EXIBIT 2.2
ASSET PURCHASE AGREEMENT
by and among
Ronco Marketing Corporation
a Delaware corporation
on the one hand,
and
RONCO INVENTIONS, LLC
a California limited liability company
POPEIL INVENTIONS, INC.
a Nevada corporation
RP PRODUCTIONS, INC.
a Nevada corporation
RMP FAMILY TRUST,
an Illinois Irrevocable Trust,
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
on the other hand
December 10, 2004
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of this 10th day of December, 2004 by and among Ronco Marketing Corporation,
a Delaware corporation ("Purchaser"), Ronco Inventions, LLC, a California
limited liability company ("Ronco"), Popeil Inventions, Inc., a Nevada
corporation ("Popeil Inc."), RP Productions, Inc., a Nevada corporation ("RP"),
RMP Family Trust, an Illinois Irrevocable Trust, ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
as co-Trustees (the "Shareholder"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"). In this
Agreement, Ronco, Popeil Inc., RP, ▇. ▇▇▇▇▇▇ are individually referred to as a
"Seller" and collectively as "Sellers."
W I T N E S S E T H:
WHEREAS, Ronco, Popeil Inc. and RP are engaged in the business of
manufacturing, distributing and marketing various consumer products (the
"Business");
WHEREAS, the Shareholder owns, directly or indirectly, all of the issued
and outstanding equity interests of Ronco, Popeil Inc., and RP; and
WHEREAS, Purchaser desires to purchase, and Sellers desire to sell to
Purchaser, substantially all assets related to the Business and owned by
Sellers, and Sellers desire to assign and delegate to Purchaser, and Purchaser
is willing to assume, substantially all liabilities and obligations associated
with the Business, in each case to the extent and only as provided in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto
agree as follows:
A G R E E M E N T
ARTICLE 1
SALE OF ASSETS AND CLOSING
1.1 Included Assets. On the terms and subject to the conditions set forth
in this Agreement, Sellers shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase and pay for, at the Closing, free and
clear of all Liens (other than for any Liens arising from this Agreement or any
of the Operative Agreements), all of Sellers' right, title and interest in, to
and under the assets and properties used or held for use in connection with the
Business (as conducted as of the date hereof) that are hereinafter described
(collectively, the "Included Assets"):
(A) Tangible Personal Property. The furniture, fixtures, equipment,
molds, tooling, and other tangible personal property (other than the
Inventory) listed or described in Schedule 1.1(A);
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(B) Personal Property Leases. The leases or subleases of tangible
personal property listed in Schedule 1.1(B), together with any options to
extend and renew said leases and/or purchase the underlying property (the
"Personal Property Leases");
(C) Business Contracts. All Contracts (other than the Real Property
Leases, the Personal Property Leases and the Accounts Receivable) listed
on Schedule 1.1(C);
(D) Intellectual Property. All Intellectual Property (including such
Sellers' goodwill therein), all customer and supplier lists, and all
rights (including, without limitation, pertaining to legal judgments),
privileges, claims, credits, rights of set-off, rights of indemnification,
hold harmless agreements, covenant not to be prosecuted, all covenants and
warranties (express or implied), causes of action and options, in each
case currently or previously used or held for use in the Business and
related to the Included Products, including, without limitation, the
Intellectual Property listed or described on Schedule 1.1(D),
(collectively, the "Acquired Intellectual Property");
(E) Licenses. All Licenses in effect as of the date hereof that are
used or held in connection with the Business and listed in Schedule
1.1(E), in each case to the extent such Licenses are transferable;
(F) Books and Records. All of the Books and Records. To the extent
any of the Books and Records are items susceptible to duplication and are
required by Legal Rules to be retained by Sellers, such Sellers may
deliver photostatic copies or other reproductions thereof;
(G) URLs. The URLs ▇▇▇▇▇.▇▇▇, ▇▇▇▇▇.▇▇, ▇▇▇▇.▇▇▇▇▇.▇▇▇, and any
other URLs currently or previously used in the Business and related to the
Included Products;
(H) Accounts Receivable. All trade accounts receivable and all
notes, bonds and other evidences of Indebtedness of and rights to receive
payments arising out of sales occurring in the conduct of the Business,
including any rights of any Seller with respect to any third party
collection procedures or any other actions or proceedings which have been
commenced in connection therewith (the "Accounts Receivable");
(I) Real Property Leases. The leases and subleases of real property
described in Schedule 1.1(I) as to which any Seller is the lessee,
sublessee, lessor or sublessor, together with any options to purchase the
underlying property and leasehold improvements thereon, and in each case
all other rights, subleases, licenses, permits, deposits and profits
appurtenant to or related to such leases and subleases (the "Real Property
Leases");
(J) Inventory. All inventories of raw materials, work-in-process,
finished goods, office and other supplies, parts, packaging materials and
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other accessories related thereto which are held at, or are in transit
from or to, the locations at which the Business is conducted, or located
at customers' premises on consignment, in each case, which are used or
held for use in the conduct of the Business and related to the Included
Products and including with respect to any of the foregoing purchased
subject to any conditional sales or title retention agreement in favor of
any other Person, together with all rights of any Seller against suppliers
of such inventories (the "Inventory");
(K) Prepaid Expenses. All prepaid expenses related to the Business
that are identified in Schedule 1.1(K);
(L) Security Deposits. All security deposits deposited by or on
behalf of any of Ronco, Popeil Inc. and/or RP, including any such security
deposits deposited by or on behalf of any of Ronco, Popeil Inc. and/or RP
as lessee or sublessee under the Real Property Leases; and
(M) Credit Card Reserve Accounts. All credit card reserve accounts
for each of Ronco, Popeil Inc. and RP as of the Closing, including the
cash therein as of such date.
1.2 Excluded Assets. Notwithstanding any contrary provision hereof, all
assets, rights and properties of Sellers not specifically referred to or
described in Section 1.1 above or the Schedules referred to therein are excluded
from the Included Assets and will be retained by Sellers, including, but not
limited to, tangible assets located at the ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇ and Carpenteria, California offices of the Business and those assets,
rights and properties listed or described in Schedule 1.2 (collectively, the
"Excluded Assets").
1.3 Liabilities.
(A) Assumed Liabilities. Subject to Sections 1.3(B) and 8.2, at the
Closing, Purchaser shall assume and agree to pay, perform and discharge,
when due, any and all of the obligations and liabilities of Sellers, or
any of them, set forth on Schedule 1.3(A) (the "Assumed Liabilities").
(B) Retained Liabilities. Purchaser is not assuming, and shall not
be deemed to have assumed, and the Assumed Liabilities do not include any
liability or obligation of Sellers, or any of them, not identified or
described on Schedule 1.3(A) and, except as provided in Section 1.6(I),
any liability or obligation for Taxes whether or not accrued, assessed or
currently due and payable, including, without limitation, any Taxes (i) of
the Sellers, whether or not they relate to the Business, (ii) arising from
the operation of the Business or the ownership of the Included Assets for
any Tax period (or portion thereof) ending on or prior to the Closing Date
or (iii) arising out of the consummation of the transactions contemplated
hereby, other than sales or use or like Taxes (which shall be borne by
Purchaser as and to the extent provided in Section 1.6(I)). Hereinafter,
all such liabilities and obligations to be retained by Sellers pursuant to
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the immediately preceding sentence are referred to as the "Retained
Liabilities". For purposes of this Section 1.3(B), all real property
Taxes, personal property Taxes and similar ad valorem obligations levied
with respect to the Included Assets for a Tax period that includes (but
does not end on) the Closing Date shall be apportioned between Sellers and
the Purchaser based upon the number of days of such period included in the
Tax period before (and including) the Closing Date and the number of days
of such Tax period after the Closing Date.
1.4 Deposit. Concurrently with the date hereof, Purchaser will deliver to
and deposit with the Escrow Agent the sum of One Hundred Thousand Dollars
($100,000) (the "Deposit"). The Deposit will be held pursuant to the terms and
conditions of this Agreement and the Escrow Agreement. If Purchaser elects to
terminate this Agreement before the Closing pursuant to any of Sections 9.1(B),
(E), (H) or (J), Purchaser and the Sellers' Designee shall, promptly after such
termination by Purchaser (unless such Sellers were previously entitled to
receive the Deposit pursuant to Section 9.1(F) and the immediately succeeding
sentence of this Section 1.4), execute and deliver to the Escrow Agent joint
written instructions directing the Escrow Agent to release the Deposit to
Purchaser (and Purchaser shall be entitled to retain the Deposit). If Sellers
elect to terminate this Agreement pursuant to any subsection of Section 9 other
than subsections (B), (E), (H) or (J) thereof, Purchaser shall join with the
Sellers' Designee in promptly executing joint written instructions directing the
Escrow Agent to release the Deposit to Sellers (and Sellers shall be entitled to
retain the Deposit).
1.5 Purchase Price; Allocation. The aggregate purchase price to be paid to
Sellers for the Included Assets (the "Purchase Price") shall equal the sum of
Forty Million Dollars ($40,000,000) (the "Base Purchase Price") plus an amount
equal to the aggregate principal amount of the Notes (as defined below), as such
principal amount may be adjusted pursuant to Section 1.6 below. The Purchase
Price shall be payable as follows:
(A) Cash Payment. At the Closing, Purchaser shall pay Sellers,
in cash via wire transfer of immediately available funds to the
account or accounts of Sellers designated on Schedule 1.5(A), an
aggregate of Thirty-Nine Million Nine Hundred Thousand Dollars
($39,900,000) (the "Purchase Closing Payment"). The Purchase Closing
Payment will be allocated ratably among the Sellers in accordance
with Schedule 1.5(A) (which Schedule, not to be inconsistent with
the Tax allocation set forth on Schedule 1.10, will be provided by
Sellers to Purchaser not later than three (3) Business Days prior to
Closing).
(B) Release of Deposit. Subject to Section 1.4, at the
Closing, Purchaser and the Sellers' Designee will execute and
deliver to the Escrow Agent joint written instructions directing the
Escrow Agent to release the Deposit to the Sellers, which Deposit
will be distributed by the Escrow Agent among Sellers, via wire
transfer of immediately available funds, in accordance with Schedule
1.5(A).
(C) Delivery of Notes.
(i) Prior, and as a mutual condition, to the Closing, ▇. ▇▇▇▇▇▇ and
Sellers' Designee, on the one hand, and Purchaser, on the other hand,
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shall use good faith efforts to agree in writing upon a reasonable amount
of cash necessary to be conveyed to Purchaser at the Closing to be used in
the operation of the Business by Ronco for the first calendar quarter of
2005 (such amount, the "Included Cash").
(ii) At the Closing, Purchaser will deliver to each Seller listed on
Schedule 1.5(C) a purchase money promissory note, in substantially the
form attached as Exhibit C (each, a "Note" and together, the "Notes"), in
the initial principal amount equal to such Seller's portion (as set forth
on Schedule 1.5(C) to be provided by Sellers to Purchaser not later than
three (3) Business Days prior to Closing and which will not be
inconsistent with the Tax allocation set forth on Schedule 1.10) of the
sum of:
(A) Subject to Section 1.6 below, an amount equal to the
Estimated Combined NCOAV; plus
(B) The Included Cash; plus
(C) If the sum of the Estimated Combined NCOAV and the
Included Cash is less than $15,000,000, the Additional Cash.
The initial aggregate principal amount of the Notes will be subject to
adjustment as provided in Section 1.6 below.
(D) Not later than ten (10) days prior to the anticipated
Closing Date, Purchaser and each Seller shall cause their
appropriate representatives to confer in good faith for the purposes
of determining, as of the Closing, the Estimated Combined NCOAV,
which is the sum of (i) the Estimated Ronco NCOAV, (ii) the
Estimated Popeil Inc. NCOAV and (iii) the Estimated RP NCOAV. Such
estimates shall be prepared in accordance with the accounting
methodologies set forth on Schedule 1.5(D). As used in this
Agreement, "Estimated Ronco NCOAV" means the amount of the Parties'
good faith estimate of the Ronco Net Current and Other Asset Value
prepared in accordance with the accounting methodologies reflected
on Schedule 1.5(D) or, if the Parties cannot agree on such estimate
prior to 5:00 p.m. California time on the day that is two Business
Days prior to the anticipated Closing Date, the greater of (a)
Purchaser's good faith estimate of the Ronco Net Current and Other
Asset Value and (b) Ronco's good faith estimate of the Ronco Net
Current and Other Asset Value. As used in this Agreement, "Estimated
Popeil Inc. NCOAV" means the amount of the Parties' good faith
estimate of the Popeil Inc. Net Current and Other Asset Value
prepared in accordance with the accounting methodologies reflected
on Schedule 1.5(D) or, if the Parties cannot agree on such estimate
prior to 5:00 p.m. California time on the day that is two Business
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Days prior to the anticipated Closing Date, the greater of (a)
Purchaser's good faith estimate of the Popeil Inc. Net Current and
Other Asset Value and (b) Popeil Inc.'s good faith estimate of the
Popeil Inc. Net Current and Other Asset Value. As used in this
Agreement, "Estimated RP NCOAV" means the amount of the Parties'
good faith estimate of the RP Net Current and Other Asset Value
prepared in accordance with the accounting methodologies reflected
on Schedule 1.5(D) or, if the Parties cannot agree on such estimate
prior to 5:00 p.m. California time on the day that is two Business
Days prior to the anticipated Closing Date, the greater of (a)
Purchaser's good faith estimate of the RP Net Current and Other
Asset Value and (b) RP's good faith estimate of the RP Net Current
and Other Asset Value. Notwithstanding anything in the foregoing to
the contrary, if the Parties expect that the Estimated Combined
NCOAV plus the Included Cash will exceed $15,000,000 as of the
Closing, then the Sellers shall, at their discretion, retain such
Accounts Receivable that they specifically identify to the Purchaser
in writing prior to the Closing that the Sellers reasonably
determine is necessary to reduce the sum of the Estimated Combined
NCOAV plus the Included Cash to $15,000,000. Such selected Accounts
Receivable shall thereafter be deemed an Excluded Asset and shall
not be included in the calculation of any of the Estimated Ronco
NCOAV or the Ronco Net Current and Other Asset Value, the Estimated
Popeil Inc. NCOAV or the Popeil Inc. Net Current and Other Asset
Value or the Estimated RP NCOAV or the RP Net Current and Other
Asset Value (as applicable). In addition, Schedule 1.2 to this
Agreement shall be deemed amended to include such Accounts
Receivable and Section 1.1(H) and Schedules 1.6(F), 1.6(G) and
1.6(H) shall each be deemed amended to exclude such Accounts
Receivable.
(E) Purchaser hereby agrees to cooperate with Sellers and
their Affiliates to modify the structure of the purchase of the
Included Assets hereunder as may be necessary, as determined in the
reasonable discretion of Sellers' tax advisor, to minimize the
income tax consequences to Sellers and their Affiliates of the
transactions contemplated by this Agreement, except to the extent
such cooperation is disadvantageous to Purchaser in its good faith
determination.
1.6 Post Closing Purchase Price Adjustment.
(A) Promptly after the Closing, Purchaser shall, at its sole
cost and expense, perform an accounting, in accordance with the
accounting methodologies reflected on Schedule 1.5(D), to determine,
as of the Closing, the amount of the (i) Ronco Net Current and Other
Asset Value, (ii) Popeil Inc. Net Current and Other Asset Value and
(iii) RP Net Current and Other Asset Value. Not later than
forty-five (45) days after the Closing, Purchaser will deliver or
cause to be delivered to the Sellers' Designee, with a copy to each
of Ronco, Popeil Inc. and RP, a written report (the "Written
Report") summarizing Purchaser's determination of the (a) Ronco Net
Current and Other Asset Value, (b) Popeil Inc. Net Current and Other
Asset Value and (c) RP Net Current and Other Asset Value, together
with Purchaser's calculation of the (x) Ronco Adjustment Amount, if
any, (y) Popeil Inc. Adjustment Amount, if any, and (z) RP
Adjustment Amount, if any, based on Purchaser's determination of the
(1) Ronco Net Current and Other Asset Value, (2) Popeil Inc. Net
Current and Other Asset Value and (3) RP Net Current and Other Asset
Value, respectively, in accordance with this Section 1.6(A)
(collectively, the "Adjustment Determination"). At all times during
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the accounting process, Purchaser will keep the Sellers' Designee
informed of Purchaser's progress, and representatives of Sellers,
including the Sellers' Designee, will be afforded a reasonable
opportunity to observe and to consult with Purchaser and/or
Purchaser's agents regarding the procedures undertaken by Purchaser
and the application by Purchaser of the applicable accounting
methodologies set forth on Schedule 1.5(D).
(B) If the Ronco Adjustment Amount as initially determined by
Purchaser is a positive number, then Purchaser shall promptly
execute and deliver to Ronco a promissory note, in the form attached
hereto as Exhibit K(1), in the principal amount of the undisputed
portion of the Ronco Adjustment Amount. If the Popeil Inc.
Adjustment Amount as initially determined by Purchaser is a positive
number, then Purchaser shall promptly execute and deliver to Popeil
Inc. a promissory note, in the form attached as Exhibit K, in the
principal amount of the undisputed portion of the Popeil Inc.
Adjustment Amount. If the RP Adjustment Amount as initially
determined by Purchaser is a positive number, then Purchaser shall
promptly execute and deliver to RP a promissory note, in the form
attached as Exhibit K, in the principal amount of the undisputed
portion of the RP Adjustment Amount. If there are any Objections to
any of the Ronco Adjustment Amount, Popeil Inc. Adjustment Amount or
RP Adjustment Amount, and, as a result of the resolution of any
Objections by agreement pursuant to Section 1.6(D) or by the
Accounting Arbitrator pursuant to Section 1.6(E) there is a further
positive adjustment in respect of such adjustment amount beyond the
undisputed amount, then such amount shall be added to the principal
amount due to the applicable Seller under the promissory notes
described in this Section 1.6(B).
(C) If the Ronco Adjustment Amount as initially determined by
Purchaser is a negative number, then the undisputed portion of the
negative Ronco Adjustment Amount shall be deducted from the
principal amount of the Note issued by Purchaser to Ronco pursuant
to Section 1.5(C). If the Popeil Inc. Adjustment Amount as initially
determined by Purchaser is a negative number, then the undisputed
portion of the negative Popeil Inc. Adjustment Amount shall be
deducted from the principal amount of the Note issued by Purchaser
to Popeil Inc. pursuant to Section 1.5(C). If the RP Adjustment
Amount as initially determined by Purchaser is a negative number,
then the undisputed portion of the negative RP Adjustment Amount
shall deducted from the principal amount of the Note issued by
Purchaser to RP pursuant to Section 1.5(C). If there are any
Objections to any of the Ronco Adjustment Amount, Popeil Inc.
Adjustment Amount or the RP Adjustment Amount, and, as a result of
the resolution of any Objections by agreement pursuant to Section
1.6(D) or by the Accounting Arbitrator pursuant to Section 1.6(E)
there is a further negative adjustment in respect of the disputed
amount of such adjustment amount, then the principal amount of the
Note issued by Purchaser to the applicable Seller shall be further
decreased accordingly. Any decreases in the principal amount of the
Notes as specified in this Section 1.6(C) shall be treated as being
effective as of the Closing.
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(1) To bear interest as described in the Addendum to the APA dated December
10, 2004.
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(D) Within thirty (30) calendar days following receipt of the
Adjustment Determination (the "Objection Period"), the Sellers'
Designee shall notify Purchaser in writing of any objections to the
Adjustment Determination (the "Objections"), setting forth written
explanations of the Objections and the adjustments that the Sellers'
Designee believes should be made. Following notice of the
Objections, Purchaser shall have fifteen (15) calendar days to
review and respond to the Objections, setting forth written
explanations in those areas where it disagrees with the Objections,
and delivering such response to the Sellers' Designee. Purchaser and
the Sellers' Designee shall then have an additional fifteen (15)
calendar days at the end of such period to attempt to resolve in
good faith the Objections and for the Purchaser or Sellers to pay
any adjustment amounts, if applicable. All written explanations
delivered by any Party pursuant to this Section 1.6(D) shall be in
reasonable detail and shall set forth such Party's analysis of the
calculations, in each case, made in accordance with the accounting
methodologies reflected on Schedule 1.5(D), of the (i) Ronco Current
and Other Assets, (ii) Ronco Current and Other Liabilities, (iii)
Popeil Inc. Current and Other Assets, (iv) Popeil Inc. Current and
Other Liabilities, (v) RP Current and Other Assets and/or (vi) RP
Current and Other Liabilities, as applicable.
(E) If Purchaser and the Sellers' Designee are unable to
resolve any of their disagreements with respect to the Objections
within the time periods specified in Section 1.6(D) above, they
shall refer any unresolved Objections to a nationally recognized
firm of independent certified public accountants as to which the
parties mutually agree (the "Accounting Arbitrator") within ten (10)
days. The Accounting Arbitrator shall determine, only with respect
to the remaining differences so submitted, whether and to what
extent the calculations set forth on the Adjustment Determination
require adjustment. In making its determination, the Accounting
Arbitrator shall only consider (i) this Agreement and the Schedules
and Exhibits hereto and (ii) the written explanations previously
delivered by the Parties to each other pursuant to Section 1.6(D).
There shall be no oral arguments or ex parte communications with the
Accounting Arbitrator by any Party regarding the substance of the
remaining differences submitted to the Accounting Arbitrator. The
Accounting Arbitrator's determination of the Ronco Current and Other
Assets, the Ronco Current and Other Liabilities, the Popeil Inc.
Current and Other Assets, the Popeil Inc. Current and Other
Liabilities, the RP Current and Other Assets and/or the RP Current
and Other Liabilities, as applicable, shall be in accordance with
the applicable accounting methodologies reflected on Schedule
1.5(D). If Purchaser and Sellers' Designee are unable to agree on an
Accounting Arbitrator within the time frame specified above, then
Purchaser and the Sellers' Designee shall each select, within five
(5) calendar days, a nationally-recognized firm of independent
certified public accountants and such firms shall jointly select an
independent Accounting Arbitrator within ten (10) calendar days. If
one of the parties hereto fails to select a nationally recognized
firm of independent certified public accountants within the time
frame above, then the accounting firm so selected by the party who
did make their selection shall serve as the Accounting Arbitrator.
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The Accounting Arbitrator's determination shall be final and binding
on the Parties. Purchaser and the Sellers' Designee shall use their
best efforts to cause the Accounting Arbitrator to complete its
determination within thirty (30) days of its selection, and
Purchaser and Sellers shall pay any applicable adjustment amounts as
determined by the Accounting Arbitrator promptly after such
determination. The fees and expenses of the Accounting Arbitrator
shall be paid one-half by Purchaser, with the remainder of such fees
and expenses paid collectively by the applicable Seller or Sellers.
