<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 28, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
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Commission file number 0-19557
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SALTON/MAXIM HOUSEWARES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-3777824
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(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
550 Business Center Drive
Mount Prospect, Illinois 60056
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(Address of principal executive (Zip Code)
offices)
(847) 803-4600
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(Registrant's telephone number, including area code)
N/A
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Former name, former address and former fiscal year, if changed
since last year
Indicate by check mark whether this registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of February 7, 1997 -
13,017,144 shares of its $.01 par value Common Stock.
<PAGE> 2
EXPLANATORY NOTE: This Form 10-Q/A amends and restates the Form 10-Q/A filed
for the quarter ended December 28, 1996.
SALTON/MAXIM HOUSEWARES, INC.
FORM 10-Q/A
QUARTER ENDED DECEMBER 28, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
Balance Sheets-December 28, 1996
(Unaudited) and June 29, 1996 .......................... 3
Statements of Operations
Thirteen weeks ended
December 28, 1996 and
December 30, 1995 (Unaudited)
and Twenty-six weeks ended
December 28, 1996 and
December 30, 1995 (Unaudited) .......................... 4
Statements of Cash Flows
Twenty-six weeks ended
December 28, 1996 and
December 30, 1995 (Unaudited) .......................... 5
Notes to Financial
Statements (Unaudited) ................................. 6
Item 2: Management's Discussion and
Analysis of Financial Condition
and Results of Operations .............................. 9
PART II OTHER INFORMATION
Item 1: Legal Proceedings ...................................... 13
Item 6: Exhibits and Reports on Form 8-K ....................... 13
Signature .............................................. 14
</TABLE>
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SALTON/MAXIM HOUSEWARES, INC.
BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS Dec. 28, June 29,
CURRENT ASSETS: 1996 1996
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<S> <C> <C>
Cash $41 $4
Accounts receivable, net of allowances 37,931 15,871
Inventories 30,699 28,288
Prepaid expenses and other current assets 4,425 1,934
Deferred tax assets 1,249 1,949
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Total current assets 74,345 48,046
PROPERTY, PLANT AND EQUIPMENT:
Molds and tooling 12,996 12,373
Warehouse equipment 371 296
Office furniture and equipment 3,006 1,930
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16,373 14,599
Less accumulated depreciation (9,424) (8,368)
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6,949 6,231
INTANGIBLES, NET OF ACCUM. AMORTIZATION 5,721 3,671
INVESTMENT - WINDMERE 9,632
NON-CURRENT DEFERRED TAX ASSET 1,533 1,533
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TOTAL ASSETS $98,180 $59,481
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $13,942 $10,057
Accrued expenses 4,160 1,233
Revolving line of credit 36,758 24,095
Due to Windmere 5,000
Current portion - Subordinated debt 417
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Total current liabilities 59,860 35,802
LONG-TERM PORTION SUBORDINATED DEBT 889 500
DUE TO WINDMERE 3,254
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Total liabilities 60,749 39,556
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized,
2,000,000 shares; no shares issued
Common stock, $.01 par value; authorized,
20,000,000 shares; issued and outstanding,
1997-13,017,144 shares,1996-6,508,572 shares 130 65
Unrealized gains(losses) on securities
available for sale (467)
Additional paid-in capital 52,943 29,293
Less Note Receivable - Windmere (10,848)
Accumulated deficit (4,327) (9,433)
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Total stockholders' equity 37,431 19,925
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Total liabilities and stockholder's equity $98,180 $59,481
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</TABLE>
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SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
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12/28/96 12/30/95 12/28/96 12/30/95
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<S> <C> <C> <C> <C>
NET SALES $58,837 $36,370 $93,699 $59,654
Cost of goods sold 38,598 25,239 61,978 41,716
Distribution expenses 2,212 1,767 4,005 3,087
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GROSS PROFIT 18,027 9,364 27,716 14,851
Selling, general and administrative expenses 10,745 5,728 17,757 9,332
------- ------- ------- -------
OPERATING INCOME 7,282 3,636 9,959 5,519
Interest expense 1,159 1,202 2,099 2,017
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INCOME BEFORE INCOME TAXES 6,123 2,434 7,860 3,502
Income tax benefit(expense) (2,146) (70) (2,754) (110)
------- ------- ------- -------
NET INCOME $ 3,977 $ 2,364 $ 5,106 $ 3,392
======= ======= ======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 13,259,814 6,588,222 12,896,673 6,583,265
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE:
NET INCOME $0.30 $0.36 $0.40 $0.52
</TABLE>
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SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
26 weeks ended
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12/28/96 12/30/95
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME: $5,106 $3,392
Adjustments to reconcile net income
to net cash provided by(used in)
operating activities:
Change in deferred taxes 700
Depreciation and amortization 1,533 1,165
Changes in assets and liabilities:
Accounts receivable (22,060) (9,493)
Inventories (2,411) (8,671)
Prepaid expenses and other
current assets (2,491) (515)
Accounts payable 3,885 3,755
Accrued expenses 2,927 703
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (12,811) (9,664)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,774) (2,253)
Block acquisition and related payments (2,624)
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NET CASH USED IN INVESTING
ACTIVITIES (4,398) (2,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments to) revolving line of credit 12,663 12,862
Repayments of subordinated note payable (417)
Additional short-term subordinated note payable 5,000
Financing costs 0 (242)
Payment for product line acquisitions 0 (691)
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NET CASH PROVIDED BY(USED IN)
FINANCING ACTIVITIES 17,246 11,929
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NET INCREASE IN CASH $37 $12
Cash, beginning of period 4 6
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CASH, END OF PERIOD $41 $18
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST $2,059 $1,839
INCOME TAXES $58
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
</TABLE>
During the twenty-six week period ended December 28, 1996 a long-term debt
obligation of $3,254 was cancelled by the consummation of a transaction with
Windmere-Durable Holdings, Inc.("Windmere"). In addition, the Company received
a $10,848 note receivable and 748,112 shares of Windmere Common stock in
exchange for 6,508,572 newly issued shares of Common stock of the Company.
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SALTON/MAXIM HOUSEWARES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS.
The financial statements have been prepared from the Company's books without
audit and are subject to year end adjustments. The interim financial
statements reflect all adjustments consisting only of normal recurring accruals
which are, in the opinion of management, necessary for a fair presentation of
financial information. The financial statements should be read in conjunction
with the financial statements and notes thereto included in the Salton/Maxim
Housewares, Inc. 1996 Annual Report to Shareholders and the Annual Report on
Form 10-K. The results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.
2. EARNINGS PER COMMON SHARE.
Net income per common share is computed based upon the weighted average number
of common shares outstanding. The shares shown as outstanding in the
Statements of Operations have been adjusted for dilutive common stock
equivalents applying the treasury stock method.
3. EVENTS OF THE FIRST HALF ENDED DECEMBER 28, 1996.
On July 11, 1996, the Company consummated its previously announced transaction
with Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to that certain
Stock Purchase Agreement dated February 27, 1996, as amended (the "Stock
Purchase Agreement"). Windmere is a corporation engaged principally in
manufacturing and distributing a wide variety of personal care products and
household appliances. Pursuant to the Stock Purchase Agreement, Windmere
purchased from the Company 6,508,572 newly issued shares of Common Stock (the
"Purchase"), which represented 50% of the outstanding shares of Common Stock of
the Company on February 27, 1996 after giving effect to the Purchase. As
consideration for the Purchase, Windmere paid the Company (i) $3,254,286 in
cash, as described below; (ii) a subordinated promissory note in the aggregate
principal amount of $10,847,620 (the "Note"), which Note is secured by certain
assets of Windmere and its domestic subsidiaries and guaranteed by such
domestic subsidiaries; and (iii) 748,112 shares of Windmere's common stock.
Windmere's common stock is traded on the NYSE. The cash portion of the
consideration for the Purchase was paid by the cancellation of the Company's
obligation to repay a loan in the
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<PAGE> 7
principal amount of $3,254,286 which Windmere had made to the Company in April
1996. The Note is payable five years from the closing date of the Purchase and
bears interest at 8% per annum payable quarterly. Windmere was also granted an
option to purchase up to 485,000 shares of Common Stock at $4.83 per share,
which option is exercisable only if and to the extent that options to purchase
shares of Common Stock which were outstanding on February 27, 1996 are
exercised.
On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation. Block China designs and
markets table top products, including china, crystal and glassware. The
consideration paid by the Company consisted of $1,485,000 in cash and a warrant
to purchase 25,000 shares of Common Stock with an exercise price equal to the
fair market value of the Common Stock on the closing date of the acquisition.
The consideration also included an earn-out of up to $500,000 and 150,000
shares of Common Stock based on Block China's financial performance over a
three-year period. Net sales of Block products approximated 11% of revenues in
the twenty-six weeks ended December 28, 1996.
The Company was named as a defendant in Ullman-Briggs, Inc. v. Salton/Maxim
Housewares, Inc., which was filed on or about November 6, 1991 in the United
States District Court for the District of New Jersey. Ullman Briggs was
awarded a judgment in the amount of approximately $645,641 plus interest
against Salton, Inc., the predecessor company. The action alleged that the
Company was liable to Ullman-Briggs for such amount because the sale of assets
of Salton, Inc. to the Company in 1988 was a fraudulent conveyance. The action
sought damages in the amount of approximately $645,641 plus interest and
punitive damages in the amount of $500,000, and costs and disbursements
occasioned as a result of the action. The case was settled in October, 1996
for an insignificant amount.
The Company entered into a major supply contract with Kmart Corporation on
January 31, 1997. Under the contract, the Company will supply Kmart with small
kitchen appliances, personal care products, heaters, fans and electrical air
cleaners and humidifiers under the White-Westinghouse(R) brand name. Kmart
will be the exclusive discount department store to market these
White-Westinghouse(R) products.
The Company, White Consolidated Industries, Inc. ("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
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<PAGE> 8
White Consolidated in the 1970's and the parties' subsequent conduct.
Procedural motions concerning the 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 indemnifying the Company for the costs of litigation.
In the second quarter of 1996, Windmere licensed the right to use the
Farberware(TM) name for small electric appliances. Farberware(TM) is a
time-honored trade name in the cookware and small electric appliance industry.
Under the Company's marketing cooperation agreement with Windmere, the Company
obtained the exclusive, worldwide right to distribute Farberware(TM) small
electric appliances.
