{"id":41234,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/purchase-money-note-salton-maxim-housewares-inc-and-windmere.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"purchase-money-note-salton-maxim-housewares-inc-and-windmere","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/finance\/purchase-money-note-salton-maxim-housewares-inc-and-windmere.html","title":{"rendered":"Purchase Money Note &#8211; Salton\/Maxim Housewares Inc. and Windmere Durable Holdings Inc."},"content":{"rendered":"<pre>\n\n                       PURCHASE MONEY NOTE DATED AS OF\n                                JULY 27, 1998\n\n\n     1.  Principal, Interest, Maturity.  As partial payment for the purchase of\nshares of stock of Salton\/Maxim Housewares, Inc., a Delaware corporation\n('Salton'), owned by Windmere Durable Holdings, Inc., a Florida corporation\n('Windmere'), pursuant to a Stock Agreement dated as of May 6, 1998 among\nSalton, Windmere and third parties, Salton hereby promises to pay to the order\nof Windmere the principal amount of Fifteen Million Dollars and no cents\n($15,000,000), with simple interest at the annual rate of four percent (4%) from\nthe date hereof, to be paid annually on the fifteenth day of June, commencing\nJune 15, 1999. Any unpaid principal balance plus accrued and unpaid interest\nshall be due and payable on the last day of the seventy eighth (78th) full\ncalendar month next following the date hereof. If: (i) accrued and unpaid\ninterest is not paid in full on any interest payment date ('Interest Default')\nor (ii) the principal balance is not paid upon the due date, whether at the\nmaturity of the Note or upon acceleration as set forth in Section 3 hereof\n('Principal Default'), then, in the case of an Interest Default, simple interest\non the unpaid balance of this Note shall accrue on and after the Interest\nDefault at the rate of eight percent (8%) per annum until the Interest Default\nis cured or is waived in writing by the holder of the Note and, in the case of a\nPayment Default, simple interest on the unpaid balance of this Note shall also\naccrue on and after the Payment Default on the unpaid principal balance at the\nrate of eight percent (8%) per annum until payment in full is made of all\naccrued and unpaid interest and the unpaid principal balance. In addition, in\nthe case of any Interest Default or Payment Default, Salton agrees to pay all\ncosts of collection, including legal fees and out of pocket expenses and court\ncosts.\n\n     2.  Affiliate Definition; Credit.  As used in this Note, the term\n'Affiliate' of Salton or 'Affiliate' of Windmere means any person or entity that\nis controlled by, under the control of or under common control with a person or\nentity within the meaning of Rule 405 adopted by the Securities and Exchange\nCommission pursuant to the Securities Act of 1933, as amended. Commencing as of\nthe date hereof, to the extent that Salton or any Affiliate of Salton purchases\nproducts from Windmere, its manufacturing Affiliate with offices in Hong Kong,\nDurable Electrical Metal Factory, Ltd., or any other Affiliate of Windmere, an\namount equal to five percent (5%) of the total purchase price paid by Salton\nshall constitute a credit, first, against accrued and unpaid interest owing on\nthis Note and, next, against the unpaid principal balance of this Note;\nprovided, however, that such credits shall not be considered payments,\ndistributions or sets-offs under Section 3 of this Note; and further provided,\nthat nothing contained herein shall obligate Salton or any Salton Affiliate to\nbuy any products from Windmere or any Windmere Affiliate, nor obligate Windmere\nor any Windmere Affiliate to sell any products to Salton or any Salton\nAffiliate.\n\n     3.  Subordination.  The principal balance, accrued and unpaid interest and\nall other amounts owing under this Note are expressly made subordinate and\njunior, as hereinafter set forth in this Section 3, to the prior payment in full\nof all Senior Debt (as that term is hereinafter defined).\n\n\n\n\n\n\n\n     3.1. Definition of Senior Debt.  As used herein 'Senior Debt' shall mean\nall indebtedness whenever incurred by Salton for borrowed money, whether\nsecured or unsecured, with the exception of indebtedness owed to any Affiliate\nof Salton, and trade debt.  As used in this Section 3.1, the term 'Affiliate'\nshall not include any investor (other than a Salton Executive Related Party)\nwho acquires an equity interest in Salton at the closing of the Salton Option\nor thereafter provided that such investor's interest represents less than fifty\npercent (50%) of the voting interests in Salton or any parent company of\nSalton.\n\n     3.2. Acceleration.  If: (i) Senior Debt in an aggregate amount, including\nprincipal, accrued interest and other amounts owing on such Senior Debt, in\nexcess of one million dollars matures, or is otherwise due and payable\n(whether by acceleration or otherwise) and remains undischarged for a period in\nexcess of one hundred and twenty (120) days or (ii) Salton files a petition, as\na debtor, for relief under the United States Bankruptcy Code or an action\nseeking to place Salton in involuntary bankruptcy under such Code is filed and\nSalton does not oppose such action or such action is not discharged within\nsixty (60) days next following the filing of such action, then, Windmere shall\nhave the right, on not less than five (5) days notice to Salton, to accelerate\nthe maturity of this Note, whereupon the remaining principal balance plus\naccrued and unpaid interest shall become due immediately, subject to the terms\nof this Section 3.  