Purchase Money Note - Salton/Maxim Housewares Inc. and Windmere Durable Holdings Inc.


                       PURCHASE MONEY NOTE DATED AS OF
                                JULY 27, 1998


     1.  Principal, Interest, Maturity.  As partial payment for the purchase of
shares of stock of Salton/Maxim Housewares, Inc., a Delaware corporation
('Salton'), owned by Windmere Durable Holdings, Inc., a Florida corporation
('Windmere'), pursuant to a Stock Agreement dated as of May 6, 1998 among
Salton, Windmere and third parties, Salton hereby promises to pay to the order
of Windmere the principal amount of Fifteen Million Dollars and no cents
($15,000,000), with simple interest at the annual rate of four percent (4%) from
the date hereof, to be paid annually on the fifteenth day of June, commencing
June 15, 1999. Any unpaid principal balance plus accrued and unpaid interest
shall be due and payable on the last day of the seventy eighth (78th) full
calendar month next following the date hereof. If: (i) accrued and unpaid
interest is not paid in full on any interest payment date ('Interest Default')
or (ii) the principal balance is not paid upon the due date, whether at the
maturity of the Note or upon acceleration as set forth in Section 3 hereof
('Principal Default'), then, in the case of an Interest Default, simple interest
on the unpaid balance of this Note shall accrue on and after the Interest
Default at the rate of eight percent (8%) per annum until the Interest Default
is cured or is waived in writing by the holder of the Note and, in the case of a
Payment Default, simple interest on the unpaid balance of this Note shall also
accrue on and after the Payment Default on the unpaid principal balance at the
rate of eight percent (8%) per annum until payment in full is made of all
accrued and unpaid interest and the unpaid principal balance. In addition, in
the case of any Interest Default or Payment Default, Salton agrees to pay all
costs of collection, including legal fees and out of pocket expenses and court
costs.

     2.  Affiliate Definition; Credit.  As used in this Note, the term
'Affiliate' of Salton or 'Affiliate' of Windmere means any person or entity that
is controlled by, under the control of or under common control with a person or
entity within the meaning of Rule 405 adopted by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. Commencing as of
the date hereof, to the extent that Salton or any Affiliate of Salton purchases
products from Windmere, its manufacturing Affiliate with offices in Hong Kong,
Durable Electrical Metal Factory, Ltd., or any other Affiliate of Windmere, an
amount equal to five percent (5%) of the total purchase price paid by Salton
shall constitute a credit, first, against accrued and unpaid interest owing on
this Note and, next, against the unpaid principal balance of this Note;
provided, however, that such credits shall not be considered payments,
distributions or sets-offs under Section 3 of this Note; and further provided,
that nothing contained herein shall obligate Salton or any Salton Affiliate to
buy any products from Windmere or any Windmere Affiliate, nor obligate Windmere
or any Windmere Affiliate to sell any products to Salton or any Salton
Affiliate.

     3.  Subordination.  The principal balance, accrued and unpaid interest and
all other amounts owing under this Note are expressly made subordinate and
junior, as hereinafter set forth in this Section 3, to the prior payment in full
of all Senior Debt (as that term is hereinafter defined).







     3.1. Definition of Senior Debt.  As used herein 'Senior Debt' shall mean
all indebtedness whenever incurred by Salton for borrowed money, whether
secured or unsecured, with the exception of indebtedness owed to any Affiliate
of Salton, and trade debt.  As used in this Section 3.1, the term 'Affiliate'
shall not include any investor (other than a Salton Executive Related Party)
who acquires an equity interest in Salton at the closing of the Salton Option
or thereafter provided that such investor's interest represents less than fifty
percent (50%) of the voting interests in Salton or any parent company of
Salton.