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<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED DECEMBER 28, 1996 COMPARED WITH THIRTEEN WEEKS ENDED
DECEMBER 30, 1995.
Net sales in the second quarter of fiscal year 1997 were $58.8 million,
an increase of approximately $22.5 million or 61.8%, compared to net sales of
$36.4 million in the second quarter of fiscal year 1996. This increase in
sales is primarily attributable to increased sales of the Juiceman(TM) juice
extractors, George Foreman Grills(TM), Breadman(TM), and HouseBrand Programs.
Also, the addition of Block China sales contributed to the period. Net sales
of Block China products approximated 11% of net sales in the second quarter of
1997.
Gross profit in the second quarter of 1997 was $18.0 million or 30.6% of
net sales as compared to $9.4 million or 25.7% in the second quarter of 1996.
Cost of goods sold during the period decreased to 65.6% of net sales compared
to 69.4% in 1996. Distribution expenses were approximately $2.2 million or
3.8% of net sales in 1997 compared to $1.8 million or 4.9% of net sales in the
same period in 1996. However, gross profit and costs of goods sold in 1997 as
a percentage of net sales were improved primarily due to a more favorable mix
of sales of higher gross margin items when compared to 1996.
Selling, general and administrative expenses increased to $10.7 million
for the period compared to $5.7 million for the same period in 1996.
Advertising costs for certain media and cooperative coverages of the Company
and its products increased about $2.9 million in 1997 compared to 1996.
Selling, general and administrative expenses were 18.3% of net sales compared
to 15.7% of net sales last year. This increase was primarily a result of the
increase in advertising costs. The remaining dollar increase was primarily
attributable to higher costs for additional personnel, trade show expenses,
royalties, commissions and various other marketing costs related to the higher
sales level.
Interest expense was approximately $1.2 million for the quarter in 1997
and 1996. Interest expense during the current quarter was offset by interest
income earned on the Windmere note. The average amount outstanding under the
Company's revolving line of credit increased about $5.7 million when compared
to the average amount outstanding in the same period a year ago. This increase
was used primarily to finance higher net sales and a seasonable build in
inventory.
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<PAGE> 10
The Company had income before income taxes of $6.1 million in the second
quarter of 1997 compared to income before income taxes of $2.4 million in 1996.
Net operating loss carryforwards and resultant deferred tax assets were used
in both periods to significantly offset current income taxes payable. The
Company had net income after income taxes in the second quarter of $4.0 million
or $0.30 per share on weighted average common shares outstanding of 13,259,814
in 1997 compared to net income after income taxes of $2.4 million or $0.36 per
share or weighted average shares outstanding of 6,588,222 in 1996.
TWENTY-SIX WEEKS ENDED DECEMBER 28, 1996 COMPARED WITH TWENTY-SIX WEEKS
ENDED DECEMBER 30, 1995.
Net sales in the first half of fiscal year 1997 were $93.7 million, an
increase of approximately $34.0 million or 57.1%, compared to net sales of $59.7
million in the first half of fiscal year 1996. This increase in sales is
primarily attributable to increased sales of the Juiceman(TM) juice extractors,
George Foreman Grills(TM), Breadman(TM), HouseBrand programs, and the
addition of Block China sales. Net sales of Block China products approximated
11% of net sales in the first half of 1997.
Gross profit in the first half of 1997 was $27.8 million or 29.6% of net
sales as compared to $14.9 million or 24.9% in the first half of 1996. Costs
of goods sold during the period decreased to 66.2% of net sales compared to
69.9% in 1996. Distribution expenses were approximately $4.0 million or 4.3%
of net sales in 1997 compared to $3.1 million or 5.2% of net sales in the same
period in 1996. However, gross profit and cost of goods sold in 1997 as a
percentage of net sales were improved primarily due to a more favorable mix of
sales of higher gross margin items when compared to 1996.
Selling, general and administrative expenses increased to $17.8 million
for the period compared to $9.3 million for the same period in 1996.
Advertising costs for certain media and cooperative coverages of the Company
and its products increased about $4.8 million in 1997 compared to 1996.
Selling, general and administratives expenses were 18.9% of net sales compared
to 15.7% of net sales last year. This increase was primarily a result of the
increase in advertising costs. The remaining dollar increase was primarily
attributable to higher costs for additional personnel, trade show expenses,
royalties, commissions and various other marketing costs related to the higher
sales level.
Interest expense for the half was approximately $2.1 million compared to
$2.0 million in the same period in 1996. Interest expense during the current
year was offset by interest income earned on the Windmere note. The average
amount outstanding
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under the Company's revolving line of credit increased about $9.0 million when
compared to the average amount outstanding in the same period a year ago. This
increase was used primarily to finance higher net sales and a seasonal build in
inventory.
The Company had income before income taxes of $7.9 million in the first
half of 1997 compared to income before income taxes of $3.5 million in 1996.
Net operating loss carryforwards and resultant deferred taxes assets were used
in both periods to significantly offset current income taxes payable. The
Company had net income after income taxes in the first half of 1997 of $5.1
million or $0.40 per share on weighted average common shares outstanding of
12,896,673 in 1997 compared to net income after income taxes of $3.4 million or
$0.52 per share on weighted average shares outstanding of 6,583,265 in the
first half of 1996.
LIQUIDITY AND CAPITAL RESOURCES
In the first half of 1997, the Company used net cash of $12.8 million in
operating activities and net cash of $4.4 million in investing activities.
This resulted primarily from the growth in sales in the period and higher
levels of inventory and receivables, the acquisition of Block China, as well as
increased investment in capital assets, primarily tooling. Financing
activities provided cash of $17.2 million for these purposes from increased
line of credit proceeds and a $5.0 million short term note with Windmere which
bears interest at 9.8% per annum. At December 28, 1996, the Company had
approximately $36.8 million outstanding as drawings under its revolving line of
credit (the "Facility"). Typically, given the seasonal nature of the Company's
business, the Company's borrowings tend to be the highest in mid-summer to
fall. Under the terms of the Facility, the Company had the ability at December
28, 1996 to borrow a total of approximately $41.0 million. The Company will
continue to incur short-term borrowings in order to finance working capital
requirements. The Company's ability to fund its operating activities is
directly dependent upon its rate of growth, ability to effectively manage its
inventory, the terms under which it extends credit to its customers and its
ability to collect under such terms and its ability to access external sources
of financing. The Company believes that its internally generated funds,
together with funds available under the Facility and other potential external
financing sources, will provide sufficient funding to meet the Company's
capital requirements and its operating needs for at least the next 12 months.
The Company from time to time explores additional or new sources of
financing. While the Company has been able to maintain access to external
financing sources, no assurance can be given that such access will continue or
that the Company will
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<PAGE> 12
be successful in obtaining new or replacement sources of financing.
On July 11, 1996, the Company consummated its previously announced
transaction with Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to that
certain Stock Purchase Agreement dated February 27, 1996, as amended (the
"Stock Purchase Agreement"). Windmere is a corporation engaged principally in
manufacturing and distributing a wide variety of personal care products and
household appliances. Pursuant to the Stock Purchase Agreement, Windmere
purchased from the Company 6,508,572 newly issued shares of Common Stock (the
"Purchase"), which represents 50% of the outstanding shares of Common Stock of
the Company on February 27, 1996 after giving effect to the Purchase. As
consideration for the Purchase, Windmere paid the Company (i) $3,254,286 in
cash, as described below; (ii) a subordinated promissory note in the aggregate
principal amount of $10,847,620 (the "Note"), which Note is secured by certain
assets of Windmere and its domestic subsidiaries and guaranteed by such
domestic subsidiaries; and (iii) 748,112 shares of Windmere's common stock.
Windmere's common stock is traded on the NYSE. The cash portion of the
consideration for the Purchase was paid by the cancellation of the Company's
obligation to repay a loan in the principal amount of $3,254,286 which Windmere
had made to the Company in April 1996. The Note is payable five years from the
closing date of the Purchase and bears interest at 8% per annum payable
quarterly. Windmere was also granted an option to purchase up to 485,000
shares of Common Stock at $4.83 per share, which option is exercisable only if
and to the extent that options to purchase shares of Common Stock which were
outstanding on February 27, 1996 are exercised.
On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation. Block China designs and
markets table top products, including china, crystal and glassware. The
consideration paid by the Company consisted of $1,485,000 in cash and a warrant
to purchase 25,000 shares of Common Stock with an exercise price equal to the
fair market value of the Common Stock on the Closing date of the acquisition.
The consideration also included an earn-out of up to $500,000 and $150,00
shares of Common Stock based on Block China's financial performance over a
three-year period.
The Company entered into a major supply contract, dated January 27,
1997, with Kmart Corporation. Under the contract, the Company supplies Kmart
with small kitchen appliances, personal care products, heaters, fans and
electrical air cleaners and humidifiers under the White-Westinghouse(R) brand
name. Kmart is the exclusive discount department store to market these
White-Westinghouse(R) products.
The Company also entered into a letter agreement dated April 30, 1997
(the "Letter Agreement") with Windmere, the owner of approximately 50% of the
outstanding common stock of the Company. Pursuant to the Letter Agreement, in
consideration of Windmere's marketing cooperation efforts in connection with
the Company's supply contract with Kmart and Windmere's guarantee of the
Company's obligations under such contract, the Company has agreed to pay to
Windmere a fee equal to 50% of defined profits derived from the Company's
supply contract with Kmart.
A copy of the Company's license agreement dated February 1, 1996 with
White Consolidated Industries, Inc. ("White Consolidated"), the Company's
license agreement dated May 21, 1996 with White Consolidated and the Company's
supply contract with Kmart are attached hereto as Exhibits 10.30, 10.31 and
10.32, respectively. A copy of the Letter Agreement is attached as Exhibit
10.33 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 29, 1997. The foregoing description of the Company's supply
contract with Kmart and the Letter Agreement does not purport to be complete
and is qualified in its entirety by reference to the text of the supply
contract attached hereto as Exhibit 10.32 and the Letter Agreement attached as
Exhibit 10.33 to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 29, 1997.
The Company expects that purchases of White-Westinghouse(R) products by
Kmart will contribute significantly to the Company's sales. Shipments of the
White-Westinghouse(R) products to Kmart commenced late in the second quarter of
fiscal 1997.