(F) As used in this Section 1.6, the "Ronco Adjustment Amount"
(which may be a positive or negative number) shall be equal to the
Ronco Net Current and Other Asset Value minus the Estimated Ronco
NCOAV. As used in this Agreement, "Ronco Net Current and Other Asset
Value" means the amount that is equal to the difference between the
Ronco Current and Other Assets and the Ronco Current and Other
Liabilities as of the opening of business on the Closing Date, as
determined after the Closing pursuant to Section 1.6(A) and/or
Sections 1.6(D) and/or 1.5(E). The "Ronco Current and Other Assets"
means those assets of Ronco identified or described under the
heading "Selected Current and Other Assets" on Schedule 1.6(F) based
on the accounting methodologies reflected on Schedule 1.5(D). The
"Ronco Current and Other Liabilities" means those liabilities of
Ronco identified or described under the heading "Selected Current
and Other Liabilities" on Schedule 1.6(F) based on the accounting
methodologies reflected on Schedule 1.5(D).
(G) As used in this Section 1.6, the "Popeil Inc. Adjustment
Amount" (which may be a positive or negative number) shall be equal
to the amount obtained by subtracting the Estimated Popeil Inc.
NCOAV from the Popeil Inc. Net Current and Other Asset Value. As
used in this Agreement, "Popeil Inc. Net Current and Other Asset
Value" means the amount that is equal to the difference between the
Popeil Inc. Current and Other Assets and the Popeil Inc. Current and
Other Liabilities as of the opening of business on the Closing Date,
as determined after the Closing pursuant to Section 1.6(A) and/or
Sections 1.6(D) and/or 1.6(E). The "Popeil Inc. Current and Other
Assets" means those assets of Popeil Inc. identified or described
under the heading "Selected Current and Other Assets" on Schedule
1.6(G) based on the accounting methodologies reflected on Schedule
1.5(D). The "Popeil Inc. Current and Other Liabilities" means those
liabilities of Popeil Inc. identified or described under the heading
"Selected Current and Other Liabilities" on Schedule 1.6(G) based on
the accounting methodologies reflected on Schedule 1.5(D).
(H) As used in this Section 1.6, the "RP Adjustment Amount"
(which may be a positive or negative number) shall be equal to the
amount obtained by subtracting the Estimated RP NCOAV from the RP
Net Current and Other Asset Value. As used in this Agreement, "RP
Net Current and Other Asset Value" means the amount that is equal to
the difference between the RP Current and Other Assets and the RP
Current and Other Liabilities as of the opening of business on the
Closing Date, as determined after the Closing pursuant to Section
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1.6(A) and/or Sections 1.6(D) and/or 1.6(E). The "RP Current and
Other Assets" means those assets of RP identified or described under
the heading "Selected Current and Other Assets" on Schedule 1.6(H)
based on the accounting methodologies reflected on Schedule 1.5(D).
The "RP Current and Other Liabilities" means those liabilities of RP
identified or described under the heading "Selected Current and
Other Liabilities" on Schedule 1.6(H) based on the accounting
methodologies reflected on Schedule 1.5(D).
(I) Not later than ten (10) calendar days prior to the
anticipated Closing Date, Purchaser and the Sellers' Representative
shall (i) mutually calculate in good faith the total estimated sales
and like Taxes that shall be payable under the laws of any
jurisdiction by each Seller as a result of such Seller's receipt of
its ratable share of the Purchase Price and (ii) set forth the
amounts of such estimated Taxes in an exhibit to this Agreement to
be attached hereto as Schedule 1.6(I). At the Closing, Purchaser
shall pay each Seller an amount sufficient to provide Sellers with
the same net proceeds from the Purchase Price that Sellers would
have realized from a sale transaction in which Sellers did not have
to pay such sales or like Tax liability set forth on Schedule 1.6(I)
(i.e., on a "grossed up" basis). Immediately after the final
determination of the Combined NCOAV pursuant to this Section 1.6,
Purchaser and the Sellers' Representative shall mutually calculate
in good faith any adjustments to such estimated Tax amounts as may
result from the final determination of the Purchase Price. Not later
than three (3) calendar days after any such adjustments have been
calculated, (1) Purchaser shall pay Ronco, Popeil Inc. and/or RP, as
applicable, an amount in cash equal to the incremental sales or like
Tax liability calculated to be payable by such Seller (again, on a
"grossed up" basis) as a result of the final determination of (a)
the Ronco Net Current and Other Asset Value, (b) the Popeil Inc. Net
Current and Other Asset Value and (c) the RP Net Current and Other
Asset Value, as applicable or (2) Ronco, Popeil Inc. and/or RP shall
repay Purchaser the amount by which the estimated sales or like
Taxes as set forth on Schedule 1.6(I) may exceed the final
calculation of estimated sales or like Tax liability based on the
final determination of (a) the Ronco Net Current and Other Asset
Value, (b) the Popeil Inc. Net Current and Other Asset Value and (c)
the RP Net Current and Other Asset Value, as applicable. Each Seller
shall pay, in a timely manner, to the appropriate taxing authorities
all amounts received from Purchaser pursuant to this Section 1.6(I).
If such amounts remitted by any Seller to any taxing authority
pursuant to this Section 1.6(I) prove to be insufficient, Purchaser
agrees to pay the amount of any such deficiency (including any
penalties and interest thereon, and again on a "grossed up" basis)
to such Seller, immediately upon presentation by such Seller to
Purchaser of any deficiency notice or similar correspondence
received by such Seller from any taxing authority asserting such
deficiency. Conversely, each Seller agrees to promptly refund to
Purchaser the amount of any refund that may be received by such
Seller from any taxing authority in respect of any amounts remitted
to such authority by such Seller pursuant to this Section 1.6(I).
Notwithstanding the foregoing, the maximum aggregate amount that
Purchaser shall be obligated to pay Sellers pursuant to this Section
1.6(I) shall not exceed $10,000.
10
1.7 Payments on the Purchase Money Promissory Notes.
(A) For so long as any amounts remain outstanding under the
Notes, Purchaser shall make per unit quality control payments ("QC
Payments") earned by Sellers for each product as set forth below in
this Section 1.7; provided, that such QC Payments shall not be
payable pursuant to this Section 1.7 with respect to any units of
product manufactured for marketing and sale through retail
distribution channels, it being understood and agreed that the QC
Payments to be payable with respect to such units of product are to
be as provided in the QC Amendment contemplated by Section 7.3(H).
The QC Payments shall be made to the Sellers' Designee, who shall
distribute such payments on a pro rata basis as set forth on
Schedule 1.5(A) to the applicable Sellers for application to amounts
outstanding under the Notes in accordance with such Notes. The
Sellers will earn the QC Payments each time a unit of one of the
products listed below is manufactured by, for, or on behalf of the
Purchaser or any of its Affiliates. For purposes of determining the
QC Payments earned pursuant to this Section 1.7, a product will be
deemed to be manufactured no later than five (5) business days after
such product is made available for Purchaser or any of Purchaser's
Affiliates or designees to take immediate possession. Purchaser will
make all QC Payments hereunder as such QC Payments are earned. All
QC Payments shall be non-refundable. None of the Sellers shall be
deemed to have waived, amended, modified or changed any provision of
this Agreement, or its respective rights hereunder, the Notes or any
other document or agreement entered into in connection with this
Agreement, as a result of its acceptance of any of the payments
called for in this Section 1.7(A), including, but not limited to,
such Seller's right to dispute the amounts paid under this Section
1.7(A) in accordance with the provisions of Section 1.7(D).
(B) Purchaser shall provide the Sellers' Designee, as
representative for the Sellers, with a quarterly report detailing
the number of each of the products listed below that are
manufactured (as such term is used above) during such calendar
quarter.
(C) Purchaser shall prepare reasonably accurate, complete and
detailed records in order to substantiate the amounts payable as set
forth in Section 1.7(A), and Purchaser shall maintain such records
for a period of at least three (3) years following the quarterly
period to which such records relate.
(D) Purchaser's records that relate to the subject matter of
this Section 1.7 may be examined once per calendar year in Los
Angeles, California on reasonable notice and during normal business
hours by an independent auditor selected by the Sellers' Designee
and paid for by Sellers. If any such examination reveals that
Purchaser owes Sellers additional QC Payments, Purchaser shall: (a)
immediately pay the Sellers' Designee for distribution to Sellers on
a pro rata basis such delinquent amounts, which payments shall be
11
applied by the applicable Sellers against outstanding amounts owed
to such Sellers under their respective Notes in accordance with such
Notes; and (b) pay to the Sellers' Designee for distribution to
Sellers interest on the overdue amounts calculated at a rate equal
to the lesser of 10% per annum or the maximum rate allowed by
applicable Legal Rules, which payments shall also be applied against
outstanding amounts owed to such Sellers under such Notes in
accordance therewith. Notwithstanding anything herein to the
contrary, (i) if the actual aggregate amount of QC Payments made by
Purchaser to Sellers over the entire audited period are less than
ninety percent (90%) of those amounts owed for the period as
determined by the independent auditor selected by the Sellers'
Designee as representative for Sellers, Purchaser shall pay to the
Sellers' Designee, upon demand therefor, for distribution to Sellers
on a pro rata basis an amount equal to the costs of the audit and
(ii) if the actual aggregate amount of QC Payments made by Purchaser
to Sellers over the entire audited period are at least ninety
percent (90%) of those amounts owed for the period as determined by
the independent auditor selected by the Sellers' Designee as
representative for Sellers, the costs of the audit shall be borne by
Sellers.
QC Payment Schedule
Product manufactured QC Payment per unit of product
manufactured
Showtime Rotisserie - Pro Model $4.50
Showtime Rotisserie - Standard Model $3.50
Showtime Rotisserie - Compact Model $3.00
Pastamaker $2.50
Motorized Food Dehydrator $2.50
Nonmotorized Food Dehydrator $1.25
Popeil's Pocket Fishermen $1.75
Cutlery Set (12 pieces or more) $1.50
Block for Cutlery Set $1.75
GLH Hair Cosmetic (per GLH regular size can) $1.50
GLH Hair Cosmetic (per GLH small size can) $ .75
Mr. Microphone $1.50
Egg Scrambler $1.25
Solid Flavor Injector $1.00
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Liquid Flavor Injector $1.50
Flatware Set $1.50
Scissors $1.00
Rotisserie Cookbook $ .65
Lean Rotisserie Cookbook $ .65
Marinade Cookbook $ .65
Lean Rotisserie Booklet (noninstructional) $ .65
Lean Marinade Booklet (noninstructional) $ .65
Bagel Cutter $1.00
Door Saver $1.00
Showtime Outdoor Stand $ .75
Showtime Vinyl Cover $ .50
Grip Spatula $ .25
Flip-It Spatula $ .25
Showtime Pro Model Kebob Rods (each) $ .20
Showtime Standard Model Kebob Rods (each) $ .20
Showtime Compact Model Kebob Rods (each) $ .20
Showtime Mini Model Kebob Rods (each) $ .20
Char Rubs (per container) $ .▇▇
▇▇▇▇▇▇▇▇▇ (per container) $ .15
Barbecue Sauce (per container) $ .15
Barbecue Seasonings (per container) $ .15
Sausage Seasonings (per container) $ .15
Jerky Seasonings (per container) $ .15
Rib Basket $1.50
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Lobster Basket $1.50
1.8 Closing. Subject to Article 9 below, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
or such other location agreed upon by the Parties, at 10:00 a.m. (local time) on
the third Business Day following the satisfaction or waiver of the conditions
set forth in Article 7 or another date mutually agreed upon by the Parties (the
"Closing Date").
(A) Sellers' Closing Deliveries. The applicable Sellers shall
take the following actions at the Closing:
(i) ▇▇▇▇ of Sale. Sellers shall deliver or cause to be delivered to
Purchaser the ▇▇▇▇ of Sale, duly executed by Sellers.
(ii) Assignment and Assumption Agreement. Sellers shall deliver or
cause to be delivered to Purchaser the Assignment and Assumption
Agreement, duly executed by Sellers.
(iii) Product Development Agreement. Sellers shall cause to be
delivered to Purchaser the Product Development Agreement, duly executed by
▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇.
(iv) Consulting Agreements. Sellers shall cause to be delivered to
Purchaser the Consulting Agreements for ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, duly
executed by each (as applicable).
(v) Trademark Co-Existence Agreement. Sellers shall deliver to
Purchaser the Trademark Co-Existence Agreement, duly executed by the
applicable Sellers.
(vi) FIRPTA Certificate. Each Seller shall deliver to Purchaser a
duly executed certificate in the form specified by Treasury Regulation
Section 1.1445-2(b)(2).
(vii) Payments. Sellers shall deliver to Purchaser the Included Cash
and, if any, the Additional Cash.
(viii) Other Reasonably Requested Documents. Sellers shall deliver
to Purchaser such other documents or instruments as are required pursuant
to this Agreement or as may be reasonably requested by Purchaser or any
Person providing financing for Purchaser's payment of the Purchase Closing
Payment.
(B) Purchaser's Closing Deliveries. Purchaser shall take the
following actions at the Closing:
(i) Payments. Purchaser shall pay Sellers the Purchase Closing
Payment in accordance with the terms of Section 1.5(A).
14
(ii) Deposit. Subject to Section 1.4, Purchaser shall cause to be
delivered to Sellers the Deposit in accordance with the terms of Section
1.5(B).
(iii) Notes. Purchaser shall deliver to each Seller set forth on
Schedule 1.5(C) such Seller's Note, duly executed by Purchaser.
(iv) Sales Tax. Purchaser shall deliver to each Seller the tax gross
up payment payable to such Seller pursuant to Section 1.6(I), as set forth
on Schedule 1.6(I).
(v) ▇▇▇▇ of Sale. Purchaser shall deliver or cause to be delivered
to Sellers the ▇▇▇▇ of Sale, duly executed by Purchaser.
(vi) Assignment and Assumption Agreement. Purchaser shall deliver or
cause to be delivered to Sellers the Assignment and Assumption Agreement,
duly executed by Purchaser.
(vii) Product Development Agreement. Purchaser shall deliver or
cause to be delivered to ▇. ▇▇▇▇▇▇, the Product Development Agreement,
duly executed by Purchaser. (viii) Consulting Agreements. Purchaser shall
deliver to each of ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ their respective Consulting
Agreements, duly executed by Purchaser.
(ix) Trademark Co-Existence Agreement. Purchaser shall deliver or
cause to be delivered to the applicable Sellers the Trademark Co-Existence
Agreement, duly executed by Purchaser.
(x) Letter of Credit. Purchaser shall deliver or cause to be
delivered to Sellers the Letter of Credit.
(xi) Other Reasonably Requested Documents. Purchaser shall deliver
or cause to be delivered to Sellers such other documents or instruments as
are required pursuant to this Agreement or as may be reasonably requested
by Sellers.
(C) Joint Deliveries. At the Closing, Purchaser and the
Sellers' Designee shall execute and deliver to the Escrow Agent
joint written instructions directing the Escrow Agent to deliver to
the Sellers at the Closing the Deposit, together with any interest
and earnings thereon.
1.9 Further Assurances; Post-Closing Cooperation. At any time or from time
to time after the Closing, at Purchaser's reasonable request and without further
consideration, Sellers and/or the Shareholder shall execute and deliver to
Purchaser such other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take such other actions
as Purchaser may reasonably deem necessary or desirable in order more
effectively to transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of the Included Assets.
15
1.10 Tax Allocation. Exhibit 1.10 sets forth an allocation of the Purchase
Price (and all other capitalized costs) among the Included Assets of each of the
Sellers in accordance with Section 1060 of the Code and the Treasury regulations
thereunder (and any similar provision of state, local or foreign law, as
appropriate), subject to any adjustment to the Purchase Price pursuant to
Section 1.6. Purchaser and each of the Sellers and their respective Affiliates
shall report, act and file Tax Returns (including, without limitation, IRS Form
8594) in all respects and for all purposes consistent with Exhibit 1.10. Neither
Purchaser nor any Sellers shall take any position (whether in audits, Tax
Returns or otherwise) which is inconsistent with such allocation unless required
to do so by applicable Legal Rules.
1.11 Sales and Use Tax. Subject to the provisions of Section 1.6(I),
Purchaser and Sellers will cooperate in preparing and filing use and sales tax
returns relating to, and Purchaser will pay, any and all sales, real estate,
transfer or use tax due with regard to the transactions provided for in this
Article 1, whether levied on Purchaser or Sellers.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers make the representations and warranties set forth in this
Article 2, in each case as of the date of this Agreement. Purchaser hereby
acknowledges and agrees that Sellers are not making any representation or
warranty whatsoever, express or implied, except those representations and
warranties of Sellers expressly set forth in this Agreement.
2.1 Organization. Each Seller that is not an individual (other than Ronco)
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Ronco is a limited liability company
duly organized, validly existing and in good standing under the laws of
California. Each of Popeil Inc. and RP has the corporate power to own its
properties and to carry on the Business as conducted by it as of the date
hereof, and Ronco has the limited liability company power to own its properties
and to carry on the Business as conducted by it as of the date hereof. The
copies of the Certificates of Incorporation, Bylaws and operating agreements of
each Seller heretofore delivered to Purchaser are true, complete and correct and
are in full force and effect. Each of Ronco, Popeil Inc. and RP is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the failure to
be in good standing or qualified would not reasonably be expected to have a
Material Adverse Effect on Ronco, Popeil Inc. or RP taken as a whole.
2.2 Authority; Non-Contravention. This Agreement and the other agreements
contemplated hereby to be executed by each of Sellers pursuant hereto have been
duly executed and delivered by each of Sellers, and constitute valid and binding
obligations of each of Sellers, enforceable in accordance with their respective
terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors or
by general equitable principles. Each Seller has the power and authority to
execute and deliver and perform its obligations under this Agreement and the
other agreements contemplated herein to be executed by it. The execution and
delivery by Sellers and the Shareholder of this Agreement do not, and the
performance by Sellers and the Shareholder of their respective obligations under
16
this Agreement and the consummation of the transactions contemplated hereby will
not (a) conflict with or result in a material violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws
(or other comparable corporate charter documents) of any Seller, to the extent
applicable, (b) violate in any material respect any Legal Rules or (c) except as
set forth on Schedule 2.2, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any Material Contract or result in any Lien on any of the Included Assets.
2.3 Title or Right to Included Assets. Each Seller has good and marketable
title to or other right to use all of the Included Assets it shall convey to
Purchaser at the Closing, free of Liens.
2.4 Financial Statements; No Material Adverse Change. .
(A) Attached as Exhibit H are true, correct and complete
copies of the following financial statements: audited consolidated
income statements and statements of cash flow of Ronco, Popeil Inc.
and RP for the fiscal years ended December 31, 2003, December 31,
2002, and December 31, 2001, and audited consolidated balance sheets
of Ronco, Popeil Inc. and RP as of December 31, 2003, December 31,
2002, and December 31, 2001, together with notes thereto and reports
of auditors thereon (the "Audited Financial Statements"). The
Audited Financial Statements: (a) have been prepared in accordance
with the books of account and records of Ronco, Popeil Inc. and RP
and (b) have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistently
applied with prior periods, except as set forth on Schedule 2.4(A).
(B) Except as set forth on Schedule 2.4(B), since December 31,
2003, there has not occurred any Material Adverse Change with
respect to Ronco, Popeil Inc., and RP, taken as a whole, except any
such change arising from changes in the general state of the
industries in which such sellers operate, conditions, events or
circumstances generally affecting the U.S. economy, including as a
result of acts of war or terrorism, changes in GAAP, changes in law
or regulations, or changes resulting from the fact that the
transactions contemplated by this Agreement have been publicly
disclosed.
2.5 Tax Matters. All tax returns and tax reports required to be filed with
respect to the income, operations, business or assets of Ronco, Popeil Inc.
and/or RP have been timely filed (or appropriate extensions have been obtained,
which extensions are listed on Schedule 2.5) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed. All of the foregoing, as filed, are true, correct and complete in all
material respects with respect to the income, operations, business or assets of
Ronco, Popeil Inc. and RP, and reflect accurately all liabilities for taxes with
respect to the income, operations, business or assets of Ronco, Popeil Inc. and
RP for the periods to which such returns relate, and all such amounts shown as
owing thereon have either been paid or fully accrued on the books of Ronco,
Popeil Inc. or RP, as applicable.
17
2.6 Intellectual Property Rights.
(A) The execution, delivery and performance of this Agreement
and the Operative Agreements and the consummation of the
transactions contemplated hereby and thereby will not breach,
violate or conflict with any agreement governing any Acquired
Intellectual Property and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of
any such Intellectual Property or in any material way impair the
right of Purchaser or any of its affiliates to use, sell, license or
dispose of, or bring any action for the post-Closing infringement
of, any such intellectual property or portion thereof.
(B) Set forth on Schedule 2.6(B) is a true and complete list
of all material registrations and material applications for
registration of all Acquired Intellectual Property.
(C) Except as set forth on Schedule 2.6(C), to the knowledge
of Sellers, Sellers either (i) own the entire right, title and
interest in and to the Acquired Intellectual Property, free and
clear of any encumbrances, or (ii) have the royalty-free right to
use the same as and where they are used by Sellers on the Closing
Date. Except as set forth on Schedule 2.6(C), and except for the
Excluded Assets, to the knowledge of Sellers, Sellers do not use in
their conduct of the Business (as such conduct of the Business
relates to the Included Products) any Intellectual Property other
than the Acquired Intellectual Property.
(D) Except as disclosed in Schedule 2.6(D): (i) Sellers have
not received any written notice of any challenge of any kind to any
registrations for domain names or copyrights or any filings for
patent rights and Marks identified as owned by Sellers in Schedule
2.6(B), whether registered, issued or pending, as the case may be;
(ii) Sellers have the sole and exclusive right to bring actions for
infringement or unauthorized use of the Acquired Intellectual
Property owned by Sellers and, to the knowledge of Sellers, there is
no basis for any such action; and (iii) Sellers are not in material
breach of any agreement affecting the Acquired Intellectual
Property.
(E) Except as set forth on Schedule 2.6(E), to the knowledge
of Sellers, (i) no infringement of any Intellectual Property of any
other Person is occurring in any way from the ownership or use by
Sellers of the Acquired Intellectual Property; (ii) no claim of
invalidity of any Intellectual Property identified on Schedule
2.6(B) has been made against Sellers; and (iii) no proceedings are
pending or, to the knowledge of Sellers, threatened that challenge
the validity, ownership or use of any Intellectual Property
identified on Schedule 2.6(B).
