<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
December 9, 1999
------------------------------------------------
Date of Report (Date of earliest event reported)
Salton, 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)
(847) 803-4600
-------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On December 9, 1999, Salton, Inc. ("Salton") announced that it has
entered into agreements with George Foreman, Sam Perlmutter and Michael Srednick
which provide for Salton to acquire the right to use in perpetuity and worldwide
the name "George Foreman", including pictures and likeness of George Foreman, in
connection with the marketing and sale of food preparation appliances. This
transaction would terminate as of July 1, 1999 Salton's obligation to pay
royalties to George Foreman and his partners based on the sale of "George
Foreman" products.
The purchase price payable to George Foreman is $100,000,000 in cash,
payable in five annual installments of $20,000,000 commencing on the closing
date, and shares of Salton common stock valued at $10,000,000 at the closing.
The purchase price payable to each of Sam Perlmutter and Michael Srednick is
$6,875,000 in cash, payable in five annual installments of $1,375,000 commencing
on the closing, and shares of Salton common stock valued at $6,875,000 at the
closing.
The number of shares actually delivered at the closing to Messrs.
Foreman, Perlmutter and Srednick will be based on the average of the closing
price of Salton common stock on the New York Stock Exchange for the twenty
trading days ending on the third trading day preceding the closing date;
provided that each of Mr. Perlmutter and Mr. Srednick will in no event receive
less than 237,069 shares. In connection with the transactions, Mr. Foreman will
also receive $100,000 per year through December 31, 2009 for assisting Salton in
registering unregistered trademarks and registering future trademarks. The
closing of the transaction, which is expected to occur during the first calendar
quarter of 2000, is subject to several conditions, including the registration of
the shares for public sale.
The agreements between Salton and each of George Foreman, Sam
Perlmutter and Michael Srednick are attached hereto as Exhibits 10.1, 10.2 and
10.3, respectively, and are hereby incorporated herein by reference. A copy of
Salton's press release, dated December 9, 1999, is attached hereto as Exhibit
99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements
give effect to:
- the issuance of 109,090 shares of Salton common stock to the
former stockholders of TMI Acquisition Corp. in satisfaction of
Salton's obligation to pay TMI Acquisition Corp. certain amounts
based on future sales of Toastmaster(R) products; and
- Salton's pending acquisition of the right to use in perpetuity and
worldwide the name "George Foreman" in connection with the
marketing and sale of food preparation appliances for an aggregate
purchase price of $113,750,000 in cash, payable in five annual
installments of $22,750,000 commencing on the closing date, and
shares of Salton common stock valued at $23,750,000 at the
closing.
The unaudited pro forma condensed consolidated balance sheet data gives
effect to these transactions as if they had occurred on September 25, 1999. The
unaudited pro forma consolidated statements of operations data give effect to
these transactions as if they had occurred on (1) June 28, 1998 with respect to
the fiscal year ended June 26, 1999 and (2) June 27, 1999 with respect to the
thriteen weeks ended September 25, 1999.
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<PAGE> 3
The unaudited pro forma consolidated financial information set forth below
reflects pro forma adjustments that are based upon available information and
certain assumptions that Salton believes are reasonable. In particular, the
number of shares of Salton common stock to be issued in connection with the
George Foreman transaction is based on an assumed price of $28.00 per share
at the closing of that transaction. The pro forma financial information is for
informational purposes only and does not purport to represent what Salton's
results of operations or financial position would have actually been had the
transactions to which pro forma effect is given been consummated as of the dates
or for the periods indicated.
<TABLE>
<CAPTION>
SALTON, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 25, 1999
(IN THOUSANDS)
-----------------------------------------------
HISTORICAL PRO FORMA
SALTON (1) ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Total Assets:
$ 16,644 (2)
(22,750) (3)
---------
Cash $ 8,336 (6,106) $ 2,230
Accounts Receivable, Net of Allowances 159,525 159,525
Inventories 155,965 155,965
Prepaid Expenses and Other Current Assets 8,521 8,521
Deferred Taxes 3,134 3,134
--------- --------- ---------
Total Current Assets $ 335,481 (6,106) 329,375
Property Plant and Equipment 46,520 46,520
Accumulated Depreciation (21,513) (21,513)
--------- --------- ---------
Net Property Plant and Equipment $ 25,007 25,007
(1,000) (4)
121,020 (3)
---------
Intangibles, Net and Other Assets 42,500 120,020 162,520
- - -
--------- --------- ---------
Total Assets $ 402,988 $ 113,914 $ 516,902
========= ========= =========
Total Liabilities
Accounts Payable $ 53,732 50 (3) $ 53,782
Accrued Expenses 28,264 89 (4) 28,353
Income Taxes 6,144 $ 5,924 (2) 12,068
Revolving Line of Credit and Other Current
Debt 67,196 67,196
Deferred Income Taxes - - -
--------- --------- ---------
Total Current Liabilities 155,336 6,063 161,399
Non-current Deferred Tax Liability 157 - 157
- -
(4,000) (4)
74,520 (3)
---------
Long Term Debt $ 182,013 70,520 252,533
-
--------- --------- ---------
Total Liabilities 337,506 76,583 414,039
Stockholders Equity
Preferred Stock
Common Stock 134 - 134
11,790 (3)
1,516 (4)
---------
Treasury Stock (43,308) 13,306 (30,002)
11,960 (3)
1,484 (4)
---------
Additional Paid in Capital 45,317 13,444 58,761
Accumulated other comprehensive income (49) - (49)
Retained Earnings 63,388 10,581 (5) 73,969
--------- --------- ---------
Total Liabilities 65,482 37,331 102,813
--------- --------- ---------
Total Liabilities & Stockholders Equity $ 402,988 $ 113,914 $ 516,902
========= ========= =========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
<PAGE> 4
SALTON, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
FISCAL YEAR ENDED JUNE 26, 1999
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SALTON (1) ADJUSTMENTS AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 506,116 $ 506,116
Cost of Goods sold 285,526 285,526
Distribution expenses 21,621 21,621
----------- ----------- -----------
Gross profit 198,969 - 198,969
$ 8,068 (6)
(25) (6)
Selling General, and Administrative expenses 129,588 (38,096) (6)
50 (9)
(536) (8) 99,049
----------- ----------- -----------
Operating income 69,381 (30,539) 99,920
6,334 (7)
Interest expense 15,518 173 (7) 22,025
----------- ----------- -----------
Income before income taxes 53,863 (24,032) 77,895
Income taxes 19,320 8,553 (10) 27,873
----------- ----------- -----------
Net income $ 34,543 $ (15,479) $ 50,022
========== =========== ===========
Earnings per share: Basic $ 3.21 $ 4.27
Earnings per share: Diluted $ 2.37 $ 3.22
Weighted average common shares outstanding 10,760 11,718
Weighted average common and equivalent shares outstanding 14,562 15,519
EBITDA (11) $ 76,682 $ 115,264
EBITDA MARGIN (12) 15.2% 22.8%
Depreciation and amortization $ 7,301 $ 15,344
Capital Expenditures $ 5,390 $ 5,390
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
<PAGE> 5
SALTON, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
THIRTEEN WEEKS ENDED SEPTEMBER 25, 1999
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SALTON (1) ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 196,340 $ 196,340
Cost of goods sold 110,401 110,401
Distribution expenses 7,120 7,120
--------- -------- ---------
Gross profit 78,819 - 78,819
$ 2,017 (6)
(16,644) (6)
(6) (6)
50 (9)
Selling, general and administrative expenses 50,490 89 (8) 35,996
--------- -------- ---------
Operating income 28,329 (14,494) 42,823
1,584 (7)
Interest expense 5,477 7,061
--------- -------- ---------
Income before income taxes 22,852 (12,910) 35,762
Income taxes 8,954 4,595 (10) 13,549
--------- -------- ---------
Net income $ 13,898 $ (8,315) $ 22,213
========= ======== =========
Earnings per share: Basic $ 1.35 $ 1.98
Earnings per share: Diluted $ 0.95 $ 1.43
Weighted average common shares outstanding 10,290 11,247
Weighted average common and equivalent shares outstanding 14,574 15,531
EBITDA (11) $ 30,609 $ 47,114
EBITDA MARGIN (12) 15.6% 24.0%
Depreciation and amortization $ 2,280 $ 4,291
Capital Expenditures $ 2,311 $ 2,311
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
<PAGE> 6
SALTON, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The unaudited proforma consolidated financial statements have been adjusted for
the items set forth below.
(1) Represents the historical financial position of Salton as of September 25,
1999 and the consolidated results of operations for fiscal year ended
June 26, 1999 and the thirteen weeks ended September 25, 1999.
BALANCE SHEET
(2) Reflects the reversal of royalty payments of $16,644 on George Foreman
products, for the thirteen weeks ended September 25, 1999, and the
corresponding additional income taxes payable of $5,924 based upon an
assumed tax rate of 35.59%.
(3) Reflects the following in connection with Salton's pending acquisition of
the right to use in perpetuity and worldwide the name "George Foreman" in
connection with the marketing and sale of food preparation appliances (the
"Trademark"): (a) the first installment of cash payments of $22,750 due at
the closing date; (b) the recording of notes payable of $91,000 for the
remaining four annual cash installments, recorded at the aggregate present
value of $74,520 utilizing an 8.5% interest rate; (c) the issuance of
848,214 shares of common stock out of treasury shares at a carrying value
of $13.90 per share and the recording of additional paid-in-capital based
on the per share price of Salton common stock of $28 as of December 3,
1999; (d) the recording of an intangible asset of $121,020 for the
Trademark; and (e) the estimated expenses of $50 for accounting, legal,
printing and filing fees. The actual aggregate number of shares to be
issued will be determined by dividing $23,750 by the average of the closing
price of Salton common stock on the NYSE for the twenty trading days ending
on the third trading day preceding the closing date, per the agreement.
(4) Reflects the following in connection with the satisfaction of Salton's
obligation to the TMI Acquisition Corp.: (a) the reduction of the original
obligation by $4,000 based on the terms of the new agreement and the
related reduction in goodwill of $1,000; (b) the issuance of 109,090 shares
of common stock out of treasury shares at a carrying value of $13.90 per
share and the recording of additional paid-in-capital based on the per
share price of $27.50 in accordance with the agreement; and (c) the
recording of a liability and expense of $89 to reflect the agreement by
Salton to reimburse the former stockholders of TMI Acquisition Corp. in
cash to the extent that the selling price of any of the shares sold by such
stockholders during a specified period of time is less than $27.50 per
share and the agreement by such stockholders to pay Salton in cash to the
extent that such selling price exceeds $27.50 per share (the "Stock Price
Guarantee"), based on the common stock price on September 24, 1999 of
$26.6875.
(5) Reflects net impact on retained earnings of the aforementioned pro forma
adjustments.
STATEMENT OF OPERATIONS
(6) A. For fiscal year ended June 26, 1999:
(1) Reflects amortization of the Trademark of $8,068 on a straight-line
basis preliminarily over a 15-year useful life. The Company is in the
process of assessing the estimated useful life of the Trademark which
is not expected to be less than 10 years or greater than 20 years.
(2) Reflects the reduction in goodwill amortization expense of $25 (see
note (4)(a)).
(3) Reflects the reversal of royalty payments of $38,096 on George Foreman
products.
B. For the thirteen weeks ended September 25, 1999:
(1) Reflects amortization of the Trademark of $2,017 on a straight-line
basis preliminarily over a 15-year useful life. The Company is in the
process of assessing the estimated useful life of the Trademark which
is not expected to be less than 10 years or greater than 20 years.
(2) Reflects the reduction in goodwill amortization expense of $6 (see
note (4)(a)).
(3) Reflects the reversal of royalty payments of $16,644 on George Foreman
products.
(7) A. For fiscal year ended June 26, 1999:
(1) Reflects the imputed interest expense associated with the notes
payable of $6,334 (see note (3)).
(2) Reflects interest on additional borrowings of $173 for the initial
cash payment for the Trademark.
B. For the thirteen weeks ended September 25, 1999
(1) Reflects the imputed interest expense associated with the notes
payable of $1,584.
(8) A. For fiscal year ended June 26, 1999:
(1) Reflects the change in the fair value of the Stock Price Guarantee
that is included in the agreement for the issuance of 109,090 shares of
Salton common stock to the former stockholders of TMI Acquisition Corp.
of $536 based on the closing price of Salton common stock on June
26, 1999 of $32.4167 per share.
B. For the thirteen weeks ended September 25, 1999:
(1) Reflects the change in the fair value of the Stock Price Guarantee
that is included in the agreement for the issuance of 109,090 shares of
Salton common stock to the former stockholders of TMI Acquisition Corp.
of $89 based on the closing price of Salton common stock on
September 24, 1999 of $26.6875.
(9) The estimated expenses of $50 for accounting, legal, printing and filing
fees.
(10) Income tax expense is adjusted to reflect the income tax effects of pro
forma adjustments based upon an assumed rate of 35.59%.
OTHER DATA
(11) EBITDA represents operating income plus depreciation and amortization.
EBITDA is presented because it is widely accepted measure to provide
information regarding a company's ability to pay interest, repay debt or
make capital expenditures. EBITDA should not be considered in isolation or
in accordance with generally accepted accounting principles, or as a
measure of a company's profitability or liquidity. Additionally, Salton's
calculation of EBITDA may differ from that performed by other companies,
and thus the amounts disclosed for EBITDA may not be directly comparable to
similarly titled measures disclosed by other companies.
(12) EBITDA margin represents EBITDA as a percentage of net sales.
<PAGE> 7
(c) Exhibits
Exhibit No. Description
- ----------- -----------
10.1 Agreement effective as July 1, 1999 between Salton and George
Foreman.
10.2 Agreement effective as of July 1, 1999 between Salton and Sam
Perlmutter.
10.3 Agreement effective as of July 1, 1999 between Salton and
Michael Srednick.
99.1 Press Release, dated December 9, 1999, issued by Salton.
<PAGE> 8
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, INC.
/s/ WILLIAM B. RUE
---------------------------------
William B. Rue
Dated: December 9, 1999 President and Chief Operating Officer
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<PAGE> 9
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Agreement effective as July 1, 1999 between Salton and George
Foreman.
10.2 Agreement effective as of July 1, 1999 between Salton and Sam
Perlmutter.
10.3 Agreement effective as of July 1, 1999 between Salton and
Michael Srednick.
99.1 Press Release, dated December 9, 1999, issued by Salton.
<PAGE> 1
EXHIBIT 10.1
AGREEMENT MADE AS OF JULY 1, 1999
BETWEEN
GEORGE FOREMAN, AN INDIVIDUAL ("FOREMAN"),
AND
SALTON INC., A DELAWARE CORPORATION ("SALTON")
WHEREAS: Foreman desires to sell to Salton and Salton agrees to purchase from
Foreman certain trademarks and other property which have been used by Foreman in
the sale and promotion of products for the last three years.
THEREFORE, Foreman and Salton agree as set forth below.
1. Property to be Sold. Foreman agrees to sell to Salton all right, title
and interest in:
(a) the unregistered common law trademarks attached hereto and the
good will associated therewith to use in perpetuity and worldwide
which include, but are not limited to the name "George Foreman"
(including shortened versions of the name, such as "George"),
pictures, likenesses, caricatures and the signatures of George Foreman
which have been used in connection with the marketing of products by
Salton. (the properties listed on Schedule 1(a) is referred to as
"Foreman Permanent Property No. I"); and
(b) the right to use in perpetuity and worldwide the name "George
Foreman" (including shortened versions of the name such as "George"),
pictures, likenesses, and the signatures of Foreman solely in
connection with the marketing and sale of food preparation apparatus
and appliances for domestic use, namely the cooking and serving of
food and non-alcoholic drinks for household use (the Foreman Food
Products Line"). The property referred to in this subsection 1(b) is
called the ("Foreman Permanent Property No. II").
The sale includes all rights related to Foreman Permanent Property Nos. I and II
and the right to sue for past infringements thereof.
2. Purchase Price. The total purchase price ("Purchase Price") to be paid
to Foreman for the assets sold under this Agreement is one hundred ten
million dollars ($110,000,000) of which one hundred million dollars
($100,000,000) shall be payable in cash and ten million dollars shall
be payable in shares of Common Stock of Salton (the "Salton Shares")
valued as set forth in Section 7 and shall be allocated among the
assets being sold as follows:
(a) for Foreman Permanent Property No. I-ninety five million dollars
($95,000,000);
(b) for Foreman Permanent Property No. II-fifteen million dollars
($15,000,000) allocated among the classes of property included
within Foreman Permanent Property No. II as follows:
<PAGE> 2
(i) two million five hundred thousand dollars ($2,500,000) to
Class 7 under the United States Trademark Patent Office
Registration System ("System");
(ii) ten million dollars ($10,000,000) to Class 11 under the
System; and
(iii) two million five hundred thousand dollars ($2,500,000) to
Class 21 under the System.
3. Terms of Payment. The Purchase Price owing to Foreman shall be paid as
follows:
(a) On the Closing (defined in Section 9 below), thirty million
dollars ($30,000,000) of which twenty million dollars
($20,000,000) shall be paid in cash and ten million ($10,000,000)
shall be paid in shares of the Common Stock of Salton (the
"Salton Shares"). The cash portion of the Purchase Price paid at
the Closing shall be delivered by Federal Funds wired to a bank
account designated by Foreman on the date of the Closing. The
portion of the Purchase Price to be paid in Salton Shares shall
be delivered in one or more stock certificates of Salton
evidencing the Salton Shares registered in the name of Foreman.
The Salton Shares delivered at the Closing shall have been
registered for sale with the United States Securities and
Exchange Commission ("SEC") so that, after the completion of the
Closing, the Salton Shares may be sold in public transactions
without restriction pursuant to such registration for a period of
not less than one hundred eighty (180) days as set forth in
Section 8 below.
(b) The balance of the Purchase Price, eighty million dollars
($80,000,000) shall be paid in cash in equal installments of
twenty million dollars ($20,000,000) each, without interest, on
the first, second, third and fourth anniversary of the Closing
date, unless the date of the anniversary is not a business day
when banks in both New York City and Houston, Texas are generally
open for business ("Business Day") in which case the payment
shall be made on the next date which is Business Day. If any
installment of the Purchase Price owing after the Closing is not
paid when due, Salton shall pay Foreman interest on the unpaid
portion of such installment at a fluctuating annual rate that is
always equal to the sum of: (i) the Prime Rate as announced from
time to time in the Wall Street Journal (Midwest Edition), such
rate to change when and as of the date such change is announced,
plus (ii) two percent (2%).
