<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
July 2, 1998
------------------------------------------------
Date of Report (Date of earliest event reported)
Salton/Maxim Housewares, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19557 36-3777824
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
550 Business Center Drive, Mount Prospect, Illinois 60056
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(708) 803-4600
-------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 2, 1998, Salton/Maxim Housewares, Inc. (the "Registrant")
announced that it has obtained a commitment letter from Lehman Brothers, Inc.
for a senior secured credit facility of up to $215 million. The Registrant
plans on using a portion of the proceeds from such facility to repurchase the
50% interest in the Registrant's outstanding common stock currently held by
Windmere in accordance with the previous disclosed agreement between the
parties. A copy of the Registrant's press release, dated July 2, 1998,
relating to the above-described transactions is attached hereto as Exhibit 99.1
and is incorporated herein by reference. A copy of the commitment letter,
dated July 2, 1998, is attached hereto as Exhibit 10.20 and is incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.20 Commitment Letter, dated July 2, 1998, between Lehman
Brothers, Inc. and Salton/Maxim Housewares, Inc.
99.1 Press Release of Salton/Maxim Housewares, Inc., issued
July 2, 1998.
</TABLE>
-1-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALTON/MAXIM HOUSEWARES, INC.
/s/ WILLIAM B. RUE
-------------------------
William B. Rue
Dated: July 2, 1998 Senior Vice President and
Chief Operating Officer
-2-
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.20 Commitment Letter, dated July 2, 1998, between Lehman
Brothers, Inc. and Salton/Maxim Housewares, Inc.
99.1 Press Release of Salton/Maxim Housewares, Inc., issued
July 2, 1998.
</TABLE>
-3-
<PAGE> 1
Exhibit 10.20
LEHMAN BROTHERS INC. LEHMAN COMMERCIAL PAPER INC.
3 WORLD FINANCIAL CENTER 3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10285
July 1, 1998
Salton/Maxim Housewares, Inc.
Senior Secured Credit Facilities
Commitment Letter
Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mt. Prospect, IL 60056
Attention: Mr. William Rue
Ladies and Gentlemen:
You have advised Lehman Commercial Paper Inc. ("LCPI") and Lehman Brothers
Inc. ("LBI") that Salton/Maxim Housewares, Inc., a Delaware corporation (the
"Borrower"), intends to purchase (the "Stock Repurchase") from Windmere-Durable
Holdings, Inc. (the "Seller") (i) the 6,535,072 shares of the Borrower's common
stock (the "Stock") owned by the Seller for consideration consisting of $12.00
in cash per share of Stock plus a $15,000,000 subordinated promissory note of
the Borrower and (ii) options owned by the Seller to purchase 458,500 shares of
Stock at $7.17 per share for consideration consisting of $3,287,445 in cash.
In that connection, you have requested that LBI agree to structure, arrange and
syndicate senior secured credit facilities in an aggregate amount of up to
$215,000,000 (the "Credit Facilities"), and that LCPI commit to provide the
entire principal amount of the Credit Facilities. It is understood that the
Borrower may, at its option, refinance a portion of the loans under the Credit
Facilities with the proceeds of at least $100,000,000 in senior subordinated
notes to be issued by the Borrower after the closing under the Credit
Facilities.
LBI is pleased to advise you that it is willing to act as exclusive
advisor and arranger for the Credit Facilities.
Furthermore, LCPI is pleased to advise you of its commitment to provide
the entire amount of the Credit Facilities upon the terms and subject to the
conditions set forth or
<PAGE> 2
2
referred to in this commitment letter (the "Commitment Letter") and in the
Summary of Terms and Conditions attached hereto as Exhibit A (the "Term
Sheet").
It is agreed that LBI will act as the sole and exclusive advisor and
arranger for the Credit Facilities and that LBI will, in such capacity, perform
the duties and exercise the authority customarily performed and exercised by it
in such role. You agree that no other agents, co-agents or arrangers will be
appointed, no other titles will be awarded and no compensation (other than (i)
that expressly contemplated by the Term Sheet and the Fee Letter referred to
below and (ii) a $250,000 fee payable by the Borrower to Andrew Glashow) will
be paid in connection with the Credit Facilities unless you and we shall so
agree.
We intend to syndicate the Credit Facilities to a group of financial
institutions (together with LCPI, the "Lenders") identified by us in
consultation with you; provided, that syndication of the Credit Facilities is
not a condition to LCPI's obligation to make the Credit Facilities available.
LBI may commence syndication efforts at any time after the execution of this
Commitment Letter, and you agree actively to assist LBI in completing a
syndication satisfactory to it. Such assistance shall include (a) your using
commercially reasonable efforts to ensure that the syndication efforts benefit
materially from your existing lending relationships, (b) direct contact between
senior management and advisors of the Borrower and the proposed Lenders, (c)
assistance in the preparation of a Confidential Information Memorandum and
other marketing materials to be used in connection with the syndication and (d)
the hosting, with LBI, of one or more meetings of prospective Lenders. You
also agree that, at your expense, you will work with LBI and LCPI to procure a
rating for the Credit Facilities by Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group; provided that procuring such a rating is not a
condition to LCPI's obligation to make the Credit Facilities available.
