LIMITED SUBORDINATION AGREEMENT
Limited
Subordination Agreement (this “Agreement”)
dated
October 18, 2006, among RONCO CORPORATION, a Delaware corporation, and RONCO
MARKETING CORPORATION, a California corporation (together, “Borrower”);
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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident
of
California (individually and collectively, if more than one, “Subordinate
Lender”);
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ INC., a Texas corporation (“SMH”),
individually and on behalf of the Lenders (as defined in the Letter Loan
Agreement dated June 9, 2006, among the Borrower, SMH, and the Lenders)
(“Lender”).
RECITALS
A. Borrower
is now or may in the future become indebted to Subordinate Lender (any and
all
existing and future indebtedness of Borrower to Subordinate Lender, the
“Subordinate
Debt”).
B. Lender
is
a party to an Intercreditor and Subordination Agreement of even date herewith
(the “Laurus-SMH
Subordination Agreement”)
with
Laurus Master Fund, Ltd., a Cayman Islands company (“Senior
Lender”),
pursuant to which Lender has agreed to subordinate the Priority Debt (as
hereinafter defined) to the Senior Liabilities (as defined in the Laurus-SMH
Subordination Agreement) as provided in Laurus-SMH Subordination
Agreement.
C. Subordinate
Lender is a party to a Subordination Agreement of even date herewith (the
“Laurus-Popeil
Subordination Agreement”)
with
the Senior Lender, pursuant to which the Subordinate Lender has agreed to
subordinate the Subordinate Debt to the Senior Liabilities (as defined in the
Laurus-SMH Subordination Agreement) as provided in the Laurus-Popeil
Subordination Agreement.
D. To
induce
Lender to grant financial assistance to Borrower by way of new credit or
advances or otherwise Borrower and Subordinate Lender hereby agree to certain
terms of subordination as set forth herein.
E. Subordinate
Lender has a direct financial interest in Borrower and will be benefited by
Lender’s granting such financial assistance to Borrower.
F. The
parties have entered into this Agreement in order to set forth the terms of
the
subordination required by Lender.
AGREEMENTS
1. Limited
Subordination.
The
Subordinate Debt is and shall be subordinated and junior in right of payment
to
all existing and future indebtedness of Borrower to Lender, including, without
limitation, principal, interest accrued and to accrue thereon, and costs and
attorneys’ fees associated therewith (the “Priority
Debt”),
to the
extent that Borrower receives and disburses the proceeds of Policy No. 81 070
567 issued by the ▇▇▇▇ ▇▇▇▇▇▇▇ Life Insurance Company on the life of ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇ and any supplementary contracts issued in connection therewith (the
“Policy”),
but
only to the extent of such proceeds. Such agreed subordination shall be without
prejudice to Lender’s right to assert that any and all obligations of Borrower
on the Subordinate Debt are also subordinate to the Priority Debt pursuant
to
applicable law and without prejudice to Subordinate Lender’s right to challenge
such assertion.
2. Payments
to Subordinate Lender. So
long
as Borrower is not in default under any of the documents evidencing, securing,
or otherwise governing the Priority Debt (collectively, the “Loan
Documents”),
nothing herein shall prohibit Subordinate Lender from receiving and accepting
payments on the Subordinate Debt. However, in the event of a default by Borrower
under any of the Loan Documents, including, without limitation, any breach
of
the various financial covenants set forth therein, Borrower shall not make
any
payment upon any portion of the Subordinate Debt with the proceeds of the
Policy.
3. Turnover
of Payments.
In the
event of a default by Borrower under the Loan Documents and following notice
of
such default to Subordinate Lender, Lender shall have the right to compel
Subordinate Lender to turnover to Lender any payments made to Subordinate Lender
following notice of such default by or on behalf of Borrower on the Subordinate
Debt with the proceeds of the Policy until the Priority Debt has been paid
in
full. Borrower agrees to provide notice to Subordinate Lender when any payment
to Subordinate Lender represents proceeds from the Policy. Provision of such
notice is not a condition to Lender’s right to compel turnover of funds required
to be turned over to it pursuant to this Paragraph 3.
4. Insolvency
or Liquidation Proceedings. In
connection with any insolvency or liquidation proceedings relating to Borrower
or the Priority Debt, this Agreement shall remain in full force and effect
and
Lender. The parties hereto shall not file any proofs of claim, objections,
pleadings, or other papers, or take any other actions, that are or would be
inconsistent with the system of priorities set forth in this
Agreement.
