
<PAGE>   1
                                                                    EXHIBIT 10.1
















                 PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT


                                 BY AND BETWEEN


                         SALTON/MAXIM HOUSEWARES, INC.


                                      AND


                               KMART CORPORATION




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

                                JANUARY 27, 1997

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








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<PAGE>   2


                 PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT

        This Agreement ("Agreement") is entered into as of January 27, 1997
(the "Execution Date") between Salton/Maxim Housewares, Inc., a Delaware
corporation ("Salton"), and Kmart Corporation, a Michigan corporation
("Kmart").

                                    PREAMBLE

        WHEREAS, pursuant to License Agreements by and between White
Consolidated Industries, Inc. ("WCI") and Salton (the "License Agreements"),
Salton has the exclusive right and license within the United States to use the
trademark "White-Westinghouse" and all associated designs and trade dress
(together, the "Trademark") in connection with the design, manufacture,
advertising, sale and promotion of, among others, the products listed on
Exhibit A hereto, each of which will bear and include the Trademark (such
products bearing the Trademark are hereinafter referred to as the "Products");

        WHEREAS, Kmart is a leading discount retailer of various consumer and
other products, including products similar to the Products; and

        WHEREAS, Salton desires to grant to Kmart certain exclusive rights and
obligations to purchase, distribute, sell, market and promote the Products in
the United States, and Kmart desires to accept and exercise these rights and
obligations, upon the terms and subject to the conditions of this Agreement.

        WHEREAS, simultaneously with the execution of this Agreement, Kmart is
executing an agreement with New M-Tech Corporation, an affiliate of Salton, as
defined in Section 1.1 below (the "New Tech Agreement"), for the use of the
Trademark on Audio products, Video products, Telephones, Telephone Answering
Machines and Telephone accessories all as specifically described therein, which
agreement is critical to Kmart's overall program for use of the Trademark on
Products under this Agreement with Salton, is a primary inducement for Kmart's
entering into, and is a continuing necessary component of and precondition to
Kmart's performance under this Agreement with Salton.

        Accordingly, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows: 

                            TERMS AND CONDITIONS

1.      DEFINITIONS 

        As used in this Agreement, the following terms shall have the meaning 
given to them below: 

        1.1    "Affiliate" means any Person involved in a situation where, 
               directly or indirectly, one Person controls, or has the power
               to control, the other Person or a third party controls, or has 
               the power to control, both Persons. 

        1.2    "Discount Department Store" shall include, without limitation, 
               the Persons listed on Schedule 1.2 hereof as well as all 
               department stores which are similar to Discount Department 
               Stores in terms of market niche, size and product pricing which 
               now or hereafter may exist.

        1.3    "Person" shall include any individual, corporation, partnership, 
               association, cooperative, joint venture, or any other form of 
               business entity recognized under the law.


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        1.4    "sale" shall mean any action involving selling.  

        1.5    "sell" shall mean to, directly or indirectly, sell, distribute, 
               supply, solicit or accept orders for, negotiate for the sale or
               distribution of, or take any other action that is in furtherance
               of, any of the foregoing.  "Sell" also include any other forms
               of that verb, whether active or passive, or in the past,
               present, or future tense.

        1.6    "United States" shall mean the United States of America, 
               including Puerto Rico and Guam.

2.      APPOINTMENT

        2.1    Appointment by Salton; Acceptance by Kmart.  Subject to the
               provisions of this Agreement, Salton hereby appoints Kmart as
               the sole and exclusive Discount Department Store to purchase,
               distribute, sell, market and promote the Products in the United
               States and Kmart hereby accepts such appointment. The rights
               granted to Kmart under this Agreement shall hereinafter
               collectively be referred to as the "Right."  No other Discount
               Department Store shall have any such Right during the Term of
               this Agreement and/or any extension or renewal thereof,
               regardless of source (i.e., whether from Salton or any other
               entity) subject to Sections 10.4 and 10.5 hereof. 
               Notwithstanding the foregoing, nothing in this Agreement shall
               be deemed to preclude the sale of Products (i) by entities or
               stores other than Discount Department Stores including, without
               limitation, retail department stores, specialty housewares,
               gourmet and kitchen stores and national cable television
               programs or (ii) by any Person outside the United States.
               Furthermore, nothing in this Agreement shall preclude Kmart from
               purchasing products of the type listed on Exhibit A hereto from
               any sources other than Salton if such products do not bear or
               include or are not sold under the Trademark, and no payments
               shall be due to Salton hereunder in respect of such sales. 