The matters discussed in the immediately preceding paragraph relating
to expected benefits from Company's supply contract with Kmart are
forward-looking statements that are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in
the forward-looking statements. These factors include: economic conditions
and the retail environment, the timely development, introduction and customer
acceptance of White-Westinghouse(R) products; competitive products and pricing;
dependence on foreign suppliers and supply and manufacturing constraints;
cancellation or reduction of orders; and other factors detailed elsewhere from
time to time in the Company's filings with the Securities and Exchange
Commission.
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<PAGE> 13
PART II: OTHER INFORMATION
Item 1: Legal Proceedings
The Company, White Consolidated Industries, Inc. ("White Consolidated"),
Windmere-Durable Holdings, Inc. 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 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 indemnifying the Company for the costs of litigation.
Item 6: Exhibits and Reports on Form 8-K
(b) The Company filed a report on Form 8-K dated February 3, 1997 reporting
under Item 5 thereof that the Company has entered into a supply contract with
Kmart Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SALTON/MAXIM HOUSEWARES, INC.
Date: July 25, 1997 /s/WILLIAM B. RUE
---------------------------
William B. Rue
Senior Vice President and
Chief Operating Officer
(Duly Authorized Officer
of the Registrant)
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<PAGE> 15
EXHIBIT INDEX
Exhibit Number Description of Document
10.30 License Agreement dated as of February 1, 1996
between White Consolidated Industries, Inc. and the
Registrant
10.31 License Agreement dated as of May 21, 1996 between
White Consolidated Industries, Inc. and the Registrant
10.32 Purchase, Distribution and Marketing Agreement dated
as January 27, 1997 between Kmart Corporation and the
Registrant*
27 Financial Data Schedule
- ---------------
* Contains confidential material omitted and filed separately with the
Securities and Exchange Commission. Brackets denote such omissions.
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<PAGE> 1
EXHIBIT 10.30
LICENSE AGREEMENT
AGREEMENT ("Agreement") entered into as of February 1, 1996, ("Effective
Date") by and between White Consolidated Industries, Inc., a Delaware
Corporation, having its principal office at 11770 Berea Road, Cleveland, Ohio
44111 ("Licensor"), and Salton/Maxim Housewares, Inc., a Delaware Corporation,
having its principal office at 550 Business Center Drive, Mt. Prospect,
Illinois 60056 (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 small kitchen appliances 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, covenants and provisions contained herein, the parties hereto do
hereby agree as follows:
ARTICLE 1
GRANT OF LICENSE AND DESIGNATION OF TRADEMARK PRODUCTS
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.
In the event of any good faith 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
<PAGE> 2
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 this 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 use of the Trademark in connection with 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
to perform its obligations hereunder.
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 the 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.
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<PAGE> 3
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 Delaware.
Licensee has all corporate power and authority to execute and deliver this
Agreement and to 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 the 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.
ARTICLE 5
TERM OF AGREEMENT
5.1 CONTRACT TERM. The Contract Term of this Agreement commence on the date
first mentioned above and ending on June 30, 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 thirteen (13) one (1) year periods
commencing as of July 1, 1998 and ending on June 30, 2011, at midnight Eastern
Standard Time, unless sooner terminated pursuant to the terms of this Agreement
with such extended term(s) to be subject to the same terms and conditions as
provided herein except that as a condition to the extension term(s), Licensee
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 or
Extension Term of this Agreement as set forth in Article 8 hereof. 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.
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<PAGE> 4
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
percentages of the Net Invoice Value of Trademarked Products Sold by Licensee
(the "Royalties"):
<TABLE>
<CAPTION>
Trademark Products
------------------
Wholesale Price as Follows
--------------------------
Under $10.00/Unit $10.00 or More/Unit
----------------- -------------------
<S> <C> <C>
Contract Term 2.0% 3.0%
First Extension Term 3.0% 3.0%
Second and Third Extension Term(s) 3.0% 3.5%
Fourth and Future Extension Term(s) 3.0% 4.0%
</TABLE>
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").
Article 7
MINIMUM ROYALTY PAYMENTS
7.1 MINIMUM ROYALTIES. Notwithstanding anything to the contrary set forth
herein, Licensee shall pay to the Licensor aggregate, cumulative Minimum
Royalties by the end of the Contract Term and any applicable Extension Term as
follows (The Per Term Minimum Royalties is for information purposes only):
<TABLE>
<CAPTION>
Per Term in Thousands Cumulative
<S> <C> <C>
Contract Term $146.2 Thousand $146.2 Thousand
First Extension Term 136.5 Thousand 282.7 Thousand
Second Extension Term 211.2 Thousand 493.9 Thousand
Third Extension Term 316.9 Thousand 810.8 Thousand
Fourth Extension Term 409.5 Thousand 1,220.3 Thousand
Fifth Extension Term 491.4 Thousand 1,711.7 Thousand
Sixth Extension Term 589.2 Thousand 2,300.9 Thousand
Seventh Extension Term 707.5 Thousand 3,008.4 Thousand
Eighth Extension Term 848.6 Thousand 3,857.0 Thousand
Ninth Extension Term 1,019.2 Thousand 3,876.2 Thousand
Tenth Extension Term 1,221.7 Thousand 6,097.9 Thousand
Eleventh Extension Term 1,467.4 Thousand 7,568.3 Thousand
Twelfth Extension Term 1,760.9 Thousand 9,326.2 Thousand
Thirteenth Extension Term 2,113.5 Thousand 11,439.7 Thousand
</TABLE>
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<PAGE> 5
[*]
7.2 INITIAL ROYALTY PAYMENT. Licensee shall pay Licensor an initial royalty
payment (the "Initial Royalty Payment") of fifty thousand dollars ($50,000)
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 MINIMUM ROYALTY PAYMENTS. To the extent that the aggregate, cumulative,
Minimum Royalties set forth above exceeds the aggregate, cumulative Earned
Royalties paid to Licensor by the end of the Contract Term or Extension Term,
as applicable, Licensee shall pay Licensor such excess with the Royalty payment
for the last fiscal quarter of the Contract Term or such Extension Term, as
applicable, in accordance with Section 7.4
7.4 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 term payable by such due date (such sum hereinafter referred to as the
"Royalty Payment"). Each Royalty Payment, payable in US currency, shall be
remitted by check at Licensor's address as provided in this Agreement.
7.5 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 and 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
provided in this Agreement.
ARTICLE 8
MINIMUM SALES OF TRADEMARKED PRODUCT
8.1 FAILURE TO MEET REQUIRED MINIMUM SALES. Licensee shall use its best efforts
advertise and sell Trademarked Product in the Territory during the term of this
Agreement. Should Licensee fail to achieve the aggregate, cumulative NIV sales
set forth below in this Article 8 (the per term NIV sales is for information
purposes only), then Licensor may, at its option, elect to terminate this
Agreement by written notice delivered to Licensee within sixty (60) days after
the
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<PAGE> 6
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.
<TABLE>
<CAPTION>
NIV Sales per Term Cumulative NIV Sales
<S> <C> <C>
Contract Term $9.0 Million $9.0 Million
First Extension Term 7.0 Million 16.0 Million
Second Extension Term 10.0 Million 26.0 Million
Third Extension Term 15.0 Million 41.0 Million
Fourth Extension Term 18.0 Million 59.0 Million
Fifth Extension Term 21.6 Million 80.6 Million
Sixth Extension Term 25.9 Million 106.5 Million
Seventh Extension Term 31.1 Million 137.6 Million
Eighth Extension Term 37.3 Million 174.9 Million
Ninth Extension Term 44.8 Million 219.7 Million
Tenth Extension Term 53.7 Million 273.4 Million
Eleventh Extension Term 64.5 Million 337.9 Million
Twelfth Extension Term 77.4 Million 415.3 Million
Thirteenth Extension Term 92.9 Million 508.2 Million
</TABLE>
ARTICLE 9
ADVERTISING AND ART WORK
9.1 ADVANCE SUBMISSION. Licensee shall submit to Licensor for approval all
advertising and promotional items, 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's reasonable
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 be paid by Licensee upon receipt of an appropriate
invoice.
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<PAGE> 7
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 principles and procedures 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 upon reasonable prior notice to Licensee.
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 Licensee has paid Royalties in excess
of the amounts required to be paid, Licensor shall apply said excess to the
next Royalty payment or, if no further Royalty payments are due, such excess
shall be remitted to Licensee.
ARTICLE 12
AUDIT BY LICENSOR
If Licensor so chooses, it may (at its expense, except as provided below) cause
its independent accountants to audit or review, upon reasonable prior notice to
Licensee, all books and records of Licensee pertaining Trademarked Product.
Licensor shall deliver to Licensee not later than sixty (60) days from
Licensor's receipt of the applicable Report a statement describing its
objections (if any) to Licensee's determination of the Royalties for the
applicable period. Each of Licensor and Licensee shall use reasonable efforts
to resolve any such disputes, but if a final resolution is not obtained within
thirty (30) days after Licensor has submitted its objections, any remaining
disputes will be resolved by an accounting firm mutually agreeable to Licensor
and Licensee (the fees and expenses of such firm to be paid by Licensor, except
as provided below). If Licensor and Licensee are unable to mutually agree on
such an accounting firm, a "big-six" accounting firm shall be selected by lot
after eliminating one firm designated as objectionable by each of Licensor and
Licensee. The determination of any accounting firm so selected shall be
conclusive and binding upon the parties. In the event any such audit or review
as finally determined pursuant to this Article 12 shall disclose that Licensee
has underpaid Royalties for any reporting period, Licensee shall forthwith upon
written demand of Licensor pay the amount, if any, by which the Royalties owing
exceed Royalties paid, plus interest of ten percent (10%) per annum on such
amounts, accruing from the date on which such amounts were due to the date on
which sum amounts are paid. Should such audit disclose that the Royalties paid
exceeded
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<PAGE> 8
the Royalties due, any excess amount revealed by such audit will be
remitted to Licensee. If Licensor causes its own independent accountants to
review the Reports described herein and the effect of such review as finally
determined pursuant to this Article 12 is that the amount of the Royalties for
the applicable period is understated by two percent (2%) or more, then Licensee
shall pay the reasonable costs of Licensor's independent accountant and the
reasonable costs of any mutually selected accountant or other accountant
selected pursuant to this Article 12.