5. Laurus
Subordination Agreement. This
Agreement is intended to set forth limited subordination rights as between
Lender and Subordinate Lender with respect to the Priority Debt and the
Subordinate Debt and is subject to the subordination of both the Priority Debt
and the Subordinate Debt to the Senior Liabilities as defined and set forth
in
each of the Laurus-SMH Subordination Agreement and the Laurus-Popeil
Subordination Agreement.
6. Continuing
Agreement.
This
Agreement shall in all respects be a continuing agreement, and this Agreement
and the agreements and obligations of the parties hereto shall remain in full
force and effect until the Priority Debt has been paid in full.
7 Assignment.
This
Agreement shall extend to and bind the respective heirs, personal
representatives, successors and assigns of the parties hereto, and the covenants
of Borrower and Subordinate Lender set forth herein respecting subordination
shall extend to, include, and be enforceable by any transferee or endorsee
to
whom Lender may transfer all or any portion of the Priority Debt.
8 Governing
Law. This
Agreement shall be governed by the laws of the State of Texas, without regard
to
that state’s choice of law rules, and Borrower and Subordinate Lender consent to
the jurisdiction of the courts of the State of Texas.
9. Lender
Discretion.
Nothing
in this Agreement shall be construed as requiring Lender to grant any financial
assistance to Borrower or as limiting or precluding Lender from the exercise
of
Lender’s independent judgment and discretion in connection with Lender’s
financial arrangements with Borrower.
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10. WAIVER
OF JURY TRIAL THE
PARTIES HERETO HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN
CONTRACT, TORT, OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT,
OR TO ANY ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.
11. No
Rights to Turkey Fryer.
Lender
acknowledges that it has no interest in the “Turkey Fryer,” as defined in the
New Product Development Agreement dated June 30, 2005 by and between ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇ and ▇▇▇▇▇ Marketing Corporation, a Delaware corporation (“RMC”).
12. No
Present Intention to Initiate Legal Action.
Lender
has no present intention of any kind to initiate any litigation, arbitration,
or
other proceedings whatsoever against or involving Subordinate Lender or any
of
them.
13. Arbitration;
Attorneys’ Fees.
Lender
agrees that it will, and it will cause SMH’s subsidiaries, affiliates,
directors, officers, shareholders and employees to, arbitrate any dispute or
controversy of any kind or nature that it or any of them has or may have with
or
involving any Subordinate Lender that relates to this Agreement or to the
transactions contemplated hereby, solely and exclusively in the manner
prescribed by Section 11.10 of the Asset Purchase Agreement dated December
10,
2004, as amended or supplemented, among RMC and Subordinate Lender, it being
understood and agreed that, with respect to any such dispute, Lender shall
be
bound by and observe the terms of such Section 11.10. Without limiting the
foregoing, Lender agrees that the defendant in any such dispute shall be awarded
costs and attorneys’ fees as provided by such Section 11.10, unless the
plaintiff is the prevailing party in such dispute. If the prevailing party
in
such dispute is the plaintiff, each party shall bear its own costs and
attorneys’ fees.
In
Witness Whereof,
the
parties have executed this Agreement as of the day and year first above
written.
[Signatures
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BORROWER
RONCO
CORPORATION,
a
Delaware corporation
By
/s/
▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Its
Interim
President
RONCO
MARKETING CORPORATION,
a
Delaware corporation
By:
/s/
▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇
Its
President
LENDER:
▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ INC,
a
Texas corporation, individually and on behalf
of
the Lenders
By
/s/
▇▇▇ ▇.
▇▇▇▇▇▇
______________________________
Its
______________________________
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SUBORDINATE
LENDER:
RONCO
INVENTIONS, LLC,
a
California limited liability company
By
/s/
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Its Corporate
Secretary
RONCO
INVENTIONS, INC.
a
Nevada corporation
By
/s/
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Its
Corporate
Secretary
RP
PRODUCTIONS, INC.
a
Nevada corporation,
By
/s/
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Its Corporate
Secretary
RMP
FAMILY TRUST, an Illinois irrevocable trust
By /s/
▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Its
Co-Trustee
/s/
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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