     3.2. Acceleration.  If: (i) Senior Debt in an aggregate amount, including
principal, accrued interest and other amounts owing on such Senior Debt, in
excess of one million dollars matures, or is otherwise due and payable
(whether by acceleration or otherwise) and remains undischarged for a period in
excess of one hundred and twenty (120) days or (ii) Salton files a petition, as
a debtor, for relief under the United States Bankruptcy Code or an action
seeking to place Salton in involuntary bankruptcy under such Code is filed and
Salton does not oppose such action or such action is not discharged within
sixty (60) days next following the filing of such action, then, Windmere shall
have the right, on not less than five (5) days notice to Salton, to accelerate
the maturity of this Note, whereupon the remaining principal balance plus
accrued and unpaid interest shall become due immediately, subject to the terms
of this Section 3.  Except as specifically set forth in this Section 3.2,
Windmere shall not have the right to accelerate this Note.

     3.3 Amendment of Senior Debt.  The Senior Debt shall continue to be Senior
Debt and entitled to the benefits of these subordination provisions
irrespective of any amendment, modification or waiver of any term of the Senior
Debt, any extension or renewal of the Senior Debt, or the granting or release
of any collateral or security securing the repayment of the Senior Debt.

     3.4 Default in Respect of Senior Debt.

         (a) Payment Default.  In the event that Salton shall default in the
     payment of any principal of, or interest on, any Senior Debt when the
     same becomes due and payable, whether at maturity, at a date fixed for
     prepayment, by declaration of acceleration or otherwise, then,

             (i)   unless and until such default shall have been cured or
         waived or shall have ceased to exist, no direct or indirect payment    
         (in cash, property or securities or by set-off or otherwise) shall be
         made or agreed to be made on account of this Note or as a sinking fund
         for this Note, or in respect of any redemption, retirement, purchase,
         prepayment or other acquisition of this Note, and

             (ii)  no holder of this Note will take action to accelerate
         this Note except as set forth above in Section 3.2, or to commence,    
         or join with any other creditor in commencing, any bankruptcy,
         reorganization or insolvency proceeding with respect to Salton, or
         will initiate and prosecute any other action or proceeding 



                                     -2-






         (whether at law or in equity) against Salton to recover all or any
         part of this Note (unless the agent (or, if there shall be no agent
         for the holders of Senior Debt at such time, the holders of the Senior
         Debt) shall have agreed in writing in advance to any such  action or
         proceeding or prosecution, and shall have joined in, such action or
         proceeding or prosecution).

         (b)  Other Defaults.  Upon the occurrence of any other 'default' (as
     defined in any agreement evidencing the Senior Debt) then, unless and
     until such default shall have been cured or waived in writing or shall
     have ceased to exist,

                 (i)   no direct or indirect payment (in cash, property or
         securities or by set-off or otherwise) shall be made or agreed to      
         be made on account of this Note or as a sinking fund for this Note, or
         in respect of any redemption, retirement, purchase, prepayment or
         other acquisition of this Note during the period of 180 days after the
         occurrence of such default, and

                 (ii)  no holder of this Note will take action to accelerate
         this Note except as set forth in Section 3.2 or, for a period of  
         180 days after the occurrence of such default, commence, or join with
         any other creditors in commencing, any bankruptcy, reorganization or
         insolvency proceedings with respect to Salton, or will initiate and
         prosecute any other action or proceeding (whether at law or in equity)
         against Salton to recover all or any part of this Note (unless the
         agent (or, if there shall be no agent for the holders of Senior Debt
         at such time, the holders of the Senior Debt) shall have agreed in
         writing in advance to, and shall have joined, in such proceeding).