2.7 Litigation. Except as set forth on Schedule 2.7(a), there are no
actions, suits, investigations, claims or proceedings ("Litigation") pending or,
to the knowledge of Sellers, threatened before any court or by or before any
governmental or regulatory authority or arbitrator: (a) affecting any of Ronco,
Popeil Inc. or RP (as plaintiff or defendant) which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
18
Ronco, Popeil Inc. or RP or (b) relating to the transactions contemplated by
this Agreement. Schedule 2.7(a) sets forth a list of any Litigation commenced
against any of Ronco, Popeil Inc. or RP in the last two (2) years.
2.8 Conduct of Business. Except as set forth on Schedule 2.8, the Business
is conducted collectively and exclusively through Ronco, Popeil Inc. and RP.
Except as set forth on Schedule 2.8, the Included Assets include all assets used
or held for use by Sellers in the conduct of the Business (as conducted as of
the date hereof) and directly related to the Included Products.
2.9 Employee Matters. All employees of Ronco, Popeil Inc. and RP are
at-will employees, and none of such employees is entitled to severance or like
payments upon the termination of their employment by any of Ronco, Popeil Inc.,
or RP. Schedule 2.9 sets forth a correct and complete list of all employees of
each of Ronco, Popeil Inc. and RP as of the date hereof, specifying their names,
job designations, dates of hire and annual base salaries and/or their hourly
wage rates in effect as of the date hereof. Also set forth on Schedule 2.9 is a
complete and correct list or description of any compensation (other than
salaries or hourly wages) and any employee benefits to which the employees of
Ronco, Popeil Inc. and RP are entitled and any employee benefit plan maintained
or contributed to by any of Ronco, Popeil Inc. or RP for the benefit of such
employees or their dependents.
2.10 Contracts. Schedule 2.10 hereto lists those agreements that are set
forth on Schedule 1.1(C) that are material to the Business of Ronco, Popeil Inc.
and RP (the "Material Assets"). With respect to each Material Contract: (a) the
agreement is legal, valid, binding, enforceable, and in full force and effect
against Ronco, Popeil Inc. and RP, as applicable, and (b) none of Ronco, Popeil
Inc. and/or RP is in material breach or default in any material respect under
the terms of any such agreements to which it is a party.
2.11 No Brokers or Finders. No agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of
Sellers or any of their Affiliates in connection with the negotiation, execution
or performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to receive any brokerage or finder's or
similar fee or other commission from Sellers as a result of this Agreement or
such transactions.
2.12 Accounts Receivable. Except as set forth on Schedule 2.12, the
Accounts Receivable arose from bona fide sales transactions in the ordinary
course of business and, to the knowledge of Sellers, are subject to no valid
defenses, set-offs or counterclaims.
2.13 Licenses. To the knowledge of Sellers, Schedule 1.1(E) lists all
Licenses held by any Seller in connection with the Business.
19
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as contemplated by this Agreement, Purchaser represents and
warrants to Sellers and the Shareholder as of the date hereof as follows:
3.1 Organization. Each of Purchaser and RIM is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has full power and authority to own and/or lease all of its
properties and assets, and, as of and giving effect to the Closing, will have
full power and authority to own and/or lease or license the Included Assets.
3.2 Authority; Non-Contravention. This Agreement and the other agreements
contemplated hereby to be executed by Purchaser pursuant hereto have been duly
executed and delivered by Purchaser, and constitute valid and binding
obligations of Purchaser enforceable against it in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles. Purchaser has full power and authority to
execute and deliver and perform its obligations under this Agreement and the
other agreements contemplated herein to be executed by it. The execution and
delivery by Purchaser of this Agreement do not, and the execution and delivery
by Purchaser of the Operative Agreements to which it is a party, the performance
by Purchaser of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated hereby and
thereby shall not conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Formation or limited
liability company operating agreement of Purchaser.
3.3 No Undisclosed Liabilities. Prior to the date hereof, Purchaser has
not conducted any business or operations, and except as set forth on Schedule
3.3, Purchaser has no obligations or liabilities of any kind or nature
whatsoever, whether known or unknown, accrued, absolute, contingent or
otherwise, and whether due or to become due.
3.4 Legal Proceedings. There is no Order or Action pending or, to the
knowledge of Purchaser, threatened against or affecting Purchaser or that might
adversely affect Purchaser's ability to perform this Agreement or the
consummation of any of the transactions contemplated hereby.
3.5 No Brokers or Finders. Except as set forth on Schedule 3.5, no agent,
broker, finder, or investment or commercial banker, or other Person or firm
engaged by or acting on behalf of Purchaser or any of its Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to
receive any brokerage or finder's or similar fee or other commission from
Purchaser as a result of this Agreement or such transactions.
3.6 Financial Resources. As of the date hereof, Purchaser has cash and/or
customary written debt term sheets from certain lenders providing the terms and
conditions upon which these lenders have committed, subject to the terms and
conditions specified therein, to provide debt financing in an aggregate amount
20
of up to $30 million for purposes of paying a portion of the Purchase Closing
Payment pursuant to this Agreement. Purchaser has provided Sellers with true,
correct and complete (excluding any economic terms between Purchaser and such
lenders) copies of any such term sheets, and any and all amendments or
supplements thereto, for such financing in connection with the transactions
contemplated hereby. No later than concurrently with the execution of this
Agreement, Purchaser has paid all fees required to be paid to such lenders
through the date hereof.
ARTICLE 4
COVENANTS OF PURCHASER, SELLERS, THE SHAREHOLDER AND ▇. ▇▇▇▇▇▇
During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to Section 9.1
or the Closing Date, Sellers and the Shareholder agree, jointly and severally
that (except as expressly contemplated by this Agreement or to the extent that
Purchaser shall otherwise consent in writing):
4.1 Ordinary Course. The Shareholder shall and shall cause Ronco, Popeil
Inc. and RP to (i) carry on the Business in the ordinary course, including with
respect to the collection of receivables, payment of payables and all Taxes,
manufacturing activities, advertising activities, sales practices, and research
and development activities, in substantially the same manner as heretofore
conducted, (ii) use commercially reasonable efforts to maintain the Included
Assets in substantially the same condition (except for normal wear and tear)
existing on the date hereof, (iii) use commercially reasonable efforts to
preserve its rights and interests in and to the Included Assets and (iv) use
commercially reasonable efforts to maintain the services of, and good relations
with, their customers and suppliers; provided, however, that nothing in this
Section 4.1 will prohibit the Sellers from transferring, assigning or selling
any of their assets so long as, to the extent such assets are Included Assets,
such sale, transfer or assignment is in compliance with the requirements of
Section 4.3. Without limiting the generality of the foregoing, from the date
hereof through the Closing Date, Seller shall not, without the prior written
consent of Purchaser (which shall not be unreasonably withheld or delayed):
(A) enter into any material contract or commitment, or amend,
terminate or fail to renew any Contract, License or permit, or incur
or agree to incur any liability, except in each case in the ordinary
course of business consistent with past practices;
(B) increase compensation payable or to become payable or make
a bonus payment to or otherwise enter into one or more bonus
agreements with any employee or agent, except in the ordinary course
of business;
(C) create, assume or permit to exist any new and material
mortgage, pledge or other lien or encumbrance upon any of the
Included Assets;
(D) authorize or commit to make any capital expenditures in
excess of the current budget for capital expenditures for the
Business;
21
(E) dispose of any property, plant or equipment (other than
supplies), except in the ordinary course of business with adequate
replacement thereof consistent with past practices;
(F) take any action that would cause any of the
representations and warranties of Sellers stated in this Agreement
to fail to be true and correct in all material respect as of the
Closing;
(G) make any change in any method of accounting or keeping of
books of account or accounting practices or principles, except as
required by applicable law or, in the opinion of the independent
public accountants of Sellers, by GAAP;
(H) license to any Person the Intellectual Property;
(I) fail to renew a License or fail to make or supplement any
application for a License reasonably necessary to the operation of
the Business;
(J) materially amend any limited liability company agreement
or other organizational documents of Sellers; or
(K) enter into any commitment to do any of the foregoing.
4.2 No Solicitation. In consideration of Purchaser's deposit of the
Deposit with the Escrow Agent pursuant to Section 1.4 hereof and the Escrow
Agreement, during the period from the date hereof until the earlier of the
Closing or the termination of this Agreement, the Shareholder shall not, and no
Seller shall, directly or indirectly, through any officer, director, employee or
agent (including any investment banker, financial advisor, attorney, accountant
or other representative or agent) or otherwise, (a) solicit, initiate or
encourage inquiries or the submission of proposals or offers from any third
party relating to any acquisition or purchase of all or any material portion of
the business, properties or assets of, or any equity interest in, any of Ronco,
Popeil Inc. or RP or any of their respective Affiliates or any merger,
consolidation, business combination or similar transaction (other than with
Purchaser), involving any such Seller or any of its Affiliates (an "Acquisition
Transaction"), or (b) participate in any discussions or negotiations regarding,
or furnish to any other person any confidential information with respect to, or
otherwise cooperate in any way with, or participate in, facilitate or agree to
endorse or encourage, any effort or attempt by any other person to do or seek to
do any of the foregoing. The Shareholder and each Seller shall (a) promptly
advise Purchaser orally and in writing of any such offer and of any inquiries or
proposals of or contacts with third parties for any Acquisition Transaction
involving any of Ronco, Popeil Inc. or RP or any of their respective Affiliates,
and (b) not accept (nor shall any of such Seller's Board of Directors or any
committee thereof recommend) any such proposal or offer.
4.3 No Acquisitions or Dispositions. In consideration of Purchaser's
deposit of the Deposit with the Escrow Agent pursuant to Section 1.4 hereof and
the Escrow Agreement, none of Ronco, Popeil Inc. or RP shall (a) acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or (b) otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to such Seller. No Seller shall,
and the Shareholder shall ensure that no Seller shall, lease or otherwise
dispose of any of its assets included among the Included Assets, except for any
22
current assets included among the Included Assets (which shall not be disposed
of other than in the ordinary course of business); provided, however, that,
subject to the last sentence of Section 11.9, Sellers may sell, transfer, assign
or otherwise dispose of any of the Included Assets prior to the Closing Date to
(A) a trust, partnership or other entity formed primarily for estate or family
planning purposes (such as a family limited partnership) that is solely for the
benefit of ▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇'▇ spouse, one or more of the descendants of ▇.
▇▇▇▇▇▇'▇ parents, or one or more of the descendants of ▇. ▇▇▇▇▇▇'▇ spouse's
parents (irrespective of the age of such descendants), (B) a member of a
Seller's Family Group or (C) to one or more Affiliates of Sellers, if, in the
case of clause (C), Sellers are advised by their tax advisor that such sale,
transfer, assignment or disposal would permit the transactions contemplated
hereby to be effected in a manner advantageous from a Tax perspective to any of
the Sellers and/or the Shareholder, and in each case if (i) such permitted
transferee or assignee becomes a party to this Agreement as a Seller, (ii) such
sale, transfer, assignment or other disposition does not cause any of the
representations and warranties of Sellers stated in this Agreement to fail to be
true and correct in all material respects as of the Closing (adjusting each such
representation and warranty as appropriate to reflect the fact that the term
"Sellers" includes any such permitted transferee or assignee of Sellers) or
impede the transactions contemplated hereby and by the Operative Agreements and
(iii) such sale, transfer, assignment or other disposition is not
disadvantageous to Purchaser in the reasonable, good faith judgment of
Purchaser.
4.4 Access to Information. The Shareholder shall and shall cause each of
Ronco's, Popeil Inc.'s and RP's independent accountants, officers and employees
to afford to Purchaser, and the accountants, counsel and other representatives
of Purchaser and its Affiliates, reasonable access during the period prior to
the earlier of the Closing Date or the termination of this agreement and during
normal business hours to the properties, books, contracts, commitments, records
and management of each such Seller and, to the independent accountants of
Purchaser, to the extent permitted by such Sellers' Accountants, reasonable
access to the records of each such Seller's accountants. During such period, the
Shareholder shall cause each such Seller to use reasonable efforts to furnish
promptly to Purchaser all information concerning the business, properties and
personnel of such Seller as Purchaser may reasonably request.
4.5 Communications. None of the Shareholder nor any Seller shall furnish
any communication to the public generally if the subject matter thereof relates
to Purchaser or to the transactions contemplated by this Agreement without the
prior approval of Purchaser as to the content thereof, which approval shall not
be unreasonably withheld, and subject to each Party's compliance with applicable
law.
4.6 Good Faith. Sellers and the Shareholder shall act in good faith and
use all commercially reasonable efforts to cause to be satisfied all the
conditions precedent to their obligations and those of the other Parties over
which they have control or influence, including obtaining any consents or any
governmental permits required to be obtained by any Seller or the Shareholder to
consummate the transactions contemplated hereby, if any, and complying with any
applicable bulk transfer laws. Subject to the provisions of Article 9, none of
the Shareholder or any Seller shall take any action that would prevent the
performance of this Agreement or the consummation of the transactions
23
contemplated hereby. Without limiting the foregoing, neither any Seller nor the
Shareholder shall enter into any agreement to do any thing which they are not
permitted to do under this Article 4.
4.7 Financing Support. Sellers and the Shareholder shall use commercially
reasonable efforts to perform such actions as may be reasonably requested by
Purchaser in order for Purchaser to obtain financing for the transactions
contemplated hereby, provided, that no Seller or the Shareholder shall be
required to pay or bear any costs or expenses in connection with such actions.
Without limiting the scope of commercially reasonable efforts that Sellers and
the Shareholder may provide pursuant to this Section 4.7 (but subject to the
provisos in the immediately preceding sentence), Sellers agree to use
commercially reasonable efforts to assist Purchaser to obtain a policy of
insurance covering losses arising from Sellers' breaches of any representations
or warranties hereunder, with such terms and conditions as may be requested or
required by any Person providing financing for the transactions contemplated
hereby and such other terms and conditions as may be desired by Purchaser.
Notwithstanding the foregoing, it shall not be considered commercially
unreasonable for Sellers and/or the Shareholder to decline or fail to agree to
any changes to the terms of this Agreement or any of the Operative Agreements
that may be requested by any Person providing insurance and/or funding for or in
connection with the transactions contemplated hereby.
4.8 Notice of Developments. At all times prior to the Closing Date, (a)
each Seller shall give prompt written notice to Purchaser, and Purchaser shall
give prompt written notice to each Seller, of the occurrence of any event that
causes or is reasonably likely to cause any representation or warranty of such
Party stated in this Agreement to be untrue or inaccurate in any material
respect after the date hereof but on or before the Closing Date and (b)
Purchaser shall give prompt written notice to Sellers, and Sellers shall give
prompt written notice to Purchaser, of any development adversely affecting the
ability of the notifying party to consummate the transactions contemplated by
this Agreement. No such notification provided by any Party pursuant to this
Section 4.8 shall be deemed to amend or supplement the schedules attached hereto
delivered by such Party hereunder or to prevent or cure any misrepresentation or
breach of warranty of such Party or, with respect to such notifications
regarding events reasonably likely to cause any representation or warranty of
such Party to be untrue or inaccurate in all material respect, constitute an
admission by or agreement of such Party that such representation or warranty is
untrue or inaccurate in any material respect.
4.9 QVC Agreement. Prior to the earlier of the Closing Date or the QVC
Date, Purchaser and Sellers shall use commercially reasonable efforts to cause
QVC, Inc. to enter into an amendment to the QVC Agreement contemplated by the
first sentence of Section 7.2(G) hereof and to consent to the assignment of the
QVC Agreement as so amended from Ronco, Inc. to Purchaser or RIM.
4.10 Patent and Trademark Office Communications. Sellers will deliver to
Purchaser a true, correct and complete copy of any and all written
communications between any Seller and the U.S. Patent and Trademark Office
related to any of the Intellectual Property included among the Included Assets
dated on or after the date hereof and through the Closing Date. Deliveries of
such copies shall be effected promptly after the date of the applicable written
communications.
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4.11 QC Amendment. Beginning promptly after the date hereof, Purchaser and
Sellers shall use commercially reasonable efforts to negotiate the QC Amendment
in good faith so that the conditions to Sellers' and Purchaser's obligations to
effect the Closing specified in Section 7.3(H) may be expeditiously satisfied.
4.12 Bulk Transfer Laws. Sellers and Purchaser hereby waive compliance
with any applicable bulk transfer, including, without limitation, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any similar
statute, with respect to the transactions contemplated hereby, provided that
Sellers will, jointly and severally, indemnify and hold harmless Purchaser for
any Losses incurred by Purchaser in connection with any claims by creditors of
Sellers to which such bulk transfer laws apply.
ARTICLE 5
COVENANTS OF PURCHASER
During the period from the date of this Agreement and continuing
until the earlier of termination or the Closing Date, Purchaser agrees that
(except as expressly contemplated by this Agreement or to the extent that
Sellers shall otherwise consent in writing):
5.1 Good Faith; Due Diligence. Purchaser shall act in good faith and use
all commercially reasonable efforts to cause to be satisfied all the conditions
precedent to its obligations and those of the other Parties over which it has
control or influence, including obtaining any consents or any governmental
permits required to be obtained by Purchaser to consummate the transactions
contemplated hereby. Subject to the provisions of Article 9, Purchaser shall not
take any action which would prevent the performance of this Agreement or the
consummation of the transactions contemplated hereby. Without limiting the
foregoing provisions of this Section 5.1, Purchaser shall diligently proceed
with its due diligence review of the Included Assets and the Business and
operations of Sellers with the aim of causing to occur, as expeditiously as
reasonably practicable, the satisfaction of the condition to Purchaser's
obligation to effect the Closing stated in Section 7.2(C).
5.2 Financing Support. Purchaser shall use commercially reasonable efforts
to perform such actions as may be reasonably requested by Purchaser's financing
sources for purposes of obtaining the financing for the transactions
contemplated hereby.
5.3 Letter of Credit. Purchaser shall use commercially reasonable efforts
to obtain and deliver to Sellers the Letter of Credit as contemplated by Section
7.3.
ARTICLE 6
CONTINUING COVENANTS AND AGREEMENTS
6.1 Confidentiality. All non-public information disclosed by any Party (or
its representatives), whether before or after the date of this Agreement, in
connection with the transactions contemplated by, or the discussions and
negotiations preceding, this Agreement to any other Party (or its
representatives) shall be kept confidential by such other Party and its
25
representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such disclosure is in
connection with any legal proceeding to which the Party desiring to make such
disclosure is a party, or to the extent otherwise required by law, or to the
extent such duty as to confidentiality is waived in writing by the other Party.
Subsequent to the termination of this Agreement, upon written request (delivered
pursuant to Section 11.8) of any Seller to Purchaser, or of Purchaser to any
Seller (the requesting party being referred to as the "Requesting Party" and the
recipient of such request being referred to as the "Requested Party"), the
Requested Party shall return all materials that the Requesting Party provided to
the Requested Party and all reproductions, photocopies, duplications, or
likeness of the materials to such Requesting Party within three Business Days
after its receipt of such request.
6.2 Tax Cooperation. After the Closing, Sellers and Purchaser shall, and
shall cause their respective Affiliates to, provide reasonable cooperation in
the preparation of all Tax Returns and shall provide, or cause to be provided,
reasonable access to any records and other information reasonably requested by
such Parties in connection with such preparation as well as access to, and the
cooperation of, their respective accountants. Sellers and Purchaser shall, and
shall cause their respective Affiliates to, provide reasonable cooperation in
connection with any Tax investigation, audit or other proceeding. Any
information obtained pursuant to this Section 6.2 or pursuant to any other
provision of this Agreement providing for the sharing of information or the
review of any Tax Return shall be subject to Section 6.1. For the avoidance of
doubt, Purchaser acknowledges and agrees that after the Closing, Sellers shall
be entitled to retain exclusive ownership and possession of their respective
books and records pertaining to Taxes arising from the operation of the Business
or the ownership of the Included Assets for any Tax period (or portion thereof)
ending on or prior to the Closing Date, subject to Purchaser's right of
reasonable access pursuant to this Section 6.2.
6.3 Further Assurances. Except as otherwise provided in this Agreement,
each of the Parties shall use commercially reasonable efforts to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement. If at any time after the Closing any further action is reasonably
necessary or desirable to carry out the purposes of this Agreement and the other
agreements contemplated hereby, including, without limitation, the execution of
additional documents or instruments, the Parties shall take all such reasonably
necessary action to the extent commercially reasonable. Notwithstanding the
foregoing, it shall not be considered commercially unreasonable for Sellers
and/or the Shareholder to decline or fail to agree to any changes to the terms
of this Agreement or the Operative Agreements that may be requested by any
Person providing insurance and/or funding for or in connection with the
transactions contemplated hereby.
6.4 Public Announcements. Subject to Section 6.1, Purchaser and Sellers
shall consult with each other and shall mutually agree (with the agreement of
each Party not to be unreasonably withheld) upon the content and timing of any
press release or other public statements with respect to the transactions
contemplated by this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation and agreement, except
as may be required by applicable law; provided, however, that Purchaser and
Sellers shall give prior notice to the other Party of the content and timing of
26
any such press release or other public statement required by applicable law,
unless it is impracticable to do so, in which event such notice shall be given
no later than concurrently with the issuance of such press release or making of
such public statement.
6.5 Employee Matters.
(A) Transferred Employees. Purchaser will offer employment to
be effective as of the Closing Date to the employees of Ronco,
Popeil Inc. and RP whose names are listed on Schedule 6.5(A), either
directly or through a co-employment arrangement with an employee
leasing company selected by Purchaser, with terms, conditions, wages
and benefits substantially equivalent to the terms and conditions of
employment in effect as of the date hereof. Each such employee who
accepts such offer and becomes an employee of Purchaser after the
Closing pursuant to this Section 6.5(A) will be referred to as a
"Transferred Employee".
(B) Termination of Employment; Health Care Coverage.
Immediately prior to the Closing, each of Ronco, Popeil Inc. and RP
will terminate (a) the employment of all employees of Ronco, Popeil
Inc. and/or RP whose names are listed on Schedule 6.5(B), and (b)
all employment agreements and other arrangements with such
employees. As of the Closing, Ronco, Popeil Inc. or RP (as
appropriate) shall pay to their employees whose names are listed on
Schedule 6.5(B) any and all liabilities relating to or arising out
of their employment or termination of employment by Ronco, Popeil
Inc. and RP, including any payments and benefits due to such
employees pursuant to accrued wages, salary, bonus, commission or
other forms of compensation. Purchaser will provide continuation
health care coverage to all Transferred Employees and their
qualified beneficiaries who incur a qualifying event after the
Closing Date in accordance with and to the extent required under the
continuation health care coverage requirements of Code Section
4980B, as amended, and Sections 601 through 608 of ERISA ("COBRA").