(c) The balance of the Purchase Price owing after the Closing Date,
including interest owing on any unpaid portion of an installment
due after the Closing, shall be subordinate to the payment in
full of the amounts owing under the Amended and Restated Credit
Agreement ("Credit Agreement") between Salton, as borrower, and
Lehmann Brothers Commercial Paper, Inc., as administrative agent
("Lehmann") for the several lenders who, from time to time, are
parties to the Credit Agreement. The subordination shall be set
forth in a subordination agreement among Salton, Lehmann, as
administrative agent for the several lenders under the Credit
Agreement, and Foreman, to be entered into on or before the
Closing Date in substantially the form of and containing
substantially the terms and conditions of the Subordination
Agreement attached hereto as Schedule 3(c).
-2-
<PAGE> 3
4. Trademark, Copyright Application Assistance. At the Closing, Foreman
shall enter into a ten year contract providing for assistance from
Foreman in executing assignments, applications and other documents
which Salton reasonably requires in order to obtain further trademarks
and copyrights for the products included in the Foreman Food Products
Line in the form of and containing the terms and conditions set forth
in Schedule 4 attached hereto (the "Applications Assistance
Contract").
5. Representations and Warranties of Foreman. Foreman represents,
warrants and agrees with Salton that, as of the date hereof and up to
and including the date of closing that each of the following
representations is true and correct:
(i) Foreman shall be the sole owner of the property sold under
this Agreement as Foreman Permanent Property Nos. I and
II. Foreman owns no other trademarks related to small
kitchen electric products intended for making or serving
food or non-alcoholic beverages.
(ii) There are no contracts currently in effect which limit or
restrict the right of Foreman in any manner to use or
transfer any of the Foreman Permanent Property Nos. I and
II or to register any unregistered common law marks listed
on Schedule 1(a) and neither George Foreman Productions,
Inc., a Nevada corporation, owned and controlled by
Foreman ("Productions") or Foreman is a defendant to any
Action relating to, or otherwise has been notified of, any
claim that any use by, on behalf of or through Foreman, of
any of the property included in Foreman Permanent Property
Nos. I and II infringes or violates the proprietary,
contractual or other rights of any Person and, to
Foreman's knowledge, no basis for any such claim exists.
To Foreman's knowledge, there is no infringement by any
Person of Foreman Permanent Property Nos. I and II.
(iii) Foreman has the right to assign and sell the properties
sold under this Agreement.
(iv) Except for Salton, Foreman has not licensed or in any
other way authorized any person to use in any manner any
of Foreman Permanent Property Nos. I and II.
(v) To Foreman's knowledge, all trademarks listed on Schedule
1(a) in the United States are valid and subsisting, there
is no pending or, to Foreman's knowledge, threatened
proceedings or litigation with respect thereto, and
Schedule 1(a) is complete and correct. All of the items
included in Foreman Permanent Property No. I are in use
and have not been abandoned.
(vi) All of the items which may constitute copyrighted works
used to market products under Foreman Permanent Property
No. I are original and will be properly and effectively
assigned to Salton at Closing. Foreman agrees to take
reasonable and prudent steps to protect Salton's rights in
and to such copyrights. Except for Salton, to Foreman's
knowledge, no Person has any right to such copyrights.
-3-
<PAGE> 4
(vii) Foreman has no commitment or legal obligation, absolute or
contingent, to any Person other than Salton to sell,
assign, license, transfer or effect a sale of any of
Foreman Permanent Property Nos. 1 or 2 or to enter into
any Contract or cause the entering into of a Contract with
respect to the foregoing.
(viii) Productions is a duly organized and existing corporation
in good standing under the laws of Nevada.
(ix) As of the date of Closing, Foreman shall own all right,
title and interest in and to Foreman Property No. I and
Foreman Property No. II free and clear of all security
interests, liens and encumbrances.
6. Representations and Warranties of Salton. Salton represents and
warrants and agrees with Foreman that, as of the date hereof and up to
and including the date of Closing that each of the following
representations is true and correct:
(i) Salton is a duly organized and existing corporation under
the laws of the State of Delaware.
(ii) Salton has the corporate power under its articles of
incorporation and by laws to enter into and perform this
Agreement.
(iii) The Board of Directors of Salton has, by unanimous written
consent in lieu of a special meeting, authorized Salton to
enter into and perform this Agreement.
(iv) There are no contracts currently in effect which limit or
restrict the right of Salton to enter into or perform this
Agreement except only that Salton may determine that it
requires consent from its lenders under the Second Amended
and Restated Credit Agreement by and among Salton and
Lehmann Brothers Commercial Paper, Inc., as Administrative
Agent for the several lenders who are parties from time to
time to such agreement ("Credit Agreement") to enter into
and close the transactions contemplated by this Agreement.
(v) There are no existing uncured events of default on the
part of Salton under its Credit Agreement.
(vi) Salton has authorized but unissued shares of Common Stock
and shares of Common Stock held as Treasury shares and has
reserved, and shall continue to keep reserved for issuance
in connection with the Closing of this Agreement a
sufficient number of Shares to satisfy its obligation to
deliver the number of Shares necessary to close this
Agreement.
7. Calculation of Number of Shares to be Delivered to Foreman at Closing.
In order to determine the number of shares of common stock of Salton
to be delivered to Foreman on the Closing, ten million dollars shall
be divided by the Average Salton Price as defined in this Section 7.
Average Salton Price shall be the average of the closing prices of
Salton common stock on the New York Stock Exchange ("NYSE") as
reported
-4-
<PAGE> 5
on the NYSE Composite Transaction Tape for the twenty (20) trading
days ending on the third trading day preceding the Closing Date.
8. Registration of Salton Shares. Immediately following the execution of
this Agreement, Salton shall:
(i) prepare and file with the SEC as soon as is reasonably
practicable a registration statement on Form 3 under the
1933 Securities Act, as amended ("Securities Act") with
respect to the Salton Shares to be delivered to Foreman at
the Closing and shall use its best reasonable efforts to
have the Registration Statement declared effective by the
SEC under the Securities Act effective upon the Closing,
subject to the conditions set forth below in this Section
8;
(ii) use its reasonable efforts to register or qualify such
Salton Shares under such other securities or blue sky laws
of such jurisdictions as Foreman reasonably requests and
do any and all other acts and things which may be
reasonably necessary or advisable to enable Foreman to
consummate the disposition in such jurisdictions of the
Salton Shares owned by Foreman (provided that Salton will
not be required to (x) qualify generally to do business in
any jurisdiction where it would not otherwise be required
to qualify but for this section, (y) subject itself to
taxation in any such jurisdiction or (z) consent to
general service of process in any such jurisdiction); and
(iii) prepare and file with the NYSE a listing application
covering the Salton Shares to be issued at the Closing and
use its reasonable best efforts to obtain prior to the
Closing, approval for the listing of the Salton Shares
subject only to official notice of issuance.
Notwithstanding the foregoing, Salton shall have the right to delay
the effectiveness of the registration and of the listing of the Salton
Shares for a period of up to one hundred twenty (120) days, if there
are, in Salton's judgment, possible developments, events or actions
which may occur concerning Salton or its business which would be
required to be disclosed in a registration statement filed with the
SEC, which are not in the best interest of Salton to disclose and need
not be disclosed under the Securities Act unless and until such
developments, events or actions occur.
9. Conditions to Closing.
(a) Foreman Conditions. At or before the Closing, Foreman shall have
received the following:
(i) a copy of the Articles of Incorporation, as amended, of
Salton certified by the Delaware Secretary of State;
(ii) a copy of the By-Laws of Salton and a copy of the
Unanimous Consent of Directors of the Board of Directors
of Salton authorizing the execution, delivery and
performance of this Agreement, both certified by the
Secretary of Salton;
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<PAGE> 6
(iii) a good standing certificate of Salton certified by the
Secretary of State of Delaware;
(iv) a copy of a Registration Statement, as then amended and
made effective by the SEC on or prior to the closing
registering for sale the Shares of Salton to be delivered
to Foreman at the Closing;
(v) a so called bring down certificate executed by an officer
of Salton certifying that the representations and
warranties of Salton set forth in Section 6 above are true
and correct as of the Closing;
(vi) Foreman shall have received the cash portion of the
purchase price to be delivered at the Closing;
(vii) Foreman shall have received a first priority lien security
agreement executed by Salton substantially in the form and
containing the terms and conditions of the Trademark
Security Agreement allocated hereto as Schedule 9(vii)
granting to Foreman a purchase money security interest
under the Uniform Commercial Code, as adopted in Illinois,
in the Foreman Permanent Property Nos. I and II to be sold
hereunder to Salton which security agreement can also be
registered as a first priority security filing with the
U.S. Trademark registration office, executed UCC 1 filing
forms to be filed with the Secretary of State of Illinois
and any other filing office as Foreman deems reasonably
necessary in order to perfect his purchase money security
interest in the Foreman Permanent Properties to be sold
hereunder and such other documents as Foreman may
reasonably request in order to grant Foreman a first
priority purchase money lien on the Foreman Permanent
Properties in order to secure the unpaid portion of the
Purchase Price owing to Foreman;
(viii) Foreman shall have received certificates for Salton Shares
issued in the name of Foreman without any restrictive
legend duly listed on the NYSE;
(ix) a copy of the Applications Assistance Contract attached
hereto as Schedule 4 executed and delivered by Salton; and
(x) a copy of the Subordination Agreement referred to in
Section 3(c) above executed and delivered by Salton and
Lehmann Brothers, Inc., as administrative agent for the
several lenders under the Credit Agreement.
(b) Salton Conditions. At or before the Closing, Salton shall have
received the following:
(i) evidence of Uniform Commercial Code searches, searches of
the Offices of the United States Trademark Patent Office
Registration System and other certificates reasonably
requested by Salton in order to confirm that the Foreman
Permanent Properties being sold hereunder by Foreman are
free and clear of all security interests, liens and
encumbrances;
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<PAGE> 7
(ii) a copy of a Registration Statement, as then amended and
made effective by the SEC on or prior to the Closing
registering for sale by Foreman the Shares of Salton to be
delivered to Salton at the closing;
(iii) a bill of sale and assignment of Foreman Permanent
Property Nos. I and II;
(iv) a copy of the Applications Assistance Contract attached
hereto as Schedule 4 executed and delivered by Foreman;
(v) a copy of the Subordination Agreement referred to in
Section 3(c) above executed and delivered by Foreman and
Lehmann Brothers Commercial Paper, Inc., as administrative
agent for the several lenders under the Credit Agreement;
(vi) such other approvals from Lehmann Brothers Commercial
Paper, Inc. as agent for the several lenders under the
Credit Agreement as Salton requires, in its reasonable
discretion, in order to close this Agreement;
(vii) a quitclaim and release from George Foreman Productions
Inc., a Nevada corporation, of any interest such company
may have or claim with respect to Foreman Permanent
Properties Nos. I and II; and
(viii) such other documents and assignments as Salton may require
reasonably in order to effect the assignment and transfer
to Salton of the assets sold hereunder.
10. Closing. The closing shall occur on or before February 15, 2000 on not
less than five business days notice from Salton at the offices of
Salton located in Mount Prospect, Illinois or such other office as
Foreman and Salton mutually agree to at 10 A.M., CST ("Closing Date").
As soon as the Salton Shares to be delivered to Foreman are duly
registered for sale as required by this Agreement, Salton and Foreman
each agree to make reasonable business efforts to effect the Closing
as soon thereafter as possible. At the Closing, Foreman and Salton
shall each make the deliveries required of them as set forth above;
provided that, if Salton determines that it is necessary for Salton to
delay the filing or effectiveness of the registration of the Salton
Shares to be delivered to Foreman as set forth in Section 8 above,
Salton shall have right to either: (i) delay the Closing for a period
or periods of time up to an aggregate of one hundred twenty (120) days
or (ii) to pay in cash at the Closing the ten million dollars
($10,000,000) otherwise payable in Salton Shares and to deliver the
Salton Shares registered for sale as set forth in this Agreement as
one half of the amount owing to Foreman on the first anniversary of
the Closing Date, except that the number of Salton Shares to be
delivered to Foreman on the first anniversary of the Closing Date
shall be determined by using as the "Average Salton Price" the average
of the closing prices of Salton common stock on the New York Stock
Exchange ("NYSE") as reported on the NYSE Composite Transaction Tape
for the twenty trading days ending on the third trading day preceding
the first anniversary of the Closing Date.
11. Indemnification and Survival of Representations, Warranties, Covenants
and Indemnity Obligation.
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<PAGE> 8
11.1. Survival of Representations, Etc. All representations and
warranties of Foreman and Salton contained herein shall survive
the Closing Date and shall terminate at the close of
twenty-four (24) full calendar months next following the
Closing Date. Upon the termination of a representation or
warranty in accordance with the foregoing, the representation
or warranty shall have no further force or effect for any
purpose under this Agreement, including Section 11.2 hereof,
provided that, any representation or warranty in respect of
which indemnity may be sought under Section 11.2, and the
indemnity with respect thereto, shall survive the time at which
it would otherwise terminate pursuant to this Section 11.1 if
written notice of the inaccuracy or breach thereof giving rise
to such right of indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time.
11.2. Indemnification.
(a) By Foreman. Foreman shall indemnify Salton and its officers and
directors, , and hold each of them harmless from and against
any and all claims, demands, actions, suits, judgments,
liability and loss, including legal fees and expenses and court
costs (collectively, "Loss") incurred by any of them in
connection with, arising out of, or resulting from (i) any
breach of any representation or warranty made by Foreman in
this Agreement; or (ii) any failure by Foreman to perform in a
timely manner any agreement, covenant or obligation of Foreman
pursuant to this Agreement.
(b) By Salton. Salton shall indemnify Foreman and hold him harmless
from and against any and all Loss incurred by him in connection
with, arising out of or resulting from (i) any breach or
inaccuracy of any representation or warranty made by Salton in
this Agreement or (ii) any failure by Salton to perform in a
timely manner any agreement, covenant or obligation of Salton
pursuant to this Agreement.
(c) Defense of Claims. If a claim for Loss (a "Claim") is to be
made by a party entitled to indemnification hereunder (the
"Indemnified Party") against the party from whom
indemnification is claimed (the "Indemnifying Party"), the
Indemnified Party shall give written notice (a "Claim Notice")
to the Indemnifying Party as soon as practicable after the
Indemnified Party becomes aware of any fact, condition or event
which may give rise to Loss for which indemnification may be
sought under this Section 11.2. If any lawsuit or enforcement
action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to
the Indemnifying Party as promptly as practicable (and in any
event within ten (10) business days after the service of the
citation or summons). The failure of any Indemnified Party to
give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the
Indemnifying Party demonstrates actual Loss caused by such
failure. Notwithstanding the foregoing, a Claim Notice must be
made within the survival period set forth in Section 11. 1,
whether or not the Indemnifying Party is prejudiced by any
failure to give the Claim Notice. The Claim Notice shall
describe in reasonable detail the nature of the Claim,
including an estimate of the amount of Loss that have been or
may be suffered
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<PAGE> 9
or incurred by the Indemnified Party attributable to such
Claim, the basis of the Indemnified Party's request for
indemnification under the Agreement and all information in the
Indemnified Party's possession relating to such Claim. After
receipt of such Claim Notice, the Indemnifying Party shall be
entitled, if it so elects, at its own cost, risk and expense,
(i) to take control of the defense and investigation of such
lawsuit or action and (ii) to employ and engage attorneys of
its own choice to handle and defend the same, provided however
that the attorneys shall be reasonably acceptable to the
Indemnified Party. If the Indemnifying Party fails to assume in
writing the defense of such Claim within ten (10) business days
after receipt of the Claim Notice, the Indemnified Party
against which such Claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party)
have the right to undertake, at the Indemnifying Party's cost
and expense, the defense, compromise or settlement of such
Claim on behalf of and for the account and risk of the
Indemnifying Party; provided, however, that such Claim shall
not be compromised or settled without the written consent of
the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. In the event that the Indemnified Party
assumes the defense of the Claim, the Indemnified Party will
keep the Indemnifying Party reasonably informed of the progress
of any such defense, compromise or settlement. Notwithstanding
the foregoing, the Indemnified Party shall be entitled to
conduct its own defense at the cost and expense of the
Indemnifying Party if the Indemnified Party establishes that
the conduct of its defense by the Indemnifying Party would
reasonably be likely to prejudice materially the Indemnified
Party due to a conflict of interest between the Indemnified
Party and the Indemnifying Party; and provided further that in
any event the Indemnified Party may participate in such defense
at its own expense.
(d) Settlement. In the event that the Indemnified Party settles any
Claim without the prior written consent of the Indemnifying
Party, the Indemnifying Party shall have no further
indemnification obligations under this Section 11.2 with
respect to such Claim; provided, however, that if the
Indemnifying Party refuses to defend or otherwise handle such
Claim and it is subsequently determined that the Indemnifying
Party is or was obligated to defend or indemnify the
Indemnified Party with respect to such Claim, then the
Indemnified Party shall remain obligated with respect to such
settlement amount. If the Indemnifying Party shall control the
defense of any such Claim, the Indemnifying Party shall obtain
the prior written consent of the Indemnified Party (which shall
not be unreasonably withheld) before entering into any
settlement of a Claim or ceasing to defend such Claim if,
pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief shall be imposed against
the Indemnified Party or if such settlement or cessation does
not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such
Claim, without prejudice. In the event that the Indemnifying
Party proposes a settlement to any Claim with respect to which
the Indemnifying Party is or was entitled to defend, which
settlement is satisfactory to the party instituting such Claim,
and the Indemnified Party withholds its consent to such
settlement, and thereafter a final judgment is entered against
the Indemnifying Party or Indemnified Party pursuant to which
Loss exceeds the amount of the proposed settlement, then in
such case the Indemnifying Party
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<PAGE> 10
shall have no obligation to indemnify the Indemnified Party
under this Section 11.2 against and in respect of the amount by
which the Loss resulting from such final judgment exceed the
amount of the proposed settlement.
