<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1997 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 May 9, 1997 -
13,017,144 shares of its $.01 par value Common Stock.
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SALTON/MAXIM HOUSEWARES, INC.
FORM 10-Q
QUARTER ENDED MARCH 29, 1997
INDEX
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<TABLE>
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PAGE NO.
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PART I FINANCIAL INFORMATION
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Item 1: Financial Statements
Balance Sheets-March 29, 1997
(Unaudited) and March 30, 1996...... 3
Statements of Operations
Thirteen weeks ended
March 29, 1997 and
March 30, 1996 (Unaudited)
and Thirty-nine weeks ended
March 29, 1997 and
March 30, 1996 (Unaudited)........... 4
Statements of Cash Flows
Thirty-nine weeks ended
March 29, 1997 and
March 30, 1996 (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
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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>
Mar. 29, June 29,
1997 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $21 $4
Accounts receivable, net of allowances 28,792 15,871
Inventories 34,779 28,288
Prepaid expenses and other current assets 4,306 1,934
Deferred tax assets 1,212 1,949
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Total current assets 69,110 48,046
PROPERTY, PLANT AND EQUIPTMENT:
Molds and tooling 14,011 12,373
Warehouse equiptment 374 296
office furniture and equiptment 3,705 1,930
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18,090 14,599
Less accumulated depreciation (9,900) (8,368)
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8,190 6,231
INTANGIBLES, NET OF ACCUM. AMORTIZATION 5,321 3,671
INVESTMENT - WINDMERE 10,567
NON-CURRENT DEFERRED TAX ASSET 1,533 1,533
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TOTAL ASSETS $94,721 $59,481
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $16,989 $10,057
Accrued expenses 2,122 1,233
Revolving line of credit 32,032 24,095
Current portion - Subordinated debt 5,000 417
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Total current liabilities 56,143 35,802
LONG-TERM PORTION SUBORDINATED DEBT 889 500
DUE TO WINDMERE 3,254
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Total liabilities 57,032 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 468
Additional paid-in capital 52,943 29,293
Less Note Receivable - Windmere (10,848)
Accumulated deficit (5,004) (9,433)
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TOTAL STOCKHOLDERS' EQUITY 37,689 19,925
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $94,721 $59,481
======= =======
</TABLE>
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SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
13 weeks ended 39 weeks ended
--------------------- --------------------
3/29/97 3/30/96 3/29/97 3/30/96
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<S> <C> <C> <C> <C>
NET SALES $41,690 $20,190 $135,389 $79,844
Cost of goods sold 27,188 13,604 89,166 55,320
Distribution expenses 1,920 1,339 5,925 4,426
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GROSS PROFIT 12,582 5,247 40,298 20,098
Selling, general and administrative expenses 12,528 5,013 30,285 14,345
------- ------- ------- -------
OPERATING INCOME 54 234 10,013 5,753
Interest expense 941 959 3,040 2,976
------- ------- ------- -------
INCOME(LOSS) BEFORE INCOME TAXES (887) (725) 6,973 2,777
Income tax benefit(expense) 210 20 (2,544) (90)
------- ------- ------- -------
NET INCOME(LOSS) ($677) ($705) $4,429 $2,687
======= ======= ======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 13,017,144 6,508,572 13,031,591 6,583,783
NET INCOME(LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE;
NET INCOME(LOSS) ($0.05) ($0.11) $0.34 $0.41
</TABLE>
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SALTON/MAXIM HOUSEWARES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
39 weeks ended
-----------------
3/29/97 3/30/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME:
Adjustments to reconcile net income $4,429 $2,687
to net cash used in
operating activities:
Change in deferred taxes 737
Depreciation and amortization 2,286 1,761
Changes in assets and liabilities:
Accounts receivable (12,921) (4,506)
Inventories (6,491) (7,705)
Prepaid expenses and other
current assets (2,372) (593)
Accounts payable 6,932 5,590
Accrued expenses 889 234
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Net cash used in
operating activities (6,511) (2,532)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,491) (2,881)
Block acquisition and related payments (2,501)
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Net cash used in investing
activities (5,992) (2,881)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving line of credit 7,937 6,805
Repayments of subordinated note payable (417) (333)
Additional short-term subordinated note payable 5,000
Financing costs (242)
Payment for product line acquisitions (815)
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Net cash provided by
financing activities 12,520 5,415
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Net increase in cash $17 $2
Cash beginning of period 4 6
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Cash end of period $21 $8
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $3,049 $2,693
Income taxes $1,058 $10
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
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 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 (loss) 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 NINE MONTHS ENDED MARCH 29, 1997.
