SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1997 Commission file number 0-6664
K-TEL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0946588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2605 Fernbrook Lane North, Minneapolis, Minnesota 55447-4736
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 559-6888
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
At May 7, 1997 there were outstanding 3,769,934 shares of common stock, $.01 par
value per share of K-tel International, Inc.
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
For the quarter ended March 31, 1997
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations
- Three and nine month periods ended March 31, 1997 and 1996 3
Consolidated Balance Sheets
- March 31, 1997 and June 30, 1996 4
Consolidated Statements of Cash Flows
- Nine month periods ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBITS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN THOUSANDS - EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 18,477 $ 18,422 $ 51,230 $ 53,838
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of goods sold 9,612 8,683 25,520 27,515
Advertising 2,816 3,628 8,534 9,476
Selling, general & administrative 5,411 5,456 13,772 15,583
-------- -------- -------- --------
Total Costs and Expenses 17,839 17,767 47,826 52,574
-------- -------- -------- --------
OPERATING INCOME 638 655 3,404 1,264
-------- -------- -------- --------
NON-OPERATING INCOME (EXPENSE):
Interest income 35 34 65 109
Interest expense (5) (108) (26) (300)
Foreign currency transaction gain (loss) (176) (33) (125) (34)
-------- -------- -------- --------
Total Non-operating Income (Expense) (146) (107) (86) (225)
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 492 548 3,318 1,039
PROVISION (BENEFIT) FOR INCOME TAXES (18) 92 204 360
-------- -------- -------- --------
NET INCOME $ 510 $ 456 $ 3,114 $ 679
======== ======== ======== ========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .13 $ .12 $ .80 $ .18
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,075 3,796 3,895 3,804
======== ======== ======== ========
</TABLE>
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
(IN THOUSANDS)
March 31, June 30,
1997 1996
-------- --------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,535 $ 3,255
Accounts receivable, net 14,436 15,028
Inventories 5,714 5,808
Royalty advances 1,358 1,188
Prepaid expenses 1,368 645
Income tax refund receivable 18 89
-------- --------
Total Current Assets $ 27,429 26,013
-------- --------
Property and Equipment 3,121 2,759
Less-Accumulated depreciation and amortization (2,123) (1,966)
-------- --------
Property and Equipment, net 998 793
Other Assets 1,121 989
-------- --------
$ 29,548 $ 27,795
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Line of credit $ -- $ 1,864
Note payable to affiliate 1,000 --
Accounts payable 3,251 4,112
Accrued royalties 11,507 10,866
Reserve for returns 5,356 6,817
Other current liabilities 3,792 2,328
Income taxes payable 87 244
-------- --------
Total Current Liabilities $ 24,993 $ 26,231
-------- --------
Common Stock 37 37
Contributed capital 7,947 7,870
Accumulated deficit (2,551) (5,666)
Cumulative translation adjustment (878) (677)
-------- --------
Total Shareholders' Investment 4,555 1,564
-------- --------
$ 29,548 $ 27,795
======== ========
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31,
1997 1996
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 3,114 $ 679
Adjustments to reconcile net income to cash provided by
(used for) operating activities:
Depreciation and amortization 465 714
Changes in current operating items:
Restricted Cash --- 535
Accounts receivable 496 (4,267)
Inventories (10) (215)
Royalty advances (160) 356
Prepaid expenses and other (725) 658
Current liabilities (193) 1,386
------- -------
Cash provided by (used for) operating activities 2,987 (154)
------- -------
Cash flows from investing activities:
Property and equipment purchases (540) (197)
Proceeds from sale of property and equipment 30 27
Music catalog additions (188) (651)
Other (104) (43)
------- -------
Cash used for investing activities (802) (864)
------- -------
Cash flows from financing activities:
Repayments on line of credit (1,864) 1,480
Proceeds from note payable to Affiliate 1,000 ---
Proceeds from exercise of stock options 78 38
------- -------
Cash provided by (used for) financing activities (786) 1,518
Effect of exchange rates on cash (119) (37)
------- -------
Net increase (decrease) in cash and cash equivalents 1,280 463
Cash and cash equivalents at beginning of year 3,255 2,154
------- -------
Cash and cash equivalents at period end $ 4,535 $ 2,617
======= =======
</TABLE>
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended March 31,
1997 are not necessarily indicative of the results that may be expected
for the year as a whole. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended June 30, 1996.
2. LAWSUIT SETTLEMENT
In 1993, Dominion Entertainment, Inc. and K-tel Entertainment (U.K.),
Ltd. filed a lawsuit against a United Kingdom entertainment company
regarding infringement on a number of the Company's owned music master
copyrights. During December, 1996, the Company settled the lawsuit for
$950,000, consisting of a reimbursement of legal costs which produced
an $850,000 net income benefit to the company and is recorded as a
reduction of selling, general and administrative expenses in the
accompanying statement of operations for the period ended March 31,
1997. The Company also entered into a license agreement with the United
Kingdom company which included an advance of future royalties of
approximately $650,000 which has been recorded as a liability for
deferred income on the accompanying balance sheet as of March 31, 1997.
3. RECENTLY ISSUED ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" ("Statement 121"), issued in March 1995 and effective for
fiscal years beginning after December 15, 1995, establishes accounting
standards for the recognition and measurement of impairment of
long-lived assets, and goodwill either to be held or disposed of.
Management believes the adoption of Statement 121 will not have a
material impact on the Company's financial position or results of
operations.
During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share", which requires the disclosure of basic earnings
per share and diluted earnings per share. The Company expects to adopt
SFAS 128 in fiscal 1998 and anticipates it will not have a material
impact on previously reported earnings per share.
4. SALE OF MUSIC BUSINESS
On March 1, 1997 the Board of Directors of the Company approved the
sale of the Company's worldwide music business, except for the
Company's music business in Europe and direct response (including
retail sales) business, to Platinum Entertainment, Inc. for
$35,000,000, subject to certain adjustments. The transaction is subject
to shareholder approval and other conditions. If the closing conditions
are not satisfied by August 30, 1997, either party may terminate this
agreement. There can be no assurance that the sale will be consummated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
A. Results of Operations
The following tables set forth, for the periods indicated, certain
items from the Company's consolidated statements of operations
expressed as a percentage of net sales.
K-TEL INTERNATIONAL, INC.
RESULTS OF OPERATIONS BY GEOGRAPHIC REGION
(IN 000'S)
<TABLE>
<CAPTION>
Quarter Ended March 31, 1997 Quarter Ended March 31, 1996
------------------------------------------------ --------------------------------------------------
North America Europe Total North America Europe Total
-------------- -------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $11,857 100% $ 6,620 100% $18,477 100% $12,973 100% $ 5,449 100% $18,422 100%
Costs and expenses
Cost of goods sold 6,796 57% 2,816 43% 9,612 52% 6,339 49% 2,344 43% 8,683 47%
Advertising 1,427 12% 1,389 21% 2,816 15% 2,338 18% 1,290 24% 3,628 20%
Selling, general &
administrative 3,160 27% 1,787 27% 4,947 27% 3,025 23% 1,893 35% 4,918 27%
------- --- ------- --- ------- --- ------- --- ------- --- ------- ---
Operating Income (Loss) $ 474 4% $ 628 9% $ 1,102 6% $ 1,271 10% $ (78) (2)% $ 1,193 6%
======= === ======= === ======= === ======= === ======= === ======= ===
</TABLE>
In addition to the operating amounts above for the quarter ended March 31, 1997,
the parent holding company recorded $464,000 in expenses. For the quarter ended
March 31, 1996 the parent holding company recorded $538,000 in expenses.
K-TEL INTERNATIONAL, INC.