Except as specifically set forth in this Section 3.2,\nWindmere shall not have the right to accelerate this Note.\n\n     3.3 Amendment of Senior Debt.  The Senior Debt shall continue to be Senior\nDebt and entitled to the benefits of these subordination provisions\nirrespective of any amendment, modification or waiver of any term of the Senior\nDebt, any extension or renewal of the Senior Debt, or the granting or release\nof any collateral or security securing the repayment of the Senior Debt.\n\n     3.4 Default in Respect of Senior Debt.\n\n         (a) Payment Default.  In the event that Salton shall default in the\n     payment of any principal of, or interest on, any Senior Debt when the\n     same becomes due and payable, whether at maturity, at a date fixed for\n     prepayment, by declaration of acceleration or otherwise, then,\n\n             (i)   unless and until such default shall have been cured or\n         waived or shall have ceased to exist, no direct or indirect payment    \n         (in cash, property or securities or by set-off or otherwise) shall be\n         made or agreed to be made on account of this Note or as a sinking fund\n         for this Note, or in respect of any redemption, retirement, purchase,\n         prepayment or other acquisition of this Note, and\n\n             (ii)  no holder of this Note will take action to accelerate\n         this Note except as set forth above in Section 3.2, or to commence,    \n         or join with any other creditor in commencing, any bankruptcy,\n         reorganization or insolvency proceeding with respect to Salton, or\n         will initiate and prosecute any other action or proceeding \n\n\n\n                                     -2-\n\n\n\n\n\n\n         (whether at law or in equity) against Salton to recover all or any\n         part of this Note (unless the agent (or, if there shall be no agent\n         for the holders of Senior Debt at such time, the holders of the Senior\n         Debt) shall have agreed in writing in advance to any such  action or\n         proceeding or prosecution, and shall have joined in, such action or\n         proceeding or prosecution).\n\n         (b)  Other Defaults.  Upon the occurrence of any other 'default' (as\n     defined in any agreement evidencing the Senior Debt) then, unless and\n     until such default shall have been cured or waived in writing or shall\n     have ceased to exist,\n\n                 (i)   no direct or indirect payment (in cash, property or\n         securities or by set-off or otherwise) shall be made or agreed to      \n         be made on account of this Note or as a sinking fund for this Note, or\n         in respect of any redemption, retirement, purchase, prepayment or\n         other acquisition of this Note during the period of 180 days after the\n         occurrence of such default, and\n\n                 (ii)  no holder of this Note will take action to accelerate\n         this Note except as set forth in Section 3.2 or, for a period of  \n         180 days after the occurrence of such default, commence, or join with\n         any other creditors in commencing, any bankruptcy, reorganization or\n         insolvency proceedings with respect to Salton, or will initiate and\n         prosecute any other action or proceeding (whether at law or in equity)\n         against Salton to recover all or any part of this Note (unless the\n         agent (or, if there shall be no agent for the holders of Senior Debt\n         at such time, the holders of the Senior Debt) shall have agreed in\n         writing in advance to, and shall have joined, in such proceeding).\n\n     3.5 Insolvency.  In the event of\n\n         (a)  any insolvency, bankruptcy, receivership, liquidation,\n     reorganization, readjustment, composition or other similar proceeding\n     which relates to Salton or its property,\n\n         (b)  any proceeding for the liquidation, dissolution or other\n     winding-up of Salton, voluntary or involuntary, whether or not involving\n     insolvency or bankruptcy proceedings,\n\n         (d)  any assignment by Salton for the benefit of creditors, or\n\n         (d)  any other marshalling of the assets of Salton,\n\nthen and in any such event:\n\n                 (i)  all Senior Debt shall first be paid in full, in cash or\n         cash equivalents, before any payment or distribution, whether in\n         cash, securities or other property, shall be made to any holder of\n         this Note on account of this Note;\n\n\n                                     -3-\n\n\n\n\n\n\n\n                 (ii) any payment or distribution, whether in cash, securities\n         or other property (other than securities of Salton or any other        \n         corporation provided for by a plan or reorganization or