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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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.
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 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 Marketing Cooperation
Agreement dated July 11, 1996 between the Company and Windmere. 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
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<PAGE> 8
equal to 50% of defined profits derived from the Company's supply contract with
Kmart.
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 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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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis contains certain forward-looking
statements, including statements relating to expected benefits from the
Company's supply contract with Kmart. These forward-looking statements 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 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.
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 29, 1997 COMPARED WITH THIRTEEN WEEKS ENDED
MARCH 30, 1996.
Net sales in the third quarter of fiscal year 1997 were $41.7 million, an
increase of approximately $21.5 million or 106.5% compared to net sales of
$20.2 million in the third quarter of fiscal year 1996. This increase in sales
is primarily attributable to increased sales of the Juiceman(TM) juice
extractors and George Foreman Grills(TM). Also, the addition of sales of Block
China products and White-Westinghouse(R) products under the Company's supply
agreement with Kmart contributed to the results of the period. Net sales of
these products approximated 33.1% of net sales. Sales under the Kmart
agreement are expected to increase in anticipation of Kmart instituting a broad
range program under the White-Westinghouse(R) trade name.
Gross profit in the third quarter of 1997 was $12.6 million or 30.2% of
net sales as compared to $5.2 million or 26.0% in the third quarter of 1996.
Cost of goods sold during the period decreased to 65.2% of net sales compared
to 67.4% in 1996. Distribution expenses were approximately $1.9 million or
4.6% of net sales in 1997 compared to $1.3 million or 6.6% 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 $12.5 million
for the period compared to $5.0 million for the same period in 1996.
Advertising costs for certain media and cooperative coverages of the Company
and its products increased about $3.9 million in 1997 compared to 1996.
Selling, general
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and administrative expenses were 30.0% of net sales compared to 24.8% of net
sales last year. This increase was primarily a result of the increase in
advertising costs and royalties and fees of approximately $400,000 due to
Windmere under the Company's marketing cooperation agreement with Windmere and
for guarantees and other services provided by Windmere. In addition, the
Company incurred about $537,000 in administrative costs associated with the
commencement of the White-Westinghouse(R) and the Farberware(TM) programs. The
remaining dollar increase was primarily attributable to higher costs for
additional personnel, commissions and various other marketing costs related to
the higher sales level.
Interest expense was approximately $941,000 for the quarter in 1997 or
$18,000 lower than that of 1996. Interest expense during the current quarter
was offset by interest income earned on the Windmere promissory note issued to
the Company in July 1996. The average amount outstanding under the Company's
revolving line of credit increased about $4.6 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 corresponding build in
inventory.
The Company had a net loss before income taxes of $887,000 in the third
quarter of 1997 compared to a net loss before income taxes of $725,000 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 a net loss after income taxes in the third quarter of $677,000 or $0.05 per
share on weighted average common shares outstanding of 13,017,144 in 1997
compared to a net loss after income taxes of $705,000 or $0.11 per share on
weighted average shares outstanding of 6,508,572 in 1996.
THIRTY-NINE WEEKS ENDED MARCH 29, 1997 COMPARED WITH THIRTY-NINE WEEKS
ENDED MARCH 30, 1996.
Net sales in the first nine months of fiscal year 1997 were $135.4
million, an increase of approximately $55.6 million or 69.6%, compared to net
sales of $79.8 million in the first nine months of fiscal year 1996. This
increase in sales is primarily attributable to increased sales of the
Juiceman(TM) juice extractors, George Foreman Grills(TM), private label
programs and Block China products and the addition of White-Westinghouse(R)
sales under the Kmart program. Net sales of Block China products and
White-Westinghouse(R) products to Kmart approximated 19.6% of net sales in the
first nine months of 1997. Sales under the Kmart agreement are expected to
increase in anticipation of Kmart instituting a broad range program under the
White-Westinghouse(R) trade name.
Gross profit in the first nine months of 1997 was $40.3 million or 29.8%
of net sales as compared to $20.1 million or 25.2% in the first nine months of
1996. Costs of goods sold
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during the period decreased to 65.9% of the net sales compared to 69.3% in
1996. Distribution expenses were approximately $5.9 million or 4.4% of net
sales in 1997 compared to $4.4 million or 5.5% 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 $30.3 million
for the period compared to $14.3 million for the same period in 1996.
