LETTER LOAN AGREEMENT June 9, 2006
LETTER
LOAN AGREEMENT
June
9,
2006
The
Lenders Identified on
Schedule
1
c/o
Sanders Xxxxxx Xxxxxx Inc.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Ladies
and Gentlemen:
The
undersigned, RONCO
CORPORATION, a
Delaware corporation
(“Borrower”),
has
requested that Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas corporation, individually
and
as administrative agent (the “Lead
Lender”),
and
the persons and entities listed on the schedule of lenders attached hereto
as
Schedule 1
(each,
together with the Lead Lender, a “Lender”
and, collectively,
the“Lenders”)
lend to
Borrower the net sum of up to $3,000,000.00. Subject to the terms of this Loan
Agreement (this “Agreement”),
Borrower and each of the Lenders hereby agree as follows:
1. Loan.
(a) At
the
Initial Closing (as defined below), on the terms and subject to the conditions
set forth in this Agreement, the Lead Lender agrees to lend to Borrower the
sum
of $1,500,000.00 (the “Initial
Loan”)
for
working capital and other general corporate purposes as set forth on
Schedule
2
hereto.
The Initial Loan shall be evidenced by a subordinated promissory note in
substantially the form attached hereto as Exhibit
A
(the
“Initial
Note”).
(b) At
the
Second Closing (as defined below), on the terms and subject to the conditions
set forth in this Agreement, the Lead Lender agrees to lend to Borrower the
additional sum of $1,500,000.00 (the “Second
Loan”)
for
working capital and other general corporate purposes as set forth on
Schedule
2
hereto.
The Second Loan shall be evidenced by a subordinated promissory note in
substantially the form attached hereto as Exhibit
B
(the
“Second
Note”).
(c) At
the
Third Closing (as defined below), on the terms and subject to the conditions
set
forth in this Agreement, each Rights Lender (as defined below) severally agrees
to purchase a subordinated promissory note in substantially the form attached
hereto as Exhibit C
(each, a
“Subsequent Note”
and,
collectively with the Initial Note and the Second Note, the “Notes”
or
a
“Note”)
in the
principal amount set forth opposite the Rights Lender’s name on Schedule 1
hereto
(the “Multiple
Lender Loan,”
and
collectively with the Initial Loan and the Second Loan, the “Loans”).
The
aggregate principal amount of the Subsequent Notes sold at the Third Closing
shall not exceed $3,000,000.00 (the
“Aggregate
Subsequent Loan Amount”).
Principal
and interest on the Notes shall be due and payable in the manner and at the
times set forth in the Notes.
(d) Each
Loan
shall be made at a closing (each of which is referred to in this Agreement
as a
“Closing”).
The
Initial Loan shall be made at an initial Closing to be held as of the date
of
this Agreement (the “Initial Closing”).
(e) The
Second Loan shall be made at a second Closing by the Lead Lender (the
“Second
Closing”).
The
Second Closing shall take place at such date, time, and place as shall be agreed
by the Borrower and the Lead Lender following the fulfillment or waiver of
the
conditions precedent set forth in Section 2(a)(ii) of this
Agreement.
(f) The
Multiple Lender Loan shall be made at a third Closing (the “Third
Closing”)
by
such persons or entities that indicate their intent to participate in the Rights
Offering (as defined below) (the “Rights
Lenders”).
The
Third Closing shall take place at such date, time, and place as determined
by
the Borrower in its sole discretion; provided, however, that the Third Closing
shall occur no later than seventy-five (75) days after the Initial Closing.
The
Rights Lenders shall, upon execution and delivery of the relevant signature
pages, become parties to, and be bound by, this Agreement, without the need
for
an amendment to this Agreement except to add such person’s or entity’s name to
Schedule
1,
and
shall have the rights and obligations of a Lender hereunder as of the date
of
the Third Closing. Immediately prior to the Third Closing, Schedule
1
will be
amended to list the Rights Lenders participating in the Third Closing hereunder
and the principal amount of the Note being purchased by such Rights Lender
hereunder. At the applicable Closing, the Borrower will deliver to each Lender
the respective Note to be purchased by such Lender, against receipt by the
Borrower of the corresponding purchase price set forth on Schedule
1 hereto.
(g) Notwithstanding
the foregoing, in the event that the aggregate principal amount of the Notes
purchased at the Initial Closing, the Second Closing and the Third Closing
exceeds $3,000,000.00 (the “Excess”),
then
Borrower and the Lead Lender agree that Borrower shall prepay its obligations
under the Initial Note and the Second Note to the extent of the Excess. The
Lead
Lender waives all notice provisions in the Initial Note and the Second Note
with
respect to the prepayment of the Excess.
2. Conditions
Precedent.