ARTICLE 13
LICENSEE OBLIGATIONS
13.1 LICENSEE DILIGENCE. Licensee shall use its best efforts to sell
Trademarked Product. Licensor shall have the right to terminate this Agreement
upon written notice to Licensee in the event that Licensee shall fail to sell
any Trademarked Product for a period of ninety (90) consecutive days.
13.2 LICENSOR INSPECTION RIGHTS. Licensor shall have the right upon reasonable
prior notice to Licensee 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.
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.
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<PAGE> 9
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, in a timely manner,
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.
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 shall not enter into subcontracts for the manufacture of Trademarked
Product without the express written consent of Licensor, which consent shall
not be unreasonably withheld. 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 Trademark Product. Licensee shall
discontinue using any subcontractor who shall fail to comply with the Approved
Quality standards.
ARTICLE 16
ASSIGNMENT; TRANSFERS; SUBLICENSE
Except as otherwise explicitly provided herein, Licensee may not enter into any
sublicense for the use of the Trademark by others. This Agreement shall not be
assignable by Licensee without the prior written consent of Licensor. Such
consent shall not be unreasonably withheld, except that no such prior written
consent shall be required for any assignment of this Agreement by Licensee to a
successor in interest of Licensee as a result of any merger, consolidation or
other corporate reorganization involving Licensee or a sale by Licensee of a
substantial part of its assets provided that no more than twenty percent (20%)
of the business of such successor (measured by revenues) competes directly with
Licensor.
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.
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<PAGE> 10
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 shall not 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
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 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
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 there be by any right of contribution
against Licensor therefor, 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
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<PAGE> 11
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 THE TRADEMARK
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
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, at Licensor's
expense, in obtaining registrations for the Trademark in the event any
Trademark 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 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 the same shall not be cured
within ten (10) days 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 fifteen (15) days 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 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.
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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 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
Trademark, including associated goodwill, and shall not thereafter manufacture,
sell, or use the Trademark in any manner; provided that Licensee may continue
to use the Trademark in connection with the advertising and sale of Trademarked
Product and may continue to use the Trademark in connection with the
manufacture of Trademarked Product, which are in the process of being completed
at time of said termination, for two hundred and seventy (270) days after the
termination of this Agreement; further provided, however, that all sums then
due to Licensor pursuant to this Agreement have first been paid; and further
provided, that Licensee shall, within thirty (30) days after 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 270 day 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 of sale by
Licensee to any third party, for an amount equal to the wholesale cost of such
Trademarked Product as indicated in Licensee's then current catalogue.
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 270 day period specified in Section 21.1 of this Agreement. Upon
termination of the aforesaid 270 day period, all labels, signs, packages,
wrappers, cartons, circulars, advertisements, and other items bearing or
containing any reproduction or representation of any 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 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
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<PAGE> 13
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
LICENSOR COVENANT
During the Contract Term or Extension Terms hereof, Licensor agrees that it will
not, either alone or acting together with a third party, manufacture, market,
sell or distribute any Product in the Territory, provided that during the final
ninety (90) days of any Contract or Extension Term hereof, and upon
prior written notice to Licensee, Licensor shall have the right to design and
manufacture such products 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
such products 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 two hundred seventy (270) day period as provided in Article 21
hereof).
ARTICLE 23
GOODWILL
Licensee acknowledges and recognizes that the Trademark is of substantial
significance and value to Licensor and that said Trademark has acquired
valuable secondary meaning, value and goodwill. Except as may be otherwise
specified in this Agreement, Licensee shall not use any 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 $2 million
and Licensor shall be named therein as an additional insured 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
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<PAGE> 14
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. 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.
ARTICLEE 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 or
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.
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.
-14-
<PAGE> 15
ARTICLE 29
AMENDMENTS AND WAIVERS
This Agreement may be amended or modified only in a writing executed by the
parties hereto, and either party hereto may waive any of its rights hereunder
or performance by the other party of any of its obligations hereunder, only by
instrument in writing. In the event either party hereto shall at any time
waive any of its rights under this Agreement or the performance by the other
party 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 the 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. This 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.
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<PAGE> 16
ARTICLE 34
INDEMNIFICATION
34.1 LICENSOR INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this
Section, "Licensor Indemnified Parties" refers to Licensor and officers,
directors, employees and agents of Licensor. Licensee shall indemnify and hold
harmless the Licensor 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 by Licensee of any trademark
(including, without limitation, the Trademark), patent, process, method
or device;
(b) the actual or alleged infringement by Licensee of any copyrights,
trade name or patent or any act by Licensee 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 Trademark
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; provided, however, that the
indemnification obligations of Licensee pursuant to this Article 34
shall not apply with respect to any of the events set forth in (a)
through (f) above to the extent that such event is attributable to any
event described under Section 34.2 hereof as to which Licensor shall
indemnify Licensee.
34.2 LICENSEE INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this
Section, "Licensee Indemnified 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 judgments arising out of any
assertion or allegation by any persons, entities or 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. Each party hereto shall indemnify and forever
hold harmless the other party against and from any and all claims, suits,
losses, damages, costs, obligations, liabilities, judgments, damages and
expenses, including without limitation, reasonable attorneys'
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<PAGE> 17
fees arising out of breach or alleged breach by such party of any
provision of this Agreement, or any misrepresentation made by such party herein
or any act not expressly authorized herein.
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, drawings, designs and any other
knowledge, information, techniques, know-how or data pertaining to the
manufacture, use, application, marketing, distribution and sale 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 SURVIVAL OF TERMS. The provisions of this Article 35 shall survive the
termination of this Agreement.
ARTICLE 36
PUBLIC ANNOUNCEMENTS
Unless expressly approved in advance in writing by the other party,
neither party 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
such announcement.
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<PAGE> 18
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 facsimile and confirmed by certified mail, return receipt
requested, addressed to the parties concerned as follows:
to Licensee at: Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mt. Prospect, Illinois 60056
Facsimile: 708-803-8080
with copies to: Neal Aizenstein, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Facsimile: 312-876-7934
and to Licensor at: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
with copies to: Ms. M. 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
New York, New York 10019
Facsimile: 212-581-1461
and shall be deemed to have been given upon receipt.
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<PAGE> 19
IN WITNESS WHEREOF, this Agreement is executed on the day and year first
written above.
White Consolidated Industries, Inc. (Licensor)
__________________________________________________
By: Stanley R. Miller
Assistant Secretary
Salton/Maxim Housewares, Inc. (Licensee)
__________________________________________________
By: William B. Rue
Senior Vice President/COO
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<PAGE> 20
EXHIBIT A
[*]
irons
can openers
mixers
food processors
electric knives
popcorn makers
toaster
toaster ovens
coffee makers
espresso/cappuccino makers
bread machines
pasta makers
doughnut makers
woks
pressure cookers
ice tea makers
sandwich makers
waffle irons/waffle makers
pancake grills
portable grilling machines
ice cream makers
yogurt makers
juice makers
juice extractors
<PAGE> 1
EXHIBIT 10.31
LICENSE AGREEMENT
AGREEMENT ("Agreement") made and effective this 21st day of May, 1996 by
and between White Consolidated Industries, Inc., a Delaware corporation having
its principal office at 11770 Berea Road, Cleveland, Ohio 44111 ("Licensor"),
and Salton/Maxim Housewares, Inc., a Delaware corporation having its principal
office at 550 Business Center Drive, Mt. Prospect, Illinois 60056 (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 on Exhibit A hereto (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 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"); and
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 mutual promises, covenants and
provisions herein contained and wishing to be bound hereby, the parties hereto
do hereby agree as follows:
Article 1
GRANT OF LICENSE AND DESIGNATION OF TRADEMARK PRODUCTS
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.
In the event of any good faith disputes between the parties to this Agreement
regarding the definition of Trademarked Product, the final decision regarding
such definition shall rest in
<PAGE> 2
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 this Agreement.
Licensee recognizes that Licensor sells products of the same description as
some of the products licensed herein, namely, humidifiers and air cleaners.
Licensee agrees not to challenge Licensor's continued right to sell such
products under the Trademark.
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 use of the Trademark in connection with 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 to perform its obligations hereunder.
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 the 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.
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<PAGE> 3
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 Delaware.
Licensee has all corporate power and authority to execute and deliver this
Agreement and to 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 the 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.
ARTICLE 5
TERM OF AGREEMENT
5.1 CONTRACT TERM. The Contract Term for each of Category 1, Category 2 and
Category 3 Trademarked Product commences on the date first mentioned above and
ends 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 thirteen (13) one (1) year periods
commencing as of January 1,1999 and ending on December 31, 2011, at midnight
Eastern Standard Time, unless sooner terminated pursuant to the terms
of this Agreement with such extended term(s) to be subject to the same terms
and conditions as provided herein except that as a condition to the extension
term(s), Licensee 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 option 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. Licensor may terminate this Agreement without
cause, in respect of some or all of the Trademarked Product 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.
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<PAGE> 4
ARTICLE 6
ROYALTIES
6.1 EARNED ROYALTIES OF CATEGORIES 1 AND 3 OF TRADEMARKED PRODUCT. Subject to
Article 7 hereof, Licensee shall pay to Licensor for the rights granted
hereunder a sum equal to the following percentages of the Net Invoice Value of
Trademarked Product sold by Licensee (the "Royalties"):
<TABLE>
<CAPTION>
TRADEMARKED PRODUCT - WHOLESALE PRICE
-------------------------------------
UNDER $10.00/UNIT $10.00 OR MORE/UNIT
<S> <C> <C>
Contract Term 2.0% 3.0%
First Extension Term 3.0% 3.0%
Second and Third Extension Term(s) 3.0% 3.5%
Fourth and Future Extension Term(s) 3.0% 4.0%
</TABLE>
The Royalties shall be remitted in accordance with Article 7.4 of this
Agreement.
6.2 EARNED ROYALTIES CATEGORY 2. Subject to Article 7 hereof, Licensee shall
pay to Licensor for the rights granted hereunder a sum equal to two percent
(2%) of the Net Invoice Value of Trademarked Product sold by Licensee (the
"Royalties"). The Royalties shall be remitted in accordance with Article 7.4
of this Agreement.
6.3 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").