Advertising costs for certain media and cooperative coverages of the Company
and its products increased about $8.7 million in 1997 compared to 1996.
Selling, general and administrative expenses were 22.4% of net sales compared
to 18.0% of net sales last year. This increase was primarily a result of the
increase in advertising costs and royalties and fees of approximately $400,000
due to Windmere under the Company's marketing cooperation agreement with
Windmere and for guarantees and other services provided by Windmere. In
addition, the Company incurred about $1.1 million in costs associated with the
commencement of the White-Westinghouse(R) and the Farberware(TM) programs. 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 $3.0 million for the first nine months
in both fiscal 1997 and 1996. Interest expense during the current year was
offset by interest income earned on the Windmere promissory note issued to the
Company in July 1996. The average amount outstanding under the Company's
revolving line of credit increased about $7.6 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 corresponding build in
inventory.
The Company had income before income taxes of $7.0 million in the first
nine months of 1997 compared to income before income taxes of $2.8 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 first nine months of 1997 of
$4.4 million or $0.34 per share on weighted average common shares outstanding
of 13,031,591 in 1997 compared to net income after income taxes of $2.7 million
or $0.41 per share on weighted average shares outstanding of 6,583,783 in the
first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of 1997, the Company used net cash of $6.5
million in operating activities and net cash of $6.0 million in investing
activities. This resulted primarily from
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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 $12.5
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 March 30, 1997, the Company had approximately $31.5 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 March 30, 1997 to borrow a total of approximately
$35.7 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 entered into a major supply contract with Kmart Corporation on
January 27, 1997. 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 Marketing Cooperation
Agreement dated July 11, 1996 between the Company and Windmere. 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.
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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
(a) Exhibit No.
10.33 Letter Agreement dated April 30, 1997 between the Company
and Windmere-Durable Holdings, Inc.
27 Financial Data Schedule
(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: May 9, 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> 1
Exhibit 10.33
LETTER AGREEMENT DATED APRIL 30, 1997 ("AGREEMENT")
BETWEEN
WINDMERE CORPORATION ("WINDMERE")
AND
SALTON/MAXIM HOUSEWARES, INC. ("SALTON")
WHEREAS, Windmere, with its main office in Miami Lakes, Florida, and Salton,
with its main office in Mt. Prospect, Illinois, have worked together to obtain
the benefits of significant sales of products under the White-Westinghouse
brand to K-Mart Corporation ("K-Mart"), and have signed a multi-year contract
between Salton and K-Mart documenting said relationship.
WHEREAS, the distribution profits on the sales to K-Mart of the
White-Westinghouse brand of appliances will all be received and recorded on the
books of Salton (the "White-Westinghouse Profits").
NOW, THEREFORE, following K-Mart's execution of the aforesaid contract and 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, this Letter Agreement documents the
obligation of Salton to pay a fee as described herein to Windmere as
compensation for its efforts on Salton's behalf in obtaining said
White-Westinghouse Profits.
FEE: Salton shall pay Windmere a fee equal to 50% of the White-Westinghouse
profits (the "50% Fee"). The 50% Fee shall be paid within 60 days of the close
of each calendar quarter based on the transactions in said quarter, accompanied
by a sales report transmitted by facsimile, which will provide such sales
information and other data as Windmere may reasonably require to describe the
calculation of the 50% fee.
For purposes of this Agreement, the "White-Westinghouse Profits" shall be
computed based on all White-Westinghouse sales (net of actual returns) to
K-Mart less direct costs of sales and direct expenses, such as the Detroit
office selling expenses, inspection fees, warehousing costs, freight out,
royalties and cooperative advertising. Direct Expenses shall not include taxes
whether based on income or property, data processing and/or other selling,
general and administrative costs except those identified in the preceding
sentence or mutally agreed upon.
PAYMENT: Payment shall be by wire transfer to Windmere's bank account.
TERM: This Agreement shall not be cancelable during the term of that
definitive contract between Salton and K-Mart, including any extensions or
modifications thereof. The term of this agreement shall coincide with the
contract term as specified in that said contract between Salton and K-Mart.
JURISDICTION: This Agreement shall be interpreted under the laws of the State
of Florida.
Windmere Corporation Salton/Maxim Housewares, Inc.
By: /s/ Harry D. Schulman By: /s/ Leonhard Dreimann
---------------------------- --------------------------
Harry D. Schulman Leonhard Dreimann
Senior Vice President President
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF OPERATIONS.
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0
0
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