RESULTS OF OPERATIONS BY GEOGRAPHIC REGION
(IN 000'S)
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1997 Nine Months Ended March 31, 1996
------------------------------------------------ ------------------------------------------------
North America Europe Total North America Europe Total
-------------- -------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $30,484 100% $20,746 100% $51,230 100% $36,220 100% $17,618 100% $53,838 100%
Costs and expenses
Cost of goods sold 16,177 53% 9,343 45% 25,520 50% 19,285 53% 8,230 47% 27,515 51%
Advertising 4,270 14% 4,264 21% 8,534 17% 5,749 16% 3,727 21% 9,476 18%
Selling, general &
administrative 7,194 24% 5,402 26% 12,596 24% 8,832 24% 5,430 31% 14,262 26%
------- --- ------- --- ------- --- ------- --- ------- --- ------- ---
Operating Income (Loss) $ 2,843 9% $ 1,737 8% $ 4,580 9% $ 2,354 7% $ 231 1% $ 2,585 5%
======= === ======= === ======= === ======= === ======= === ======= ===
</TABLE>
In addition to the operating amounts above for the nine months ended March 31,
1997, the parent holding company recorded $1,176,000 in expenses. For the nine
months ended March 31, 1996 the parent holding company recorded $1,321,000 in
expenses.
For the nine months ended March 31, 1997 consolidated net sales were
$51,230,000 with operating income of $3,404,000 and net income of
$3,114,000 or $.80 per share. Consolidated net sales for the same
period last year were $53,838,000 with operating income of $1,264,000
and net income of $679,000 or $.18 per share.
For the quarter ended March 31, 1997 consolidated net sales were
$18,477,000 with operating income of $638,000 and net income of
$510,000 or $.13 per share. For the same period last year, sales were
$18,422,000 with operating income of $655,000 and net income of
$456,000 or $.12 per share.
Consolidated net sales decreased $2,608,000 or 5% for the nine months
ended March 31, 1997 from the previous year comparable period. North
American net sales were down 16% from the prior year comparable period
due primarily to prior year fourth quarter divestitures of unprofitable
businesses/divisions, lower U.S. consumer convenience product retail
sales resulting from less new product promotions and lower U.S. direct
response television sales resulting from fewer promotions. These North
American sales decreases were partially offset by a European 18% sales
increase resulting from stronger German and United Kingdom sales in the
current period. Foreign currency conditions were less favorable than in
the comparable prior year period and caused sales to be $967,000 lower
for the nine months ended March 31, 1997, than they would have been had
exchange rates remained consistent with the prior year.
Consolidated net sales increased $55,000 for the quarter ended March
31, 1997 from the previous year comparable period. North American sales
decreased and European sales increased over the prior year comparable
period for the same reasons as described above.
Cost of goods sold for the nine months ended March 31, 1997 were 50% of
sales compared to 51% for the same period last year. North American
cost of goods sold, as a percentage of sales, were approximately the
same for the prior year comparable period. European cost of goods sold
as a percentage of net sales decreased slightly from the prior year
comparable period due mainly to overall higher music and consumer
product margins resulting from a stronger margin product mix in the
current period.
Cost of goods sold as a percent of sales for the quarter ended March
31, 1997 were 52% compared to 47% for the previous year comparable
period. North American cost of goods sold were 57% of sales compared to
49% of sales in the prior year comparable period due mainly to an
overall higher cost product mix for it's music products. European cost
of goods sold as a percent of sales for the quarter ended March 31,
1997 were approximately the same for the prior year comparable period.
Consolidated advertising costs as a percent of sales were 17% for the
nine months ended March 31, 1997 as compared to 18% in the prior year
comparable period. North American advertising costs as a percent of net
sales were 14% compared to 16% for the comparable nine month period in
the prior year due to higher prior year levels of direct response
television advertising in the U.S.. Direct response sales typically
carry higher gross margins to cover higher advertising requirements
than normal retail sales. European advertising costs as a percent of
sales for the nine month period ended March 31, 1997 were approximately
the same for the prior year period.
Consolidated advertising costs as a percent of sales were 15% for the
quarter ended March 31, 1997 compared to 20% in the prior year period.
North American advertising costs as a percent of net sales were 12%
compared to 18% in the prior year comparable period due to fewer direct
response television promotions. European advertising cost as percent of
sales were 21% compared to 24% in the prior year due to less promotions
in the Finland and the United Kingdom subsidiaries.
Selling, general and administrative expenses for the nine month period
ended March 31, 1997 were $13,772,000 or 27% of net sales compared to
$15,583,000 or 29% of net sales in the prior year comparable period.
North American selling, general and administrative expenses were down
$1,638,000 for the nine months ended March 31, 1997 due to the second
quarter settlement of a long outstanding legal dispute with a United
Kingdom entertainment company regarding infringement of a number of the
Company's owned music master recordings. The settlement resulted in a
second quarter net benefit (recovery of legal expenses) to the Company
of $850,000 (See Note 2). European selling, general and administrative
expenses for the nine months ended March 31, 1997 were lower as a
percent of sales compared to the prior year due mainly to better
overall European sales performance in the current fiscal year.
For the quarter ended March 31, 1997, selling, general and
administrative expenses were $5,411,000 or 29% of net sales compared to
$5,456,000 or 30% of net sales in the prior year comparable period.
North American selling, general and administrative expenses increased
for the three months ended March 31, 1997 due mainly to the start-up of
a new video division and a television infomercial/media buying
subsidiary. These increased selling, general and administrative
expenses were partially off-set by the divestitures of small under
performing businesses at the end of the previous fiscal year and less
new consumer convenience product promotions and related overhead.
European selling, general and administrative expenses were lower as a
percent of sales for the quarter ended March 31, 1997, compared to the
prior year comparable period, due mainly to better overall European
sales performance in the current period.
Operating income increased to $3,404,000 for the nine months ended
March 31, 1997, from operating income of $1,264,000 for the same period
last year. North American operating income was $2,843,000 compared to
$2,354,000 for the prior year comparable period. The increase for the
nine months ended March 31, 1997, was due mainly to the positive profit
impact from the above mentioned settlement with a U.K. entertainment
company regarding infringement of a number of the Company's owned music
master recordings. European operating income was $1,737,000 compared to
$231,000 for the prior year comparable period due mainly to current
year profit in the Company's German operation and current profit from
the Company's United Kingdom operation compared to a prior year
comparable period loss as a result of restructuring those operations.
Operating income decreased to $638,000 for the quarter ended March 31,
1997 from operating income of $655,000 for the same period last year.
North American operating income was $474,000 compared to $1,271,000 in
the prior year comparable period. The decrease in operating income for
the quarter ended March 31, 1997 was due mainly to the increased
selling, general and administrative expense related to the
aforementioned new video and infomercial/media buying businesses and to
less consumer product promotions in the current period as compared to
the previous year comparable period (in which a successful and
profitable new product promotion was marketed). European operating
income was $628,000 compared to a loss of $78,000 for the prior year
comparable period due mainly to stronger current period profit from the
Company's German and United Kingdom operations as mentioned above.
Interest expense decreased to $26,000 for the nine month and $5,000 for
the three month periods ended March 31, 1997 as compared to $300,000
and $108,000 for the prior year comparable periods. The decrease in
interest expense is due to the reduced usage of the Company's asset
based line of credit in the current fiscal year.
During the nine month period ended March 31, 1997, the Company
experienced a foreign currency transaction loss of $125,000 compared to
a loss of $34,000 experienced in the comparable period in the prior
year. For the quarter ended March 31, 1997, the Company experienced a
foreign currency translation loss of $176,000 compared to the prior
year third quarter loss of $33,000. The Company has a policy to reduce
its foreign currency exchange exposure by hedging its exposure through
the use of forward contracts. Most of the Company's foreign currency
transaction exposure is due to certain European subsidiaries
liabilities which are payable to the Company's U.S. parent or U.S.
subsidiaries. In accordance with generally accepted accounting
principles the payable balances are adjusted quarterly to the local
currency equivalent of the U.S. dollar. Gains or losses resulting from
these intercompany liabilities remain unrealized until such time the
underlying liabilities are settled.