ARTICLE 7
MINIMUM ROYALTY PAYMENTS
7.1 MINIMUM ROYALTIES. The minimum royalties for the Contract Term shall be
paid as follows:
Category 1: Sixty-five thousand dollars ($65,000) in advance upon execution
of this Agreement. The Minimum Royalty for each Extension Term as shown below
shall be payable in four (4)
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<PAGE> 5
equal installments each by the thirtieth day of March, June, September and
December of the respective Term.
Category 2: Eighty-five thousand dollars ($85,000) in advance of execution of
this Agreement and the balance of fifteen thousand dollars ($15,000) payable on
or before December 31, 1998. The Minimum Royalty for each Extension Term as
shown below shall be payable in four (4) equal installments each by the 30th
day of March, June, September and December of the respective term.
Category 3: Forty-thousand dollars ($40,000) in advance on execution of this
Agreement and the balance in eight (8) equal installments of $5,125 each by
the 30th day of March, June, September and December of 1997 and 1998. The
Minimum Royalty for each extension term shall be paid in four (4) equal
installments each by the 30th day of March, June, September and December of the
respective term.
<TABLE>
<CAPTION>
Category 1 Category 2 Category 3
----------------- ----------------- -----------------
Minimum Royalties Minimum Royalties Minimum Royalties
----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Term Year
- ------- ------
Initial 1996/8 $65 Thousand $100 Thousand $83 Thousand
Ext. 1 1999 78 Thousand 100 Thousand 98 Thousand
Ext. 2 2000 106 Thousand 120 Thousand 127 Thousand
Ext. 3 2001 127 Thousand 140 Thousand 148 Thousand
Ext. 4 2002 159 Thousand 180 Thousand 204 Thousand
Ext. 5 2003 193 Thousand 200 Thousand 227 Thousand
Ext. 6 2004 228 Thousand 240 Thousand 272 Thousand
Ext. 7 2005 273 Thousand 300 Thousand 341 Thousand
Ext. 8 2006 318 Thousand 360 Thousand 409 Thousand
Ext. 9 2007 363 Thousand 420 Thousand 477 Thousand
Ext. 10 2008 409 Thousand 520 Thousand 568 Thousand
Ext. 11 2009 454 Thousand 620 Thousand 636 Thousand
Ext. 12 2010 499 Thousand 740 Thousand 704 Thousand
Ext. 13 2011 545 Thousand 800 Thousand 749 Thousand
</TABLE>
7.2 INITIAL ROYALTY PAYMENT. Licensee shall pay Licensor an Initial Royalty
Payment of: Category 1: Sixty-five thousand ($65,000); Category 2:
Eighty-five thousand ($85,000); Category 3: forty thousand dollars ($40,000)
upon execution of this Agreement. The Initial Royalty Payment for each
Category shall be applied against the first royalties payable for that Category
respectively, pursuant to Article 7.4 of this Agreement.
7.3 MINIMUM ROYALTY PAYMENTS. To the extent that the aggregate, cumulative,
Minimum Royalties set forth above exceeds the aggregate, cumulative Earned
Royalties paid to Licensor by the end of the Contract Term or Extension Term,
as applicable, Licensee shall pay Licensor such excess with the Royalty payment
for the last fiscal quarter of the Contract Term or such Extension Term, as
applicable, in accordance with Article 7.4.
7.4 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
-5-
<PAGE> 6
above; plus (ii) the excess, if any, of the Earned Royalties (per Article 6)
over the Minimum Royalties for the then current term payable by such due date
(such sum hereinafter referred to as the "Royalty Payment"). Each Royalty
Payment, payable in U.S. currency, shall be remitted by check at Licensor's
address as provided in this Agreement.
7.5 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 and 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 (iv) a check payable to Licensor in full payment of the amount due under
Articles 6 and 7 of this Agreement for such period. Each Royalty payment,
payable in U.S. currency, shall be remitted by check at Licensor's address
as provided in this Agreement.
7.6 QUARTERLY REPORT OF SALES AND ROYALTY PAYMENTS. Licensee shall report
Gross and NIV sales separately for Category 1, Category 2 and Category 3 of
Trademarked Product, respectively, in accordance with Article 7.4, and also
report Consolidated Gross and NIV sales ("Consolidated Sales") which shall
include Gross and NIV sales of Category 1, Category 2 and Category 3 of the
Trademarked Product, in accordance with Article 7.4.
ARTICLE 8
MINIMUM SALES OF TRADEMARKED PRODUCT
8.1 FAILURE TO MEET MINIMUM SALES IN CATEGORY 1, CATEGORY 2 AND CATEGORY 3 OF
TRADEMARKED PRODUCT. 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 a level of NIV sales equal to the combined minimum
sales of Category 1, Category 2, and Category 3 of Trademarked Product, as set
for below, which, for purposes of this Paragraph 8.1, Licensee may accumulate
over any two consecutive Terms, then Licensor may, at its option, elect to
terminate Licensee's grant in, of or to that Category(ies) of Trademarked
Product for which Licensee shall not have achieved minimum sales for two
consecutive Terms by written notice delivered to Licensee within sixty (60) days
after the end of any period in which Licensee failed to maintain 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, nor shall it affect Category(ies) of
Trademarked Product for which Licensee achieves the Minimum NIV Sales as set
forth below in this Article 8.1.
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<TABLE>
<CAPTION>
Category 1 Category 2 Category 3
------------- ------------- -------------
Term Year Minimum Sales Minimum Sales Minimum Sales
- ------- ------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Initial 1996/8 $4.0 Million $5.0 Million $5.0 Million
Ext. 1 1999 4.0 Million 5.0 Million 5.0 Million
Ext. 2 2000 5.0 Million 6.0 Million 6.0 Million
Ext. 3 2001 6.0 Million 7.0 Million 7.0 Million
Ext. 4 2002 7.0 Million 9.0 Million 9.0 Million
Ext. 5 2003 8.5 Million 10.0 Million 10.0 Million
Ext. 6 2004 10.0 Million 12.0 Million 12.0 Million
Ext. 7 2005 12.0 Million 15.0 Million 15.0 Million
Ext. 8 2006 14.0 Million 18.0 Million 18.0 Million
Ext. 9 2007 16.0 Million 21.0 Million 21.0 Million
Ext. 10 2008 18.0 Million 26.0 Million 25.0 Million
Ext. 11 2009 20.0 Million 31.0 Million 28.0 Million
Ext. 12 2010 22.0 Million 37.0 Million 31.0 Million
Ext. 13 2011 24.0 Million 40.0 Million 33.0 Million
</TABLE>
ARTICLE 9
ADVERTISING AND ART WORK
9.1 ADVANCE SUBMISSION. Licensee shall submit to Licensor for approval all
advertising and promotional items, 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's reasonable
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, mechanical, 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 be 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 Category 1, Category 2, Category 3 of 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 principles and procedures
consistently applied. Licensor or its duly authorized agents or
representatives shall have the
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right to inspect said books and records at Licensee's premises during
Licensee's regular business hours upon reasonable prior notice to Licensee.
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, relating to Category 1, Category 2 and Category 3 of Trademarked Product.
If said statement discloses that Licensee has paid Royalties in excess of the
amounts required to be paid, Licensor shall apply said excess to the next
Royalty payment or, if no further Royalty payments are due, such excess shall
be remitted to Licensee.
ARTICLE 12
AUDIT BY LICENSOR
If Licensor so chooses, it may (at its expense, except as provided below) cause
its independent accountants to audit or review, upon reasonable prior notice to
Licensee, all books and records of Licensee pertaining Trademarked Product.
Licensor shall deliver to Licensee not later than sixty (60) days from
Licensor's receipt of the applicable Report a statement describing its
objections (if any) to Licensee's determination of the Royalties for the
applicable period. Each of Licensor and Licensee shall use reasonable efforts
to resolve any such disputes, but if a final resolution is not obtained within
thirty (30) days after Licensor has submitted its objections, any remaining
disputes will be resolved by an accounting firm mutually agreeable to Licensor
and Licensee (the fees and expenses of such firm to be paid by Licensor, except
as provided below). If Licensor and Licensee are unable to mutually agree on
such an accounting firm, a "big-six" accounting firm shall be selected by lot
after eliminating one firm designated as objectionable by each of Licensor and
Licensee. The determination of any accounting firm so selected shall be
conclusive and binding upon the parties. In the event any such audit or review
as finally determined pursuant to this Article 12 shall disclose that Licensee
has underpaid Royalties for any reporting period, Licensee shall forthwith upon
written demand of Licensor pay the amount, if any, by which the Royalties owing
exceed Royalties paid, plus interest of ten percent (10%) per annum on such
amounts, accruing from the date on which such amounts were due to the date on
which sum amounts are paid. Should such audit disclose that the Royalties paid
exceeded the Royalties due, any excess amount revealed by such audit will be
remitted to Licensee. If Licensor causes its own independent accountants to
review the Reports described herein and the effect of such review as finally
determined pursuant to this Article 12 is that the amount of the Royalties for
the applicable period is understated by two percent (2%) or more, then Licensee
shall pay the reasonable costs of Licensor's independent accountant and the
reasonable costs of any mutually selected accountant or other accountant
selected pursuant to this Article 12.
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ARTICLE 13
LICENSEE OBLIGATIONS
13.1 LICENSEE DILIGENCE. Licensee shall design, manufacture, advertise, sell
and ship 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. 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 in 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 differentiated
versions of Trademarked Product, i.e., "White-Westinghouse Elite" to retailers
in all major classes of trade including department stores (i.e., Macy's,
Burdine's, Bloomingdale's, etc.), regional discounters (i.e., Caldor, Bradlees,
etc.), specialty electronic chains (i.e., The Wiz, etc.), mail order, premium
and television shop services. Licensee shall exhibit Trademarked Product in
exhibit or booth space at the annual Housewares Show and other appropriate
trade shows.
13.2 LICENSOR INSPECTION RIGHTS. Licensor shall have the right upon reasonable
prior notice to Licensee 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 TRADEMARKED PRODUCT FOR NON-USE. Licensee's
failure to introduce for sale, by the commencement of the First Extension Term,
any of the eleven (11) Trademarked Product listed on Exhibit A shall be deemed
a forfeiture of its grant to use the Trademark on that Product. Failure of
Licensee to ship any of the Trademarked Product listed on Schedule A for a
period of one (1) year shall be deemed a forfeiture of its Grant to use the
Trademark on that Product.