(e) Mitigation. Each Indemnified Party shall have an obligation to
mitigate Loss under this Agreement, and to that end each party
shall use its reasonable efforts and shall consult and
cooperate with each other with a view towards mitigating
claims, losses, liabilities, damages, deficiencies, costs and
expenses that may give rise to claims for indemnification under
this Section 11.2.
(f) Cooperation. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions
contemplated by this Agreement is commenced, whether before or
after the Closing, the parties hereto agree to cooperate and
use reasonable efforts to vigorously defend against and respond
thereto and make available to each other such personnel,
witnesses, books, records, documents or other information
within its control that are necessary or appropriate for such
defense; provided that, subject to Section 11.2(c), the
Indemnifying Party shall reimburse the Indemnified Party for
its out of pocket expenses incurred in connection therewith.
(g) Limitations.
(i) Neither Salton nor Foreman shall be liable to the other
under this Section 11.2 for any Loss due pursuant to
Section 11.2(a)(i) or Section 11.2(b)(i) exclusively,
unless and until the aggregate amount otherwise due the
Indemnified Party exceeds One Hundred Thousand Dollars
($100,000) excluding legal fees and expenses ("Initial
Loss Amount"). Thereafter the total amount of all such
Loss excluding the Initial Loss Amount actually
incurred shall be indemnifiable.
(ii) Nothing herein shall relieve Salton or Foreman of any
liability to make any payment expressly required to be
made by such party pursuant to this Agreement or deny
Foreman any right created by the Security Agreement
referred to in Section 9(a)(vii).
11.3. Insurance Proceeds. With respect to any Claim required to be
indemnified pursuant to this Agreement, so long as the
Indemnifying Party has complied with its indemnification
obligations on such Claim: (i) to the extent available, the
Indemnified Party shall assign to the Indemnifying Party any
applicable proceeds under any insurance policy which covers the
matter which is the subject of the indemnification and shall
take reasonable steps to insure that the Indemnifying Party
obtains the benefits of such policy, including providing any
notices as required under such policy and (ii) if the
Indemnified Party receives insurance proceeds with respect to
any Loss paid by the Indemnifying Party, then the Indemnified
Party shall reimburse the Indemnifying Party in an amount
equivalent to such proceeds up to the amount actually paid by
the Indemnifying Party.
11.4 Exclusive Remedy. The rights of Salton under Section 11.2 shall
be the exclusive remedy of Salton with respect to claims based
upon a breach or
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<PAGE> 11
alleged breach of the representations, warranties and covenants
of Foreman contained herein. The rights of Foreman under
Section 11.2 shall be the exclusive remedy of Foreman with
respect to claims based upon a breach or alleged breach of the
representations, warranties and covenants of Salton contained
herein. Except as expressly set forth in this Agreement,
neither Foreman nor Salton has made any representations or
warranties, express or implied, in connection with the
transactions contemplated by this Agreement.
12. Miscellaneous.
(a) Notices. All notices, requests, demands and other
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given when received if: (i) personally delivered; (ii)
when transmitted if transmitted by telecopy, electronic or
digital transmission method and followed by a confirmation of
receipt from the recipient of the notice; (iii) when delivered
if sent to a domestic address by recognized overnight delivery
service (e.g., DHL); and upon receipt, if sent by prepaid U.S.
certified or registered mail, return receipt requested. In each
case notice shall be sent as indicated below:
If to Foreman:
George Foreman
4402 Walham Court
Kingwood, Texas 77345
with copies to:
Edward Wallison, Esq.
1111 Bagby, Suite 2030
Houston, Texas 77002
and
Mann, Frankfort, Stein & Lipp
12 Greenway Plaza, 8th Floor
Houston, Texas 77046-1291
Attention: William J. Hickl III
If to Salton, addressed to:
Salton, Inc.
550 Business Center Drive
Mount Prospect, IL
Attn: Leon Dreimann
Chief Executive Officer
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<PAGE> 12
(b) Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the
laws of the State of Illinois (without reference to its choice
of law provisions).
(c) Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto and thereto,
the Security Agreement referred to in Section 9(a)(vii) and the
Subordination Agreement referred to in Section 9(a)(x),
constitute the entire agreement among the parties pertaining to
the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the parties hereto. No amendment, supplement, modification or
waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
(d) Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
(e) Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum
extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
(f) Titles; Gender. The titles, captions or headings of the
Sections herein, and the use of a particular gender, are for
convenience of reference only and are not intended to be a part
of or to affect or restrict the meaning or interpretation of
this Agreement.
(g) Arbitration. Each party hereto agrees to resolve any claim,
demand, dispute, action or cause of action arising under or in
connection with this Agreement by arbitration in accordance
with the Rules of the American Arbitration Association ("AAA")
applicable to commercial disputes, except that each party shall
be entitled to discovery and to present witnesses in the
discretion of the arbitrators. There shall be three (3)
arbitrators, one selected by Foreman and one selected by
Salton. The third arbitrator shall be selected by the first two
arbitrators. The decision of the arbitration panel shall be
determined by a majority vote. If Salton or Foreman desires to
initiate an arbitration, they shall give Notice to the other
("Initial Notice"). The party who sends the Initial Notice
shall include the name of the arbitrator designated by such
party. The party receiving the Initial Notice shall designate
its arbitrator within fourteen (14) Business Days next
following receipt of the Initial Notice. If the arbitrators
designated by Salton and Foreman cannot agree upon a third
arbitrator within thirty (30) days following the designation of
the second arbitrator, then, upon the application of Salton or
Foreman, the AAA shall select the third arbitrator. If either
Salton or
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<PAGE> 13
Foreman does not designate an arbitrator as required under this
Agreement within the time period allowed then upon the
application of the other party, the AAA shall chose the second
arbitrator. Any decision of the arbitration panel shall be
specifically enforceable by any state or U.S. federal court
sitting in Houston Texas or Chicago, Illinois.
(h) Interpretation. The headings and captions contained in this
Agreement and in the Schedules hereto are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Further Assurances. Each of Foreman and Salton will use
reasonable efforts to implement the provisions of this
Agreement, including but not limited to the execution and
delivery of such other documents (including any license,
assignment or assumption agreement, official certificates of
registration, renewals, transfers or other documents supporting
ownership of trademarks) in addition to those required by this
Agreement, in form and substance reasonably satisfactory to the
other party, as may be reasonably deemed necessary to implement
any provision of this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties hereto as the date first written above.
Salton, Inc.
By: /s/ Leon Dreimann /s/ George Foreman
-------------------------------- --------------------------------
Name: Leon Dreimann George Foreman
Title: Chief Executive Officer
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<PAGE> 14
SCHEDULE 4
APPLICATIONS ASSISTANCE CONTRACT
Schedule 4 to Purchase Agreement
dated as of July 1, 1999
APPLICATION ASSISTANCE AGREEMENT
dated as of ("Agreement")
between
Salton, Inc., a Delaware corporation ("Salton"),
and
George Foreman ("Foreman")
A. On the date hereof, pursuant to a Purchase Agreement dated as of
July 1, 1999 among the parties hereto ("Purchase Agreement"), Foreman has sold
to Salton permanent worldwide rights to certain unregistered trademarks; and
Foreman has sold to Salton the permanent worldwide rights to the use of his name
in connection with portable kitchen appliance products that are used to make or
serve food and non-alcoholic beverages (the "Foreman Food Products Line").
B. Salton will require assistance from Foreman over a substantial
period of time in order to register unregistered trademarks and to register
future trademarks and to obtain copyrights and materials which are used to
promote and market products within the Foreman Food Products Line.
C. Capitalized terms used in this Agreement and not defined herein are
defined in the Purchase Agreement.
Therefore, Salton and Foreman agree as set forth below.
1. Term. The Term of this Agreement shall commence on the date hereof
and end on December 31, 2009.
2. Payment for Services. Salton shall pay Foreman one million dollars
($1,000,000) for services hereunder in forty (40) quarterly installments of
twenty-five thousand dollars ($25,000) on the last business day of each calendar
quarter, commencing with the quarter ending March 31, 2000.
3. Services.
a. At the request of Salton, Foreman shall execute and deliver
affidavits, declarations, applications and other documents required by Salton in
order to: (i) register unregistered trademarks sold to Salton under the Purchase
Agreement in the United States of America; (ii) register trademarks already
registered in the U.S.A. in other jurisdictions worldwide; (iii) register for
protection in any jurisdiction in the world trademarks on products sold in the
Foreman Food Products Line; (iv) register copyrights on writings, recordings,
pictures and other presentations used by Salton to market products under
trademarks included in the Foreman Permanent Properties sold under the Purchase
<PAGE> 15
Agreement and the permanent worldwide rights to use the name and likeness of
George Foreman as described and sold to Salton under Section 1(b) of the
Purchase Agreement.
b. The services to be provided under this Agreement relate solely to
the matters set forth in this Agreement and do not require of Foreman any other
personal services or to make any appearances for Salton or to act in promotional
videos or otherwise to promote products marketed by Salton in the Foreman Food
Products Line.
4. No Additional Rights. Foreman shall have no right, directly or
indirectly, to royalties or any other payments arising out of the sale of
products making use of the trademarks and other rights sold by Foreman to Salton
pursuant to the Purchase Agreement.
Salton, Inc.
By: ___________________________ _____________________________
Leon Dreimann George Foreman
Chief Executive Officer
<PAGE> 16
SCHEDULE 9(vii) to Purchase Agreement
dated as of July 1, 1999
TRADEMARK SECURITY AGREEMENT
(attached hereto)
<PAGE> 1
Exhibit 10.2
Agreement made as of July 1, 1999
by and between
Sam Perlmutter ("Seller")
and
Salton Inc., a Delaware corporation ("Salton")
WHEREAS:
A. Seller expects to receive a distribution from MikeSam LLC, a California
limited liability company ("MikeSam") of a seven and one half percent
(7.5%) undivided interest in certain licenses for trademarks and MikeSam is
sometimes referred to for convenience in this Agreement;;
B. Seller desires to acquire an option to sell to Salton (the "Put"), and
Salton desires to acquire an option to purchase from Seller (the "Call"),
Seller's undivided interest in certain trademarks.
THEREFORE, Seller and Salton agree as set forth below.
1. Property Subject to Options. The property subject to the Put and the
Call is all right, title and interest in a seven and one half percent
(7.5%) undivided interest in the following assets:
(a) the registered trademarks and the goodwill associated therewith
to use in perpetuity and worldwide which include, but are not
limited to the name George Foreman (including shortened versions
of the name, such as "George"), pictures, caricatures,
likenesses, and the signatures of G. Foreman which have been used
in connection with the marketing of certain products by Salton;
and
(b) The unregistered common law trademarks and the good will
associated therewith and certain trademark applications to use in
perpetuity and worldwide which include, but are not limited to
the name George Foreman (including shortened versions of the
name, such as "George"), pictures, caricatures, likenesses, and
the signatures of George Foreman which have been used in
connection with the marketing of certain products by Salton.
Seller's interests in the property referred to above are defined as the
"Foreman Interests".
2. Seller's Put; Purchase Price.
(a) Seller shall have the right to exercise its Put of the Foreman
Interests during a period ("Put Period") that commences December
1, 1999, and ends at the close of business, CST, on the thirtieth
(30th day) next following the first day of the Put Period
(including the first day of the Put Period). If Seller does not
exercise its Put within the Put Period, the Put shall terminate
automatically without any notice from Salton and Seller shall
have no further right to compel Salton to purchase the Foreman
Interests.
1
<PAGE> 2
(b) If Seller gives Notice to Salton of Seller's exercise of its Put,
there shall be a closing of the sale pursuant to the Put (the
"Closing") which shall occur as set forth in Section 6(c) not
later than sixty (60) days after such Notice is given on a date
designated by Salton, except that if the sixtieth (60th) day is
not a day when banks in Los Angeles and New York City are both
open for business ("Business Day"), then the Closing shall occur
not later then the next day that is a Business Day.
(c) If Seller's Put is exercised, the total purchase price to be paid
to Seller for the Foreman Interests is thirteen million seven
hundred fifty thousand dollars ($13,750,000) of which six million
eight hundred and seventy five thousand dollars ($6,875,000)
shall be paid in cash and six million eight hundred and seventy
five thousand dollars ($6,875,000) shall be paid in shares of
Common Stock of Salton (the "Salton Shares") valued as set forth
in Section 5.
3. Salton's Call; Purchase Price.
(a) Salton shall have the right to exercise its Call on the Foreman
Interests within a thirty (30) day period ("Call Period") that
begins on the day next following the end of the Put Period and
ends on the close of business, CST, on the thirtieth (30th) day
next following the commencement of the Call Period (including the
first day of the Call Period). If Salton has not exercised its
Call within the Call Period, the Call shall terminate
automatically without any notice from Seller and Salton shall
have no further right to compel Seller to sell the Foreman
Interests.
(b) Upon Salton giving Notice to Seller of Salton's exercise of its
Call, there shall be a Closing of the sale pursuant to the Call
which shall occur as set forth in Section 6(c) not later than
thirty (30) days after such Notice is given on a date designated
by Salton, except that if the thirtieth (30th) day is not a
Business Day, then the Closing shall occur not later then the
next day that is a Business Day.
(c) If Salton's Call is exercised by Salton, the total purchase price
to be paid to Seller for the Foreman Interests is thirteen
million five hundred thousand dollars ($13,500,000) of which six
million seven hundred fifty thousand dollars ($6,750,000) shall
be payable in cash and six million seven hundred fifty thousand
dollars ($6,750,000) shall be payable in Salton Shares valued as
set forth in Section 5.
4. Terms of Payment. The total purchase price owing to Seller shall be
paid as set forth below.
(a) Put Price. On the exercise of Seller's Put, the total purchase
price, $13,750,000, shall be paid as follows:
(i) On the Closing (defined in Section 6(c) below),one million
three hundred seventy-five thousand dollars ($1,375,000)
shall be paid in cash and six million eight hundred
seventy-five thousand dollars ($6,875,000) shall be paid in
shares of the Common Stock of Salton (the "Salton Shares").
The cash portion of the purchase price to be paid at the
Closing
2
<PAGE> 3
shall be delivered by Federal Funds wired to a bank
account designated by Seller prior to the date of the
Closing. The portion of the purchase price to be paid in
Salton Shares shall be delivered in one or more stock
certificates of Salton evidencing the Salton Shares
registered in the name of Seller.
(ii) The balance of the cash portion of the purchase price, five
million five hundred thousand dollars ($5,500,000) shall be
paid in four equal installments of one million three
hundred seventy-five thousand dollars ($1,375,000) each,
without interest, on the first day of July, 2000, 2001,
2002 and 2003 unless such July 1 is not a Business Day, in
which case the payment shall be made on the next date which
is Business Day. Each installment shall be delivered by
federal funds wired to a bank account designated by Seller
prior to the date of closing.
(b) Call Price. On the exercise of Purchaser's Call, the total
purchase price, $13,500,000, owing to Seller shall be paid as set
forth below:
(i) On the Closing (defined in Section 6(c) below), one million
three hundred thousand dollars ($1,300,000) shall be paid
in cash and six million five hundred thousand dollars
($6,500,000) shall be paid in shares of the Common Stock of
Salton (the "Salton Shares"). The cash portion of the
purchase price to be paid at the Closing shall be delivered
by Federal Funds wired to a bank account designated by
Seller prior to the date of the Closing. The portion of the
purchase price to be paid in Salton Shares shall be
delivered in one or more stock certificates of Salton
evidencing the Salton Shares registered in the name of
Seller.
(ii) The balance of the cash portion of purchase price, five
million four hundred thousand dollars ($5,400,000) shall be
paid in four equal installments of one million three
hundred fifty thousand dollars ($1,350,000) each, without
interest, on the first days of July, 2000, 2001, 2002 and
2003 unless such July 1 is not a Business Day, in which
case the payment shall be made on the next date which is
Business Day. Each installment shall be delivered by
federal funds wired to a bank account designated by Seller
prior to the date of closing.
(c) Advance Payments. Salton shall receive credit at a Closing under
this Agreement, and, to the extent of Salton's payments, against
the annual installments of the purchase to be paid in cash, for
payments made by Salton after the date hereof, as advances toward
the cash portion of the purchase price in the event the call or
the Put is exercised.
5. Calculation of Number of Shares to be delivered to Seller at Closing.
(a) On Exercise of Put. The number of shares of common stock of
Salton to be delivered to Seller on the Closing shall be the
greater of the following two
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<PAGE> 4
numbers: (i) two hundred thirty-seven thousand and sixty-nine
(237,069) or (ii) 6,875,000 divided by the Average Salton Price
as defined in this Section 5.
(b) On Exercise of Call. The number of shares of common stock of
Salton to be delivered to Seller on the Closing shall be the
greater of the following two numbers: (i) two hundred twenty-four
thousand one hundred thirty eight (224,138) or (ii) 6,500,000
divided by the Average Salton Price as defined in this Section 5.
(c) The "Average Salton Price" shall be the average of the closing
prices of Salton common stock on the New York Stock Exchange
("NYSE") as reported on the NYSE Composite Transaction Tape for
the twenty trading days ending on the third trading day preceding
the Closing Date
6. Conditions to Closing.
(a) Seller Conditions. At or before the Closing, Seller shall have
received the following:
(i) a copy of the Articles of Incorporation, as amended, of
Salton certified by the Delaware Secretary of State
(ii) a copy of the By-Laws of Salton and a copy of the Unanimous
Consent of Directors of the Board of Directors of Salton
authorizing the execution, delivery and performance of this
Agreement, both certified by the Secretary of Salton;
(iii) a good standing certificate of Salton certified by the
Secretary of State of Delaware;
(iv) a bring down certificate executed by an officer of Salton
certifying that the representations and warranties of
Salton set forth in Section 7 below are true and correct as
of the Closing;
(v) Seller shall have received the cash portion of the purchase
price to be delivered at the Closing; and
(vi) Seller shall have received certificates for Salton Shares
issued in the name of Seller bearing a restrictive legend
which permits the Salton Shares to be sold only pursuant to
a registered offering pursuant to Section 9 hereof or
pursuant to Rule 144 adopted by the Securities and Exchange
Commission.
