AMENDMENT NO. 1 TO LETTER LOAN AGREEMENT
AMENDMENT
NO. 1
TO
This Amendment
No. 1 to Letter Loan Agreement
(the
“Amendment”)
is
made effective as of October 18, 2006 (the “Amendment
Date”)
and is
entered into by and among Ronco Corporation, a Delaware corporation (the
“Borrower”),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc., a Texas corporation, individually and as
administrative agent (the “Lead
Lender”)
and
the persons and entities listed on the schedule of lenders attached to the
Agreement (as defined below) as Schedule 1
(each,
together with the Lead Lender, a “Lender”
and, collectively,
the“Lenders”).
Capitalized
terms used in this Amendment that are not otherwise defined herein shall have
the meanings set forth in the Agreement (as defined below).
Whereas,
the
Borrower and the Lenders are parties to that certain Letter Loan Agreement
dated
June 9, 2006 (the “Agreement”)
pursuant to which the Borrower and the Lenders have certain rights and
obligations;
Whereas, the
Borrower intends to enter into a Senior Credit Agreement with Laurus Master
Fund, Ltd (the “Laurus
Loan”);
Whereas, a
condition to closing on the Laurus Loan is that the Lead Lender loan an
additional $1,500,000 to Borrower (the “Lead
Lender Loan”);
Whereas, certain
provisions of the Agreement require amendment to facilitate the Lead Lender
Loan;
Whereas,
as
of the
date of this Amendment only the Lead Lender and the Borrower were parties to
the
Agreement; and
Whereas,
the
Agreement may be amended by the Lead Lender and the Borrower.
Now,
Therefore,
in
consideration of the mutual covenants and obligations set forth herein, and
for
other good and valuable consideration, the receipt and sufficiency of which
is
hereby acknowledged, the Borrower and the Lenders hereby agree as
follows:
| 1. |
Amendment
of the Agreement.
|
The
parties hereby agree to amend the terms of the Agreement as of the Amendment
Date as provided below.
1.1 Amendment
of Section 1(a).
The
form of Initial Note attached to the Agreement as Exhibit A is hereby amended
and restated in its entirety to read as set forth in Exhibit
A
hereto.
1.2 Amendment
of Section 1(b).
The
form of Second Note attached to the Agreement as Exhibit B is hereby amended
and
restated in its entirety to read as set forth in Exhibit
B
hereto.
1.3 Amendment
of Section 1(c).
The form
of Subsequent Note attached to the Agreement as Exhibit C is hereby amended
and
restated in its entirety to read as set forth in Exhibit
C
hereto.
1.4 Amendment
of Section 1(f).
Section
1(f) is hereby amended and restated in its entirety to read as
follows:
“(f) The
Multiple Lender Loan shall be made at a third Closing (the “Third
Closing”)
by
such persons or entities that indicate their intent to participate in the Rights
Offering (as defined below) (the “Rights
Lenders”).
The
Third Closing shall take place at such date, time, and place as determined
by
the Borrower in its sole discretion; provided, however, that the Third Closing
shall occur no later than forty-five days after the date of the Mailing (as
defined below). The Rights Lenders shall, upon execution and delivery of the
relevant signature pages, become parties to, and be bound by, this Agreement,
without the need for an amendment to this Agreement except to add such person’s
or entity’s name to Schedule
1,
and
shall have the rights and obligations of a Lender hereunder as of the date
of
the Third Closing. Immediately prior to the Third Closing, Schedule
1
will be
amended to list the Rights Lenders participating in the Third Closing hereunder
and the principal amount of the Note being purchased by such Rights Lender
hereunder. At the applicable Closing, the Borrower will deliver to each Lender
the respective Note to be purchased by such Lender, against receipt by the
Borrower of the corresponding purchase price set forth on Schedule
1 hereto.
Notwithstanding the foregoing, the Borrower and the Lead Lender agree that
participation by a Rights Lender in the Rights Offering is contingent upon
such
Rights Lender agreeing to be bound as a “Subordinated Lender” pursuant to that
certain Intercreditor and Subordination Agreement between the Lead Lender,
individually and as agent for the Lenders and Laurus Master Fund, Ltd.”
1.5 Amendment
of Section 1(g).
Section
1(g) is hereby amended and restated in its entirety to read as
follows:
“(g)
Notwithstanding the foregoing, in the event that the aggregate principal amount
of the Notes purchased at the Initial Closing, the Second Closing and the Third
Closing exceeds $3,000,000.00 (the “Excess”),
then
Borrower and the Lead Lender agree that Borrower shall prepay its obligations
under the Initial Note and the Second Note to the extent of the Excess (the
“Rights
Offering Payment”).
