EXHIBIT 10.5
NEW PRODUCT DEVELOPMENT AGREEMENT
This New Product Development Agreement (this "Agreement") is
made
and entered into as of __________, 2005, by
and among Ronald M. Popeil ("Popeil"
or "Party"), Alan L. Backus ("Backus" or
"Party") and Ronco Marketing
Corporation, a Delaware corporation
("Company" or "Party" and together with
Popeil and Backus, the "Parties").
Reference is made to that certain Asset Purchase Agreement,
dated
December 10, 2004, by and among Company,
Ronco Inventions, LLC, Popeil
Inventions, Inc., RP Productions, Inc., RMP
Family Trust and Popeil (the "Asset
Purchase Agreement").
This Agreement is entered into in connection with the Asset
Purchase
Agreement. The purpose of this Agreement is
to set forth the terms and
conditions pursuant to which Company may
acquire certain rights in and to
certain consumer products to be conceived,
created, designed and developed by
Popeil.
In consideration of the mutual covenants and undertakings set
forth
in this Agreement and for other good and
valuable consideration, the receipt and
sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as
follows:
1.
Development of New Products. As used in this Agreement, the term
"New
Product" means any consumer product
conceived, created, designed and developed
by Popeil and Backus during the Term (as
defined below), to the extent Popeil
owns and controls the rights to such
products, as well as the product designs,
prototypes, tooling and a completed
commercial or infomercial for such New
Product. Subject to the terms and
conditions of this Agreement, Popeil and
Backus may, in their sole and absolute
discretion, but shall in no event be
obligated to, conceive, create, design and
develop New Products during the Term.
Notwithstanding anything to the contrary
set forth in this Agreement, "New
Products" shall not include any products or
works (including without limitation,
books, interviews, articles and other
publications, motion pictures (including,
without limitation, the motion picture
tentatively entitled "Salesman of the
Century"), television programs (including,
without limitation, cooking shows on
which Popeil appears and/or reality based
or fictional productions, but not
including home shopping or infomercial-type
programs the principal purpose of
which is to obtain and fulfill sales
orders), videos, video games and gaming
devices, CDs and DVDs) that are (i)
autobiographical in nature, or (ii)
derivative of or the result of any product
or work described in (i) above,
and/or (iii) derivative of or the result of
any promotion by Popeil of himself
(e.g., derivative of or the result of an
appearance by Popeil on a talk show)
(the products and/or works described in
(i), (ii), and (iii) above are
hereinafter collectively referred to as
"Exempted Works"). Popeil shall have the
exclusive right, in his sole and absolute
discretion, to conceive, create,
design, develop, market, promote
(including, without limitation, through
personal appearances) and/or sell Exempted
Works, and Popeil shall have no duty
of any kind or nature to notify Company, to
account to Company or to pay Company
any sums or other consideration with
respect to Exempted Works or with respect
to services he may render in connection
with Exempted Works.
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A. New
Product Development. For the purposes of this Agreement, all
New
Products
shall be developed, if at all, at Popeil's sole cost and
expense.
A New
Product shall be deemed appropriate for submission to Company
in
accordance
with the terms and conditions of this Agreement, at such time,
if ever,
as the New Product has been conceived, created and designed and
a
working
prototype of the New Product (a "Prototype") has been produced.
B. Third
Parties. Popeil may, in his sole and absolute discretion,
contract
with and/or engage the services of such persons and/or entities
as he sees
fit for purposes of conceiving, creating, designing, developing
and/or
completing New Products under this Agreement.
C.
Allocation of Time. As between Popeil and Company, Popeil shall
determine,
in his sole and absolute discretion, the amount of time (if
any) he
and Backus will devote to the conception, creation, design,
development and completion of New Products, and Popeil shall not
be
required
to spend any minimum number of hours per day, week, month or
year
conceiving, creating, designing, developing or completing New
Products. In
such
regard, Popeil makes no representation or warranty as to the
number
of New
Products that may be conceived, created, designed, developed or
completed
by him during the Term, it being understood that Popeil and
Backus may
choose not to conceive, create, design, develop or complete any
New
Products during the Term.
D.