        2.2    Territorial Limitations.  Salton covenants and agrees that
               during the term of this Agreement or until this Agreement is 
               terminated in accordance with the provisions of Article 10
               below: 

               2.2.1     Salton shall not, directly or indirectly, sell any 
                         Product to a Discount Department Store in the United 
                         States, subject to Sections 10.4 and 10.5 hereof. 

               2.2.2     Except with the prior written consent of Salton (which 
                         consent may be refused in the sole, absolute and 
                         arbitrary discretion of Salton), Kmart shall not
                         sell any Product to any Person outside the United
                         States.  The United States includes Puerto Rico and
                         Guam. 

               2.2.3     The parties acknowledge and agree that the 
                         relationship hereby established between Kmart and
                         Salton is solely that of buyer and seller of goods
                         that each is an independent contractor engaged in the
                         operation of its own respective business, that neither
                         party shall be considered to be the agent of the other
                         party for any purpose whatsoever, except as otherwise
                         expressly indicated in this Agreement, and that,
                         except as otherwise expressly indicated in this
                         Agreement, neither party has any authority to enter
                         into any contract, assume any obligations or make any
                         warranties or representations on behalf of the other
                         party.  Nothing in this Agreement shall be construed
                         to establish a partnership or joint venture
                         relationship between Salton and Kmart.  Nothing in
                         this Agreement shall be deemed in any way to
                         constitute a sublicense by Salton of its rights under
                         the 

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                         License Agreement, and the relationship between the 
                         parties hereto shall at all times be as set forth
                         in this paragraph. 

3.      REPRESENTATIONS AND WARRANTIES OF SALTON 
 
        3.1    Salton represents and warrants to Kmart as follows: 

               3.1.1     Organization, Power and Authority.  It is duly 
                         organized  and validly existing under the laws of the 
                         State of Delaware, has all requisite power and
                         authority to conduct its business as now, and as
                         proposed to be, conducted and to execute, deliver and
                         perform its obligations under this Agreement.  This
                         Agreement has been duly authorized, executed and
                         delivered by Salton and represents a valid and binding
                         obligation enforceable against Salton in accordance
                         with its terms. 

               3.1.2     No Conflicts; Consents.  Execution and delivery 
                         hereof, or performance by Salton hereunder, shall not 
                         (a) violate or create a default under (i) Salton's 
                         Certificate of Incorporation or by-laws (true and 
                         correct copies of which have been delivered to Kmart), 
                         (ii) any mortgage, indenture, agreement, note or other 
                         instrument to which it is a party or to which its 
                         assets are subject including, without limitation,
                         the License Agreement or (iii) any court order or
                         decree or other governmental directive or (b) result
                         in the action of any lien, charge or encumbrance on
                         any material portion of Salton's assets, except as
                         contemplated hereby. 

               3.1.3     Brokers.  No broker, investment banker, financial 
                         advisor or other person is entitled to any broker's, 
                         finder's, financial advisor's or other similar fee or 
                         commission in connection with the transactions 
                         contemplated by this Agreement based upon arrangements 
                         made by or on behalf of Salton.


