aside and/or required to be repaid to the Company, its
successors or assigns under any bankruptcy law, state or federal law, common law
or equitable cause, then, to the extent of such payment or repayment, the
obligations, or part thereof, under this Note that have been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.
3. DEFAULT. If any of the following events shall occur and be
continuing (each such event, an "Event of Default"):
(a) the Company fails to repay the Principal Amount of the
Note, or any interest thereon, within ten (10) Business Days of the due date
thereof, which failure is not cured within ten (10) Business Days of written
notice thereof received by the Company;
(b) the Company violates any covenant, agreement or condition
contained in this Note and such violation remains uncured for ten (10) Business
Days after receipt of written notice from the Holder, which notice shall specify
the conduct required to cure such violation; and
(c) the Company shall be adjudicated insolvent, or fails to
pay, or admits in writing its inability to pay its debts as they mature, or
makes a general assignment for the benefit of creditors; or the Company shall
apply for or consent to the appointment of any receiver, custodian, trustee or
similar officer for it or for all or any substantial part of its property, or
such receiver, custodian, trustee or similar officer shall be appointed without
the application or consent of the Company; or the Company shall institute (by
petition, application, answer, consent or otherwise), or take any action to
authorize the institution of, any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to the Company under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against the Company and such proceeding shall not be dismissed within sixty (60)
days after being instituted;
then, (i) upon the occurrence of any Event of Default described in clause (c) of
this Section, the unpaid Principal Amount of, and accrued and unpaid interest
on, the Note shall automatically become immediately due and payable, together
with all other amounts payable under this Note, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or further
notice of any kind, all of which are hereby expressly waived by the Company, and
(ii) upon the occurrence of any other Event of Default, Holder may, at its
option, by written notice to the Company declare the entire unpaid Principal
Amount of the Note, all interest accrued and unpaid thereon and all other
amounts payable under this Note to be forthwith due and payable, whereupon all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
further notice of any kind, all of which are hereby expressly waived by the
Company.
4. PREPAYMENT; REDEMPTION. This Note may, at the option of the Company,
be redeemed prior to maturity as a whole at any time or in part from time to
time, at the principal office of the Company, upon the notice provided herein,
at the then outstanding amount of the Note, together with accrued interest to
the date fixed for redemption.
5. LOST NOTE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it
(which shall be without surety in the case of loss, theft or destruction of this
Note held by the initial purchaser thereof), and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation if such Note is mutilated, the Company will make and deliver in
lieu thereof a new Note of like tenor, in the principal amount of such lost,
stolen, destroyed or mutilated Note outstanding at the time of delivery of such
new Note. Any Note made and delivered in accordance with the
-2-
<PAGE>
provisions of this Section shall be dated as of the last date to which interest
has been paid on the Note lost, stolen, destroyed or mutilated or if no interest
has been paid, the original date of this Note.
6. WAIVER OF TRIAL BY JURY. THE HOLDER HEREBY AND THE COMPANY BY
ACCEPTANCE OF THIS NOTE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREOF, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE COMPANY MAKING THE LOAN EVIDENCED BY
THIS NOTE.
7. NO ORAL MODIFICATION; ASSIGNMENT. This Note cannot be changed or
modified other than pursuant to a written instrument signed by the parties
hereto. This Note cannot be assigned by the Holder, in whole or in part, unless
the Company shall consent in writing prior to such assignment.
8. SUBORDINATION. Payments under this Note are subordinated to
repayment of all Senior Indebtedness (as defined in the next sentence), but only
to the extent and in the manner provided in this Section 8. "Senior
Indebtedness" shall mean all indebtedness owed by the Company to the Senior
Creditor pursuant to the Senior Creditor Letter Agreement, as such agreement may
be amended from time to time, or any indebtedness incurred by the Company from
time to time in connection with any other credit facility with any financial
institution or bank; provided that in no event shall the Senior Indebtedness
outstanding at any time ever exceed $50,000,000.
(a) Upon any payment or distribution of the assets of the
Company, whether in cash, property or securities, from any source whatsoever, to
creditors upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, or adjustment of the Company or its
securities (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the assets and
liabilities of the Company or otherwise), the Senior Creditor shall be entitled
to receive payment in full in cash of all amounts due or to become due in
respect of the Senior Indebtedness before any payment is made on account of or
applied on this Note.
(b) No payment under this Note shall be made during a Payment
Blockage Period (as defined hereinafter); PROVIDED, HOWEVER, that no more than
one Payment Blockage Period may exist during any 360 day period. As used herein,
"Payment Blockage Period" is the period commencing on the business day following
the day the Company receives from the Senior Creditor notice that an "Event of
Default" (as defined in Senior Creditor Letter Agreement) has occurred and is
continuing in respect of the Senior Indebtedness and terminating 180 days later.
(c) The Holder or any subsequent holder of this Note, by its
acceptance of this Note, agrees that during any Payment Blockage Period, it will
not ask, demand, sue for, take or receive from the Company, by set-off or in any
other manner, any money which may now or hereafter be owing by the Company under
this Note.
9. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure to
the benefit of the Company, the Holder and their respective successors and
assigns.
10. NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar communications equipment) against receipt to the party to whom
it is to be given, (i) if to the Company, at its address at 5980 Miami Lakes
Drive, Miami Lakes, Florida 33014, Attention: President, with a copy to
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida
-3-
<PAGE>
33131, Attention: Andrew Hulsh, Esq.; (ii) if to the Holder, at its address as
listed on the books and records of the Company or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section shall be deemed given at the time of receipt thereof.
11. APPLICABLE LAW. This Agreement shall for all purposes be construed
and interpreted in accordance with the laws of the State of Florida, without
regard to any conflict of law rule or principle that would give effect to the
laws of another jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered on the date first set forth above.
WINDMERE CORPORATION
By: /S/ DAVID M. FRIEDSON
------------------------------------
David M. Friedson
President
-4-
EXHIBIT 10.32
WINDMERE CORPORATION
8% PROMISSORY NOTE
$2,000,000 April 16, 1996
WINDMERE CORPORATION, a Florida corporation (the "Company"), for value
received, hereby promises to pay to NEW M-TECH CORPORATION, a Florida
corporation (the "Holder"), as escrow agent for itself, NewTech International
Corporation and NewTech Hong Kong Ltd., the principal sum of two million dollars
($2,000,000) (the "Principal Amount"), on April 15, 2001 (the "Maturity Date")
together with any unpaid interest accruing thereon as provided in Section 1
hereof. All payments hereunder will be in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Upon payment in full of the Principal
Amount, interest and other amounts due hereunder, Holder shall surrender this
Note to the Company at its principal place of business.
1. INTEREST PAYMENTS. Interest on the principal amounts from time to
time outstanding under this Note shall accrue from the date hereof through the
Maturity Date at a per annum rate equal, for each respective Interest Period
hereunder, to eight percent (8%), computed on the basis of the actual number of
days elapsed over a 365-day year. Except as otherwise provided herein, interest
on the outstanding Principal Amount shall be due and payable semi-annually in
arrears on the first Business Day (as defined below) of each Interest Period (as
defined below) commencing October 15, 1996, with a final payment due and payable
on the Maturity Date in an amount equal to the Principal Amount and all accrued
and unpaid interest on the Principal Amount as of such date.
As used in this Note:
(i) "Business Day" shall mean any day other than a
Saturday, Sunday or day on which commercial banking institutions are authorized
by law to be closed in Miami, Florida.
(ii) "Interest Period" shall mean a period consisting of
six calendar months or portion thereof, with the first Interest Period
commencing on (and including) the date hereof and ending on October 15, 1996.
2. PAYMENT TERMS. All payments of principal and interest
(including all prepayments) with respect to this Note shall be made on the due
date thereof to Holder at the following address:
New M-Tech Corporation
16550 N.W. 10th Avenue
Miami, Florida 33169
or at such other place within the continental United States as Holder may from
time to time designate in writing to the Company. Payments (including all
prepayments) received by Holder from the Company on this Note shall be applied
first to the payment of accrued and unpaid interest hereunder and only
thereafter to the outstanding Principal Amount.
The Company agrees that to the extent the Company makes a payment or
payments to Holder which payment or payments, or any part thereof, are
subsequently invalidated, declared to be fraudulent
<PAGE>
or preferential, set aside and/or required to be repaid to the Company, its
successors or assigns under any bankruptcy law, state or federal law, common law
or equitable cause, then, to the extent of such payment or repayment, the
obligations, or part thereof, under this Note that have been paid, reduced or
satisfied by such amount shall be reinstated and continued in full force and
effect as of the time immediately preceding such initial payment, reduction or
satisfaction.
3. DEFAULT. If any of the following events shall occur and be
continuing (each such event, an "Event of Default"):
(a) the Company fails to repay the Principal Amount of the
Note, or any interest thereon, within ten (10) Business Days of the due date
thereof, which failure is not cured within ten (10) Business Days of written
notice thereof received by the Company;
(b) the Company violates any covenant, agreement or condition
contained in this Note and such violation remains uncured for ten (10) Business
Days after receipt of written notice from the Holder, which notice shall specify
the conduct required to cure such violation; and
(c) the Company shall be adjudicated insolvent, or fails to
pay, or admits in writing its inability to pay its debts as they mature, or
makes a general assignment for the benefit of creditors; or the Company shall
apply for or consent to the appointment of any receiver, custodian, trustee or
similar officer for it or for all or any substantial part of its property, or
such receiver, custodian, trustee or similar officer shall be appointed without
the application or consent of the Company; or the Company shall institute (by
petition, application, answer, consent or otherwise), or take any action to
authorize the institution of, any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to the Company under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against the Company and such proceeding shall not be dismissed within sixty (60)
days after being instituted;
then, (i) upon the occurrence of any Event of Default described in clause (c) of
this Section, the unpaid Principal Amount of, and accrued and unpaid interest
on, the Note shall automatically become immediately due and payable, together
with all other amounts payable under this Note, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or further
notice of any kind, all of which are hereby expressly waived by the Company, and
(ii) upon the occurrence of any other Event of Default, Holder may, at its
option, by written notice to the Company declare the entire unpaid Principal
Amount of the Note, all interest accrued and unpaid thereon and all other
amounts payable under this Note to be forthwith due and payable, whereupon all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or
further notice of any kind, all of which are hereby expressly waived by the
Company.
4. PREPAYMENT; REDEMPTION. This Note may, at the option of the Company,
be redeemed prior to maturity as a whole at any time or in part from time to
time, at the principal office of the Company, upon the notice provided herein,
at the then outstanding amount of the Note, together with accrued interest to
the date fixed for redemption.
