EXHIBIT 10.2
ASSIGNMENT AND ACCEPTANCE
This ASSIGNMENT AND ACCEPTANCE (this "ASSIGNMENT") dated as of February 27,
2001 is made among Foothill Capital Corporation, a California corporation (the
"ASSIGNOR"), K-5 Leisure Products, Inc., a Nevada corporation (the "ASSIGNEE"),
K-Tel International (USA), Inc. ("USA"), Dominion Entertainment, Inc.
("ENTERTAINMENT"), K-Tel Consumer Products, Inc. ("CONSUMER"), K-Tel TV, Inc.
("TV"), K-Tel Video, Inc. ("VIDEO"; and collectively with USA, Entertainment,
Consumer, and TV, hereinafter collectively referred to as "BORROWERS"), and
K-Tel International, Inc. ("INTERNATIONAL"), K-Tel OnLine, Inc.("ONLINE"), and
K-Tel DVD, Inc., ("DVD", and collectively with OnLine and International, the
"GUARANTORS").
RECITALS
A. The Assignor is party to that certain Loan and Security Agreement, dated
as of November 19, 1997 (as amended, amended and restated, modified,
supplemented or renewed from time to time, the "LOAN AGREEMENT"), with Borrower.
Any terms defined in the Loan Agreement and not defined in this Assignment are
used herein as defined in the Loan Agreement;
B. As provided under the Loan Agreement, the Assignor has: (i) committed
(the "LOAN COMMITMENT") to make revolving loans ("REVOLVING LOANS") to Borrower,
and (ii) made a term loan to Borrower (the "Term Loan"), and together with the
Revolving Loans, the "Loans");
C. As provided under the Loan Agreement the Assignor has also committed to
cause to be issued, or to guarantee, Letters of Credit (the "LETTER OF CREDIT
COMMITMENT", and together with the Loan Commitment, the "COMMITMENT"). No
Letters of Credit are outstanding under the Loan Agreement;
D. The Assignee and International are parties to that certain Credit
Agreement, dated as of September 27, 1999 (the "ASSIGNEE CREDIT AGREEMENT"),
pursuant to which the Assignee, which is an affiliate of Borrowers, has made
certain loans to International, which loans were guaranteed by the other
Borrowers;
E. The Assignor and the Assignee are parties to that certain Intercreditor
Agreement dated as of September 27, 1999 (as amended, the "INTERCREDITOR
AGREEMENT"), pursuant to Section 6 of which the Assignor has agreed under
certain circumstances to offer to the Assignee the opportunity to purchase the
Loans from the Assignor;
F. The Assignor, the Borrowers and the Guarantors are parties to that
certain Forbearance Agreement, dated as of November 13, 2000 (as amended, the
"FORBEARANCE AGREEMENT"), pursuant to which the Borrowers acknowledged the
existence of certain Events of Default under the Loan Agreement.
G. The Assignor has agreed to sell and assign to the Assignee the Loans and
the Loan Documents, and to assign and delegate to Assignee Assignor's
obligations, if any, in respect of the Commitment and under the Loan Documents,
all on the terms and subject to the conditions set forth herein and the Assignee
wishes to purchase and accept assignment of the Loans and the Loan Documents,
and to assume such obligations from the Assignor on such terms and subject to
such conditions.
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ACCEPTANCE.
(a) Subject to the terms and conditions of this Assignment, (i) the
Assignor hereby sells, transfers, delegates, and assigns to the Assignee, and
(ii) the Assignee hereby purchases, assumes and undertakes from the Assignor,
"AS IS," "WHERE IS," AND WITHOUT REPRESENTATION, WARRANTY OR RECOURSE OF ANY
KIND (except as specifically provided in Section 5 of this Assignment) all of
Assignor's right, title, and interest in, and to and under the Loan Documents
(including the Forbearance Agreement) and the Loans, and all obligations
(including the Commitment) of Assignor arising under the Loan Documents.