               3.1.4     Trademark/Compliance with Laws.  It has the 
                         contractual right and authority to use the Trademark
                         for the Products as provided in this Agreement and to
                         grant to Kmart all rights which are set forth in this
                         Agreement including but not limited to the "Right"
                         described in Section 2.1 herein, including but not
                         limited to, the right to import all Products into the
                         United States for the full duration of this Agreement;
                         and Salton shall provide U.S. Customs with sufficient
                         proof and documentation to enable Kmart to do so.
                         (Notwithstanding the foregoing, Salton shall have up
                         to ten (10) business days to correct any such U.S.
                         Customs Problems which do not affect Kmart's ability
                         to use the Trademark in connection with the sale of
                         any of the Products pursuant to this Agreement.)  In
                         addition, no other Discount Department Store shall
                         have the right to use the Trademark in connection with
                         the sale of any of the Products or sell Products
                         bearing the Trademark or have any of Kmart's rights
                         hereunder during the Term of this Agreement and any
                         renewal and/or extension hereof.  Furthermore, this
                         Agreement as well as Salton's performance hereunder
                         shall be in compliance with all applicable laws, rules
                         and regulations other than immaterial violations.  Any
                         claim which Kmart reasonably believes impairs or would
                         impair Kmart's ability to receive any of the benefits
                         of this Agreement, or any failure under this Agreement
                         and/or under the NewTech Agreement with respect to
                         this (or the Salton Agreement's) Section 3.1.4 and/or
                         Section 2.1, whether such failure relates to any or
                         all Products, shall entitle Kmart, in addition to all
                         other rights and remedies, without resort to the
                         notice and cure requirements under Section 10.3
                         herein, to immediately terminate this Agreement and
                         owe nothing to Salton 


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                         except for payment for Products accepted and sold by 
                         Kmart through the date of termination.

               3.1.5     Qualifications.  Throughout the Term of this Agreement 
                         and any renewal or extension hereof, Salton shall 
                         comply with the following requirements: 

                         a.   New Vendor Packet Compliance.  Salton must have 
                              executed and delivered to Kmart all documents 
                              required by Kmart's New Vendor Packet, including, 
                              but not limited to, Kmart's agreement on standard 
                              purchase order terms and conditions attached as
                              Exhibit B (collectively, the "Related Documents")
                              and must currently be in full compliance with the
                              same except as required by this Agreement. 
                              Salton's execution of this Agreement shall
                              constitute Salton's acceptance of and agreement
                              to the terms and conditions contained in all of
                              the Related Documents to the extent not
                              inconsistent with the terms of this Agreement.

                         b.   Kmart Corporation Code of Business Conduct.
                              Salton must be in full compliance with the Kmart
                              Code of Business Conduct and all applicable laws,
                              rules and regulations, including but not limited
                              to child, forced, and prison labor laws and must
                              not have violated the Code of Business Conduct or
                              applicable laws during the twelve calendar months
                              preceding the date of execution of this
                              Agreement.

                         c.   Continuing Business Conduct with Kmart Foreign
                              Subsidiaries and Operations.  Salton must not
                              restrict or curtail in any way its historical
                              business practices and course of dealing with
                              Kmart's foreign subsidiaries and other foreign
                              operations if any existed.

                         d.   Industry Performance.  Salton must at a minimum
                              meet normal industry standards for performance
                              regarding timing and completion levels of fill
                              rates without substitutions.

                         e.   Electronic Data Interchange.  Salton must
                              accommodate and participate in Kmart's electronic
                              data interchange program.

4.      REPRESENTATIONS AND WARRANTIES OF KMART

        4.1    Kmart represents and warrants to Salton as follows: 

               4.1.1     Organization, Power and Authority.  It is duly 
                         organized and validly existing under the laws of the 
                         State of Michigan, has all requisite power and
                         authority to conduct its business as now, and as
                         proposed to be, conducted and to execute, deliver and
                         perform its obligations under this Agreement.  This
                         Agreement has been duly authorized, executed and
                         delivered by Kmart and represents a valid and binding
                         obligation enforceable against Kmart in accordance
                         with its terms.