(a) To
Obligations of the Lenders
(i) The
obligation of the Lead Lender to make the Initial Loan to Borrower at the
Initial Closing is subject to the conditions precedent, unless waived in writing
by the Lead Lender, that:
(A)
the
Lead
Lender shall have received duly executed copies of this Agreement, the Initial
Note, the Security Agreement in substantially the form attached hereto as
Exhibit
D
(the
“Security
Agreement”),
and
the
Assignment of Life Insurance Policy in substantially the form attached hereto
as
Exhibit
E
(the
“Insurance
Assignment”)
(all
such documents and any other security documents relating to the Loans and any
modifications thereof, are hereinafter collectively referred to as the
“Loan
Documents”);
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(B) all
representations and warranties (as modified by the disclosures on the Schedule
of Exceptions) made by Borrower to the Lead Lender under this Agreement and
the
other Loan Documents, if applicable, are true and correct in all material
respects as of the date of the Initial Closing;
(C) all
documents and proceedings shall be reasonably satisfactory to legal counsel
for
the Lead Lender;
(D) no
condition or event exists which constitutes an Event of Default (as hereinafter
defined) or which, with the lapse of time and/or giving of notice, would
constitute an Event of Default; and
(E) no
material adverse change in the financial condition of Borrower since the
effective date of the most recent financial statements furnished to the Lead
Lender by Borrower shall have occurred and be continuing.
(ii) The
Lead
Lender’s obligation to make the Second Loan at the Second Closing shall be
further subject to the conditions precedent (other than Section 2(a)(ii)(G),
which closing shall occur simultaneously with the Second Closing), unless waived
in writing by the Lead Lender, that:
(A) all
representations and warranties (as modified by the disclosures on the Schedule
of Exceptions) made by Borrower to Lead Lender under this Agreement and the
other Loan Documents, if applicable, are true and correct in all material
respects as of the date of the Second Closing;
(B) all
documents and proceedings shall be reasonably satisfactory to legal counsel
for
the Lead Lender;
(C) no
condition or event exists which constitutes an Event of Default (as hereinafter
defined) or which, with the lapse of time and/or giving of notice, would
constitute an Event of Default;
(D) the
Lead
Lender shall have received duly executed copies of the Second Note;
(E) no
material adverse change in the financial condition of Borrower since the
effective date of the most recent financial statements furnished to Lead Lender
by Borrower shall have occurred and be continuing;
(F) To
the
extent permissible under applicable federal and state securities laws, Borrower
shall have sent by regular first class mail (the “Mailing”)
to all
holders of Borrower’s Series A Convertible Preferred Stock, at such holder’s
address as is shown in the Borrower’s records at the time of such Mailing, an
offer to participate as a Rights Lender in the
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Third
Closing to the extent of their Pro Rata Share (as defined below) (the
“Rights
Offering”).
For
purposes of this Agreement, “Pro
Rata Share”
means
(x) the Aggregate Subsequent Loan Amount multiplied by (y) a fraction,
(i) the numerator of which shall be the number of shares of Series A Convertible
Preferred Stock held by such Rights Lender on the date hereof and (ii) the
denominator of which shall be the total number of outstanding shares of Series
A
Convertible Preferred Stock as of the date hereof. Borrower agrees that a Rights
Lender shall have no more than thirty days from the date of the Mailing to
indicate that such Rights Lender intends to participate in the Rights Offering;
(G) Borrower
shall close simultaneously with the Second Closing on a credit agreement (the
“Senior
Credit Agreement”)
for a
facility of not less than $15 million between Borrower and Xxxxx Fargo Bank,
National Association on terms substantially equivalent to those contained in
the
commitment letter dated May 20, 2006, or Borrower shall have closed on a Senior
Credit Agreement for a facility of not less than $15 million with Laurus Master
Fund, Ltd.; and
(H) Xxxxx
Fargo Bank, National Association or Laurus Master Fund, Ltd. shall have received
a subordination/consent agreement from Ronco Inventions, LLC, Popeil Inventions,
Inc., RP Productions, Inc., RMP Family Trust, and Xxxxxx X. Xxxxxx.
(b) To
Obligations of Borrower.
The
Borrower’s obligation to sell and issue the Notes at each Closing is subject to
the fulfillment on or before such Closing of the following conditions, unless
waived in writing by the Borrower:
(i)
Borrower
shall have received duly executed copies of this Agreement from each of the
Lenders participating in such Closing;
(ii) all
representations and warranties made by Lenders to Borrower under this Agreement
and the other Loan Documents, if applicable, in such Closing are true and
correct in all material respects;
(iii)
all
documents and proceedings shall be reasonably satisfactory to legal counsel
for
the Borrower;
(iv)
the
Borrower shall be satisfied that the offer and sale of the Notes and the shares
issuable upon conversion of the Notes (the “Conversion
Shares”)
shall
be qualified or exempt from registration or qualification under all applicable
federal and state securities laws (including receipt by the Borrower of all
necessary blue sky law permits and qualifications required by any state, if
any); and
(v) Borrower
shall have received the purchase price for the applicable Note as set forth
on
Schedule
1
hereto.
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3. Representations
and Warranties of Borrower.
A
Schedule of Exceptions (each, a “Schedule
of Exceptions”)
shall
be delivered to the applicable Lenders participating in each Closing. Except
as
set forth on the Schedule of Exceptions delivered to the Lender at the
applicable Closing, the Borrower hereby represents and warrants to such Lenders
as of the date of such Closing:
(a) Borrower
is a corporation duly organized validly existing and in good standing under
the
laws of the State of Delaware and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted, except for
where the failure to have such requisite authority would not result in a
material adverse effect on the Borrower’s financial condition or business as now
conducted (a “Material
Adverse Effect”).
