EXHIBIT 10.39
FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
AND TO REVOLVING NOTE
This Amendment is made as of this 28th day of December, 1995, by and
between K-TEL, INC., a Minnesota corporation, having its principal place of
business in Plymouth, Minnesota ("Borrower"), and TCF BANK MINNESOTA FSB, a
federally chartered stock savings bank (the "Bank").
RECITALS
A. The Borrower and the Bank have entered into a Revolving Credit
Agreement dated as of January 30, 1995, as amended by a First Amendment to
Revolving Credit Agreement and to Revolving Note dated as of July 20, 1995, by a
Second Amendment to Revolving Credit Agreement dated as of October 2, 1995 and
by a Third Amendment to Revolving Credit Agreement and to Revolving Note dated
as of November 28, 1995 (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 Borrower in the aggregate amount of up to $3,000,000.
B. The Borrower's obligation to repay the revolving advances made by
the Bank under the Credit Agreement is evidenced by the Borrower's Revolving
Note dated January 30, 1995, payable to the Bank's order in the original
principal amount of $3,000,000, as amended (the "Note").
C. The Borrower has requested that the Bank extend the Commitment
Termination Date to November 30, 1996 and make certain other changes to the
Credit Agreement.
D. The Bank is willing to grant the Borrower's request subject to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used in this Amendment, unless specifically
defined herein, shall have the meanings given to such terms in the Credit
Agreement.
2. Section 1.1 of the Credit Agreement is hereby amended by deleting
the existing definitions of "Borrowing Base", "Commitment Amount", "Commitment
Termination Date", "Interest Rate Spread", "Subordinated Debt" and "Returns" and
by substituting therefor the following new definitions:
"`Borrowing Base' means, at any time, the lesser of the
Commitment Amount or the sum of
(i) 75% of Eligible Accounts, less Returns, computed on
the basis of the most recent Borrowing Base
Certificate furnished to the Bank under Section
5.1(e); plus
(ii) the lesser of (a) 40% of Eligible Inventory or (b)
$1,500,000, computed on the basis of the most recent
Borrowing Base Certificate furnished to the Bank
under Section 5.1(e); minus
(iii) the amount of all deposits made into the Borrower's
Collateral Account since the date of the most recent
Borrowing Base Certificate furnished to the Bank
under Section 5.1(e); minus
(iv) the amount of the Borrower's inventory reserve
maintained pursuant to Section 5.10, which inventory
reserve shall in no event be less than $300,000 at
any time."
"`Commitment Amount' means $2,500,000."
"`Commitment Termination Date' means November 30, 1996 or the
earlier termination of the Commitment pursuant to Section 7.2 hereof."
"`Interest Rate Spread' means (i) one and one-half of one
percent (1.50%) through and including December 31, 1995 and (ii) one
and three-quarters of one percent (1.75%) from and after January 1,
1996."
"`Subordinated Debt' of any Person means indebtedness for
borrowed money of such Person which has been subordinated in right of
payment to such Person's indebtedness to the Bank on terms accepted in
writing by the Bank; provided, however, for purposes of Section 5.8 and
5.9 of this Agreement, the Subordinated Debt of the Borrower shall not
include at any time any indebtedness for borrowed money owed by the
Borrower to K-Tel USA which is in excess of an aggregate amount of
$1,000,000."
"`Returns' means, as of the date of determination, 10% of the
Borrower's billed and unpaid Accounts."
3. Section 1.1 of the Credit Agreement is hereby amended by adding the
following new definitions of "Capital Base" and "Fourth Amendment" in the
appropriate alphabetical location:
"`Capital Base' of any Person means, at any date, the sum of
the Tangible Net Worth of such Person plus the Subordinated Debt of
such Person at such date."
"`Fourth Amendment' means that certain Fourth Amendment to
Revolving Credit Agreement and to Revolving Note dated as of December
28th, 1995, between the Bank and the Borrower."
4. Section 5.7 of the Credit Agreement is hereby amended to read as
follows:
"Section 5.7 Current Ratio. The Borrower will maintain at all
times the ratio of its Current Assets to Current Liabilities at not
less than 1.0 to 1."