               4.1.2     No Conflicts; Consents.  Execution and delivery
                         hereof, or performance by Kmart hereunder, shall not
                         (a) violate or create a default under (i) Kmart's
                         Certificate of Incorporation or by-laws (true and
                         correct copies of which have been delivered to
                         Salton), (ii) any mortgage, indenture,
                         agreement, note or other instrument to which it is a
                         party or to which its assets are subject or (iii) any
                         court 


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                         order or decree or other governmental directive or (b)
                         result in the action of any lien, charge or 
                         encumbrance on any material portion of Kmart's assets.
               
               4.1.3     Brokers.  No broker, investment banker, financial
                         advisor or other person is entitled to any broker's,
                         finder's, financial advisor's or other similar fee or
                         commission in connection with the transactions
                         contemplated by this Agreement based upon arrangements
                         made by or on behalf of Kmart.

5.      MINIMUM ORDERS; OTHER OBLIGATIONS

        5.3    Retail Sales Price.  Kmart shall have sole discretion in setting 
               the sales price for the sale of the Products to its customers.

6.      DELIVERY

        6.1    Availability of Products.  Products shall be shipped in 
               accordance with the Specific Purchase Orders.  Salton shall use
               its reasonable best efforts to make available to Kmart
               sufficient quantities of the Products to satisfy Kmart's Product
               Orders.

        6.2    Product Forecasts.  To assist Salton in production scheduling 
               for the manufacture of the Products, Kmart shall provide to
               Salton, monthly, a six month rolling forecast of its
               requirements for Products.  The first forecast shall be provided
               by Kmart to Salton within thirty (30) business days of the
               Execution Date of this Agreement (to forecast the requirements
               for the six months ended June 30, 1997 and for the next five
               succeeding calendar months) and thereafter shall be provided to
               Salton on or before the 20th day of each month (to forecast the
               requirements for the next six succeeding calendar months).  It
               is understood and agreed that all forecasts are estimates only
               and Kmart shall only be bound to purchase the Products pursuant
               to Specific Purchase Orders issued by it to Salton, subject to
               the satisfaction of the Minimum Product Order commitment set
               forth in Section 5.1 hereof; and the Fee on any shortfall in the
               Minimum Product Order for any Category and Kmart's payment for
               conforming Products ordered and timely delivered through the
               date of Termination shall be Salton's sole and exclusive remedy
               hereunder.

        6.3    Shipping Arrangements; Risk of Loss.  The shipping arrangements, 
               insurance and risk of loss relating to Products purchased 
               hereunder shall be specified in each Specific Purchase Order.

7.      MANUFACTURE OF PRODUCTS; PRICE AND PAYMENT TERMS 

               7.1.10    Currency Exchange.  Prices charged Kmart and payments 
                         made by Kmart to Salton for the Products shall be in 
                         U.S. dollars.


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8.      RETURNS, ALLOWANCES AND WARRANTIES

        8.1    Terms of Specific Purchase Order to Control.  The terms and
               conditions of this Agreement, including the Purchase Order
               Forms, as well as the terms and conditions set forth in each
               Specific Purchase Order shall determine the rights and
               obligations of the parties with respect to returns, allowances
               and warranties relating to Products ordered thereunder. 

9.      DAMAGES, INDEMNIFICATION AND INSURANCE 

        9.3    Survival.  The provisions of this Section 9 shall survive the 
               termination or expiration of this Agreement. 

10.     TERM AND TERMINATION 

        10.1   Term.  The Term of this Agreement shall be a period commencing
               on the Execution Date and terminating on unless earlier
               terminated in accordance with this Section 10 of this Agreement.