(b) The
execution, delivery, and performance of this Agreement and the other Loan
Documents have been duly authorized by all necessary action by Borrower and
are
the legal, valid, and binding obligations of Borrower, enforceable in accordance
with their respective terms, except (i) as limited by bankruptcy, insolvency,
or
other laws of general application relating to the enforcement of creditors’
rights, (ii) as limited by rules of law governing specific performance,
injunctive relief or other equitable remedies and by general principles of
equity and (iii) to the extent the indemnification provisions contained in
the Loan Documents may further be limited by applicable laws and principles
of
public policy.
(c) The
Borrower has delivered to the Lead Lender its consolidated balance sheet as
of
June 30, 2005 and the related consolidated statements of operations and cash
flows for the one day June 30, 2005 (Date of Acquisition) and stockholders'
equity for the period October 15, 2004 (Date of Inception) to June 30, 2005
and
its unaudited consolidated balance sheet at March 31, 2006, its unaudited
Consolidated and Combined Statements of Operations for the three and nine months
ended March 31, 2006, its unaudited Consolidated Statement of Stockholders'
Equity for the nine months ended March 31, 2006 and its unaudited Consolidated
and Combined Statements of Cash Flows for the nine months ended March 31,
2006
(the
“Financial
Statements”).
Each
Financial Statement is true and correct in all material respects, fairly
presents in all material respects the financial condition of Borrower as of
the
date(s) and during the period(s) indicated therein, and has been pre-pared
in
accordance with generally accepted accounting principles, consistently applied
throughout the period indicated, except as disclosed therein. Except as set
forth on the Schedule of Exceptions, as of the date of this Agreement, there
are
no obligations, liabilities, or indebtedness (including contingent and indirect
liabilities) which are material to Borrower, and not reflected in such Financial
Statements; and no material adverse changes have occurred in the financial
condition or business of Borrower since the date of the most recent Financial
Statements.
(d) Neither
the execution and delivery of this Agree-ment and the other Loan Documents,
nor
the consummation of any of the transactions herein or therein contemplated,
nor
compliance with the terms and provisions hereof or thereof, will (i) contravene
or conflict with any provision of law, statute, or regulation to which Borrower
is subject or any judgment, license, order, or permit applicable to Borrower
that would
-5-
result
in
a Material Adverse Effect, (ii) contravene or conflict with any provision of
any
indenture, mortgage, deed of trust, or other instrument to which Borrower may
be
subject that would result in a Material Adverse Effect, or (iii) require the
consent, approval, authorization, or order of any court, governmental authority,
or, to Borrower’s knowledge, third party in connection with the execution and
delivery by Borrower of this Agreement or the transactions contemplated herein
or therein, which have not previously been obtained and which failure to obtain
would result in a Material Adverse Effect.
(e) Except
as
set forth on Schedule of Exceptions, no litigation, investigation, or
governmental proceeding is pending or, to the Borrower’s knowledge, threatened
against or affecting Borrower that would have a Material Adverse Effect.
(f) The
Borrower has good and marketable title to its properties and assets, and has
good title to all its leasehold interests, in each case subject to no material
mortgage, pledge, lien, lease, encumbrance or charge, other than (i) liens
for current taxes not yet due and payable, (ii) liens imposed by law and
incurred in the ordinary course of business for obligations not past due,
(iii) liens in respect of pledges or deposits under workers’ compensation
laws or similar legislation, and (iv) liens, encumbrances and defects in title
which do not in any case materially detract from the value of the property
subject thereto or have a Material Adverse Effect, and which have not arisen
otherwise than in the ordinary course of business.
(g) The
principal office, chief executive office, and principal place of business of
Borrower are in Chatsworth, California; provided, however, that the Borrower
intends to move its principal office, chief executive office, and principal
place of business to Simi Valley, California.
(h) All
tax
reports and returns required by any law or regulation to be filed have been
filed and all taxes required to be paid by Borrower have in fact been paid,
except (i) where the failure to do so would not have a Material Adverse Effect
or (ii) the taxes are being contested in good faith by appropriate proceedings
for which adequate reserves have been established.
(i) To
the
Borrower’s knowledge, no written certificate or written statement herewith or
heretofore delivered by Borrower to Lender in connection herewith, or in
connection with any transaction contemplated hereby, contains any untrue
statement of a material fact or fails to state any materi-al fact necessary
to
keep the statements contained therein from being misleading.
(j) To
Borrower’s knowledge, Borrower and its subsidiaries are in compliance with all
laws, ordinances, governmental rules, or regulations the conduct of Borrower’s
and its subsidiaries’ business, the ownership of its assets, and otherwise,
except for where the failure to so comply would not have a Material Adverse
Effect. To Borrower’s knowledge, no event of default exists under any material
agreement, contract, or understanding to which Borrower or any subsidiary is
a
party, which violation or event of default would have a Material Adverse
Effect.