(b) With effect on and after the Effective Date (as defined in Section
5 hereof), (i) the Assignee shall be a party to the Loan Agreement and each
other of the Loan Documents to which the Assignor was a party, and succeed to
all of the rights and be obligated to perform all of the obligations of Assignor
under the Loan Agreement and any such other Loan Documents (including the
Forbearance Agreement), and (ii) the Assignor shall relinquish all of its rights
and be released from all of its obligations (including the Commitment) under the
Loan Documents. The Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan Documents
(including the Forbearance Agreement) are required to be performed by the
Assignor.
2. PAYMENTS.
As consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, the Assignee shall: pay to the Assignor on the Effective Date
in immediately available funds an amount equal to $3,479,544.85, (the "PURCHASE
PRICE") representing the principal amount of all Loans as of the Effective Date,
together with any interest, fees and other payments accrued under the Loan
Documents, but unpaid as of the Effective Date. A detailed calculation of the
Purchase Price is set forth on SCHEDULE A attached hereto.
3. INDEPENDENT CREDIT DECISION.
The Assignee (a) acknowledges that it is an affiliate under common
ownership with Borrowers and that it is familiar with the financial condition of
Borrowers, (b) acknowledges that it has received a copy of the Loan Agreement,
the Forbearance Agreement, and the Loan Documents, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment; and (c) agrees that it has
made and that it will continue to make, independently and without reliance upon
the Assignor, and based on such documents and information as it shall deem
appropriate at the time, its own credit and legal decisions in taking or not
taking action under the Loan Documents.
4. EFFECTIVE DATE.
As between the Assignor and the Assignee, the effective date for this
Assignment (the "EFFECTIVE DATE") shall be the later of: (i) February 27, 2001;
and (ii) the first day on which the following conditions precedent have been
satisfied:
(i) this Assignment shall be executed and delivered by the
Assignor, the Assignee, the Borrowers, and the Guarantors, and
(ii) the Assignee shall pay to the Assignor the Purchase Price.
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5. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder, that such
interest has not been sold, assigned, subordinated or encumbered by the Assignor
and is free and clear of any lien or other adverse claim created by the
Assignor.
(b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents or the Forbearance Agreement,
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or the Forbearance Agreement, or any other
instrument or document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to: (i) the financial condition of the Borrowers or any Guarantor,
(ii) the performance or observance by the Borrowers or any Guarantor of any of
their obligations under the Loan Documents or any other instrument or document
furnished in connection therewith, (iii) the state of title to any assets in
which the Assignor has a security interest, or the extent of, perfection of, or
priority of such security interest.
(c) The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and any other documents
required or permitted to be executed or delivered by it in connection with this
Assignment, and to fulfill its obligations hereunder; (ii) no notices to, or
consents, authorizations or approvals of, any person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment; and no further action by, or notice to, or filing with any
person is required of it for such execution, delivery or performance; (iii) this
Assignment has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
Assignee represents and acknowledges that it is taking the Loan Documents as is,
without the benefit of any representations and warranties, except as expressly
stated in subsection 5(a) above.
(d) The Borrowers represent and warrant that the amounts set forth on
Schedule A are the true and correct amounts of principal, interest, and fees
accrued and owing under the Loan Agreement as of this date.
6. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Assignment,
including the delivery of any UCC or real property assignments and the delivery
to Assignee of any possessory Collateral, provided, however, that any and all
fees, costs, or expenses of the Assignor or the Assignee incurred after the
Effective Date arising out of this Section 6 (including all attorneys fees and
costs) shall be at the sole cost of the Borrower.