        10.2   Extension of Terms.
 
               10.3   Termination by Either Party.  The occurrence of one or 
               more of the following events shall constitute a default of the 
               party responsible for the occurrence of such event ("Default"): 

        10.4   Termination at Option of Kmart.

        10.5   Termination at Option of Salton.

        10.6   Duties Following Termination.  Upon Termination of this 
               Agreement, neither party shall have any obligation to the other
               party except as hereinafter set forth in this Section 10.6. 
               Notwithstanding the termination or expiration of this Agreement
               pursuant to this Article 10 or any other provision of this
               Agreement, unless otherwise indicated in this Agreement, all
               rights and obligations which were incurred or which matured
               under specific Purchase Orders issued prior to the effective
               date of termination or expiration shall survive termination and
               be subject to enforcement under the terms of this Agreement. 
               Termination of this Agreement shall not affect any duty of Kmart
               or Salton under Sections 9.1, 11.1, 11.2, 11.3, 12.1, 12.4,
               12.6, 12.11, 12.13 or 12.14 existing prior to the effective date
               of termination or expiration , all of which are intended to
               survive termination. Kmart shall have the right to distribute,
               sell, market and promote all existing inventory of Products
               ordered pursuant to Specific Purchase Orders prior to the
               termination of this Agreement, and to use all packaging
               materials, labels, tags, signage, advertising and promotional
               materials to effectuate the sale of such Products. 

        10.7   Non-interference.  Except for negotiations involving Salton or
               with a Third Party Manufacturer, Kmart agrees that, except
               with Salton, it will not, during the Term of this Agreement or 
               any extension or renewal thereof negotiate, obtain information 
               or discuss


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               with or enter into any agreement with any person or entity
               covering the licensing, purchase, sale, marketing or
               distribution of the Trademark for any of the Categories of
               Product purchased by Kmart from Salton. 

11.     CONFIDENTIALITY/PRESS RELEASES 

        11.1   Confidentiality and Non-Disclosure.  Salton agrees that any all
               information in any form that is provided to Salton or any of its
               representatives as part of this Agreement is provided and
               received in confidence, and Salton, shall at all times preserve
               and protect the confidentiality of such information, and of any
               other proprietary or non-public information of or relating to
               Kmart or any of its related companies of which it or any of its
               representatives becomes aware or acquires during the performance
               of this Agreement (such information is hereinafter referred to
               as "Confidential Information"). Salton also agrees that it shall
               take all reasonable steps to ensure that such Confidential
               Information will not be disclosed to, or used by any person,
               association or entity except its own employees, and then only to
               the extent necessary to permit it to perform this Agreement.

               Each of Salton and Kmart agrees to keep the Minimum Product
               Orders, pricing, and Term of this Agreement (including rights of
               extension and termination) strictly confidential, except that
               each of Salton and Kmart shall be permitted to disclose any and
               all information concerning the transactions contemplated hereby
               to the extent it is legally required to do so, whether under
               applicable securities laws or otherwise, provided, that Salton
               will use its reasonable best efforts to file with the Securities
               and Exchange Commission or any other applicable regulator or
               court a request for confidential treatment of the pricing and
               other business terms set forth in this Agreement.

               In the course of performance of this Agreement, Salton may
               disclose certain information to Kmart which Salton considers
               proprietary and confidential.  In order to be considered as
               proprietary and confidential and, thus, subject to the following
               restrictions, Salton must comply with both of the following
               requirements prior to disclosure of the information: (i) the
               information must be clearly and conspicuously identified in
               writing as "PROPRIETARY AND CONFIDENTIAL INFORMATION OF SALTON';
               and (ii) Salton must limit its dissemination of the information
               to an authorized representative of Kmart (i.e., one listed on
               attached Exhibit E) with a need to know such information in
               furtherance of the performance of this Agreement (the
               "Authorized Recipient") Provided Salton has complied with (i)
               and (ii) above, the Authorized Recipient shall maintain the
               confidentiality of such information to the same extent Kmart
               protects its own proprietary information and shall not disclose
               it to anyone other than Kmart employees, agents and/or
               consultants with a need to know who shall also be subject to
               this restriction.

               Confidential Information shall not include information that a 
               party can demonstrate by written evidence:

               (i)    is in the public domain (provided that information in the 
                      public domain has not and does not come into the public 
                      domain as a result of the disclosure by the receiving 
                      party or any of its Affiliates);

               (ii)   is known to the receiving party or any of its Affiliates 
                      prior to the disclosure by the other party; or



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               (iii)  becomes available to the party on a non-confidential 
                      basis from a source other than an Affiliate of that party
                      or the disclosing party.