5. LOST NOTE. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it
(which shall be without surety in the case of loss, theft or destruction of this
Note held by the initial purchaser thereof), and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation if such Note is mutilated, the Company will make and deliver in
lieu thereof a new Note of like tenor, in the principal amount of such lost,
stolen, destroyed or mutilated Note outstanding at the time of delivery of such
new Note. Any Note made and delivered in accordance with the
-2-
<PAGE>
provisions of this Section shall be dated as of the last date to which interest
has been paid on the Note lost, stolen, destroyed or mutilated or if no interest
has been paid, the original date of this Note.
6. WAIVER OF TRIAL BY JURY. THE HOLDER HEREBY AND THE COMPANY BY
ACCEPTANCE OF THIS NOTE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREOF, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE COMPANY MAKING THE LOAN EVIDENCED BY
THIS NOTE.
7. NO ORAL MODIFICATION; ASSIGNMENT. This Note cannot be changed or
modified other than pursuant to a written instrument signed by the parties
hereto. This Note cannot be assigned by the Holder, in whole or in part, unless
the Company shall consent in writing prior to such assignment.
8. SUBORDINATION. Payments under this Note are subordinated to
repayment of all Senior Indebtedness (as defined in the next sentence), but only
to the extent and in the manner provided in this Section 8. "Senior
Indebtedness" shall mean all indebtedness owed by the Company to the Senior
Creditor pursuant to the Senior Creditor Letter Agreement, as such agreement may
be amended from time to time, or any indebtedness incurred by the Company from
time to time in connection with any other credit facility with any financial
institution or bank; provided that in no event shall the Senior Indebtedness
outstanding at any time ever exceed $50,000,000.
(a) Upon any payment or distribution of the assets of the
Company, whether in cash, property or securities, from any source whatsoever, to
creditors upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, or adjustment of the Company or its
securities (whether voluntary or involuntary, or in bankruptcy, insolvency,
reorganization, liquidation or receivership proceedings, or upon an assignment
for the benefit of creditors, or any other marshalling of the assets and
liabilities of the Company or otherwise), the Senior Creditor shall be entitled
to receive payment in full in cash of all amounts due or to become due in
respect of the Senior Indebtedness before any payment is made on account of or
applied on this Note.
(b) No payment under this Note shall be made during a Payment
Blockage Period (as defined hereinafter); PROVIDED, HOWEVER, that no more than
one Payment Blockage Period may exist during any 360 day period. As used herein,
"Payment Blockage Period" is the period commencing on the business day following
the day the Company receives from the Senior Creditor notice that an "Event of
Default" (as defined in Senior Creditor Letter Agreement) has occurred and is
continuing in respect of the Senior Indebtedness and terminating 180 days later.
(c) The Holder or any subsequent holder of this Note, by its
acceptance of this Note, agrees that during any Payment Blockage Period, it will
not ask, demand, sue for, take or receive from the Company, by set-off or in any
other manner, any money which may now or hereafter be owing by the Company under
this Note.
9. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure to
the benefit of the Company, the Holder and their respective successors and
assigns.
10. NOTICE. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar communications equipment) against receipt to the party to whom
it is to be given, (i) if to the Company, at its address at 5980 Miami Lakes
Drive, Miami Lakes, Florida 33014, Attention: President, with a copy to
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida
-3-
<PAGE>
33131, Attention: Andrew Hulsh, Esq.; (ii) if to the Holder, at its address as
listed on the books and records of the Company or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section shall be deemed given at the time of receipt thereof.
11. APPLICABLE LAW. This Agreement shall for all purposes be construed
and interpreted in accordance with the laws of the State of Florida, without
regard to any conflict of law rule or principle that would give effect to the
laws of another jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered on the date first set forth above.
WINDMERE CORPORATION
By: /s/ David M. Friedson
------------------------------------
David M. Friedson
President
-4-
EXHIBIT 10.33
RENTAL CONTRACT
Party A :Shenzhen Buji District Economic Development Company
Legal Representative :Mr. Tsang Leung Tel: 887-1086
Fax: 887-3362
Party B :Durable Electronic Industries Co. Ltd.
Person in Charge :Mr. John Shieh I.D.#: P069664(5)
Fax: 887-3714
Correspondence Address :Unit 1104, Block A, Hunghom Commercial Centre,
39 Ma Tau Wai Road, Hunghom, Kowloon, H.K.
Party B agreed to rent from Party A 10,182 square meter of Lo Wang Industrial
Zone E, No. 1, 3 Level Manufacturing Plant, 988 square meter of Zone E, No. 9
Administration Officer, 1,777 square meter of Zone D, No. 17 Come, 1,000 square
meter of Zone D, No. 18 Dome, 1,131 square meter of Zone D, No. 21, 3 Level
Dining Room, 909 square meter of Zone F, No. 3, 208 square meter of Maintenance
Section. Both parties bear and share equal responsibilities, to implement the
following conditions stipulated as follows:
1) Party A to render the following:
1.1) Render all the above mentioned flats - 10,182 square meter of
Manufacturing Plant, 6,790 square meter of Dining Room, Dome,
Administration Office Area and Electricity Room etc...
Grand Total is 16,972 sq. meter.
1.2) Provide 800 KVA Electricity Facilities Unit (High Volt
Electricity part and Electricity Room are responsible by Party
A, whilst, Low Volt Electricity part is responsible by Party
B.) Down-deposit payment will be paid by Party B.
All utilities applications will be taken care by Party A.
1.3) One additional cargo lift is to be installed by Party A in
which the completion date is March (existing have 2 cargo
lifts)
<PAGE>
2) Party B responsibilities:
2.1) Must follow strictly the scope of business operation
regulations, to proceed the production, and follow the rule of
China Regulations, Politics, Customs, Environmental Politics;
follow this agreement conditions, follow the Safety of
Production Guidelines, Safety of Fire System Guidelines,
listen and follow instructions provided by China
Institution/Authorities.
2.2) Labour Management: Appointment of factory workers, taking care
of wages, labour insurance, Live Benefit, Praise and
Punishment issues, which should stick and comply with the
"Rules and Regulations of Enterprise Joint Venture with PRC"
as well as the Shenzhen Labour and Insurance Authorities.
2.3) Part B to pay for electricity, water and fees for various
government department on drainage, environmental, worker visa,
customs duty and inland revenue.
2.4) During the contract period, Part B to pay for insurance
coverage on the rental area and responsible for maintenance of
same on doors, windows, drainage works, water and electricity
set up.
2.5) Part A will have no responsibility on Part B's debt or
creditors issues.
2.6) Part B to pay for any added on charges on water and
electricity.
2.7) Part B to pay for the installation of telephone which is one
of her assets.
3) Rental calculation and Advance rental
3.1) First and second year, April 1, 1997 to March 31, 1999
Area for canteen, quarters, office electricity room, the
monthly rental is RMB11 - while manufacturing plant will be at
RMB12.
If the hand over period is on/before January 15, 1997, rental
starts from April 1. If the hand over period in on/before
April 1, rental starts from May 1.
3.2) The third and fourth year, monthly rental is at RMB13 - for
manufacturing plant and RMB12 - for other areas.
The fifth year, monthly rental is at RMB14 - for manufacturing
plant and RMB13 - for others areas.
<PAGE>
3.3) Renovation period is up to March 31 and rental starts from
April 1.
3.4) Advance payment (for one month rental).
RMB200,000 - as the deposit payable within 10 days from date
of contract. This deposie will be returned to Party B when the
contract terminates (with deduction on any damage made in the
rental areas).
3.5) Rental Calculation
Rental starts on April 1 (if the hand over is on April 1,
rental starts on May 1). Rental payment should be made before
the 30th of each month. A surcharge of 5% per day will be
added if the rental payment is over 10 days.
3.6) If rental payment, water, and electricity bill are overdue for
one month or above, Party B will be considered as Breach of
Contract and Party A has the right to forfeit the rental
deposit as compensation.
4) Others.
4.1) Party B will be resonsible for the maintenance works on all rental
areas on fire precautions, safety and cleanliness in canteen.
4.2) During the rental period, any renovation/alteration works should get
the consent of Party A before such work is carried out. When the rental
period terminates, Party B is not allowed to dismantle the added on
facilities on electricity and water supplies.
4.3) Maintenance of manufacture plant and quarters during the contract
period.
Maintenance works, added on facilities, fire safety equipment will be
responsible by Party B while on Party A will be responsible for
construction work maintenance.
4.4) Maintanance fees from various departments for health, environmental,
drainage will be paid by Party B.
4.5.1) Responsibility and Breach of Contract
This contract will consider as void due to new regulation/discipline of
the central government or Act of God.
<PAGE>
4.5.2) Termination or Extension of Contract
Any changes of the rental contract require 2 months advance notice to
either party. The compensation is one month rental payment from the
requested party.
4.6) This contract is valid for 5 years from Jan 1, 1997 to December 31,
2001.
4.7) This contract has 2 copies and is legal binding with both parties
company chops and signatures.
Signed by Signed By
Party A Party B
/S/ ILLEGIBLE /S/ ILLEGIBLE
- --------------------------- ---------------------------
DEI
Dated: December 16, 1996
<PAGE>
SUPPLEMENTARY CONTRACT
----------------------
Party A: Buji District Economic Development Company
Legal Representative: Tsang Leung Tel: 887-1083
Party B: Durable Electronic Industry Ltd.
Man-in-Charge: John Shieh
A rental contract was signed between the two parties on Dec 16, 1996. But due to
the delay of hand over the premises by the previous occupier - the shoes
manufacturer to party B, a revised rental agreement is set as follows:
1. Originally hand over date is Jan 15, 1997, with rental payable to party
A effective from April 1, 1997. In the case if the hand-over is before
April 1, 1997 the rental will start on May 1, 1997. Effective from now
onwards rental starts from June 1, 1997, including the plant,
dormitories and other space areas.
1.1 For the first & second year (period between June 1, 1997 to March 30,
1999) monthly rental for management quarter, areas for canteen, office,
maintenance will be RMB11 - per square meter. Areas for manufacturing
plant will be RMB12 per square meter.
1.2 The third and fourth year (April 1, 99 - March 30, 2001) monthly rental
for manufacturing plant area will be RMB13 per square meter while
others at RMB12 per square meter.
1.3 The fifth year - monthly rental for manufacturing plant area will be
RMB14 per square meter and others at RMB13 per square meter.