(b) Salton Conditions. At or before the Closing, Salton shall have
received the following:
(i) a copy of the Articles of Organization, as amended, of
MikeSam certified by the California Secretary of State
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<PAGE> 5
(ii) a good standing certificate of MikeSam certified by the
Secretary of State of California ;
(iii) a copy of the operating agreement of MikeSam certified by
Seller and by Mike Srednick, the owner of all the
outstanding stock of Srednick and Associates, Inc., the
owner of the remaining interests in MikeSam.
(iv) evidence of Uniform Commercial Code searches, searches of
the Offices of the United States Trademark Patent Office
Registration System and other certificates reasonably
requested by Salton in order to confirm that the properties
being sold hereunder by Seller are free and clear of all
security interests, liens and encumbrances.
(v) a bill of sale and assignment of the Foreman Interests;
(vi) such other documents and assignments as Salton may require
reasonably in order to effect the assignment and transfer
to Salton of the assets sold hereunder; and
(vii) Salton shall have such consents, if any, as Salton
determines are required under Salton's existing Credit
Agreement with Lehman Brothers Commercial Paper Inc. as
Administrative Agent for the several bank lenders who are
parties from time to time to the Credit Agreement.
(c) Closing. The closing shall occur on the date as determined above
in this Agreement at the offices of Sonnenschein Nath & Rosenthal
located at Suite 1500, 601 South Figueroa Street, Los Angeles, CA
90017 at 10 A.M., CST. At the closing, Seller and Salton shall
each make the deliveries required of them as set forth above.;
7. Representations and Warranties of Seller. Seller represents, warrants
and agrees with Salton that, as of the date hereof and up to and
including the date of closing that each of the following
representations is true and correct:
(a) No Prior Transfer of Seller's Interest. Seller has not licensed
or in any other way authorized any Person to use in any manner
any of the Seller's undivided interest in the Foreman Interests
and to Seller's knowledge, there is no unauthorized use thereof
by any Person.
(b) No Prior Commitment to Sell. Seller has no commitment or legal
obligation, absolute or contingent, to any Person other than
Salton to sell, assign, license, transfer or effect a sale of any
of Seller's undivided interest in the Foreman Interests or to
enter into any Contract or cause the entering into of a Contract
with respect to the foregoing.
(c) Seller's Percentage Interest. As of the date of Closing, Seller
shall own all right, title and interest in and to a seven and one
half percent (7.5%) undivided interest in the Foreman Interests
free and clear of all Liens.
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<PAGE> 6
(d) MikeSam. MikeSam owned all right, title and interest in and to a
fifteen percent (15%) interest in a Joint Venture ("JV") formed
pursuant to a Joint Venture Agreement dated as March 1, 1995
among Salton Maxim Houseware, Inc., George Foreman Productions,
Inc., a Nevada corporation and Benjamin H., a California
corporation ("BH"); BH was never organized; MikeSam has owned
since the creation of the Joint Venture Agreement the 15%
interest designated in the Joint Venture Agreement to belong to
BH; upon a dissolution of the joint venture, MikeSam will receive
and continue to own as set forth above, a fifteen percent (15%)
undivided interest in the Foreman Interests distributed in the
liquidation of the JV.
(e) Only Members. The only two members of MikeSam are, Seller and
Srednick & Associates, Inc., a California corporation, each of
which owned a fifty percent (50%) interest as a member in
MikeSam.
(f) Litigation. There are no Claims pending or threatened before any
Governmental Authority or before any arbitrator of any nature,
brought by or against the Seller or MikeSam involving, affecting
or relating to the business, assets, operations or securities of
MikeSam, or the transactions contemplated by this Agreement, nor
is there any basis for any such Claim. Neither of MikeSam or the
Seller, or their respective assets is subject to any order, writ,
judgment, award, injunction or decree of any Governmental
Authority or arbitrator.
(g) Liens and Encumbrances. Seller holds and owns full,
unconditional, good and marketable title to his interest in
MikeSam free and clear of all Liens.
(h) Contracts. The consummation of the transactions contemplated
hereby, without notice to or consent or approval of any party,
will not constitute a default under or a breach of any provisions
of any Contract affecting Seller.
(i) Absence of Employee Benefit Plans. MikeSam has never maintained
nor has any liability with respect to an employee benefit plan as
defined in ERISA.
(j) ERISA. There are no facts which could give rise to any Claim
against or liability of MikeSam or Seller for failure to comply
with ERISA or the Code in connection with the sale of Seller's
interest in the Foreman Interests.
(k) Environmental Matters. (a) MikeSam is and at all times has been,
in compliance with all applicable Environmental Laws. MikeSam is
not subject to any requirement to have any permits and other
governmental authorizations under applicable Environmental Laws.
MikeSam has not received any communication (written or oral),
whether from a Governmental Authority, Person, citizens group or
otherwise, that alleges that MikeSam is not or was not in
compliance with any Environmental Law. (b)There is no
Environmental Claim pending or threatened against MikeSam or
against any Person whose Liability for any Environmental Claim
that MikeSam has or may have retained or assumed either
contractually or by operation of law.
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<PAGE> 7
(l) Taxes. MikeSam has timely filed or caused to be filed all
federal, state, local and foreign Tax (as defined below) and
information returns required to be filed and has paid all Taxes
required to be paid in respect of the periods for which returns
are due, up to and including the Closing. For these purposes, the
Tax attributable to the period including the Closing should be
determined as if the taxable year ended at the Closing. MikeSam
is not delinquent in the payment of any Tax, and no deficiencies
for any Tax, assessment or governmental charge have been or will
be claimed, proposed, assessed or threatened. There are no Liens
on the assets of MikeSam for unpaid Taxes. No waiver or extension
of time to assess any Taxes has been given or requested. No claim
has been made by any taxing authority in any jurisdiction that
MikeSam is or may be subject to taxation by that jurisdiction.
For the purposes of this Section, the term "Tax" shall include
all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments imposed by any federal,
state, local or foreign or other taxing authority on MikeSam or
any of its former or present properties, assets or operations
(including as a result of being a member of an affiliated,
combined or unitary group or as a result of any obligation
arising out of an agreement to indemnify any other Person), and
including those related to income, employee welfare or retirement
(including social security), gross receipts, sales, use,
occupation, services, leasing, valuation, addition of value,
transfer, license, customs duties or franchise; provided,
however, that, although the term "Tax" is defined herein to
include "income", nothing herein shall be deemed to be a
representation or warranty that the other member of MikeSam who
is not Seller, has paid all Tax that is owing by reason of the
fifty percent (50%) share of the income of MikeSam that has been
allocated for each fiscal year of MikeSam to such other member as
required by the operating agreement of MikeSam and as has been
set forth in the K-1 informational forms which have been filed by
MikeSam and a copy of which K-1 returns have been furnished to
such other member during the existence of MikeSam in accordance
with the requirements of the Internal Revenue Code and California
law. MikeSam's Tax Returns have never been audited by the
Internal Revenue Service or comparable state, local or foreign
agencies. MikeSam has not been a member of an Affiliated Group or
been included in a combined, consolidated or unitary Tax return.
MikeSam is not a party to or bound by any Tax allocation or Tax
sharing agreement or has any current or potential obligation to
indemnify any other Person with respect to Taxes. MikeSam is not
required to make any adjustments under Section 481(a) of the Code
by reason of a change in accounting method which affects any
taxable year ending after the Closing Date, or has any
application pending to effect such a change of accounting method.
(m) Compliance with Applicable Law. (a) MikeSam does not require and
has no licenses, permits, franchises, authorizations,
registrations and approvals (the "Licenses") from any
Governmental Authority and is not and will not be subject to any
pending or threatened administrative or judicial proceeding with
respect to the lack thereof. MikeSam has not acted or been in
violation of, any Rule of any Governmental Authority applicable
to MikeSam or its assets or prior operations.
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<PAGE> 8
(n) Brokers' Fees and Commissions. The Seller has not employed any
investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby.
(o) Labor Matters. (a) No present or former employee or independent
contractor performing services for MikeSam has a Claim pending or
has threatened to or will make a Claim against MikeSam (under any
Rule of any Governmental Authority or otherwise), including any
Claim for (i) overtime pay, other than overtime pay for the
current payroll period, (ii) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current
payroll period), (iii) vacations, time off or pay in lieu of
vacation or time off, other than vacation or time off (or pay in
lieu thereof) earned in respect of MikeSam's current fiscal year,
(iv) any violation of any Rule or contract relating to minimum
wages or maximum hours of work, (v) discrimination against
employees on any basis, (vi) unlawful or wrongful employment or
termination practices, (vii) unlawful retirement, termination or
labor relations practices or breach of contract or (viii) any
violation of occupational safety or health standards. There are
and will be no administrative charges, arbitration or mediation
proceedings or court complaints pending or threatened against
MikeSam before the U.S. Equal Employment Opportunity Commission
or any state or federal court or agency or any other entity
concerning alleged employment discrimination, contract violation
or any other matters relating to the employment of labor. There
is and will be no unfair labor practice charge or complaint
pending or threatened against MikeSam before the National Labor
Relations Board or any similar state or local body.
(p) Compliance With Laws. MikeSam is and has been in compliance with
all applicable Rules relating to the employment of labor,
including employment and employment practices, terms and
conditions of employment, wages and hours, equal opportunity,
occupational health and safety, severance, termination or
discharge, collective bargaining and the payment of employee
welfare and retirement and other taxes, the Worker Adjustment
Retraining and Notification Act and the Immigration Reform and
Control Act of 1986, each as amended, and is not engaged in any
unfair labor practice or any violation of any other law, rule or
regulation concerning employment or retention of independent
contractors.
(q) No Employees. MikeSam has no employees. As of the Closing Date,
MikeSam will not a signatory or party to, or otherwise bound by,
a collective bargaining agreement (or any other agreement with
any labor organization) which covers employees of MikeSam, and
there is no activity or proceeding of any labor organization (or
representative thereof) to organize any unorganized employees of
MikeSam. There is not pending or threatened against MikeSam any
labor dispute, grievance, slowdown, lockout, strike, work
stoppage or other collective labor action in effect, pending or
threatened against or affecting MikeSam.
(r) Accounts Receivable; Liabilities. MikeSam has no accounts
receivable or liabilities. MikeSam will have no liability for any
healthcare, medical, disability,
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<PAGE> 9
death benefit or similar expenses of any manager or employee of
MikeSam or any other Person which are the result of injuries or
illnesses which occurred prior to the Closing (regardless of when
such expenses are incurred).
(s) No Leased or Owned Real Property. MikeSam does not own, lease or
sublease any real property.
(t) Disclosure. All documents, agreements and other papers and
materials delivered by or on behalf of the Seller in connection
with this Agreement, and the transactions contemplated hereby and
thereby are true, complete and accurate. None of the
representations, warranties or statements of the Seller contained
in this Agreement or in any Schedules or Exhibits hereto contains
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the representations, warranties or statements made, in the
context in which made, not false or misleading. There is no fact
that the Seller has not disclosed to Salton in writing that
causes an adverse effect or could result in an adverse effect.
The Seller acknowledges that the statements contained in this
Section shall not be deemed to limit or qualify any of the other
representations or warranties contained in this Agreement, in any
Schedules or Exhibits hereto or in any agreement or document
delivered in connection herewith.
(u) No Existing Commitment to Sell. Seller has no commitment or legal
obligation, absolute or contingent, to any Person other than
Salton to sell, assign, license, transfer or effect a sale of any
of his interest in the Foreman Interests or to enter into any
contract or cause the entering into of a contract with respect to
the Foreman Interests.
(v) Organization of MikeSam. MikeSam was a duly organized and
existing limited liability company in good standing under the
laws of California.
(w) Seller's Legal Capacity. Seller has the legal capacity to own his
distributed interest in the Foreman Interests and to enter into
and perform this Agreement As of the Closing Date, Seller shall
own all right, title and interest in and to the Foreman Interests
free and clear of all Liens.
(x) Status of MikeSam. MikeSam has all requisite power and authority
to own its properties and MikeSam is not insolvent within the
meaning of Section 1-201(23) of the Uniform Commercial Code. No
order has been made or petition presented or resolution adopted
which relates to the winding-up of MikeSam or for an
administration order in respect of MikeSam, nor has any
administrative receiver, receiver or receiver and manager been
appointed by any Governmental Authority or other Person with
respect to all or part of the assets of MikeSam, and no power to
make any such appointment has arisen. Seller has delivered to
Purchaser complete and correct copies of the Articles of
Organization (or comparable organizational documents) presently
in effect for MikeSam, and MikeSam is not in default under or in
violation of any provision of such documents.
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(y) MikeSam Qualification. MikeSam is qualified or licensed to do
business and is in good standing in California which is the only
jurisdiction in which the conduct of its business requires such
licensing or qualification.
(z) Seller's Due Authorization. This Agreement has been duly and
validly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Salton, constitute valid
and binding legal obligations of the Seller, enforceable against
Seller in accordance with its terms.
(aa) Sale No Conflict with MikeSam Documents. Neither the execution,
delivery or performance of this Agreement nor the consummation of
the transactions contemplated hereby will (a) violate, conflict
with or result in any breach of any provision of the Articles of
Organization or Bylaws (or comparable organizational documents)
of MikeSam, (b) violate, conflict with or result in a violation
or breach of, or constitute a default (with or without due notice
or lapse of time or both) under, or permit the termination of, or
require any notice under, or require the consent of any other
party to, or result in the acceleration of, or entitle any party
to accelerate (whether as a result of a change in control of
MikeSam) any obligation or agreement, or result in the loss of
any benefit or the imposition of any fee or penalty, or give rise
to the creation of any Lien upon the property or assets of
MikeSam, or (c) violate any Rules (including foreign, federal and
state securities laws) of any Governmental Authority applicable
to MikeSam or the Seller.
(bb) No Filing Required. No filing or registration with, no notice to
and no permit, authorization, consent or approval of, any third
party or any Governmental Authority is necessary for the
consummation of the transactions contemplated by this Agreement.
(cc) Books and Records. The books and records of MikeSam are, and have
been, maintained in the usual, regular, ordinary and appropriate
manner by Seller or his agents, and all of the transactions of
MikeSam, if any, are properly reflected therein.
8. Representations and Warranties of Salton. Salton represents and
warrants and agrees with Seller that, as of the date hereof and up to
and including the date of closing that each of the following
representations is true and correct:
(a) Organization. Salton is a duly organized and existing corporation
under the laws of the State of Delaware.
(b) Corporate Authority. Salton has the corporate power under its
articles of incorporation and by laws to enter into and perform
this Agreement.
(c) Board Approval. The Board of Directors of Salton has, by
unanimous written consent in lieu of a special meeting,
authorized Salton to enter into and perform this Agreement.
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(d) Restrictions on Salton. There are no contracts currently in
effect which limit or restrict the right of Salton to enter into
or perform this Agreement except only that Salton may determine
that it requires consent from its lenders under the Second
Amended and Restated Credit Agreement dated January 7, 1999 by
and among Salton and Lehmann Brothers Commercial Paper, Inc., as
Administrative Agent for the serveral lenders who are parties
from time to time to such agreement ("Credit Agreement") to enter
into and close the transactions contemplated by this Agreement.
(e) Shares Available. Salton has authorized but unissued shares of
Common Stock and shares of Common Stock held as Treasury shares
and has reserved, and shall continue to keep reserved for
issuance in connection with the Closing of this Agreement a
sufficient number of Shares to satisfy its obligation to deliver
the number of Shares necessary to close this Agreement.
(f) There are no existing uncured events of default on the part of
Salton under its Credit Agreement.
(g) Salton has authorized but unissued shares of Common Stock and
shares of Common Stock held as Treasury shares and has reserved,
and shall continue to keep reserved for issuance in connection
with the Closing of this Agreement a sufficient number of Shares
to satisfy its obligation to deliver the number of Shares
necessary to close this Agreement.
9. Demand Registration of Salton Shares.
(a) Requests for Registration. The holders of a majority of the
Salton Shares may make one request for registration under the
Securities Act of all or part of their Salton Shares on Form S-1
or any similar long-form registration ("Long-Form Registration")
or, if available, on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registration"). The request for a
Demand Registration (as defined below) shall specify the
approximate number of Salton Shares requested to be registered
and the anticipated per share price range for such offering.
Within ten days after receipt of any such request, Salton will
give written notice of such requested registration to all other
registered holders of the Salton Shares and, subject to Section 8
(b) below, will include in such registration all Salton Shares
with respect to which Salton has received written requests for
inclusion therein within fifteen (15) business days after the
receipt of Salton 's notice. The registration requested pursuant
to this Section 9 (a) is referred to herein as the "Demand
Registration." The holders of the Salton Shares taken together
will be entitled to request for their collective benefit only one
(1) Demand Registration. Salton will pay all Registration
Expenses (as defined in this Section 9 in connection with such
Demand Registration whether or not the Registration becomes
effective.
(b) Priority on Demand Registrations. Salton may include in the
Demand Registration securities of Salton which are not Salton
Shares without the consent of the holders of the Salton Shares to
be included in such registration unless the
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managing underwriters of the Demand Registration advise Salton in
writing that, in their opinion, the number of Salton Shares and
other securities of Salton requested to be included in such
offering exceeds the number of securities of Salton which can be
sold therein without adversely affecting the marketability of the
offering. If such managing underwriters so advise Salton, Salton
will include in such registration, prior to the inclusion of any
securities of Salton which are not Salton Shares, the number of
Salton Shares requested to be included, which in the opinion of
such underwriters, can be sold without adversely affecting the
marketability of the offering, pro rata among the respective
holders thereof on the basis of the number of shares of Salton
Shares owned by each such holder.
(c) Selection of Underwriters. The Demand Registration will be
managed by the holders of Salton Shares as follows: (i) the
holders of a majority of the Salton Shares included in the Demand
Registration will have the right to select the managing
underwriters to administer the offering, subject to Salton's
approval; and (ii) in consultation with the managing
underwriter(s), the holders of a majority of the Salton Shares
will have the power to determine the number of Salton Shares to
be included in the offering (subject to the applicable
limitations set forth herein), the offering price per Salton
Share, the underwriting discounts and commissions per Salton
Share, the timing of the registration (subject to the applicable
limitations set forth herein) and all other administrative
matters related to the registration.
(d) Piggyback Registrations.