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. Should Licensee's net worth fall below $* Dollars,
Licensor may, at its option, terminate this Agreement. Likewise, Licensor
may terminate this Agreement immediately if Licensee incurs net operating
losses for three or more consecutive years.
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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 of 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 Quality more than the deviation which would occur
as a result of normal deviations in raw material characteristics.
14.5 SERVICING AND REPAIRS. Licensee will propose, in a timely manner, a
mechanism by which Licensee will respond to inquires 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.
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 shall not enter into subcontracts for the manufacture of Trademarked
Product without the express written consent of Licensor, which consent shall
not be unreasonably withheld. 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.
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ARTICLE 16
ASSIGNMENT; TRANSFERS; SUBLICENSE
Except as otherwise explicitly provided herein, Licensee may not enter into any
sublicense for the use of the Trademark by others. This Agreement shall not be
assignable by Licensee without the prior written consent of Licensor. Such
consent shall not be unreasonably withheld, except that no such prior written
consent shall be required for any assignment of this Agreement by Licensee to a
successor in interest of Licensee as a result of any merger, consolidation or
other corporate reorganization involving Licensee or a sale by Licensee of a
substantial part of its assets provided that no more than twenty percent (20%)
of the business of such successor (measured by revenues) competes directly with
Licensor.
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 shall not 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
Licensor.
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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 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
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 there be by any right of contribution
against Licensor therefor, 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 THE TRADEMARK
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
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, at Licensor's
expense, in obtaining registrations for the Trademark in the event any
Trademark 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:
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"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.
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 the same shall not be cured within ten (10)
days 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 fifteen (15) days 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
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 be 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 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
Trademark, including associated goodwill, and shall not thereafter manufacture,
sell, or use the Trademark in any manner; provided that Licensee may continue
to use the Trademark in connection with the advertising and sale of Trademarked
Product and may continue to use the Trademark in connection with the
manufacture of Trademarked Product, which are in the process of being completed
at time of said termination, for two hundred and seventy (270) days after the
termination of this Agreement; further provided, however, that all sums then
due to Licensor pursuant to this Agreement have first been paid; and further
provided that Licensee shall, within thirty (30) days after 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 270 day 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
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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 of sale by Licensee to any third party, for an amount
equal to the wholesale cost of such Trademarked Product as indicated in
Licensee's then current catalogue.
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
270 day period specified in Section 21.1 of this Agreement. Upon termination of
the aforesaid 270 period, all labels, signs, packages, wrappers, cartons,
circulars, advertisements, and other items bearing or containing any
reproduction or representation of any 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
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.
ARTICLE 22
LICENSOR COVENANT
During the Contract Term or Extension Term hereof, Licensor agrees that
it will not, either alone or acting together with a third party, manufacture,
market, sell or distribute any Product in the Territory, provided that during
the final ninety (90) days of any Contract or Extension Term hereof, and upon
prior written notice to Licensee, Licensor shall have the right to design and
manufacture such products 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 such
products 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 two hundred and seventy (270) day period as provided in Article 21
hereof).
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ARTICLE 23
GOODWILL
Licensee acknowledges and recognizes that the Trademark is of substantial
significance and value to Licensor and that said Trademark has acquired
valuable secondary meaning, value and goodwill. Except as may be otherwise
specified in this Agreement, Licensee shall not use any 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 $2 million
and Licensor shall be named therein as an additional insured 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. 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
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inconsistent with Licensee's right hereunder, shall not be deemed to be
interference with or infringement or 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.
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
This Agreement may be amended or modified only in a writing executed by the
parties hereto, and either party hereto may waive any of its rights hereunder
or performance by the other party of any of its obligations hereunder, only by
instrument in writing. In the event either party hereto shall at any time
waive any of its rights under this Agreement or the performance by the other
party 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 the subject matter hereof.
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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. This 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.
ARTICLE 34
INDEMNIFICATION
34.1 LICENSOR INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this
Section, "Licensor Indemnified Parties" refers to Licensor and officers,
directors, employees and agents of Licensor. Licensee shall indemnify and hold
harmless the Licensor 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 by Licensee of any trademark
(including, without limitation, the Trademark), patent, process,
method or device;
(b) the actual or alleged infringement by Licensee of any copyrights, trade
name or patent or any act by Licensee held to constitute libel, slander
or defamation; 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; provided; however, that
the indemnification obligations of Licensee pursuant to this Article 34
shall not apply with
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respect to any of the events set forth in (a) through (f) above to the extent
that such event is attributable to any event described under Section 34.2
hereof as to which Licensor shall indemnify Licensee.
34.2 LICENSEE INDEMNIFIED PARTIES; BASIC INDEMNIFICATION. For purposes of this
Section, "Licensee Indemnified 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 judgments arising out of any
assertion or allegation by any persons, entities or 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. Each party hereto shall indemnify and forever
hold harmless the other party 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 such party of any provision of this Agreement,
or any misrepresentation made by such party herein or any act not expressly
authorized herein.
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, drawings, designs and any other
knowledge, information, techniques, know-how or data pertaining to the
manufacture, use, application, marketing, distribution and sale 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
-18-
<PAGE> 19
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
ANNOUNCEMENTS
36.1 PUBLIC ANNOUNCEMENTS. Unless expressly approved in advance in writing by
the other party, neither party 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 such 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
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 facsimile and confirmed by certified mail, return receipt
requested, addressed to the parties concerned as follows:
-19-
<PAGE> 20
<TABLE>
<S> <C>
to Licensee at: Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mt Prospect, Illinois 60056
Facsimile: 708-803-8080
with copies to: Neal Aizenstein, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Facsimile: 312-876-7934
and to Licensor at: White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
with copies to: Ms. M. Sharon Schiller, Trademark Counsel
White Consolidated Industries, Inc.
11770 Berea Road
Cleveland, Ohio 44111
Facsimile: 216-252-8158
</TABLE>
-20-
<PAGE> 21
and Mr. Allan R. Feldman
Leveraged Marketing Corporation of America
156 West 56th Street
New York, New York 10019
Facsimile: 212-581-1461
and shall be deemed to have been given upon receipt.
IN WITNESS WHEREOF, this Agreement is executed on the day and year
first written above.
White Consolidated Industries, Inc. (Licensor)
__________________________________________________
By: Stanley R. Miller
Assistant Secretary
Salton/Maxim Housewares, Inc. (Licensee)
__________________________________________________
By: William B. Rue
Senior Vice President/COO
-21-
<PAGE> 22
EXHIBIT A
Effective: May 21, 1996
Category 1: Personal Care
1. Hair Dryers
2. Hair Curlers
3. Curling Wands and brushes
4. Make-up Mirrors
5. Nail, Face Feet and Body Care Products
6. Massagers
Category 2: Fans and Heaters
7. Portable Cooling Fans
8. Portable Room Heaters and Heater/Fan Combinations
Category 3: Tabletop Air Cleaners and Humidifiers
9. Portable Room Air Cleaners
10. Portable Room Air Ionizers and Air Cleaner/Ionizer
Combinations
11. Portable Room Humidifiers
-22-
<PAGE> 1
EXHIBIT 10.32
PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
BY AND BETWEEN
SALTON/MAXIM HOUSEWARES, INC.
AND
KMART CORPORATION
_________________________
JANUARY 27, 1997
_________________________
<PAGE> 2
PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
This Agreement ("Agreement") is entered into as of January 27, 1997 (the
"Execution Date") between Salton/Maxim Housewares, Inc., a Delaware corporation
("Salton"), and Kmart Corporation, a Michigan corporation ("Kmart").
PREAMBLE
WHEREAS, pursuant to License Agreements by and between White Consolidated
Industries, Inc. ("WCI") and Salton (the "License Agreements"), Salton 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, Salton 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 New M-Tech Corporation, an affiliate of Salton, as
defined in Section 1.1 below (the "New Tech Agreement"), for the use of the
Trademark on Audio products, Video products, Telephones, Telephone Answering
Machines and Telephone accessories all as specifically described therein, which
agreement is critical to Kmart's overall program for use of the Trademark on
Products under this Agreement with Salton, 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 Salton.
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.
<PAGE> 3
1.3 "Person" shall include any individual, corporation,
partnership, association, cooperative, joint venture, or any other
form of business entity recognized under the law.
1.4 "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 includes 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 Salton; Acceptance by Kmart. Subject to the
provisions of this Agreement, Salton 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 Salton 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
Salton if such products do not bear or include or are not sold under
the Trademark, and no payments shall be due to Salton hereunder in
respect of such sales.
2.2 Territorial Limitations. Salton 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 Salton 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 Salton
(which consent may be refused in the sole, absolute and
arbitrary discretion of Salton), Kmart shall not sell any
Product to any Person outside the United States. The United
States includes Puerto Rico and Guam.
2
<PAGE> 4
2.2.3 The parties acknowledge and agree that the relationship
hereby established between Kmart and Salton 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 Salton and Kmart.
Nothing in this Agreement shall be deemed in any way to
constitute a sublicense by Salton 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 SALTON
3.1 Salton 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
Delaware, 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 Salton and represents a valid and
binding obligation enforceable against Salton in accordance
with its terms.
3.1.2 No Conflicts; Consents. Execution and delivery hereof, or
performance by Salton hereunder, shall not (a) violate or
create a default under (i) Salton'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 Salton'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
Salton.
3.1.4 Trademark/Compliance with Laws. It has the contractual
right and authority to use the Trademark for 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,
including but not limited to, the right to import all
Products into the United States for the full duration of
this Agreement; and Salton shall provide U.S. Customs with
3
<PAGE> 5
sufficient proof and documentation to enable Kmart to do so.
(Notwithstanding the foregoing, Salton 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 any of the 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 Salton'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 any of the benefits of this Agreement, or any
failure under this Agreement and/or under the NewTech
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 or 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 to
Salton 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, Salton shall comply with
the following requirements:
a. New Vendor Packet Compliance. Salton 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. Salton's execution of this Agreement shall
constitute Salton'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. Salton 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. Salton 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.
4
<PAGE> 6
d. Industry Performance. Salton must at a minimum meet
normal industry standards for performance regarding
timing and completion levels of fill rates without
substitutions.
e. Electronic Data Interchange. Salton must accommodate
and participate in Kmart's electronic data interchange
program.