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(k) To
Borrower’s knowledge, no event of default under this Agreement or default under
the other Loan Documents to which Borrower is a party has occurred and to
Borrower’s knowledge, the Borrower is not in default with respect to any writ,
injunction, decree, or demand of any court or any government authority which
would have a Material Adverse Effect.
4. Representations
and Warranties of Lender.
Each
Lender, severally and not jointly, represents and warrants to Borrower upon
the
acquisition of a Note as follows:
(a) Binding
Obligation.
Such
Lender has full legal capacity, power, and authority to execute and deliver
this
Agreement and to perform its obligations hereunder. Each of this Agreement
and
the Note issued to such Lender is a valid and binding obligation of the Lender,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors’ rights generally and general principles of
equity.
(b) Securities
Law Compliance.
Such
Lender has been advised that the Note and the underlying securities have not
been registered under the Securities Act of 1933, as amended (the “Securities
Act”),
or
any state securities laws and, therefore, cannot be resold unless it is
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration requirements is available. Such
Lender is aware that, Borrower is under no obligation to effect any such
registration with respect to the Note or to file for or comply with any
exemption from registration. Such Lender has not been formed solely for the
purpose of making this investment and is purchasing the Note to be acquired
by
such Lender hereunder for its own account for investment, not as a nominee
or
agent, and not with a view to, or for resale in connection with, the
distribution thereof. Such Lender has such knowledge and experience in financial
and business matters that such Lender is capable of evaluating the merits and
risks of such investment, is able to incur a complete loss of such investment
and is able to bear the economic risk of such investment for an indefinite
period of time. Such Lender is an accredited investor as such term is defined
in
Rule 501 of Regulation D promulgated under the Securities
Act.
(c) Access
to Information.
Such
Lender acknowledges that Borrower has given such Lender access to the corporate
records and accounts of the Borrower, has made its officers and representatives
available for interview by such Lender, and has furnished such Lender with
all
documents and other information required for such Lender to make an informed
decision with respect to the purchase of the Note.
5. Affirmative
Covenants.
Until
payment in full of the Note and all other obligations and liabilities of
Borrower under this Agreement, Borrower agrees and covenants that (unless the
Lead Lender shall otherwise consent in writing):
(a) Xxxxxxx
X. Xxxxx, subject to his ability to serve, is and shall continue to (i) serve
as
Chief Executive Officer of the Borrower and report to the Board of Directors
and
(ii) serve as a member of the Board of Directors of the Borrower (subject to
the
approval of the Borrower’s stockholders at any annual or other stockholder
meeting where directors are to be elected).
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(b) Subject
to (i) the earlier resignations of Xxxxx Xxxxxxxxxxx and X. Xxxxxxx Xxxxxx
xxxx
the Borrower’s Board of Directors, (ii) his ability to serve, and (iii) the
approval of the Borrower’s stockholders at any annual or special meeting of the
Borrower’s stockholders where directors are to be elected, the Board of
Directors of Borrower shall appoint Xxxx Xxxxxxx as a member of the Board of
Directors of the Borrower and, if Xx. Xxxxxxx meets the independence and other
applicable requirements of, the Xxxxxxxx-Xxxxx Act of 2002, the rules of the
Nasdaq Stock Market, and the rules and regulations adopted by the Securities
and
Exchange Commission (the “SEC”),
the
Board of Directors of Borrower shall appoint Xx. Xxxxxxx as a member of the
Audit Committee of the Board of Directors of the Borrower (the “Audit
Committee”).
In
such capacities, Xx. Xxxxxxx shall have access
to
all financial and related records of Borrower and be provided an office and
customary senior management support in Borrower’s executive
office.
Upon
payment in full of the Note and all other obligations and liabilities of
Borrower under this Agreement, then the Board of Directors of Borrower may
at
such time request that Xx. Xxxxxxx resign from Borrower’s Board of Directors,
and within five (5) days following such request, Xx. Xxxxxxx shall resign from
Borrower’s Board of Directors.
(c) Borrower
will use the proceeds of the Loan for working capital and other general
corporate purposes but only as set forth on Schedule
2
hereto.
(d) Borrower
shall use reasonable commercial efforts to conduct its business in an orderly
and efficient manner consistent with good business practices and in accordance
with all valid regulations, laws, and orders of any governmental authority
the
violation of which would have a Material Adverse Effect and will act in
accordance with customary industry standards in maintaining and operating its
assets, properties, and investments.
(e) Borrower
shall maintain complete and accurate books and records of its transactions
in
accordance with general-ly accepted accounting principles, and will give Lead
Lender, following reasonable advance notice, access during business hours to
all
books, records and documents of Borrower and permit Lead Lender to make and
take
away copies thereof. Notwithstanding any provision of this Agreement to the
contrary, Borrower shall not be required to disclose, permit the inspection,
examination, copying or making extracts of, or discuss, any document,
information or other matter that (i) constitutes non-financial trade secrets
or
non-financial proprietary information, or (ii) the disclosure of which to the
Lead Lender, or its designated representative, is then prohibited by (A) law
or
(B) an agreement binding on Borrower that was not entered into by Borrower
for
the primary purpose of concealing information from the Lead Lender.