LBI, in consultation with the Borrower, will manage all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate, the allocations of the
commitments among the Lenders and the amount and distribution of fees among the
Lenders. To assist LBI in its syndication efforts, you agree promptly to
prepare and provide to LBI and LCPI all information with respect to the
Borrower, the Stock Repurchase and the other transactions contemplated hereby,
including all financial information and projections (the "Projections"), as we
may reasonably request in connection with the arrangement and syndication of
the Credit Facilities. You hereby represent and covenant that (a) all
information other than the Projections (the "Information") that has been or
will be prepared by or under the direction of the Borrower and made available
to LBI and LCPI by you or any of your representatives is or will be, when
furnished, complete and correct in all material respects and does not or will
not, when furnished, contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which
such statements are made and (b) the Projections that have been or will be made
available to LBI and LCPI by you or any of your
<PAGE> 3
3
been or will be prepared in good faith based upon reasonable assumptions. You
understand that in arranging and syndicating the Credit Facilities we may use
and rely on the Information and Projections without independent verification
thereof.
As consideration for LCPI's commitment hereunder and LBI's agreement to
perform the services described herein, you agree to pay to LCPI the
nonrefundable fees set forth in Annex I to the Term Sheet and in the Fee Letter
dated the date hereof and delivered herewith (the "Fee Letter").
The commitments and agreements of LBI and LCPI described herein are
subject to (a) there not occurring or becoming known to us after the date
hereof any event or condition that has had or could reasonably be expected to
have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of the Borrower and its subsidiaries, taken
as a whole, (b) our completion of and satisfaction in all respects with a due
diligence investigation of the Borrower, (c) our not becoming aware after the
date hereof of any information or other matter affecting the Borrower or the
transactions contemplated hereby which is inconsistent in a material and
adverse manner with any such information or other matter disclosed to us prior
to the date hereof, (d) there not having occurred a material disruption of or
material adverse change in financial, banking or capital market conditions
that, in our judgment, could reasonably be expected to materially impair the
syndication of the Credit Facilities, (e) our satisfaction that prior to and
during the syndication of the Credit Facilities there shall be no competing
offering, placement or arrangement of any debt securities or bank financing by
or on behalf of the Borrower or any affiliate thereof, provided, that the
restrictions of this clause (e) shall in any event cease to apply after the
date which is nine months after the Closing Date (as defined in the Term
Sheet), (f) the negotiation, execution and delivery on or before July 31, 1998
of definitive documentation with respect to the Credit Facilities satisfactory
to LCPI and its counsel and (g) the other conditions set forth or referred to
in the Term Sheet. LBI, LCPI and the Borrower intend to work diligently to
close the Credit Facilities as promptly as practicable. Although this
Commitment Letter and the Term Sheet summarize the principal terms and
conditions applicable to the Credit Facilities, the terms and conditions of
LCPI's commitment hereunder and of the Credit Facilities are not limited to
those set forth herein and in the Term Sheet. Those matters that are not
covered by the provisions hereof and of the Term Sheet are subject to the
approval and agreement of LCPI and the Borrower and shall be consistent with
this Commitment Letter and the Term Sheet.
You agree (a) to indemnify and hold harmless LBI, LCPI, their respective
affiliates and their respective officers, directors, employees, advisors, and
agents (each, an "indemnified person") from and against any and all losses,
claims, damages and liabilities to which any such indemnified person may become
subject arising out of or in connection with this Commitment Letter, the Credit
Facilities, the use of the proceeds thereof, the Stock Repurchase or any
related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any indemnified person
is a party thereto, and to reimburse each indemnified person upon demand for
any legal or other expenses incurred in connection with investigating or
defending any of the foregoing,
<PAGE> 4
4
provided that the foregoing indemnity will not, as to any indemnified person,
apply to losses, claims, damages, liabilities or related expenses to the extent
they are found by a final, non-appealable judgment of a court to arise from the
willful misconduct or gross negligence of such indemnified person, and (b) to
reimburse LBI and LCPI and their affiliates on demand for all reasonable
out-of-pocket expenses (including due diligence expenses, syndication expenses,
travel expenses, and reasonable fees, charges and disbursements of counsel)
incurred in connection with the Credit Facilities and any related documentation
(including this Commitment Letter, the Term Sheet, the Fee Letter and the
definitive financing documentation) or the administration, amendment,
modification or waiver thereof. No indemnified person shall be liable for any
indirect or consequential damages in connection with its activities related to
the Credit Facilities.
You acknowledge that LBI and its affiliates (the term "LBI" being
understood to refer hereinafter in this paragraph to include such affiliates,
including LCPI) may be providing debt financing, equity capital or other
services (including financial advisory services) to other companies in respect
of which you may have conflicting interests regarding the transactions
described herein and otherwise. LBI will not use confidential information
obtained from you by virtue of the transactions contemplated by this Commitment
Letter or their other relationships with you in connection with the performance
by LBI of services for other companies, and LBI will not furnish any such
information to other companies. You also acknowledge that LBI has no
obligation to use in connection with the transactions contemplated by this
Commitment Letter, or to furnish to you, confidential information obtained from
other companies.