The provision for income taxes was $204,000 and a benefit of $18,000
for the nine months and quarter ended March 31, 1997, respectively,
compared to an income tax provision in the prior year comparable
periods of $360,000 and $92,000 . Variations in the Company's tax
provision are a factor of the country of origin of profits and the
availability of net operating loss carryforwards.
Operating results for the nine month period ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the
year as a whole.
B. Liquidity and Capital Resources
During the nine months ended March 31, 1997, cash and cash equivalents
increased approximately $1,280,000 to $4,535,000. The overall increase
in cash was due mainly to net income for the period and the proceeds
from a loan from an affiliate owned and operated by the Chairman of the
Board (as discussed below). Offsetting some of this cash increase were
increases in prepaid expenses driven mainly by the purchase of video
production rights for the Company's new U.S. video division, by
purchases of property and equipment (mainly fixed asset increases of
information systems in support of old and new businesses) and repayment
of the line of credit.
During the first nine months of fiscal 1997 the Company purchased
approximately $361,000 of consumer convenience product from K-tel
International Ltd., a company owned and operated in Canada by Mr.
Philip Kives, the Chairman of the Board. The Company owed approximately
$32,000 to K-tel International Ltd. at March 31, 1997. Also, K-tel
International Ltd. purchased approximately $202,000 from the Company
during the first nine months ended March 31, 1997 and owed the Company
$88,000 at March 31, 1997. No interest will be charged on the related
outstanding balances during fiscal 1997. During March 1997, the
affiliate controlled by the Chairman of the Board provided $1,000,000
in short-term working capital financing to the Company to fund the
Company's U.S. operations. The Company pays interest on the unpaid
principal amount of financing, at the same rate as the Company pays on
it's revolving credit agreement, until repayment of the loan which is
due on demand.
The Company's United States subsidiaries, 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. (the "Subsidiaries") have a revolving credit agreement
maturing July 31, 1997. The agreement provides for an asset based line
of credit not to exceed $1,000,000 in total, with availability based on
a monthly borrowing base derived from the Subsidiaries' accounts
receivable and inventory. Borrowings are collateralized by the assets
of the Subsidiaries, including accounts receivable, inventories,
equipment and Dominion Entertainment, Inc.'s owned music master
recordings. The Company has also guaranteed all borrowings of the
Subsidiaries. There was no amount outstanding under the line of credit
at March 31, 1997. The Subsidiaries are required to maintain minimum
levels of tangible net worth and certain other financial ratios. As of
March 31, 1997 the Subsidiaries were in compliance or have obtained
waivers for these covenants.
Management considers its cash needs for the current fiscal year to be
adequately covered by its operations, borrowings under the line of
credit or by funding from a company owned by Mr. Kives, the Chairman of
the Board of Directors of the Company. Although management is not privy
to the financial statements of the Chairman's other companies, he has
assured the Company that he will fund its operations on an as needed
basis consistent with his past practices which have mainly been by way
of giving the Company open ended payment terms on product purchased
from his affiliate companies.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
10.46 Restated Revolving Credit Agreement -
K-tel USA and Dominion attached to this report as Exhibit 10.46
10.47 Non-Qualified Stock Option Agreement - Philip Kives attached to this report as Exhibit 10.47
11 Statement Regarding Computation of Earnings Per Share
27 Financial Data Schedule (SEC use)
</TABLE>
(b) REPORTS ON FORM 8-K
On March 12, 1997 the Company filed a Form 8-K, with the Securities and Exchange
Commission regarding the March 1, 1997 Board of Directors approval of the sale
of the Company's K-tel International (USA), Inc. and Dominion Entertainment,
Inc. businesses. The information required under this item is incorporated herein
by reference to the Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K-TEL INTERNATIONAL, INC.
REGISTRANT
/S/ PHILIP KIVES
PHILIP KIVES
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
/S/ DAVID WEINER
DAVID WEINER
PRESIDENT
/S/ MARK DIXON
MARK DIXON
CHIEF FINANCIAL OFFICER
(principal accounting officer)
EXHIBIT 10.46
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of April 10, 1997
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") agree as follows:
RECITALS
K-Tel USA, Dominion and the Bank have entered into a Revolving
Credit Agreement dated as of July 22, 1994, as amended by a First Amendment to
Revolving Credit Agreement dated as of January 30, 1995, by a Second Amendment
to Revolving Credit Agreement and to Revolving Note dated as of July 20, 1995,
by a Third Amendment to Revolving Credit Agreement dated as of October 2, 1995,
by a Fourth Amendment to Revolving Credit Agreement and to Revolving Note dated
as of November 28, 1995, by a Fifth Amendment to Revolving Credit Agreement and
to Revolving Note dated as of December 28, 1995, by a Sixth Amendment to
Revolving Credit Agreement dated as of August 23, 1996, by a Seventh Amendment
to Revolving Credit Agreement dated as of October 9, 1996 and by an Eighth
Amendment to Revolving Credit Agreement dated as of November 25, 1996 (as
amended, the "Prior Credit Agreement"), pursuant to which the Bank, subject to
the terms and conditions set forth therein, agreed to make revolving advances to
K-Tel USA and Dominion and to issue letters of credit for the account of K-Tel
USA and Dominion in the aggregate amount of up to $5,000,000.
The joint and several obligation of K-Tel USA and Dominion to
repay the revolving advances made by the Bank under the Prior Credit Agreement
is evidenced by the Revolving Note of K-Tel USA and Dominion dated August 23,
1996, payable to the order of the Bank in the original principal amount of
$5,000,000 (the "Prior Note").
K-Tel USA and Dominion have requested, among other things,
that the Bank (i) consent to the creation of K-Tel Productions, K-Tel Video,
K-Tel Direct, K-Tel TV and K-Tel Consumer Products as new wholly-owned
Subsidiaries of K-Tel International, (ii) allow K-Tel Productions, K-Tel Video,
K-Tel Direct and K-Tel Consumer Products to become co-borrowers with K-Tel USA
and Dominion, (iii) reduce the amount of the Commitment from $5,000,000 to
$1,000,000 and (iv) extend the Maturity Date from January 31, 1997 to July 31,
1997.
The Bank is willing to grant the requests of K-Tel USA and
Dominion pursuant to the terms of this Agreement, which shall constitute an
amendment to and a complete restatement of the Prior Credit Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1. 1 Defined Terms. For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means, as to the Borrowers, the aggregate billed
and unpaid obligations of customers and other account debtors to K-Tel USA
arising out of the sale or lease of goods or rendition of services by K-Tel USA
in the ordinary course of business of K-Tel USA, on an open account or deferred
payment basis.
"Advance" means an advance made by the Bank to the Borrowers
pursuant to Section 2.2 hereof.
"Affiliate" means (i) any Person that, either directly or
indirectly, is in control of, is controlled by, or is under common control with
the Borrowers or any of them, or (ii) any Person who is a (A) shareholder,
director, officer or employee of the Borrowers or any of them, or (B) any Person
who is a director, officer or employee of any Person described in clause (i)
above. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (X) to vote more than 50% of the securities having
ordinary voting power for the election of directors of such Person, or (Y) to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise.
"Agreement" means this Amended and Restated Revolving Credit
Agreement, as the same may be supplemented, amended or restated from time to
time.
"Base Rate" means the fluctuating rate of interest publicly
announced by the Bank from time to time as its "base rate" or, if the Bank
ceases to announce a rate so designated, any similar successor rate designated
by the Bank. The Borrowers acknowledge that the Base Rate is a reference rate
established by the Bank for the pricing of some of its loans and that the Base
Rate does not represent the lowest rate charged by the Bank on its loans.