(i) Option to Offer Piggyback. Whenever Salton proposes to
register any of its securities under the Securities Act and
the registration form to be used for the registration of
such securities (a"Piggyback Registration"), whether or not
for sale for its own account, Salton may elect to give
prompt written notice to the holders of Salton Shares of
its intention to effect such a registration and to include
in such registration all Salton Shares with respect to
which Salton has received written requests for inclusion
therein within 15 business days after the receipt of
Salton's notice, subject to the terms of this Section 9.
(ii) Piggyback Expenses. The Registration Expenses of the
holders of Salton Shares will be paid by Salton in all
Piggyback Registrations.
(iii) Loss of Demand Registration. If the holders off Salton
Shares sell or are offered the right to sell at least
seventy five percent (75%) of the total number of Salton
Shares issued at the Closing in one or more Piggy Back
Registrations, the holders of Salton Shares shall no longer
be entitled to receive a Demand Registration under this
Agreement.
(e) Holdback Agreements.
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(i) Each holder of Salton Shares agrees not to effect any
public sale or distribution (including sales pursuant to
Rule 144) of equity securities of Salton, or any
securities, options or rights convertible into or
exchangeable or exercisable for such securities, during the
seven (7) days prior to and the one hundred eighty (180)
day period beginning on the effective date of any
underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the
registered public offering otherwise agree.
(ii) Salton agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the
one hundred eighty (180) day period beginning on the
effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of
such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor form), unless the
underwriters managing the registered public offering
otherwise agree.
(f) Registration Procedures. Whenever the holders of Salton Shares
have requested that any Salton Shares be registered pursuant to
this Agreement, Salton will use its reasonable efforts to effect
the registration and the sale of such Salton Shares in accordance
with the intended method of disposition thereof and pursuant
thereto Salton will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective for a period of either (i)
not less than six months (subject to extension pursuant to
Section 9 (h) or, if such registration statement relates to
an underwritten offering, such longer period as in the
opinion of counsel for the underwriters a prospectus is
required by law to be delivered in connection with sales of
Salton Shares by an underwriter or dealer or (ii) such
shorter period as will terminate when all of the securities
covered by such registration statement have been disposed
of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such
registration statement (but in any event not before the
expiration of any longer period required under the
Securities Act), and to comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by such registration statement until
such time as all of such securities have been disposed of
in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such
registration statement;
(ii) furnish to each seller of Salton Shares such number of
copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such
registration statement (including each preliminary
prospectus) and such other documents as such seller may
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<PAGE> 14
reasonably request in order to facilitate the disposition
of the Salton Shares owned by such seller;
(iii) use its reasonable efforts to register or qualify the
Salton Shares under such other securities or blue sky laws
of such jurisdictions as any seller reasonably requests and
do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the
Salton Shares owned by such seller (provided that Salton
will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise
be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such
jurisdiction);
(iv) notify each seller of such Salton Shares, at any time when
the prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the
discovery of the happening of any event as a result of
which, the prospectus included in such registration
statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein
not misleading in the light of the circumstances under
which they were made, and, at the request of any such
seller, Salton will prepare and furnish to such seller a
reasonable number of copies of a supplement or amendment to
such prospectus so that, as thereafter delivered to the
purchasers of such Salton Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading in the light of the circumstances under which
they were made;
(v) enter into such customary agreements (including
underwriting agreements in customary form) and take all
such other actions as the holders of a majority of the
Salton Shares being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the
disposition of such Salton Shares;
(vi) make available for inspection by any seller of Salton
Shares, any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent
corporate documents and properties of Salton, and cause
Salton's officers, directors, employees and independent
accountants to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(vii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related
prospectus or suspending the
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<PAGE> 15
qualification of any securities included in such registration
statement for sale in any jurisdiction, Salton will use
reasonable efforts promptly to obtain the withdrawal of such
order;
(viii) obtain one or more comfort letters, dated the effective
date of such registration statement (and, if such
registration includes an underwritten public offering,
dated the date of the closing under the underwriting
agreement), signed by Salton's independent public
accountants in customary form and covering such matters of
the type customarily covered by comfort letters as the
holders of a majority of the Salton Shares being sold
reasonably request (provided that such Salton Shares
constitute at least 10% of the securities covered by such
registration statement); and
(ix) provide a legal opinion of Salton's outside counsel, dated
the effective date of such registration statement (and, if
such registration includes an underwritten public offering,
dated the date of the closing under the underwriting
agreement), with respect to the registration statement,
each amendment and supplement thereto, the prospectus
included therein (including the preliminary prospectus) and
such other documents relating thereto in customary form and
covering such matters of the type customarily covered by
legal opinions of such nature.
(x) Salton may require each seller of Salton Shares as to which
any registration is being effected to furnish Salton such
information regarding such seller and the distribution of
such securities as Salton may from time to time reasonably
request in writing. .
(g) Registration Expenses. All expenses incident to Salton's
performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, salaries and expenses
of its officers and employees performing legal or accounting
duties, the expense of any annual audit or quarterly review, the
expense of any liability insurance, the expenses and fees for
listing the securities to be registered on the New York Stock
Exchange, and fees and disbursements of counsel for Salton and
all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained
by Salton (all such expenses being herein called "Registration
Expenses"), will be borne by Salton.
(h) Delay of Registration. Notwithstanding the foregoing, Salton
shall have the right to delay the effectiveness of the
registration and of the listing of the Salton Shares for a period
of up to one hundred eighty (180) days if: there are, in Salton's
judgment, possible developments, events or actions which may
occur concerning Salton or its business which would be required
to be disclosed in a registration statement filed with the SEC,
which are not in the best interest of Salton to disclose and need
not be disclosed under the Securities Act unless and until such
developments, events or actions occur
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<PAGE> 16
(i) Participation in Underwritten Registrations.No Person may
participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by
the Person or Persons entitled hereunder to approve such
arrangements (including, without limitation, pursuant to the
terms of any over-allotment or "green shoe" option requested by
the managing underwriter(s); provided, that no holder of
Registrable Securities will be required to sell more than the
number of Registrable Securities that such holder has requested
Salton to include in any registration) and (ii) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
10. Indemnification.
(a) Salton. Salton agrees to indemnify and hold harmless each holder
of Salton Shares, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act)
against any losses, claims, actions, proceedings, judgments,
damages and liabilities, joint or several, to which such holder
or any such director, officer or controlling person may become
subject to under the Securities Act or otherwise (collectively
"Loss"), insofar as such Loss arises out of or is based upon (i)
any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto
(relating to the Salton Shares) or (ii) any omission or alleged
omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
Salton will reimburse such holder and each such director, officer
and controlling person for any legal or any other expenses
incurred by them in connection with investigating or defending
any such Loss; provided, however, that Salton shall not be liable
in any such case to the extent that any such Loss arises out of
or is based upon an untrue statement or alleged untrue statement,
or omission or alleged omission, made in such registration
statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information
prepared and furnished to Salton by such holder expressly for use
therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or
supplements thereto after Salton has furnished such holder with a
sufficient number of copies of the same. In connection with an
underwritten offering, Salton will indemnify such underwriters,
their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification
of the holders of Salton Shares.
(b) Seller. In connection with any registration statement in which a
holder of Salton Shares is participating, each such holder will
furnish to Salton in writing such information and affidavits as
Salton reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted
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<PAGE> 17
by law, will indemnify and hold harmless each other holder of
Salton Shares, Salton, its directors and officers and each other
Person who controls Salton (within the meaning of the Securities
Act) against any Loss, joint or several, to which such other
holder, Salton or any such director or officer or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or in any application
or (ii) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue
statement or omission is made in such registration statement, any
such prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application, in reliance upon and
in conformity with written information prepared and furnished to
Salton by such holder expressly for use therein, and such holder
will reimburse Salton and each such director, officer and
controlling Person and each other holder of Salton Shares for any
legal or any other expenses incurred by them in connection with
investigating or defending any such Loss.
(c) Notice; Defense. Any person entitled to indemnification hereunder
will (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification and (ii)
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
acceptable to the indemnifying party. If such defense is assumed,
the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party
a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such
claim.
(d) Survival. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or
any officer, director or controlling person of such indemnified
party and will survive the transfer of securities. Salton also
agrees to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the
event Salton's indemnification is unavailable for any reason. .
11. Survival of Representations, Warranties. All representations and
warranties of Seller and Salton contained herein shall survive the
Closing Date and shall terminate at the
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<PAGE> 18
close of twenty four (24) full calendar months next following the
Closing Date. Upon the termination of a representation or warranty in
accordance with the foregoing, the representation or warranty shall
have no further force or effect for any purpose under this Agreement,
provided that, any representation or warranty in respect of which
indemnity may be sought under Section 13 and the indemnity with
respect thereto, shall survive the date at which it would otherwise
terminate pursuant to this Section 12 if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity
shall have been given to the party against whom such indemnity may be
sought prior to such time.
12. Indemnification.
(a) By Seller. Seller shall defend and indemnify Salton, and its
officers and directors, and hold each of them harmless from and
against any and all claims, demands, actions, suits, judgments,
liability and loss, including legal fees and expenses and court
costs (collectively "Loss") incurred by any of them in connection
with, arising out of, or resulting from (i) any breach of any
representation or warranty made by Seller in this Agreement; or
(ii) any failure by Seller to perform in a timely manner any
agreement, covenant or obligation of Seller pursuant to this
Agreement.
(b) By Salton. Salton shall defend and indemnify Seller, and its
officers and directors, and hold each of them harmless from and
against any and all Loss incurred by each of them in connection
with, arising out of or resulting from (i) any breach or
inaccuracy of any representation or warranty made by Salton in
this Agreement or (ii) any failure by Salton to perform in a
timely manner any agreement, covenant or obligation of Salton
pursuant to this Agreement.
(c) Defense of Claims. If a claim for Loss (a "Claim") is to be made
by a party entitled to indemnification hereunder (the
"Indemnified Party") against the party from whom indemnification
is claimed (the "Indemnifying Party"), the Indemnified Party
shall give written notice (a "Claim Notice") to the Indemnifying
Party as soon as practicable after the Indemnified Party becomes
aware of any fact, condition or event which may give rise to Loss
for which indemnification may be sought under this Section 13. If
any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice
thereof shall be given to the Indemnifying Party as promptly as
practicable (and in any event within ten (10) business days after
the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not
affect rights to indemnification hereunder, except to the extent
that the Indemnifying Party demonstrates actual Loss caused by
such failure. Notwithstanding the foregoing, a Claim Notice must
be made within the survival period set forth in Section 12,
whether or not the Indemnifying Party is prejudiced by any
failure to give the Claim Notice. The Claim Notice shall describe
in reasonable detail the nature of the Claim, including an
estimate of the amount of Loss that have been or may be suffered
or incurred by the Indemnified Party attributable to such Claim,
the basis of the Indemnified Party's request for indemnification
under the Agreement and all
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<PAGE> 19
information in the Indemnified Party's possession relating to such
Claim. After receipt of such Claim Notice, the Indemnifying Party
shall be entitled, if it so elects, at its own cost, risk and expense,
(i) to take control of the defense and investigation of such lawsuit
or action and (ii) to employ and engage attorneys of its own choice to
handle and defend the same, provided however that the attorneys shall
be reasonably acceptable to the Indemnified Party. If the Indemnifying
Party fails to assume the defense of such Claim within ten (10)
business days after receipt of the Claim Notice, the Indemnified Party
against which such Claim has been asserted will (upon delivering
notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the
account and risk of the Indemnifying Party; provided, however, that
such Claim shall not be compromised or settled without the written
consent of the Indemnified Party, which consent shall not be
unreasonably withheld. In the event the Indemnifying Party assumes the
defense of the Claim, the Indemnifyong Party will keep the Indemnified
Party reasonably informed of the progress of any such defense,
compromise or settlement. Notwithstanding the foregoing, the
Indemnified Party shall be entitled to conduct its own defense at the
cost and expense of the Indemnifying Party if the Indemnified Party
establishes that the conduct of its defense by the Indemnifying Party
would reasonably be likely to prejudice materially the Indemnified
Party due to a conflict of interest between the Indemnified Party and
the Indemnifying Party; and provided further that in any event the
Indemnified Party may participate in such defense at its own expense.
(d) Settlement. In the event that the Indemnified Party settles any
Claim without the prior written consent of the Indemnifying
Party, the Indemnifying Party shall have no further
indemnification obligations under this Section 13 with respect to
such Claim; provided, however, that if the Indemnifying Party
refuses to defend or otherwise handle such Claim and it is
subsequently determined that the Indemnifying Party is or was
obligated to defend or indemnify the Indemnified Party with
respect to such Claim, then the Indemniying Party shall remain
obligated with respect to such settlement amount. If the
Indemnifying Party shall control the defense of any such Claim,
the Indemnifying Party shall obtain the prior written consent of
the Indemnified Party (which shall not be unreasonably withheld)
before entering into any settlement of a Claim or ceasing to
defend such Claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such
settlement or cessation does not expressly and unconditionally
release the Indemnified Party from all liabilities and
obligations with respect to such Claim, without prejudice. In the
event that the Indemnifying Party proposes a settlement to any
Claim with respect to which the Indemnifying Party is or was
entitled to defend, which settlement is satisfactory to the party
instituting such Claim, and the Indemnified Party withholds its
consent to such settlement, and thereafter a final judgment is
entered against the Indemnifying Party or Indemnified Party
pursuant to which Loss exceeds the amount of the proposed
settlement, then in such case the Indemnifying Party shall have
no obligation to indemnify the Indemnified Party under this
Section 12 against and in respect of
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<PAGE> 20
the amount by which the Loss resulting from such final judgment exceed
the amount of the proposed settlement.
(e) Mitigation. Each Indemnified Party shall have an obligation to
mitigate Loss under this Agreement, and to that end each party
shall use its reasonable efforts and shall consult and cooperate
with each other with a view towards mitigating Loss, costs and
expenses that may give rise to claims for indemnification under
this Section 12.
(f) Cooperation. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated
by this Agreement is commenced, whether before or after the
Closing, the parties hereto agree to cooperate and use reasonable
efforts to vigorously defend against and respond thereto and make
available to each other such personnel, witnesses, books,
records, documents or other information within its control that
are necessary or appropriate for such defense; provided that,
subject to Section 12, the Indemnifying Party shall reimburse the
Indemnified Party for its out of pocket expenses incurred in
connection therewith.
(g) Insurance Proceeds. With respect to any Claim required to be
indemnified pursuant to this Agreement, so long as the
Indemnifying Party has complied with its indemnification
obligations on such Claim, (i) to the extent available, the
Indemnified Party shall assign to the Indemnifying Party any
applicable proceeds under any insurance policy which covers the
matter which is the subject of the indemnification and shall take
reasonable steps to insure that the Indemnifying Party obtains
the benefits of such policy, including providing any notices as
required under such policy; and (ii) if the Indemnified Party
receives insurance proceeds with respect to any Loss paid by the
Indemnifying Party, then the Indemnified Party shall reimburse
the Indemnifying Party in an amount equivalent to such proceeds
up to the amount actually paid by the Indemnifying Party.
(h) Offset. If a Put or a Call is exercised under this Agreement,
following the Closing of this Agreement, in addition to any other
remedies set forth herein for the benefit of Salton, upon any
breach by Seller of any representation, warranty or agreement by
Seller set forth in this Agreement, including the indemnification
provisions of this Section 12, Salton shall have the right to
offset any amounts or any performance owing by Salton to Seller
under this Agreement or any other agreement between Seller and
Salton any the amount of any Loss incurred by Salton by reason of
such breach by Seller.
13. Definitions. As used in this Agreement, the following capitalized
terms shall have the following meaning.
"Affiliate" shall mean (i) a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, another Person and (ii) any parent, spouse, lineal
descendant or adopted child of a Person specified in clause (i), any spouse or
adopted child of any such descendant or any child of such spouse, the executors,
administrators,
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<PAGE> 21
conservators or personal representatives of any Person referred to in this
clause (ii) and any Person which, directly or indirectly, is owned or controlled
by one or more of the Persons referred to in this clause (ii);
"Affiliated Group" means any affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group under
state, local or foreign income Tax law) of which the Company or any of its
Affiliates is or has been a member;
"Claims" shall mean all pending and threatened claims, actions, causes
of action, demands, orders, notices, suits, grievances, proceedings, disputes,
arbitrations and investigations;
"Environmental Claim" shall mean any Claim (written or oral) by any
Person or any Governmental Authority alleging potential Liability or obligations
(including potential Liability or obligations for or requirement to incur
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the presence, release or threatened
release into the environment, of any Materials of Environmental Concern at any
location, whether or not owned or operated by the Company, or (ii) circumstances
forming the basis of any violation, potential violation or alleged violation, or
Liability, potential Liability or alleged Liability, under any Environmental
Law;
"Environmental Laws" shall mean all Rules and permit conditions
relating to pollution or protection of human health or the environment
(including ambient air, indoor air, surface water, ground water, land surface or
subsurface strata), including Rules relating to emissions, discharges, releases
or threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern;
"Governmental Authority" shall mean any court (federal, state, local,
foreign or otherwise), any arbitration or other alternative dispute mechanism,
any federal, state, local, foreign or other government or governmental
department, agency, board, commission, bureau or instrumentality and any other
regulatory authority;
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes;
"Liens" shall mean all title defects, charges, claims, restrictions,
liens, pledges, security interests, mortgages, tenancies and other possessory
interests, conditional sale or other title retention agreements, assessments,
easements, rights of way, covenants, restrictions, rights of first refusal,
encroachments and other burdens, options, restrictions or encumbrances of any
kind;
"Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or, as applicable, any other entity;
"Rules" shall mean any federal, state, local or foreign statute, law,
code, ordinance, rule, regulation, judgment, writ, decree, injunction, order,
concession, grant, franchise, permit or license or other governmental or
regulatory authorization or approval applicable to the Company or any of the
Stockholders or any of their respective assets, properties or operations or any
Plan;
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<PAGE> 22
14. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted
by telecopy, electronic or digital transmission method and
followed by a confirmation of receipt from the recipient of the
notice ; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service
(e.g., DHL); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent
as indicated below:
If to Seller:
Sam Perlmutter
5757 Wilshire Boulevard, Suite 636
Los Angeles, CA 90036
Tel: (323) 931-1017
Fax: (323) 857-1351
If to Salton, addressed to:
Salton, Inc.