(f) Borrower
shall furnish to Lead Lender and each Significant Lender, immediately upon
becoming aware of the existence of any condition or event consti-tuting an
Event
of Default or event which, with the lapse of time and/or giving of notice,
would
constitute an Event of Default, written notice specifying the nature and period
of existence thereof and any action which Borrower is taking or proposes to
take
with respect thereto. For purposes of this Section
5(f), “Significant
Lender”
means
a
Lender that has a Significant Investment. For purposes of this Section
5(f), “Significant
Investment”
means
the sum of the principal amount of the Note held by such Lender and the
aggregate purchase price of the shares of the Company’s Series A Convertible
Preferred Stock held by such Lender equals at least $1,000,000.
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(g) Borrower
shall maintain or cause to be maintained insurance from responsible and
reputable companies in such amounts and covering such risks as is reasonably
acceptable to Lead Lender, is prudent and is usually carried by companies
engaged in business similar to that of Borrower including, without limitation,
insurance, comprehensive liability insurance, fire and extended insurance,
with
Borrower named as a co-loss payee; Borrower shall furnish Lead Lender, on
request, with certified copies of insurance policies or other appropriate
evidence of compliance with the foregoing covenant.
(h) Borrower
shall promptly notify the Lead Lender of the filing of any Current Report on
Form 8-K with the SEC that reports (i) any material adverse change in its
financial condition or business, (ii) any default under any material agreement,
contract, or other instrument to which Borrower is a party or by which any
of
its properties are bound, or any acceleration of any maturity of any
indebtedness owing by Borrower, (iii) any material adverse claim against or
affecting Borrower or any of its subsidiaries or any of their properties, and
(iv) any litigation or any claim or controversy which might become the
subject of litigation, against Borrower or affecting any of Borrower’s property,
if such litigation or potential liti-gation might, in the event of an
unfavorable outcome, have, in the Lead Lender’s reasonable judgment, a Material
Adverse Effect.
(i) Borrower
shall maintain and preserve its existence under the laws of the State of
Delaware and Borrower shall preserve and maintain all licenses, privileges,
franchises, certificates and the like necessary for the operation of its and
its
subsidiaries business the loss of which would have a Material Adverse
Effect.
(j) Borrower
agrees to furnish to Lead Lender within such time period as the Lead Lender
may
reasonably request such additional information and statements, lists of assets
and liabilities, tax returns, publicly available financial statements, reporting
statements or any other reports with respect to Borrower’s financial condition,
business operations, and properties as the Lead Lender may reasonably request
from time to time. Notwithstanding any provision of this Agreement to the
contrary, Borrower shall not be required to disclose, permit the inspection,
examination, copying or making extracts of, or discuss, any document,
information or other matter that (i) constitutes non-financial trade secrets
or
non-financial proprietary information, or (ii) the disclosure of which to the
Lead Lender, or its designated representative, is then prohibited by (A) law
or
(B) an agreement binding on Borrower that was not entered into by Borrower
for
the primary purpose of concealing information from the Lead Lender.
(k) Borrower
shall, at the request of the Lead Lender, (i) execute, acknowledge, deliver,
or
record such further reasonable instruments and do such further reasonable acts
deemed necessary, desirable, or proper by the Lead Lender to carry out the
purposes of the Loan Documents or to protect the liens or security interests
under the Loan Documents against the rights or interests of third persons,
and
(ii) do such further reasonable acts deemed necessary, desirable, or proper
by
the Lead Lender to comply with the requirements of any agency having
jurisdiction over the Lead Lender.
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(l) Borrower
agrees to reimburse the Lead Lender for all reasonable costs and expenses of
the
Lead Lender, including reasonable attorney’s fees, incurred in connection with
the making of the Loan, the preparation, execution, delivery, and performance
of
this Agreement and the other agreements referred to herein and any subsequent
amendments thereto or waivers thereof, and the charges for recording fees and
legal fees in connection with the Loan transaction, whether or not the Loan
transaction contemplated hereunder or under any other Loan Documents is closed;
and further Borrower’s obligations hereunder shall survive the delivery of the
Loan Documents, the closing of the Loan transaction contemplated hereunder,
and
the release or termination of the Loan Documents, or any other event
whatsoever.
6. Negative
Covenants.