"Borrowing Base" means, at any time, the lesser of (i) the
Commitment Amount or (ii) 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).
"Borrowing Base Certificate" means a certificate in the form
of Exhibit B hereto setting forth the Accounts, the Eligible Accounts and the
Borrowing Base of the Borrowers as of a particular date.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks are required by law or authorized to close in
Minneapolis, Minnesota.
"Capital Base" of any Person means, at any date of
determination, the sum of the Tangible Net Worth of such Person plus the
Subordinated Debt of such Person at such date of determination.
"Capital Lease" means any lease of property (whether real,
personal or mixed) by any Borrower that, in accordance with GAAP, should be
reflected as a liability on the balance sheet of such Borrower.
"Closing Date" has the meaning specified in Section 2.2.
"Collateral Accounts" means collectively the K-Tel USA
Collateral Account, the Dominion Collateral Account, the K-Tel Productions
Collateral Account, the K-Tel Video Collateral Account, the K-Tel Direct
Collateral Account, the K-Tel TV Collateral Account and the K-Tel Consumer
Products Collateral Account.
"Commitment" means the Bank's obligation to make Advances to
the Borrowers under Section 2.2 hereof.
"Commitment Amount" means $1,000,000.
"Commitment Termination Date" means July 31, 1997 or the
earlier termination of the Commitment pursuant to Section 7.2 hereof.
"Compilation" means a work formed by the collection and
assembling of preexisting Sound Recordings or other material or data that are
selected, coordinated, or arranged in such a way that the resulting work as a
whole constitutes an original work of authorship.
"Composition" means a single musical, written or other
composition of any kind.
"Current Assets" of any Person means, the aggregate amount of
assets of such Person which, in accordance with GAAP, may be properly classified
as current assets, after deducting adequate reserves where proper, but in no
event including any real estate and in no event including any amounts due from
Affiliates.
"Current Liabilities" of any Person means, (i) all Debt of
such Person, due on demand or within one year from the date of determination
thereof, and (ii) all other items (including taxes accrued as estimated) which,
in accordance with GAAP, may be properly classified as current liabilities of
such Person.
"Debt" means (i) all items of indebtedness or liability which,
in accordance with GAAP, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet as of the date on which Debt is
to be determined, (ii) indebtedness secured by property owned by any Person
whose indebtedness secured thereby shall have been assumed, and (iii) guarantees
and endorsements (other than for purposes of collection in the ordinary course
of business) and other contingent obligations in respect of, or to purchase or
otherwise acquire, indebtedness of others.
"Default" means any event or condition that, with notice or
lapse of time or both, would become an Event of Default.
"Dominion Collateral Account" means the collateral bank
account established by Dominion with the Bank under the Amended and Restated
Collateral Bank Account Agreement delivered to the Bank by Dominion pursuant to
Section 3.1(m), as the same may be amended, supplemented or restated from time
to time.
"Dominion's Copyright Security Agreement" means the Copyright
Security Agreement of Dominion in favor of the Bank dated as of July 22, 1994,
as the same has heretofore been amended and supplemented and as the same may
hereafter be amended, supplemented or restated from time to time.
"Dominion's Security Agreement" means the Amended and Restated
Security Agreement of Dominion in favor of the Bank of even date herewith, as
the same may hereafter be amended, supplemented or restated from time to time.
"Eligible Accounts" means all billed and unpaid Accounts of
K-Tel USA as of the date of determination, except the following shall not in any
event be deemed Eligible Accounts:
(a) any Account which is unpaid more than 60 days after
its due date;
(b) Any Account the account debtor of which is a Person
who (i) is not organized under the laws of the United
States or a state thereof or is not a resident of the
United States or a state thereof or (ii) has its
principal place of business located outside of the
United States;
(c) any Account which is owed by the United States
Government or any agency of the United States
Government;
(d) any Account which is owed by an account debtor whose
creditworthiness is at any time unacceptable to the
Bank in its sole discretion;
(e) any Account which is contingent or subject to an
asserted dispute, offset, counterclaim or other
defense;
(f) any Account which is owed by an account debtor that
is the subject of a bankruptcy proceeding or has gone
out of business;
(g) any Account which is owed by an Affiliate of any
Borrower or owed by an officer, director or
shareholder of any Borrower or by an officer,
director or shareholder of any Affiliate of any
Borrower;
(h) any Account with respect to which the Bank does not
have a perfected, first priority security interest;
(i) any Account which is not free and clear of all liens
and security interests other than the first priority
security interest in favor of the Bank;
(j) any Account which is owed by an account debtor as to
which 10% or more of the total amount due under
Accounts from such account debtor is ineligible under
clause (a) above or otherwise ineligible, regardless
of whether the particular Account is eligible; and
(k) any Account which is otherwise deemed ineligible by
the Bank in its sole discretion.
"Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1251 et seq., the Clean Water Act, 33 U.S.C. ss. 1321
et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., and any other federal,
state, county, municipal, local or other statute, law, ordinance or regulation
which may relate to or deal with the environment, including such as protect
human health and natural resources, all as may be from time to time amended.
"Existing Advances" has the meaning specified in Section 2.1.
"Existing Letters of Credit" has the meaning specified in
Section 2.11.
"Existing Letter of Credit Applications" has the meaning
specified in Section 2.11.
"ERISA" means Title IV of the Employee Retirement Income
Security Act of 1974, as amended.
"Event of Default" has the meaning specified in Section 7.1
hereof.
"Floating Rate" means an annual rate equal to the sum of the
Base Rate plus the Interest Rate Spread, which Floating Rate shall change when
and as the Base Rate changes.
"GAAP" means, at any particular time, generally accepted
accounting principles in the United States in effect at such time.
"Hazardous Substances" means petroleum products and
by-products and any dangerous, toxic or hazardous pollutants, contaminants,
chemicals, material and substances listed or identified in, or regulated by, any
Environmental Laws.
"Interest Rate Spread" means two percent (2.00%).
"Inventory" means all of the inventory of any of the
Borrowers, whether now owned or hereafter acquired, whether acquired, held or
furnished for sale, for lease or under service contracts, and wherever located.
"K-Tel Consumer Products Collateral Account" means the
collateral bank account established by K-Tel Consumer Products with the Bank
under the Collateral Bank Account Agreement delivered to the Bank by K-Tel
Consumer Products pursuant to Section 3.1(m), as the same may be amended,
supplemented or restated from time to time.
"K-Tel Consumer Products' Security Agreement" means the
Security Agreement of K-Tel Consumer Products in favor of the Bank of even date
herewith, as the same may be amended, supplemented or restated from time to
time.
"K-Tel Direct Collateral Account" means the collateral bank
account established by K-Tel Direct with the Bank under the Collateral Bank
Account Agreement delivered to the Bank by K-Tel Direct pursuant to Section
3.1(m), as the same may be amended, supplemented or restated from time to time.
"K-Tel Direct's Security Agreement" means the Security
Agreement of K-Tel Direct in favor of the Bank of even date herewith, as the
same may be amended, supplemented or restated from time to time.
"K-Tel International" means K-Tel International, Inc., a
Minnesota corporation, having its principal place of business in Plymouth,
Minnesota, which is the parent corporation of each of the Borrowers.
"K-Tel International's Guaranty" means the Amended and
Restated Guaranty Agreement of K-Tel International in favor of the Bank of even
date herewith, as the same may hereafter be amended, supplemented or restated
from time to time.
"K-Tel International's Pledge Agreement" means the Amended and
Restated Collateral Pledge Agreement of K-Tel International in favor of the Bank
of even date herewith, as the same may hereafter be amended, supplemented or
restated from time to time.