2. Other terms remain unchanged.
3. This supplementary contract has 2 copies and each party keeps one. It
is legal binding with both parties company chops and signatures on it.
Signed by Signed By
Party A Party B
/S/ ILLEGIBLE /S/ ILLEGIBLE
- --------------------------- ---------------------------
DEI
Dated: June 25, 1997
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of April 15,
1998, by and between Newtech Electronics Industries, Inc. (f/k/a New M-Tech
Corporation), a Florida corporation, with its principal place of business at
16550 N.W. 10th Avenue, Miami, Florida 33169 (the "Company"), and Joel Newman
("Executive").
RECITALS
WHEREAS, Executive is the Chairman, Chief Executive Officer and
President of the Company and has continuously served as a valuable employee of
the Company since its inception.
WHEREAS, of the contributions made by all of the Company's employees
and officers, Executive's leadership, creativity, loyalty and services have
constituted major factors in the extraordinarily successful growth and
development of the Company.
WHEREAS, the Company desires to continue such employment upon certain
terms and conditions. All of the terms, conditions and undertakings of this
Agreement (including, without limitation, Section 8 hereof) were submitted to
and duly approved and authorized in writing by the Company's Board of Directors.
WHEREAS, the Company intends to file with the Securities and Exchange
Commission a Registration Statement on Form S-1 with respect to the Company's
proposed underwritten initial public offering of Common Stock (the "Offering").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Company and Executive hereby agree as follows:
AGREEMENT
1. EMPLOYMENT. Executive shall be employed as the Chairman, Chief
Executive Officer and President of the Company.
2. TERM. The term of this Agreement shall commence upon the date of the
consummation of the Offering (the "Commencement Date") and shall terminate as
provided below (the "Term"). Except as otherwise provided in Sections 6, 7 and
13 below, and except for termination for cause, the Term shall be a continuous
two-year period commencing this date and running for a period such that on each
"Anniversary Date," as defined below, one additional year automatically shall be
added. On any Anniversary Date either party may provide written notice to the
other party of that party's intention not to extend the Term of this Agreement
beyond the number of years then remaining in the Term, which number shall always
be two. Such written notice shall be deemed the notice to terminate this
Agreement at the end of the two-year term
<PAGE>
then in effect. The "Anniversary Date," as used herein, shall be the first day
of the second year of the Term and the first day of each subsequent year,
including each year beyond the first two years of the Term. It is the intention
of the parties that the Term as of each Anniversary Date automatically shall be
two years, that two years' written notice shall be required to terminate this
Agreement, except as otherwise provided in Sections 6, 7 and 13, and except for
termination for cause, and that said written notice to terminate may only be
given on an Anniversary Date.
3. DUTIES. During the Term, Executive shall use his best efforts and
devote a sufficient amount of his working time and attention to the affairs of
the Company in order to perform the duties of the Chairman, Chief Executive
Officer and President of the Company. Executive shall report directly to the
Board of Directors of the Company (the "Board") and shall perform such
reasonable tasks and carry out such reasonable responsibilities as the Board
shall assign or designate.
4. COMPENSATION. During the Term of this Agreement, the Company shall
compensate Executive as follows:
(a) SALARY. The Company shall pay Executive a base annual
salary of $475,000, to be distributed in equal bi-weekly installments (the "Base
Annual Salary"). The Base Annual Salary shall commence on the Commencement Date
and shall remain in effect for the next consecutive twelve months of the Term.
Thereafter, the Base Annual Salary will increase progressively for each of the
ensuing twelve-month periods ("Fiscal Year") during the Term by an amount at
least equal to the percentage increase in the Miami-Dade County Consumer Price
Index published by the Bureau of Labor Statistics, United States Department of
Labor (the "Index") for the twelve-month period beginning three months before
the beginning of each such Fiscal Year. If at any time at which the
determination of the Base Annual Salary adjustment is required the Index is no
longer published or issued, the parties shall use such other index as is then
generally recognized or accepted for similar determinations of purchasing power.
If the parties are unable to agree on the selection of an index which would most
accurately carry out the intent hereof, or if there is a dispute with respect to
any computations as called for herein, then the issue with respect thereto shall
be determined by arbitration according to the then existing rules of the
American Arbitration Association. Nothing contained herein shall be construed to
prevent the Company from increasing Executive's Base Annual Salary more often
than annually or by a higher amount than required by the Index.
(b) AUTOMOBILE. The Company shall provide Executive with a new
automobile approximately every three years, of make and model comparable to the
automobile which Employee is accustomed to driving, and the Company shall bear
the cost of such automobile and all fuel, maintenance and insurance costs
associated with such automobile.
(c) EMPLOYEE BENEFITS. Executive shall participate in the
Company's 1997 Stock Option Plan and all other insurances, or insurance plans,
and employee benefits and bonuses covering the Company's senior executive
officers as are now or may in the future be in effect. Employee shall be
accorded at least the same level of insurance benefits and coverage, both as to
types and amounts, as he has been accorded for the three months immediately
2
<PAGE>
preceding the date hereof, and the Company shall bear the full cost of providing
such insurance coverage.
(d) EXPENSES. The Company shall reimburse Executive for all
reasonable expenses incurred by him in the course of conducting his duties
hereunder.
(e) VACATION. Executive shall be entitled to a minimum of four
weeks paid vacation per year.
(f) ADDITIONAL COMPENSATION. Notwithstanding anything to the
contrary contained in this Agreement, Executive shall be entitled to all
benefits, including bonuses, paid or given by the Company to executive officers
of the Company during the Term, and nothing contained in this Agreement shall in
any way be deemed to limit Executive's receipt of or participation in such
benefits, bonuses or benefit plans or to preclude the Company from making
additional payments, in the form of bonuses or otherwise, or conferring
additional benefits upon Executive.
5. RESTRICTIONS. During the term of this Agreement, Executive shall not
use, disclose, confirm, furnish or make accessible to anyone, other than in the
regular course of business of the Company, any knowledge or information of a
confidential or secret nature with respect to the business affairs, assets,
operations, plans or know-how of the Company or its subsidiaries or affiliates.
6. DEATH. If Executive shall die during the Term of this Agreement,
the Term shall terminate on the date thereof, and the Company shall pay
Executive's estate a sum equivalent to one year's Base Annual Salary, as
adjusted pursuant to Section 4(a) above. Such payment shall be paid within 90
days of Executive's death and shall be in addition to any life insurance
benefits payable as the result of Executive's death.
7. DISABILITY. If during the Term Executive is unable to perform the
essential duties of his position, with or without reasonable accommodation, by
reason of illness or incapacity, for a period of 360 consecutive days or more,
the Company may, at its option, upon written notice to Executive, terminate this
Agreement, which termination shall be effective one year from the date of such
written notice. Such termination, however, shall not affect any rights of
Executive to insurance payments due to Executive as a result of the insurance
coverage provided for in Paragraph 4(c). Determination of whether Executive is
disabled shall be determined in accordance with the Company's long-term
disability plan.
8. CHANGE IN CONTROL. This Agreement shall continue in full force and
effect notwithstanding any change in control, merger, consolidation or
reorganization of any kind involving the Company or the sale of all or
substantially all of its assets. It shall be binding upon the Company and
Executive and their respective heirs, executors, administrators, successors and
assigns.
Notwithstanding anything to the contrary contained herein, in
the Company's 1997 Stock Option Plan or the related stock option agreements or
in any of the Company's other
3
<PAGE>
stock option plans, incentive compensation plans or similar plans or in the
related agreements between the Company and Executive from time to time, if at
any time during the Term there shall be a change in control of the Company, then
Executive shall have the option of terminating this Agreement immediately upon
notice and, in such event: (i) any stock option of the Company granted to
Executive shall be exercisable immediately and the stock of the Company acquired
pursuant to such exercise may be sold by Executive subject to no restrictions by
the Company whatsoever (other than those imposed by federal and state securities
laws); and (ii) the Company shall pay to Executive, at the time of such
termination, a lump sum equal to three times Executive's Base Annual Salary,
adjusted pursuant to Section 4(a) above for the fiscal year in which such
termination occurs. The Company's execution of this Agreement constitutes the
determination in writing of its Board of Directors to provide for the
acceleration of vesting of Executive's stock options pursuant to Section 8(b) of
the Company's 1997 Stock Option Plan and Section 10 of any Stock Option Grant
thereunder. For purposes of this Agreement, a "change in control" shall mean:
(a) (i) (A) The acquisition (other than by
or from the Company), at any time after the date hereof, by any person, entity
or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of
either the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
in the election of Directors, which acquisition has not been approved by the
Board; or
(B) Approval by the shareholders of the
Company of (x) a reorganization, merger or consolidation with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of Directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (y) a liquidation or dissolution of the Company
or (z) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned, which transaction has not been approved by the
Board; AND
(ii) Such change in control results in a diminution
in Executive's compensation, responsibilities or position such that Executive
cannot in good faith continue to fulfill the responsibilities for which he is
employed, as determined by Executive in his sole discretion, and if such change
in control did not occur due to Executive's intentional bulk sale of voting
shares of the Company owned by him directly to such control persons or group; OR
(b) The four (4) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") or any group of the Incumbent Board
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a Director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the Directors then comprising the Incumbent
Board (as opposed to an election or nomination of an individual whose initial
assumption of office is in
4
<PAGE>
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board.
Such lump sum payment shall be in lieu of any and all
compensation due to Employee for the years that would otherwise be remaining in
the Term pursuant to Paragraph 2. Upon receipt of said lump sum payment, this
Agreement and all rights and duties of the parties shall be terminated, except
as follows. In consideration for such lump sum payment and for the right to
terminate under the conditions set forth above, Executive agrees to consult with
the Company and its officers if requested to do so for a period of at least
three years from the date of such termination. However, Executive shall be
required to devote only such part of his time to such services as Executive
believes reasonable in Executive's sole discretion, and the time and date such
services are offered shall be determined by Executive so long as that time and
date is within a reasonable period of time after the request. It is expressly
agreed that the Company's rights to avail itself of the advice and consultation
services of Executive shall at all times be exercised in a reasonable manner,
that adequate notice shall be given to Executive in such events, and that
noncompliance with any such request by Executive for good cause, including, but
not limited to, ill health, prior commitments, conflicts of interest or absence
from Miami-Dade County, Florida, shall not constitute a breach or violation of
this Agreement. Executive agrees that, except for reimbursement of all
reasonable expenses incurred by him with respect to such consultation and
advisory services, payable as such consultation and advisory services are
rendered, he shall not be entitled to any further compensation. It is understood
that in furnishing any advisory and consulting services provided herein,
Employee shall not be an employee of the Company but shall act in the capacity
of an independent contractor.