Until
payment in full of the Notes and all other obligations and liabilities of
Borrower hereunder, and the performance of all covenants and agreements of
Borrower hereunder, Borrower covenants that (unless the Lead Lender shall
otherwise consent in writing) Borrower shall not:
(a) endorse,
guarantee, or otherwise become liable for the obligations of any person, firm,
or corporation except for endorsements of negotiable instruments by Borrower
in
the ordinary course of business;
(b) mortgage,
assign, encumber, incur, assume, or grant a security interest in or lien upon
any of the assets of Borrower (collectively, a “Lien”),
except for Permitted Liens. For purposes of this Section 6, “Permitted
Liens”
means
(i) Liens for taxes not yet delinquent or Liens for taxes being contested in
good faith and by appropriate proceedings for which adequate reserves have
been
established; (ii) Liens in respect of property or assets imposed by law which
were incurred in the ordinary course of business, such as carriers’,
warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens
arising in the ordinary course of business which are not delinquent or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other types of social security, and mechanic’s Liens, carrier’s
Liens, and other Liens to secure the performance of tenders, statutory
obligations, contract bids, government contracts, performance and return of
money bonds, and other similar obligations, incurred in the ordinary course
of
business, whether pursuant to statutory requirements, common law or consensual
arrangements; (iv) Liens in favor of Lenders; (v) Liens upon any equipment
acquired or held by Borrower or any of its subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such equipment, so long as such Lien extends only
to the equipment financed, and any accessions, replacements, substitutions,
and
proceeds (including insurance proceeds) thereof or thereto; (vi) Liens arising
from judgments, decrees, or attachments in circumstances not constituting an
Event of Default under Section 6 of this Agreement; (vii) Liens in favor of
customs and revenue authorities arising as a matter of l
-10-
aw
to
secure payments of customs duties in connection with the importation of goods,
(viii) Liens which constitute rights of setoff of a customary nature or
banker’s liens, whether arising by law or by contract; (ix) Liens on
insurance proceeds in favor of insurance companies granted solely as security
for financed premiums; (x) leases or subleases and licenses or sublicenses
granted in the ordinary course of Borrower’s business; and (xi) Liens in favor
of Xxxxx Fargo Bank, National Association or Laurus Master Fund,
Ltd.
(c) liquidate,
dissolve, or merge or consolidate with, or acquire all or substantially all
of
the assets of, any other company, firm, or association; or make any other
substantial change in Borrower’s capitalization; or engage in any business,
other than the businesses currently engaged in by Borrower and any business
substantially similar or related thereto;
(d) sell
any
of its assets, except (i) in the ordinary course of business; (ii) the sale
or
other disposition of assets no longer used or useful in the conduct of its
business; (iii) the sale, lease, assignment, or other transfer of a subsidiary’s
assets to the Borrower; or (iv) the sale of Borrower’s assets to any other
person, firm, or corporation with the agreement that such assets shall be leased
back to Borrower, unless replaced with assets of equal value;
(e) make
any
material change in the nature of Borrower’s business as carried on as of the
date of this Agreement; or
(f) transfer,
assign, or encumber Borrower’s rights or obligations under any Loan Documents or
the proceeds of the Loan without the prior written consent of the Lead Lender,
except for Permitted Liens.
7. Default.
An
“Event of Default” shall exist if any one or more of the following events
(herein collectively called “Events
of Default”)
shall
occur:
(a) Borrower
shall fail to pay when due any principal of, or interest on, the Notes or any
other fee or payment, due hereunder or under any of the Loan Documents and
such
payment shall not have been made within ten days of Borrower’s receipt of
written notice to Borrower of such failure to pay from the applicable Lenders
or
the Lead Lender on behalf of all the Lenders;
(b) any
representation or warranty made in any of the Loan Documents shall prove to
be
untrue or inaccurate in any material respect as of the date on which such
representation or warranty is made;
(c) material
default shall occur in the performance of any of the covenants or agreements
of
Borrower contained herein in any of the other Loan Documents and such default
(other than a monetary default) shall continue for a period of 30 days after
the
affected Lender or the Lead Lender on behalf of any affected Lender sends
Borrower notice thereof;
-11-
(d) Borrower
shall (i) apply for or consent to the appointment of a receiver, custodian,
trustee, intervenor, or liquidator of it or of all or a substantial part of
its
assets, (ii) voluntarily become the subject of a bankruptcy, reorganization,
or
insolvency proceeding or be insolvent or admit in writing that it is unable
to
pay its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) in connection with any voluntary bankruptcy or
insolvency, file a petition or answer seeking reorganization or an arrangement
with creditors or to take advantage of any bankruptcy or insolvency laws, (v)
in
connection with any involuntary bankruptcy or insolvency proceedings, file
an answer admitting the material allegations of, or consent to, or default
in
answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, (vi) become the subject of an order for relief under
any bankruptcy, reorganization or insolvency pro-ceeding, and such order shall
continue unstayed and in effect for a period of 60 days, or (vii) fail to
pay any money judgment against it before the expiration of 60 days after such
judgment becomes final and no longer subject to appeal;
(e) an
order,
judgment, or decree shall be entered by any court of competent jurisdiction
or
other competent authority approving a petition appointing a receiver, custodian,
trustee, intervenor, or liquidator of Borrower or of all or substantially all
of
its assets, and such order, judgment or decree shall continue unstayed and
in
effect for a period of 60 days; or a complaint or petition shall be filed
against Borrower seeking or instituting a bankruptcy, insolvency,
reorganization, rehabilitation, or receivership proceeding of Borrower, and
such
petition or complaint shall not have been dismissed within 60 days;
(f) an
event
of default shall have occurred with respect to the payment of any material
indebtedness of the Borrower, including without limitation the indebtedness
evidenced by the Senior Credit Agreement, or in the performance of any of its
material obligations, including without limitation any of its material
obligations under the Senior Credit Agreement or any of the agreements between
the Company and Xxxxxx X. Xxxxxx and any such event of default shall continue
for more than any applicable period of grace;
(g) the
Lead
Lender shall not have received completed and executed consents to release of
medical records of Xxxxxx X. Xxxxxx relating to the Life Insurance Policy
referred to in the Insurance Agreement within 45 days following the date of
the
Initial Closing;
(h) the
Lead
Lender shall not have received a subordination/consent agreement from Ronco
Inventions, LLC, Popeil Inventions, Inc., RP Productions, Inc., RMP Family
Trust, and Xxxxxx X. Xxxxxx subordinating payment of Borrower’s indebtedness to
them to the Loans within 45 days following the Initial Closing; and
(i) the
Third
Closing shall not have occurred within 75 days following the Initial Closing.