7. RELEASE BY ASSIGNEE.
The Assignee, for itself and each of its successors, assigns, directors,
officers, employees, agents, attorneys, attorneys-in-fact, consultants and
advisors of or to any of the foregoing (collectively, the "Assignee Releasors")
hereby acquits, waives, releases, and discharges Foothill Capital Corporation in
its capacity as the lender under the Loan Documents and the Assignor hereunder,
and its successors, assigns, directors, officers, employees, agents, attorneys,
consultants and advisors of any of the foregoing (collectively,
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the "Releasees"), of and from any and all claims (including, without limitation,
any liabilities, damages and causes of action to the extent arising therefrom)
whatsoever, in law or in equity, whether known or unknown, which the Assignee
Releasors ever had, now have, or hereinafter can, shall or may have against the
Releasees by reason of any matter arising out of or related to the Loan
Documents, the Loans, the Forbearance Agreement, the Intercreditor Agreement, or
this Agreement, or any other actions or omissions relating in any way thereto;
PROVIDED, HOWEVER, that nothing in this Section 7 shall acquit, waive, release
or discharge Assignor of any representation, warranty or covenant explicitly
made by Assignor in this Assignment. The Assignee Releasors specifically waive
as against the Releasees any rights they, or any of them, may have under Section
1542 of the California Civil Code, which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
8. CONSENT, RELEASE BY BORROWERS, GUARANTORS.
Borrowers and Guarantors consent to this Assignment. As an inducement to
Assignor to enter into this Assignment, each Borrower and each Guarantor, for
itself and each of its successors, assigns, directors, officers, employees,
agents, attorneys, attorneys-in-fact, consultants and advisors of or to any of
the foregoing (collectively, the "Borrower Releasors") hereby acquits, waives,
releases, and discharges the Releasees, of and from any and all claims
(including, without limitation, any liabilities, damages and causes of action to
the extent arising therefrom) whatsoever, in law or in equity, whether known or
unknown, which the Borrower Releasors ever had, now have, or hereinafter can,
shall or may have against the Releasees by reason of any matter arising out of
or related to the Loan Documents, the Loans, the Forbearance Agreement, or this
Agreement, or any other actions or omissions relating in any way thereto. The
Borrower Releasors specifically waive as against the Releasees any rights they,
or any of them, may have under Section 1542 of the California Civil Code, which
provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
9. CONTINUING INDEMNIFICATION.
Notwithstanding the assignment of the Assignor's rights pursuant to this
Assignment or any other agreement, document or instrument executed in connection
herewith, each Borrower agrees to (a) reimburse Assignor for any costs and
expenses (including, without limitation, attorneys fees and costs) incurred by
Assignor in connection with this Assignment, and (b) pay, indemnify, defend, and
hold Releasees harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Assignment and of the Loan Agreement, the Forbearance
Agreement, and any other Loan Documents or the transactions contemplated
therein, and with respect to any investigation, litigation, or proceeding
related to this Assignment, the Loan Agreement, any other Loan Document, or the
use of the proceeds of the credit provided thereunder (irrespective of whether
any Releasee is a party thereto), or any act, omission, event or circumstance in
any manner related thereto.
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10. DISHONORED ITEMS.
The Payoff Amount has been calculated on the premise that all checks and
other instruments delivered by the Borrowers to the Assignor, or to any other
financial institution that has in turn provided the amount thereof to the
Assignor for application to the Borrowers' loan balance, have been or will be
honored and paid in full. The Assignee agrees to pay the Assignor, on demand at
any time during the 90 days following the Effective Date, the amount of any such
check or other instrument that may be returned for nonpayment, for any reason.
11. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this Assignment shall
be in writing and signed by the parties hereto. No failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof and any waiver of any breach of the provisions of this
Assignment shall be without prejudice to any rights with respect to any other or
further breach thereof.
(b) All payments made hereunder shall be made without any set-off or
counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses (including attorneys fees and costs) incurred in connection with the
negotiation, preparation, execution and (subject to Section 6 above) performance
of this Assignment. Nothing contained in this Section 11(c) shall prevent either
the Assignor or the Assignee from charging the Borrower's loan account for any
such fees, costs, or expenses pursuant to the terms of the Loan Agreement.
