EXHIBIT 10.49
SECOND AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This Second Amendment is made as of this ____ day of
September, 1997, by and among K-TEL INTERNATIONAL (USA), INC., a Minnesota
corporation, having its principal place of business in Plymouth, Minnesota
("K-Tel USA"), DOMINION ENTERTAINMENT, INC., a Minnesota corporation, having its
principal place of business in Plymouth, Minnesota ("Dominion"), K-TEL
PRODUCTIONS, INC., a Minnesota corporation, having its principal place of
business in Plymouth, Minnesota ("K-Tel Productions"), K-TEL VIDEO, INC., a
Minnesota corporation, having its principal place of business in Plymouth,
Minnesota ("K-Tel Video"), K-TEL DIRECT, INC., a Minnesota corporation, having
its principal place of business in Plymouth, Minnesota ("K-Tel Direct"), K-TEL
TV, INC., a Minnesota corporation, having its principal place of business in
Plymouth, Minnesota ("K-Tel TV"), K-TEL CONSUMER PRODUCTS, INC., a Minnesota
corporation, having its principal place of business in Plymouth, Minnesota
("K-Tel Consumer Products"; K-Tel USA, Dominion, K-Tel Productions, K-Tel Video,
K-Tel Direct, K-Tel TV and K-Tel Consumer Products are sometimes herein
collectively referred to as the "Borrowers" and each is sometimes individually
referred to as a "Borrower"), and TCF NATIONAL BANK MINNESOTA, a national
banking association, formerly known and organized as TCF Bank Minnesota fsb, a
federally chartered stock savings bank (the "Bank").
RECITALS
A. The Borrowers and the Bank have entered into an Amended and
Restated Revolving Credit Agreement dated as of April 10, 1997, as amended by a
First Amendment to Amended and Restated Revolving Credit Agreement and to
Revolving Note dated as of July 31, 1997 (as amended, the "Credit Agreement"),
pursuant to which the Bank, subject to the terms and conditions set forth
therein, agreed to make revolving advances to the Borrowers in the aggregate
amount of up to $1,000,000.
B. The Borrowers' joint and several obligation to repay the
revolving advances made by the Bank under the Credit Agreement is evidenced by
the Borrowers' Revolving Note dated April 10, 1997, payable to the Bank's order
in the original principal amount of $1,000,000 (the "Prior Note").
C. The Borrowers have requested, among other things, that the
Bank (i) extend the Commitment Termination Date and the Maturity Date from
August 31, 1997 to
December 31, 1997, (ii) increase the Commitment Amount from $1,000,000 to
$2,500,000 and (iii) waive certain Events of Default on the part of the
Borrowers.
D. The Bank is willing to grant the Borrowers' requests
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used in this Second Amendment, unless
specifically defined herein, shall have the meanings given to such terms in the
Credit Agreement.
2. Events of Default have occurred under Section 7.1(c) of the
Credit Agreement because (i) K-Tel USA did not have the required minimum Net
Income before Taxes through the date of this Second Amendment as required by
Section 5.9 of the Credit Agreement, and (ii) the Borrower was not in compliance
with the provisions of Sections 6.2 and 6.4 of the Credit Agreement through the
date of this Second Amendment. Upon the terms and subject to the conditions set
forth in this Second Amendment, the Bank hereby waives the foregoing Events of
Default. This waiver shall be effective only in the specific instance and for
the specific purpose for which it is given, and this waiver shall not entitle
the Borrower to any other or further waiver in any similar circumstance.
3. Section 1.1 of the Credit Agreement is hereby amended by
deleting the existing definitions of "Commitment Amount," "Commitment
Termination Date" and "Maturity Date" and by substituting therefor the following
new definitions:
"'Commitment Amount' means $2,500,000."
"'Commitment Termination Date' means December 31, 1997 or the
earlier termination of the Commitment pursuant to Section 7.2 hereof."
"'Maturity Date' means December 31, 1997."