Creative Controls. As between Popeil and Company, Popeil shall have
all
creative
controls over New Products, and over all packaging,
advertising,
naming and
promotion therefor, including, without limitation, all creative
controls
over all stages of New Product conception, creation, design,
development and completion.
2. Right
of First Refusal. Subject to the terms and conditions of this
Agreement, Company shall have a right of
first refusal, exercisable in
accordance with the terms of Paragraph 2.A
below, to acquire any and all New
Products submitted to Company by Popeil
under this Agreement. The "Term" of this
Agreement and the right of first refusal
shall commence upon the Closing Date
(as such term is defined in the Asset
Purchase Agreement) and shall expire upon
the date that is three (3) years from the
Closing Date, it being understood and
agreed, however, that, notwithstanding
anything to the contrary in this
Agreement, Popeil shall in no event be
required to submit a New Product that has
not reached the prototype phase prior to
expiration of the Term or earlier
termination of this Agreement. The Term
shall be subject to extension, if at
all, only by the mutual agreement in
writing of the parties.
A.
Submission/Negotiation Process. During the Term, Popeil shall
submit
all
Prototypes to Company for consideration by Company, promptly
following
completion
of the Prototype. Submissions of Prototypes shall consist of a
written
notification from Popeil, alerting Company that a Prototype has
been
completed (a "Prototype Notice"), along with the Prototype and
such
items as
shall be reasonably necessary for Company to evaluate the
Prototype.
Except with respect to the Turkey Fryer, the terms of which are
addressed
in Paragraph 2.F below, if Company decides to acquire such New
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Product,
the acquisition price (the "Acquisition Price") of such New
Product
and the terms of such acquisition (e.g., whether the
acquisition
will
include the conveyance or license of any intellectual property
associated
with the New Product described in the Prototype Notice) shall
then be
negotiated between the parties in good faith for a period (the
"Negotiation Period") mutually agreed upon by the parties, but no
longer
than 30
days following the delivery of the Company's written response.
The
Acquisition Price will include, but will not be limited to, the
cost of
any New
Product designs, prototypes, tooling, completion costs related
to
the
completion of the New Product described in Paragraph 2. C below
and
any
completed commercial or infomercial related to such New
Product.
B. First
Refusal. In the event that Company and Popeil do not reach
agreement
regarding the Acquisition Price of a New Product within the
Negotiation Period, Popeil must put his last best offer to Company
in
writing
and deliver such offer to Company. Popeil shall not, during the
Term after
the Negotiation Period, conclude transactions with any third
party with
respect to the New Product on economic terms, taken together in
the
aggregate, more than ten percent (10%) less favorable to Popeil
than
the last
terms reasonably offered by Popeil in writing to Company during
the
Negotiation Period unless Popeil first offers the New Product
to
Company in
writing on such terms and Company does not within ten (10) days
after its
receipt of such notice, notify Popeil in writing that it wishes
to acquire
the New Product in accordance with the terms offered to such
third
party by Popeil. If Company doesn't give such an acceptance
notice
within the
aforesaid 10-days, Popeil will be able proceed with the third
party.
C. New
Product Completion or Abandonment. If Company desires to acquire
a
New
Product as to which it has received a Prototype Notice and Company
and
Popeil
reach an agreement regarding the Acquisition Price during the
Negotiation Period, Popeil shall resume developing the New Product
and
shall,
upon completion, deliver the finished New Product to Company.
Notwithstanding the foregoing, if, at any point during the
completion
process
(i.e., after agreement on the Acquisition Price and prior to
completion
and delivery of the New Product to Company), Popeil determines,
in his
good faith business judgment, that the New Product is not and
will
not be
marketable or fit for sale, Popeil may abandon such New Product
with no further obligation
to Company in connection with such New Product.
Upon
abandonment, Popeil shall promptly deliver notice of such
abandonment
to
Company.
D.