(C) Benefits Liabilities. From and after the Closing,
Purchaser will be solely responsible for all liabilities and
obligations, arising under, resulting from or relating to
Purchaser's employment or termination of the Transferred Employees.
(D) WARN Act. On and after the Closing Date, with respect to
any terminations by Purchaser after the Closing Date, Purchaser will
be responsible with respect to the Transferred Employees and their
beneficiaries for compliance with the WARN Act, including any
requirement to provide for and discharge any and all notifications,
benefits, and liabilities to Transferred Employees and any
Governmental Entity. Purchaser will not take any action after the
Closing Date that would cause any termination of employment of any
employees by any of Ronco, Popeil Inc. and RP or any of its
Affiliates prior to the Closing Date to constitute a "plant closing"
or "mass layoff" under the WARN Act or any similar state or local
law or create any liability to Seller or any of its Affiliates for
employment terminations under applicable Legal Rules. Except for the
termination by Ronco, Popeil Inc. or RP of their employees as of
27
immediately prior to the Closing as contemplated by Section 6.5(B)
above, none of Ronco, Popeil Inc. or RP shall terminate the
employment of their employees prior to the Closing to the extent
such termination(s) would constitute a "plant closing" or "mass
layoff" under the WARN Act or any similar state or local law or
create any liability to Purchaser for employment terminations under
applicable Legal Rules.
(E) H-1B Nonimmigrant Visas. Purchaser will be responsible for
all actions and costs associated with transferring the H-1B
nonimmigrant visa for Zhen Sun from Ronco, Popeil Inc. and/or RP as
of the date hereof, to Purchaser, including (a) filing, to the
extent necessary, a Labor Condition Application with the U.S.
Department of Labor or a Form I-129, Petition for Nonimmigrant
Worker, with H Supplement, and supporting documentation with the
Immigration and Naturalization Service and (b) paying any transfer
fees or associated costs or expenses therewith.
(F) No Third Party Beneficiary Rights. No provision of this
Agreement shall create any third party beneficiary rights in any
Transferred Employee (or beneficiary thereof) or prohibit or prevent
Purchaser from terminating the employment of any Transferred
Employee at any time after Closing. No provision of this Agreement
shall interfere with, restrict or constitute a limitation on
Purchaser's right to amend, modify or terminate its plans, programs
or policies regarding wages, benefits and other employment matters
at any time or from time to time.
6.6 Additional Covenants of Purchaser. Except as may be required pursuant
to applicable Legal Rules, for so long as any amounts remain outstanding under
the Notes, Purchaser shall not, without the prior written consent of Sellers,
which shall not be unreasonably withheld or delayed, (i) sell, license or
otherwise transfer to any Person its rights in or to any of the Included Assets
(except for sales of finished products in the ordinary course of business and
except for pledges of Included Assets to lenders providing financing to
Purchaser) or (ii) cease or materially curtail its manufacturing or marketing of
any of the Included Products. Notwithstanding the foregoing, Purchaser may
transfer those Included Assets set forth on Schedule 6.6(a) to Ronco IP
Management Inc., a Delaware corporation ("RIM"), an Affiliate of Purchaser;
provided, however, that (A) concurrently with such transfer RIM assumes,
pursuant to a writing duly executed by RIM and delivered to Sellers, a portion
of the obligations of Purchaser under the Notes in the amounts set forth on
Schedule 6.6(b) and (B) RIM agrees in a writing duly executed by RIM and
delivered to Sellers to be bound by the provisions of this Agreement as an
additional Purchaser.
6.7 Cooperation. The Parties recognize that, in the future, litigation,
administrative proceedings or other proceedings (e.g., audits and
investigations) may arise relating to the Included Assets or the Business and
the conduct thereof which may relate in part, directly or indirectly, to the
period prior to the Closing Date or both to the period prior to the Closing Date
and the period subsequent to the Closing Date. Purchaser agrees that, to the
extent reasonable under the circumstances and at the request of Sellers and/or
the Shareholder, it shall provide Sellers and/or the Shareholder with access to
the Books and Records and other information, records, books and documents in its
28
possession relating to the Included Assets and the Business to assist Sellers
and/or the Shareholder in connection with any such litigation or proceedings in
which Sellers and/or the Shareholder is or may be involved; provided, however,
that such access shall be provided in a manner designed to minimize disruption
of the normal business activities of Purchaser. Purchaser agrees to maintain the
Books and Records and such other information, records, books or other documents
related to the Included Assets and the Business for at least five (5) years.
6.8 Insurance Cooperation. ▇. ▇▇▇▇▇▇ hereby acknowledges and agrees that
the Purchaser may seek to obtain a "key man" insurance policy covering the life
of ▇. ▇▇▇▇▇▇, a disability policy covering ▇. ▇▇▇▇▇▇, and/or business
interruption insurance, in each case under which the Purchaser will pay all
costs and receive all benefits. ▇. ▇▇▇▇▇▇ agrees to provide reasonable
cooperation in order to assist Purchaser in its efforts to obtain such
insurance, including, with respect to key man life insurance or disability
insurance, by submitting to any physical examination and providing access to
prospective insurers for underwriting purposes to ▇. ▇▇▇▇▇▇'▇ medical records,
in each case only to the extent reasonably required in order to obtain such
insurance and subject to Purchaser's obligation to keep strictly confidential
any information that may be learned by Purchaser in connection with such
physical examination of ▇. ▇▇▇▇▇▇ and/or in connection with Purchaser's attempts
to secure such "key man" or disability insurance. At ▇. ▇▇▇▇▇▇'▇ request, his
personal physician may be in attendance for any such required physical
examination. Purchaser will pay all costs and expenses incurred in connection
with actions taken pursuant to or as contemplated by this Section 6.8
(including, without limitation, any costs or expenses incurred by ▇. ▇▇▇▇▇▇
pursuant to this Section 6.8).
6.9 Letter of Credit. From and after the Closing and until the Notes have
been repaid in full, Purchaser shall, not later than fifteen (15) calendar days
after any date as of which the remaining amount available to be drawn down under
the Letter of Credit falls below the lesser of $250,000 or the total amount
remaining outstanding under the Notes, obtain and deliver to Sellers a
supplemental standby letter or letters of credit from one or more U.S. banking
institutions acceptable to Sellers, in each case with substantially the same
terms and conditions as the Letter of Credit, in an aggregate face amount
necessary to restore the aggregate amount available to be drawn down by Sellers
under the Letter of Credit and such supplemental standby letter or letters of
credit to the lesser of $250,000 or the total amount then outstanding under the
Notes. The foregoing obligations of Purchaser shall apply each time the
aggregate remaining amount available to be drawn down under the Letter of Credit
falls below the lesser of $250,000 or the total amount then outstanding under
the Notes; provided that such obligations shall in any event terminate upon
repayment in full of the Notes.
6.10 Personal Appearances on Direct Response Television.
(A) From and after the Closing, ▇. ▇▇▇▇▇▇ agrees that, subject
to the provisions of this Section 6.10 (including, without
limitation, the last sentence of this Section 6.10(A)), if requested
by Purchaser or RIM, ▇. ▇▇▇▇▇▇ shall make personal appearances on
Direct Response Television Programs (as defined herein) to promote
products marketed by Purchaser or RIM through such programs. The
Parties agree that, with respect to such personal appearances, R.
29
Popeil shall have the right to designate ▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇ and/or
▇. ▇▇▇▇▇▇ to make appearances in his place. The Parties further
agree that, with respect to such personal appearances on the QVC
Shopping Network, ▇. ▇▇▇▇▇▇ shall, together with his permitted
designees, collectively make such number of annual appearances on
QVC as may be required pursuant to the QVC Agreement as amended as
of Closing. Notwithstanding any contrary provision hereof, (i)
Purchaser or RIM, as applicable, shall give ▇. ▇▇▇▇▇▇ reasonable
prior notice of any requested personal appearances, and (ii) ▇.
▇▇▇▇▇▇'▇ agreement to make any appearances (or designate ▇. ▇▇▇▇▇▇
and/or ▇. ▇▇▇▇▇▇, as applicable, to make such appearances) pursuant
to this Section 6.10(A) or as contemplated by the QVC Agreement (as
amended) shall in all events be in ▇. ▇▇▇▇▇▇'▇ sole and absolute
discretion. Without limiting the foregoing, Purchaser acknowledges
and agrees that ▇. ▇▇▇▇▇▇'▇ personal appearance obligations under
this Section 6.10(A) are subject and subordinate to his preexisting
obligations under (a) the Agreement by and between IGT and ▇.
▇▇▇▇▇▇, dated 2/27/04 and (b) the Option Purchase Agreement, by and
between Lucky Brand Foundation and Home Box Office (HBO), dated
2/2/01. As used in this Section 6.10, "Direct Response Television
Programs" means television programs, aired live on home shopping
networks or like networks, on which products are promoted for sale
directly to consumers.
(B) ▇. ▇▇▇▇▇▇ (or his permitted designee) shall be entitled to
receive as an appearance fee an amount equal to 50% of the Gross
Profits (as defined in this Section 6.10(B)) from sales of any
products promoted by ▇. ▇▇▇▇▇▇ (or such permitted designee) through
personal appearances made pursuant to this Section 6.10. As used
herein, "Gross Profits" means gross sales less landed cost of goods
sold less direct costs associated with personal appearances
(including transportation and lodging costs and any costs of food or
other products used in such appearances, all of which shall be
reimbursed to ▇. ▇▇▇▇▇▇ or his permitted designees upon request
therefor, but excluding any amounts paid to ▇. ▇▇▇▇▇▇ as an
appearance fee pursuant to this Section 6.10(B)) less any commission
payable to Coordinated Strategic Alliances in connection with the
applicable personal appearance. For the avoidance of any doubt, it
is agreed and understood that (i) Gross Profits shall not be reduced
by or otherwise reflect any allocation of overhead or general and
administrative expenses of any kind and (ii) ▇. ▇▇▇▇▇▇'▇ entitlement
to Gross Profits as an appearance fee pursuant to this Section
6.10(B) is independent of his right to receive revenues or profits
from the sale of products promoted by ▇. ▇▇▇▇▇▇ or any of his
designees other than on behalf of or at the request of Purchaser or
RIM (whether with respect to products that Purchaser has declined to
acquire pursuant to its right of first refusal under the Product
Development Agreement, products the rights to which have been
acquired by ▇. ▇▇▇▇▇▇ pursuant to the Product Development Agreement
upon an even of default under the Notes, or otherwise).
(C) In addition to the above-described appearance fee, ▇.
▇▇▇▇▇▇ shall be entitled to receive the remaining 50% of the Gross
Profits from sales on any Direct Response Television Programs of any
products promoted by ▇. ▇▇▇▇▇▇ or his permitted designees through
30
personal appearances made pursuant to this Section 6.10 until such
payments (i.e., the payments pursuant to this Section 6.10(C)) total
$400,000 in the aggregate (such amount, the "Estimated Interest
Differential"). Thereafter, Purchaser or RIM, as applicable, shall
be entitled to receive the remaining 50% of Gross Profits (i.e., the
other 50% of Gross Profits not payable to ▇. ▇▇▇▇▇▇ as an appearance
fee pursuant to Section 6.10(B) above) from sales on any Direct
Response Television Programs of any products promoted by ▇. ▇▇▇▇▇▇
or his permitted designees through personal appearances made
pursuant to this Section 6.10.
(D) Purchaser or RIM, as applicable, shall make all payments
to ▇. ▇▇▇▇▇▇ or his designee(s), as applicable, due pursuant to this
Section 6.10 not later than the fifteenth (15th) calendar day
following Purchaser's or RIM's receipt of payment from the Direct
Response Television Program operator for the applicable products
sold over such program. Each such payment shall be accompanied by a
detailed statement setting forth Purchaser's or RIM's calculation of
the applicable Gross Profits and the payment due to ▇. ▇▇▇▇▇▇ or his
designee(s). Purchaser or RIM, as applicable, shall prepare and
maintain for a period of at least three (3) years after the due date
for the payment to which the records relate reasonably accurate,
complete and detailed records in order to substantiate the amounts
payable under this Section 6.10.
(E) Purchaser's records that relate to the subject matter of
this Section 6.10 may be examined once per calendar year in Los
Angeles, California on reasonable notice and during normal business
hours by an independent auditor selected by the Sellers' Designee
and paid for by ▇. ▇▇▇▇▇▇. If any such examination reveals that
Purchaser owes ▇. ▇▇▇▇▇▇ or his designee(s) additional amounts under
this Section 6.10, Purchaser shall: (a) immediately pay ▇. ▇▇▇▇▇▇ or
his designee(s) such delinquent amounts; and (b) pay to ▇. ▇▇▇▇▇▇ or
his designee(s) interest on the overdue amounts calculated at a rate
equal to the lesser of 10% per annum or the maximum rate allowed by
applicable Legal Rules. Notwithstanding anything herein to the
contrary, if the actual aggregate amounts paid by Purchaser or RIM
to ▇. ▇▇▇▇▇▇ or his designee(s) over the entire audited period are
less than ninety percent (90%) of those amounts owed for the period
as determined by the independent auditor selected by the Sellers'
Designee, Purchaser shall pay to ▇. ▇▇▇▇▇▇, upon demand therefor, an
amount equal to the costs of the audit.
(F) Promptly after the Closing, Purchaser or RIM, as
applicable, shall, at its sole cost and expense, determine, as of
the earlier of the date as of which the Notes have been fully paid
or the date that is 30 months after the Closing Date, the amount by
which (1) the aggregate interest that would have been payable by
Purchaser or RIM, as applicable, under the Notes had all payments
under such Notes been applied first to accrued but unpaid interest
and then to outstanding principal from inception through the date
that is 30 months after the Closing Date exceeds (2) the actual
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aggregate interest paid by Purchaser and/or RIM under the Notes
through the earlier of the repayment of outstanding principal of
such Notes and all interest accrued thereon or the date that is 30
months after the Closing Date (such excess, as finally agreed by
Purchaser or RIM, on the one hand, and ▇. ▇▇▇▇▇▇, on the other hand,
the "Actual Interest Differential"). If the Actual Interest
Differential exceeds the Estimated Interest Differential, then
Purchaser or RIM, as applicable, shall, not later than fifteen (15)
calendar days after the earlier of the date that the Notes have been
paid in full or the stated maturity date of the Notes, pay ▇. ▇▇▇▇▇▇
the amount of such excess. If the Estimated Interest Differential
exceeds the Actual Interest Differential, then ▇. ▇▇▇▇▇▇ shall, not
later than fifteen (15) calendar days after the earlier of the date
that the Notes have been paid in full or the stated maturity date of
the Notes, pay Purchaser or RIM, as applicable, the amount of that
excess. Purchaser and RIM, on the one hand, and the Sellers'
Designee and ▇. ▇▇▇▇▇▇, on the other hand, shall work together in
good faith to promptly resolve any disagreements with respect to the
calculations contemplated by this Section 6.10(F), and the Parties
agree to refer to the Accounting Arbitrator any such disagreements
that remain unresolved after fifteen (15) business days following ▇.
▇▇▇▇▇▇'▇ receipt of Purchaser's or RIM's initial determination of
the Actual Interest Differential. If such referral to the Accounting
Arbitrator is made, Purchaser or RIM, on the one hand, and ▇.
▇▇▇▇▇▇, on the other hand, will each bear 50% of the costs and
expenses of the Accounting Arbitrator.
(G) For the sake of clarification, it is agreed that no
amounts payable to ▇. ▇▇▇▇▇▇ or any of his designees under this
Section 6.10 shall be applied against amounts due under the Notes.
6.11 Product Liability Insurance. At all times after the Closing and until
the later of (i) the fourth anniversary of the last date on which ▇. ▇▇▇▇▇▇ or
any of his designees makes a personal appearance to promote the sale of any
products manufactured by or on behalf of Purchaser or RIM or (ii) the seventh
(7th) anniversary of the Closing Date, each of Purchaser and RIM shall maintain
in full force and effect a policy or policies of product, general liability and
errors and omissions insurance policies with combined limits of not less than
$10,000,000 and issued by reputable insurers with A.M. Best (or equivalent)
ratings, which policies shall name each of ▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇ and
▇▇▇▇ ▇. ▇▇▇▇▇▇ as additional insured Persons.
6.12 Termination of Selected Agreements. Beginning promptly after the date
hereof, Sellers shall use commercially reasonable efforts to enter into written
termination agreements, which are reasonably satisfactory to Purchaser, with
respect to the Selected Agreements, so as to cause to be expeditiously satisfied
the conditions to Purchaser's obligation to effect the Closing stated in Section
7.2(J).
6.13 Consent of Additional Lenders. Purchaser shall not (and shall not
cause or permit RIM to) (a) refinance any amount borrowed from the Purchase
Money Lenders that are granted, upon the Closing, a security interest in any of
the Intellectual Property that is the subject of the Trademark Co-Existence
Agreement or any Intellectual Property or other assets (limited to only those
assets that the ▇. ▇▇▇▇▇▇ can acquire from the Purchaser or its Affiliates under
the New Product Development Agreement upon an event of default under the Notes,
such as tooling, equipment and infomercials) that relate to any products
acquired by Purchaser under the New Product Development Agreement (the "Secured
Assets") or (b) encumber the Secured Assets with any further borrowings, unless
such lenders providing the refinancing or any new financing (the "Additional
Lenders") have entered into a written agreement with ▇. ▇▇▇▇▇▇, Purchaser and
32
RIM pursuant to which such Additional Lenders consent to the rights of ▇. ▇▇▇▇▇▇
and the obligations of Purchaser and/or RIM under the Trademark Co-Existence
Agreement and the New Product Development Agreement (including, without
limitation, such rights and obligations upon the occurrence of an event of
default under the Notes), which written agreement includes such terms and
conditions as are reasonably acceptable to ▇. ▇▇▇▇▇▇.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to Obligations of All Parties. The obligations of each
Party to this Agreement to effect the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions unless waived by both Purchaser and Sellers:
(A) Government Approvals. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any Governmental Entity necessary for
the consummation of the transactions contemplated by this Agreement
shall have been filed, occurred or been obtained.
(B) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have been
issued by any court with jurisdiction and remain in effect, and no
litigation seeking the issuance of such an order or injunction,
shall be pending which, in the good faith judgment of Sellers or
Purchaser has a reasonable probability of resulting in such order,
injunction or damages. In the event any such order or injunction
shall have been issued, each Party agrees to use all commercially
reasonable efforts to have any such injunction lifted.
(C) Statutes. No statute, rule or regulation shall have` been
enacted by the government of the United States or any state,
province or agency thereof which would (i) make the consummation of
the transactions contemplated hereby illegal, (ii) prohibit
Purchaser's ownership or operation of all or a material portion of
the Business or Included Assets or compel Purchaser to dispose of or
hold separate all or a material portion of the Business or Included
Assets or its existing business or assets as a result of this
Agreement or (iii) render the Parties unable to consummate the
transactions contemplated hereby.
7.2 Conditions to Obligations of Purchaser. The obligations of Purchaser
to effect the transactions contemplated hereby are subject to the satisfaction
on or prior to the Closing Date of the following additional conditions unless
waived by Purchaser:
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(A) Representations and Warranties. The representations and
warranties of Sellers set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement
and as if made at and as of the Closing Date, except for such
representations and warranties herein that are made as of a
different date, in which case such representations and warranties
will be true and correct in all material respects of such date, and
Purchaser shall have received a certificate or certificates duly
executed by an officer of each of Ronco, Popeil Inc. and RP to such
effect.
(B) Performance of Obligations of Sellers and the Shareholder.
Each Seller and the Shareholder shall have performed in all material
respects all obligations required to be performed by each under this
Agreement prior to the Closing Date (including, without limitation,
by delivering all documents and instruments to be delivered by
Sellers and the Shareholder pursuant to Section 1.8 of this
Agreement), and Purchaser shall have received a certificate signed
by an officer of each Seller that is an entity and the Shareholder
to such effect.
(C) Due Diligence. Purchaser shall have completed its due
diligence review of the Included Assets and the Business and
operations of Ronco, Popeil Inc. and RP and the results of such due
diligence shall be reasonably satisfactory to Purchaser. Purchaser
shall notify Sellers in writing pursuant to Section 11.8 as promptly
as practicable after its discovery of any fact, circumstance or
condition that Purchaser believes constitutes a failure of the
foregoing condition stated in this Section 7.2(C).
(D) Required Contractual Consents. There shall have been
obtained by Sellers, in form and substance reasonably acceptable to
Purchaser, the consents or approvals required in connection with the
transactions contemplated hereby under any material contract listed
on Schedule 7.2(D) to which Sellers (or any of them) are a party or
that otherwise relate to the Included Assets.
(E) Material Adverse Changes. Since the date hereof, there
shall not have occurred any Material Adverse Change with respect to
Sellers or the Included Assets, in each case taken as a whole.
(F) Operative Agreements. The applicable Sellers and other
parties other than Purchaser shall have duly executed and delivered
the Operative Agreements.
(G) QVC Agreement. Ronco, Inc. shall, with QVC, Inc.'s written
consent, have assigned to Purchaser or RIM the QVC Agreement
effective as of the Closing Date, which shall have been duly and
appropriately amended to (i) clarify that the non-exclusive right
granted to QVC, Inc. pursuant to Section 1(b) of the QVC Agreement
to use "means and media other than Direct Response Television
Programs" to promote the products covered by the QVC Agreement does
34
not include the right to promote the products through any mass
retailer distribution channels such as Wal-Mart or Target Stores and
(ii) provide that the obligation of Purchaser or RIM, as applicable,
under Section 4(a) of the QVC Agreement to cause the Spokespeople
(as defined in the QVC Agreement) to make at least 10 program
appearances shall terminate not later than the earliest of (1) the
termination of the QVC Agreement as amended as contemplated hereby,
(2) the termination of the Consulting Services and Personal
Appearance Agreement to be entered into as of the Closing between
the Purchaser and ▇. ▇▇▇▇▇▇ or (3) the third anniversary of the
Closing Date. Notwithstanding the foregoing, the Parties agree that
if the assignment and amendment of the QVC Agreement described in
the immediately preceding sentence is not effected by the Closing
Date (the "QVC Date"), the Parties shall work in good faith to
implement an alternative arrangement by which the Parties receive
the economic and other benefits from the QVC Agreement as
contemplated by the first sentence of this Section 7.2(G) and
Section 6.10 hereof, it being understood and agreed that the
implementation of such alternative arrangement to the reasonable
satisfaction of Purchaser and Sellers shall constitute satisfaction
of the condition stated in this Section 7.2(G) for all purposes of
this Agreement. The parties agree that if the QVC Agreement is
amended and assigned as contemplated by the first sentence of this
Section 7.2(G), then (x) Schedule 1.1(C) hereto shall be deemed
amended to add the QVC Agreement as so amended and (y) Schedule
1.3(A) shall be deemed amended to include, as an additional Assumed
Liability, any and all liabilities and obligations under the QVC
Agreement, as amended (other than any such obligations of ▇. ▇▇▇▇▇▇
as a spokesperson thereunder).