4. Section 1.1 of the Credit Agreement is hereby amended by
adding the following new definition of "Second Amendment" in the appropriate
alphabetical location:
"'Second Amendment' means that certain Second Amendment to
Amended and Restated Revolving Credit Agreement dated as of September
__, 1997, between the Bank and the Borrowers."
5. Section 2.2 of the Credit Agreement is hereby amended to
read as follows:
"Section 2.2 The Advances. The Bank agrees, on the terms and
conditions herein set forth, to make Advances to K-Tel USA and Dominion
from time to time during the period from the date when all of the
conditions set forth in Section 3.1 hereof are met (the "Closing Date")
to and including the Commitment Termination Date in an aggregate amount
not to exceed at any time outstanding the Borrowing Base less the L/C
Amount. Within the above limits, K-Tel USA and Dominion may borrow,
prepay pursuant to Section 2.8 and reborrow under this Section 2.2. The
Borrowers agree that the proceeds of all Advances made after the
effective date of the Second Amendment shall be made only to K-Tel USA
and Dominion (and not to the other Borrowers) and shall be used by
K-Tel USA and Dominion (and not by the other Borrowers) for the general
working capital purposes of K-Tel USA and Dominion. The Advances made
by the Bank shall be evidenced by a single promissory note of the
Borrowers, dated as of the date of the Second Amendment, payable to the
order of the Bank appropriately completed in substantially the form of
Exhibit A attached to the Second Amendment, as the same may be renewed,
extended, amended or any note shall be issued in substitution therefor
from time to time (the "Note"). The Note shall bear interest in
accordance with Section 2.4 hereof and principal of and interest on the
Note shall be due and payable as provided in Section 2.6 hereof. The
Note has been issued in substitution for, and in replacement of, but
not in payment of, the Borrowers' Revolving Note dated April 10, 1997,
payable to the order of the Bank in the original principal amount of
$1,000,000, as amended."
6. Section 2.10 of the Credit Agreement is hereby amended to
read as follows:
"Section 2.10 Use of Loan Proceeds and Letters of Credit.
K-Tel USA and Dominion shall use the proceeds of each Advance only for
general working capital purposes of K-Tel USA and Dominion. K-Tel USA
and Dominion will use each Letter of Credit for its general corporate
purposes. Neither the proceeds of any Advances nor any Letter of Credit
shall be used by or for the benefit of any of the Borrowers (other than
K-Tel USA and Dominion) or any Affiliate of the Borrowers (other than
K-Tel USA or Dominion), except for existing documentary Letters of
Credit issued for the benefit of K-Tel Consumer Products and
documentary Letters of Credit issued after the date of the Second
Amendment for the benefit of K-Tel Consumer Products in the ordinary
course of business."
7. Section 5.8 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.8 Capital Base of K-Tel USA. K-Tel USA will
maintain at all times its Capital Base in an amount not less than
($100,000)."
8. Section 5.9 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.9 Intentionally Omitted."
9. Article V of the Credit Agreement is hereby amended by
adding the following new Section 5.11:
"Section 5.11 Prohibition of Repayment of Indebtedness owing
to Xxxxxx Xxxxx. The Borrowers covenant and agree that, so long as any
Advances shall be unpaid and/or the Bank's Commitment shall be
outstanding, none of the Loan Parties will repay any principal of any
indebtedness owing by the Loan Parties or any of them to Xxxxxx Xxxxx
or to any entity controlled by Xxxxxx Xxxxx. Nothing in this Section
5.11 shall be deemed to prohibit the payment of interest, when due, by
the Loan Parties to Xxxxxx Xxxxx or to an entity controlled by Xxxxxx
Xxxxx with respect to the outstanding principal indebtedness owed by
the Loan Parties or any of them to Xxxxxx Xxxxx or to an entity
controlled by Xxxxxx Xxxxx."
10. Article V of the Credit Agreement is hereby amended by
adding the following new Section 5.12:
"Section 5.12 Prohibition on Repurchase Stock of K-Tel
International. The Borrowers covenant and agree that, so long as any
Advance shall be unpaid and/or the Bank's Commitment shall be
outstanding, none of the Loan Parties shall repurchase any of the
issued and outstanding stock of K-Tel International."