Election by Company Not to Acquire New Product. With respect to
each
New Product as
to which Company has received a Prototype Notice, if (i)
Company
elects not to acquire such New Product; or (ii) Company and
Popeil
do not
reach agreement regarding the Acquisition Price of such New
Product
within the
Negotiation Period, then, in accordance with the terms and
conditions
of this Agreement and subject to the terms of Paragraph 2.B
above:
(i) Popeil shall have no further obligation to Company
whatsoever
with respect to the New Product, Company
shall have no rights of any kind or
nature in or to the New Product, and Popeil
may thereafter use or dispose of the
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New Product as he sees fit in his sole and
absolute discretion; provided,
however, that, notwithstanding anything to
the contrary contained herein, Popeil
shall have no right to license or otherwise
exploit any New Product that is a
derivative product to any existing consumer
product to which Popeil owns and
controls the rights in the following five
product-line categories: Rotisseries,
Pasta Makers, Pocket Fisherman, GLH- Hair
Loss Products, Food Dehydrators (the
"5 Product Line Categories"). Without
limiting the foregoing, with respect to
New Products that are not derivative
products that fall within the 5 Product
Line Categories, Popeil may thereafter (w)
manufacture, merchandise and market
the New Product himself or through any
third party; (x) engage in discussions
with any third party with respect to the
New Product; and/or (y) complete and
conclude transactions with any third party
with respect to the New Product.
Popeil may not, however, act as a spokesman
for such New Products in
commercials, infomercials and/or other
marketing endeavors.
(ii) With the exception of the 5 Product Line Categories
identified in paragraph 2.C.(i) above, the
Company shall grant Popeil a
worldwide, perpetual, royalty-free license
to use, in connection with the
non-acquired New Product, any and all
patents conveyed to Company pursuant to or
in connection with the Asset Purchase
Agreement. Such license shall be
irrevocable and on terms and conditions no
more restrictive or burdensome on the
licensee than the absolute minimum required
by law, if any.
(iii) For New Products not acquired by Company neither
Popeil's name nor likeness nor any material
identifying Popeil can be used on
the packaging of the product or on the
product itself. However, unless Company
has paid Popeil $100,000 as of the
effective date of this Agreement,
notwithstanding the foregoing sentence, on
each such New Product not acquired by
Company hereunder Popeil may place a badge
no larger than a silver dollar, which
can bear the legend "created by Ron Popeil"
and/or "invented by Ron Popeil". If
Company has not exercised its option
hereunder to prevent the use of the "silver
dollar badge", then for each such New
Product not acquired by Company, Company
hereby grants to Popeil in connection with
such product a world-wide, perpetual,
royalty-free license to use or exercise the
"silver dollar" exception on such
New Products not acquired by Company, so
long as such products are of a quality
that are comparable to Company's
products.
E.
Suspension of Right of First Refusal. At such time as (i) there is
an
Event of
Default under the Notes and (ii) the amount available to draw
down under
the standby letter of credit contemplated under Section 6.9 of
the Asset
Purchase Agreement is insufficient to cure such payment
default,
the right
of first refusal under this Agreement shall be suspended until
such time
as there is no longer an Event of Default under the Notes. For
purposes
of clarity, if, during the suspension period, a product that
would
otherwise be subject to the right of first refusal hereunder is
sold
to a third
party such product will not thereafter be subject to the right
of first
refusal or otherwise made available to Company after the
suspension
is lifted. For purposes of this Agreement, the term "Event of
Default"
has the meaning ascribed to such term under the Notes. For
purposes
of this Agreement, the term "Notes" means those purchase money
promissory
notes issued by Company to Ronco Inventions, LLC, Popeil
Inventions, Inc. and RP Productions in connection with the Asset
Purchase
Agreement.
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F. Turkey
Fryer Agreement. If Popeil delivers a Prototype Notice to
Company
with respect to a Turkey Fryer, then the following terms shall
apply.
(i) Turkey Fryer Acquisition Price. The Acquisition Price for
the
Turkey Fryer will be:
(a) an up front fee of $3,000,000 (to be paid to Popeil and/or
his designee(s)) (the "Up Front Fee");
(b) a $5.50 per manufactured unit quality service payment to
be paid to Popeil (which Up Front Fee is
not to be applied against the per unit
quality service payment) in perpetuity;
provided, however, that at such time, if
ever, that the combined amount of the Up
Front Fee and the aggregate monies paid
to Popeil from such unit quality service
payments equal $10,000,000 (the
"Royalty Cap"), C