550 Business Center Drive
Mount Prospect, Il 60056
Attn: Leon Dreimann,
Chief Executive Officer
Tel: 847 803 4600
Fax: (847) 803-1211
(b) Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws
of the State of Delaware (without reference to its choice of law
provisions).
(c) Entire Agreement; Amendments and Waivers. This Agreement, ,
together with all exhibits and schedules hereto and thereto , and
the constitute the entire agreement among the parties pertaining
to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by
the party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise
expressly provided.
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<PAGE> 23
(d) Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(e) Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any
other such instrument.
(f) Titles; Gender. The titles, captions or headings of the Sections
herein, and the use of a particular gender, are for convenience
of reference only and are not intended to be a part of or to
affect or restrict the meaning or interpretation of this
Agreement.
(g) Waiver of Trial by Jury. Each party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand,
action or cause of action arising under or in connection with
this Agreement or the transaction contemplated hereby.
(h) Interpretation. The headings and captions contained in this
Agreement and in the Schedules hereto are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Further Assurances. Each of Seller and Salton will use reasonable
efforts to implement the provisions of this Agreement, including
but not limited to the execution and delivery of such other
documents (including any license, assignment or assumption
agreement, official certificates of registration, renewals,
transfers or other documents supporting ownership of trademarks)
in addition to those required by this Agreement, in form and
substance reasonably satisfactory to the other party, as may be
reasonably deemed necessary to implement any provision of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as the date first written above.
SALTON, INC.
a Delaware Corporation
/s/ Leon Dreimann /s/ Sam Perlmutter
- ----------------------------------- --------------------------
Name: Leon Dreimann Name: Sam Perlmutter
Title: Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.3
AGREEMENT MADE AS OF JULY 1, 1999
BY AND BETWEEN
MICHAEL SREDNICK ("SREDNICK")
AND
SALTON INC., A DELAWARE CORPORATION ("SALTON")
WHEREAS:
A. Srednick is sometimes referred to for convenience in this Agreement as
"Seller";
B. Seller desires to acquire an option to sell to Salton (the "Put") and
Salton desires to acquire an option to purchase from Seller (the
"Call") all of the outstanding shares of stock (the "Stock") of
Srednick and Associates, Ltd. (the "Company").
THEREFORE, Seller and Salton agree as set forth below.
1. Property Subject to Options. The property subject to the Put and the
Call is all right, title and interest in the Stock.
2. Seller's Put; Purchase Price.
(a) Seller shall have the right to exercise its Put of the Stock
during a period ("Put Period") that commences December 1, 1999,
and ends at the close of business, CST, on the thirtieth (30th
day) next following the first day of the Put Period (including the
first day of the Put Period). If Seller does not exercise its Put
within the Put Period, the Put shall terminate automatically
without any notice from Salton and Seller shall have no further
right to compel Salton to purchase the Stock.
(b) If Seller gives Notice to Salton of Seller's exercise of its Put,
there shall be a closing of the sale pursuant to the Put (the
"Closing") which shall occur as set forth in Section 6(c) not
later than sixty (60) days after such Notice is given on a date
designated by Salton, except that if the sixtieth (60th) day is
not a day when banks in Los Angeles and New York City are both
open for business ("Business Day"), then the Closing shall occur
not later then the next day that is a Business Day.
(c) If Seller's Put is exercised, the total purchase price to be paid
to Seller for the Stock is thirteen million seven hundred fifty
thousand dollars ($13,750,000) of which six million eight hundred
seventy-five thousand dollars ($6,875,000) shall be paid in cash
and six million eight hundred seventy-five thousand dollars
($6,875,000) shall be paid in shares of Common Stock of Salton
(the "Salton Shares") valued as set forth in Section 5.
<PAGE> 2
3. Salton's Call; Purchase Price.
(c) Salton shall have the right to exercise its Call on the Stock
within a thirty (30) day period ("Call Period") that begins on the
day next following the end of the Put Period and ends on the close
of business, CST, on the thirtieth (30th) day next following the
commencement of the Call Period (including the first day of the
Call Period). If Salton has not exercised its Call within the Call
Period, the Call shall terminate automatically without any notice
from Seller and Salton shall have no further right to compel
Seller to sell the Stock.
(d) Upon Salton giving Notice to Seller of Salton's exercise of its
Call, there shall be a Closing of the sale pursuant to the Call
which shall occur as set forth in Section 6(c) not later than
thirty (30) days after such Notice is given on a date designated
by Salton, except that if the thirtieth (30th) day is not a
Business Day, then the Closing shall occur not later then the next
day that is a Business Day.
(e) If Salton's Call is exercised by Salton, the total purchase price
to be paid to Seller for the Stock is thirteen million five
hundred thousand dollars ($13,500,000) of which six million seven
hundred fifty thousand dollars ($6,750,000) shall be payable in
cash and six million seven hundred fifty thousand dollars
($6,750,000) shall be payable in Salton Shares valued as set forth
in Section 5. forth in Section 5.
4. Terms of Payment, The total purchase price owing to Seller shall be
paid as set forth below.
(e) Put Price. On the exercise of Seller's Put, the total purchase
price, $13,750,000, shall be paid as follows:
(i) On the Closing (defined in Section 6(c) below), one million
three hundred seventy-five thousand dollars ($1,375,000)
shall be paid in cash and six million eight hundred
seventy-five thousand dollars ($6,875,000) shall be paid in
shares of the Common Stock of Salton (the "Salton Shares").
The cash portion of the purchase price to be paid at the
Closing shall be delivered by Federal Funds wired to a bank
account designated by Seller prior to the date of the
Closing. The portion of the purchase price to be paid in
Salton Shares shall be delivered in one or more stock
certificates of Salton evidencing the Salton Shares
registered in the name of Seller.
(ii) The balance of the cash portion of the purchase price, five
million five hundred thousand dollars ($5,500,000) shall be
paid in four equal installments of one million three hundred
seventy-five thousand dollars ($1,375,000) each, without
interest, on the first day of July, 2000, 2001, 2002 and
2003 unless such July 1 is not a
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<PAGE> 3
Business Day, in which case the payment shall be made on the
next date which is Business Day. Each installment shall be
delivered by federal funds wired to a bank account
designated by Seller prior to the date of Closing or to such
other bank account as may be designated by Seller from time
to time at least ten (10) days prior to the payment due
date.
(f) Call Price. On the exercise of Purchaser's Call, the total
purchase price, $13,500,000, owing to Seller shall be paid as set
forth below:
(ii) On the Closing (defined in Section 6(c) below), one million
three hundred thousand dollars ($1,300,000) shall be paid in
cash and six million five hundred thousand dollars
($6,500,000) shall be paid in shares of the Common Stock of
Salton (the "Salton Shares"). The cash portion of the
purchase price to be paid at the Closing shall be delivered
by Federal Funds wired to a bank account designated by
Seller prior to the date of the Closing. The portion of the
purchase price to be paid in Salton Shares shall be
delivered in one or more stock certificates of Salton
evidencing the Salton Shares registered in the name of
Seller.
(iii) The balance of the cash portion of purchase price, five
million four hundred thousand dollars ($5,400,000) shall be
paid in four equal installments of one million three hundred
fifty thousand dollars ($1,350,000) each, without interest,
on the first days of July, 2000, 2001, 2002 and 2003 unless
such July 1 is not a Business Day, in which case the payment
shall be made on the next date which is Business Day. Each
installment shall be delivered by federal funds wired to a
bank account designated by Seller prior to the date of
Closing or to such other bank account as may be designated
by Seller from time to time at least ten (10) days prior to
the payment due date.
(b) Advance Payments. Salton shall receive credit at a Closing under
this Agreement, and, to the extent of Salton's payments, against
the annual installments of the purchase to be paid in cash, for
payments made by Salton after the date hereof, as advances toward
the cash portion of the purchase price in the event the call or
the Put is exercised.
5. Calculation of Number of Shares to be Delivered to Seller at Closing.
Calculation of Number of Shares to be delivered to Seller at Closing.
(a) On Exercise of Put. The number of shares of common stock of Salton
to be delivered to Seller on the Closing shall be the greater of
the following two numbers: (i) two hundred thirty-seven thousand
and sixty-nine (237,069) or (ii) 6,875,000 divided by the Average
Salton Price as defined in this Section 5.
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<PAGE> 4
(b) On Exercise of Call. The number of shares of common stock of
Salton to be delivered to Seller on the Closing shall be the
greater of the following two numbers: (i) two hundred twenty-four
thousand one hundred thirty eight (224,138) or (ii) 6,500,000
divided by the Average Salton Price as defined in this Section 5.
(c) The "Average Salton Price" shall be the average of the closing
prices of Salton common stock on the New York Stock Exchange
("NYSE") as reported on the NYSE Composite Transaction Tape for
the twenty trading days ending on the third trading day preceding
the Closing Date.
6. Conditions to Closing.
(a) Seller Conditions. At or before the Closing, Seller shall have
received the following:
(i) a copy of the Articles of Incorporation, as amended, of
Salton certified by the Delaware Secretary of State;
(ii) a copy of the By-Laws of Salton and a copy of the Unanimous
Consent of Directors of the Board of Directors of Salton
authorizing the execution, delivery and performance of this
Agreement, both certified by the Secretary of Salton;
(iii) a good standing certificate of Salton certified by the
Secretary of State of Delaware;
(iv) a bring down certificate executed by an officer of Salton
certifying that the representations and warranties of Salton
set forth in Section 8 below are true and correct as of the
Closing;
(v) Seller shall have received the cash portion of the purchase
price to be delivered at the Closing; and
(vi) Seller shall have received certificates for Salton Shares
issued in the name of Seller bearing a restrictive legend
which permits the Salton Shares to be sold only pursuant to
a registered offering pursuant to Section 9 or pursuant to
Rule 144 adopted by the Securities and Exchange Commission
and as amended after the date hereof..
(b) Salton Conditions. At or before the Closing, Salton shall have
received the following:
(i) a copy of the Articles of Incorporation, as amended, of the
Company certified by the California Secretary of State;
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<PAGE> 5
(ii) a good standing certificate of the Company certified by the
Secretary of State of California;
(iii) a copy of the organizational documents of MikeSam and the
operating agreement of MikeSam LLC;
(iv) a bring down certificate executed by an officer of the
Company certifying that the representations and warranties
of Seller set forth in Section 7 below are true and correct
as of the Closing Date;
(v) evidence of Uniform Commercial Code searches, searches,
federal tax lien searches and other certificates reasonably
requested by Salton in order to confirm that the Stock
being sold hereunder by Seller and the interest of the
Company in MikeSam are free and clear of all pledges,
security interests, Liens and encumbrances;
(vi) a stock certificate of the Company evidencing all of the
outstanding shares of the Company duly assigned to Salton;
(vii) such other documents and assignments as Salton may require
reasonably in order to effect the assignment and transfer
to Salton of the Stock sold hereunder; and
(viii) Salton shall have such consents, if any, as Salton
determines are required under Salton's existing Credit
Agreement with Lehman Brothers Commercial Paper Inc. as
Administrative Agent for the several bank lenders who are
parties from time to time to the Credit Agreement.
(c) Closing. The Closing shall occur on the date as determined above
in this Agreement at the offices of Sonnenschein Nath & Rosenthal
located at Suite 1500, 601 South Figueroa Street, Los Angeles, CA
90017 at 10 A.M., CST. At the Closing, Seller and Salton shall
each make the deliveries required of them as set forth above.
7. Representations and Warranties of Seller. Seller represents, warrants
and agrees with Salton that, as of the date hereof and up to and
including (except as otherwise herein provided) the date of Closing
that each of the following representations is true and correct:
(a) No Assets Except Interest in MikeSam. As of the Closing, the
Company has no property or assets of any kind whatsoever except
its interest in MikeSam LLC, a California limited liability
company ("MikeSam").
(b) Only Asset of MikeSam. MikeSam's only asset is its existing 15%
interest in a Joint Venture Agreement dated as of March 1, 1995
("JV Agreement") by and among Salton, Foreman Productions, Inc.
and Benjamin H., a California corporation, creating a joint
venture ("JV").
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<PAGE> 6
(c) Benjamin H. Benjamin H., a California corporation, never held an
interest in the JV and MikeSam holds the 15% interest in the JV
designated as belonging to Benjamin H.
(d) Only Members of MikeSam. The only two members of MikeSam are Sam
Perlmutter, an individual, and the Company.
(e) No Violation. Neither the execution, delivery or performance of
this Agreement nor the consummation of the transactions
contemplated hereby or thereby will (a) violate, conflict with or
result in any breach of any provision of the Articles of
Incorporation or Bylaws (or comparable organizational documents)
of the Company, or (b) violate, conflict with or result in a
violation or breach of, or constitute a default (with or without
due notice or lapse of time or both) under, or permit the
termination of, or require any notice under, or require the
consent of any other party to, or result in the acceleration of,
or entitle any party to accelerate (whether as a result of a
change in control of the Company any obligation or agreement, or
result in the loss of any benefit or the imposition of any fee or
penalty, or give rise to the creation of any Lien upon any assets
of the Company in each case under any of the terms, conditions or
provisions of any debt, note, bond, mortgage, indenture, deed of
trust, license, lease, permit, agreement or other instrument or
obligation to which the Company or Seller is a party or by which
they or any of their respective properties or assets may be bound
or affected or (c) violate any Rules (including foreign, federal
and state securities laws) of any Governmental Authority
applicable to the Company, or the Seller or any of their
respective properties.
(f) Capitalization of the Company. The authorized capital stock of the
Company consists solely of One Hundred Thousand (100,000) shares
of Common Stock, and there are issued and outstanding One Thousand
(1,000) shares of Common Stock owned of record and beneficially by
the Seller, free and clear of all Liens. There are no shares of
Common Stock held by the Company as treasury stock. All of the
issued and outstanding shares of Common Stock are validly issued,
fully paid, non-assessable and are without, and were not issued in
violation of, any preemptive rights. No other class of capital
stock of the Company is authorized, issued or outstanding, and
there are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments to acquire from the
Company any shares of capital stock of the Company, or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for any shares of capital stock of the Company,
or any other security of the Company. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights
with respect to the Company. There are no voting agreements,
voting trust agreements, proxies or stockholder or similar
agreements relating to the capital stock of the Company. Upon
delivery of and payment for the Stock as herein
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<PAGE> 7
provided, Seller shall convey to Salton valid and marketable title
thereto, free and clear of any Liens. No other Person, including
Affiliates of the Seller has any rights in, to or under or with
respect to the Stock. Upon delivery and payment for the Stock as
herein provided, such Stock shall be duly authorized, validly
issued, fully paid and non-assessable.
(g) Consents and Approvals. No filing or registration with, no notice
to and no permit, authorization, consent or approval of, any third
party or any Governmental Authority is necessary for the
consummation by the Seller of the transactions contemplated by
this Agreement or to enable the Company to continue to hold its
interest in MikeSam after the Closing.
(h) Books and Records. The books and records of the Company are, and
have been, maintained in the usual, regular, ordinary and
appropriate manner by the Company and all of the transactions of
the Company are properly reflected therein.
(i) Financial Statements. Seller has furnished to Salton (a) copies of
the reviewed balance sheet of the Company as of the last day in
the period ended December 31, 1998, together with the related
reviewed statements of income, stockholder equity and changes in
cash flows for such year, and the notes and supplementary
information thereto, accompanied by the review reports thereon of
the Company's independent public accountant, and (b) shall deliver
no later than December 10, 1999 copies of the unaudited balance
sheet of the Company as of November 30, 1999 (the "Most Recent
Balance Sheet"), together with the related unaudited consolidated
statements of income, stockholder equity and changes in cash flows
for the eleven month period ended on such date, certified by the
Seller (such reviewed and unaudited financial statements being
hereinafter referred to as the "Financial Statements"). The
Financial Statements and each item therein, including any notes
thereto (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods covered thereby ("GAAP"), (ii) present fairly the
financial position as of such dates and for the periods then
ended, (iii) are accurate, correct and complete and in accordance
with the books of account and records of the Company and (iv) can
be reconciled with the financial statements and the financial
records maintained and the accounting methods applied by the
Company for federal income tax purposes.
(j) C Status. The Company has never elected so called Subchapter S
status under Section 1351 et seq. of the Internal Revenue Code of
1986, as amended, and has always been taxed for federal income tax
purposes as a so called C corporation.
(k) Absence of Undisclosed Liabilities. As of the Closing, there are
no Liabilities, commitments or obligations of the Company of any
kind
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<PAGE> 8
whatsoever, there is no valid basis for the assertion of any such
Liabilities, commitments or obligations, and no existing
condition, situation or set of circumstances which is reasonably
likely to result in such a Liability, commitment or obligation.
(l) Litigation. There are no Claims pending or threatened before any
Governmental Authority or before any arbitrator of any nature,
brought by or against the Seller or the Company involving,
affecting or relating to the business, assets, operations or
securities of the Company, or the transactions contemplated by
this Agreement, nor is there any basis for any such Claim. Neither
of the Company nor the Seller, or their respective assets is
subject to any order, writ, judgment, award, injunction or decree
of any Governmental Authority or arbitrator.
(m) Liens and Encumbrances. The Company holds and owns full,
unconditional, good and marketable title to its interest in
MikeSam free and clear of all Liens.
(n) Contracts. The consummation of the transactions contemplated
hereby, without notice to or consent or approval of any party,
will not constitute a default under or a breach of any provisions
of any Contract of the Company.
(o) Absence of Employee Benefit Plans. As of the Closing, the Company
does not maintain nor does it have any liability with respect to
an employee benefit plan as defined in ERISA.
(p) ERISA. There are no facts which could give rise to any Claim
against or liability of the Company, the Seller or Salton for
failure to comply with ERISA or the Code.
(q) Environmental Matters. (a) The Company is and at all times has
been, in compliance with all applicable Environmental Laws. The
Company is not subject to any requirement to have any permits and
other governmental authorizations under applicable Environmental
Laws. The Company has not received any communication (written or
oral), whether from a Governmental Authority, Person, citizens
group or otherwise, that alleges that the Company is not or was
not in compliance with any Environmental Law. (b) There is no
Environmental Claim pending or threatened against the Company or
against any Person whose Liability for any Environmental Claim
that the Company has or may have retained or assumed either
contractually or by operation of law.