11. Section 6.2 of the Credit Agreement is hereby amended to
read as follows:
"Section 6.2 Indebtedness of the Borrowers. None of the
Borrowers will incur, create, assume or permit to exist any
indebtedness for borrowed money, or any other indebtedness or
liability, including, without limitation, trade debt or other payables
or Capitalized Leases, except:
(a) Indebtedness of the Borrowers to the Bank.
(b) Indebtedness of the Borrowers in existence on the date of
the Second Amendment and listed in Schedule 6.2 attached to the Second
Amendment.
(c) Trade debt and other payables of the Borrowers incurred in
the ordinary course of business.
(d) Indebtedness of K-Tel USA incurred in connection with
foreign exchange contracts which are entered into by K-Tel USA solely
for the purpose of protecting against exchange change rate
fluctuations.
(e) Accounts payable of Dominion to attorneys who have
represented Dominion in the ordinary course of Dominion's business.
(f) Royalties payable by Dominion or K-Tel USA in the ordinary
course of Dominion's or K-Tel USA's business.
(g) Commissions payable by Dominion or K-Tel USA incurred in
the ordinary course of Dominion's or K-Tel USA's business."
12. Section 6.4 of the Credit Agreement is hereby amended to
read as follows:
"Section 6.4 Investments of the Borrowers. None of the
Borrowers will purchase or hold beneficially any stock or other
securities or evidence of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, except:
(a) Investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America having a maturity of one year or less, commercial paper issued
by U.S. corporations rated "A-1" or "A-2" by Standard & Poors
Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of
one year or less issued by members of the Federal Reserve System having
deposits in excess of $100,000,000.
(b) Travel advances to officers and employees of the Borrowers
in the ordinary course of business.
(c) Advances in the form of progress payments, prepaid rent or
security deposits.
(d) Investments of the Borrowers in existence on the date of
the Second Amendment and listed in Schedule 6.4 attached to the Second
Amendment."
13. Conditions Precedent. The effectiveness of this Second
Amendment shall be subject to the conditions precedent that the Bank shall have
received an executed original hereof, together with each of the following, each
in form and substance acceptable to the Bank:
(a) The Note, duly executed on behalf of the Borrowers.
(b) The First Amendment to Amended and Restated Guaranty by
Corporation, duly executed on behalf of K-Tel International, in the
form attached hereto as Exhibit B.
(c) A certified copy of the resolutions of the Board of
Directors of each Loan Party evidencing approval of this Second
Amendment and the Note and other matters contemplated hereby, certified
by the Secretary or Assistant Secretary of each Loan Party as being a
true, correct and complete copy thereof which has been duly adopted and
is in full force and effect, together with a certificate of such
Secretary or Assistant of such Loan Party certifying the names and true
signatures of the officers of such Loan Party who are authorized to
sign this Second Amendment and the Note and the other documents to be
delivered by the Loan Parties hereunder.
(d) Acknowledgment of Borrowers, duly executed on behalf of
the Borrowers.
(e) Acknowledgment and Agreement of Guarantor attached below,
duly executed on behalf of K-Tel International.
(f) Form W-9, duly executed by the Borrowers.
(g) Payment to the Bank of a fee in the amount of $25,000.
(h) Such other items as the Bank may require.
14. References. From and after the date of this Second
Amendment all references in the Credit Agreement to "this Agreement" and all
references in the other Loan Documents to the Credit Agreement shall be deemed
to refer to the Credit Agreement as amended by this Second Amendment. From and
after the date of this Second Amendment all references in the Loan Documents to
"the Note" shall be deemed to refer to the Note issued to the Bank pursuant to
this Second Amendment.
15. No Other Changes. Except as explicitly amended by this
Second Amendment, all of the original terms and conditions of the Credit
Agreement and the other Loan Documents shall remain in full force and effect.
16. No Other Waiver. Except as explicitly set forth in
paragraph 2 of this Amendment, the execution of this Second Amendment and
acceptance of any documents related thereto shall not be deemed to be a waiver
of any existing or future Default or Event of Default under the Credit Agreement
or any other Loan Document, whether or not known
to the Bank and whether or not such Default or Event of Default exists on the
date of this Second Amendment.