        11.2   Press Releases.  Salton shall not issue any press releases
               relating to this Agreement or its relationship with Kmart
               without the prior written approval by an authorized
               representative of either the Corporate Affairs Department or the
               Investor Relations Department of Kmart as to the contents
               thereof.

        11.3   The Press Release confidentiality and non-disclosure obligations 
               contained herein shall survive and continue after termination of 
               this Agreement or any related agreements the parties may 
               execute, and shall bind each of Salton's and Kmart's legal 
               representatives, successors and assigns.

12.     GENERAL TERMS AND CONDITIONS

        12.1   Dispute Resolution.  All disputes arising out of, or in relation 
               to, this Agreement (other than disputes arising out of any
               claim by a third party in an action commenced against a party)
               shall be referred for decision forthwith to a senior executive
               of each party who is not personally involved in the dispute.  If
               no agreement can be reached through this process within thirty
               (30) days of request by one party to the other to nominate a
               senior executive for dispute resolution, then either party shall
               be entitled to pursue any and all available legal remedies.

        12.2   No Assignment.  Other than as specifically set forth in this 
               Agreement, this Agreement may not be assigned nor may the 
               performance of any duties hereunder be delegated by either party 
               without the prior written consent of the other party; provided, 
               that any such attempted assignment shall be void and shall not
               relieve the assignor from any of its obligations hereunder or
               under any other document or agreement delivered by such party
               pursuant to, or delivered (or acknowledged to have been
               delivered) contemporaneously with or in connection with the
               execution of, this Agreement, which shall continue to be binding
               upon such party notwithstanding any such attempted assignment.

        12.3   Notices.  Any notice required or permitted to be given under 
               this Agreement shall be sufficiently given if in writing and
               delivered by registered or certified mail (return receipt
               requested), facsimile (with confirmation of transmittal),
               overnight courier (with confirmation of delivery), or hand
               delivered to the appropriate party at the address set forth
               below, or at such other address as such party may from time to
               time specify for that purpose in a notice similarly given:


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<TABLE>
        <S>                                              <C>                                                 
        If to Salton:                                    Salton/Maxim Housewares, Inc.                       
                                                         550 Business Center Drive                           
                                                         Mt. Prospect, Illinois 60056                        
                                                         Attn: William B. Rue                                
                                                         Fax:  (847) 803-8080                                
                                                                                                             
        with a copy to (other than                       Greenberg, Traurig, Hoffman, Lipoff,                
        regularly prepared notices, reports, etc.         Rosen & Quentel, P.A.                              
        required to be delivered hereunder):             1221 Brickell Avenue                               
                                                         Miami, Florida 33131                               
                                                         Attn: Cesar L. Alvarez                             
                                                         Fax:  (305) 579-0717                               
                                                                                                             
                                                         and                                                
                                                         Sonnenschein Nath & Rosenthal                      
                                                         8000 Sears Tower                                   
                                                         Chicago, Illinois 60606                            
                                                         Attn: Neil Aizenstein                              
                                                         Fax:  (312) 876-7934                               
                                                                                                             
        If to Kmart:                                     Kmart Corporation                                  
                                                         3100 W. Big Beaver Road                            
                                                         Troy, Michigan 48084                               
                                                         Attn: Divisional Vice President                    
                                                         Home Electronics/Home Appliances                   
                                                         Fax: (810) 643-1054                                
                                                                                                             
        with a copy to (other than                       Kmart Corporation                                  
        regularly prepared notices, reports, etc.        Legal Department                                   
        required to be delivered hereunder):             3100 W. Big  Beaver Road                           
                                                         Troy, Michigan 48084                               
                                                         Attn: General Counsel                              
</TABLE>

        Any such notice shall be effective (i) if sent by mail, as aforesaid, 
        three (3) business days after mailing, (ii) if sent by facsimile, as 
        aforesaid, when sent, and (iii) if sent by courier or hand delivered, 
        as aforesaid, when received.  Provided, that if any such notice shall 
        have been sent by mail and if on the date of mailing thereof or during 
        the period prior to the expiry of the third business day following the 
        date of mailing there shall be a general postal disruption (whether as 
        a result of rotating strikes or otherwise) in the United States, then 
        such notice shall not become effective until the third business day 
        following the date of resumption of normal mail service.  