4. REPRESENTATIONS AND WARRANTIES OF KMART
4.1 Kmart represents and warrants to Salton 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)
of Incorporation or by-laws (true and correct copies of
which have been delivered to Salton), (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 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
Agreement based 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 Salton [*] (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.
* Confidential Treatment Requested
5
<PAGE> 7
<TABLE>
<CAPTION>
Category Up to and
(In Including 7/1/98- 7/1/99- 7/1/00- 7/1/01- 7/1/02- 7/1/03-
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>
Kitchen
Housewares: $40.0 $50.0 $52.0 $54.1 $56.2 $ 58.5 $ 60.8
Personal
Care: 13.0 13.5 14.1 14.6 15.2 15.8 16.4
Heaters/Fans: 18.0 18.7 19.5 20.2 21.1 21.9 22.8
Electric
Air
Cleaners $ 6.0 $ 6.2 $ 6.5 $ 6.8 $ 7.0 $ 7.3 $ 7.6
and
Humidifiers:
Total ----- ----- ----- ----- ----- ------ ------
$77.0 $88.4 $92.1 $95.7 $99.5 $103.5 $107.6
===== ===== ===== ===== ===== ====== ======
</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 Salton,
provided that: (i) Salton'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 Salton's acceptance
of such Specific Purchase Order; and (ii) Salton is required to
accept all Specific Purchase Orders for which [*], and all such Orders
shall automatically qualify as accepted by Salton; and (iii) Salton
is required to accept all Specific Purchase Orders which Salton is to
fill [*] ("Direct Salton Orders"), provided (a) they are issued at
prices negotiated by Kmart and Salton or; (b) are consistent with
prices quoted by Salton 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 Salton [*] over the
preceding one hundred twenty (120) days, and all such Orders placed
shall automatically qualify as accepted by Salton. Notwithstanding
the foregoing, Salton 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
Salton as set forth above and Salton [*] 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, Salton is unable to procure Products
[*] then [*] 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.
* Confidential Treatment Requested
6
<PAGE> 8
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 Salton as set forth above and
Salton [*] 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 Salton within thirty (30) days
following the end of any such period, as Salton's sole and exclusive
remedy hereunder and upon receipt of an invoice from Salton 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)
five percent (5%) (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 Salton's
Fees (for both ordered and unordered Products) ever exceed the amount
Salton would have received in any Category under Section 5.1 herein if
Kmart had met all Minimum Product Order commitments stated therein,
and Salton shall reconcile and refund all Fees received in excess
thereof subject to Section 7.1.2 hereof. For example, if during the
Period from the Execution Date of this Agreement through June 30,
1998, Kmart issues Product Orders in the Kitchen Housewares Category
equal to an aggregate of $48.0 million and, if during the period from
July 1, 1998 through June 30, 1999, Kmart issues Product Orders in the
Kitchen Housewares Category equal to an aggregate of $41.0 million,
then Kmart shall pay Salton, as Salton's sole and exclusive remedy for
Kmart's failure to issue the Minimum Product
* Confidential Treatment Requested
7
<PAGE> 9
Orders for the Products, an amount equal to $50,000 on or before
July 30, 1999 ($1.0 million x 5%). Product Orders in a particular
Category may not be used to satisfy the Minimum 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 retail sales of Kitchen Housewares in the United
States decrease by 30% during the Period from July 1, 1999 to June
30, 2000 and Kmart issues orders for $60.0 million of Products in
the Kitchen Housewares Category during the Period from July 1, 1999
to June 30, 2000, then the Minimum Product Orders commitment for
Kitchen Housewares for the Period from July 1, 2000 to June 30, 2001
shall be reduced from $54.1 million to $43.2 million ([30%-10%] x
$60.0 = $12.0 million; $12.0 million subtracted from $54.1 million
= $42.1 million; however, the Minimum Product Orders can never be
reduced under this Section 5.2 by more than 80% of $54.1 million
(which equals $43.2 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 Salton 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 Salton, 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.
8
<PAGE> 10
6. DELIVERY
6.1 Availability of Products. Products shall be shipped in
accordance with the Specific Purchase Orders. Salton 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 Salton in production scheduling
for the manufacture of the Products, Kmart shall provide to Salton,
monthly, a six month rolling forecast of its requirements for
Products. The first forecast shall be provided by Kmart to Salton
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 Salton 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
Salton, 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 Salton'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 Salton [*] Salton acknowledges
and Kmart acknowledges (based upon Salton'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 Salton,
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, Salton 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 Salton 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
Salton, then Kmart shall enter into an agreement with
Salton for such Products as Kmart desires to purchase
and Salton is willing to manufacture pursuant to a
purchase order identical in all respects to the
* Confidential Treatment Requested
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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 Salton in its sole discretion at or
prior to the time the applicable Direct Purchase Order is issued by
Kmart and accepted by Salton.
7.1.2 Orders from [*] 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 "[*] Purchase
Order"). Kmart shall make direct payments to [*] of the amounts owed
under such [*] Purchase Order for conforming Products timely delivered
(the "[*] Payments"). Salton shall remain liable for the [*] Payments
in the event Kmart fails to make such [*] Payments. Kmart shall
indemnify and hold harmless Salton 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 contributed to by
Salton, 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 [*] Salton shall not
be liable for the failure to perform, including warranties, [*] unless
and except to the extent that such failure is caused or contributed to
by Salton, Windmere or WCI.
7.1.3 Purchase Orders from Kmart to Salton 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 Salton 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)
five percent (5%) 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
"Salton 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 Salton Payment to Salton whereupon Salton shall pay the
[*] Payment to [*] or (ii) pay the [*] Payment directly to [*] and
remit the difference between the Salton Payment and the [*] Payment
directly to Salton. Kmart's exercise of either of the preceding
options shall extinguish any and all rights of Salton to such
payments.
* Confidential Treatment Requested
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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 Salton 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 Salton Payments made directly to Salton upon delivery of
conforming Products. Salton 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 is
such review reveals an underpayment of more than one percent (1%) of
the amount to which Salton is entitled hereunder, then Salton may
conduct such review twice per year. The cost and expenses of such
examination shall be paid solely by Salton; provided, that if such
examination reveals an underpayment to either Salton of more than
one percent (1%) of the amount to which Salton 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 Salton and Windmere-Durable Holdings, Inc. ("Windmere")
presently Deloitte & Touche and Grant Thornton L.L.P., shall have
the right during the term of this Agreement at any time that either
Salton 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 Salton
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 Salton, without the express prior written consent of
Kmart. The cost and expenses of such examination shall be paid
solely by Salton and/or Windmere, as the case may be; provided, that
if such
* Confidential Treatment Requested
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examination reveals an underpayment of more than one percent
(1%) of the amount to which Salton 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 Salton against
[*] with respect to Products purchased from [*] pursuant to this
Agreement, which rights may not be enforced by Salton. Salton
shall have no liability with respect to any non-performance of
[*] unless Salton, 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 Salton Payment to [*], and such payment is not assignable to any
other party, including Salton.
7.1.7 Sole and Exclusive Remedy of Salton. Salton'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 Salton Payment and the [*] Payment or for
enforcement of Kmart's indemnification obligation under Section
7.1.2 hereunder. Salton shall have no right to enforce against
Kmart, Kmart's payment of the [*] Payment portion of the Salton
Payment unless Kmart shall have wrongfully failed to pay such amount
to [*] upon timely delivery of conforming Products under a [*]
Purchase Order. Salton shall have no right to enforce performance
or seek any other remedy against [*] hereunder or under any [*]
Purchase Order.
7.1.8 Invoicing Requirements/Payment Terms.
A. Salton will follow the invoicing requirements provided by
Kmart from time to time.
B. Payment for all Direct Salton Orders of Products f.o.b.
Asia ("Import Products") and purchased hereunder shall be as
follows: (i) Direct Salton 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 Salton 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
* Confidential Treatment Requested
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herein. If Kmart, in its sole and exclusive discretion
exercises the payment option set forth in (ii) under Section
7.1.3, Salton shall invoice Kmart for the difference between
the Salton Payment and the TPM Payment after Salton receives
each Aggregate Sales Report described in Section 7.1.4 herein.
Salton 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
Kmart Corporation Administration
3100 West Big Beaver Road Kmart Corporation
Troy, MI 48084 3100 West Big Beaver Road
Troy, MI 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
Salton from a financial institution reasonably acceptable to Salton
("Letter of Credit") which can only be drawn upon for Kmart's failure
to pay for Direct Salton 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 Salton
Payment) Salton 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 Salton and all of the following conditions are met:
(i) Kmart has failed to pay for such Products as provided herein (ii)
Salton 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 Salton as
follows: "Salton has timely delivered conforming Products f.o.b. Asia
to Kmart, Kmart has taken deliveries of such Products and Salton has
invoiced Kmart therefor. Kmart Corporation owes Salton/Maxim
Housewares, Inc. $___________ pursuant to invoices [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.
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Salton 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 Salton and shall terminate on
December 15, 1997.
7.1.10 Currency Exchange. Prices charged Kmart and payments made by Kmart to
Salton 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, Salton
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.
Salton 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, attorneys fees,
settlement payments and damages arising in connection with any such
claims. Kmart agrees to timely advise Salton of any such suit, claim
or proceeding, and to extend reasonable cooperation to Salton in the
defense or settlement of such suit, claim or proceeding, but Salton
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,
Salton shall promptly, at its option either: (a) procure for Kmart the
right to continue using, purchasing, distributing, selling, marketing
and/or 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 Salton for such Products and such Right, including but
not limited to all Salton Payments.
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9.2 Insurance. Salton 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 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, Salton shall tender to Kmart
certificates of insurance evidencing the coverage required to
be maintained by Salton 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 Salton 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 Salton 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"):
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(a) Material breach of the Agreement, including, without limitation,
(i) the failure of Salton to supply Products and/or provide
services as provided for herein with such diligence as will insure
compliance with all delivery, installation, completion 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) New Tech's breach of
the NewTech 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 Salton's remedies shall not
exceed the amount Salton 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 Salton's Default or wrongful termination of
this Agreement, Kmart shall not owe Salton 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 Salton written notice at any time up to June 30,
2000. Following delivery of such notice to Salton, 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,
Salton may commence marketing plans for the sale of Products to any other
Person, including other Discount Department Stores, and, after July
31, 2001 Salton may
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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 Salton
of its desire to so terminate this Agreement. Upon any such
termination, Kmart shall owe nothing to Salton 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.