9. WAIVERS. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by either party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically stated in writing
as aforementioned.
10. SAVINGS PROVISION. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time, shall not affect the validity of the remaining portions thereof.
11. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Florida.
12. NOTICES. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, such notice
must be in writing and given by personal delivery or by Federal Express, UPS or
other similar courier service, to the recipient at the address set forth below
and shall be deemed effective upon receipt.
5
<PAGE>
If to the Company: Newtech Electronics Industries, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33169
If to Executive: Joel Newman
355 Ocean Boulevard
Golden Beach, Florida 33161
13. DEFAULT. In the event either party defaults in the performance of
its obligations under this Agreement, the nondefaulting party may, after giving
30 days notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated or tried (at both trial and appellate levels).
14. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (a "Payment"), would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.
Anything to the contrary notwithstanding, if the Reduced Amount is zero and it
is determined further that any Payment which is not an Agreement Payment would
nevertheless be nondeductible by the Company for Federal income tax purposes
because of Section 280G of the Code, then the aggregate present value of
Payments which are not Agreement Payments shall also be reduced (but not below
zero) to an amount expressed in present value which maximizes the aggregate
present value of Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this Section 14,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code.
(b) All determinations required to be made under this Section
14 shall be made by the Miami, Florida office of Ernst & Young, independent
certified public accountants, or, at Executive's option, any other nationally or
regionally recognized firm of independent public accountants selected by
Executive and approved by the Company, which approval shall not be unreasonably
withheld or delayed (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within twenty (20)
business days of the date of a change in control (as defined in Section 8 of
this Agreement, as amended from time
6
<PAGE>
to time) or such earlier time as is requested by the Company and an opinion to
Executive that he has substantial authority not to report any excise tax on his
Federal income tax return with respect to any Payments. Any such determination
by the Accounting Firm shall be binding upon the Company and Executive.
Executive shall determine which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 14, provided that,
if Executive does not make such determination within ten (10) business days of
the receipt of the calculations made by the Accounting Firm, the Company shall
elect which and how much of the Payments shall be eliminated or reduced
consistent with the requirements of this Section 14 and shall notify Executive
promptly of such election. Within five (5) business days thereafter, the Company
shall pay to or distribute to or for the benefit of Executive such amounts as
are then due to Executive under this Agreement. All fees and expenses of the
Accounting Firm incurred in connection with the determinations contemplated by
this Section 14 shall be borne by the Company.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been made by
the Company which should not have been made ("Overpayment") or that additional
Payments which will not have been made by the Company could have been made
("Underpayment"), in each case consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm, based upon the assertion
of a deficiency by the Internal Revenue Service against Executive, which the
Accounting Firm believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of Executive shall be treated for all purposes as
a loan AB INITIO to Executive which Executive shall repay to the Company
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to
have been made and no amount shall be payable by Executive to the Company if and
to the extent such deemed loan and payment would not either reduce the amount on
which Executive is subject to tax under Section 1 and Section 4999 of the Code
or generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
* * * *
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have signed this
Agreement as of the day and year first above written.
NEWTECH ELECTRONICS INDUSTRIES, INC.
By:/S/ LEONOR SCHUCK
---------------------------------
Name: Leonor Schuck
Title: Vice President, Finance and
Chief Financial Officer
EXECUTIVE:
/S/ JOEL NEWMAN
---------------------------------------
Joel Newman
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of April 15,
1998, by and between Newtech Electronics Industries, Inc. (f/k/a New M-Tech
Corporation), a Florida corporation, with its principal place of business at
16550 N.W. 10th Avenue, Miami, Florida 33169 (the "Company"), and Hatch Masuda
("Executive").
RECITALS
WHEREAS, Executive is the Senior Vice President, Design and Product
Development of the Company.
WHEREAS, the Company desires to continue such employment upon certain
terms and conditions. All of the terms, conditions and undertakings of this
Agreement (including, without limitation, Section 8 hereof) were submitted to
and duly approved and authorized in writing by the Company's Board of Directors.
WHEREAS, the Company intends to file with the Securities and Exchange
Commission a Registration Statement on Form S-1 with respect to the Company's
proposed underwritten initial public offering of Common Stock (the "Offering").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Company and Executive hereby agree as follows:
AGREEMENT
1. EMPLOYMENT. Executive shall be employed as the Senior Vice
President, Design and Product Development of the Company.
2. TERM. The term of this Agreement shall commence upon the date of the
consummation of the Offering (the "Commencement Date") and shall terminate as
provided below (the "Term"). Except as otherwise provided in Sections 6, 7 and
14 below, and except for termination for cause, the Term shall be a continuous
two-year period commencing this date and running for a period such that on each
"Anniversary Date," as defined below, one additional year automatically shall be
added. On any Anniversary Date either party may provide written notice to the
other party of that party's intention not to extend the Term of this Agreement
beyond the number of years then remaining in the Term, which number shall always
be two. Such written notice shall be deemed the notice to terminate this
<PAGE>
Agreement at the end of the two-year term then in effect. The "Anniversary
Date," as used herein, shall be the first day of the second year of the Term and
the first day of each subsequent year, including each year beyond the first two
years of the Term. It is the intention of the parties that the Term as of each
Anniversary Date automatically shall be two years, that two years' written
notice shall be required to terminate this Agreement, except as otherwise
provided in Sections 6, 7 and 14, and except for termination for cause, and that
said written notice to terminate may only be given on an Anniversary Date.
3. DUTIES. During the Term, Executive shall use his best efforts and
devote all of his working time and attention to the affairs of the Company in
order to perform the duties of the Senior Vice President, Design and Product
Development of the Company. Executive shall report directly to the Chief
Executive Officer and President of the Company and shall perform such reasonable
tasks and carry out such reasonable responsibilities as the Company's Board of
Directors (the "Board") or the Chief Executive Officer and President shall
assign or designate.
4. COMPENSATION. During the Term of this Agreement, the Company shall
compensate Executive as follows:
(a) SALARY. The Company shall pay Executive a base annual
salary of $192,000, to be distributed in equal bi-weekly installments (the "Base
Annual Salary"). The Base Annual Salary shall commence on the Commencement Date
and shall remain in effect for the next consecutive twelve months of the Term.
Thereafter, the Base Annual Salary will increase progressively for each of the
ensuing twelve-month periods ("Fiscal Year") during the Term by an amount at
least equal to the percentage increase in the Miami-Dade County Consumer Price
Index published by the Bureau of Labor Statistics, United States Department of
Labor (the "Index") for the twelve-month period beginning three months before
the beginning of each such Fiscal Year. If at any time at which the
determination of the Base Annual Salary adjustment is required the Index is no
longer published or issued, the parties shall use such other index as is then
generally recognized or accepted for similar determinations of purchasing power.
If the parties are unable to agree on the selection of an index which would most
accurately carry out the intent hereof, or if there is a dispute with respect to
any computations as called for herein, then the issue with respect thereto shall
be determined by arbitration according to the then existing rules of the
American Arbitration Association. Nothing contained herein shall be construed to
prevent the Company from increasing Executive's Base Annual Salary more often
than annually or by a higher amount than required by the Index.
(b) EMPLOYEE BENEFITS. Executive shall participate in the
Company's 1997 Stock Option Plan and all other insurances, or insurance plans,
and employee benefits and bonuses covering the Company's senior executive
officers as are now or may in the future be in effect. Employee shall be
accorded at least the same level of insurance benefits and coverage, both as to
types and amounts, as he has been accorded for the three months immediately
preceding the date hereof, and the Company shall bear the full cost of providing
such insurance coverage.
(c) EXPENSES. The Company shall reimburse Executive for all
reasonable expenses incurred by him in the course of conducting his duties
hereunder.
(d) VACATION. Executive shall be entitled to a minimum of
three weeks paid vacation per year.
-2-
<PAGE>
(e) ADDITIONAL COMPENSATION. Notwithstanding anything to the
contrary contained in this Agreement, Executive shall be entitled to all
benefits, including bonuses, paid or given by the Company to executive officers
of the Company during the Term, and nothing contained in this Agreement shall in
any way be deemed to limit Executive's receipt of or participation in such
benefits, bonuses or benefit plans or to preclude the Company from making
additional payments, in the form of bonuses or otherwise, or conferring
additional benefits upon Executive.
5. RESTRICTIONS.
(a) NON-COMPETITION; NON-SOLICITATION. During the "Restricted
Period" (as hereinafter defined), Executive agrees not to, directly or
indirectly, alone or as a partner, officer, director, employee, consultant,
agent, independent contractor, member or stockholder of any company or person,
engage in any business activity, including but not limited to any business
activity related to the design, sourcing, manufacture, marketing or sale of
consumer electronic products in the "Restricted Area" (as hereinafter defined)
which is directly or indirectly in competition with the products being designed,
sourced, manufactured, marketed or sold by the Company or any subsidiary or
which is directly or indirectly detrimental to the business of the Company or
any subsidiary; provided, however, that the record or beneficial ownership by
Executive of five percent (5%) of the publicly traded capital stock of any such
company or person for investment purposes shall not be deemed to be in violation
of this Section 5(a) so long as Executive is not an officer, director, employee
or consultant of such company or person.
Executive further agrees that, during the "Non-Solicitation Period" (as
hereinafter defined), Executive shall not in any capacity, either separately,
jointly or in association with others, directly or indirectly do any of the
following: (a) recruit, solicit, induce or otherwise influence any employee,
director, officer, consultant, agent, supplier, customer, prospect, proprietor,
partner, stockholder, lender, joint venturer, investor, lessor or any other
person or entity that had a business relationship with the Company or any
subsidiary at any time during the two (2) years prior to the date of such
solicitation, to discontinue, reduce or modify such relationship with the
Company or any subsidiary; or (b) employ or seek to employ any person or agent
who is then employed or retained by the Company or any subsidiary (or who was so
employed or retained at any time within the two (2) years prior to the date
Executive employs or seeks to employ such person).
The "Restricted Period" shall mean the period of two (2) years after
the date on which Executive's employment with the Company under this Agreement
is terminated. The "Restricted Area" shall mean the United States of America,
Mexico, South America, Central America and the Caribbean.