This Commitment Letter shall not be assignable by any party hereto without
the prior written consent of the other parties hereto (and any purported
assignment without such consent shall be null and void), is intended to be
solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than
the parties hereto. This Commitment Letter may not be amended or waived except
by an instrument in writing signed by you and LBI and LCPI. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. This Commitment Letter and the Fee Letter are the only
agreements that have been entered into among us with respect to the Credit
Facilities and set forth the entire understanding of the parties with respect
thereto. This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, agents and advisors who are directly
involved in the consideration of this matter, and Centre Partners and its
clients who provide equity financing contemplated hereby or (b) as may be
compelled in a judicial or administrative proceeding or as otherwise required
by
<PAGE> 5
5
law (in which case you agree to inform us promptly thereof), provided, that
the foregoing restrictions shall cease to apply (except in respect of the Fee
Letter and its terms and substance) after this Commitment Letter has been
accepted by you.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force
and effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or LCPI's commitment hereunder.
LBI also will provide financial advisory services to the Borrower with
respect to the transaction to which this Commitment Letter relates. The
Borrower agrees that LBI has the right to place advertisements in financial and
other newspapers and journals at its own expense describing its services to the
Borrower, provided that LBI will submit a copy of any such advertisements to
the Borrower for its approval, which approval shall not be unreasonably
withheld. Furthermore, the Borrower agrees to include a reference to LBI's role
as financial advisor in any press release announcing the transaction.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to LCPI executed counterparts hereof and of the Fee Letter, together
with the amounts agreed upon pursuant to the Fee Letter to be payable upon the
acceptance hereof, not later than 5:00 p.m., New York City time, on July 2,
1998. The commitments and agreements of LBI and LCPI herein will expire at
such time in the event LCPI has not received such executed counterparts and
such amounts in accordance with the immediately preceding sentence.
<PAGE> 6
6
LBI and LCPI are pleased to have been given the opportunity to assist you
in connection with this financing, and we look forward to working with you.
Very truly yours,
LEHMAN COMMERCIAL PAPER INC.
By:
----------------------------------------
Title: Authorized Signatory
LEHMAN BROTHERS INC.
By:
----------------------------------------
Title: Authorized Signatory
Accepted and agreed to
as of the date first
written above by:
SALTON/MAXIM HOUSEWARES, INC.
By:
-------------------------------
Title:
<PAGE> 7
Exhibit A
---------
SALTON/MAXIM HOUSEWARES, INC.
$215,000,000 CREDIT FACILITIES
Summary of Terms and Conditions
July 1, 1998
-------------------------------
Salton/Maxim Housewares, Inc., a Delaware corporation (the "Borrower"),
intends to purchase (the "Stock Repurchase") from Windmere-Durable Holdings,
Inc. (the "Seller") (i) the 6,535,072 shares of the Borrower's common stock
(the "Stock") owned by the Seller for consideration consisting of $12.00 in
cash per share of Stock plus a $15,000,000 subordinated promissory note of the
Borrower (the "Seller Note") and (ii) options owned by the Seller to purchase
458,500 shares of Stock at $7.17 per share for consideration consisting of
$3,287,445 in cash. The Stock purchased in the Stock Repurchase will become
treasury stock upon consummation of such purchase. In order to finance the
Stock Repurchase and to provide for working capital and general corporate needs
following the Stock Repurchase, the Borrower wishes to establish senior secured
credit facilities in an aggregate amount of up to $215,000,000 as described
below in this Summary of Terms and Conditions. It is understood that the
Borrower may, at its option, refinance the Tranche A Term Loans (as defined
below) with the proceeds of approximately $100,000,000 in senior subordinated
notes to be sold in an offering for which Lehman Brothers Inc. will act as sole
underwriter, initial purchaser and/or placement agent (the "Senior Subordinated
Notes") which may be issued by the Borrower after the closing under the credit
facilities described below (the date, if any, on which the Senior Subordinated
Notes are issued and the Tranche A Term Loans are repaid in full, the
"Refinancing Date").
I. Parties
-------
Borrower: Salton/Maxim Housewares, Inc., a Delaware
corporation (the "Borrower").
Guarantors: Each of the Borrower's direct and indirect
subsidiaries, if any, other than Salton Hong Kong
Limited (the "Hong Kong Subsidiary") (the
"Guarantors"; the Borrower and the Guarantors,
collectively, the "Credit Parties").
Advisor and Arranger: Lehman Brothers Inc. (in such capacity, the
"Arranger").
Syndication Agent: Lehman Commercial Paper Inc. (the "Syndication
Agent").
<PAGE> 8
2
Administrative Agent: An entity selected by the Syndication Agent, in
consultation with the Borrower, during the
syndication process to serve as
administrative agent (the "Administrative
Agent").
Lenders: A syndicate of banks, financial institutions and
other entities arranged by the Syndication
Agent, in consultation with the Borrower
(collectively, the "Lenders").
