NEW PRODUCT DEVELOPMENT AGREEMENT

 

                                                                    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