(r) Taxes. The Company has timely filed or caused to be filed all
federal, state, local and foreign Tax (as defined below) and
information returns required to be filed and has paid all Taxes
required to be paid in respect of the periods for which returns
are due, and will deliver to Salton an
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<PAGE> 9
adequate accrual or reserve for the payment of all Taxes payable
in respect of the period, including portions thereof, subsequent
to the last of said periods required to be so accrued or reserved
up to and including the Closing. For these purposes, the Tax
attributable to the period including the Closing should be
determined as if the taxable year ended at the Closing. The
Company is not delinquent in the payment of any Tax, and no
deficiencies for any Tax, assessment or governmental charge have
been or will be claimed, proposed, assessed or threatened. There
are no Liens on the assets of the Company for unpaid Taxes. No
waiver or extension of time to assess any Taxes has been given or
requested. No claim has been made by any taxing authority in any
jurisdiction that the Company is or may be subject to taxation by
that jurisdiction. For the purposes of this Section, the term
"Tax" shall include all taxes, charges, withholdings, fees,
levies, penalties, additions, interest or other assessments
imposed by any federal, state, local or foreign or other taxing
authority on the Company or any of its former or present
properties, assets or operations (including as a result of being a
member of an affiliated, combined or unitary group or as a result
of any obligation arising out of an agreement to indemnify any
other Person), and including those related to income, employee
welfare or retirement (including social security), gross receipts,
sales, use, occupation, services, leasing, valuation, addition of
value, transfer, license, customs duties or franchise. For periods
subsequent to 1995, the Company's Tax Returns have never been
audited by the Internal Revenue Service or comparable state, local
or foreign agencies. The Company has not been a member of an
Affiliated Group or been included in a combined, consolidated or
unitary Tax return. The Company is not a party to or bound by any
Tax allocation or Tax sharing agreement or has any current or
potential obligation to indemnify any other Person with respect to
Taxes. The Company is not required to make any adjustments under
Section 481(a) of the Code by reason of a change in accounting
method which affects any taxable year ending after the Closing
Date, or has any application pending to effect such a change of
accounting method.
(s) Compliance with Applicable Law. (a) The Company does not require
and has no licenses, permits, franchises, authorizations,
registrations and approvals (the "Licenses") from any Governmental
Authority and is not and will not be subject to any pending or
threatened administrative or judicial proceeding with respect to
the lack thereof. The Company has not acted or been in violation
of, any Rule of any Governmental Authority applicable to the
Company or its assets or prior operations.
(t) Brokers' Fees and Commissions. The Seller has not employed any
investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby.
(u) Labor Matters. (a) At the Closing, no present or former employee
or independent contractor performing services for the Company has
a Claim
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<PAGE> 10
pending or has threatened to or will make a Claim against the
Company (under any Rule of any Governmental Authority or
otherwise), including any Claim for (i) overtime pay, other than
overtime pay for the current payroll period, (ii) wages, salaries
or profit sharing (excluding wages, salaries or profit sharing for
the current payroll period), (iii) vacations, time off or pay in
lieu of vacation or time off, other than vacation or time off (or
pay in lieu thereof) earned in respect of the Company's current
fiscal year, (iv) any violation of any Rule or contract relating
to minimum wages or maximum hours of work, (v) discrimination
against employees on any basis, (vi) unlawful or wrongful
employment or termination practices, (vii) unlawful retirement,
termination or labor relations practices or breach of contract or
(viii) any violation of occupational safety or health standards.
There are and will be no administrative charges, arbitration or
mediation proceedings or court complaints pending or threatened
against the Company before the U.S. Equal Employment Opportunity
Commission or any state or federal court or agency or any other
entity concerning alleged employment discrimination, contract
violation or any other matters relating to the employment of
labor. There is and will be no unfair labor practice charge or
complaint pending or threatened against the Company before the
National Labor Relations Board or any similar state or local body.
(v) The Company is and has been in compliance with all applicable
Rules relating to the employment of labor, including employment
and employment practices, terms and conditions of employment,
wages and hours, equal opportunity, occupational health and
safety, severance, termination or discharge, collective bargaining
and the payment of employee welfare and retirement and other
taxes, the Worker Adjustment Retraining and Notification Act and
the Immigration Reform and Control Act of 1986, each as amended,
and is not engaged in any unfair labor practice or any violation
of any other law, rule or regulation concerning employment or
retention of independent contractors.
(w) At the Closing, the Company has no employees except Seller. As of
the Closing Date, the Company will not a signatory or party to, or
otherwise bound by, a collective bargaining agreement (or any
other agreement with any labor organization) which covers
employees of the Company, and there is no activity or proceeding
of any labor organization (or representative thereof) to organize
any unorganized employees of the Company. There is not pending or
threatened against the Company any labor dispute, grievance,
slowdown, lockout, strike, work stoppage or other collective labor
action in effect, pending or threatened against or affecting the
Company.
(x) Accounts Receivable; Liabilities. At the Closing, the Company has
no accounts receivable or liabilities and will have no liability
for any healthcare, medical, disability, death benefit or similar
expenses of any
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<PAGE> 11
director or employee of the Company or any other Person which are
the result of injuries or illnesses which occurred prior to the
Closing (regardless of when such expenses are incurred).
(y) The Company does not own, lease or sublease any real property.
(z) Disclosure. All documents, agreements and other papers and
materials delivered by or on behalf of the Seller in connection
with this Agreement, and the transactions contemplated hereby and
thereby are true, complete and accurate. None of the
representations, warranties or statements of the Seller contained
in this Agreement or in any Schedules or Exhibits hereto contains
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the representations, warranties or statements made, in the context
in which made, not false or misleading. There is no fact that the
Seller has not disclosed to Salton in writing that causes an
adverse effect or could result in an adverse effect. The Seller
acknowledges that the statements contained in this Section shall
not be deemed to limit or qualify any of the other representations
or warranties contained in this Agreement, in any Schedules or
Exhibits hereto or in any agreement or document delivered in
connection herewith.
(aa) Seller has no commitment or legal obligation, absolute or
contingent, to any Person other than Salton to sell, assign,
license, transfer or effect a sale of any of the Stock or to enter
into any contract or cause the entering into of a contract with
respect to the Stock.
(bb) The Company is a duly organized and existing corporation in good
standing under the laws of California.
(cc) Seller has the legal capacity to own the Stock and to enter into
and perform this Agreement and the Company has been duly
authorized by the unanimous written consent of its sole
stockholder enter into and to perform this Agreement.
(dd) As of the Closing Date, Seller shall own all right, title and
interest in and to Stock free and clear of all pledges, security
interests, liens and encumbrances.
(ee) The Company has all requisite power and authority to own its
properties and the Company is not insolvent within the meaning of
Section 1-201(23) of the Uniform Commercial Code. No order has
been made or petition presented or resolution adopted which
relates to the winding-up of the Company or for an administration
order in respect of the Company, nor has any administrative
receiver, receiver or receiver and manager been appointed by any
Governmental Authority or other Person with respect to all or part
of the assets of the Company, and no power to make any such
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<PAGE> 12
appointment has arisen. The Company has delivered to Purchaser
complete and correct copies of the Articles of Incorporation (or
comparable organizational documents) presently in effect for the
Company, and the Company is not in default under or in violation
of any provision of such documents. The Company does not have any
business subsidiaries or investments, direct or indirect, in any
Person other than its interest as a member of MikeSam.
(ff) The Company is qualified or licensed to do business and is in good
standing in California which is the only jurisdiction in which the
ownership or leasing of property by it or the conduct of its
business requires such licensing or qualification.
(gg) This Agreement has been duly and validly executed and delivered by
Seller and, assuming due authorization, execution and delivery by
Salton, constitute valid and binding legal obligations of the
Seller, enforceable against the Seller in accordance with its
terms.
(hh) Neither the execution, delivery or performance of this Agreement
nor the consummation of the transactions contemplated hereby will
(a) violate, conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws (or
comparable organizational documents) of the Company, (b) violate,
conflict with or result in a violation or breach of, or constitute
a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or require any notice under,
or require the consent of any other party to, or result in the
acceleration of, or entitle any party to accelerate (whether as a
result of a change in control of the Company) any obligation or
agreement, or result in the loss of any benefit or the imposition
of any fee or penalty, or give rise to the creation of any Lien
upon the property or assets of the Company, or (c) violate any
Rules (including foreign, federal and state securities laws) of
any Governmental Authority applicable to the Company or the
Seller.
(ii) No Filing Required. No filing or registration with, no notice to
and no permit, authorization, consent or approval of, any third
party or any Governmental Authority is necessary for the
consummation of the transactions contemplated by this Agreement or
to enable the Company to continue to exist after the Closing Date.
(jj) Books and Records. The books and records of the Company are, and
have been, maintained in the usual, regular, ordinary and
appropriate manner by Seller or its agents, and all of the
transactions of the Company are properly reflected therein.
5. Representations and Warranties of Salton. Salton represents and
warrants and agrees with MikeSam that, as of the date hereof and up to
and including the date of closing that each of the following
representations is true and correct:
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<PAGE> 13
(a) Organization. Salton is a duly organized and existing corporation
under the laws of the State of Delaware.
(b) Corporate Authority. Salton has the corporate power under its
articles of incorporation and by laws to enter into and perform
this Agreement.
(c) Board Approval. The Board of Directors of Salton has, by unanimous
written consent in lieu of a special meeting, authorized Salton to
enter into and perform this Agreement.
(d) Restrictions on Salton. There are no contracts currently in effect
which limit or restrict the right of Salton to enter into or
perform this Agreement except only that Salton may determine that
it requires consent from its lenders under the Second Amended and
Restated Credit Agreement by and among Salton and Lehmann Brothers
Commercial Paper, Inc., as Administrative Agent for the several
lenders who are parties from time to time to such agreement
("Credit Agreement") to enter into and close the transactions
contemplated by this Agreement.
(e) No Defaults. There are no existing uncured events of default on
the part of Salton under its Credit Agreement.
(f) Shares Available. Salton has authorized but unissued shares of
Common Stock and shares of Common Stock held as Treasury shares
and has reserved, and shall continue to keep reserved for issuance
in connection with the Closing of this Agreement a sufficient
number of Shares to satisfy its obligation to deliver the number
of Shares necessary to close this Agreement.
6. Demand Registration of Salton Shares.
(a) Requests for Registration. The holders of a majority of the Salton
Shares may make one request for registration under the Securities
Act of all or part of their Salton Shares on Form S-1 or any
similar long-form registration ("Long-Form Registration") or, if
available, on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registration"). The request for a Demand
Registration (as defined below) shall specify the approximate
number of Salton Shares requested to be registered and the
anticipated per share price range for such offering. Within ten
days after receipt of any such request, Salton will give written
notice of such requested registration to all other registered
holders of the Salton Shares and, subject to Section 8 (b) below,
will include in such registration all Salton Shares with respect
to which Salton has received written requests for inclusion
therein within fifteen (15) business days after the receipt of
Salton `s notice. The registration requested pursuant to this
Section 9 (a) is referred to herein as the "Demand Registration."
The holders of the Salton Shares taken together will be entitled
to request for their collective
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<PAGE> 14
benefit only one (1) Demand Registration. Salton will pay all
Registration Expenses (as defined in this Section 9 in connection
with such Demand Registration whether or not the Registration
becomes effective.
(b) Priority on Demand Registrations. Salton may include in the Demand
Registration securities of Salton which are not Salton Shares
without the consent of the holders of the Salton Shares to be
included in such registration unless the managing underwriters of
the Demand Registration advise Salton in writing that, in their
opinion, the number of Salton Shares and other securities of
Salton requested to be included in such offering exceeds the
number of securities of Salton which can be sold therein without
adversely affecting the marketability of the offering. If such
managing underwriters so advise Salton, Salton will include in
such registration, prior to the inclusion of any securities of
Salton which are not Salton Shares, the number of Salton Shares
requested to be included, which in the opinion of such
underwriters, can be sold without adversely affecting the
marketability of the offering, pro rata among the respective
holders thereof on the basis of the number of shares of Salton
Shares owned by each such holder.
(c) Selection of Underwriters. The Demand Registration will be managed
by the holders of Salton Shares as follows: (i) the holders of a
majority of the Salton Shares included in the Demand Registration
will have the right to select the managing underwriters to
administer the offering, subject to Salton's approval; and (ii) in
consultation with the managing underwriter(s), the holders of a
majority of the Salton Shares will have the power to determine the
number of Salton Shares to be included in the offering (subject to
the applicable limitations set forth herein), the offering price
per Salton Share, the underwriting discounts and commissions per
Salton Share, the timing of the registration (subject to the
applicable limitations set forth herein) and all other
administrative matters related to the registration.
(d) Piggyback Registrations.
(i) Option to Offer Piggyback. Whenever Salton proposes to
register any of its securities under the Securities Act and
the registration form to be used for the registration of
such securities (a "Piggyback Registration"), whether or
not for sale for its own account, Salton may elect to give
prompt written notice to the holders of Salton Shares of
its intention to effect such a registration and to include
in such registration all Salton Shares with respect to
which Salton has received written requests for inclusion
therein within 15 business days after the receipt of
Salton's notice, subject to the terms of this Section 9.
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<PAGE> 15
(ii) Piggyback Expenses. The Registration Expenses of the
holders of Salton Shares will be paid by Salton in all
Piggyback Registrations.
(iii) Loss of Demand Registration. If the holders off Salton
Shares sell or are offered the right to sell at least
seventy five percent (75%) of the total number of Salton
Shares issued at the Closing in one or more Piggy Back
Registrations, the holders of Salton Shares shall no longer
be entitled to receive a Demand Registration under this
Agreement.
(e) Holdback Agreements.
(i) Each holder of Salton Shares agrees not to effect any
public sale or distribution (including sales pursuant to
Rule 144) of equity securities of Salton, or any
securities, options or rights convertible into or
exchangeable or exercisable for such securities, during the
seven (7) days prior to and the one hundred eighty (180)
day period beginning on the effective date of any
underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the
registered public offering otherwise agree.
(ii) Salton agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities
convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the
one hundred eighty (180) day period beginning on the
effective date of any underwritten Demand Registration or
any underwritten Piggyback Registration (except as part of
such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor form), unless the
underwriters managing the registered public offering
otherwise agree.
(f) Registration Procedures. Whenever the holders of Salton Shares
have requested that any Salton Shares be registered pursuant to
this Agreement, Salton will use its reasonable efforts to effect
the registration and the sale of such Salton Shares in accordance
with the intended method of disposition thereof and pursuant
thereto Salton will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration
statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement
effective for a period of either (i) not less than six
months (subject to extension pursuant to Section 9 (h) or,
if such registration statement relates to an underwritten
offering, such longer period as in the opinion of
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<PAGE> 16
counsel for the underwriters a prospectus is required by law
to be delivered in connection with sales of Salton Shares by
an underwriter or dealer or (ii) such shorter period as will
terminate when all of the securities covered by such
registration statement have been disposed of in accordance
with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement
(but in any event not before the expiration of any longer
period required under the Securities Act), and to comply
with the provisions of the Securities Act with respect to
the disposition of all securities covered by such
registration statement until such time as all of such
securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(ii) furnish to each seller of Salton Shares such number of
copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such
registration statement (including each preliminary
prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of
the Salton Shares owned by such seller;
(iii) use its reasonable efforts to register or qualify the Salton
Shares under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the Salton Shares
owned by such seller (provided that Salton will not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(iv) notify each seller of such Salton Shares, at any time when
the prospectus relating thereto is required to be delivered
under the Securities Act, upon discovery that, or upon the
discovery of the happening of any event as a result of
which, the prospectus included in such registration
statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not
misleading in the light of the circumstances under which
they were made, and, at the request of any such seller,
Salton will prepare and furnish to such seller a reasonable
number of copies of a supplement or amendment to such
prospectus so that, as thereafter delivered to the
purchasers of such Salton Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the
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<PAGE> 17
statements therein not misleading in the light of the
circumstances under which they were made;
(v) enter into such customary agreements (including
underwriting agreements in customary form) and take all
such other actions as the holders of a majority of the
Salton Shares being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the
disposition of such Salton Shares;
(vi) make available for inspection by any seller of Salton
Shares, any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent
corporate documents and properties of Salton, and cause
Salton's officers, directors, employees and independent
accountants to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(vii) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related
prospectus or suspending the qualification of any
securities included in such registration statement for sale
in any jurisdiction, Salton will use reasonable efforts
promptly to obtain the withdrawal of such order;
(viii) obtain one or more comfort letters, dated the effective
date of such registration statement (and, if such
registration includes an underwritten public offering,
dated the date of the Closing under the underwriting
agreement), signed by Salton's independent public
accountants in customary form and covering such matters of
the type customarily covered by comfort letters as the
holders of a majority of the Salton Shares being sold
reasonably request (provided that such Salton Shares
constitute at least 10% of the securities covered by such
registration statement);
(ix) provide a legal opinion of Salton's outside counsel, dated
the effective date of such registration statement (and, if
such registration includes an underwritten public offering,
dated the date of the Closing under the underwriting
agreement), with respect to the registration statement,
each amendment and supplement thereto, the prospectus
included therein (including the preliminary prospectus) and
such other documents relating thereto in customary form and
covering such matters of the type customarily covered by
legal opinions of such nature; and
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<PAGE> 18
(x) Salton may require each seller of Salton Shares as to which
any registration is being effected to furnish Salton such
information regarding such seller and the distribution of
such securities as Salton may from time to time reasonably
request in writing.
(g) Registration Expenses. All expenses incident to Salton's
performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, salaries and expenses
of its officers and employees performing legal or accounting
duties, the expense of any annual audit or quarterly review, the
expense of any liability insurance, the expenses and fees for
listing the securities to be registered on the New York Stock
Exchange, and fees and disbursements of counsel for Salton and all
independent certified public accountants, underwriters (excluding
discounts and commissions) and other Persons retained by Salton
(all such expenses being herein called "Registration Expenses"),
will be borne by Salton.