Executive acknowledges and agrees that the covenants provided for in
this Section 5(a) are reasonable and necessary in terms of time, area and line
of business to protect the Company's legitimate business interests in protecting
its "Trade Secrets" (as hereinafter defined). Executive further acknowledges and
agrees that such covenants are reasonable and necessary in terms of time, area
and line of business to protect the Company's other legitimate business
interests,
-3-
<PAGE>
which include its interests in protecting its (x) valuable "Confidential
Information" (as hereinafter defined), (y) substantial relationships with
specific customers throughout the United States of America, Mexico, South
America, Central America and the Caribbean and (z) customer goodwill associated
with its ongoing business by way of its marketing throughout the United States
of America, Mexico, South America, Central America and the Caribbean. Executive
hereby expressly authorizes the enforcement of the covenants provided for in
this Section 5(a) by (w) the Company, (x) any assignee of the Company, (y) any
affiliate of the Company and (z) any successor to the business of the Company.
To the extent that the covenant provided for in this Section 5(a) may later be
deemed by a court to be too broad to be enforced with respect to its duration or
with respect to any particular activity or geographic area, the court making
such determination shall have the power to (and the parties contemplate that
such court will) reduce the duration or scope of the provision, and to add or
delete specific words or phrases to or from the provision. The provision as
modified shall then be enforced.
(b) NON-DISCLOSURE. During the term of this Agreement and
during the periods described in the last sentence of this paragraph, Executive
shall (i) receive and hold all Company Information in trust and in strictest
confidence, (ii) protect the Company Information from disclosure and shall in no
event take any action causing, or fail to take any action necessary to prevent,
any Company Information to lose its character as Company Information or as
property of the Company, and (iii) not, directly or indirectly, use, disseminate
or otherwise disclose any Company Information to any third party without the
prior written consent of the Company, which may be withheld in the Company's
absolute discretion. The provisions of this paragraph shall survive the
termination of this Agreement (x) for a period of five years with respect to
Confidential Information and (y) with respect to Trade Secrets, for so long as
any such information qualifies as a Trade Secret under applicable law.
"Company Information" shall mean Confidential Information and Trade
Secrets. "Confidential Information" shall mean confidential data and
confidential information relating to the business and/or products of the Company
and its subsidiaries (which does not rise to the status of a Trade Secret under
applicable law) which is or has been disclosed to Executive or of which
Executive became aware as a consequence of or through the performance of its
obligations under this Agreement and which has value to the Company and its
subsidiaries and is not generally known to competitors of the Company and its
subsidiaries. Confidential Information shall not include any data or information
that (i) has been voluntarily disclosed to the general public by the Company or
its subsidiaries, (ii) has been independently developed and disclosed to the
general public by others or (iii) otherwise enters the public domain through
lawful means. "Trade Secrets" shall mean information of the Company and its
subsidiaries, including, but not limited to, technical or non-technical data,
formulas, designs, styles, specifications, configurations, concepts, techniques,
procedures, production methods, customer lists, compilations, programs,
financial data, financial plans, product or service plans or lists of actual or
potential customers or suppliers, which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons or entities which can obtain
economic value from its disclosure or use, and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
-4-
<PAGE>
(c) INJUNCTION. The parties hereto hereby acknowledge that a
breach or violation by Executive of any or all of the covenants and agreements
contained in this Section 5 may cause irreparable harm and damage to the Company
in a monetary amount which may be virtually impossible to ascertain. As a
result, Executive acknowledges and agrees that the Company shall be entitled to
an injunction from any court of competent jurisdiction without having to post a
bond and restraining any breach or violation of any or all of the covenants and
agreements contained in this Section 5 by Executive, either directly or
indirectly, and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies that the Company may possess
hereunder, at law or in equity. Nothing contained in this Section 5 shall be
construed to prevent the Company from seeking and recovering from Executive
damages sustained by it as a result of any breach or violation by any of them of
any of the covenants or agreements contained in this Section 5.
6. DEATH. If Executive shall die during the Term of this Agreement, the
Term shall terminate on the date thereof, and the Company shall pay Executive's
estate a sum equivalent to one year's Base Annual Salary, as adjusted pursuant
to Section 4(a) above. Such payment shall be paid within 90 days of Executive's
death and shall be in addition to any life insurance benefits payable as the
result of Executive's death.
7. DISABILITY. If during the Term Executive is unable to perform the
essential duties of his position, with or without reasonable accommodation, by
reason of illness or incapacity, for a period of 360 consecutive days or more,
the Company may, at its option, upon written notice to Executive, terminate this
Agreement, which termination shall be effective one year from the date of such
written notice. Such termination, however, shall not affect any rights of
Executive to insurance payments due to Executive as a result of the insurance
coverage provided for in Paragraph 4(c). Determination of whether Executive is
disabled shall be determined in accordance with the Company's long-term
disability plan.
8. CHANGE IN CONTROL. This Agreement shall continue in full force and
effect notwithstanding any change in control, merger, consolidation or
reorganization of any kind involving the Company or the sale of all or
substantially all of its assets. It shall be binding upon the Company and
Executive and their respective heirs, executors, administrators, successors and
assigns.
Notwithstanding anything to the contrary contained herein, in
the Company's 1997 Stock Option Plan or the related stock option agreements or
in any of the Company's other stock option plans, incentive compensation plans
or similar plans or in the related agreements between the Company and Executive
from time to time, if at any time during the Term there shall be a change in
control of the Company, then Executive shall have the option of terminating this
Agreement immediately upon notice and, in such event: (i) any stock option of
the Company granted to Executive shall be exercisable immediately and the stock
of the Company acquired pursuant to such exercise may be sold by Executive
subject to no restrictions by the Company whatsoever (other than those imposed
by federal and state securities laws); and (ii) the Company shall pay to
Executive, at the time of such termination, a lump sum equal to three times
Executive's Base Annual Salary, adjusted pursuant to Section 4(a) above for the
fiscal year in
-5-
<PAGE>
which such termination occurs. The Company's execution of this Agreement
constitutes the determination in writing of its Board of Directors to provide
for the acceleration of vesting of Executive's stock options pursuant to Section
8(b) of the Company's 1997 Stock Option Plan and Section 10 of any Stock Option
Grant thereunder. For purposes of this Agreement, a "change in control" shall
mean:
(a) (i) (A) The acquisition (other than by or from
the Company), at any time after the date hereof, by any
person, entity or "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either the then outstanding shares of Common
Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in
the election of Directors, which acquisition has not been
approved by the Board; or
(B) Approval by the shareholders of the
Company of (x) a reorganization, merger or consolidation with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of Directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (y) a liquidation or dissolution of the Company
or (z) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned, which transaction has not been approved by the
Board; AND
(ii) Such change in control results in a diminution
in Executive's compensation, responsibilities or position such that Executive
cannot in good faith continue to fulfill the responsibilities for which he is
employed, as determined by Executive in his sole discretion, and if such change
in control did not occur due to Executive's intentional bulk sale of voting
shares of the Company owned by him directly to such control persons or group; OR
(b) The four (4) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") or any group of the Incumbent Board
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a Director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the Directors then comprising the Incumbent
Board (as opposed to an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board.
Such lump sum payment shall be in lieu of any and all
compensation due to Employee for the years that would otherwise be remaining in
the Term pursuant to Paragraph 2. Upon receipt of said lump sum payment, this
Agreement and all rights and duties of the parties shall be terminated, except
as follows. In consideration for such lump sum payment and for the
-6-
<PAGE>
right to terminate under the conditions set forth above, Executive agrees to
consult with the Company and its officers if requested to do so for a period of
at least three years from the date of such termination. However, Executive shall
be required to devote only such part of his time to such services as Executive
believes reasonable in Executive's sole discretion, and the time and date such
services are offered shall be determined by Executive so long as that time and
date is within a reasonable period of time after the request. It is expressly
agreed that the Company's rights to avail itself of the advice and consultation
services of Executive shall at all times be exercised in a reasonable manner,
that adequate notice shall be given to Executive in such events, and that
noncompliance with any such request by Executive for good cause, including, but
not limited to, ill health, prior commitments, conflicts of interest or absence
from Miami-Dade County, Florida, shall not constitute a breach or violation of
this Agreement. Executive agrees that, except for reimbursement of all
reasonable expenses incurred by him with respect to such consultation and
advisory services, payable as such consultation and advisory services are
rendered, he shall not be entitled to any further compensation. It is understood
that in furnishing any advisory and consulting services provided herein,
Employee shall not be an employee of the Company but shall act in the capacity
of an independent contractor.
9. INVENTIONS AND PATENTS. Executive agrees that all inventions,
innovations or improvements in the Company's method of conduction its business
(including new contributions, improvements, ideas and discoveries, whether
patentable or not) conceived or made by him during his employment with the
Company belong to the Company. Executive will promptly disclose such inventions,
innovations or improvements to the Board and perform all actions reasonably
requested by the Board to establish and confirm such ownership.
10. WAIVERS. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by either party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically stated in writing
as aforementioned.
11. SAVINGS PROVISION. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time, shall not affect the validity of the remaining portions thereof.
12. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Florida.
13. NOTICES. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, such notice
must be in writing and given by personal delivery or by Federal Express, UPS or
other similar courier service, to the recipient at the address set forth below
and shall be deemed effective upon receipt.
-7-
<PAGE>
If to the Company: Newtech Electronics Industries, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33169
If to Executive: Hatch Masuda
_____________________________
_____________________________
14. DEFAULT. In the event either party defaults in the performance of
its obligations under this Agreement, the nondefaulting party may, after giving
30 days notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated or tried (at both trial and appellate levels).
15. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (a "Payment"), would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.
Anything to the contrary notwithstanding, if the Reduced Amount is zero and it
is determined further that any Payment which is not an Agreement Payment would
nevertheless be nondeductible by the Company for Federal income tax purposes
because of Section 280G of the Code, then the aggregate present value of
Payments which are not Agreement Payments shall also be reduced (but not below
zero) to an amount expressed in present value which maximizes the aggregate
present value of Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this Section 15,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code.
(b) All determinations required to be made under this Section
15 shall be made by the Miami, Florida office of Ernst & Young, independent
certified public accountants, or, at Executive's option, any other nationally or
regionally recognized firm of independent public accountants selected by
Executive and approved by the Company, which approval shall not be unreasonably
withheld or delayed (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within twenty (20)
business days of the date of a change in control (as defined in Section 8 of
this Agreement, as amended from time
-8-
<PAGE>
to time) or such earlier time as is requested by the Company and an opinion to
Executive that he has substantial authority not to report any excise tax on his
Federal income tax return with respect to any Payments. Any such determination
by the Accounting Firm shall be binding upon the Company and Executive.