        12.4   Governing Law and Consent to Jurisdiction. THIS AGREEMENT SHALL 
        BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED IN TROY, MICHIGAN, AND 
        SHALL BE CONSTRUED, INTERPRETED AND ENFORCED UNDER AND IN ACCORDANCE 
        WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN.  SALTON AGREES TO 
        EXERCISE ANY RIGHT OR REMEDY IN CONNECTION WITH THIS AGREEMENT 
        EXCLUSIVELY IN, AND HEREBY SUBMITS TO THE JURISDICTION OF, THE STATE 
        OF MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED STATES 
        DISTRICT COURT IN DETROIT, MICHIGAN.



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        12.5   Binding Agreement.  This Agreement shall be binding upon the 
               parties hereto, and their respective successors and permitted
               assigns,  whether by operation of law or otherwise.

        12.6   Entire Agreement.  This Agreement and all other documents and 
               instruments specifically incorporated by reference herein
               contain the entire agreement and understanding of the parties
               with respect to the subject matter hereof and thereof and
               supersedes all negotiations, prior discussions and agreements
               relating to the subject of this Agreement. Any terms or
               conditions in any forms of Salton used in the performance of this
               Agreement which are in conflict with or in addition to the terms
               and conditions of this Agreement shall be void. This Agreement
               may not be amended or modified except by a written instrument
               signed by all of the parties hereto.

        12.7   Headings.  The headings to the various articles and paragraphs 
               of this Agreement have been inserted for convenience only and 
               shall not affect the meaning of the language contained in this 
               Agreement.

        12.8   Waiver.  The waiver by any party of any breach by another party 
               of any term or condition of this Agreement shall not constitute 
               a waiver of any subsequent breach or nullify the effectiveness 
               of that term or condition.

        12.9   Counterparts.  This Agreement may be executed in identical
               duplicate copies exchanged by facsimile transmission.  The      
               parties agree to execute two identical original copies of the 
               Agreement after exchanging signed facsimile versions.  Each 
               identical counterpart shall be deemed an original, but all of 
               which together shall constitute one and the same instrument.

        12.10  Severability of Provisions.  If, for any reason whatsoever, any 
               term, covenant or condition of this Agreement or the application 
               thereof to any party or circumstance is to any extent held or 
               rendered invalid, unenforceable or illegal, then such term,
               covenant or condition:

                              (i)  is deemed to be independent of the remainder
                        of such document and to be severable and divisible
                        therefrom and its validity, unenforceability or
                        illegality does not affect, impair or invalidate the
                        remainder of such document or any part thereof; and

                              (ii) continue to be applicable and enforceable to
                        the fullest extent permitted by law against any party
                        and circumstances other than those as to which it has
                        been held or rendered invalid, unenforceable or
                        illegal.


        12.11  Limitation on Damages.  Except with respect to Salton's 
               liability under Section 9 of this Agreement, neither party shall
               be liable to the other party for incidental, consequential,
               punitive or exemplary damages arising in connection with this
               Agreement or the performance, omission of performance or
               termination hereof, even if said party has been advised of the
               possibility of such damages and without regard to the nature of
               the claim or the underlying theory or cause of action (whether in
               contract, tort or otherwise).  In addition, in no event shall
               Kmart be liable for direct or any other damages in excess of the
               amount to which Salton is entitled to under Section 5 herein for
               Minimum Product Orders which have not been placed as of the
               effective date of the Default or Termination plus payment due for
               Products accepted by Kmart as of such date, nor shall Kmart's
               aggregate liability under this Agreement exceed such amount.