II. Types and Amounts of
Credit Facilities
-----------------
1. Term Loan Facilities
--------------------
Types and Amounts of
Facilities: Term Loan Facilities (the "Term Loan Facilities")
in an aggregate amount of $165,000,000
(the loans thereunder, the "Term Loans") as
follows:
Tranche A Term Loan Facility: A 5 year term loan
facility (the "Tranche A Term Loan Facility") in
an aggregate principal amount equal to $90,000,000
(the loans thereunder, the "Tranche A Term
Loans"). The Tranche A Term Loans shall be
repayable in quarterly installments in amounts set
forth below for each year following the Closing
Date (as defined below):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1 $5,000,000
2 $5,000,000
3 $25,000,000
4 $25,000,000
5 $30,000,000
</TABLE>
Delayed Draw Term Loan Facility: A 5 year term
loan facility (the "Delayed Draw Term Loan
Facility") in an aggregate principal amount
equal to $75,000,000 (the loans thereunder, the
"Delayed Draw Term Loans"). The Delayed Draw Term
Loans shall be repayable in quarterly installments
in amounts set forth below for each year following
the Closing Date:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1 0
</TABLE>
<PAGE> 9
3
<TABLE>
<S> <C>
2 $10,000,000
3 $20,000,000
4 $20,000,000
5 $25,000,000;
</TABLE>
provided, that if less than $75,000,000 in
aggregate principal amount of Delayed Draw Term
Loans shall be borrowed, each of the installment
amounts set forth above shall be proportionally
reduced.
Availability: The Tranche A Term Loans shall be made in a single
drawing on the Closing Date. The Delayed Draw Term
Loans may be made in up to 10 drawings, in minimum
amounts to be determined, during the period
commencing on the Closing Date and ending on the
date which is 364 days after the Closing Date.
Purpose: The proceeds of the Tranche A Term Loans shall be
used to finance the Stock Repurchase and repay the
Borrower's existing indebtedness to Foothill
Capital and to pay related fees and expenses and
for general corporate purposes. The proceeds of the
Delayed Draw Term Loans shall be used to finance
working capital and other general corporate
purposes of the Borrower and its subsidiaries,
including permitted acquisitions.
2. Revolving Credit Facility
-------------------------
Type and Amount of
Facility: 5-year revolving credit facility (the "Revolving
Credit Facility"; together with the Term Loan
Facilities, the "Credit Facilities") in the amount
of $50,000,000 (the loans thereunder, the
"Revolving Credit Loans").
Availability: The Revolving Credit Facility shall be available on
a revolving basis during the period commencing on
the Closing Date and ending on the fifth
anniversary thereof (the "Revolving Credit
Termination Date").
Letters of Credit: A portion of the Revolving Credit Facility not in
excess of $10,000,000 shall be available for the
issuance of letters of credit (the "Letters of
Credit") by one or more Lenders to
<PAGE> 10
4
be selected by the Borrower in the syndication
process (in such capacity, the "Issuing Lender").
No Letter of Credit shall have an expiration date
after the earlier of (a) one year after the date
of issuance and (b) five business days prior to
the Revolving Credit Termination Date, provided
that any Letter of Credit with a one-year tenor
may provide for the renewal thereof for additional
one-year periods (which shall in no event extend
beyond the date referred to in clause (b) above).
Drawings under any Letter of Credit shall be
reimbursed by the Borrower (whether with its own
funds or with the proceeds of Revolving Credit
Loans). To the extent that the Borrower does not
so reimburse the Issuing Lender, the Lenders under
the Revolving Credit Facility shall be irrevocably
and unconditionally obligated to reimburse the
Issuing Lender on a pro rata basis.
Maturity: The Revolving Credit Termination Date.
Purpose: The proceeds of the Revolving Credit Loans shall be
used to finance the working capital needs,
including inventory, and for general corporate
purposes of the Borrower and its subsidiaries.
III. Certain Payment Provisions
--------------------------
Fees and Interest Rates: As set forth on Annex I.
Optional Prepayments and
Commitment Reductions: Loans may be prepaid and commitments may be reduced
by the Borrower in minimum amounts to be agreed
upon. Optional prepayments of the Term Loans shall
be applied to the Tranche A Term Loans and the
Delayed Draw Term Loans ratably and to the
installments thereof ratably in accordance with the
then outstanding amounts thereof and may not be
reborrowed.
Mandatory Prepayments and
Commitment Reductions: The following amounts shall be applied to prepay
the Term Loans and reduce the Revolving Credit
Facility:
<PAGE> 11
5
(a) 100% of the net proceeds of any incurrence
of certain indebtedness (including, without
limitation, the Senior Subordinated Notes) after
the Closing Date by the Borrower or any of its
Restricted Subsidiaries (as defined below);
(b) 100% of the net proceeds of any sale or
other disposition (including as a result of
casualty or condemnation) by the Borrower or any
of its Restricted Subsidiaries of any assets
(except for the sale of inventory in the ordinary
course of business and certain other dispositions
to be agreed on); provided, that the definitive
credit agreement will provide that proceeds of any
such disposition which are reinvested in the
Borrower's business within a time period to be
agreed upon will not be required to be applied
toward prepayment of the Loans and reduction of
the Revolving Credit Facility; and
(c) 50% of excess cash flow (to be defined in
a mutually satisfactory manner) for each fiscal
year of the Borrower (commencing with the fiscal
year in which the Closing Date occurs).