The
Lead Lender waives all notice provisions in the Initial Note and the Second
Note
with respect to the Rights Offering Payment.
1.6 Addition
of Section 1(h).
The
Agreement is hereby amended to add Section 1(h) which reads in its entirety
as
follows:
2
“(h)
The
Lead Lender agrees that it shall invest the Rights Offering Payment in the
Borrower no later than 30 business days after the date of the Third Closing
(the
“New
Investment”);
provided however that the Borrower and the Lead Lender agree that the New
Investment shall (i) be in any form mutually acceptable to the Borrower and
the
Lead Lender and (ii) in the event that the New Investment is in the form of
a
loan by the Lead Lender to the Borrower then such loan shall not mature prior
to
the loan made by Laurus Master Fund, Ltd. to the Borrower pursuant to the Senior
Credit Agreement.”
1.7 Amendment
of Section 2(a)(ii)(C).
Section
2(a)(ii)(C) is hereby amended and restated in its entirety to read as
follows:
“(C)
Intentionally Omitted.”
1.8 Amendment
of Section 2(a)(ii)(E). Section
2(a)(ii)(E) is hereby amended and restated in its entirety to read as
follows:
“(E)
Intentionally Omitted.”
1.9 Amendment
of Section 2(a)(ii)(F). Section
2(a)(ii)(F) is hereby amended and restated in its entirety to read as
follows:
“(F)
the
Lead Lender shall have received a subordination/consent agreement from Ronco
Inventions, LLC, Popeil Inventions, Inc., RP Productions, Inc., RMP Family
Trust, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ subordinating their interest in the Life Insurance
Policy (as defined below) to the Loans; and the Lead Lender shall have received
completed and executed consents to release of medical records of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ relating to the Life Insurance Policy;”
1.10 Amendment
of Section 3(c). Section
3(c) is hereby amended and restated in its entirety to read as
follows:
“(c)
As
of the date of the Second Closing, the Borrower has delivered to the Lead Lender
its consolidated balance sheet as of June 30, 2006 and the related consolidated
statements of operations and cash flows for the year ended June 30, 2006 and
stockholders' equity for the year ended June 30, 2006 (the “Financial
Statements”).
Each
Financial Statement is true and correct in all material respects, fairly
presents in all material respects the financial condition of Borrower as of
the
date(s) and during the period(s) indicated therein, and has been pre-pared
in
accordance with generally accepted accounting principles, consistently applied
throughout the period indicated, except as disclosed therein. Except as set
forth on the Schedule of Exceptions, as of the date of this Agreement, there
are
no obligations, liabilities, or indebtedness (including contingent and indirect
liabilities) which are material to Borrower, and not reflected in such Financial
Statements; and no material adverse changes have occurred in the financial
condition or business of Borrower since the date of the most recent Financial
Statements.”
3
1.11 Amendment
of Section 5(a).
Section
5(a) is hereby amended and restated in its entirety to read as
follows:
“(a) To
the
extent permissible under applicable federal and state securities laws, by
the earlier to occur of seven days after (i) December 31, 2006 or (ii) the
end of the Pricing Period, Borrower shall send by regular first class mail
(the
“Mailing”)
to all
holders of Borrower’s Series A Convertible Preferred Stock, at such holder’s
address as is shown in the Borrower’s records at the time of such Mailing, an
offer to participate as a Rights Lender in the Third Closing to the extent
of
their Pro Rata Share (as defined below) (the “Rights
Offering”).
For
purposes of this Agreement, “Pro
Rata Share”
means
(x) the Aggregate Subsequent Loan Amount multiplied by (y) a fraction,
(i) the numerator of which shall be the number of shares of Series A Convertible
Preferred Stock held by such Rights Lender on the date hereof and (ii) the
denominator of which shall be the total number of outstanding shares of Series
A
Convertible Preferred Stock as of the date hereof. Borrower agrees that a Rights
Lender shall have no more than thirty days from the date of the Mailing to
indicate that such Rights Lender intends to participate in the Rights
Offering.”
1.12 Addition
of Section 5(m).
The
Agreement is hereby amended to add Section 5(m) which reads in its entirety
as
follows:
“(m)
Borrower shall use reasonable commercial efforts to file Amendment No. 7 to
Borrower’s Registration Statement on Form SB-2 on Form S-1 (No. 333-127056) no
later than October 31, 2006, and thereafter shall use reasonable commercial
efforts to promptly cause such registration statement to be declared effective
and Borrower shall provide notice of such effectiveness to the stockholders
listed in the selling stockholder table of such registration statement at such
stockholder’s address as is shown in the Borrower’s records at the time of such
notice.”
1.13 Amendment
of Section 6(c).