readjustment\n         the payment of which is subordinated, at least to the extent of this\n         Note as provided in this Section 3, to the payment of all Senior Debt\n         at the time outstanding and to any securities issued to the holders of\n         Senior Debt in respect of the Senior Debt under any such plan or\n         reorganization or readjustment), that would otherwise (but for this\n         Section 3) be payable or deliverable in respect of this Note, shall be\n         paid or delivered directly to the holders of Senior Debt in accordance\n         with the priorities then existing among such holders of Senior Debt\n         until all Senior Debt shall have been paid in full, in cash or cash\n         equivalents; and\n\n                 (iii)  If any holder of this Note fails to file a claim or\n         proof of debt in respect of such this Note in such proceedings at least\n         five (5) business days prior to the latest date permitted by rule of\n         law or court order for such filing, then the holders of Senior Debt\n         shall be authorized (but not obligated) to file such claim or proof on\n         behalf of such holder of this Note.  Each holder of the this Note\n         agrees that, while it shall retain the right to vote its claim and\n         otherwise act in any bankruptcy, insolvency or similar proceeding\n         related to Salton, such holder will not take any act or vote in any way\n         so as to contest the enforceability of the subordination provisions set\n         forth herein.\n\n     3.6 Turnover of Payments.  In the event that\n\n           (a)  any payment or distribution shall be paid to or collected or\n     received by any holder of this Note in contravention of any of the terms of\n     this Section 3 and prior to the payment in full, in cash or cash\n     equivalents, of the Senior Debt at the time outstanding, and\n\n           (b)  any holder of such Senior Debt shall have notified the holder\n     of this Note, within one hundred eighty (180) days of any such payment or\n     distribution, of the facts by reason of which such collection or receipt\n     so contravenes this Section 3,\n\nthen and in any such event such holder of this Note will deliver such payment\nor distribution, to the extent necessary to pay all such Senior Debt in full,\nin cash or cash equivalents to the holders of such Senior Debt and, until so\ndelivered the same shall be held in trust by such holder of this Note as the\nproperty of the holders of such Senior Debt.  If after any amount is delivered\nto the holders of Senior Debt pursuant to this Section 3.6 and (i) the holder\nof this Note shall be required by an order or judgment of a court of competent\njurisdiction to return a payment (the 'Avoided Payment') received by them and\nso paid over (in whole or in part) to the holders of Senior Debt, or (ii) the\noutstanding Senior Debt shall thereafter be paid in full, in cash or cash\nequivalents, without giving effect to such delivery made pursuant to this\nSection 3.6, then, in either case, the holders of Senior Debt shall return to\nsuch holder of this Note any amount equal to the amount delivered to such\nholders of Senior Debt pursuant to this Section 3.6, so \n\n\n                                      -4-\n\n\n\n\n\nlong as (in the case of the immediately preceding clause (ii) only) after the\nreturn of such amount the Senior Debt shall remain paid in full, in cash or cash\nequivalents.  For purposes of clause (i) of the immediately preceding sentence,\nif less than all of the Avoided Payment was paid over to the holders of Senior\nDebt and the holder of this Note is able to satisfy its obligations under such\norder or judgment in whole or in part from the portion of the Avoided Payment\nnot so paid over to the holders of the Senior Debt, the holders of Senior Debt\nshall not be required to return any portion of the Avoided Payment in excess of\nthe amount actually required by the holder(s) of this Note to satisfy its\nobligations.\n\n     3.7 Obligations Not Impaired.  No right of any present or future holder of\nany Senior Debt to enforce subordination as herein provided shall at any time\nin any way be prejudiced or impaired by (and such right shall remain in full\nforce and effect notwithstanding):\n\n                 (a)  any act or failure to act on the part of Salton\n         (including by way of an amendment to the provisions of this Section 3);\n\n                 (b)  any extension or indulgence in respect of any payment or\n         prepayment of the Senior Debt or any part thereof or in respect of\n         any other amount payable to any holder of Senior Debt;\n\n                 (c)  any amendment, modification, restatement, or waiver of, or\n         addition or supplement to, or deletion from, or compromise, release,\n         consent or other action in respect of, any of the terms of any Senior\n         Debt or any other agreement which may be relating to any Senior Debt;\n\n                 (d)  any exercise or non-exercise by any holder of Senior Debt\n         of any right, power, privilege or remedy under or in respect of any\n         Senior Debt or this Note, or any waiver of any such