All such amounts shall be applied, first, to
the prepayment of outstanding Term Loans, second,
to the permanent reduction of the undrawn
commitments under the Delayed Draw Term Loan
Facility and, third, to the permanent reduction of
the Revolving Credit Facility; provided, that the
excess cash flow amounts described in clause (c)
above shall not reduce the Revolving Credit
Facility. Each such prepayment of the Term Loans
shall be applied to the Tranche A Term Loans and
the Delayed Draw Term Loans ratably and to the
installments thereof ratably in accordance with
the then outstanding amounts thereof and may not
be reborrowed; provided, that prepayments made
with the proceeds of the Senior Subordinated Notes
shall be applied to prepay ratably the Tranche A
Term Loans and any outstanding Delayed Draw Term
Loans, and any proceeds remaining after such
prepayment shall not be required to be used to
prepay Loans or reduce any Credit Facility. The
Revolving Credit Loans shall be prepaid and the
Letters of Credit shall be cash collateralized or
replaced to the extent such extensions of credit
exceed the amount of the Revolving Credit
Facility.
<PAGE> 12
6
IV. Collateral The obligations of each Credit Party in respect
---------- of the Credit Facilities shall be secured by a
perfected first priority security interest
(subject to customary permitted encumbrances) in
all of its tangible and intangible assets
(including, without limitation, intellectual
property, real property (other than the Borrower's
existing warehouse leases and other leasehold
interests not having material value) and all of
the capital stock of each of the Borrower's direct
and indirect domestic subsidiaries and 65% of the
capital stock of the Borrower's foreign
subsidiaries), except for those assets as to which
the Syndication Agent shall determine in its sole
discretion that the costs of obtaining such a
security interest are excessive in relation to the
value of the security to be afforded thereby.
V. Certain Conditions
------------------
Initial Conditions: The availability of the Credit Facilities shall
be conditioned upon satisfaction of, among other
things, the following conditions precedent (the
date upon which all such conditions precedent
shall be satisfied, the "Closing Date") on or
before July 31, 1998:
(a) The Borrower shall have executed and
delivered the definitive credit agreement (the
"Credit Agreement"), and each Credit Party, as
applicable, shall have executed and delivered the
other financing documentation with respect to the
Credit Facilities (together with the Credit
Agreement, the "Credit Documentation").
(b) The Borrower shall have received at least
$40,000,000 in cash from the issuance of its
convertible preferred stock to Centre Partners or
funds managed by Centre Partners, and the terms of
such stock shall be satisfactory to the
Syndication Agent (it being agreed that such terms
shall be satisfactory if they are consistent with
the terms described in the term sheet, dated May
22, 1998, with respect to such convertible
preferred stock). The Seller Note shall be
satisfactory to the Syndication Agent (it being
agreed that the Seller Note as set forth in
Exhibit A to the Stock Agreement, dated May 6,
1998, between the Borrower and
<PAGE> 13
7
the Seller is satisfactory). The capital
structure of the Borrower and its subsidiaries
after giving effect to the Stock Repurchase shall
reflect the Stock Repurchase, the transactions
described in this paragraph and the incurrence of
the indebtedness contemplated hereby.
(c) The Lenders, the Administrative Agent, the
Syndication Agent and the Arranger shall have
received all fees required to be paid, and all
expenses for which invoices have been presented,
on or before the Closing Date.
(d) All governmental and third party approvals
(including any necessary shareholder approvals)
necessary or, in the discretion of the Syndication
Agent, advisable in connection with the Stock
Repurchase, the financing contemplated hereby and
the continuing operations of the Borrower and its
subsidiaries shall have been obtained and be in
full force and effect.
(e) The Lenders shall be satisfied that the Stock
Repurchase and the financing contemplated hereby
will not violate Regulations T, U or X of the
Board of Governors of the Federal Reserve System.
(f) The Lenders shall have received (i) audited
consolidated financial statements of the Borrower
for fiscal years 1996 and 1997 and (ii)
satisfactory unaudited interim consolidated
financial statements of the Borrower for each
quarterly period ended subsequent to the date of
the latest financial statements delivered pursuant
to clause (i) of this paragraph as to which such
financial statements are available (it being
understood that such financial statements for the
first three quarters of fiscal year 1998 have been
reviewed and found acceptable).
(g) The Lenders shall have received a
satisfactory pro forma consolidated balance sheet
of the Borrower as at the date of the most
recent consolidated balance sheet delivered
pursuant to paragraph (f) above, adjusted to give
effect to the consummation of the Stock Repurchase
and the financings contemplated hereby as if such
transactions had occurred on such date.
<PAGE> 14
8
(h) The Lenders shall have received a
satisfactory business plan for fiscal year 1999.
(i) The Lenders shall have received the results
of a recent lien search in each relevant
jurisdiction with respect to the Borrower and its
subsidiaries, and such search shall reveal no
liens on any of the assets of the Borrower or its
subsidiaries except for liens permitted by the
Credit Documentation or liens to be discharged on
or prior to the Closing Date pursuant to
documentation satisfactory to the Administrative
Agent.
(j) The Lenders shall have received a
satisfactory solvency opinion from Houlihan, Lokey
or another independent valuation firm satisfactory
to the Syndication Agent which shall document the
solvency of the Borrower and its subsidiaries
after giving effect to the Stock Repurchase and
the other transactions contemplated hereby.
(k) The Lenders shall be satisfied with the
environmental affairs of the Borrower and its
subsidiaries.
(l) The Lenders shall have received such legal
opinions (including opinions (i) from counsel to
the Borrower and its subsidiaries and (ii)
from such special and local counsel as may be
required by the Syndication Agent), documents and
other instruments as are customary for
transactions of this type or as they may
reasonably request.