(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 Salton. Salton 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,
Salton may commence marketing plans for the sale of Products to any
other Person, including other Discount Department Stores, and, after
July 31, 2001 Salton may market and sell Products to any other
Person, including Discount Department Stores, notwithstanding
Section 2.1 hereof. In the event that Salton does not elect to
terminate this Agreement in accordance with the foregoing sentences
of this Section 10.5, then Salton 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 Salton 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 Salton 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
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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 Salton
or with a Third Party Manufacturer, Kmart agrees that, except with
Salton, 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 Salton.
10.8 Termination of the NewTech Agreement. If the NewTech Agreement is
terminated at any time for any reason, Kmart may, in its sole
option, elect to terminate this Agreement, and upon 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. Salton agrees that any
and all information in any form that is provided to Salton or any of
its representatives as part of this Agreement is provided and
received in confidence, and Salton, 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"). Salton 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 Salton 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 Salton
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 Salton 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, Salton may disclose
certain information to Kmart which Salton considers proprietary and
confidential. In order
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to be considered as proprietary and confidential and, thus, subject
to the following restrictions, Salton 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 SALTON';
and (ii) Salton 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 Salton 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
(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. Salton 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 the Investor Relations
Department of Kmart as to the contents thereof.
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 Salton'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.
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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:
<TABLE>
<S> <C>
If to Salton: Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mt. Prospect, Illinois 60056
Attn: William B. Rue
Fax: (847) 803-8080
with a copy to (other than Greenberg, Traurig, Hoffman, Lipoff,
regularly 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
and
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attn: Neil Aizenstein
Fax: (312) 876-7934
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 Kmart Corporation
regularly prepared notices, reports, etc. Legal Department
required to be delivered hereunder): 3100 W. Big Beaver Road
Troy, Michigan 48084
Attn: General Counsel
</TABLE>
20
<PAGE> 22
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.
SALTON 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
Salton 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 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
21
<PAGE> 23
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 Salton'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, tort or otherwise). In
addition, in no event shall Kmart be liable for direct or any other
damages in excess of the amount to which Salton 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"). Salton, 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 Salton'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 Salton. 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. Salton acknowledges Kmart Properties Inc.'s
("KPI") 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 right, title or interest in the
Kmart Marks by KPI or Kmart to Salton. Salton 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
22
<PAGE> 24
the Kmart Marks. Salton shall not use, print or duplicate the
Kmart Marks except and only if Salton has obtained prior approval
as provided herein. Salton's use of the Kmart Marks is limited to
the Term of this Agreement; upon termination hereof, Salton shall
immediately cease all use of the Kmart Marks. Salton 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 right, title or interest in the Trademark or the License
Agreement by Salton or WCI to Kmart. Kmart shall not do or cause to
be done anything impairing Salton'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.
SALTON/MAXIM HOUSEWARES, INC. KMART CORPORATION
By: By:
(Signature) (Signature)
Name: Name:
Title: Title:
23
<PAGE> 25
EXHIBIT A
DESCRIPTION OF PRODUCTS
KITCHEN HOUSEWARES:
Irons
Can Openers
Mixers
Food Processors
Electric Knives
Popcorn Makers
Toasters
Toaster Ovens
Coffee Makers
Espresso/Cappuccino Makers
Bread Machines
Pasta Makers
Doughnut Makers
Woks
Pressure Cookers
Ice Tea Makers
Sandwich Makers
Waffle Irons/Waffle Makers
Pancake Grills
Portable Grilling Machines
Ice Cream Makers
Yogurt Makers
Juice Makers
Juice Extractors
PERSONAL CARE:
Hair Dryers
Hair Curlers
Curling Wands and Brushes
Make up Mirrors
Nail, Face, Feet and Body Care Products
Massagers
FANS AND HEATERS:
Portable Cooling Fans
Portable Room Heaters and Heater/Fan
Combinations
ELECTRIC AIR CLEANERS AND HUMIDIFIERS:
Humidifiers
Air Cleaners
24
<PAGE> 26
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
50-Off 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
25
<PAGE> 27
PURCHASE ORDER TERMS AND CONDITIONS EXHIBIT B
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, acknowledgment 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 each 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 responsibility, and (viii)
occupational safety and health; (c) copyright 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, expenses, claim, liability or penalty, including
without limitation, claims of infringement of patents, copyrights,
trademarks, unfair composition, bodily injury, property or other damage,
arising out of any use, possession, consumption or sale of said Merchandise
and form any failure of Vendor to property perform an Order. Vendor shall
not be relieved of the forgoing 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
<PAGE> 28
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 Buyers'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 options 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 the Buyer's rights
resulting from defective or non-conforming Merchandise.
5. Buyers 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 provisions of any federal or state bankruptcy or insolvency laws
or Vendor ceased 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
form 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 to 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.
<PAGE> 29
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 RELATION OR ANY TRANSACTION OF ANY NATURE
BETWEEN BUYER AND VENDOR, TO COMMENCE SAME (I) EXCLUSIVELY IN (AND VENDOR
HEREBY CONSENT 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 STATUE 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 affect 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 for each item on the invoice.
No substitutions of Merchandise shall be made without the written
authorization of Buyer. (B) Each Order may 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 instruction 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 n NO PACKAGE QUANTITY CHANGE on an Order without the
written authorization of the 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 mar the contents of each
Distribution Center carton clearly on the outside of the carton, case, or
package. (c) Merchandise not packaged or shipped in quantities Order by
Buyer shall at Buyer's option be returned to Vendor at Vendor's expense.
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.
<PAGE> 30
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
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 HOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED. Vendor acknowledges and
agrees that any sales forecast, 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
hall 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 ..." starting in line 6; and (iii)
Paragraph 12 - delete in its entirety.
<PAGE> 31
[KMART LETTERHEAD]
___________ 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 purchase orders only.
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
returning one original of this letter (WITH NO CHANGES OF ANY KIND) to the
address 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
RETURN TO:
ATTN
----------------------------- --------------------------------------------
KMART CORPORATION Title
3100 WEST BIG BEAVER ROAD
TROY MI 48084-3163
<PAGE> 32
PURCHASE ORDER TERMS AND CONDITIONS EXHIBIT C
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, acknowledgment 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 each 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 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, expenses, claim,
liability or penalty, including without limitation, claims of
infringement of patents, copyrights, trademarks, unfair composition,
bodily injury, property or other damage, arising out of any use,
possession, consumption or sale of said Merchandise and form any
failure of Vendor to property perform an Order. Vendor shall not be
relieved of the forgoing 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
<PAGE> 33
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 Buyers'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 options
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 the Buyer's rights resulting from defective
or nonconforming Merchandise.
5. Buyers 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 provisions of any federal or state bankruptcy
or insolvency laws or Vendor ceased 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 form 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 to 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.
<PAGE> 34
8. Michigan Contract and Jurisdiction. EACH ORDERS 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 RELATION OR ANY TRANSACTION OF ANY NATURE
BETWEEN BUYER AND VENDOR, TO COMMENCE SAME (I) EXCLUSIVELY IN (AND
VENDOR HEREBY CONSENT 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 STATUE 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 affect 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 for each item on
the invoice. No substitutions of Merchandise shall be made without the
written authorization of Buyer. (B) Each Order may 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 instruction 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 n NO PACKAGE
QUANTITY CHANGE on an Order without the written authorization of the
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 mar the contents of
each Distribution Center carton clearly on the outside of the carton,
case, or package. (c) Merchandise not packaged or shipped in
quantities Order by Buyer shall at Buyer's option be returned to Vendor
at Vendor's expense. 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
<PAGE> 35
(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 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 HOSE OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
ARE EXCLUDED. Vendor acknowledges and agrees that any sales forecast,
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 hall 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
..." starting in line 6; and (iii) Paragraph 12 - delete in its
entirety.
<PAGE> 36
[KMART LETTERHEAD]
___________ 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 purchase orders only.
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
returning one original of this letter (WITH NO CHANGES OF ANY KIND) to the
address 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
RETURN TO:
ATTN
----------------------------- --------------------------------------------
KMART CORPORATION Title
3100 WEST BIG BEAVER ROAD
TROY MI 48084-3163
<PAGE> 37
TERMS AND CONDITIONS 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 provision in Seller's invoices, billing statements, acknowledgments
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 imitation, 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 damage, 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 certificates(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 of Contract may at Buyer's option be deemed canceled 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
occurring 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
<PAGE> 38
or implied, are not strictly complied with by Seller with respect to any
shipment or installment shipment of the Merchandise order 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, buy any 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 and until 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 AMERICAN AT DETROIT, MICHIGAN AND CONDUCTED IN ACCORDANCE WITH THE RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. JUDGEMENT 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 EXCLUSIVE 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 provision 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 provision 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 provision; (e) all of the terms herein
shall apply to additional quantities of Merchandise order by Buyer except
to the extent covered by a new written agreement; and (f) all documents
prepared in connection
<PAGE> 39
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 the 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 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 that (1)
misstates 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 t 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 redelivered 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, right of warranty and
indemnification obligation on the part of Buyer to a manufacturer in
connection with the Merchandise. This partial assignments 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 to Seller). The testing
of Seller's Merchandise by or on behalf of Kmart is not a substitute for
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> 40
EXHIBIT E
AUTHORIZED REPRESENTATIVES OF KMART
Senior Vice President General Merchandise Manager, Hardlines
Divisional Vice President, Merchandising Hardlines
Buyer, Appliances, Music, Electronics
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF OPERATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-29-1996
<PERIOD-END> DEC-28-1996
<EXCHANGE-RATE> 1
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 37,931
<ALLOWANCES> 2,390
<INVENTORY> 30,699
<CURRENT-ASSETS> 74,345
<PP&E> 16,373
<DEPRECIATION> 9,424
<TOTAL-ASSETS> 98,180
<CURRENT-LIABILITIES> 59,860
<BONDS> 889
0
0
<COMMON> 130
<OTHER-SE> 37,301
<TOTAL-LIABILITY-AND-EQUITY> 98,180
<SALES> 93,699
<TOTAL-REVENUES> 93,699
<CGS> 61,978
<TOTAL-COSTS> 65,983
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,099
<INCOME-PRETAX> 7,860
<INCOME-TAX> 2,754
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,106
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