(H) Assignment of Intellectual Property to Sellers. Purchaser
shall have received documentation reasonably satisfactory to
Purchaser evidencing the transfer and assignment from Advantage
Partners, LLC to Sellers of all Intellectual Property included among
the Included Assets, and such documentation shall have been duly
recorded with the U.S. Patent and Trademark Office.
(I) QC Amendment. Purchaser and Sellers shall have entered
into a written amendment to this Agreement (the "QC Amendment")
providing for an additional schedule of per unit QC Payments to be
made by Purchaser to Sellers in respect of products to be sold by or
on behalf of Purchaser or its Affiliates through retail distribution
channels. In addition to such terms and conditions as Purchaser and
Sellers may mutually agree upon as contemplated by Section 4.11,
such written amendment shall provide that these QC Payments shall be
payable in addition to any QC Payments payable to Sellers pursuant
to Section 1.7 and shall be applied to amounts outstanding under the
Notes in the same manner as the Notes provide with respect to the QC
Payments payable pursuant to Section 1.7.
(J) Termination of Selected Agreements. The applicable Sellers
shall have agreed in writing with the other party or parties thereto
to terminate the agreements to which such Seller or Sellers is or
are a party as of or prior to the Closing and that are identified on
Schedule 7.2(J) (such agreements, the "Selected Agreements"), and
Purchaser shall have received true, correct and complete copies of
35
such written termination agreements, which shall be reasonably
satisfactory to Purchaser. Additionally, Purchaser shall have
received evidence, reasonably satisfactory to Purchaser, that any
and all Liens on Included Assets granted by any Seller in connection
with the Mellon Loan Agreement (which is included among the Selected
Agreements to be terminated pursuant to this Section 7.2(J)) shall
have been terminated and released of record.
7.3 Conditions to Obligations of Sellers. The obligations of Sellers to
effect the transactions contemplated hereby are subject to the satisfaction on
or prior to the Closing Date of the following additional conditions unless
waived by Sellers:
(A) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true
and correct in all material respects as of the date of this
Agreement and as if made at and as of the Closing Date, except for
such representations and warranties herein that are made as of a
different date, in which case such representations and warranties
will be true and correct in all material respects of such date, and
Sellers shall have received a certificate duly executed by an
officer of Purchaser to such effect.
(B) Performance of Obligations of Purchaser. Purchaser shall
have performed in all material respects all obligations required to
be performed by it under this Agreement prior to the Closing Date
(including, without limitation, by delivering all documents and
instruments to be delivered by Purchaser pursuant to Section 1.8 of
this Agreement), and Sellers shall have received a certificate duly
executed by an officer of Purchaser to such effect.
(C) Material Adverse Changes. Since the date hereof, there
shall not have occurred any Material Adverse Change with respect to
Purchaser.
(D) Letter of Credit. Purchaser shall have secured, for the
benefit of Sellers and to secure the full and timely payment of
obligations due from Purchaser to Sellers pursuant to Section 1.7
and the Notes, a standby letter of credit issued by a U.S. banking
institution acceptable to Sellers in the face amount of at least
$250,000, with a maturity date not earlier than 30 days after the
maturity date of the Notes and otherwise including such terms and
conditions as are reasonably satisfactory to Sellers (the "Letter of
Credit"), and Purchaser shall have delivered the Letter of Credit to
Sellers.
(E) Operative Agreements. Purchaser and/or RIM, as applicable,
shall have duly executed and delivered to Sellers each of the
Operative Agreements to which any Seller is a party.
(F) QVC Agreement. Ronco, Inc. shall, with QVC, Inc.'s written
consent, have assigned to Purchaser or RIM the QVC Agreement
effective as of the Closing Date, which shall have been duly and
appropriately amended to (i) clarify that the non-exclusive right
granted to QVC, Inc. pursuant to Section 1(b) of the QVC Agreement
to use "means and media other than Direct Response Television
Programs" to promote the products covered by the QVC Agreement does
36
not include the right to promote the products through any mass
retailer distribution channels such as Wal-Mart or Target Stores and
(ii) provide that the obligation of Purchaser or RIM, as applicable,
under Section 4(a) of the QVC Agreement to cause the Spokespeople
(as defined in the QVC Agreement) to make at least 10 program
appearances shall terminate not later than the earliest of (1) the
termination of the QVC Agreement as amended as contemplated hereby,
(2) the termination of the Consulting Services and Personal
Appearance Agreement to be entered into as of the Closing between
the Purchaser and ▇. ▇▇▇▇▇▇ or (3) the third anniversary of the
Closing Date. Notwithstanding the foregoing, the Parties agree that
if the assignment and amendment of the QVC Agreement described in
the immediately preceding sentence is not effected by the QVC Date,
the Parties shall work in good faith to implement an alternative
arrangement by which the Parties receive the economic and other
benefits from the QVC Agreement as contemplated by the first
sentence of this Section 7.3(F) and Section 6.10 hereof, it being
understood and agreed that the implementation of such alternative
arrangement to the reasonable satisfaction of Purchaser and Sellers
shall constitute satisfaction of the condition stated in this
Section 7.3(F) for all purposes of this Agreement.
(G) Consent of Purchaser Money Lenders. Any and all Purchase
Money Lenders that are to be granted, upon the Closing, a security
interest in any of the Intellectual Property that is the subject of
the Trademark Co-Existence Agreement or any Intellectual Property or
other assets (limited to only those assets that the ▇. ▇▇▇▇▇▇ can
acquire from the Purchaser or its Affiliates under the New Product
Development Agreement upon an event of default under the Notes, such
as tooling, equipment and infomercials) that relate to any products
acquired by Purchaser under the New Product Development Agreement
shall have entered into a written agreement with ▇. ▇▇▇▇▇▇,
Purchaser and RIM pursuant to which such Purchase Money Lenders
consent to the rights of ▇. ▇▇▇▇▇▇ and the obligations of Purchaser
and/or RIM under the Trademark Co-Existence Agreement and the New
Product Development Agreement (including, without limitation, such
rights and obligations upon the occurrence of an event of default
under the Notes), which written agreement includes such terms and
conditions as are reasonably acceptable to ▇. ▇▇▇▇▇▇ (it being
agreed that it shall be acceptable to ▇. ▇▇▇▇▇▇ that such Purchase
Money Lender(s) may require as a condition to its/their consent to
such remedies that such Purchase Money Lender(s) receive(s) a
payment or prepayment (as applicable) of amounts due by Purchaser or
RIM to such Purchase Money Lender(s) in an aggregate amount equal to
not more than the Acquisition Amount (as such term is defined in the
Product Development Agreement)).
(H) QC Amendment. Purchaser and Sellers shall have entered
into a written amendment to this Agreement (the "QC Amendment")
providing for an additional schedule of per unit QC Payments to be
made by Purchaser to Sellers in respect of products to be sold by or
on behalf of Purchaser or its Affiliates through retail distribution
channels. In addition to such terms and conditions as Purchaser and
37
Sellers may mutually agree upon as contemplated by Section 4.11,
such written amendment shall provide that these QC Payments shall be
payable in addition to any QC Payments payable to Sellers pursuant
to Section 1.7 and shall be applied to amounts outstanding under the
Notes in the same manner as the Notes provide with respect to the QC
Payments payable pursuant to Section 1.7.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 Survival. Each of the representations and warranties of each of
Purchaser, on the one hand, and Sellers, on the other hand, contained in this
Agreement (including those made in the Exhibits and Schedules hereto) and any
other document or certificate delivered pursuant to this Agreement shall expire
on the date that is 18 months after the Closing Date.
8.2 Indemnification by Sellers. On and after the Closing Date, ▇. ▇▇▇▇▇▇,
the Shareholder, Ronco, Popeil Inc. and RP (collectively, for purposes of this
Article 8, the "Indemnifying Sellers") shall, jointly and severally, defend,
indemnify and hold harmless Purchaser and its Affiliates and their respective
officers, directors, employees, agents, successors and assigns (collectively,
"Purchaser Indemnified Persons"), and shall reimburse Purchaser Indemnified
Persons, for, from and against all Losses imposed on or incurred by Purchaser
Indemnified Persons resulting from or arising out of (i) any breach of any
representation, warranty, covenant or agreement of Sellers or the Shareholder
under this Agreement, the Operative Agreements to which any Sellers are a party,
or any certificate or other document delivered or to be delivered pursuant
hereto or thereto, (ii) the Retained Liabilities or (iii) the Excluded Assets.
8.3 Indemnification by Purchaser. On and after the Closing Date, Purchaser
shall defend, indemnify and hold harmless Sellers, each of their respective
Affiliates and each respective Affiliate of their respective Affiliates,
officers, directors, employees, agents, successors and assigns (collectively,
"Seller Indemnified Persons"), and shall reimburse the Seller Indemnified
Persons for, from and against all Losses imposed on or incurred by the Seller
Indemnified Persons resulting from or arising out of (i) any breach of any
representation, warranty, covenant or agreement of Purchaser under this
Agreement, the Operative Agreements to which Purchaser is a party, or any
certificate or other document delivered or to be delivered pursuant hereto or
thereto, (ii) the Assumed Liabilities or (iii) Purchaser's use, operation of or
exploitation of any of the Included Assets or conduct of the Business on or
after the Closing.
8.4 Limitations.
(A) Indemnification Cap. Notwithstanding any other contrary
provision in this Agreement, except with respect to claims for
fraud, no Indemnifying Seller shall be liable for indemnification
obligations pursuant to this Article 8 if the payment of such
indemnification would, when added to all amounts previously paid by
the Indemnifying Sellers pursuant to this Article 8 (after the
deductible provided in Section 8.4(C) has been exceeded), exceed, in
the aggregate, One Million Dollars ($1,000,000).
38
(B) Purchaser's Indemnification Cap. Notwithstanding any other
contrary provision in this Agreement, except with respect to claims
for fraud, Purchaser shall not be obligated to pay any
indemnification obligation pursuant to this Article 8 if such
payment would, when added to all amounts previously paid by
Purchaser pursuant to this Article 8 (after the deductible provided
in Section 8.4(C) has been exceeded), exceed One Million Dollars
($1,000,000).
(C) Deductible. Notwithstanding any other contrary provision
in this Agreement, only when Losses for which indemnification is
sought against a party to this Agreement (the "Indemnifying Person")
totaling Twenty-Five Thousand Dollars ($25,000) have been incurred
(and set forth in a Certificate) by the other party (the
"Indemnified Person") may such Indemnified Person make any claim,
demand or request to Indemnifying Person for payments pursuant to
this Article 8, and in such case the Indemnified Person, subject to
making a valid claim pursuant to this Article 8, shall be entitled
to indemnification for the full amount of the Losses, subject to the
cap in Section 8.1(A) or Section 8.1(B), as applicable, after
deducting Twenty-Five Thousand Dollars ($25,000).
(D) Adjustment Amounts. Indemnifying Sellers shall not be
obligated to pay any indemnification obligation pursuant to this
Article 8 in respect of any Loss to the extent such Loss is
reflected in or accounted for in the determination of the Ronco
Adjustment Amount, the Popeil Inc. Adjustment Amount and/or the RP
Adjustment Amount, calculated in accordance with Section 1.6.
(E) Offset. Notwithstanding Section 8.2 or any other provision
of this Agreement to the contrary, if an Indemnifying Seller is
required to pay an indemnification obligation to Purchaser pursuant
to this Article 8 at a time when any amount remains due and payable
under Purchaser's Note to such Seller, then Purchaser shall be
obligated first to offset such Seller's indemnification obligation
to Purchaser against amounts owed by Purchaser to such Seller under
such Seller's Note (with the amount of such offset first applied to
outstanding fees or expenses due under such Note, then to
outstanding and accrued interest thereunder, and then to any
outstanding and unpaid principal thereunder). (In the case of any
such offset, the applicable Seller or Sellers shall promptly deliver
to Purchaser a copy of such Seller's Note, duly notated to reflect
such offset, with such notation duly acknowledged and initialed by
an authorized signatory of such Seller.) Any indemnification amount
that remains outstanding after any such offset shall be payable by
such Seller, subject to all of the limitations, conditions and other
provisions of this Article 8.
8.5 Remedies. Except as provided in Section 11.15, Purchaser, on the one
hand, and Sellers, on the other hand, agree that their sole and exclusive remedy
in respect of the breach by the other party of any representation or warranty of
such party in Article 2 or 3, as applicable (except in respect of claims for
fraud), shall be the right to obtain indemnification as provided herein, and all
other rights and remedies of any kind or nature are hereby expressly and forever
39
waived and released. In furtherance of the foregoing, each of the parties hereto
expressly waives any and all rights and benefits conferred upon such party by
the provisions of Section 1542 of the California Civil Code and expressly
consents that the waiver and release provided in the immediately preceding
sentence shall be given full force and effect according to its express terms and
provisions, including, without limitation, as to claims, demands and causes of
action that are unknown and unsuspected. Section 1542 provides: "A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release, which if known by him
must have materially affected his settlement with the debtor." The parties
acknowledge and agree that the foregoing sole remedy and waiver and release
provisions shall (i) not apply to claims, demands or causes of action in respect
of any breach or breaches by any party of its covenants or agreements stated in
this Agreement (it being understood and agreed that the parties hereto shall not
be limited to indemnification rights pursuant to this Agreement in respect of
the breach by any other party or parties of such party's or parties' covenants
or agreements stated in this Agreement, but rather shall be entitled to all
rights or remedies under applicable Legal Rules with respect to any such breach
or breaches (i.e., breaches of covenants or agreements hereunder)), (ii) not
apply to claims, demands or causes of action based on fraud and (iii) be subject
to the provisions of Section 11.15.
8.6 Indemnification Procedures.
(A) Certificate. After the incurrence of a Loss or Losses by
an Indemnified Person, including, without limitation, any claim by a
third party described in Section 8.6(D), which might give rise to
indemnification under this Agreement, the Indemnified Person shall
deliver to an the Indemnifying Person a certificate (the
"Certificate"), which Certificate shall:
(i) state that the Indemnified Person has paid or properly accrued
Losses, or anticipates that it shall incur liability for Losses; and
(ii) specify in reasonable detail each individual item of Loss
included in the amount so stated, the date such item was paid or properly
accrued, the basis for any anticipated liability and the nature of the
misrepresentation or breach of warranty or to which each such item is
related and the computation of the amount to which such Indemnified Person
claims to be entitled.
(B) Denial of Obligation to Indemnify. In case the
Indemnifying Person shall object to the indemnification of an
Indemnified Person in respect of any claim or claims specified in
any Certificate, the Indemnifying Person shall, within thirty (30)
days after receipt by the Indemnifying Person of such Certificate,
deliver to the Indemnified Person a written notice to such effect.
The Indemnifying Person and the Indemnified Person shall, within the
fifteen (15) day period beginning on the date of receipt by the
Indemnified Person of such written objection, attempt in good faith
to agree upon the rights of the respective parties with respect to
each of such claims to which the Indemnifying Person shall have so
objected. If the Indemnified Person and the Indemnifying Person
succeed in reaching agreement on their respective rights with
respect to any such claims, the Indemnified Person and the
Indemnifying Person shall promptly prepare and sign a memorandum
40
setting forth such agreement. Should the Indemnified Person and the
Indemnifying Person be unable to agree as to any particular item or
items or amount or amounts, then the Indemnified Person and the
Indemnifying Person shall immediately proceed to arbitration
pursuant to Section 11.10.
(C) Third Party Claims. After receipt by an Indemnified Person
of notice of any claim or the commencement of any action by any
third party, the Indemnified Person shall, if a claim is to be made
by it under this Article 8, notify the Indemnifying Person in
writing of the claim or the commencement of that action. If any such
claim or action shall be brought against an Indemnified Person, and
it shall notify the Indemnifying Person, the Indemnifying Person
shall have the right to assume the defense of such claim or action
with counsel reasonably satisfactory to the Indemnified Person.
If the Indemnifying Person assumes the defense of such claim or action,
the Indemnifying Person shall not be liable to the Indemnified Person under this
Article 8, for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense after such assumption by the
Indemnifying Person, other than reasonable costs of investigation; provided,
however, any Indemnified Person shall have the right to employ separate counsel
in any such claim or action and to participate in the defense but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the employment has been specifically authorized by the Indemnifying
Person in writing, (ii) such Indemnified Person shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Person and
in the reasonable judgment of such counsel it is advisable for such Indemnified
Person to employ separate counsel or (iii) the Indemnifying Person has failed to
assume the defense of such claim or action and employ counsel reasonably
satisfactory to the Indemnified Person, in which case, if such Indemnified
Person notifies the Indemnifying Person in writing that it elects to employ
separate counsel at the expense of the Indemnifying Person, the Indemnifying
Person shall not have the right to assume the defense of such claim or action on
behalf of such Indemnified Person, it being understood, however, that the
Indemnifying Person shall not, in connection with any one such claim or action
or separate but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties.
Each Indemnified Person, as a condition of the indemnity agreements
contained herein, shall use its reasonable best efforts to cooperate with the
Indemnifying Person in the defense of any such claim or action. The Indemnifying
Person shall not be liable for any settlement of any such claim or action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment in favor of the plaintiff in any such claim or action, the Indemnifying
Person agrees to indemnify and hold harmless any Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
(D) Agreed Claims. Claims for Losses specified in any
Certificate to which an Indemnifying Person shall not object in
writing within thirty (30) days of receipt of such Certificate,
41
claims for Losses covered by a memorandum of agreement of the nature
described in Section 8.6(C) of this Agreement, claims for Losses the
validity and amount of which have been the subject of final judicial
determination or settlement as contemplated by Section 8.6(D) of
this Agreement are collectively referred to as "Agreed Claims".
Within ten (10) days of the determination of the amount of any
Agreed Claim for which the Indemnified Person is entitled to
indemnification under this Agreement, the Indemnifying Person shall
pay the Indemnified Person an amount equal to the Agreed Claim by
wire transfer in immediately available funds to the bank account or
accounts designated in writing by the Indemnified Person not less
than two days prior to such payment.
(E) Subrogation of Indemnifying Person. If the Indemnified
Person receives payment or other indemnification from an
Indemnifying Person, the Indemnifying Person shall be subrogated to
the extent of such payment or indemnification to all rights in
respect of the subject matter of such claim to which the Indemnified
Person may be entitled, to institute appropriate action for
recovery, and the Indemnified Person agrees reasonably to assist and
cooperate with the Indemnifying Person at no expense to the
Indemnified Person in enforcing such rights.
(F) The Parties hereby agree that the Sellers' Designee is
hereby authorized to act on behalf of the Indemnifying Sellers for
all purposes of this Article 8, including, without limitation, for
the purposes of asserting or receiving on behalf of Sellers any
indemnification claims hereunder and coordinating the negotiation,
defense, compromise or settlement of any such claims. In furtherance
of the foregoing, Purchaser agrees to deliver any and all
Certificates or other notices required or permitted to be delivered
by Purchaser under this Article 8 to the Sellers' Designee and to
deal exclusively with the Sellers' Designee with respect to any
indemnification claims hereunder.
ARTICLE 9
TERMINATION
9.1 Termination. Notwithstanding any contrary provision hereof, this
Agreement may be terminated by written notice given prior to or at the Closing:
(A) by mutual written consent of Purchaser, on the one hand,
and Sellers and the Shareholder, on the other hand;
(B) by Purchaser if Sellers (or any of them) shall, despite
the satisfaction of the conditions to Sellers' obligations to
consummate the transactions contemplated hereby (including, without
limitation, any mutual conditions stated in Section 7.1), fail or
refuse to consummate the transactions contemplated hereby;
42
(C) by any Seller if Purchaser shall, despite the satisfaction
of the conditions to Purchaser's obligation to consummate the
transactions contemplated hereby (including, without limitation, any
mutual conditions stated in Section 7.1), fail or refuse to
consummate the transactions contemplated hereby;
(D) by Purchaser if the results of its due diligence review
contemplated by Section 5.1 are not reasonably satisfactory to
Purchaser (and Purchaser would not also be permitted to terminate
this Agreement pursuant to Section 9.1(E));
(E) by Purchaser, if Sellers (or any of them) shall breach any
of their representations, warranties or obligations hereunder and
such breach, individually or together with all other such breaches,
has caused or constitutes a Material Adverse Effect with respect to
Ronco, Popeil Inc. or RP or the Included Assets, in each case taken
as a whole, and shall not have been cured such that no Material
Adverse Effect is continuing or waived and such Sellers shall not
have provided reasonable assurance that such breach shall be cured
such that no Material Adverse Effect shall be continuing as of the
Closing Date;
(F) by Purchaser, on the one hand, or any Seller, on the other
hand, if the transactions contemplated hereby shall not have been
consummated, other than through failure of the Party seeking to
terminate this Agreement pursuant to this Section 9.1(F) to fulfill
its obligations hereunder, on or before January 18th (the
"Termination Date"). (For the sake of clarification, if the
consummation of the transactions contemplated hereby shall not have
occurred on or before the Termination Date as a result of the
failure of Purchaser's closing condition stated in Section 7.2(C) to
be satisfied, such failure shall not, of itself, constitute a
failure of Sellers (or any of them) to fulfill their obligations
hereunder.);
(G) by Sellers, if Purchaser shall breach any of its
representations, warranties or obligations hereunder and such
breach, individually or together with all other such breaches, has
caused or constitutes a Material Adverse Effect with respect to
Purchaser and shall not have been cured such that no Material
Adverse Effect is continuing or waived and Purchaser shall not have
provided reasonable assurance that such breach shall be cured such
that no Material Adverse Effect shall be continuing as of the
Closing Date;
(H) by either Purchaser, on the one hand, or any Seller, on
the other hand, if any Governmental Entity takes any action or
enacts, promulgates or issues or deems applicable to the
transactions contemplated hereby any statute, rule, regulation or
order which would make consummation of the transactions contemplated
hereby illegal;
(I) by any Seller upon receipt of a written notice from
Purchaser pursuant to Section 7.2(C) (so long as Purchaser is not
43
entitled to terminate this Agreement pursuant to Section 9.1(E) as a
result of the matter or matters specified in such notice);
(J) by Purchaser, if at any time after the date hereof there
has occurred a Material Adverse Change with respect to any of the
Sellers; and
(K) by any Seller, if at any time after the date hereof a
Material Adverse Change has occurred with respect to the Purchaser.