17. Release. The Borrowers and K-Tel International by signing
the Acknowledgment and Agreement of Guarantor set forth below, each hereby
absolutely and unconditionally releases and forever discharges the Bank, and any
and all participants, parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description, whether arising in law or equity or upon
contract or tort or under any state or federal law or otherwise, which the
Borrowers or any Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Second Amendment, whether such claims, demands and causes of action are matured
or unmatured or known or unknown.
18. Expenses. The Borrowers hereby reaffirm their agreement
under Section 8.5 of the Credit Agreement. Without limiting the generality of
the foregoing, the Borrowers specifically agree to pay all fees and
disbursements of counsel to the Bank for the services performed by such counsel
in connection with the preparation of this Second Amendment and the documents
and instruments incidental thereto.
19. Counterparts. This Second Amendment and the Acknowledgment
and Agreement of Guarantor may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date first above written.
K-TEL INTERNATIONAL (USA), INC.
By ______________________________________
Its___________________________________
DOMINION ENTERTAINMENT, INC.
By ______________________________________
Its___________________________________
K-TEL PRODUCTIONS, INC.
By ______________________________________
Its___________________________________
K-TEL VIDEO, INC.
By ______________________________________
Its___________________________________
K-TEL DIRECT, INC.
By ______________________________________
Its___________________________________
K-TEL TV, INC.
By ______________________________________
Its___________________________________
K-TEL CONSUMER PRODUCTS, INC.
By ______________________________________
Its___________________________________
TCF NATIONAL BANK MINNESOTA
By ______________________________________
Its___________________________________
And
By ______________________________________
Its___________________________________
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, K-Tel International, Inc., a guarantor of the
indebtedness of K-Tel International (USA), Inc., Dominion Entertainment, Inc.,
K-Tel Productions, Inc., K-Tel Video, Inc., K-Tel Direct, Inc., K-Tel TV, Inc.
and K-Tel Consumer Products, Inc. (together, the "Borrowers") to the Bank
pursuant to its Amended and Restated Guaranty dated as of April 10, 1997, and as
amended by First Amendment to Amended and Restated Guaranty by Corporation of
even date herewith (as amended, the "Guaranty"), hereby (i) acknowledges receipt
of the foregoing Second Amendment; (ii) consents to the terms (including without
limitation the release set forth in paragraph 17 of the foregoing Second
Amendment) and execution thereof; (iii) reaffirms its obligations to the Bank
pursuant to the terms of its Guaranty, its Amended and Restated Collateral
Pledge Agreement (the "Pledge Agreement") dated as of April 10, 1997 and its
Amended and Restated Security Agreement dated as of April 10, 1997 (the
"Security Agreement"); and (iv) acknowledges and agrees that the Bank may amend,
restate, extend, renew or otherwise modify the Credit Agreement and any
indebtedness or agreement of the Borrowers, or enter into any agreement or
extend additional or other credit accommodations, without notifying or obtaining
the consent of the undersigned and without impairing the liability of the
undersigned under its Guaranty, Pledge Agreement and/or its Security Agreement
for all of the present and future indebtedness of the Borrowers to the Bank.
K-TEL INTERNATIONAL, INC.
By ______________________________________
Its___________________________________
SCHEDULE 6.2
TO SECOND AMENDMENT TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Schedule of Existing Permitted Indebtedness of Borrowers
1. Lease Agreement dated September 4, 1991 with Xxxx Atlantic TriCon
Leasing Corporation for certain equipment.
2. Payment Plan Equipment Schedule and Payment Agreement dated August 1,
1989 with Hewlett-Packard Company for certain equipment.
3. Payment Plan Equipment Schedule and Payment Agreement dated September
24, 1990 with Hewlett-Packard Company for certain equipment.
4. $125,000 owed to Simitar Entertainment, Inc. for purchase of certain
video production rights.
[BORROWER TO PREPARE CURRENT LIST OF ALL
INTERCOMPANY INDEBTEDNESS ACCEPTABLE TO TCF]
SCHEDULE 6.4
TO SECOND AMENDMENT TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Schedule of Existing Permitted Investments of Borrowers
[BORROWER TO PREPARE CURRENT LIST OF ALL
INTERCOMPANY INVESTMENTS ACCEPTABLE TO TCF]