(d) This Assignment may be executed in any number of counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
(e) THIS ASSIGNMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
CALIFORNIA AND SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF SUCH STATE, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY
THE LAWS OF ANY OTHER STATE OR JURISDICTION. Each of the Assignor, Assignee,
Borrowers, and Guarantors agrees that, in addition to any other courts that may
have jurisdiction under applicable laws or rules, any action or proceeding to
enforce or arising out of this Assignment may be commenced in the Superior Court
of the State of California for Los Angeles County, or in the United States
District Court for the Central District of California, and each of the Assignor,
Assignee, Borrowers, and Guarantors consents and submits in advance to such
jurisdiction and agrees that venue will be proper in such courts on any such
matter. Each party to this Assignment hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(f) THE ASSIGNOR, THE ASSIGNEE, BORROWERS, AND GUARANTORS EACH OF
WAIVES TRIAL BY JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT
OF THIS ASSIGNMENT, THE LOAN AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR
WRITTEN) DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE ASSIGNOR, ON THE ONE HAND, AND ANY OF THE
ASSIGNEE, THE BORROWERS OR THE GUARANTORS, ON THE OTHER HAND. EACH OF THE
PARTIES TO THIS AGREEMENT CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND
FREELY MADE.
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(g) Assignee, Borrowers, and Guarantors agree that after this
Assignment and Acceptance have been completed, all references to "Foothill
Capital Corporation" are changed to "K-5 Leisure Products, Inc.," that all
references to the state of incorporation of K-5 Leisure Products, Inc. shall be
to Nevada law; and that Section 13 of the Loan Agreement shall be amended to
read as follows:
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT,) THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA
OR, AT THE SOLE OPTION OF K-5 LEISURE PRODUCTS, INC.. IN ANY OTHER COURT IN
WHICH K-5 LEISURE PRODUCTS, INC. SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
BORROWER AND K-5 LEISURE PRODUCTS, INC. WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 12. EACH BORROWER AND K-5 LEISURE PRODUCTS, INC.
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND K-5 LEISURE PRODUCTS, INC. REPRESENTS THAT THEY HAVE REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the Assignor, the Assignee, the Borrowers, and the
Guarantors have caused this Assignment to be executed and delivered by their
duly authorized officers as of the date first above written.
FOOTHILL CAPITAL CORPORATION,
as Assignor
By: /s/ X. XxxXxxxxx
--------------------------------
Title: Vice President
-----------------------------
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K-5 LEISURE PRODUCTS, INC.,
as Assignee
By: /s/ X. Xxxxx
--------------------------------
Title: President
-----------------------------
Address for Notices:
000 Xxxxxxxxx Xxxxxxxx
-----------------------------------
Xxxxxxxx, XX X0X 0X0
-----------------------------------
Canada
-----------------------------------
BORROWERS:
K-TEL INTERNATIONAL (USA), INC.,
a Minnesota corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
DOMINION ENTERTAINMENT, INC.,
a Minnesota corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
K-TEL CONSUMER PRODUCTS, INC.,
a Minnesota corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
K-TEL TV, INC., a Minnesota
corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
K-TEL VIDEO, INC., a Minnesota
corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
GUARANTORS:
K-TEL INTERNATIONAL, INC.,
a Minnesota corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
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K-TEL ONLINE, INC., a Minnesota
corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
K-TEL DVD, INC., a Minnesota
corporation
By: /s/ Xxxxxx Xxxx
--------------------------------
Its: Chief Financial Officer
-------------------------------
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SCHEDULE A
----------
K-TEL
PAYOFF AMOUNT
AMOUNT
--------------
Revolving Principal $ 490,338.08
Term Loan Principal 2,904,874.00
Accrued Audit Expenses 7,500.00
Accrued Legal Fees - Xxxxxxxxx 20,000.00
Accrued Legal Fees - Faegre 5,000.00
Accrued Interest Expense - Revolver 8,345.56
Accrued Interest Expense - Term Loan 27,233.28
Accrued Fees (Service Fee,
Unused & Wire Fee) 3,753.93
Deposit for Foothill Expenses Not Yet
Invoiced 12,500.00
--------------
Total Expected Payoff Amount $3,479,544.85