9.2 Effect of Termination. In the event of termination of this Agreement
by Sellers (or any of them), on the one hand, or Purchaser, on the other hand,
as provided in Section 9.1, this Agreement shall forthwith become void and,
notwithstanding any contrary provision hereof, there shall be no liability or
obligation whatsoever on the part of the Parties or their respective officers,
directors, employees or Affiliates except (i) the obligations set forth in
Sections 11.10 (Dispute Resolution) and 11.11 (Expenses and Attorneys' Fees) and
(ii) the Deposit shall be distributed pursuant to the terms of this Agreement
and the Escrow Agreement. Purchaser agrees that its sole remedy in respect of
any breach by Sellers of Sellers' representations and warranties stated herein
shall be (1) to terminate this Agreement and receive the Deposit from the Escrow
Agent pursuant to this Agreement and the Escrow Agreement, if the Closing shall
not have occurred or (2) to receive indemnification pursuant to this Agreement
if the Closing has occurred. Sellers agree that their sole remedy in respect of
any breach by Purchaser of Purchaser's representations and warranties stated
herein shall be (1) to terminate this Agreement and receive the Deposit from the
Escrow Agent pursuant to this Agreement and the Escrow Agreement, if the Closing
shall not have occurred or (2) to receive indemnification pursuant to this
Agreement if the Closing has occurred. In the event this Agreement is terminated
pursuant to Section 9.1, Purchaser (a) shall promptly (but in no event later
than 10 calendar days after such termination) take all necessary or appropriate
steps to cause the corporate name of Purchaser and RIM to be changed in the
official records of the Secretary of State (or comparable Governmental Entity)
of the applicable jurisdiction to delete any references to the name "Ronco" and
(b) shall not thereafter cause or permit the use of the name "Ronco" or any
other ▇▇▇▇ of Sellers in Purchaser's corporate name or that of RIM or any other
Affiliate of Purchaser or RIM or otherwise use any Intellectual Property of any
Seller without the express written consent of such Seller.
ARTICLE 10
DEFINITIONS
10.1 Definitions. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Accounting Arbitrator" has the meaning set forth in Section 1.6(E).
"Accounts Receivable" has the meaning set forth in Section 1.1(H).
"Acquisition Transaction" has the meaning set forth in Section 4.2.
"Actual Interest Differential" has the meaning set forth in Section
6.10(F).
44
"Adjustment Determination" has the meaning set forth in Section
1.6(A).
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract or otherwise and,
in any event and without limitation of the previous sentence, any Person owning
ten percent (10%) or more of the voting securities of another Person shall be
deemed to control that Person.
"Agreed Claims" has the meaning set forth in Section 8.6(D).
"Agreement" has the meaning set forth in the introductory paragraph.
"Acquired Intellectual Property" has the meaning set forth in
Section 1.1(D).
"Additional Cash" means the difference between $15,000,000 and the
sum of (a) the Estimated Combined NCOAV and (b) the Included Cash.
"Additional Lenders" has the meaning set forth in Section 6.13.
"Assignment and Assumption Agreement" means the assignment and
assumption agreement to be entered into as of the Closing by and among Purchaser
and Sellers, pursuant to which Sellers will assign and transfer to Purchaser,
and Purchaser will assume from Sellers, (i) all intangible assets included among
the Included Assets and (ii) the Assumed Liabilities, in form and substance
reasonably satisfactory to Purchaser and Sellers.
"Assumed Liabilities" has the meaning set forth in Section 1.2.
"Audited Financial Statements" has the meaning set forth in Section
2.4.
"Base Purchase Price" has the meaning set forth in Section 1.5.
"Base Purchase Price Component" has the meaning set forth in Section
1.5(C)(i).
"▇▇▇▇ of Sale" means the ▇▇▇▇ of sale to be entered into as of the
Closing among Purchaser and Sellers, pursuant to which Sellers will transfer,
assign and convey to Purchaser, and Purchaser will accept and assume from
Sellers, all Included Assets that are not the subject of the Assignment and
Assumption Agreement, in form and substance reasonably satisfactory to Purchaser
and Sellers.
"Books and Records" means, except as provided in Section 6.2 or
described on Schedule 1.2, all files, documents, instruments, papers, books and
records relating to the Included Assets, including, without limitation, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, Contracts,
Licenses, customer lists, all information relating to customers or visitors to
any web sites owned or operated by Sellers, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
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"Business" has the meaning set forth in the Recitals.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California are authorized or obligated to
close.
"Certificate" has the meaning set forth in Section 8.6(A).
"Closing" and "Closing Date" have the meanings set forth in Section
1.8.
"COBRA" has the meaning set forth in Section 6.5(B).
"Combined NCOAV" means the sum of the Popeil Inc. Net Current and
Other Asset Value, the Ronco Net Current and Other Asset Value and the RP Net
Current and Other Asset Value.
"Consent Fee" has the meaning set forth in Section 7.3(G).
"Consulting Agreements" means the Consulting Services and Personal
Appearance Agreement to be entered into as of the Closing between the Purchaser
and ▇. ▇▇▇▇▇▇ and the Consulting Agreement between Purchaser and ▇▇▇▇ ▇▇▇▇▇▇, in
each case containing such terms and conditions as set forth on Exhibits B and D,
respectively, and such other terms and conditions (not inconsistent with those
set forth on such Exhibits) as the parties may mutually agree upon.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Deposit" has the meaning set forth in Section 1.4.
"Direct Response Television Programs" has the meaning set forth in
Section 6.10(A).
"ERISA" means the federal Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP.
"Escrow Agreement" means the Escrow Agreement, dated October 15,
2004, among Sellers, Purchaser and the Escrow Agent, in the form attached as
Exhibit A.
"Estimated Combined NCOAV" means the sum of the Estimated Popeil
Inc. NCOAV, Estimated Ronco NCOAV and Estimated RP NCOAV.
"Estimated Interest Differential" has the meaning set forth in
Section 6.10(C).
"Estimated Popeil Inc. NCOAV" has the meaning set forth in Section
1.5(D).
"Estimated Ronco NCOAV" has the meaning set forth in Section 1.5(D).
46
"Estimated RP NCOAV" has the meaning set forth in Section 1.5(D).
"Excluded Assets" has the meaning set forth in Section 1.2.
"Family Group" means, with respect to any individual, such
individual's spouse and descendants (whether natural or adopted).
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Gross Proceeds" has the meaning set forth in Section 6.10(B).
"Included Assets" has the meaning set forth in Section 1.1.
"Included Cash" has the meaning set forth in Section 1.5(C).
"Included Products" means those products, in each case to the extent
currently owned and as currently or previously marketed by any of ▇. ▇▇▇▇▇▇,
▇▇▇▇▇, Popeil Inc. and/or RP, including, without limitation, the following:
Showtime Rotisseries (all three sizes); Six Star Plus Cutlery sets; Ronco
Electric Food Dehydrators (both sizes); Popeil Pasta Makers (including sausage
maker); Popeil Pocket Fisherman; GLH Hair Products; Solid Flavor Injector;
Liquid Flavor Injector; Flip-It; Grip Spatula; Mr. Microphone; Door Saver;
Inside the Egg Scrambler; and any accessories, companion products, spices, rubs,
marinade and sauces in each case to the extent owned by any of ▇. ▇▇▇▇▇▇, ▇▇▇▇▇,
Popeil Inc. and/or RP and as currently or previously sold under the Popeil or
Ronco name; provided, however, that Included Products shall not include any
products identified or described on Schedule 1.2.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Person" has the meaning set forth in Section 8.4(B).
"Indemnifying Person" has the meaning set forth in Section 8.4(B).
"Indemnifying Sellers" has the meaning set forth in Section 8.2.
"Intellectual Property" means any patents, patent applications
(pending or otherwise), industrial and intellectual property rights, copyrights
(including, without limitation, copyrights in infomercials, artwork and/or
computer software and/or firmware), unpublished works, inventions, formulas,
recipes, designs, plans, blueprints, trade secrets, secret processes or other
confidential information, know how, research and development findings, and any
and all Marks.
47
"Inventory" has the meaning set forth in Section 1.1(J).
"IRS" means the United States Internal Revenue Service.
"▇. ▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"knowledge of Sellers" (or phrases of similar import) means,
with respect to any matter or matters, the current actual knowledge of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, in each
case with no independent investigation or inquiry regarding such matter or
matters.
"Legal Rules" means the requirements of all laws, codes,
statutes, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses and authorizations of all Governmental Entities
with jurisdiction.
"Letter of Credit" has the meaning set forth in Section
7.3(D).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental Entity.
"Liens" means all liens, mortgages, pledges, encumbrances,
claims, options, purchase agreements, security agreements and interests,
commission arrangements, title retention agreements, covenants, restrictions
(other than restrictions that would not materially impair or affect the use or
value of an asset) and adverse interests of any kind or nature whatsoever.
"Litigation" has the meaning set forth in Section 2.7.
"Loss" or "Losses" means any demand, claim, loss, liability,
judgment and damage (and costs and expenses, including attorneys' fees, but only
as provided in Section 11.11), but shall not include any special, incidental,
consequential or punitive damages (including, without limitation, any damages
based on lost profits or diminution of value or similar damages).
"▇. ▇▇▇▇▇▇" means ▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Marks" means all trade names, trademarks, service marks and
logos and all related pending applications.
"Material Adverse Effect" and "Material Adverse Change," with
respect to Purchaser, on the one hand, or to any Seller or Sellers, the Business
or the Included Assets on the other hand, means (i) any effect on, or change in,
the business of Purchaser or any of Ronco, Popeil Inc. or RP, the Business or
the Included Assets, as the case may be, that is or is substantially likely to
be materially adverse to the business, operations, properties, assets or
financial condition of Purchaser, or to such Seller or Sellers, the Business or
the Included Assets, as the case may be; and, in the case of Purchaser,
Purchaser, or (ii) an event or circumstance that has or would have a significant
48
likelihood of a material adverse effect on the ability of Purchaser, on the one
hand, and any Seller, on the other hand, as the case may be, to perform their
respective obligations under this Agreement and the agreements contemplated
hereby.
"Material Contracts" has the meaning set forth in Section 2.10.
"Mellon Loan Agreement" means the Loan Agreement, dated August 2,
1999, between Mellon 1st Business Bank and ▇. ▇▇▇▇▇▇, as amended.
"NCOAV Component" has the meaning set forth in Section 1.5(C)(ii).
"Note" or "Notes" has the meaning set forth in Section 1.5(C).
"Objection Period" has the meaning set forth in Section 1.6(D).
"Objections" has the meaning set forth in Section 1.6(D).
"Operative Agreements" means, collectively, the Notes, the Security
Agreement, the Escrow Agreement, the Consulting Agreements, the Assignment and
Assumption Agreement, the ▇▇▇▇ of Sale, the Product Development Agreement,
Trademark Co-Existence Agreement and any other agreements to be entered into in
connection with the transaction.
"Party" means any party to this Agreement.
"Person" means an individual, a sole proprietorship, a partnership,
a corporation, a limited liability company, a limited liability partnership, an
association, an institution, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a Governmental Entity.
"Personal Property Leases" has the meaning set forth in Section
1.1(B).
"Popeil Inc." has the meaning set forth in the introductory
paragraph.
"Popeil Inc. Adjustment Amount" has the meaning set forth in Section
1.6(G).
"Popeil Inc. Current and Other Assets" has the meaning set forth in
Section 1.6(G).
"Popeil Inc. Current and Other Liabilities" has the meaning set
forth in Section 1.6(G).
"Popeil Inc. Net Current and Other Asset Value" has the meaning set
forth in Section 1.6(G).
"Product Development Agreement" means the product development
agreement to be entered into as of the Closing between Purchaser and ▇. ▇▇▇▇▇▇
containing the material terms and conditions set forth in Exhibit F and such
other terms and conditions (not inconsistent with those set forth on Exhibit F)
as the parties may mutually agree upon.
"Purchase Price" has the meaning set forth in Section 1.5.
49
"Purchaser" has the meaning set forth in the introductory paragraph.
"Purchase Closing Payment" has the meaning set forth in Section
1.5(A).
"Purchaser Indemnified Persons" has the meaning set forth in Section
8.2.
"Purchase Money Lender" means any Person providing debt financing at
the Closing for Purchaser's payment of the Purchase Price.
"QVC Agreement" means the Agreement, dated as of April 2, 2000,
between QVC, Inc. and Ronco, Inc., a copy of which is attached as Exhibit J.
"QC Amendment" has the meaning set forth in Section 7.3(H).
"QVC Date" has the meaning set forth in Section 7.2(G).
"QC Payments" has the meaning set forth in Section 1.7(A).
"Real Property Leases" has the meaning set forth in Section 1.1(I).
"Requested Party" and "Requesting Party" have the meanings set forth
in Section 6.1.
"Retained Liabilities" has the meaning set forth in Section 1.2(B).
"RIM" has the meaning set forth in Section 6.6.
"Ronco" has the meaning set forth in the introductory paragraph.
"Ronco Adjustment Amount" has the meaning set forth in Section
1.6(F).
"Ronco Current and Other Assets" has the meaning set forth in
Section 1.6(F).
"Ronco Current and Other Liabilities" has the meaning set forth in
Section 1.6(F).
"Ronco Net Current and Other Asset Value" has the meaning set forth
in Section 1.6(F).
"▇. ▇▇▇▇▇▇" has the meaning set forth in the introductory paragraph.
"RP" has the meaning set forth in the introductory paragraph.
"RP Adjustment Amount" has the meaning set forth in Section 1.6(H).
"RP Current and Other Assets" has the meaning set forth in Section
1.6(H).
"RP Current and Other Liabilities" has the meaning set forth in
Section 1.6(H).
50
"RP Net Current and Other Asset Value" has the meaning set forth in
Section 1.6(H).
"▇. ▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Secured Assets" has the meaning set forth in Section 6.13.
"Selected Agreements" has the meaning set forth in Section 7.2(J).
"Seller" and "Sellers" have the meanings set forth in the
introductory paragraph.
"Sellers' Designee" has the meaning set forth in Section 11.14.
"Seller Indemnified Persons" has the meaning set forth in Section
8.3.
"Shareholder" has the meaning set forth in the introductory
paragraph.
"Tax" and "Taxes" means (a) any Governmental Entity income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty,
or additional amounts in respect of the foregoing, (b) any liability for the
payment of any amounts of the type described in (a) as a result of being a
member of a consolidated, combined, unitary or aggregate group for any Taxable
period, and (c) any liability for the payment of any amounts of the type
described in (a) or (b) as a result of being a transferee or successor to any
person or as a result of any express or implied obligation to indemnify any
other Person.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement, including any schedule or attachment
thereto, and including any amendment thereof filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Termination Date" has the meaning set forth in Section 9.1(F).
"Trademark Co-Existence Agreement" means the agreement to be entered
into as of the Closing between Purchaser and ▇. ▇▇▇▇▇▇ containing the terms and
conditions set forth on Exhibit G and such other terms and conditions (not
inconsistent with those set forth on Exhibit G) as the parties may mutually
agree upon.
"Transferred Employee" has the meaning set forth in Section 6.5(A).
"WARN Act" means the Federal Worker Adjustment and Retraining
Notification Act.
"Written Report" has the meaning set forth in Section 1.6(A).
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10.2 Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; and (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. All accounting terms
used herein and not expressly defined herein shall have the meanings given to
them under GAAP.
ARTICLE 11
MISCELLANEOUS
11.1 Entire Understanding. This Agreement (including the Recitals,
Schedules and Exhibits hereto) and the other agreements and instruments, the
execution and delivery of which are provided for herein, constitutes the entire
agreement and understanding of the Parties with respect to the subject matter
hereof, and terminates and supersedes any and all prior agreements, arrangements
and understandings, both oral and written, among the Parties concerning the
subject matter hereof. Without limiting the foregoing, it is hereby acknowledged
and agreed that none of Purchaser, the Shareholder nor any Seller is making any
representations or warranties of any kind whatsoever except for those
representations and warranties expressly set forth in this Agreement and/or the
Operative Agreements.
11.2 Waiver and Amendment. No waiver, amendment, modification or change of
any provision of this Agreement shall be effective unless and until made in
writing and signed by Purchaser (by a duly authorized officer other than any
former employee or direct or indirect owner of a Seller) on the hand and Sellers
and the Shareholder on the other hand. No waiver, forbearance or failure by any
Party of its right to enforce any provision of this Agreement shall constitute a
waiver or estoppel of such Party's right to enforce any other provision of this
Agreement or a continuing waiver by such Party of compliance with any provision.
11.3 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement, and shall not be deemed to limit or affect
any of the provisions hereof.
11.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be original, but all of which
together shall constitute one and the same instrument.
11.5 Merger of Documents. This Agreement and all agreements and documents
contemplated hereby constitute one agreement and are interdependent upon each
other in all respects.
11.6 Incorporation of Exhibits and Schedules. All Exhibits and Schedules
hereto are by this reference incorporated herein and made a part hereof for all
purposes as if fully set forth herein.
11.7 Interpretation. The provisions of this Agreement are intended to be
interpreted and construed in a manner so as to make such provisions valid,
binding and enforceable. In the event that any provision of this Agreement is
52
determined to be partially or wholly invalid, illegal or unenforceable, then
such provision shall be deemed to be modified or restricted to the extent
necessary to make such provision valid, binding and enforceable, or, if such
provision cannot be modified or restricted in a manner so as to make such
provision valid, binding and enforceable, then such provision shall be deemed to
be excised from this Agreement and the validity, binding effect and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any manner. Nothing in this Agreement shall be
interpreted or construed as creating, expressly or by implication, a
partnership, joint venture, agency relationship or employment relationship
between the Parties or any of their respective officers, directors, agents,
employees or representatives.
11.8 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing addressed to the respective Parties at
the addresses stated below or to such other changed addresses the Parties may
have fixed by notice as provided herein and shall be deemed to have been
delivered upon receipt:
(a) If to any Seller or the Shareholder:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
53
(b) If to Purchaser:
Ronco Marketing Corporation
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1330 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.9 Successors and Assigns. This Agreement shall not be assigned or
assignable by any Party without the prior written consent of the other Parties;
except as otherwise provided in the last sentence of this Section 11.9. Subject
to the preceding sentence, each term and provision of this Agreement shall be
binding upon and enforceable against and inure to the benefit of any successors
or assigns of Purchaser and any successors or assigns of Sellers and the
Shareholder. Nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the Parties and their respective successors and
assigns any rights or remedies under or by reason of this Agreement.
Notwithstanding the foregoing, if any Seller sells, transfers, assigns or
otherwise disposes of any one or more of the Included Assets prior to the
Closing as permitted in Section 4.3, (A) such transferee or assignee will also,
to the extent of such transfer or assignment of Included Assets, be a transferee
or assignee of such Seller's rights under this Agreement and must, concurrent
with such transfer or assignment, agree in writing to be bound, as a Seller,
hereby and (B) such Seller shall remain financially responsible for the
performance by such transferee or assignee of such Seller's obligations
hereunder.
11.10 Dispute Resolution. Subject to the provisions of Section 1.6(E), any
dispute arising out of or relating to this Agreement, or any Exhibit or Schedule
hereto or any other agreement or certificate delivered pursuant to this
54
Agreement, or the breach, termination or validity hereof or thereof, including
any dispute based in whole or in part on tort or other non-contractual
principles of law, shall be resolved in the following manner:
(A) Any Party may give written notice to the other Parties of
any dispute which has arisen. Any other Party may give notice within
five (5) Business Days of receipt of the first notice of any
additional dispute(s), all to the end that the Parties may be
reasonably aware of the matters in dispute.
(B) The Parties to such dispute shall use all reasonable
efforts to resolve the dispute through direct discussions within 30
days of the first written notice that there is such a dispute.
(C) If no amicable settlement is reached as a result of the
procedure in subparagraph (B) hereof, the matter shall be fully and
finally resolved by arbitration conducted expeditiously in Los
Angeles, California. The arbitration shall be administered by
Judicial Arbitration and Mediation Services ("JAMS") in its Los
Angeles County office. The arbitrator shall be a retired superior
court judge of the State of California affiliated with JAMS. Any
action brought to enforce the provisions of this Section 11.10 shall
be brought in the Los Angeles County Superior Court. Judgment upon
the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitrator shall not have any power
to alter, amend, modify or change any of the terms of this Agreement
nor to grant any remedy which is either prohibited by the terms of
this Agreement or not available in a court of law. Costs and
reasonable attorneys' fees shall be awarded to the prevailing party.
Nothing in this Section 11.10 shall preclude either party from
bringing a court action seeking an order with respect to an
equitable remedy such as injunctive relief, specific performance or
any other equitable remedy that may be applicable under the
circumstances.
(D) The dispute resolution proceedings contemplated by this
provision shall be as confidential and private as permitted by law.
To that end, the Parties shall not disclose the existence, content
or results of any claims hereunder or proceedings conducted in
accordance with this provision, and materials submitted in
connection with such proceedings shall not be admissible in any
other proceeding; provided, however, that this confidentiality
provision shall not prevent a petition to vacate or enforce an
arbitral award, and shall not bar disclosures required by law. The
Parties agree that any decision or award resulting from proceedings
in accordance with this dispute resolution provision shall have no
preclusive effect in any other matter involving third parties.
11.11 Expenses and Attorneys' Fees. Except as otherwise expressly set
forth herein, Sellers and the Shareholder, on the one hand, and Purchaser, on
the other hand, shall each pay their own expenses incident to the negotiation,
preparation and performance of this Agreement and the transactions contemplated
hereby, including but not limited to any costs and expenses incurred in
connection with due diligence and the fees, expenses and disbursements of their
respective investment bankers, accountants and counsel. In the event of any
arbitration or other action for the breach of this Agreement or
55
misrepresentation by any Party, the prevailing Party shall be entitled to be
awarded attorneys' fees, costs and expenses incurred in such arbitration or
action.
11.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
principles of conflict of laws.