"K-Tel International's Security Agreement" means the Amended
and Restated Security Agreement of K-Tel International in favor of the Bank of
even date herewith, as the same may hereafter be amended, supplemented or
restated from time to time.
"K-Tel Productions Collateral Account" means the collateral
bank account established by K-Tel Productions with the Bank under the Collateral
Bank Account Agreement delivered to the Bank by K-Tel Productions pursuant to
Section 3.1(m), as the same may be amended, supplemented or restated from time
to time.
"K-Tel Productions' Copyright Security Agreement" means the
Copyright Security Agreement of K-Tel Productions in favor of the Bank dated in
accordance with the requirements of Section 5.10 of this Agreement, in
substantially the form of Exhibit D attached hereto, as the same may hereafter
be amended, supplemented or restated from time to time.
"K-Tel Productions' Security Agreement" means the Security
Agreement of K-Tel Productions in favor of the Bank of even date herewith, as
the same may be amended, supplemented or restated from time to time.
"K-Tel TV's Security Agreement" means the Security Agreement
of K-Tel TV in favor of the Bank of even date herewith, as the same may be
amended, supplemented or restated from time to time.
"K-Tel TV Collateral Account" means the collateral bank
account established by K-Tel TV with the Bank under the Collateral Bank Account
Agreement delivered to the Bank by K-Tel TV pursuant to Section 3.1(m), as the
same may be amended, supplemented or restated from time to time.
"K-Tel USA Collateral Account" means the collateral bank
account established by K-Tel USA with the Bank under the Amended and Restated
Collateral Bank Account Agreement delivered to the Bank by K-Tel USA pursuant to
Section 3.1(m), as the same may be amended, supplemented or restated from time
to time.
"K-Tel USA's Copyright Security Agreement" means the Copyright
Security Agreement of K-Tel USA in favor of the Bank dated as of July 22, 1994,
as the same has heretofore been amended and supplemented and as the same may
hereafter be amended, supplemented or restated from time to time.
"K-Tel USA's Security Agreement" means the Amended and
Restated Security Agreement of K-Tel USA in favor of the Bank of even date
herewith, as the same may hereafter be amended, supplemented or restated from
time to time.
"K-Tel Video Collateral Account" means the collateral bank
account established by K-Tel Video with the Bank under the Collateral Bank
Account Agreement delivered to the Bank by K-Tel Video pursuant to Section
3.1(m), as the same may be amended, supplemented or restated from time to time.
"K-Tel Video's Security Agreement" means the Security
Agreement of K-Tel Video in favor of the Bank of even date herewith, as the same
may be amended, supplemented or restated from time to time.
"L/C Amount" means the sum of (i) the aggregate face amount of
any issued and outstanding Letters of Credit and (ii) the unpaid amount of the
Obligation of Reimbursement.
"Letters of Credit" has the meaning specified in Section 2.12
hereof.
"Letter of Credit Applications" has the meaning specified in
Section 2.12 hereof.
"Loan Documents" means this Agreement, the Note, the Security
Documents, the Letter of Credit Applications and all related documents from the
Borrowers or any of them or K-Tel International in favor of the Bank.
"Loan Party" or "Loan Parties" shall mean, individually or
collectively, as the case may be, each of the Borrowers and K-Tel International.
"Maturity Date" means July 31, 1997.
"Net Income before Taxes" of any Person means, at any date of
determination, the before-tax net income of such Person, decreased by any
extraordinary non-cash or non-operating expense or loss recorded by such Person
(Net Income before Taxes shall not be increased by any extraordinary,
non-operating or non-cash income recorded by such Person).
"Note" has the meaning given in Section 2.2 hereto.
"Obligation of Reimbursement" has the meaning specified in
Section 2.12 hereof.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained
for employees of either Borrower and covered by ERISA.
"Prior Credit Agreement" has the meaning specified in the
Recitals to this Agreement.
"Prior Note" has the meaning specified in the Recitals to this
Agreement.
"Reportable Event" means (i) a "reportable event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) a withdrawal
from any Plan, as described in Section 4063 of ERISA, (iii) an action to
terminate a Plan for which a notice is required to be filed under Section 4041
of ERISA, (iv) any other event or condition that might constitute grounds for
termination of, or the appointment of a trustee to administer, any Plan, or (v)
a complete or partial withdrawal from a Multiemployer Plan as described in
Sections 4203 and 4205 of ERISA.
"Returns" means, as of the date of determination, 20% of K-Tel
USA's billed and unpaid Accounts generated from the sale of music products.
"Security Documents" means K-Tel USA's Security Agreement,
K-Tel USA's Copyright Security Agreement, Dominion's Security Agreement,
Dominion's Copyright Security Agreement, K-Tel Productions' Security Agreement,
K-Tel Productions' Copyright Security Agreement, K-Tel Video's Security
Agreement, K-Tel Direct's Security Agreement, K-Tel TV's Security Agreement,
K-Tel Consumer Products' Security Agreement, K-Tel International's Guaranty,
K-Tel International's Pledge Agreement, K-Tel International's Security Agreement
and the Collateral Account Agreements.
"Sound Recording" means a work that results from the fixation
of a series of musical, spoken or other sounds (including, without limitation,
any "frontline" recordings), regardless of the nature of the material object
(such as disks, tapes, phonorecords or other objects) in which they are
embodied.
"Special Account" means a cash collateral account maintained
by the Bank in connection with Letters of Credit, as contemplated by Section
2.12.
"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.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation, irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency, is at the time directly or indirectly owned by the Borrowers or
either of them, by the Borrowers or any of them and one or more other
Subsidiaries, or by one or more other Subsidiaries.
"Tangible Net Worth" of any Person means, the excess of:
(a) the tangible assets of such Person which, in
accordance with GAAP, are tangible assets, after deducting
adequate reserves in each case where, in accordance with GAAP,
a reserve is proper, over
(b) all Debt of such Person;
provided, however, that (i) Inventory shall be taken into account on the basis
of the cost or current market value, whichever is lower, (ii) in no event shall
there be included as such tangible assets, patents, trademarks, trade names,
copyrights, licenses, good will, memberships, deferred charges or treasury stock
or any securities or Debt of such Person or any other securities unless the same
are readily marketable in the United States of America or entitled to be used as
a credit against Federal income tax liabilities, (iii) securities included as
such tangible assets shall be taken into account at their current market price
or cost, whichever is lower, and (iv) any write-up in the book value of any
assets shall not be taken into account.
ARTICLE II
Amount and Terms of the Advances
Section 2.1 Existing Advances. The Bank has made various
advances to K-Tel and Dominion (the "Existing Advances") pursuant to the Prior
Credit Agreement. As of the date hereof, the outstanding principal balance of
the Existing Advances is zero. Upon execution and delivery of this Agreement,
the Existing Advances shall be deemed to be Advances made pursuant to Section
2.2 and repayable in accordance with the Note. To the extent the Note evidences
the Existing Advances, the Note shall be issued in substitution for and
replacement of, but not in payment of, the Prior Note.
Section 2.2 The Advances. The Bank agrees, on the terms and
conditions herein set forth, to make Advances to the Borrowers 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, the Borrowers
may borrow, prepay pursuant to Section 2.8 and reborrow under this Section 2.2.
The Advances made by the Bank shall be evidenced by a single promissory note of
the Borrowers, dated the Closing Date, payable to the order of the Bank
appropriately completed in substantially the form of Exhibit A attached hereto,
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.
Section 2.3 Procedures for Requesting Advances.