Executive shall determine which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 15, provided that,
if Executive does not make such determination within ten (10) business days of
the receipt of the calculations made by the Accounting Firm, the Company shall
elect which and how much of the Payments shall be eliminated or reduced
consistent with the requirements of this Section 15 and shall notify Executive
promptly of such election. Within five (5) business days thereafter, the Company
shall pay to or distribute to or for the benefit of Executive such amounts as
are then due to Executive under this Agreement. All fees and expenses of the
Accounting Firm incurred in connection with the determinations contemplated by
this Section 15 shall be borne by the Company.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been made by
the Company which should not have been made ("Overpayment") or that additional
Payments which will not have been made by the Company could have been made
("Underpayment"), in each case consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm, based upon the assertion
of a deficiency by the Internal Revenue Service against Executive, which the
Accounting Firm believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of Executive shall be treated for all purposes as
a loan AB INITIO to Executive which Executive shall repay to the Company
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to
have been made and no amount shall be payable by Executive to the Company if and
to the extent such deemed loan and payment would not either reduce the amount on
which Executive is subject to tax under Section 1 and Section 4999 of the Code
or generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
* * * *
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have signed this
Agreement as of the day and year first above written.
NEWTECH ELECTRONICS INDUSTRIES, INC.
By:/S/ JOEL NEWMAN
----------------------------------------------
Name: Joel Newman
Title: Chairman, Chief Executive Officer and
President
EXECUTIVE:
/S/ HATCH MASUDA
-------------------------------------------------
Hatch Masuda
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of April 15,
1998, by and between Newtech Electronics Industries, Inc. (f/k/a New M-Tech
Corporation), a Florida corporation, with its principal place of business at
16550 N.W. 10th Avenue, Miami, Florida 33169 (the "Company"), and Leonor Schuck
("Executive").
RECITALS
WHEREAS, Executive is the Vice President, Finance and Chief Financial
Officer of the Company.
WHEREAS, the Company desires to continue such employment upon certain
terms and conditions. All of the terms, conditions and undertakings of this
Agreement (including, without limitation, Section 8 hereof) were submitted to
and duly approved and authorized in writing by the Company's Board of Directors.
WHEREAS, the Company intends to file with the Securities and Exchange
Commission a Registration Statement on Form S-1 with respect to the Company's
proposed underwritten initial public offering of Common Stock (the "Offering").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Company and Executive hereby agree as follows:
AGREEMENT
1. EMPLOYMENT. Executive shall be employed as the Vice President,
Finance and Chief Financial Officer of the Company.
2. TERM. The term of this Agreement shall commence upon the date of the
consummation of the Offering (the "Commencement Date") and shall terminate as
provided below (the "Term"). Except as otherwise provided in Sections 6, 7 and
13 below, and except for termination for cause, the Term shall be a continuous
two-year period commencing this date and running for a period such that on each
"Anniversary Date," as defined below, one additional year automatically shall be
added. On any Anniversary Date either party may provide written notice to the
other party of that party's intention not to extend the Term of this Agreement
beyond the number of years then remaining in the Term, which number shall always
be two. Such written notice shall be deemed the notice to terminate this
Agreement at the end of the two-year term then in effect. The "Anniversary
Date," as used herein, shall be the first day of the second year of the Term and
the first day of each subsequent year, including each year beyond the first two
years of the Term. It is the intention of the parties that the Term as of each
Anniversary Date automatically shall be two years, that two years' written
notice shall be required to terminate this
<PAGE>
Agreement, except as otherwise provided in Sections 6, 7 and 13, and except for
termination for cause, and that said written notice to terminate may only be
given on an Anniversary Date.
3. DUTIES. During the Term, Executive shall use her best efforts and
devote all of her working time and attention to the affairs of the Company in
order to perform the duties of the Vice President, Finance and Chief Financial
Officer of the Company. Executive shall report directly to the Chief Executive
Officer and President of the Company and shall perform such reasonable tasks and
carry out such reasonable responsibilities as the Company's Board of Directors
(the "Board") or the Chief Executive Officer and President shall assign or
designate.
4. COMPENSATION. During the Term of this Agreement, the Company shall
compensate Executive as follows:
(a) SALARY. The Company shall pay Executive a base annual
salary of $110,000, to be distributed in equal bi-weekly installments (the "Base
Annual Salary"). The Base Annual Salary shall commence on the Commencement Date
and shall remain in effect for the next consecutive twelve months of the Term.
Thereafter, the Base Annual Salary will increase progressively for each of the
ensuing twelve-month periods ("Fiscal Year") during the Term by an amount at
least equal to the percentage increase in the Miami-Dade County Consumer Price
Index published by the Bureau of Labor Statistics, United States Department of
Labor (the "Index") for the twelve-month period beginning three months before
the beginning of each such Fiscal Year. If at any time at which the
determination of the Base Annual Salary adjustment is required the Index is no
longer published or issued, the parties shall use such other index as is then
generally recognized or accepted for similar determinations of purchasing power.
If the parties are unable to agree on the selection of an index which would most
accurately carry out the intent hereof, or if there is a dispute with respect to
any computations as called for herein, then the issue with respect thereto shall
be determined by arbitration according to the then existing rules of the
American Arbitration Association. Nothing contained herein shall be construed to
prevent the Company from increasing Executive's Base Annual Salary more often
than annually or by a higher amount than required by the Index.
(b) EMPLOYEE BENEFITS. Executive shall participate in the
Company's 1997 Stock Option Plan and all other insurances, or insurance plans,
and employee benefits and bonuses covering the Company's senior executive
officers as are now or may in the future be in effect. Employee shall be
accorded at least the same level of insurance benefits and coverage, both as to
types and amounts, as she has been accorded for the three months immediately
preceding the date hereof, and the Company shall bear the full cost of providing
such insurance coverage.
(c) EXPENSES. The Company shall reimburse Executive for all
reasonable expenses incurred by her in the course of conducting her duties
hereunder.
(d) VACATION. Executive shall be entitled to a minimum of
three weeks paid vacation per year.
2
<PAGE>
(e) ADDITIONAL COMPENSATION. Notwithstanding anything to the
contrary contained in this Agreement, Executive shall be entitled to all
benefits, including bonuses, paid or given by the Company to executive officers
of the Company during the Term, and nothing contained in this Agreement shall in
any way be deemed to limit Executive's receipt of or participation in such
benefits, bonuses or benefit plans or to preclude the Company from making
additional payments, in the form of bonuses or otherwise, or conferring
additional benefits upon Executive.
5. RESTRICTIONS. During the term of this Agreement, Executive shall not
use, disclose, confirm, furnish or make accessible to anyone, other than in the
regular course of business of the Company, any knowledge or information of a
confidential or secret nature with respect to the business affairs, assets,
operations, plans or know-how of the Company or its subsidiaries or affiliates.
6. DEATH. If Executive shall die during the Term of this Agreement, the
Term shall terminate on the date thereof, and the Company shall pay Executive's
estate a sum equivalent to one year's Base Annual Salary, as adjusted pursuant
to Section 4(a) above. Such payment shall be paid within 90 days of Executive's
death and shall be in addition to any life insurance benefits payable as the
result of Executive's death.
7. DISABILITY. If during the Term Executive is unable to perform the
essential duties of her position, with or without reasonable accommodation, by
reason of illness or incapacity, for a period of 360 consecutive days or more,
the Company may, at its option, upon written notice to Executive, terminate this
Agreement, which termination shall be effective one year from the date of such
written notice. Such termination, however, shall not affect any rights of
Executive to insurance payments due to Executive as a result of the insurance
coverage provided for in Paragraph 4(c). Determination of whether Executive is
disabled shall be determined in accordance with the Company's long-term
disability plan.
8. CHANGE IN CONTROL. This Agreement shall continue in full force and
effect notwithstanding any change in control, merger, consolidation or
reorganization of any kind involving the Company or the sale of all or
substantially all of its assets. It shall be binding upon the Company and
Executive and their respective heirs, executors, administrators, successors and
assigns.
Notwithstanding anything to the contrary contained herein, in
the Company's 1997 Stock Option Plan or the related stock option agreements or
in any of the Company's other stock option plans, incentive compensation plans
or similar plans or in the related agreements between the Company and Executive
from time to time, if at any time during the Term there shall be a change in
control of the Company, then Executive shall have the option of terminating this
Agreement immediately upon notice and, in such event: (i) any stock option of
the Company granted to Executive shall be exercisable immediately and the stock
of the Company acquired pursuant to such exercise may be sold by Executive
subject to no restrictions by the Company whatsoever (other than those imposed
by federal and state securities laws); and (ii) the Company shall pay to
Executive, at the time of such termination, a lump sum equal to three times
3
<PAGE>
Executive's Base Annual Salary, adjusted pursuant to Section 4(a) above for the
fiscal year in which such termination occurs. The Company's execution of this
Agreement constitutes the determination in writing of its Board of Directors to
provide for the acceleration of vesting of Executive's stock options pursuant to
Section 8(b) of the Company's 1997 Stock Option Plan and Section 10 of any Stock
Option Grant thereunder. For purposes of this Agreement, a "change in control"
shall mean:
(a) (i) (A) The acquisition (other than by or from
the Company), at any time after the date hereof, by any person, entity or
"group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of
either the then outstanding shares of Common Stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
in the election of Directors, which acquisition has not been approved by the
Board; or
(B) Approval by the shareholders of the
Company of (x) a reorganization, merger or consolidation with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election
of Directors of the reorganized, merged or consolidated company's then
outstanding voting securities, (y) a liquidation or dissolution of the Company
or (z) the sale of all or substantially all of the assets of the Company, unless
the approved reorganization, merger, consolidation, liquidation, dissolution or
sale is subsequently abandoned, which transaction has not been approved by the
Board; AND
(ii) Such change in control results in a diminution
in Executive's compensation, responsibilities or position such that Executive
cannot in good faith continue to fulfill the responsibilities for which she is
employed, as determined by Executive in her sole discretion, and if such change
in control did not occur due to Executive's intentional bulk sale of voting
shares of the Company owned by her directly to such control persons or group; OR
(b) The four (4) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") or any group of the Incumbent Board
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a Director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the Directors then comprising the Incumbent
Board (as opposed to an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board.