On-Going Conditions: The making of each extension of credit shall be
conditioned upon (a) the accuracy in all material
respects of all representations and warranties in
the Credit Documentation (including, without
limitation, the material adverse change and
litigation representations) and (b) there being no
default or event of default in existence at the
time of, or after giving effect to the making of,
such extension of credit. As used herein and in
the Credit Documentation a "material adverse
change" shall mean any event, development or
circumstance that has had or could reasonably be
expected to have a material adverse effect on (a)
the Stock Repurchase, (b) the business, assets,
property or condition (financial or otherwise) of
the Borrower and its Restricted Subsidiaries taken
as a whole, or (c) the validity or
<PAGE> 15
9
enforceability of any of the Credit Documentation
or the rights and remedies of the Administrative
Agent and the Lenders thereunder.
VI. Certain Documentation Matters
-----------------------------
The Credit Documentation shall contain
representations, warranties, covenants and events
of default customary for financings of this type
and other terms deemed appropriate by the Lenders,
including, without limitation:
Restricted Subsidiaries/
Unrestricted Subsidiaries: Initially, all subsidiaries of the Borrower will
be Restricted Subsidiaries. The Borrower may
designate the Hong Kong Subsidiary as an
Unrestricted Subsidiary at any time after the
total leverage ratio is less than or equal to 4.00
to 1.00 if, after giving pro forma effect to such
designation, no Default or Event of Default is in
existence. After the Hong Kong Subsidiary is
designated as an Unrestricted Subsidiary, it will
be excluded from the financial covenants and from
the restrictions of the negative covenants.
Representations and
Warranties: Financial statements (including pro forma financial
statements); absence of undisclosed liabilities;
no material adverse change; corporate existence;
compliance with law; corporate power and
authority; enforceability of Credit Documentation;
no conflict with law or contractual obligations;
no material litigation (other than the
Westinghouse Electric Corporation litigation
described in the Borrower's Form 10-K for fiscal
year 1997); no default; ownership of property;
liens; intellectual property; no burdensome
restrictions; taxes; Federal Reserve regulations;
ERISA; Investment Company Act; subsidiaries;
environmental matters; solvency; accuracy of
disclosure; and creation and perfection of
security interests.
Affirmative Covenants: Delivery of financial statements, reports,
accountants' letters, projections, officers'
certificates and other information requested by
the Lenders; payment of other obligations;
continuation of business and maintenance of
existence and material rights and privileges;
compliance
<PAGE> 16
10
with laws and material contractual obligations;
maintenance of property and insurance; maintenance
of books and records; right of the Lenders to
inspect property and books and records; notices of
defaults, litigation and other material events;
compliance with environmental laws; further
assurances (including, without limitation, with
respect to security interests in after-acquired
property); and agreement to issue the Senior
Subordinated Notes within 120 days after the
Closing Date or to obtain interest rate protection
within 120 days after the Closing Date for an
amount equal to the principal amount of the
Tranche A Term Loans to be agreed upon on terms
and conditions satisfactory to the Syndication
Agent.
Financial Covenants: Financial covenants (including, without
limitation, minimum interest and fixed charge
coverage and maximum total leverage). Although
the permitted levels of the financial covenants
will be agreed upon and reflected in the Credit
Agreement, the maximum total leverage covenant
will in any event not permit total leverage to be
greater than 4.75 to 1.00 at any time prior to the
Refinancing Date or greater than 5.5 to 1.00 at
any time from and after the Refinancing Date
(assuming that $100,000,000 in aggregate principal
amount of Senior Subordinated Notes are issued on
the Refinancing Date). The Credit Agreement will
provide that from and after the Refinancing Date,
a maximum senior leverage covenant will be added
to the financing covenants describe above, and the
financial ratios in all financial covenants will
be adjusted to reflect the revised capital
structure of the Borrower.
Negative Covenants: Limitations (subject to materiality and other
customary exceptions, as appropriate) on:
indebtedness (including preferred stock of
subsidiaries issued to persons other than the
Borrower); liens; guarantee obligations; mergers,
consolidations, liquidations and dissolutions;
sales of assets; leases; dividends and other
payments in respect of capital stock; capital
expenditures; investments, loans and advances;
optional payments and modifications of
subordinated and other debt instruments;
transactions with affiliates; sale and leasebacks;
changes in fiscal year; negative pledge clauses;
changes in lines of business. The
<PAGE> 17
11
Credit Agreement will provide that from and
after the Refinancing Date, certain of the
negative covenants described above will be
modified to reflect the revised capital structure
of the Borrower.
Events of Default: Nonpayment of principal when due; nonpayment of
interest, fees or other amounts after a grace
period to be agreed upon; material inaccuracy of
representations and warranties; violation of
covenants (subject, in the case of certain
affirmative covenants, to a grace period to be
agreed upon); cross-default to other material
indebtedness of the Borrower and its subsidiaries;
bankruptcy events; certain ERISA events; material
judgments; actual or asserted invalidity of any
guarantee or security document, subordination
provisions or security interest; and a change of
control (the definition of which is to be agreed).