5. Section 5.8 of the Credit Agreement is hereby amended to read as
follows:
"Section 5.8 Debt to Capital Base Ratio. The Borrower will
maintain at all times the ratio of its Debt to Capital Base Ratio at
not more than 9.0 to 1."
6. Section 5.9 of the Credit Agreement is hereby amended to read as
follows:
"Section 5.9 Capital Base. The Borrower will maintain at all
times its Capital Base at not less than $550,000."
7. Article V of the Credit Agreement is hereby amended by adding the
following new Section 5.10 immediately following Section 5.9:
"Section 5.10 Minimum Inventory Reserve. The Borrower shall at
all times maintain an inventory reserve in an amount not less than
$300,000."
8. Section 6.9 of the Credit Agreement is hereby amended to read as
follows:
"Section 6.9 Capital Expenditures. Without the Bank's prior
written consent, the Borrower will not make any Capital Expenditure if,
after giving effect to such Capital Expenditure, the aggregate amount
of Capital Expenditures made by the Borrower during its fiscal year
ended June 30, 1996 or in any fiscal year thereafter would exceed
$100,000 in the aggregate."
9. The effectiveness of this Amendment shall be subject to the
condition precedent that the Bank shall have received each of the following in
form and substance acceptable to the Bank:
(a) A certified copy of the resolutions of the Board of
Directors of the Borrower evidencing approval of this Amendment and
other matters contemplated hereby, certified by the Secretary or
Assistant Secretary of the Borrower 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
Secretary of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Amendment and the
other documents to be delivered by the Borrower hereunder.
(b) A Certificate of the Secretary of the Borrower certifying
as to (1) the fact that the articles of incorporation and bylaws of the
Borrower, which were previously certified and delivered to the Lender
continue in full force and effect and have not been amended or
otherwise modified except as set forth in the Certificate to be
delivered.
(c) Acknowledgment and Agreement of Guarantors attached below.
(d) Such other items as the Bank may require.
10. From and after the date of this Amendment all references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended by this Amendment.
11. Except as explicitly amended by this Amendment, all of the original
terms and conditions of the Credit Agreement shall remain in full force and
effect.
12. The execution of this Amendment and acceptance of any documents
related thereto shall not be deemed to be a waiver of any 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 Amendment.
13. The Borrower, and K-Tel International, Inc., K-Tel International
(USA), Inc. and Dominion Entertainment, Inc., by signing the Acknowledgement and
Agreement of Guarantors 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
Borrower 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
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
14. The Borrower hereby reaffirms its agreement under Section 8.5 of
the Credit Agreement. Without limiting the generality of the foregoing, the
Borrower specifically agrees 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 Amendment and the documents and instruments incidental
thereto.
15. This Amendment and the Acknowledgment and Agreement of Guarantors
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 Amendment to be
duly executed as of the date first above written.
K-TEL, INC.
By /s/ Xxxx Xxxxx
Its Vice President
TCF BANK MINNESOTA FSB
By /s/ Xxxxxxx X. Xxxxxx
Its Vice President
And
By /s/ Xxxxx Xxxxxxxxx
Its Senior Vice President
EX1039.DOC
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS
The undersigned, K-Tel International, Inc., and K-Tel International
(USA), Inc., and Dominion Entertainment, Inc. each a guarantor of the
indebtedness of K-Tel, Inc. (the "Borrower") to the Bank pursuant to their
Guaranties dated as of January 30, 1995, respectively, (the "Guaranties"), each
hereby (i) acknowledges receipt of the foregoing Fourth Amendment; (ii) consents
to the terms (including without limitation the release set forth in paragraph 13
of the foregoing Fourth Amendment) and execution thereof; (iii) reaffirms its
obligations to the Bank pursuant to the terms of its Guaranty; 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
Borrower, 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 for
all of the present and future indebtedness of the Borrower to the Bank.
K-TEL INTERNATIONAL, INC.
By /s/ Xxxx Xxxxx
Its Vice President
K-TEL INTERNATIONAL (USA), INC.
By /s/ Xxxx Xxxxx
Its Vice President
DOMINION ENTERTAINMENT, INC.
By /s/ Xxxx Xxxxx
Its Vice President
EX1039.DOC