11.13 Representation by Counsel. Each Party represents and agrees with the
other, that it has been represented by independent counsel of its own choosing,
that it has had the full right and opportunity to consult with such counsel that
it availed itself of this right and opportunity, that such Party or its
authorized officers have carefully read and fully understand this Agreement in
its entirety that each is fully aware of the contents thereof and its meaning,
intent and legal effect, and that such Party or its authorized officer is
competent to execute this Agreement and has executed this Agreement free from
coercion, duress or undue influence
11.14 Appointment of Sellers' Designee. Sellers hereby appoint ▇▇▇▇▇ ▇.
▇▇▇▇▇ as their representative and agent to act on their behalf for purposes of
and as provided in Sections 1.4, 1.6, 1.7, 6.10, 6.13 and Article 8. Sellers
may, from time to time upon written notice to ▇▇▇▇▇ ▇. ▇▇▇▇▇ (or any successor
appointed hereunder) and Purchaser, remove ▇▇▇▇▇ ▇. ▇▇▇▇▇ (or any successor
appointed hereunder) or appoint a new representative upon the death, incapacity,
resignation or removal of ▇▇▇▇▇ ▇. ▇▇▇▇▇ (or any successor appointed hereunder).
For all purposes of this Agreement, the "Sellers' Designee" shall refer to ▇▇▇▇▇
▇. ▇▇▇▇▇ or such successor Sellers' representative appointed pursuant to this
Section 11.14. Sellers authorize the Sellers' Designee to take any action and to
make and deliver any document or instrument required or permitted to be made or
delivered under any of Sections 1.4, 1.6, 1.7, 6.10, 6.13 or Article 8. Such
authority of the Sellers' Designee includes the right to hire or retain, at the
sole expense of Sellers, such counsel, accountants, representatives and other
professional advisors as the Sellers' Designee determines in his sole and
absolute discretion to be necessary, appropriate or advisable in order to
perform his duties under Sections 1.4, 1.6, 1.7, 6.10, 6.13 or Article 8.
Purchaser will have the right to rely upon any action taken by the Sellers'
Designee pursuant to his appointment hereunder. Purchaser will have no liability
to any Seller or otherwise arising out of the acts or omissions of the Sellers'
Designee in his capacity as Sellers' representative hereunder. The Sellers'
Designee shall not have any liability to any Seller for any action taken in good
faith by him (after such consultation with Sellers as may be reasonable or
appropriate under the circumstances) pursuant to his appointment hereunder.
Sellers hereby agree jointly and severally to indemnify, defend and hold
harmless the Sellers' Designee from and against any damages, costs, expenses,
losses or liabilities (including, without limitation, any attorneys' fees and
costs) of any kind that the Sellers' Designee may incur or sustain in connection
with the performance in good faith of his duties hereunder. Without limiting the
foregoing, Sellers agree to reimburse the Sellers' Designee, promptly upon his
request therefor (together with reasonable supporting documentation), for all
out-of-pocket costs and expenses incurred by or at the direction of the Sellers'
Designee in connection with the performance of his duties hereunder. ▇▇▇▇▇ ▇.
▇▇▇▇▇ accepts the appointment made pursuant to this Section 11.14 and agrees to
abide by the provisions of this Section 11.14.
11.15 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the covenants or agreements provided in this Agreement or any Operative
56
Agreement is not performed in accordance with its specific terms or otherwise is
breached. Accordingly, each of the parties agrees that the other parties shall
be entitled to an injunction or injunctions to prevent breaches of such covenant
or agreement and to enforce specifically this Agreement or such Operative
Agreement and the terms and provisions hereof and thereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the parties and the matter.
[Signature Page Follows]
57
IN WITNESS WHEREOF, the Parties have each executed and delivered this
Asset Purchase Agreement as of the date first above written.
PURCHASER:
RONCO MARKETING CORPORATION
By: _____________________________
Name: _________________________
Title: __________________________
SELLERS:
RONCO INVENTIONS, LLC
By: _____________________________
Name: _________________________
Title: __________________________
POPEIL INVENTIONS, INC.
By: _____________________________
Name: _________________________
Title: __________________________
RP PRODUCTIONS, INC.
By: _____________________________
Name: _________________________
Title: __________________________
S-1
SHAREHOLDER:
RMP FAMILY TRUST
By: ___________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Co-Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
----------------
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ACCEPTED AND AGREED:
▇▇▇▇▇ ▇. ▇▇▇▇▇ (solely for purposes
of his appointment as Sellers' representative
pursuant to Section 11.14 hereof)
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
S-2
TABLE OF CONTENTS
Page
ARTICLE 1 SALE OF ASSETS AND CLOSING..........................................1
1.1 Included Assets...........................................................1
1.5 Purchase Price; Allocation................................................4
1.6 Post Closing Purchase Price Adjustment....................................6
1.8 Closing..................................................................13
1.9 Further Assurances; Post-Closing Cooperation.............................15
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS..........................16
2.1 Organization.............................................................16
2.2 Authority; Non-Contravention.............................................16
2.3 Title or Right to Included Assets........................................16
2.11 No Brokers or Finders...................................................19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER........................19
3.1 Organization.............................................................19
3.2 Authority; Non-Contravention.............................................19
3.3 No Undisclosed Liabilities...............................................20
3.4 Legal Proceedings........................................................20
3.5 No Brokers or Finders....................................................20
ARTICLE 4 COVENANTS OF PURCHASER, SELLERS, THE SHAREHOLDER AND ▇. ▇▇▇▇▇▇.....20
4.1 Ordinary Course..........................................................21
4.2 No Solicitation .........................................................22
4.3 No Acquisitions or Dispositions..........................................22
4.4 ccess to Information.....................................................23
4.5 Communications...........................................................23
4.6 Good Faith ..............................................................23
ARTICLE 5 COVENANTS OF PURCHASER.............................................24
5.1 Good Faith; Due Diligence................................................24
ARTICLE 6 CONTINUING COVENANTS AND AGREEMENTS................................25
6.1 Confidentiality .........................................................25
6.2 Tax Cooperation..........................................................25
6.3 Further Assurances.......................................................26
6.4 Public Announcements.....................................................26
i
TABLE OF CONTENTS
(Continued)
6.7 Cooperation .............................................................28
ARTICLE 7 CONDITIONS PRECEDENT...............................................31
7.1 Conditions to Obligations of All Parties.................................31
7.2Conditions to Obligations of Purchaser....................................32
7.3 Conditions to Obligations of Sellers.....................................33
ARTICLE 8 SURVIVAL AND INDEMNIFICATION.......................................35
8.1 Survival ................................................................35
8.2 Indemnification by Sellers...............................................35
8.3 Indemnification by Purchaser.............................................35
8.4 Limitations .............................................................35
8.5 Remedies ................................................................36
8.6 Indemnification Procedures...............................................37
ARTICLE 9 TERMINATION........................................................39
9.1 Termination .............................................................39
9.2 Effect of Termination....................................................40
ARTICLE 10 DEFINITIONS.......................................................41
10.1 Definitions ............................................................41
10.2 Construction of Certain Terms and Phrases...............................48
ARTICLE 11 MISCELLANEOUS.....................................................48
11.1 Entire Understanding....................................................48
11.2 Waiver and Amendment....................................................48
11.3 Headings ...............................................................48
11.4 Counterparts ...........................................................48
11.5 Merger of Documents.....................................................48
11.6 Incorporation of Exhibits and Schedules.................................48
11.7 Interpretation .........................................................48
11.8 Notices ................................................................49
11.9 Successors and Assigns..................................................50
11.10 Dispute Resolution.....................................................50
11.11 Expenses and Attorneys' Fees...........................................51
11.12 Governing Law 52
11.13 Representation by Counsel..............................................52
ii
Exhibits
Exhibit A Escrow Agreement
Exhibit B ▇. ▇▇▇▇▇▇ Consulting Services and Personal Appearance Agreement
Exhibit C Form of Purchase Money Promissory Note
Exhibit ▇ ▇▇▇▇▇▇ Consulting Agreement
Exhibit E Patent Transfer Agreement
Exhibit F Product Development Agreement
Exhibit G Trademark Co-Existence Agreement
Exhibit H Audited Financial Statements
Exhibit I Patent Transfer Agreement
Exhibit J QVC Agreement
Exhibit K Form of Promissory Note (Section 1.6)
Schedules
Schedule 1.1(A) Tangible Personal Property
Schedule 1.1(B) Personal Property Leases
Schedule 1.1(C) Contracts
Schedule 1.1(D) Intangible Property
Schedule 1.1(E) Licenses
Schedule 1.1(I) Real Property Leases
Schedule 1.1(K) Prepaid Expenses
Schedule 1.2 Excluded Assets
Schedule 1.3(A) Assumed Liabilities
Schedule 1.5(A) Allocation of Purchase Closing Payment
Schedule 1.5(C) Allocation of Notes
Schedule 1.5(D) Accounting Methodologies
Schedule 1.6(F) Ronco Selected Current and Other Assets/Ronco Selected Current and
Other Liabilities
Schedule 1.6(G) Popeil Inc. Current and Other Assets/Popeil Inc. Current and Other
Liabilities
Schedule 1.6(H) RP Current and Other Assets/RP Current and Other Liabilities
Schedule 1.6(I) Estimated Taxes
Schedule 1.10 Tax Allocation
Schedule 2.2 Authority; Noncontravention
Schedule 2.4(A) Financial Statements; No Material Adverse Change
Schedule 2.4(B) Financial Statements; Material Adverse Change
Schedule 2.5 Tax Matters
Schedule 2.6(B) Intellectual Property Rights
Schedule 2.6(C) Intellectual Property Rights
iii
TABLE OF CONTENTS
(Continued)
Schedule 2.6(D) Intellectual Property Rights
Schedule 2.7(a) Litigation
Schedule 2.8 Conduct of Business
Schedule 2.9 Employee Matters
Schedule 2.12 Accounts Receivable
Schedule 3.3 No Undisclosed Liabilities
Schedule 6.5(A) Employees to be Offered Employment
Schedule 6.6(a) Included Assets to be Transferred to RIM
Schedule 6.6(b) Amount under the Notes to be Assumed by RIM
Schedule 7.2(D) Required Contractual Consents
Schedule 7.2(J) Oral Agreements to be Terminated
iv
AMENDMENT AND AGREEMENT
This Amendment and Agreement (this "Amendment") is entered into as of June
16, 2005 among Ronco Marketing Corporation, a Delaware corporation
("Purchaser"), Ronco Inventions, LLC, a California limited liability company
("Inventions"), Popeil Inventions, Inc., a Nevada corporation ("Popeil Inc."),
RP Productions, Inc. ("RP"), RMP Family Trust, an Illinois Irrevocable Trust
("Popeil Trust"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Popeil" and together with Inventions,
Popeil Inc., RP and Popeil Trust, "Sellers"), and ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
(the "Escrow Agent") and ▇▇▇▇▇ ▇. ▇▇▇▇▇.
Reference is hereby made to (i) that certain Asset Purchase Agreement,
dated December 10, 2004, between Purchaser and Sellers (together with that
certain Addendum thereto dated December 10, 2004, the "Asset Purchase
Agreement"); and (ii) that certain Escrow Agreement among Purchaser, Sellers,
▇▇▇▇▇ ▇. ▇▇▇▇▇ and the Escrow Agent (the "Escrow Agreement").
With reference to the foregoing, the parties hereto hereby agree as
follows:
1. Capitalized terms used but not defined herein have the respective
meanings given in the Asset Purchase Agreement.
2. In consideration of the agreements set forth herein, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties to this Amendment hereby agree: (i) that the
Termination Date and other provisions of Section 9.1(F) of the Asset Purchase
Agreement are amended as provided in paragraph 1(e) hereof; and (ii) that
Sellers shall, from and after the date hereof and until the earlier of the
Closing or the termination of the Asset Purchase Agreement, comply with the
provisions of Section 4.2 of the Asset Purchase Agreement (which provisions are
hereby ratified and confirmed by Sellers).
3. Purchaser acknowledges that the Deposit previously deposited by
Purchaser with the Escrow Agent has been released by the Escrow Agent to
Sellers. Notwithstanding any contrary provision of the Asset Purchase Agreement
or the Escrow Agreement, (i) the Deposit shall be retained by Sellers,
regardless of whether the Closing occurs, (ii) shall not be credited toward the
Purchase Price if the Closing does occur and (iii) the Escrow Agreement will be
deemed terminated and of no force or effect (except with respect to Sections
7.1, 7.2 and 7.4 thereof, which shall survive such termination and continue in
effect).
4. The Asset Purchase Agreement and any agreement, document or instrument
entered into in connection therewith shall be deemed amended as necessary to
reflect the following:
(a) The non-default interest rate specified in Section 3 of the form
of Note referred to in Section 1.5(C)(ii) of the Asset Purchase Agreement shall
be changed from 7.5% to 9.5% per annum.
(b) The default interest rate specified in Section 5.2(A) of the
form of Note referred to in Section 1.5(C)(ii) of the Asset Purchase Agreement
shall be changed from 9% to 11% per annum, or to the extent permitted by law,
whichever is less.
(c) The QC Payment Schedule set forth in Section 1.7 of the Asset
Purchase Agreement shall be deleted in its entirety and replaced with the
following schedule:
QC Payment Schedule
Product manufactured QC Payment per unit of product
manufactured
Showtime Rotisserie - Pro Model $4.50
Showtime Rotisserie -Standard Model $3.50
Showtime Rotisserie -Compact Model $3.00
Pastamaker $3.50
Motorized Food Dehydrator $2.50
Nonmotorized Food Dehydrator $3.00
Popeil's Pocket Fishermen $1.75
Cutlery Set (12 pieces or more) $2.00
Block for Cutlery Set $1.75
GLH Hair Cosmetic (per GLH regular size can)$1.50
GLH Hair Cosmetic (per GLH small size can) $ .75
Mr. Microphone $1.50
Egg Scrambler $1.25
Solid Flavor Injector $2.00
Liquid Flavor Injector $1.50
Flatware Set $1.50
Scissors $1.00
Rotisserie Cookbook $ .65
Lean Rotisserie Cookbook $ .65
Marinade Cookbook $ .65
Lean Rotisserie Booklet (noninstructional) $ .65
Lean Marinade Booklet (noninstructional) $ .65
Bagel Cutter $1.00
Door Saver $1.00
Showtime Outdoor Stand $ .75
Showtime Vinyl Cover $ .50
Grip Spatula $ .25
Flip-It Spatula $ .25
Showtime Pro Model Kebob Rods (each) $ .40
Showtime Standard Model Kebob Rods (each) $ .40
Showtime Compact Model Kebob Rods (each) $ .40
Showtime Mini Model Kebob Rods (each) $ .40
Char Rubs (per container) $ .▇▇
▇▇▇▇▇▇▇▇▇ (per container) $ .15
Barbecue Sauce (per container) $ .15
Barbecue Seasonings (per container) $ .15
Sausage Seasonings (per container) $ .15
Jerky Seasonings (per container) $ .15
Rib Basket $1.50
Lobster Basket $1.50
(d) Sections 7.2(I) (QC Amendment) and 7.2(H) (QC Amendment) of the
Asset Purchase Agreement are hereby deleted in their entirety and replaced with
the following text: "[Reserved]".
(e) Section 9.1(F) of the Asset Purchase Agreement is hereby deleted
in its entirety and replaced with the following text:
"(F) by Purchaser, on the one hand, or any Seller, on the other
hand, if the transactions contemplated hereby shall not have been consummated,
other than directly as the result of the Party seeking to terminate this
Agreement pursuant to this Section 9.1(F) to perform such Party's material
obligations hereunder, on or before 5 p.m. California time on June 30, 2005 (the
"Termination Date"). (For the purposes of clarification, if the consummation of
the transactions contemplated hereby shall not have occurred on or before the
Termination Date as a result of the failure of Purchaser's closing conditions
stated in Sections 7.2(A) or 7.2(C) to be satisfied, such failure shall not, of
itself, constitute a failure of Sellers (or any of them) to perform their
material obligations hereunder.);"
(f) Section 11.10(B) of the Asset Purchase Agreement is hereby
deleted, with the remaining paragraphs of Section 11.10 re-lettered accordingly.
(g) Current Section 11.10(C) (to be re-designated as Section
11.10(B) after giving effect to paragraph (f) immediately hereinabove) shall be
deleted in its entirety and replaced with the following text:
"(B) All disputes shall be fully and finally resolved by binding
arbitration conducted in Los Angeles, California. The arbitration shall be
administered by Judicial Arbitration and Mediation Services ("JAMS") in its Los
Angeles County office. The arbitrator shall be a retired superior court judge of
the State of California affiliated with JAMS and shall be selected as follows.
The parties will request that JAMS provide a list of available arbitrators
satisfying the requirements of the immediately preceding sentence. Each side to
the dispute will confidentially rank in descending order of desirability (from
most desirable to least desirable) each person on such list. The person on such
list with the highest composite ranking by both sides will be selected as the
arbitrator. The arbitration hearing on the merits of the dispute will be
conducted within 45 days of the selection of the arbitrator, and the ruling of
the arbitrator on the dispute shall be rendered within 30 days thereafter,
unless good cause is shown as to why such ruling must be delayed beyond such
time (in which case the ruling shall be rendered as soon as practicable
following the selection of the arbitrator). Any action brought to enforce the
provisions of this Section 11.10 shall be brought in the Los Angeles County
Superior Court. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitrator shall not have
any power to alter, amend, modify or change any of the terms of this Agreement
nor to grant any remedy which is either prohibited by the terms of this
Agreement or not available in a court of law. Costs and reasonable attorneys'
fees shall be awarded to the prevailing party. Nothing in this Section 11.10
shall preclude either party from bringing a court action seeking an order for or
with respect to a writ of attachment, constructive trust or other provisional
remedy or an equitable remedy such as injunctive relief, specific performance or
any other equitable remedy that may be applicable under the circumstances."
(h) All agreements and instruments entered into in connection with
the Asset Purchase Agreement, including, without limitation, the Product
Development Agreement and the Notes, shall be deemed revised to the extent
necessary or appropriate to incorporate and to comply with the dispute
resolution provisions of Section 11.10 of the Asset Purchase Agreement as
modified hereby. For the purposes of clarification, the Notes shall be
enforceable pursuant to the dispute resolution procedures provided in Section
11.10 of the Asset Purchase Agreement and any other applicable provisions of the
Notes.
(i) The New Product Development Agreement - Summary of Terms
referred to in the Asset Purchase Agreement is hereby revised by deleting the
second "bullet" point in the cell opposite the heading "Turkey Fryer Agreement"
therein and replacing it with the following text:
o The purchase price for the Turkey Fryer will be an up front fee of
$3,000,000 payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or his designee(s) and a
$5.50 per manufactured unit quality service payment to be paid to
Popeil until the aggregate of such quality service payments
(including the up front fee) received by Popeil is $10,000,000, at
which time no further such quality service payments shall be payable
to Popeil in respect of the Turkey Fryer.
(j) Section 1.6(A) of the Asset Purchase Agreement is hereby amended
by changing the reference in the second sentence thereof to "forty-five (45)
days" to "thirty (30) days".
(k) Sections 7.2(G) and 7.3(F) of the Asset Purchase Agreement are
each hereby deleted in their entirety and each replaced with the following text:
"QVC shall have consented to the assignment of the QVC Agreement to Purchaser,
and the applicable Seller(s) and Purchaser shall have executed a written
assignment agreement, in form and substance reasonably satisfactory to such
Seller(s) and Purchaser, assigning to Purchaser such Seller(s)' rights and
obligations under the QVC Agreement ."
5. Effective upon the date hereof (without any further action of any party
hereto), each party hereto (a "Releasing Party") hereby forever and irrevocably
releases and discharges each other party hereto (and each such other party's
shareholders, members, partners, trustees, beneficiaries, affiliates, officers,
directors, employees, agents and attorneys) from any and all claims,
contentions, demands, causes of action at law or in equity, debts, liens,
agreements, notes, obligations or liabilities of any nature, character or
description whatsoever, whether known or unknown, which such Releasing Party may
now have or hereafter have against any such other parties hereto by reason of
any matter, event, thing or state of facts occurring, arising, done, omitted or
suffered to be done prior to the date hereof (including, without limitation, in
connection with the negotiation of the Asset Purchase Agreement or any actions
taken or omitted to be taken prior to, on or after the execution of the Asset
Purchase Agreement in connection with the Asset Purchase Agreement); provided,
that the foregoing release shall not operate to release or affect any party's
rights or obligations under and pursuant to the Asset Purchase Agreement and any
agreement, document or instrument entered into in connection therewith (as
modified by this Amendment).
In addition to the foregoing release, effective automatically
(without any further action of any party hereto) upon (i) (A) any termination by
Sellers of the Asset Purchase Agreement pursuant to Section 9.1(F) (unless the
failure to effect the Closing on or before the Termination Date is directly
attributable to the failure on the part of Sellers to perform any material
obligation required to be performed by Sellers under the Asset Purchase
Agreement) or (B) any termination by Purchaser of the Asset Purchase Agreement
pursuant to Section 9.1(F) thereof (unless the failure to effect the Closing on
or before the Termination Date is directly attributable to the failure on the
part of Purchaser to perform any material obligation required to be performed by
Purchaser under the Asset Purchase Agreement) or (ii) any termination by Sellers
or Purchaser of the Asset Purchase Agreement pursuant to any other provision of
Article IX thereof, each party hereto (a "Releasing Party") hereby releases and
discharges each other party hereto (and each such other party's shareholders,
members, partners, trustees, beneficiaries, affiliates, officers, directors,
employees, agents and attorneys) from any and all claims, contentions, demands,
causes of action at law or in equity, debts, liens, agreements, notes,
obligations or liabilities of any nature, character or description whatsoever,
whether known or unknown, which such Releasing Party may now have or hereafter
have against any such other parties hereto by reason of any matter, event, thing
or state of facts occurring, arising, done, omitted or suffered to be done on or
after the date hereof and prior to such termination of the Asset Purchase
Agreement (including, without limitation, with respect to the Asset Purchase
Agreement, the Escrow Agreement or any other agreement, document or instrument
entered into in connection therewith or otherwise in connection with the
transactions contemplated by the Asset Purchase Agreement).
The parties hereto acknowledge and represent that they, and each of
them, have been advised by their attorney of record, and are familiar with,
Section 1542 of the Civil Code of the State of California, which presently
provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor."
The parties hereto hereby waive and relinquish any and all rights
and benefits under Section 1542 of the Civil Code as now worded and as it may
from time to time hereafter be amended.
It is understood by each party hereto that the facts in respect of
which this release is given may hereafter turn out to be other than or different
from the facts in that connection known or believed to be true. Each party
hereto therefore expressly assumes the risk of the facts turning out to be so
different and agrees that the foregoing release shall be in all respects
effective and not subject to termination or rescission by any such difference in
facts.
6. Except as provided herein, none of the Asset Purchase Agreement, the
Escrow Agreement, the form Note, nor any other agreement, document or instrument
entered into in connection therewith is changed in any respect whatsoever and
shall continue in effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the date first above written.