     3.5 Insolvency.  In the event of

         (a)  any insolvency, bankruptcy, receivership, liquidation,
     reorganization, readjustment, composition or other similar proceeding
     which relates to Salton or its property,

         (b)  any proceeding for the liquidation, dissolution or other
     winding-up of Salton, voluntary or involuntary, whether or not involving
     insolvency or bankruptcy proceedings,

         (d)  any assignment by Salton for the benefit of creditors, or

         (d)  any other marshalling of the assets of Salton,

then and in any such event:

                 (i)  all Senior Debt shall first be paid in full, in cash or
         cash equivalents, before any payment or distribution, whether in
         cash, securities or other property, shall be made to any holder of
         this Note on account of this Note;


                                     -3-







                 (ii) any payment or distribution, whether in cash, securities
         or other property (other than securities of Salton or any other        
         corporation provided for by a plan or reorganization or readjustment
         the payment of which is subordinated, at least to the extent of this
         Note as provided in this Section 3, to the payment of all Senior Debt
         at the time outstanding and to any securities issued to the holders of
         Senior Debt in respect of the Senior Debt under any such plan or
         reorganization or readjustment), that would otherwise (but for this
         Section 3) be payable or deliverable in respect of this Note, shall be
         paid or delivered directly to the holders of Senior Debt in accordance
         with the priorities then existing among such holders of Senior Debt
         until all Senior Debt shall have been paid in full, in cash or cash
         equivalents; and

                 (iii)  If any holder of this Note fails to file a claim or
         proof of debt in respect of such this Note in such proceedings at least
         five (5) business days prior to the latest date permitted by rule of
         law or court order for such filing, then the holders of Senior Debt
         shall be authorized (but not obligated) to file such claim or proof on
         behalf of such holder of this Note.  Each holder of the this Note
         agrees that, while it shall retain the right to vote its claim and
         otherwise act in any bankruptcy, insolvency or similar proceeding
         related to Salton, such holder will not take any act or vote in any way
         so as to contest the enforceability of the subordination provisions set
         forth herein.

     3.6 Turnover of Payments.  In the event that

           (a)  any payment or distribution shall be paid to or collected or
     received by any holder of this Note in contravention of any of the terms of
     this Section 3 and prior to the payment in full, in cash or cash
     equivalents, of the Senior Debt at the time outstanding, and

           (b)  any holder of such Senior Debt shall have notified the holder
     of this Note, within one hundred eighty (180) days of any such payment or
     distribution, of the facts by reason of which such collection or receipt
     so contravenes this Section 3,

then and in any such event such holder of this Note will deliver such payment
or distribution, to the extent necessary to pay all such Senior Debt in full,
in cash or cash equivalents to the holders of such Senior Debt and, until so
delivered the same shall be held in trust by such holder of this Note as the
property of the holders of such Senior Debt.  If after any amount is delivered
to the holders of Senior Debt pursuant to this Section 3.6 and (i) the holder
of this Note shall be required by an order or judgment of a court of competent
jurisdiction to return a payment (the 'Avoided Payment') received by them and
so paid over (in whole or in part) to the holders of Senior Debt, or (ii) the
outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, without giving effect to such delivery made pursuant to this
Section 3.6, then, in either case, the holders of Senior Debt shall return to
such holder of this Note any amount equal to the amount delivered to such
holders of Senior Debt pursuant to this Section 3.6, so 


                                      -4-





long as (in the case of the immediately preceding clause (ii) only) after the
return of such amount the Senior Debt shall remain paid in full, in cash or cash
equivalents.  For purposes of clause (i) of the immediately preceding sentence,
if less than all of the Avoided Payment was paid over to the holders of Senior
Debt and the holder of this Note is able to satisfy its obligations under such
order or judgment in whole or in part from the portion of the Avoided Payment
not so paid over to the holders of the Senior Debt, the holders of Senior Debt
shall not be required to return any portion of the Avoided Payment in excess of
the amount actually required by the holder(s) of this Note to satisfy its
obligations.