Such lump sum payment shall be in lieu of any and all
compensation due to Employee for the years that would otherwise be remaining in
the Term pursuant to Paragraph 2. Upon receipt of said lump sum payment, this
Agreement and all rights and duties of the parties
4
<PAGE>
shall be terminated, except as follows. In consideration for such lump sum
payment and for the right to terminate under the conditions set forth above,
Executive agrees to consult with the Company and its officers if requested to do
so for a period of at least three years from the date of such termination.
However, Executive shall be required to devote only such part of her time to
such services as Executive believes reasonable in Executive's sole discretion,
and the time and date such services are offered shall be determined by Executive
so long as that time and date is within a reasonable period of time after the
request. It is expressly agreed that the Company's rights to avail itself of the
advice and consultation services of Executive shall at all times be exercised in
a reasonable manner, that adequate notice shall be given to Executive in such
events, and that noncompliance with any such request by Executive for good
cause, including, but not limited to, ill health, prior commitments, conflicts
of interest or absence from Miami-Dade County, Florida, shall not constitute a
breach or violation of this Agreement. Executive agrees that, except for
reimbursement of all reasonable expenses incurred by her with respect to such
consultation and advisory services, payable as such consultation and advisory
services are rendered, she shall not be entitled to any further compensation. It
is understood that in furnishing any advisory and consulting services provided
herein, Employee shall not be an employee of the Company but shall act in the
capacity of an independent contractor.
9. WAIVERS. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by either party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically stated in writing
as aforementioned.
10. SAVINGS PROVISION. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time, shall not affect the validity of the remaining portions thereof.
11. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Florida.
12. NOTICES. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, such notice
must be in writing and given by personal delivery or by Federal Express, UPS or
other similar courier service, to the recipient at the address set forth below
and shall be deemed effective upon receipt.
If to the Company: Newtech Electronics Industries, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33169
If to Executive: Leonor Schuck
16400 Lochness Lane
Miami Lakes, Florida 33014
5
<PAGE>
13. DEFAULT. In the event either party defaults in the performance of
its obligations under this Agreement, the nondefaulting party may, after giving
30 days notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated or tried (at both trial and appellate levels).
14. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (a "Payment"), would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to or for the benefit of Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value which
maximizes the aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.
Anything to the contrary notwithstanding, if the Reduced Amount is zero and it
is determined further that any Payment which is not an Agreement Payment would
nevertheless be nondeductible by the Company for Federal income tax purposes
because of Section 280G of the Code, then the aggregate present value of
Payments which are not Agreement Payments shall also be reduced (but not below
zero) to an amount expressed in present value which maximizes the aggregate
present value of Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. For purposes of this Section 14,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code.
(b) All determinations required to be made under this Section
14 shall be made by the Miami, Florida office of Ernst & Young, independent
certified public accountants, or, at Executive's option, any other nationally or
regionally recognized firm of independent public accountants selected by
Executive and approved by the Company, which approval shall not be unreasonably
withheld or delayed (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within twenty (20)
business days of the date of a change in control (as defined in Section 8 of
this Agreement, as amended from time to time) or such earlier time as is
requested by the Company and an opinion to Executive that he has substantial
authority not to report any excise tax on her Federal income tax return with
respect to any Payments. Any such determination by the Accounting Firm shall be
binding upon the Company and Executive. Executive shall determine which and how
much of the Payments shall be eliminated or reduced consistent with the
requirements of this Section 14, provided that, if Executive does not make such
determination within ten (10) business days of the receipt of the calculations
made by the Accounting Firm, the Company shall elect which and how much of the
Payments shall be eliminated or reduced consistent with the requirements of this
Section 14 and
6
<PAGE>
shall notify Executive promptly of such election. Within five (5)
business days thereafter, the Company shall pay to or distribute to or for the
benefit of Executive such amounts as are then due to Executive under this
Agreement. All fees and expenses of the Accounting Firm incurred in connection
with the determinations contemplated by this Section 14 shall be borne by the
Company.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been made by
the Company which should not have been made ("Overpayment") or that additional
Payments which will not have been made by the Company could have been made
("Underpayment"), in each case consistent with the calculations required to be
made hereunder. In the event that the Accounting Firm, based upon the assertion
of a deficiency by the Internal Revenue Service against Executive, which the
Accounting Firm believes has a high probability of success, determines that an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of Executive shall be treated for all purposes as
a loan AB INITIO to Executive which Executive shall repay to the Company
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to
have been made and no amount shall be payable by Executive to the Company if and
to the extent such deemed loan and payment would not either reduce the amount on
which Executive is subject to tax under Section 1 and Section 4999 of the Code
or generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
* * * *
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have signed this
Agreement as of the day and year first above written.
NEWTECH ELECTRONICS INDUSTRIES, INC.
By:/S/ JOEL NEWMAN
---------------------------------------------
Name: Joel Newman
Title: Chairman, Chief Executive Officer and
President
EXECUTIVE:
/S/ LEONOR SCHUCK
------------------------------------------------
Leonor Schuck
EXHIBIT 10.37
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is made and entered
into as of the 15th day of April, 1998, among Newtech Electronics Industries,
Inc. (f/k/a New M-Tech Corporation), a Florida corporation (the "Company"), Joel
Newman and Windmere Holdings Corporation, a Delaware corporation ("Windmere" and
together with Mr. Newman, the "Shareholders"). This Agreement shall become
effective upon the consummation of the Offering (as defined in the recitals
hereto).
RECITALS
WHEREAS, the Shareholders collectively own 9,500,000 of the 10,000,000
outstanding shares of the Company's common stock, par value $.0l per share (the
"Common Stock").
WHEREAS, the Company intends to file with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form S-1 (the "Registration
Statement") with respect to the Company's proposed underwritten initial public
offering (the "Offering") of Common Stock.
WHEREAS, in consideration of their services to the Company, the Company
has agreed to provide to the Shareholders certain registration rights with
respect to the shares of Common Stock held by them from time to time (such
Common Stock being referred to herein as the "Restricted Shares") following the
consummation of the Offering.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties agree as follows:
1. INCIDENTAL REGISTRATION. If, at any time commencing 180 days after
the date of the prospectus contained in the Registration Statement, the Company
proposes to file on its behalf and/or on behalf of any of its security holders
("the demanding security holders") a Registration Statement under the Securities
Act of 1933, as amended (the "Securities Act") on any form (other than a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan, respectively) for the general registration of the sale of securities for
cash with respect to its Common Stock or any other class of equity security (as
defined in Section 3(a)(11) of the Securities Exchange Act of 1934) of the
Company, it will give written notice to each of the Shareholders at least 30
days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by the Company. The
<PAGE>
notice shall offer to include in such filing the aggregate number of shares of
Restricted Shares as each Shareholder may request.
If a Shareholder desires to have the Restricted Shares registered under
this Section 1, he or it shall advise the Company in writing within 15 days
after the date of receipt of such offer from the Company, setting forth the
amount of such Restricted Shares with respect to which registration is
requested. The Company shall thereupon include in such filing the number of
shares of Restricted Shares with respect to which registration is so requested,
subject to the following. In the event that the proposed registration by the
Company is, in whole or in part, an underwritten public offering of securities
of the Company, the Company shall not be required to include any of the
Restricted Shares in such underwriting unless the Shareholder agrees to accept
the offering on the same terms and conditions as the shares of Common Stock, if
any, otherwise being sold through underwriters under such registration;
provided, however, that: (i) if the managing underwriter determines in good
faith and advises the Company in writing that the inclusion of all Restricted
Shares proposed to be included by the Shareholders in the underwritten public
offering and other issued and outstanding shares of Common Stock proposed to be
included therein by persons other than the Shareholders and the Company (the
"Other Shares") would jeopardize the successful sale at the desired price of
such other securities proposed to be sold by such underwriter or underwriters,
then the Company shall be required to include in the offering (in addition to
the number of shares to be sold by the Company) only that number of Restricted
Shares that the managing underwriter believes will not jeopardize the successful
sale at the desired price of such other securities proposed to be sold by such
underwriter or underwriters, and the number of Restricted Shares and Other
Shares not included in such underwritten public offering shall be reduced pro
rata based upon the number of shares of Restricted Shares and Other Shares
requested by the holders thereof to be registered in such underwritten public
offering; and (ii) in each case all shares of Common Stock owned by the
Shareholders which are not included in the underwritten public offering shall be
withheld from the market by the Shareholder for a period, not to exceed 90 days,
which the managing underwriter reasonably determines is necessary in order to
effect the underwritten public offering.
2. REQUIRED REGISTRATION. At any time commencing 180 days after the
date of the prospectus contained in the Registration Statement, a Shareholder
may request that the Company effect the registration of the sale of Restricted
Shares under the Securities Act. Upon receipt of such request (which shall
specify the intended method or methods of disposition), the Company shall
promptly notify all holders of Restricted Shares in writing of the receipt of
such request and each Shareholder may elect (by written notice sent to the
Company within 15 days from the date of such Shareholder's receipt of the
aforementioned Company's notice) to have the sale of Restricted Shares included
in such registration thereof pursuant to this Section 2. Thereupon the Company
shall use its commercially reasonable best efforts to effect, as expeditiously
as is possible (except that such filing shall be coordinated with the close of
the fiscal quarters of the Company), the registration under the Securities Act
of the sale of all shares of Restricted Shares which the Company has been so
requested to register by such Shareholders for sale, all to the
2
<PAGE>
extent required
to permit the disposition (in accordance with the intended method or methods
thereof, as aforesaid) of the Restricted Shares so registered; PROVIDED,
HOWEVER, that the Company shall not be required to effect more than three
registrations requested by each Shareholder with respect to the sale of any
Restricted Shares pursuant to this Section 2, unless the Company shall be
eligible to file a Registration Statement on Form S-3 (or other comparable short
form) under the Securities Act, in which event there shall be no limit on the
number of such registrations pursuant to this Section 2. Notwithstanding
anything to the contrary contained herein, the obligation of the Company under
this Section 2 shall be satisfied only when a Registration Statement covering at
least 80% of the Restricted Shares specified for sale by the requesting
Shareholders in the above-described matters shall have become effective and, if
such method of disposition is a firm commitment underwritten public offering, at
least 80% of such Restricted Shares shall have been sold to the underwriters
pursuant thereto.