PURCHASER:
RONCO MARKETING CORPORATION
By: _____________________________
Name: _________________________
Title: __________________________
SELLERS:
RONCO INVENTIONS, LLC
By: _____________________________
Name: _________________________
Title: __________________________
POPEIL INVENTIONS, INC.
By: _____________________________
Name: _________________________
Title: __________________________
RP PRODUCTIONS, INC.
By: _____________________________
Name: _________________________
Title: __________________________
RMP FAMILY TRUST
By: ___________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Co-Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
----------------
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ESCROW AGENT:
------------
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
By: _________________________________
Name:
Title:
▇▇▇▇▇ ▇. ▇▇▇▇▇:
--------------
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
SECOND AMENDMENT AND AGREEMENT
This Second Amendment and Agreement (this "Amendment") is entered into as
of June 29, 2005 among Ronco Marketing Corporation, a Delaware corporation
("Purchaser"), Ronco Inventions, LLC, a California limited liability company
("Ronco"), Popeil Inventions, Inc., a Nevada corporation ("Popeil Inc."), RP
Productions, Inc., a Nevada corporation ("RP"), RMP Family Trust, an Illinois
Irrevocable Trust ("Popeil Trust"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Popeil" and together with
Inventions, Popeil Inc., RP and Popeil Trust, "Sellers"), and ▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP (the "Escrow Agent") and ▇▇▇▇▇ ▇. ▇▇▇▇▇.
Reference is hereby made to (i) that certain Asset Purchase Agreement,
dated December 10, 2004, between Purchaser and Sellers (together with that
certain Addendum thereto dated December 10, 2004, and that certain Amendment and
Agreement relating thereto dated June 16, 2005, the "Asset Purchase Agreement");
and (ii) that certain Escrow Agreement among Purchaser, Sellers, ▇▇▇▇▇ ▇. ▇▇▇▇▇
and the Escrow Agent (the "Escrow Agreement").
With reference to the foregoing, the parties hereto hereby agree as
follows:
1. Capitalized terms used but not defined herein have the respective
meanings given in the Asset Purchase Agreement.
2. The Asset Purchase Agreement and any agreement, document or instrument
entered into in connection therewith shall be deemed amended as necessary to
reflect the following:
(a) All purchase orders submitted to Ronco and/or Popeil Inc. that
are dated on or before June 30, 2005 or that are received by Ronco and/or Popeil
Inc. on or before June 30, 2005 (such purchase orders, the "Purchase Orders")
and that relate to products that are shipped to the Person who submitted the
purchase order (or such Person's designee(s)) on or before July 15, 2005 shall
be included as an asset of the applicable entity (i.e., Inventions and/or Popeil
Inc.) for purposes of the determination of the Estimated Combined NCOAV and the
final determination of the Ronco Net Current and Other Asset Value and the
Popeil Inc. Net Current and Other Asset Value pursuant to the Asset Purchase
Agreement. Each such Purchase Order shall be valued at an amount equal to the
gross profit from such purchase order, to be estimated or determined, as the
case may be, based on the methodologies set forth on Schedule 1.5(D). All other
orders (i.e., other than purchase orders) (including, without limitation, those
submitted or received through a direct response channel) submitted to Ronco
and/or Popeil Inc. that are dated on or before the Closing Date or that are
received by Ronco and/or Popeil Inc. on or before the Closing Date shall be
included as an asset of the applicable entity (i.e., Ronco and/or Popeil Inc.)
for purposes of the determination of the Estimated Combined NCOAV and the final
determination of the Ronco Net Current and Other Asset Value and the Popeil Inc.
Net Current and Other Asset Value pursuant to the Asset Purchase Agreement. Each
such order shall be valued at an amount equal to the gross profit from such
order, to be estimated or determined, as the case may be, based on the
methodologies set forth on Schedule 1.5(D). Purchaser hereby covenants and
agrees to use its best efforts to cause all products that are the subject of any
Purchase Order or other order subject to this paragraph 2(a) to be shipped as
promptly as possible but in any event on or prior to July 15, 2005.
(b) All obligations of Ronco or Popeil Inc. under or with respect to
any purchase order (including, without limitation, any obligations to pay for
products once manufactured pursuant to such purchase orders) (i) issued to any
manufacturer, supplier or other vendor by Ronco and/or Popeil Inc. on or before
June 30, 2005 or dated on or before June 30, 2005 and (ii) that has not been
fulfilled on or before June 30, 2005, shall be deemed to be Assumed Liabilities.
In addition, all products delivered after the Closing by any such manufacturer,
supplier or vendor pursuant to such purchase orders shall be owned by Purchaser.
Subject to paragraph 2(a) above, none of such purchase orders shall have any
effect on, and shall not be counted in the determination of, the Estimated
Combined NCOAV or the final determination of the Ronco Net Current and Other
Asset Value, the Popeil Inc. Net Current and Other Asset Value and the RP Net
Current and Other Asset Value.
3. The parties agree that the Included Assets will include certain bank
accounts and certain cash and marketable securities of Ronco, Popeil Inc. and/or
RP. The bank and/or brokerage accounts listed or identified on Schedule 1.1(M)-1
and the cash and/or marketable securities on deposit therein, as determined
pursuant to the applicable methodologies set forth on Schedule 1.5(D), will be
conveyed to Purchaser at Closing. The cash on deposit in the bank accounts
listed or identified on Schedule 1.1(M)-2 and the cash on deposit therein, as
determined pursuant to the applicable methodologies set forth on Schedule
1.5(D), will be conveyed to Purchaser as provided in a separate Transition
services agreement, in the form attached hereto as Exhibit 1, to be entered into
among the Purchaser, Ronco, Popeil Inc. and/or RP. No other cash or marketable
securities will be conveyed by any Seller to Purchaser. All such cash and
marketable securities, valued in accordance with the applicable methodologies
set forth on Schedule 1.5(D), will be counted as an asset for purposes of the
determination of the Estimated Combined NCOAV and the final determination of the
Ronco Net Current and Other Asset Value, the Popeil Inc. Net Current and Other
Asset Value and the RP Net Current and Other Asset Value). In light of the
foregoing, the Asset Purchase Agreement is hereby further amended as follows:
(a) Section 1.1(M) is hereby revised to read as follows: "(M) Cash
and Marketable Securities. The bank and/or brokerage accounts listed or
identified on Schedule 1.1(M)-1 and the cash and/or marketable securities on
deposit therein, which shall be conveyed to Purchaser at the Closing. The cash
on deposit in the bank accounts listed or identified on Schedule 1.1(M)-2 and
the cash on deposit therein as of the time such cash is to be conveyed to
Purchaser pursuant to the Transition Services Agreement, which cash will be
conveyed to Purchaser after the Closing in accordance with the Transition
Services Agreement."
(b) Section 1.5(C)(i) of the Asset Purchase Agreement is hereby
deleted in its entirety, and the remaining paragraphs of such Section are hereby
re-numbered accordingly.
(c) Section 1.5(C)(ii) of the Asset Purchase Agreement is hereby
revised to read as follows:
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"(ii) At the Closing, Purchaser will deliver to each Seller listed on
Schedule 1.5(C) a purchase money promissory note, in substantially the form
attached as Exhibit C (each, a "Note" and together, the "Notes"), in the initial
principal amount equal to such Seller's portion (as set forth on Schedule 1.5(C)
to be provided by Sellers to Purchaser prior to Closing and which will not be
inconsistent with the Tax allocation set forth on Schedule 1.10) of the sum of:
(A) Subject to Section 1.6 below, an amount equal to the
Estimated Combined NCOAV; plus
(B) If the Estimated Combined NCOAV is less than $15,000,000,
the Additional Cash."
(e) The definition of "Additional Cash" in Article 10 of the Asset
Purchase Agreement is hereby revised to read as follows: "Additional Cash means
the amount, if any, by which $15,000,000 exceeds the Estimated Combined NCOAV."
(f) Section 1.8(A)(iv) is amended to read as follows: "(iv)
Consulting Agreement. Sellers shall cause to be delivered to Purchaser the
Consulting Agreement for ▇. ▇▇▇▇▇▇, duly executed by ▇. ▇▇▇▇▇▇."
(g) Section 1.8(A)(vii) is amended to read as follows: "Sellers
shall deliver to Purchaser the Additional Cash, if any.
(h) Section 1.8(A) of the Asset Purchase Agreement is amended to add
the following as new subparagraph (viii) thereof (and subsequent subparagraphs
of such Section renumbered accordingly): "(viii) Transition Services Agreement.
Sellers shall deliver to Purchaser the Transition Services Agreement, duly
executed by Ronco, Popeil Inc. and RP."
(i) Section 1.8(B)(viii) of the Asset Purchase Agreement is amended
to read as follows: "(viii) Consulting Agreement. Purchaser shall cause to be
delivered to ▇. ▇▇▇▇▇▇ the Consulting Agreement, duly executed by Purchaser."
(j) Section 1.8(B)(x) of the Asset Purchase Agreement is amended in
its entirety to read as follows: "(x) Transition Services Agreement. Purchaser
shall deliver to Sellers the Transition Services Agreement, duly executed by
Purchaser."
(k) Article 10 of the Asset Purchase Agreement is hereby amended to
add the following definition immediately after the definition of "Transferred
Employee" therein: ""Transition Services Agreement" means the Transition
Services Agreement to be entered into as of the Closing among the Purchaser,
Ronco, Popeil Inc. and RP, in the form attached hereto as Exhibit D." Current
Exhibit D, the form of ▇▇▇▇▇▇ Consulting Agreement, is hereby deleted. Article
10 of the Asset Purchase Agreement is hereby further amended to change the
definition of "Consulting Agreements" to read as follows: ""Consulting
Agreement" means the Consutling Services and Personal Appearance Agreement to be
3
entered into as of the Closing between Purchaser and ▇. ▇▇▇▇▇▇, containing such
terms and conditions as set forth on Exhibit B and such other terms and
conditions (not inconsistent with those set forth on such Exhibit) as the
parties may mutually agree upon."
4. The New Product Development Agreement - Summary of Terms referred to in
the Asset Purchase Agreement is hereby revised by deleting the first "bullet"
point in the cell opposite the heading "Turkey Fryer Agreement" therein and
replacing it with the following text:
o Ronco shall purchase the Turkey Fryer when it is offered during the
term of this Agreement by Popeil to Ronco.
5. Article 6 of the Asset Purchase Agreement is hereby amended as follows:
(a) Section 6.12 is hereby deleted in its entirety and replaced with
the following text: "[Reserved]".
(b) Section 6.13 is hereby deleted in its entirety and replaced with
the following text:
"6.13 Assigned Contracts.
(A) Commencing promptly after the Closing, Purchaser will use
best efforts to (i) cause all Contracts included on Schedule 1.1(C) or that are
assigned to Purchaser after the Closing pursuant to Section 6.13(B)
(collectively, the "Assigned Contracts") be terminated or (ii) cause all Sellers
and their Affiliates to be released from any liability under or with respect to
any Assigned Contract with respect to any period after the Closing (to the
extent any such Seller or Affiliate of any Seller has any such liability under
any such Contract), in each case effective as soon as possible after the
Closing, but in any event within 60 days after the Closing.
(B) Commencing promptly after the Closing and continuing until
14 days after the Closing, Sellers will use their best efforts to obtain the
consent of the applicable third party to the assignment of those Contracts
listed on Schedule 6.13(B); provided that Purchaser fully cooperates with
Sellers and promptly reimburses Sellers for all payments made or expenses
incurred by Sellers in connection therewith. With respect to any such Contract
as to which necessary approval or consent for the assignment or transfer to
Purchaser is obtained after the Closing, the applicable Sellers shall transfer
such Contract to Purchaser by execution and delivery of an instrument of
conveyance reasonably satisfactory to Purchaser and such Seller(s) within three
(3) Business Days following receipt of such approval or consent. All obligations
of Sellers under such Contracts from and after the Closing will be deemed
Assumed Liabilities."
6. Section 8.4 of the Asset Purchase Agreement is hereby amended as
follows:
(a) Section 8.4(A) is hereby amended in its entirety to read as
follows: "(A) Indemnification Cap. Notwithstanding any other contrary provision
in this Agreement, except with respect to claims for fraud, no Indemnifying
Seller shall be liable for indemnification obligations in respect of breaches of
4
any representation or warranty of Sellers or the Shareholder stated in this
Agreement or in any document, certificate or instrument delivered pursuant
hereto if the payment of such indemnification would, when added to all amounts
previously paid by the Indemnifying Sellers pursuant to this Article 8 (after
the deductible provided in Section 8.4(C) has been exceeded), exceed, in the
aggregate, One Million Dollars ($1,000,000)."
(b) Section 8.4(B) is hereby amended in its entirety to read
as follows: "(B) Purchaser's Indemnification Cap. Notwithstanding any other
contrary provision in this Agreement, except with respect to claims for fraud,
Purchaser shall not be liable for indemnification obligations in respect of
breaches of any representation or warranty of Purchaser stated in this Agreement
or in any document, certificate or instrument delivered pursuant hereto if the
payment of such indemnification would, when added to all amounts previously paid
by Purchaser pursuant to this Article 8 (after the deductible provided in
Section 8.4(C) has been exceeded), exceed, in the aggregate, One Million Dollars
($1,000,000)."
7. The first sentence of Section 8.5 (Remedies) of the Asset
Purchase Agreement is hereby amended in its entirety to read as follows: "Except
as provided in Section 11.15, Purchaser, on the one hand, and Sellers, on the
other hand, agree that their sole and exclusive remedy in respect of the breach
by the other party of any representation or warranty of such party stated in
this Agreement or in any certificate, document or instrument delivered pursuant
hereto (except in respect of claims for fraud), shall be the right to obtain
indemnification as provided herein, and all other rights and remedies of any
kind or nature are hereby expressly and forever waived and released."
8. The first sentence of Section 1.5(A) of the Asset Purchase
Agreement is hereby amended to read as follows: "(A) Cash Payment. At the
Closing, Purchaser shall pay Sellers, in cash via wire transfer of immediately
available funds to the account or accounts of Sellers designated on Schedule
1.5(A), an aggregate of Forty Million Dollars ($40,000,000) (the "Purchase
Closing Payment")."
9. Section 1.5(B) of the Asset Purchase Agreement is hereby deleted
in its entirety, and the remaining paragraphs of Section 1.5 of the Asset
Purchase Agreement are hereby renumbered accordingly.
10. The first sentence of Section 1.5(D) of the Asset Purchase
Agreement is hereby amended to read: "(D) Prior to the anticipated Closing Date,
Purchaser and each Seller shall cause their appropriate representatives to
confer in good faith for the purposes of determining, as of the Closing, the
Estimated Combined NCOAV, which is the sum of (i) the Estimated Ronco NCOAV,
(ii) the Estimated Popeil Inc. NCOAV and (iii) the Estimated RP NCOAV." The
third, fourth and fifth sentences of Section 1.6(D) of the Asset Purchase
Agreement are each hereby amended to delete the words "5:00 p.m. California time
on the day that is two Business Days" in each such sentence. All remaining
sentences of Section 1.5(D) are hereby deleted in their entirety.
11. Section 1.6 of the Asset Purchase Agreement is hereby amended in
its entirety to read as follows:
5
(a) Section 1.6(B) is hereby amended in its entirety to read as
follows: "(A) If the Combined NCOAV, as and when determined pursuant to this
Section 1.6, equals or exceeds the Estimated Combined NCOAV, then Purchaser
shall reconvey to Sellers (in the respective amounts as designated by Sellers)
such Accounts Receivable as Sellers, in their sole and absolute discretion,
shall designate, with an aggregate value, determined pursuant to the
methodologies set forth on Schedule 1.5(D), most nearly equal to the amount by
which the Combined NCOAV, as and when determined pursuant to this Section 1.6,
exceeds $15,000,000. The value of any such reconveyed Accounts Receivable shall
be applied to reduce the Notes of the Sellers as designated by the Sellers, in
each case first as a reduction of any accrued but unpaid interest under such
Notes and thereafter to reduce the outstanding principal amount of such Notes.
Such selected Accounts Receivable shall further be deemed an Excluded Asset and
shall be deemed to be set forth on Schedule 1.2."
(b) Section 1.6(C) is hereby amended in its entirety to read as
follows: "(C) If the Combined NCOAV, as and when determined pursuant to this
Section 1.6, is less than the Estimated Combined NCOAV but more than
$15,000,000, then (i) Purchaser shall reconvey to Sellers (in the respective
amounts as designated by Sellers) such Accounts Receivable as Sellers, in their
sole and absolute discretion, shall designate, with an aggregate value,
determined pursuant to the methodologies set forth on Schedule 1.5(D), most
nearly equal to the amount by which the Combined NCOAV, as and when determined
pursuant to this Section 1.6, exceeds $15,000,000 and (ii) the unpaid balance of
the Notes of the Sellers (in the respective amounts as designated by Sellers)
will be reduced by (1) the amount by which the Estimated Combined NCOAV exceeds
the Combined NCOAV and (2) the value of any such reconveyed Accounts Receivable,
in each case first as a reduction of any accrued but unpaid interest under such
Notes and thereafter to reduce the outstanding principal amount of such Notes.
Such selected Accounts Receivable shall be deemed an Excluded Asset and shall be
deemed to be set forth on Schedule 1.2. If the Combined NCOAV, as and when
determined pursuant to this Section 1.6, is less than the Estimated Combined
NCOAV and less than or equal to $15,000,000, then no Accounts Receivable shall
be reconveyed to Sellers and the unpaid balance of the Notes of the Sellers
shall be reduced (in the respective amounts as designated by Sellers), in each
case first as a reduction of any accrued but unpaid interest under such Notes
and thereafter to reduce the outstanding principal amount of such Notes, such
that the aggregate amount of such reductions to the Notes is equal to the amount
by which the Estimated Combined NCOAV exceeds the Combined NCOAV, as and when
determined pursuant to this Section 1.6."
(c) Section 1.6(F) is amended to delete the first sentence thereof, and
the defined term "Ronco Adjustment Amount" is deleted from Article 10.
(d) Section 1.6(G) is amended to delete the first sentence thereof, and
the defined term "Popeil Inc. Adjustment Amount" is deleted from Article 10.
(e) Section 1.6(H) is amended to delete the first sentence thereof, and
the defined term "RP Adjustment Amount" is deleted from Article 10.
13. Section 1.10 of the Asset Purchase Agreement is hereby amended in its
entirety to read as follows: "1.10 Tax Allocation. Exhibit 1.10 sets forth an
allocation of the Purchase Price (and all other capitalized costs) among the
6
Included Assets of each of the Sellers, subject to any adjustment to the
Purchase Price pursuant to Section 1.6. Purchaser and each of the Sellers and
their respective Affiliates shall report, act and file Tax Returns (including,
without limitation, IRS Form 8594) in all respects and for all purposes
consistent with Exhibit 1.10. Neither Purchaser nor any Sellers shall take any
position (whether in Tax examinations, Tax Returns or otherwise) that is
inconsistent with such allocation."
14. Section 6.9 of the Asset Purchase Agreement is hereby amended in its
entirety to read as follows:
"(a) Not later than five (5) Business Days after the Closing Date
(the "Letter of Credit Deadline"), Purchaser shall secure, for the benefit of
Sellers and to secure the full and timely payment of obligations due from
Purchaser to Sellers pursuant to Section 1.7 and the Notes, a standby letter of
credit issued by a U.S. banking institution acceptable to Sellers in the face
amount of at least $250,000, with a maturity date not earlier than 30 days after
the maturity date of the Notes and otherwise including such terms and conditions
as are reasonably satisfactory to Sellers (the "Letter of Credit").
(b) From and after the Letter of Credit Deadline and until the Notes
have been repaid in full, Purchaser shall, not later than fifteen (15) calendar
days after any date as of which the remaining amount available to be drawn down
under the Letter of Credit falls below the lesser of $250,000 or the total
amount remaining outstanding under the Notes, obtain and deliver to Sellers a
supplemental standby letter or letters of credit from one or more U.S. banking
institutions acceptable to Sellers, in each case with substantially the same
terms and conditions as the Letter of Credit, in an aggregate face amount
necessary to restore the aggregate amount available to be drawn down by Sellers
under the Letter of Credit and such supplemental standby letter or letters of
credit to the lesser of $250,000 or the total amount then outstanding under the
Notes. The foregoing obligations of Purchaser shall apply each time the
aggregate remaining amount available to be drawn down under the Letter of Credit
falls below the lesser of $250,000 or the total amount then outstanding under
the Notes; provided, that such obligations shall in any event terminate upon
repayment in full of the Notes."
15. Section 7.3(D) (Letter of Credit) of the Asset Purchase Agreement is
hereby amended in its entirety to read as follows: "[Reserved]".
16. Section 7.2(J) (Termination of Selected Agreements) of the Asset
Purchase Agreement is hereby deleted in its entirety.
17. Section 8.3 (Indemnification by Purchaser) of the Asset Purchase
Agreement is hereby amended by adding the following text at the end of such
Section: "or (iv) any claim, lawsuit or other proceeding against any Seller
Indemnified Person that arises out of Purchaser's financing in connection with
the transactions contemplated by the Asset Purchase Agreement, including,
without limitation, any such claim, lawsuit or other proceeding commenced by any
investor in such financing against any Seller Indemnified Person (except with
respect to this clause (iv) to the extent related to any matter with respect to
which Purchaser is entitled to indemnification from Sellers pursuant to the
Asset Purchase Agreement)."
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18. The Schedules and Exhibits attached hereto shall, for all purposes
under the Asset Purchase Agreement and any agreement, document or instrument
entered into in connection therewith, supersede and replace the corresponding
Schedules and Exhibits to the Asset Purchase Agreement.
19. Except as provided herein, none of the Asset Purchase Agreement, the
Escrow Agreement, the form Note, nor any other agreement, document or instrument
entered into in connection therewith is changed in any respect whatsoever and
shall continue in effect in accordance with its terms.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the date first above written.
PURCHASER:
RONCO MARKETING CORPORATION
By: _____________________________
Name: _________________________
Title: __________________________
SELLERS:
RONCO INVENTIONS, LLC
By: _____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary
POPEIL INVENTIONS, INC.
By: _____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary
R.P. PRODUCTIONS, INC.
By: _____________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary
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RMP FAMILY TRUST
By: ___________________________
▇▇▇▇ ▇▇▇▇▇▇▇, Co-Trustee
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ESCROW AGENT:
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▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
By: _________________________________
Name:
Title:
▇▇▇▇▇ ▇. ▇▇▇▇▇:
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▇▇▇▇▇ ▇. ▇▇▇▇▇
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