     3.7 Obligations Not Impaired.  No right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by (and such right shall remain in full
force and effect notwithstanding):

                 (a)  any act or failure to act on the part of Salton
         (including by way of an amendment to the provisions of this Section 3);

                 (b)  any extension or indulgence in respect of any payment or
         prepayment of the Senior Debt or any part thereof or in respect of
         any other amount payable to any holder of Senior Debt;

                 (c)  any amendment, modification, restatement, or waiver of, or
         addition or supplement to, or deletion from, or compromise, release,
         consent or other action in respect of, any of the terms of any Senior
         Debt or any other agreement which may be relating to any Senior Debt;

                 (d)  any exercise or non-exercise by any holder of Senior Debt
         of any right, power, privilege or remedy under or in respect of any
         Senior Debt or this Note, or any waiver of any such right, power,
         privilege or remedy or any default in respect of any Senior Debt or
         this Note, or any receipt by any holder of Senior Debt of any
         collateral security, or any failure of any holder of Senior Debt to
         perfect a security interest in any collateral, or any release by any
         holder of Senior Debt of any security for the payment of such Senior
         Debt;

                 (e)  any merger or consolidation of Salton or any of its
         subsidiaries into or with any of its subsidiaries or into or with any
         entity, or any sale, lease or transfer of any or all of the assets of
         Salton or any of its subsidiaries to any other entity or person; or

                 (f)  the absence of any notice to, or knowledge by, any holder
         of this Note of the existence or occurrence of any of the matters or
         events set forth in the foregoing clauses (a) through (e).

Nothing contained in this Section 3 shall impair, as between Salton and any
holder of this Note, the obligation of Salton to pay to such holder the
principal thereof and interest, on the this Note, 


                                      -5-





as and when the same shall become due and payable in accordance with the terms
thereof, or prevent any holder of any this Note from exercising all rights,
powers and remedies set forth herein or allowed by applicable law, all subject
to the rights of the holders of the Senior Debt to receive cash, securities or
other property otherwise payable or deliverable to the holder of this Note as
provided in this Section 3.

     3.8 Payment of Senior Debt; Subrogation.  Upon the payment in full, in
cash or cash equivalents, of all Senior Debt, the holder of this Note shall be
subrogated to all rights of any holder of Senior Debt to receive any further
payments or distributions applicable to the Senior Debt until the this Note
shall have been paid in full, and such payments or distributions received by
the holder of this Note by reason of such subrogation, of cash, securities or
other property that otherwise would be paid or distributed to the holders of
Senior Debt, shall, as between Salton and its creditors other than the holders
of Senior Debt, on the one hand, and the holder of this Note, on the other
hand, be deemed to be a payment by Salton on account of Senior Debt, and not on
account of this Note.

     4.  Cancellation of Note. If the Distribution and Marketing Agreement
between Salton and K-Mart Corporation dated January 27, 1997, as it may be
amended or renewed, is cancelled by K-Mart prior to June 30, 2004, the
principal balance of this note shall be reduced as of the date of such
cancellation in accordance with the amortization schedule attached hereto as
Schedule I, and, upon such reduction, accrued interest, interest already paid,
and interest accruing after such reduction prior to the maturity of this note
shall be recalculated on the reduced principal balance. To the extent that, on
account of such reduction, interest has been overpaid, such overpayment shall
be offset, first, against the next accruing amounts of interest not yet paid,
and then against the reduced principal balance, but Windmere shall not be
obligated otherwise to return accrued interest or principal already paid.

     5.  Applicable Law.  This Note shall be governed by and interpreted in
accordance with the laws of Delaware without regard to the conflict of laws and
principles thereof.

     6.  Notices.  Any notices under this Note shall be given as required by the
Stock Agreement.

                                  Salton/Maxim Housewares, Inc.,
                                  a Delaware corporation


                                  By:
                                     ---------------------------------------
                                  Its:
                                      -------------------------------------- 






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                                  SCHEDULE I



                                          Principal 
                                        Balance in the 
                  Cancelation              Event of
No.                Prior To              Cancelation
-------------------------------------------------------
                                  