Section
6(c) is hereby amended and restated in its entirety to read as
follows:
“(c) liquidate,
dissolve, or merge or consolidate with, or acquire all or substantially all
of
the assets of, any other company, firm, or association; or make any other
substantial change in Borrower’s capitalization (other than the issuance of
Borrower’s securities pursuant to its settlement with the holders of its Series
A Convertible Preferred Stock or to Laurus Master Fund, Ltd. in connection
with
Borrower’s entrance into a Senior Credit Agreement with Laurus Master Fund,
Ltd.); or engage in any business, other than the businesses currently engaged
in
by Borrower and any business substantially similar or related thereto;”
1.14 Amendment
of Section 7(g). Section
7(g) is hereby amended and restated in its entirety to read as
follows:
“(g) Intentionally
Omitted;”
4
1.15 Amendment
of Section 7(h).
Section
7(h) is hereby amended and restated in its entirety to read as
follows:
“(h) Intentionally
Omitted”
1.16 Amendment
of Section 7(i).
Section
7(i) is hereby amended and restated in its entirety to read as
follows:
“(i) the
Third
Closing shall not have occurred by forty-five days after the date of the
Mailing.”
1.17 Amendment
of Section 9.
Section
9 is hereby amended and restated in its entirety to read as
follows:
“9. Collateral.
Subject
to that certain Intercreditor and Subordination Agreement between Lead Lender
and Laurus Master Fund, Ltd. and the collateral assignment of the Life Insurance
Policy to Laurus Master Fund, Ltd., repayment of the Notes shall be secured
by
the Life Insurance Policy issued by ▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company on
the
life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as set forth in that certain Security Agreement,
as
amended, of even date herewith (the “Life
Insurance Policy”).”
1.18 Amendment
of Section 10(b)(i).
Section
10(b)(i) is hereby amended and restated in its entirety to read as
follows:
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“(i)
Borrower:
|
Ronco
Corporation
|
|
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
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|
|
▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Attention:
Chief Financial Officer
|
|
|
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇”
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1.19 General
Amendment. As
of the
Amendment Date, the
defined term “Loan Documents” as used in the Agreement shall not include the
Insurance Assignment.
1.20 Use
of Proceeds.
Only as
it applies to the use of proceeds by the Borrower from the Second Loan, the
parties hereby agree that Schedule
2
to the
Agreement includes the schedule set forth in Exhibit
D
hereto.
5
2.
Note
Amendment.
2.1 Initial
Note. The
parties hereby agree to amend and restate the Initial Note in its entirety
as of
the Amendment Date to read as set forth in Exhibit
A
hereto
(the “Amended
Initial Note”).
At
the Second Closing, the Lead Lender shall surrender the predecessor to the
Amended Initial Note to the Borrower for cancellation.
3.
Miscellaneous.
3.1 Waiver.
The
Lenders hereby waive any breach of the Loan Documents, including the Insurance
Assignment, occurring immediately prior to the Amendment Date. The Lenders
hereby further waive any Event of Default under the Agreement or the Initial
Note issued thereunder occurring immediately prior to the Amendment
Date.
3.2 No
Other Changes.
All
terms of the Agreement (including, without limitation, the provisions of the
Agreement which apply following termination of the Agreement) shall remain
in
full force and effect as amended hereby.
3.3 Governing
Law. This
Amendment is being executed and delivered, and is intended to be performed,
in
the State of Texas, and the substantive laws of Texas shall govern the validity,
construction, enforcement and interpretation of this Amendment.
3.4 Invalid
Provisions.
If any
provision of this Amendment are held to be illegal, invalid or unenforceable
under present or future laws effective during the term of this Amendment, such
provision shall be fully severable and this Amendment shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Amendment, and the remaining provisions of this
Amendment shall remain in full force and effect and shall not be affected by
the
illegal, invalid or unenforceable provision or by its severance from this
Amendment.
3.5 Counterparts.
This
Amendment may be executed in any number of counterparts and signatures may
be
delivered by facsimile, each of which shall be deemed an original, but both
of
which together shall constitute one and the same instrument.
6
In
Witness Whereof,
the
parties have caused this Amendment No. 1 to Letter Loan Agreement to be executed
by their respective authorized officers.
COMPANY:
RONCO
CORPORATION
By:
/s/▇▇▇▇
▇▇▇▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
Interim President and Chief Executive Officer
LENDERS:
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By:
/s/▇▇▇
▇.
▇▇▇▇▇▇
Name:
▇▇▇
▇.
▇▇▇▇▇▇
Title:
Chief
Executive
Officer
[Signature
Page to Amendment No. 1 to Letter
Loan Agreement]