(a) The Bank must receive notice of the Borrowers' request
for each Advance not later than 12:00 noon (Minneapolis time) on the
Business Day of the proposed Advance. Each such request for an Advance
may be made in writing or by telephone, shall be effective upon receipt
by the Bank and shall specify the proposed date for the requested
Advance (which shall be a Business Day), and the amount of the
requested Advance (which must be at least $10,000). Unless the Bank
determines that any condition set forth in Article III has not been
satisfied, the Bank will make the proceeds of the Advance available to
the Borrowers on the proposed date of such Advance by depositing the
same to a Borrower's demand deposit account maintained with the Bank,
as specified by the Borrowers, or in such other manner as the Bank and
the Borrowers may from time to time agree. The Borrowers shall be
jointly and severally obligated to repay all Advances notwithstanding
the fact that the person requesting same was not in fact authorized so
to do. Any request for an Advance, whether written or telephonic, shall
be deemed to be a representation that the statements set forth in
Section 3.2 are correct.
Section 2.4 Interest.
(a) Subject to the provisions of paragraph (b) below, the
outstanding principal balance of the Note shall bear interest until
fully paid at the Floating Rate.
(b) Notwithstanding the provisions of paragraph (a) above, if
an Event of Default shall occur and continue for a period of 30 days
after the Bank has given written notice to the Borrowers specifying
such Event of Default (it being understood that such grace period and
notice requirement are conditions only to imposing a higher interest
rate), the Borrowers shall pay interest on the unpaid principal of the
Note, from the first day immediately following the expiration of such
30 day period until the earlier of full payment of such principal or
the day on which such Event of Default is cured to the written
satisfaction of the Bank, at an annual rate equal to three percent
(3.00%) over the annual rate of interest that would otherwise be in
effect had there been no occurrence of an Event of Default.
(c) Interest on the Note shall be computed on the basis of
actual days elapsed in a 360 day year.
Section 2.5 Late Payment Fee. If any amount due under the
Note (whether principal and/or interest) is paid more than 10 days after the
stated due date for such payment, the Borrowers shall pay, on demand, to the
Bank a late payment fee equal to eight percent (8%) of the past-due payment.
Section 2.6 Payments of Note.
(a) Interest accruing under the Note shall be due and payable
on the first day of each month with respect to interest accruing during
the immediately preceding month, and also on the Maturity Date.
(b) The principal of the Note shall be payable in full on the
Maturity Date.
Section 2.7 Mandatory Prepayments of Advances. The Borrowers
shall, within one Business Day following the delivery of each Borrowing Base
Certificate under Section 5.1(e) hereof, prepay the Advances in the amount, if
any, by which the sum of the outstanding principal amount of the Advances and of
the L/C Amount on the date of prepayment under this Section 2.7 exceeds the
Borrowing Base set forth in such Borrowing Base Certificate.
Section 2.8 Optional Prepayment of Advances. The Borrowers
may prepay the outstanding principal amount of Advances in whole or in part
without premium or penalty. Any partial prepayment shall be applied first to
payment of any late charges or other amounts due, then to unpaid accrued
interest on the Note and the balance, if any, to the principal amount
outstanding on the Note.
Section 2.9 Payment on Nonbusiness Days and Payments.
Whenever any payment to be made under this Agreement shall be stated to be due
on any day other than a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest. All payments of principal,
interest, fees and other amounts due under this Agreement shall be made to the
Bank in immediately available funds.
Section 2.10 Use of Loan Proceeds and Letters of Credit. The
Borrowers shall use the proceeds of each Advance for general working capital
purposes of the Borrowers and to make advances to Affiliates to the extent
permitted by this Agreement. The Borrowers will use each Letter of Credit for
general corporate purposes.
Section 2.11 Existing Letters of Credit. Pursuant to the
Prior Credit Agreement and certain existing Letter of Credit Applications (the
"Existing Letter of Credit Applications"), the Bank has issued certain Letters
of Credit for the account of K-Tel USA which are currently outstanding (the
"Existing Letters of Credit"). The letter of credit number, face amount,
beneficiary and expiry date for each of the Existing Letters of Credit are set
forth on Schedule 2.11 attached hereto. Upon execution and delivery of this
Agreement, the Existing Letters of Credit shall be deemed to be Letters of
Credit issued pursuant to Section 2.12 of this Agreement.
Section 2.12 Letters of Credit.
(a) Subject to the terms and conditions set forth in this
Section 2.12 and in Article III, the Bank shall issue one or more
letters of credit for the account of the Borrowers (each such letter of
credit and each Existing Letter of Credit is herein referred to as a
"Letter of Credit") from time to time during the period from the date
hereof to and including the Commitment Termination Date, in an
aggregate amount at any time outstanding not to exceed the lesser of
(i) $500,000 or (ii) the Borrowing Base less the sum of (A) all
outstanding Advances under this Agreement and (B) the L/C Amount.
(b) The Borrowers acknowledge and agree that the Letters of
Credit issued under this Section 2.12 include the Existing Letters of
Credit listed on Schedule 2.11 attached hereto. The Borrowers further
acknowledge that they are jointly and severally liable for all
reimbursement and other obligations with respect to all Letters of
Credit, including the Existing Letters of Credit.
(c) Whenever the Borrowers desire to obtain issuance of a
Letter of Credit, the Borrowers shall request the same by written
notice to the Bank from the Borrowers, which notice or request shall
specify the date of the requested issuance (which date shall be a
Business Day). Prior to the requested date of issuance, the Borrowers
shall provide the Bank with an application for letter of credit in a
form provided by the Bank (each such letter of credit application and
each Existing Letter of Credit Application is herein referred to as a
"Letter of Credit Application") duly executed on behalf of the
Borrowers. The Borrowers acknowledge and agree that (i) the Letter of
Credit Applications include all Existing Letter of Credit Applications
and (ii) the Borrowers are jointly and severally liable with respect to
all obligations under the Existing Letter of Credit Applications. The
terms and conditions set forth in each such Letter of Credit
Application shall supplement the terms and conditions hereof, but in
the event of any inconsistency between the terms of any such Letter of
Credit Application and the terms hereof, the terms hereof shall
control. Any request for the issuance of a Letter of Credit under this
Section 2.12 shall be deemed to be a representation by the Borrowers
that (i) the conditions set forth in this Section 2.12 have been met,
and (ii) the statements set forth in Section 3.2 hereof are correct as
of the time of the request.
(d) The Borrowers shall pay to the Bank a letter of credit
fee in connection with each Letter of Credit issued hereunder as
determined by the Bank on a case-by-case basis. Each such letter of
credit fee shall be payable at the time or times determined by the
Bank. In addition, the Borrowers agree to pay to the Bank, on written
demand by the Bank, the administrative fees charged by the Bank in the
ordinary course of business in connection with the honoring of drafts
under any Letter of Credit, and all other activity with respect to the
Letters of Credit at the then-current rates of the Bank.
(e) Draws under any Letter of Credit shall be reimbursed to
the Bank in accordance with the applicable Letter of Credit Application
and as follows:
(i) Whenever a draft under a Letter of Credit is
presented to the Bank for payment, the Borrowers hereby agree
to immediately reimburse the Bank for the amount paid by the
Bank under the Letter of Credit, plus any and all reasonable
charges and expenses that the Bank may pay or incur relative
to such draw, plus interest on all such amounts, charges and
expenses as set forth below (all such amounts with respect to
all Letters of Credit are hereinafter referred to,
collectively, as the "Obligation of Reimbursement").
(ii) The Borrowers hereby agree to pay to the Bank,
on demand of the Bank, interest on all amounts, charges and
expenses payable by the Borrowers to the Bank under this
Section 2.12, accrued from the date any such draft, charge or
expense is paid by the Bank until payment in full by the
Borrowers at the interest rate in effect under Section 2.4
hereof.
(iii) If the Borrowers fail to pay to the Bank
promptly the amount of its Obligation of Reimbursement in
accordance with the terms of this Agreement and in accordance
with the terms of the applicable Letter of Credit
Applications, the Bank is hereby irrevocably authorized and
directed, in its sole discretion, to make an Advance under
Section 2.2 hereof in an amount sufficient to discharge the
Obligation of Reimbursement, including all interest accrued
thereon but unpaid at the time of such Advance, and such
Advance shall be added to the outstanding principal balance of
the Note.