 1                11/1/98               168,708.35
 2                12/1/98               337,979.05
 3                 1/1/99               507,814.00
-------------------------------
 4                 2/1/99               678,216.06
 5                 3/1/99               849,184.12
 6                 4/1/99             1,020,723.08
-------------------------------
 7                 6/1/99             1,192,833.84  
 8                 6/1/99             1,365,618.30
 9                 7/1/99             1,538,778.37
-------------------------------
10                 8/1/99             1,712,616.98
11                 9/1/99             1,887,033.05
12                10/1/99             2,062,031.50
-------------------------------
13                11/1/99             2,237,613.29
14                12/1/99             2,413,780.35
15                 1/1/00             2,590,534.63
-------------------------------
16                 2/1/00             2,767,878.09
17                 3/1/00             2,946,812.70
18                 4/1/00             3,124,340.42
-------------------------------
19                 5/1/00             3,303,463.23
20                 6/1/00             3,483,183.12
21                 7/1/00             3,863,502.08
-------------------------------
22                 8/1/00             3,844,422.10
23                 9/1/00             4,025,945.19
24                10/1/00             4,208,073.35
-------------------------------
25                11/1/00             4,390,808.61
26                12/1/00             4,574,162.98
27                 1/1/01             4,758,108.51
-------------------------------
28                 2/1/01             4,942,677.22
29                 3/1/01             5,127,861.15
30                 4/1/01             5,313,662.37
-------------------------------
31                 5/1/01             5,500,082.93
32                 6/1/01             5,687,124.86
33                 7/1/01             5,874,790.31
-------------------------------
34                 8/1/01             6,063,081.29
35                 9/1/01             6,251,999.91
36                10/1/01             6,441,548.26
-------------------------------
37                11/1/01             6,631,728.43
38                12/1/01             6,822,542.54
39                 1/1/02             7,013,992.69
-------------------------------
40                 2/1/02             7,206,081.02
41                 3/1/02             7,398,809.63
42                 4/1/02             7,692,180.68
-------------------------------
43                 5/1/02             7,786,196.29
44                 6/1/02             7,980,858.63
45                 7/1/02             8,176,189.84
-------------------------------
46                 8/1/02             8,372,132.08
47                 9/1/02             8,568,747.54
48                10/1/02             8,766,018.37
-------------------------------
49                11/1/02             8,963,946.78
50                12/1/02             9,162,534.95
51                 1/1/03             9,361,785.08
-------------------------------
52                 2/1/03             9,661,699.38
53                 3/1/03             9,762,280.06
54                 4/1/03             9,963,529.34
-------------------------------
55                 5/1/03            10,165,448.46
56                 6/1/03            10,368,042.62
57                 7/1/03            10,571,311.11
-------------------------------
58                 8/1/03            10,776,257.16
59                 9/1/03            10,979,883.03
60                10/1/03            11,165,190.99
-------------------------------
61                11/1/03            11,391,163.31
62                12/1/03            11,597,862.27
63                 1/1/04            11,805,230.15
-------------------------------
64                 2/1/04            12,013,289.27
65                 3/1/04            12,222,041.91
66                 4/1/04            12,431,490.40
-------------------------------
67                 5/1/04            12,641,637.05
68                 6/1/04            12,852,484.18
69                 7/1/04            13,064,034.14
-------------------------------
70                 8/1/04            15,000,000.00
71                 9/1/04            15,000,000.00
72                10/1/04            15,000,000.00
-------------------------------
73                11/1/04            15,000,000.00
-------------------------------
74                12/1/04            15,000,000.00
-------------------------------
75                 1/1/05            15,000,000.00
-------------------------------
76                 2/1/05            15,000,000.00
-------------------------------
77                 3/1/05            15,000,000.00
-------------------------------
78                 4/1/05            15,000,000.00
-------------------------------
                                     
-------------------------------      
                                     Assumes note is issued 10/1/1998.
-------------------------------      If the note is issued before or after such
                                     date then the schedule of reductions due
-------------------------------      to Kmart cancelation will have to be 
                                     adjusted to reflect a different number of
-------------------------------      monthly periods prior to July 1, 2004.

-------------------------------

                                      
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