Voting: Amendments and waivers with respect to the Credit
Documentation shall require the approval of
Lenders holding not less than a majority of the
aggregate amount of the Term Loans, Revolving
Credit Loans, participations in Letters of Credit
and unused commitments under the Credit
Facilities, except that (a) the consent of each
Lender affected thereby shall be required with
respect to (i) reductions in the amount or
extensions of the scheduled date of amortization
or maturity of any Loan, (ii) reductions in the
rate of interest or any fee or extensions of any
due date thereof, (iii) increases in the amount or
extensions of the expiry date of any Lender's
commitment and (iv) modifications to the pro rata
provisions of the Credit Documentation and (b) the
consent of 100% of the Lenders shall be required
with respect to (i) modifications to any of the
voting percentages and (ii) releases of all or
substantially all of the Guarantors or all or
substantially all of the collateral.
Assignments
and Participations: The Lenders shall be permitted to assign and sell
participations in their Loans and commitments,
subject, in the case of assignments (other than
assignments (i) by the Syndication Agent or (ii)
to another Lender or to an affiliate of a Lender),
to the consent of the Syndication Agent, the
Administrative Agent, the Issuing Lender and the
Borrower (which consent in each case shall not be
unreasonably
<PAGE> 18
12
withheld). Non-pro rata assignments shall
be permitted. In the case of partial assignments
(other than to another Lender or to an affiliate
of a Lender), the minimum assignment amount shall
be $5,000,000, and, after giving effect thereto,
the assigning Lender shall have commitments and
Loans aggregating at least $5,000,000, in each
case unless otherwise agreed by the Borrower, the
Syndication Agent and the Administrative Agent.
Participants shall have the same benefits as the
Lenders with respect to yield protection and
increased cost provisions, provided, that no
participant shall be entitled to receive any
greater amount pursuant to such provisions that
the transferor Lender would have received.
Voting rights of participants shall be limited to
those matters with respect to which the
affirmative vote of the Lender from which it
purchased its participation would be required as
described under "Voting" above. Pledges of Loans
in accordance with applicable law shall be
permitted without restriction. Promissory notes
shall be issued under the Credit Facilities only
upon request.
Yield Protection: The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against
increased costs or loss of yield resulting from
changes in reserve, tax, capital adequacy and
other requirements of law and from the imposition
of or changes in withholding or other taxes and
(b) indemnifying the Lenders for "breakage costs"
incurred in connection with, among other things,
any prepayment of a Eurodollar Loan (as defined in
Annex I) on a day other than the last day of an
interest period with respect thereto.
Expenses and
Indemnification: The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative
Agent, the Syndication Agent and the Arranger
associated with the syndication of the Credit
Facilities and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver with
respect thereto (including the reasonable fees,
disbursements and other charges of counsel) and
(b) all out-of-pocket expenses of the
Administrative Agent, the Syndication Agent and
the Lenders (including the fees, disbursements and
other
<PAGE> 19
13
charges of counsel) in connection with the
enforcement of the Credit Documentation.
The Administrative Agent, the Syndication Agent,
the Arranger and the Lenders (and their affiliates
and their respective officers, directors,
employees, advisors and agents) will have no
liability for, and will be indemnified and held
harmless against, any loss, liability, cost or
expense incurred in respect of the financing
contemplated hereby or the use or the proposed use
of proceeds thereof (except to the extent
resulting from the gross negligence or willful
misconduct of the indemnified party).
Governing Law and Forum: State of New York.
Counsel to the
Administrative Agent,
the Syndication Agent
and the Arranger: Simpson Thacher & Bartlett.
<PAGE> 20
Annex I
-------
Interest and Certain Fees
-------------------------
Interest Rate Options: The Borrower may elect that the Loans comprising
each borrowing bear interest at a rate per annum
equal to:
the Base Rate plus the Applicable Margin; or
the Eurodollar Rate plus the Applicable
Margin.
As used herein:
"Base Rate" means the highest of (i) the rate of
interest publicly announced by Citibank, N.A. as
its prime rate in effect at its principal office
in New York City (the "Prime Rate"), (ii) the
secondary market rate for three-month certificates
of deposit (adjusted for statutory reserve
requirements) plus 1% and (iii) the federal funds
effective rate from time to time plus 0.5%.
"Applicable Margin" means a percentage determined
in accordance with the pricing grid attached
hereto as Annex I-A.
"Eurodollar Rate" means the rate (adjusted for
statutory reserve requirements for eurocurrency
liabilities) at which eurodollar deposits
for one, two, three or six months (as selected by
the Borrower) are offered in the interbank
eurodollar market.
Interest Payment Dates: In the case of Loans bearing interest based upon
the Base Rate ("Base Rate Loans"), quarterly in
arrears.
In the case of Loans bearing interest based upon
the Eurodollar Rate ("Eurodollar Loans"), on the
last day of each relevant interest period and,
in the case of any interest period longer than
three months, on each successive date three months
after the first day of such interest period.
Commitment Fees: The Borrower shall pay a commitment fee calculated
at the rate determined in accordance with the
pricing grid attached
<PAGE> 21
2
hereto as Annex I-A on the average daily unused
portion of the Revolving Credit Facility and the
Delayed Draw Term Loan Facility, payable quarterly
in arrears.