(f) On the Commitment Termination Date, the Borrowers shall
pay to the Bank in immediately available funds for deposit in the
Special Account an amount equal to the maximum aggregate amount
available to be drawn under all Letters of Credit then outstanding,
assuming compliance with all conditions for drawing thereunder. Amounts
on deposit in the Special Account may be applied by the Bank at any
time or from time to time to the Borrower's Obligation of Reimbursement
or any other obligations of the Borrowers to the Bank arising under
this Agreement or otherwise, in the Bank's sole discretion, and shall
not be subject to withdrawal by the Borrowers so long as the Bank
maintains a security interest therein.
(g) The Borrowers hereby pledge, and grant to the Bank a
security interest in, all funds held in the Special Account from time
to time and all proceeds thereof, as security for the payment of all
present and future Obligations of Reimbursement and all other amounts
due and to become due from the Borrowers to the Bank pursuant to this
Agreement or otherwise. The Bank shall have full ownership and control
of the Special Account, and the Borrowers shall have no right to
withdraw the funds maintained in the Special Account.
ARTICLE III
Conditions Precedent to Advances and to Letters of Credit
Section 3.1 Condition Precedent to Initial Advance. The
obligation of the Bank to make its initial Advance hereunder or to issue its
initial Letter of Credit hereunder is subject to the condition precedent that
the Bank shall have received on or before the day of making such initial Advance
or of issuing such initial Letter of Credit the following, in form and substance
satisfactory to the Bank in its sole discretion:
(a) The Note, duly executed on behalf of the Borrowers.
(b) K-Tel USA's Security Agreement, dated the Closing Date,
duly executed on behalf of K-Tel USA.
(c) An Amendment to K-Tel USA's Copyright Security Agreement,
dated the Closing Date, duly executed on behalf of K-Tel USA.
(d) Dominion's Security Agreement, dated the Closing Date,
duly executed on behalf of Dominion.
(e) An Amendment to Dominion's Copyright Security Agreement,
dated the Closing Date, duly executed on behalf of Dominion.
(f) K-Tel Productions' Security Agreement, dated the Closing
Date, duly executed on behalf of K-Tel Productions.
(g) K-Tel Video's Security Agreement, dated the Closing Date,
duly executed on behalf of K-Tel Video.
(h) K-Tel Direct's Security Agreement, dated the Closing Date,
duly executed on behalf of K-Tel Direct.
(i) K-Tel Consumer Products' Security Agreement, dated the
Closing Date, duly executed on behalf of K-Tel Consumer Products.
(j) K-Tel International's Guaranty, dated the Closing Date,
duly executed on behalf of K-Tel International.
(k) The K-Tel International's Security Agreement, dated the
Closing Date, duly executed on behalf of K-Tel International.
(l) K-Tel International's Pledge Agreement, dated the Closing
Date, duly executed on behalf of K-Tel International, together with the
original stock certificates representing 100% of the issued and
outstanding shares of stock of K-Tel USA (already in the possession of
the Bank), Dominion (already in the possession of the Bank), K-Tel
Productions, K-Tel Video, K-Tel Direct and K-Tel Consumer Products,
together with stock powers duly executed in blank by K-Tel
International (with K-Tel International's signature guaranteed by the
Bank or another financial institution acceptable to the Bank).
(m) The Collateral Bank Account Agreements of K-Tel USA,
Dominion, K-Tel Productions, K-Tel Video, K-Tel Direct, K-Tel TV and
K-Tel Consumer Products, dated the Closing Date, duly executed on
behalf of, respectively, K-Tel Productions, K-Tel Video, K-Tel Direct
and K-Tel Consumer Products.
(n) K-Tel TV's Security Agreement, dated the Closing Date,
duly executed on behalf of K-Tel TV.
(o) [Intentionally omitted].
(p) Loans to One Borrower Certificates, dated the Closing
Date, duly executed on behalf of the Borrowers and K-Tel International
in favor of the Bank.
(q) An Acknowledgment of Borrowers in favor of the Bank, dated
the Closing Date, duly executed on behalf of the Borrowers.
(r) Financing statements duly executed on behalf of Borrowers
and K-Tel International sufficient when filed to perfect the security
interests granted under K-Tel USA's Security Agreement, Dominion's
Security Agreement, K-Tel Productions' Security Agreement, K-Tel
Video's Security Agreement, K-Tel Direct's Security Agreement, K-Tel
TV's Security Agreement, K-Tel Consumer Products' Security Agreement
and K-Tel International's Security Agreement, to the extent such
security interests are capable of being perfected by filing.
(s) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against any of the Borrowers or K-Tel International, and (ii) no
financing statements have been filed and remain in effect against any
of the Borrowers or K-Tel International except financing statements
perfecting only security interests permitted under Section 6.1 and
those financing statements filed by the Bank.
(t) A certified copy of the resolutions of the Board of
Directors of each of the Borrowers evidencing approval of the Loan
Documents to which such Borrower is a party and other matters
contemplated hereby, certified by the Secretary or Assistant Secretary
of such 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 of such Borrower
certifying the names and true signatures of the officers of such
Borrower authorized to sign each Loan Document to which such Borrower
is a party and the other documents to be delivered by such Borrower
hereunder.
(u) Copies of the Articles of Incorporation and By-Laws of
each of the Borrowers, certified by the Secretary or Assistant
Secretary of such Borrower as being true, correct and complete copies
thereof.
(v) A certified copy of the resolutions of the Board of
Directors of K-Tel International evidencing approval of the Loan
Documents to which K-Tel International is a party and other matters
contemplated hereby, certified by the Secretary or Assistant Secretary
of K-Tel International 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 K-Tel
International certifying the names and true signatures of the officers
of K-Tel International authorized to sign each Loan Document to which
K-Tel International is a party and the other documents to be delivered
by K-Tel International hereunder.
(w) Copies of the Articles of Incorporation and By-Laws of
K-Tel International, certified by the Secretary or Assistant Secretary
of K-Tel International as being true, correct and complete copies
thereof.
(x) A current certificate of good standing for each of the
Borrowers and K-Tel International from the Minnesota Secretary of
State.
(y) A signed copy of an opinion of counsel for the Borrowers
and K-Tel International, addressed to the Bank in form and content
acceptable to the Bank and to the Bank's counsel.
(z) Certificates of the insurance required under K-Tel USA's
Security Agreement, Dominion's Security Agreement, K-Tel Productions'
Security Agreement, K-Tel Video's Security Agreement, K-Tel Direct's
Security Agreement, K-Tel TV's Security Agreement, K-Tel Consumer
Products' Security Agreement and K-Tel International's Security
Agreement, each with a loss payable endorsement in favor of the Bank.
(aa) Payment of the costs and expenses described in Section
8.5 which have been incurred through the Closing Date.
(bb) Forms W-9, dated as of the Closing Date, duly executed by
each of the Borrowers.
(cc) Pro-forma balance sheets for each of the Borrowers as of
the Closing Date.
(dd) Such other items as the Bank may require.
Section 3.2 Conditions Precedent to All Advances and to
Issuance of All Letters of Credit. The Bank's obligation to make each Advance
(including the initial Advance) and to issue any Letter of Credit shall be
subject to the further conditions precedent that on the date of making such
Advance or of issuing such Letter of Credit, the statements set forth in (a) and
(b) below shall be true (and the Borrowers' receipt of the proceeds or benefit
of such Advance or such Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrowers that such statements are true on
such date):
(a) The representations and warranties contained in Article
IV of this Agreement are correct on and as of the date of such Advance
as though made on and as of such date;
(b) No event has occurred and is continuing, or would result
from the making of such Advance or the issuance of such Letter of
Credit, which constitutes a Default or an Event of Default.