(h) Delay of Registration. Notwithstanding the foregoing, Salton shall
have the right to delay the effectiveness of the registration and
of the listing of the Salton Shares for a period of up to one
hundred eighty (180) days if: there are, in Salton's judgment,
possible developments, events or actions which may occur
concerning Salton or its business which would be required to be
disclosed in a registration statement filed with the SEC, which
are not in the best interest of Salton to disclose and need not be
disclosed under the Securities Act unless and until such
developments, events or actions occur.
(i) Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten
unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by
the Person or Persons entitled hereunder to approve such
arrangements (including, without limitation, pursuant to the terms
of any over-allotment or "green shoe" option requested by the
managing underwriter(s); provided, that no holder of Registrable
Securities will be required to sell more than the number of
Registrable Securities that such holder has requested Salton to
include in any registration) and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms
of such underwriting arrangements.
7. Indemnification.
(a) Salton. Salton agrees to indemnify and hold harmless each holder
of Salton Shares, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act)
against any losses,
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<PAGE> 19
claims, actions, proceedings, judgments, damages and liabilities,
joint or several, to which such holder or any such director,
officer or controlling person may become subject to under the
Securities Act or otherwise (collectively "Loss"), insofar as such
Loss arises out of or is based upon (i) any untrue or alleged
untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto (relating to the Salton Shares) or
(ii) any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein
not misleading, and Salton will reimburse such holder and each
such director, officer and controlling person for any legal or any
other expenses incurred by them in connection with investigating
or defending any such Loss; provided, however, that Salton shall
not be liable in any such case to the extent that any such Loss
arises out of or is based upon an untrue statement or alleged
untrue statement, or omission or alleged omission, made in such
registration statement, any such prospectus or preliminary
prospectus or any amendment or supplement thereto, or in any
application, in reliance upon, and in conformity with, written
information prepared and furnished to Salton by such holder
expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments
or supplements thereto after Salton has furnished such holder with
a sufficient number of copies of the same. In connection with an
underwritten offering, Salton will indemnify such underwriters,
their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification
of the holders of Salton Shares.
(b) Seller. In connection with any registration statement in which a
holder of Salton Shares is participating, each such holder will
furnish to Salton in writing such information and affidavits as
Salton reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted
by law, will indemnify and hold harmless each other holder of
Salton Shares, Salton, its directors and officers and each other
Person who controls Salton (within the meaning of the Securities
Act) against any Loss, joint or several, to which such other
holder, Salton or any such director or officer or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon (i) any untrue or alleged
untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is made in such registration statement, any such
prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application, in reliance upon and in
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<PAGE> 20
conformity with written information prepared and furnished to
Salton by such holder expressly for use therein, and such holder
will reimburse Salton and each such director, officer and
controlling Person and each other holder of Salton Shares for any
legal or any other expenses incurred by them in connection with
investigating or defending any such Loss.
(c) Notice; Defense. Any person entitled to indemnification hereunder
will (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification and (ii)
unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably
acceptable to the indemnifying party. If such defense is assumed,
the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim.
(d) Survival. The indemnification provided for under this Agreement
will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling person of such indemnified party
and will survive the transfer of securities. Salton also agrees to
make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event
Salton's indemnification is unavailable for any reason.
8. Survival of Representations, Warranties. All representations and
warranties of Seller and Salton contained herein shall survive the
Closing Date and shall terminate at the close of twenty four (24) full
calendar months next following the Closing Date. Upon the termination
of a representation or warranty in accordance with the foregoing, the
representation or warranty shall have no further force or effect for
any purpose under this Agreement, provided that, any representation or
warranty in respect of which indemnity may be sought under Section 12
and the indemnity with respect thereto, shall survive the date at which
it would otherwise terminate pursuant to this Section 12 if written
notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time.
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<PAGE> 21
5. Indemnification.
(a) By Seller. Seller shall defend and indemnify Salton, and its
officers and directors, and hold each of them harmless from and
against any and all claims, demands, actions, suits, judgments,
liability and loss, including legal fees and expenses and court
costs (collectively, "Loss") incurred by any of them in connection
with, arising out of, or resulting from (i) any breach of any
representation or warranty made by Seller in this Agreement; or
(ii) any failure by Seller to perform in a timely manner any
agreement, covenant or obligation of Seller pursuant to this
Agreement.
(b) By Salton. Salton shall defend and indemnify Seller and hold
Seller harmless from and against any and all Loss incurred by each
of them in connection with, arising out of or resulting from (i)
any breach or inaccuracy of any representation or warranty made by
Salton in this Agreement or (ii) any failure by Salton to perform
in a timely manner any agreement, covenant or obligation of Salton
pursuant to this Agreement.
(c) Defense of Claims. If a claim for Loss (a "Claim") is to be made
by a party entitled to indemnification hereunder (the "Indemnified
Party") against the party from whom indemnification is claimed
(the "Indemnifying Party"), the Indemnified Party shall give
written notice (a "Claim Notice") to the Indemnifying Party as
soon as practicable after the Indemnified Party becomes aware of
any fact, condition or event which may give rise to Loss for which
indemnification may be sought under this Section 12. If any
lawsuit or enforcement action is filed against any party entitled
to the benefit of indemnity hereunder, written notice thereof
shall be given to the Indemnifying Party as promptly as
practicable (and in any event within ten (10) business days after
the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect
rights to indemnification hereunder, except to the extent that the
Indemnifying Party demonstrates actual Loss caused by such
failure. Notwithstanding the foregoing, a Claim Notice must be
made within the survival period set forth in this Section 12,
whether or not the Indemnifying Party is prejudiced by any failure
to give the Claim Notice. The Claim Notice shall describe in
reasonable detail the nature of the Claim, including an estimate
of the amount of Loss that have been or may be suffered or
incurred by the Indemnified Party attributable to such Claim, the
basis of the Indemnified Party's request for indemnification under
the Agreement and all information in the Indemnified Party's
possession relating to such Claim. After receipt of such Claim
Notice, the Indemnifying Party shall be entitled, if it so elects,
at its own cost, risk and expense, (i) to take control of the
defense and investigation of such lawsuit or action and (ii) to
employ and engage attorneys of its own choice to handle and defend
the same, provided however that the attorneys shall be reasonably
acceptable to the Indemnified Party. If the Indemnifying Party
fails to assume the defense of such Claim within ten (10) business
days
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<PAGE> 22
after receipt of the Claim Notice, the Indemnified Party against
which such Claim has been asserted will (upon delivering notice to
such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the
defense, compromise or settlement of such Claim on behalf of and
for the account and risk of the Indemnifying Party; provided,
however, that such Claim shall not be compromised or settled
without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld. In the event the
Indemnifying Party assumes the defense of the Claim, the
Indemnifying Party will keep the Indemnified Party reasonably
informed of the progress of any such defense, compromise or
settlement. Notwithstanding the foregoing, the Indemnified Party
shall be entitled to conduct its own defense at the cost and
expense of the Indemnifying Party if the Indemnified Party
establishes that the conduct of its defense by the Indemnifying
Party would reasonably be likely to prejudice materially the
Indemnified Party due to a conflict of interest between the
Indemnified Party and the Indemnifying Party; and provided further
that in any event the Indemnified Party may participate in such
defense at its own expense.
(d) Settlement. In the event that the Indemnified Party settles any
Claim without the prior written consent of the Indemnifying Party,
the Indemnifying Party shall have no further indemnification
obligations under this Section 13 with respect to such Claim;
provided, however, that if the Indemnifying Party refuses to
defend or otherwise handle such Claim and it is subsequently
determined that the Indemnifying Party is or was obligated to
defend or indemnify the Indemnified Party with respect to such
Claim, then the Indemnifying Party shall remain obligated with
respect to such settlement amount. If the Indemnifying Party shall
control the defense of any such Claim, the Indemnifying Party
shall obtain the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld) before entering into
any settlement of a Claim or ceasing to defend such Claim if,
pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief shall be imposed against the
Indemnified Party or if such settlement or cessation does not
expressly and unconditionally release the Indemnified Party from
all liabilities and obligations with respect to such Claim,
without prejudice. In the event that the Indemnifying Party
proposes a settlement to any Claim with respect to which the
Indemnifying Party is or was entitled to defend, which settlement
is satisfactory to the party instituting such Claim, and the
Indemnified Party withholds its consent to such settlement, and
thereafter a final judgment is entered against the Indemnifying
Party or Indemnified Party pursuant to which Loss exceeds the
amount of the proposed settlement, then in such case the
Indemnifying Party shall have no obligation to indemnify the
Indemnified Party under this Section 13 against and in respect of
the amount by which the Loss resulting from such final judgment
exceed the amount of the proposed settlement.
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<PAGE> 23
(e) Mitigation. Each Indemnified Party shall have an obligation to
mitigate Loss under this Agreement, and to that end each party
shall use its reasonable efforts and shall consult and cooperate
with each other with a view towards mitigating Loss, costs and
expenses that may give rise to claims for indemnification under
this Section 12.
(f) Cooperation. In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated
by this Agreement is commenced, whether before or after the
Closing, the parties hereto agree to cooperate and use reasonable
efforts to vigorously defend against and respond thereto and make
available to each other such personnel, witnesses, books, records,
documents or other information within its control that are
necessary or appropriate for such defense; provided that, subject
to this Section 12, the Indemnifying Party shall reimburse the
Indemnified Party for its out of pocket expenses incurred in
connection therewith.
(g) Insurance Proceeds. With respect to any Claim required to be
indemnified pursuant to this Agreement, so long as the
Indemnifying Party has complied with its indemnification
obligations on such Claim, (i) to the extent available, the
Indemnified Party shall assign to the Indemnifying Party any
applicable proceeds under any insurance policy which covers the
matter which is the subject of the indemnification and shall take
reasonable steps to insure that the Indemnifying Party obtains the
benefits of such policy, including providing any notices as
required under such policy; and (ii) if the Indemnified Party
receives insurance proceeds with respect to any Loss paid by the
Indemnifying Party, then the Indemnified Party shall reimburse the
Indemnifying Party in an amount equivalent to such proceeds up to
the amount actually paid by the Indemnifying Party.
(h) Offset. If a Put or a Call is exercised under this Agreement,
following the Closing of this Agreement, in addition to any other
remedies set forth herein for the benefit of Salton, upon any
breach by Seller of any representation, warranty or agreement by
Seller set forth in this Agreement, including the indemnification
provisions of this Section 12, Salton shall have the right to
offset any amounts or any performance owing by Salton to Seller
under this Agreement or any other agreement between Seller and
Salton any the amount of any Loss incurred by Salton by reason of
such breach by Seller.
6. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meaning.
"Affiliate" shall mean (i) a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, another Person and (ii) any parent, spouse, lineal
descendant or adopted child of a Person specified in clause (i), any spouse or
adopted child of any such descendant or any child of such spouse, the executors,
23
<PAGE> 24
administrators, conservators or personal representatives of any Person referred
to in this clause (ii) and any Person which, directly or indirectly, is owned or
controlled by one or more of the Persons referred to in this clause (ii);
"Affiliated Group" means any affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group under
state, local or foreign income Tax law) of which the Company or any of its
Affiliates is or has been a member;
"Claims" shall mean all pending and threatened claims, actions, causes
of action, demands, orders, notices, suits, grievances, proceedings, disputes,
arbitrations and investigations;
"Environmental Claim" shall mean any Claim (written or oral) by any
Person or any Governmental Authority alleging potential Liability or obligations
(including potential Liability or obligations for or requirement to incur
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the presence, release or threatened
release into the environment, of any Materials of Environmental Concern at any
location, whether or not owned or operated by the Company, or (ii) circumstances
forming the basis of any violation, potential violation or alleged violation, or
Liability, potential Liability or alleged Liability, under any Environmental
Law;
"Environmental Laws" shall mean all Rules and permit conditions
relating to pollution or protection of human health or the environment
(including ambient air, indoor air, surface water, ground water, land surface or
subsurface strata), including Rules relating to emissions, discharges, releases
or threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern;
"Governmental Authority" shall mean any court (federal, state, local,
foreign or otherwise), any arbitration or other alternative dispute mechanism,
any federal, state, local, foreign or other government or governmental
department, agency, board, commission, bureau or instrumentality and any other
regulatory authority;
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes;
"Liens" shall mean all title defects, charges, claims, restrictions,
liens, pledges, security interests, mortgages, tenancies and other possessory
interests, conditional sale or other title retention agreements, assessments,
easements, rights of way, covenants, restrictions, rights of first refusal,
encroachments and other burdens, options, restrictions or encumbrances of any
kind;
"Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or, as applicable, any other entity;
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<PAGE> 25
"Rules" shall mean any federal, state, local or foreign statute, law,
code, ordinance, rule, regulation, judgment, writ, decree, injunction, order,
concession, grant, franchise, permit or license or other governmental or
regulatory authorization or approval applicable to the Company or any of the
Stockholders or any of their respective assets, properties or operations or any
Plan;
7. Miscellaneous.
(a) Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted
by telecopy, electronic or digital transmission method and
followed by a confirmation of receipt from the recipient of the
notice; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service
(e.g., DHL); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent
as indicated below:
If to Seller:
Michael Srednick
131 Topsail Mall
Marina Del Rey, California 90298
Tel: (310) 574-0066
Fax: (310) 574-0072
With copies to:
Dan B. Floyd, Esq.
Floyd & Associates
101 South Madison Avenue, Suite 200
Pasadena, California 91101
Tel: (626) 440-1912
Fax: (626) 440-1952
If to Salton, addressed to:
Salton, Inc.
550 Business Center Drive
Mount Prospect, IL
Attn: Leon Dreimann
Chief Executive Officer
Tel.: 847 803 4600
Fax: (847) 803-1211
(b) Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws
of the State of Delaware (without reference to its choice of law
provisions).
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(c) Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto and thereto, and the
constitute the entire agreement among the parties pertaining to
the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto. No amendment, supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by
the party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise
expressly provided.
(d) Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(e) Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted
by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument.
(f) Titles; Gender. The titles, captions or headings of the Sections
herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect
or restrict the meaning or interpretation of this Agreement.
(g) Waiver of Trial by Jury. Each party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand,
action or cause of action arising under or in connection with this
Agreement or the transaction contemplated hereby.
(h) Interpretation. The headings and captions contained in this
Agreement and in the Schedules hereto are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement.
(i) Further Assurances. Each of Seller and Salton will use reasonable
efforts to implement the provisions of this Agreement, including
but not limited to the execution and delivery of such other
documents (including any license, assignment or assumption
agreement, official certificates of registration, renewals,
transfers or other documents supporting ownership of trademarks)
in addition to those required by this Agreement, in form and
substance reasonably satisfactory to the other party, as may be
reasonably deemed necessary to implement any provision of this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties hereto as the date first written above.
SALTON, INC.,
a Delaware corporation
/s/ Leon Dreimann /s/ Michael Srednick
- ----------------------------------------- ------------------------------
Name: Leon Dreimann Michael Srednick
Title: Chief Executive Officer
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<PAGE> 1
EXHIBIT 99.1
FOR: Salton, Inc.
APPROVED BY: William B. Rue
President and Chief Operating Officer
(847) 803-4600
FOR IMMEDIATE RELEASE
CONTACT: Investor Relations:
Cheryl Schneider/Hulus Alpay
Press: Michael McMullan/David Nugent
Morgan-Walke Associates
(212) 850-5600
SALTON, INC. TO ACQUIRE "GEORGE FOREMAN" NAME FOR USE IN SALE AND
MARKETING OF FOOD PREPARATION APPLIANCES
Mt. Prospect, IL, December 9, 1999 - Salton, Inc. (NYSE: SFP), today
announced that it has entered into an agreement to acquire the right to use in
perpetuity and worldwide the name "George Foreman", including pictures and
likenesses of George Foreman, in connection with the marketing and sale of food
preparation appliances. The aggregate purchase price payable to George Foreman
and his partners is $113,750,000 in cash, payable in five annual installments
of $22,750,000 commencing on the closing date, and shares of Salton common
stock valued at $23,750,000 at the closing. The closing of the transaction,
which is expected to occur during the first calendar quarter of 2000, is
subject to several conditions, including the registration of the shares for
public sale.
Leon Dreimann, Chief Executive Officer, commented, "This transaction will
be significantly accretive to our earnings per share. George Foreman and his
partners were previously entitled to 60% of the profits from the sale of
"George Foreman" products. As a result of this transaction, our sale of all
"George Foreman" products on or after July 1999 will contribute to our earnings
without any royalty payments."
Mr. Dreimann continued, "This transaction also benefits our stockholders
by guaranteeing us the right to use the "George Foreman" name and likeness on
our food preparation products forever and on a royalty-free basis. Our George
Foreman Grills(R) are already among our best selling products and continue to
show momentum in the marketplace. We also now have the right to develop and
market other food preparation products under the "George Foreman" name. Our
recent introductions of the Big George Rotisserie grill and George Foreman
cookware have already experienced a strong response by consumers. We are also
very excited by our George Foreman Outdoor Grill which we plan on introducing
this spring."
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SALTON, INC. TO ACQUIRE "GEORGE FOREMAN" NAME FOR USE PAGE: 2
IN SALE AND MARKETING OF FOOD PREPARATION APPLIANCES
Mr. Dreimann concluded, "George Foreman has been, and will continue to be,
a valuable part of the Salton team and will continue to assist us in our
marketing efforts."
Salton, Inc. is a leading domestic designer, marketer and distributor of a
broad range of branded, high quality small appliances, tabletop products and
personal care/time products. Its portfolio of well-recognized owned and
licensed brand names includes Salton(R), Toastmaster(R), Maxim(R), Breadman(R),
Juiceman(R), George Foreman Grills(R), White-Westinghouse(R), Farberware(R),
Melitta(R), Block(R) China, Atlantis(R), Sasaki(R), Rejuvenique(R), and
Ingraham(R).
Certain matters discussed in this news release 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: the Integration of Toastmaster, including
the failure to realize anticipated revenue enhancements and cost savings; the
Company's relationship and contractual arrangements with key customers,
suppliers and licensors; the risks relating to pending legal proceedings;
cancellation or reduction of orders; the timely development, introduction and
customer acceptance of the Company's products; dependence on foreign suppliers
and supply and manufacturing constraints; competitive products and pricing;
economic conditions and the retail environment; the availability and success of
future acquisitions; the Company's degree of leverage; the risks related to
intellectual property rights; year 2000 issues and other risks and
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
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