right, power,\n         privilege or remedy or any default in respect of any Senior Debt or\n         this Note, or any receipt by any holder of Senior Debt of any\n         collateral security, or any failure of any holder of Senior Debt to\n         perfect a security interest in any collateral, or any release by any\n         holder of Senior Debt of any security for the payment of such Senior\n         Debt;\n\n                 (e)  any merger or consolidation of Salton or any of its\n         subsidiaries into or with any of its subsidiaries or into or with any\n         entity, or any sale, lease or transfer of any or all of the assets of\n         Salton or any of its subsidiaries to any other entity or person; or\n\n                 (f)  the absence of any notice to, or knowledge by, any holder\n         of this Note of the existence or occurrence of any of the matters or\n         events set forth in the foregoing clauses (a) through (e).\n\nNothing contained in this Section 3 shall impair, as between Salton and any\nholder of this Note, the obligation of Salton to pay to such holder the\nprincipal thereof and interest, on the this Note, \n\n\n                                      -5-\n\n\n\n\n\nas and when the same shall become due and payable in accordance with the terms\nthereof, or prevent any holder of any this Note from exercising all rights,\npowers and remedies set forth herein or allowed by applicable law, all subject\nto the rights of the holders of the Senior Debt to receive cash, securities or\nother property otherwise payable or deliverable to the holder of this Note as\nprovided in this Section 3.\n\n     3.8 Payment of Senior Debt; Subrogation.  Upon the payment in full, in\ncash or cash equivalents, of all Senior Debt, the holder of this Note shall be\nsubrogated to all rights of any holder of Senior Debt to receive any further\npayments or distributions applicable to the Senior Debt until the this Note\nshall have been paid in full, and such payments or distributions received by\nthe holder of this Note by reason of such subrogation, of cash, securities or\nother property that otherwise would be paid or distributed to the holders of\nSenior Debt, shall, as between Salton and its creditors other than the holders\nof Senior Debt, on the one hand, and the holder of this Note, on the other\nhand, be deemed to be a payment by Salton on account of Senior Debt, and not on\naccount of this Note.\n\n     4.  Cancellation of Note. If the Distribution and Marketing Agreement\nbetween Salton and K-Mart Corporation dated January 27, 1997, as it may be\namended or renewed, is cancelled by K-Mart prior to June 30, 2004, the\nprincipal balance of this note shall be reduced as of the date of such\ncancellation in accordance with the amortization schedule attached hereto as\nSchedule I, and, upon such reduction, accrued interest, interest already paid,\nand interest accruing after such reduction prior to the maturity of this note\nshall be recalculated on the reduced principal balance. To the extent that, on\naccount of such reduction, interest has been overpaid, such overpayment shall\nbe offset, first, against the next accruing amounts of interest not yet paid,\nand then against the reduced principal balance, but Windmere shall not be\nobligated otherwise to return accrued interest or principal already paid.\n\n     5.  Applicable Law.  This Note shall be governed by and interpreted in\naccordance with the laws of Delaware without regard to the conflict of laws and\nprinciples thereof.\n\n     6.  Notices.  Any notices under this Note shall be given as required by the\nStock Agreement.\n\n                                  Salton\/Maxim Housewares, Inc.,\n                                  a Delaware corporation\n\n\n                                  By:\n                                     ---------------------------------------\n                                  Its:\n                                      -------------------------------------- \n\n\n\n\n\n\n                                      -6-\n\n\n\n                                      \n                                      \n                                  SCHEDULE I\n\n\n<font size=\"2\">\n                                          Principal \n                                        Balance in the \n                  Cancelation              Event of\nNo.                Prior To              Cancelation\n-------------------------------------------------------\n                                  \n 1                11\/1\/98               168,708.35\n 2                12\/1\/98               337,979.05\n 3                 1\/1\/99               507,814.00\n-------------------------------\n 4                 2\/1\/99               678,216.06\n 5                 3\/1\/99               849,184.12\n 6                 4\/1\/99             1,020,723.08\n-------------------------------\n 7                 6\/1\/99             1,192,833.84  \n 8                 6\/1\/99             1,365,618.30\n 9                 7\/1\/99             1,538,778.37\n-------------------------------\n10                 8\/1\/99             1,712,616.98\n11                 9\/1\/99             1,887,033.05\n12                