3. REGISTRATION PROCEDURES. If the Company is required by the
provisions of Section 1 or Section 2 to effect the registration of the sale of
any of its securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) keep each Shareholder advised in writing as to the
initiation of proceedings for such registration and qualification and as to
completion thereof, and will advise any such Shareholder, upon request, of the
progress of such proceedings;
(b) prepare and file with the Commission a Registration
Statement with respect to such securities and use its commercially reasonable
best efforts to cause such Registration Statement to become and remain effective
for a period of time required for the disposition of such securities by the
holders thereof, but in no event longer than 120 days after the effective date
of such Registration Statement;
(c) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration Statement until
the earlier of the expiration of 120 days after the effective date of such
Registration Statement and such time as all of such securities have been
disposed of;
(d) furnish to such selling Shareholders such number of copies
of a summary prospectus or other prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
documents, as such selling Shareholders may reasonably request;
(e) use its commercially reasonable best efforts to register
or qualify the securities covered by such Registration Statement under such
other securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as each holder of such securities shall reasonably request
(provided, however, the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which it is not
then
3
<PAGE>
qualified or to file any general consent to service or process), and do such
other reasonable acts and things as may be required of it to enable such holder
to consummate the disposition in such jurisdiction of the securities covered by
such Registration Statement;
(f) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Common
Stock; and as shall be required in connection with the action taken by the
Company; and
(g) promptly notify in writing the Shareholders and each
underwriter of the happening of any event, during the period of distribution, as
a result of which the Registration Statement includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing.
Whether or not the Company gives notification of any event
pursuant to clause (g) above, if so requested by the Company in writing, the
Shareholders shall promptly cease making, and shall not permit, any offers of
the Restricted Shares until such time as the Company notifies the Shareholders
that they may resume making offers.
4. UNDERWRITING DOCUMENTS; HOLDBACK
(a) Notwithstanding any provision of this Agreement to the
contrary, a Shareholder may not include any Restricted Shares in any
underwritten offering required or contemplated under this Agreement unless the
Shareholder timely executes and delivers the form of underwriting agreement,
custody agreement, power of attorney and other agreements and instruments
reasonably required by the underwriters of such offering in connection with the
preparation and consummation of such offering, which underwriting agreement
shall, at a minimum, provided for the indemnification set forth in Section 6.
(b) Except for (i) transfers made in transactions exempt from
the registration requirements under the Securities Act pursuant to Section 4(2)
thereof, and (ii) the Company's issuance and sale of Common Stock pursuant to
the exercise of any option, warrant, or other right to acquire shares of Common
Stock, the Company and each Shareholder agrees not to offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock within seven days before
or 90 days after the date of any final prospectus relating to any underwritten
public offering of any of the Company's Common Stock, whether such offering is
on behalf of the Company or any Shareholders or otherwise, in each case except
pursuant to such prospectus or with the written consent of the underwriter or
underwriters for such offering. Accordingly, the Company shall not be obligated
under this Agreement to effect any registration of the sale of any Restricted
Shares during such period except with respect to the offering to which such
prospectus relates.
4
<PAGE>
5. EXPENSES. All expenses incurred in complying with this Agreement,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for the Company, expenses of any special audits
incident to or required by any such registration and expenses (including
reasonable attorneys' fees) of complying with the securities or blue sky laws of
any jurisdictions pursuant to Section 3(d), except to the extent required to be
paid by participating selling securityholders by state securities or blue sky
laws, shall be paid by the Company, except that
(a) all such expenses in connection with any amendment or
supplement to the Registration Statement or prospectus filed more than 90 days
after the effective date of such Registration Statement because any holder of
Restricted Shares has not effected the disposition of the securities requested
to be registered shall be paid by such holder; and
(b) the Company shall not be liable for any fees, discounts or
commissions to any underwriter or any fees or disbursements of counsel for any
Shareholder in respect of the securities sold by the Shareholders.
6. INDEMNIFICATION. In the event of the sale of any registration of any
Restricted Shares under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each such broker or any other person, if
any, who controls any of the foregoing persons, within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement of a material fact contained in any registration statement
under which such sale of Restricted Shares were registered under the Securities
Act, any final prospectus contained therein, or any amendment or supplement
thereto, or any document prepared and/or furnished by the Company incident to
the registration or qualification of any Restricted Shares, or arise out of or
are based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any final prospectus, necessary to make the statements therein
in light of the circumstances under which they were made, not misleading, or any
violations by the Company of the Securities Act or state securities or 'blue
sky" laws applicable to the Company relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse such seller, such
underwriter, broker or other person acting on behalf of such seller and each
such controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, such final
prospectus or amendment or supplement or any document incident to the
registration or qualification of any Restricted Shares in reliance upon and in
conformity with information furnished to the Company by the Shareholder in
writing expressly for use in preparation thereof. Before Restricted Shares held
by a Shareholder shall be included in any
5
<PAGE>
registration pursuant to this Agreement, the Shareholder shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in this Section 6 for the indemnification of such prospective seller and
underwriter by the Company) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement and any person
who controls the Company within the meaning of the Securities Act, with respect
to any untrue statement or omission from such registration statement or final
prospectus contained therein or any amendment or supplement thereto, if such
untrue statement or omission was made in reliance upon and in conformity with
information furnished to the Company in writing by such Shareholder for use in
the preparation of such registration statement, final prospectus or amendment or
supplement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in this Section 6, such
indemnified party will, if a claim in respect thereof is made against any
indemnifying party, give written notice to the latter of such claim and/or the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof,
provided that if any indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to such indemnified party
which conflict in any material respect with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section 6,
such indemnifying party shall reimburse such indemnified party and shall not
have the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for that portion of the
fees and expenses of any counsel retained by the indemnified party which are
reasonably related to the matters covered by the indemnity agreement provided in
this Section 6. The indemnifying party shall not make any settlement of any
claims indemnified against thereunder without the written consent of the
indemnified party or parties, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing provisions of this Section 6, if pursuant
to an underwritten public offering of the Common Stock, the Company, the
Shareholders and the underwriters enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification among the parties thereto in connection with such offering, the
indemnification provisions of this Section 6 shall be deemed inoperative for
purposes of such offering.
7. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding the
other provisions of this Agreement, the Company shall not be obligated to
register the sale of Restricted Shares of a Shareholder if, in the opinion of
counsel to the Company, the sale or other disposition of all of
6
<PAGE>
the Shareholder's Restricted Shares may be effected in any three-month period
without registering such Restricted Shares under the Securities Act.
8. MISCELLANEOUS.
(a) NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or made
if in writing and either delivered in person or delivered by reputable overnight
courier with receipt acknowledged, addressed as follows:
(i) If to the Company at:
Newtech Electronics Industries, Inc.
16550 N.W. 10th Avenue
Miami, Florida 33169
Attention: President
(ii) If to Joel Newman at:
Joel Newman
355 Ocean Boulevard
Golden Beach, Florida 33161
(iii) If to Windmere Holdings Corporation at:
Windmere Holdings Corporation
5980 Miami Lakes Drive
Miami Lakes, Florida 33014-2467
Attention: President
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered or on the date of delivery by reputable overnight courier service,
with receipt acknowledged.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto; provided, however, that, except for transfers upon a Shareholder's death
by will or the laws of descent and distribution, the Shareholders' rights
hereunder may not be transferred without the written consent of the Company.
(c) GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Florida, without regard to the provisions thereof relating
to conflict of laws.
7
<PAGE>
(d) SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(e) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
exclusive statement of the Agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof.
(f) COUNTERPARTS. This Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately,
constitute one agreement.
(g) NO INCONSISTENT AGREEMENTS. Without the prior written
consent of the Shareholders, the Company will not hereafter enter into any
agreement with respect to its securities which grants registration rights to any
person or entity, or which is inconsistent with the rights granted to the
Shareholders in this Agreement. The Company has not previously entered into any
agreement with respect to any of its securities granting any registration rights
to any person or entity, other than the registration rights granted hereunder.
(h) REMEDIES. Each Shareholder, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. The Company further agrees that, if the Company
fails to comply with any provision of this Agreement, the Company shall pay to
the Company's affected thereby such amounts as shall be sufficient to cover any
costs and expenses, including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by such holders in enforcing
any of their rights or remedies hereunder.
* * * * *
[SIGNATURES APPEAR ON FOLLOWING PAGE]
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Shareholders have
executed this Agreement as of the date first above written.
NEWTECH ELECTRONICS INDUSTRIES, INC.
By: /S/ JOEL NEWMAN
--------------------------------------------------
Joel Newman,
Chairman of the Board, Chief Executive Officer and
President
SHAREHOLDERS:
/S/ JOEL NEWMAN
------------------------------------------------------
Joel Newman
WINDMERE HOLDINGS CORPORATION
By: /S/ DAVID FRIEDSON
--------------------------------------------------
Name: DAVID FRIEDSON
Title: AUTHORIZED SIGNATORY
9
EXHIBIT 21.1
LIST OF SUBSIDIARIES
ORGANIZED OR
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
Newtech (Hong Kong) Ltd. Hong Kong
Newtech Electronics Industries Limited Hong Kong
Durable Electronics Industries Limited Hong Kong
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" and
"Selected Consolidated Financial Data" and to the use of our reports dated April
3, 1998, except for the last paragraph of Note 1, as to which the date is April
10, 1998, in the Registration Statement (Form S-1 No. 333-00000) and related
Prospectus of Newtech Electronics Industries, Inc. and subsidiaries for the
registration of 000,000 shares of its common stock.
/S/ ERNST & YOUNG LLP
Miami, Florida
May 11, 1998
EXHIBIT 23.2
Consent of Independent Certified Public Accountants
We have issued our report dated April 2, 1998, accompanying the financial
statements of Durable Electronics Industries Limited not presented separately in
the Registration Statement and Prospectus of Newtech Electronics Industries,
Inc. We consent to the use of the aforementioned report in the Registration
Statement and Prospectus, and to the use of our name as it appears under the
caption "Experts."
/S/ GRANT THORNTON
Hong Kong
May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,030,726
<SECURITIES> 1,400,082
<RECEIVABLES> 30,686,010
<ALLOWANCES> 150,000
<INVENTORY> 25,187,800
<CURRENT-ASSETS> 62,672,914
<PP&E> 2,526,764
<DEPRECIATION> 349,010
<TOTAL-ASSETS> 68,593,420
<CURRENT-LIABILITIES> 48,523,100
<BONDS> 0
0
0
<COMMON> 100,000
<OTHER-SE> 12,185,200
<TOTAL-LIABILITY-AND-EQUITY> 68,593,420
<SALES> 208,416,612
<TOTAL-REVENUES> 208,416,612
<CGS> 186,433,089
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,130,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,762,908
<INCOME-PRETAX> 5,671,637
<INCOME-TAX> (350,762)
<INCOME-CONTINUING> 6,022,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,022,399
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.57
</TABLE>
