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ZVUE Completes Restructuring

San Francisco — ZVUE, supplier of handheld media players and accompanying digital entertainment content for download, said Tuesday it has completed “a significant restructuring.”

In the process, the company said it restructured several agreements with Eric Bauman and his affiliates, from whom ZVUE purchased on Oct. 31, 2007, in order to accomplish several operational, financial and strategic enhancements.

The company also secured financing for current and future purchase order agreements, as well as completed several cost saving initiatives.

Under the agreement, ZVUE has centralized operations of all PopSauce network websites in Rochester, N.Y., under the management of Eric Bauman. In conjunction, it has discontinued its San Francisco and overseas web operations, the company said.

ZVUE said it now expects improved performance across the PopSauce network, enabling growth in revenue as well as realizing annual cost savings of approximately $1.4 million.

According to a statement: “the performance earn out related to the ZVUE’s 2007 acquisition of, which previously called for cash payments of up to $417,000 per quarter up to a maximum of $2.5 million based on successful completion of certain development projects, has been amended to have payouts based on achievement of mutually agreed business or financial targets.”

ZVUE’s current potential cash obligation of $417,000 has been settled for $250,000 payable immediately with an additional $150,000 payable over five months. The maximum remaining performance payout has been reduced from approximately $1.25 million to $1.05 million and is now payable in cash or stock at ZVUE’s option, based on the achievement of business targets for operations, the company said.

In addition, the financial earn out related to the 2007 acquisition of has been modified to be based strictly on cash flows from Web site operations. Previously it was based on page views achieved by

ZVUE said that under the new deal, “no financial earn out will be due until the websites generate more than $3 million dollars in cash flow. The maximum potential payout has been increased from $27.5 million to $32.7 million, and the earnout period has been extended until 2012.”

Also, certain existing agreements related to stock held in escrow pursuant to the company’s 2007 acquisition of have been modified, whereby receipt of the escrowed stock has either been deferred or tied to accomplishment of specific performance objectives including substantially increased revenue targets. 

In consideration for the amendments and increased responsibility that they have assumed for the PopSauce Network, ZVUE issued a total of 500,000 fully vested shares to Eric and Neil Bauman at closing.

In addition to restructuring of the website operations, over the last several months the company said it has also eliminated another $400,000 of costs from its corporate overhead structure.

Additionally, ZVUE said it has completed a secured financing for ZVUE Products, its media player business. The financing, which closed July 15, 2008, will allow ZVUE to draw up to $1 million to finance purchase order commitments associated with the sale of MP3 and video MP3 players with mass-market retailers.