                                      12
<PAGE>   12

        12.12  Force Majeure.  Time is of the essence in the performance of all 
               parts of this Agreement; provided, however, performance by 
               either party shall be excused during the period in which such 
               performance is made reasonably impossible because of a strike, 
               act of God or change in laws ("Force Majeure").  Salton, 
               however, shall use reasonable diligence to procure substitute 
               performance.  If the period during  which performance is excused
               due to Force Majeure exceeds ten (10) days, then either party
               may terminate its obligations under any Specific Purchase Orders
               without liability, and such cancelled Order(s) shall continue to
               count towards fulfillment of the commitments set forth in Section
               5 herein.  If the period of Force Majeure excusing Salton's
               performance exceeds 120 days and such non- performance relates to
               more than 20% of the Minimum Product Orders during any Period,
               then Kmart may terminate this entire Agreement without further
               obligation to Salton.  Upon any such termination, nothing shall
               be due from Kmart beyond payment for Products accepted by Kmart
               as of the effective date of termination. 

        12.13  Kmart Marks.  Salton acknowledges Kmart Properties Inc.'s 
               ("KPI") exclusive right, title and interest in and to all
               trademarks, trade names, service marks, logos, assignees, program
               and event names, identifications and other proprietary rights and
               privileges which it licenses to Kmart with the right to
               sublicense (the "Kmart Marks"). This Agreement and its various
               provisions are not a license or assignment of any right, title or
               interest in the Kmart Marks by KPI or Kmart to Salton.  Salton
               shall not in any manner represent that it has any ownership in
               the Kmart Marks and shall not do or cause to be done anything
               impairing Kmart's exclusive license in the Kmart Marks. Salton
               shall not use, print or duplicate the Kmart Marks except and only
               if Salton has obtained prior approval as provided herein. 
               Salton's use of the Kmart Marks is limited to the Term of this
               Agreement; upon termination hereof, Salton shall immediately
               cease all use of the Kmart Marks.  Salton shall not assign or
               attempt to assign any rights with regard to the Kmart Marks which
               arise hereunder; any such attempted assignment shall be void.

        12.14  White Westinghouse Marks.  Kmart acknowledges WCI's exclusive 
               right, title and interest in and to the Trademarks.  This
               Agreement and its various provisions are not a license or
               assignment of any right, title or interest in the Trademark or
               the License Agreement by Salton or WCI to Kmart.  Kmart shall not
               do or cause to be done anything impairing Salton's exclusive
               license in the Trademark. Kmart's use of the Trademark is limited
               to the terms and conditions contained in this Agreement; upon
               termination hereof, Kmart shall immediately cease all use of the
               Trademark other than in connection with the sale, advertising or
               merchandising of Product inventory and order commitments (if any)
               existing at the time of such termination.  Kmart shall not assign
               or attempt to assign any rights with regard to the Trademark
               which arise hereunder; any such attempted assignment shall be
               void.

        12.15  No Third Party Beneficiaries.  The parties hereto expressly 
               agree that there shall be no third party beneficiaries to this 
               Agreement.



                                      13

<PAGE>   13



        IN WITNESS WHEREOF, the parties have duly executed this Agreement as of 
the Execution Date.

SALTON/MAXIM HOUSEWARES, INC.            KMART CORPORATION


By:                                      By:
   ----------------------------------       ------------------------------------
(Signature)                              (Signature)
Name:                                    Name:
     --------------------------------         ----------------------------------
Title:                                   Title:
      -------------------------------          ---------------------------------

















                                      14
<PAGE>   14




                                   EXHIBIT A
                            DESCRIPTION OF PRODUCTS

                              KITCHEN HOUSEWARES:






















                                PERSONAL CARE:





                              FANS AND HEATERS:





                    ELECTRIC AIR CLEANERS AND HUMIDIFIERS:






<PAGE>   15




                                 SCHEDULE 1.2


                          DISCOUNT DEPARTMENT STORES

















<PAGE>   16




                                   EXHIBIT E

                      AUTHORIZED REPRESENTATIVES OF KMART