-12-
8. Remedies
Upon Event of Default.
If an
Event of Default shall have occurred and be continuing, then Required Lenders
(as defined below), or the Lead Lender at the direction of Required Lenders,
may
(a) declare the principal of, and all interest then accrued on, the Notes and
any other liabilities of Borrower owed to Lenders to be forthwith due and
payable, whereupon the same shall forthwith become due and payable without
notice, presentment, demand, protest, notice of intention to accelerate, or
other notice of any kind, all of which Borrower hereby expressly waives,
anything contained herein or in the Note to the contrary notwithstanding, or
(b) without notice of default or demand, pursue and enforce any of Lenders’
rights and remedies under the Loan Documents or otherwise provided under or
pursuant to any applicable law or agreement. “Required
Lenders”
means
(a) the Lead Lender and (b) Lenders whose aggregate principal balance of Notes
exceeds 66-2/3% of the aggregate principal amount of all Notes.
9. Collateral.
Repayment of the Notes shall be secured by a collateral assignment of the Life
Insurance Policy issued by Xxxx Xxxxxxx Life Insurance Company on the life
of
Xxxxxx X. Xxxxxx, as set forth in that certain Insurance Assignment of even
date
herewith.
10. Miscellaneous.
(a) No
Waiver.
No
failure to exercise, and no delay on the part of a Lender in exercising any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The rights of a Lender hereunder
and
under the other Loan Documents shall be in addition to all other rights provided
by law. No notice or demand given in any case shall constitute a waiver of
the
right to take other action in the same, similar or other instances without
such
notice or demand.
(b) Notices.
All
notices or other communications required or permitted under any of the Loan
Documents must be given in writing and must be personally delivered, sent by
facsimile transmission or mailed by prepaid certified or registered mail, return
receipt requested, to the party to whom such notice or communication is directed
at the address of such party as follows:
|
(i)
|
Borrower:
|
Ronco
Corporation
|
|
00000
Xxxxxxxx Xxxxxx
|
||
|
Xxxxxxxxxx,
Xxxxxxxxxx 00000
|
||
|
Attention:
Chief Financial Officer
|
||
|
Telecopy
No.: ________________
|
||
|
(ii)
|
Lead
Lender:
|
Xxxxxxx
Xxxxxx Xxxxxx Inc.
|
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
|
||
|
Xxxxxxx,
Xxxxx 00000
|
||
|
Attn:
Xxxxx X. XxXxxxx
|
||
|
Telecopy
No.: 000-000-0000
|
||
|
(iii)
|
All
other Lenders:
|
To
the address set forth opposite their name on Schedule
1.
|
-13-
All
notices and communications hereunder will be deemed effectively given the
earlier of (i) when received, (ii) when delivered personally,
(iii) one business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one business day after being deposited with
an overnight courier service of recognized standing, or (v) four days after
being deposited in the U.S. mail, first class with postage prepaid.
(c) Knowledge.
For
purposes of this Agreement, “Borrower’s knowledge” refers to the knowledge,
information, and belief of Borrower’s Chief Executive Officer, President, or
Chief Financial Officer after making inquiry of their respective direct reports
or other appropriate officers or employees of Borrower reasonably likely to
have
knowledge of the matter to which such reference relates.
(d) Governing
Law.
This
Agreement and the other Loan Documents are being executed and delivered, and
are
intended to be performed, in the State of Texas, and the substantive laws of
Texas shall govern the validity, construction, enforcement and interpretation
of
this Agreement and all other Loan Documents, except to the extent: (i) otherwise
specified therein; or (ii) federal laws governing maximum interest rates
shall provide for rates of interest higher than those permitted under the laws
of the State of Texas.
(e) Invalid
Provisions.
If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under present or future laws effective during the term of this Agreement, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
(f) Entirety
and Amendments.