Letter of Credit Fees: The Borrower shall pay a commission on all
outstanding Letters of Credit at a per
annum rate equal to the Applicable Margin then in
effect with respect to Eurodollar Loans, in each
case on the face amount of each such Letter of
Credit. Such commission shall be shared ratably
among the Lenders participating in the Revolving
Credit Facility and shall be payable quarterly in
arrears.
In addition to letter of credit commission, a
fronting fee calculated at a rate per annum to
be agreed upon by the Borrower and the Issuing
Bank on the face amount of each Letter of Credit
shall be payable quarterly in arrears to the
Issuing Lender for its own account. In addition,
administrative, issuance, amendment, payment and
negotiation charges, in amounts agreed upon by the
Borrower and the Issuing Lender, shall be payable
to the Issuing Lender for its own account.
Default Rate: At any time when the Borrower is in default in the
payment of any amount of principal due under the
Credit Facilities, such amount shall bear
interest at 2% above the rate otherwise applicable
thereto. Overdue interest, fees and other amounts
shall bear interest at 2% above the rate
applicable to Base Rate Loans.
Rate and Fee Basis: All per annum rates shall be calculated on the
basis of a year of 360 days (or 365/366 days, in
the case of Base Rate Loans the interest rate
payable on which is then based on the Prime Rate)
for actual days elapsed.
<PAGE> 22
Annex I-A
---------
Pricing Grid
I. Prior to the Refinancing Date, the following pricing will be in effect:
<TABLE>
<CAPTION>
Ratio of Total Applicable
Debt to Applicable Margin- Commitment Margin-Base
EBITDA Eurodollar Loans* Fee* Rate Loans*
------ ----------------- ---- -----------
<S> <C> <C> <C>
>4.0 to 1.0 2.375% .50% 1.375%
-
>3.5 to 1.0 2.125% .50% 1.125%
-
>3.0 to 1.0 1.875% .40% .875%
-
>2.5 to 1.0 1.625% .30% .625%
-
<2.5 1.375% .30% .375%
</TABLE>
II. From and after the Refinancing Date, the following pricing will be in
effect:
<TABLE>
<CAPTION>
Ratio of Total Applicable
Debt to Applicable Margin- Commitment Margin-Base
EBITDA Eurodollar Loans* Fee* Rate Loans*
------ ----------------- ---- -----------
<S> <C> <C> <C>
>5.0 to 1.0 2.125% .50% 1.125%
-
>4.5 to 1.0 1.875% .50% .875%
-
>4.0 to 1.0 1.625% .40% .625%
-
>3.5 to 1.0 1.375% .30% .375%
- <3.5 1.125% .30% .125%
</TABLE>
- ------------------------
NOTE: THE FOREGOING PRICING IS BASED UPON THE ASSUMPTION THAT
$100,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF SENIOR SUBORDINATED NOTES WILL BE
ISSUED ON THE REFINANCING DATE.
* Notwithstanding the foregoing grids, the Applicable Margin and Commitment
Fee rate will be (i) from the Closing Date to the earlier of the
Refinancing Date and the date which is six months after the Closing Date,
those set forth under "I" above opposite the higher of (A) the Leverage
Ratio actually in effect from time to time and (B) the Leverage Ratio of
$3.5 to 1.0 under and (ii) from the Refinancing Date to the date which is
six months after the Refinancing Date, those set forth under "II" above
opposite the higher of (A) the Leverage Ratio actually in effect from time
to time and (B) the
<PAGE> 23
2
Leverage Ratio of $4.0 to 1.0. The pricing as set forth above will be
adjusted upon delivery of financial statements showing a change in the
applicable ratios that would require a change in the pricing pursuant to
the grid set forth above.
<PAGE> 1
Exhibit 99.1
NEWS RELEASE FOR: Salton/Maxim Housewares, Inc.
APPROVED BY: William Rue
Chief Operating Officer
(847)-803-4600
FOR IMMEDIATE RELEASE
- --------------------- CONTACT: Investor Relations:
Cheryl Schneider/Gordon McCoun
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
SALTON/MAXIM HOUSEWARES, INC. OBTAINS
COMMITMENT LETTER FROM LEHMAN BROTHERS, INC.
MOUNT PROSPECT, IL, July 2, 1998 -- Salton/Maxim Housewares, Inc. (Nasdaq:
SALT) today announced that it has obtained a commitment letter from Lehman
Brothers, Inc. for a senior secured credit facility of up to $215 million.
Salton plans on using a portion of the proceeds from such facility to
repurchase the 50% interest in Salton's outstanding common stock currently held
by Windmere-Durable Holdings, Inc., in accordance with the previously
disclosed agreement between the parties.
Salton is currently negotiating definitive agreements with Lehman Brothers
with respect to the credit facility and with Centre Partners Management LLC
with respect to a $40 million convertible preferred stock equity investment in
Salton. The preferred stock would be nondividend bearing and would have a
conversion price of $17 per share.
The closing of the repurchase by Salton of Windmere's 50% interest is
subject to a number of conditions, including that the closing occur on or prior
to October 30, 1998. While Salton is currently negotiating definitive
agreements with each of Lehman Brothers and Centre Partners, there can be no
assurance that Salton will obtain funds from such entities. If Salton fails to
close the repurchase of Windmere's 50% interest, there can be no assurance that
Windmere will acquire any of the shares of Salton which it does not own.
###
[MORGEN-WALKE LETTERHEAD]