10\/1\/99             2,062,031.50\n-------------------------------\n13                11\/1\/99             2,237,613.29\n14                12\/1\/99             2,413,780.35\n15                 1\/1\/00             2,590,534.63\n-------------------------------\n16                 2\/1\/00             2,767,878.09\n17                 3\/1\/00             2,946,812.70\n18                 4\/1\/00             3,124,340.42\n-------------------------------\n19                 5\/1\/00             3,303,463.23\n20                 6\/1\/00             3,483,183.12\n21                 7\/1\/00             3,863,502.08\n-------------------------------\n22                 8\/1\/00             3,844,422.10\n23                 9\/1\/00             4,025,945.19\n24                10\/1\/00             4,208,073.35\n-------------------------------\n25                11\/1\/00             4,390,808.61\n26                12\/1\/00             4,574,162.98\n27                 1\/1\/01             4,758,108.51\n-------------------------------\n28                 2\/1\/01             4,942,677.22\n29                 3\/1\/01             5,127,861.15\n30                 4\/1\/01             5,313,662.37\n-------------------------------\n31                 5\/1\/01             5,500,082.93\n32                 6\/1\/01             5,687,124.86\n33                 7\/1\/01             5,874,790.31\n-------------------------------\n34                 8\/1\/01             6,063,081.29\n35                 9\/1\/01             6,251,999.91\n36                10\/1\/01             6,441,548.26\n-------------------------------\n37                11\/1\/01             6,631,728.43\n38                12\/1\/01             6,822,542.54\n39                 1\/1\/02             7,013,992.69\n-------------------------------\n40                 2\/1\/02             7,206,081.02\n41                 3\/1\/02             7,398,809.63\n42                 4\/1\/02             7,692,180.68\n-------------------------------\n43                 5\/1\/02             7,786,196.29\n44                 6\/1\/02             7,980,858.63\n45                 7\/1\/02             8,176,189.84\n-------------------------------\n46                 8\/1\/02             8,372,132.08\n47                 9\/1\/02             8,568,747.54\n48                10\/1\/02             8,766,018.37\n-------------------------------\n49                11\/1\/02             8,963,946.78\n50                12\/1\/02             9,162,534.95\n51                 1\/1\/03             9,361,785.08\n-------------------------------\n52                 2\/1\/03             9,661,699.38\n53                 3\/1\/03             9,762,280.06\n54                 4\/1\/03             9,963,529.34\n-------------------------------\n55                 5\/1\/03            10,165,448.46\n56                 6\/1\/03            10,368,042.62\n57                 7\/1\/03            10,571,311.11\n-------------------------------\n58                 8\/1\/03            10,776,257.16\n59                 9\/1\/03            10,979,883.03\n60                10\/1\/03            11,165,190.99\n-------------------------------\n61                11\/1\/03            11,391,163.31\n62                12\/1\/03            11,597,862.27\n63                 1\/1\/04            11,805,230.15\n-------------------------------\n64                 2\/1\/04            12,013,289.27\n65                 3\/1\/04            12,222,041.91\n66                 4\/1\/04            12,431,490.40\n-------------------------------\n67                 5\/1\/04            12,641,637.05\n68                 6\/1\/04            12,852,484.18\n69                 7\/1\/04            13,064,034.14\n-------------------------------\n70                 8\/1\/04            15,000,000.00\n71                 9\/1\/04            15,000,000.00\n72                10\/1\/04            15,000,000.00\n-------------------------------\n73                11\/1\/04            15,000,000.00\n-------------------------------\n74                12\/1\/04            15,000,000.00\n-------------------------------\n75                 1\/1\/05            15,000,000.00\n-------------------------------\n76                 2\/1\/05            15,000,000.00\n-------------------------------\n77                 3\/1\/05            15,000,000.00\n-------------------------------\n78                 4\/1\/05            15,000,000.00\n-------------------------------\n                                     \n-------------------------------      \n                                     Assumes note is issued 10\/1\/1998.\n-------------------------------      If the note is issued before or after such\n                                     date then the schedule of reductions due\n-------------------------------      to Kmart cancelation will have to be \n                                     adjusted to reflect a different number of\n-------------------------------      monthly periods prior to July 1, 2004.\n\n-------------------------------\n<\/font>\n                                      \n                                     -7-\n                                      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