The
Loan Documents embody the entire agreement between the parties and supersede
all
prior agreements and understandings, if any, relating to the subject matter
hereof and thereof, and no waiver, consent, release, modification, or amendment
of or supplement to this Agreement or the other Loan Documents shall be valid
or
effective against any party hereto unless the same is in writing and signed
by
(i) if such party is Borrower, by Borrower, (ii) if such party is \the Lead
Lender, by such party, and (iii) if such party is a Lender, by such Lender
or by
the Lead Lender on behalf of Lenders with the written consent of Required
Lenders. Notwithstanding the foregoing or anything to the contrary herein,
the
Lead Lender shall not, without the prior consent of each individual Lender,
execute and deliver on behalf of such Lender any waiver or amendment which
would: (A) waive any of the conditions specified in Section 2(a)(ii), (B)
increase the maximum amount which such Lender is committed hereunder to lend,
(C) reduce any fees payable to such Lender hereunder, or the principal of,
or
interest on, such Lender’s Note, (D) extend the maturity date or postpone any
date fixed for any payment of any such fees, principal or interest on such
Lender’s Note, (E) amend the definition herein of Required Lenders (F) release
Borrower from its obligation to pay such Lender’s Note, or (G) amend this
Section 10(f). Notwithstanding the foregoing, Rights Lenders purchasing Notes
in
the Third Closing may become parties to this Agreement in accordance with
Section 1(f) without any amendment of this Agreement pursuant to this
paragraph or any consent or approval of the Lead Lender.
-14-
(g) Headings.
Paragraph and section headings are for convenience of reference only and shall
in no way affect the interpretation of this Agreement.
(h) Construction
and Conflicts.
The
provisions of this Agreement shall be in addition to those of the Notes and
the
other Loan Documents. Nothing herein contained shall prevent the Required
Lenders from enforcing the Notes and the Loan Documents in accordance with
their
respective terms. To the extent of any conflict or contradiction between the
terms of this Agreement and the terms of such Lender’s Note or the other Loan
Documents or any other document executed in connection herewith, the terms
of
this Agreement shall control.
(i) Financial
Terms.
As used
in this Agreement, all financial and accounting terms not otherwise defined
herein shall be defined and calculated in accordance with generally accepted
accounting principles consistently applied.
(j) Expenses
of Lender.
Borrower will, on demand, reimburse the Lead Lender for all of its reasonable
expenses except as otherwise provided herein, including the reasonable fees
and
expenses of legal counsel for the Lead Lender, incurred by Lead Lender in
connection with the preparation, administration, amendment, modification, or
enforcement of this Agreement, the Note, and the Loan Documents and the
collection or the attempted collection of the Note.
11. Confidentiality.
Each
Lender acknowledges that the information received by them pursuant to this
Agreement is confidential and for its use only, and it will not use such
confidential information in violation of the Securities Act or the Securities
Exchange Act of 1934, as amended, or reproduce, disclose, or disseminate such
information to any other person (other than its employees or agents having
a
need to know the contents of such information, and its attorneys), except in
connection with the exercise of rights under this Agreement, unless Borrower
has
made such information available to the public generally.
12. Right
to Assign.
A
Lender may assign the Note issued to such Lender under the terms of this
Agreement pursuant to the terms of Section 11 of the Note, provided that prior
to such assignment the assignee agrees in writing to be bound by the terms
and
conditions of this Agreement and the other Loan Documents. In case of such
assignment, Borrower shall accord full recognition thereto and hereby agrees
that all rights and remedies of such Lender in connection with the Note so
assigned shall be enforceable against Borrower by the assignee thereof. Other
than as set forth in the preceding sentence, Lender shall have no right to
assign all or any portion of its rights, interests, or obligations under this
Agreement without the prior written consent of the Borrower. Borrower shall
have
no right to assign all or any portion of its rights, interests, or obligations
under this Agreement without the prior written consent of the Lead Lender.
Notwithstanding the foregoing, the Notes may only be assigned pursuant to this
Section 12 following the Third Closing and such Notes may not be assigned to
a
competitor of Borrower without the prior written consent of
Borrower.
-15-
13. Counterparts.
This
Agreement may be executed in any number of counterparts and by different parties
hereto on separate counterparts and each such counterpart shall be deemed to
be
an original, but all such counterparts shall together constitute but one and
the
same Agreement.
14. NO
ORAL AGREEMENTS.
THIS WRITTEN LOAN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If
a
Lender agrees to the foregoing, such Lender should execute this Agreement in
the
space indicated below.
BORROWER
RONCO
CORPORATION
By:
/s/
Xxxxxxx X. Xxxxx,
Xx.
Name:
Xxxxxxx X. Xxxxx, Xx.
Title:
President and Chief Executive Officer
ACCEPTED:
LENDER
XXXXXXX
XXXXXX XXXXXX INC.
By:_/s/
Xxx X.
Xxxxxx
Name:
Xxx
X. Xxxxxx
Title:
Chief Executive Officer
____________________________________
____________________________________
List
of Loan Documents
1.
Letter
Loan Agreement
2.
Promissory
Note(s)
3.
Security
Agreement
4.
Insurance
Assignment
-16-
SCHEDULE
1
Lenders
|
Name
and Address
|
Loan
|
|
Xxxxxxx
Xxxxxx Xxxxxx Inc.
|
$1,500,000
in the Initial Closing
|
|
600
Xxxxxx, Suite 3100
|
$1,500,000
in the Second Closing
|
|
Xxxxxxx,
Xxxxx 00000
|
-17-
SCHEDULE
2
Use
of
Proceeds
[Please
provide schedule]
-18-