ARTICLE IV
Representations and Warranties
The Borrowers represent and warrant to the Bank as follows:
Section 4.1 Corporate Existence, Power and Name. Each Loan
Party is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and is duly licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary, and where the failure to be so
licensed or qualified would have a materially adverse effect on the financial
condition or operation of such Loan Party. Each Loan Party has all requisite
power and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and deliver, and to perform all of its obligations
under the Loan Documents to which it is a party. At all times since its
incorporation, K-Tel USA's correct corporate name has been "K-Tel International
(USA), Inc." and the only corporation which has been merged into K-Tel USA was
K-Tel, Inc. At all times since its incorporation, Dominion's correct corporate
name has been "Dominion Entertainment, Inc." At all times since its
incorporation, K-Tel Productions' correct corporate name has been "K-Tel
Productions, Inc." At all times since its incorporation, K-Tel Video's correct
corporate name has been "K-Tel Video, Inc." At all times since its
incorporation, K-Tel Direct's correct corporate name has been "K-Tel Direct,
Inc." At all times since its incorporation, K-Tel TV's correct corporate name
has been "K-Tel TV, Inc." At all times since its incorporation, K-Tel Consumer
Products' correct corporate name has been "K-Tel Consumer Products, Inc." As of
the date of this Agreement, K-Tel International's correct corporate name is
"K-Tel International, Inc.", and the following is a true and complete list of
all previous corporate names of K-Tel International since its incorporation and
of all other corporations merged into K-Tel International since its date of
incorporation: Imperial Products, Inc., Commonwealth Advertising, Inc., K-Tel
Entertainment, Inc., Candlelite Marketing, Inc.
Section 4.2 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by each Loan Party of the
Loan Documents to which it is a party and the borrowings from time to time
hereunder have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of the stockholders of such
Loan Party, or any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or of any order, writ, injunction or decree presently in effect
having applicability to such Loan Party or of the Articles of Incorporation or
Bylaws of such Loan Party, (iii) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which such Loan Party is a party or by which it or its properties
may be bound or affected, or (iv) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than the Security Documents to
which such Loan Party is a party) upon or with respect to any of the properties
now owned or hereafter acquired by such Loan Party.
Section 4.3 Legal Agreements. The Loan Documents to which
each Loan Party is a party constitute the legal, valid and binding obligations
of such Loan Party enforceable against such Loan Party in accordance with their
respective terms.
Section 4.4 Subsidiaries. K-Tel International owns 100% of
the issued and outstanding stock of each of the Borrowers and owns stock in each
of the other Subsidiaries of K-Tel International as listed on Schedule 4.4
attached hereto. None of the Borrowers has any Subsidiaries.
Section 4.5 Financial Condition. The Borrowers have
heretofore furnished to the Bank the following financial statements of the Loan
Parties: (i) the annual audited consolidated financial statements of K-Tel
International as of June 30, 1996, (ii) the annual unaudited consolidating
financial statements for K-Tel USA and Dominion as of June 30, 1996, (iii) the
unaudited financial statements for K-Tel International as of December 31, 1996,
and (iv) the interim monthly unaudited financial statements for K-Tel USA and
Dominion as of December 31, 1996. Those financial statements fairly present the
financial condition of K-Tel International, K-Tel USA and Dominion on the dates
thereof and the results of their respective operations and cash flows for the
periods then ended, and were prepared in accordance with GAAP.
Section 4.6 Adverse Change. There has been no material adverse
change in the business, properties or condition (financial or otherwise) of
K-Tel International, K-Tel USA or Dominion since the date of the latest
financial statement referred to in Section 4.5.
Section 4.7 Litigation. Except as set forth on Schedule 4.7
attached hereto, there are no actions, suits or proceedings pending or, to the
knowledge of any of the Borrowers, threatened against or affecting any Loan
Party or the properties of any Loan Party before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to such Loan Party, would have a
material adverse effect on the financial condition, properties, or operations of
such Loan Party.
Section 4.8 Regulation U. None of the Borrowers is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System), and no part of the proceeds of any Advance or of
any Letter of Credit will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
Section 4.9 Taxes. Each Loan Party has paid or caused to be
paid to the proper authorities when due all federal, state and local taxes
required to be withheld by such Loan Party. Each Loan Party has filed all
federal, state and local tax returns which to the knowledge of the officers of
such Loan Party are required to be filed, and each Loan Party has paid or caused
to be paid to the respective taxing authorities all taxes as shown on said
returns or on any assessment received by it to the extent such taxes have become
due.
Section 4.10 Titles and Liens. Each Loan Party has good title
to each of the properties and assets reflected in its latest balance sheet
referred to in Section 4.5 (other than any sold, as permitted by its respective
Security Documents), free and clear of all mortgages, security interests, liens
and encumbrances, except for mortgages, security interests and liens permitted
by Section 6.1 or in favor of the Bank and covenants, restrictions, rights,
easements and minor irregularities in title which do not materially interfere
with the business or operations of such Loan Party as presently conducted. No
financing statement naming any Loan Party as debtor is on file in any office
except to perfect only security interests permitted by Section 6.1 or in favor
of the Bank.
Section 4.11 Plans. Except as disclosed to the Bank in
writing prior to the date hereof, no Loan Party nor any Affiliate of any Loan
Party maintains or has maintained any Plan. No Loan Party nor any Affiliate of
any Loan Party has received any notice or has any knowledge to the effect that
it is not in full compliance with any of the requirements of ERISA. No
Reportable Event or other fact or circumstance which may have an adverse effect
on the Plan's tax qualified status exists in connection with any Plan. No Loan
Party nor any Affiliate of any Loan Party has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which are or which may become payable to participants or
beneficiaries of any such Plan).
Section 4.12 Default. Each Loan Party is in compliance with
all provisions of all agreements, instruments, decrees and orders to which it is
a party or by which it or its property is bound or affected, the breach or
default of which could have a material adverse effect on the financial
condition, properties or operations of such Loan Party.
Section 4.13 Environmental Protection. Each Loan Party has
obtained all permits, licenses and other authorizations which are required under
federal, state and local Environmental Laws at such Loan Party's facilities or
in connection with the operation of its facilities. Except as previously
disclosed to the Bank in writing, each Loan Party and all activities of each
Loan Party at its facilities comply with all Environmental Laws and with all
terms and conditions of any required permits, licenses and authorizations
applicable to such Loan Party with respect thereto. Except as previously
disclosed to the Bank in writing, each Loan Party is also in compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in Environmental Laws or
contained in any plan, order, decree, judgment or notice of which such Loan
Party is aware. Except as previously disclosed to the Bank in writing, no Loan
Party is aware of, or has received notice of, any events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or which may give rise to
any liability under, any Environmental Laws.
Section 4.14 Submissions to Bank. All financial and other
written information provided to the Bank by or on behalf of any Loan Party in
connection with the Borrowers' request for the credit facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or proforma financial statements, present a good faith opinion as to
such projections, valuations and proforma condition and results.
Section 4.15 Fiscal Year of the Loan Parties. The fiscal year
of each of the Loan Parties ends on June 30.
Section 4.16 Copyrights of Dominion.
(a) Dominion's Registered Copyrights in Sound Recordings and
Compositions. The Borrowers represent and warrant that Schedule 4.16(a)
is a true and complete list of all of the registered copyrights in
Sound Recordings and Compositions which were owned exclusively by
Dominion as of July 22, 1994. The Borrowers represent and warrant that
Dominion is the copyright owner of record in the U.S. Copyright Office
with respect to each of the registered copyrights in Sound Recordings
and Compositions listed on Schedule 4.16(a).
(b) Dominion's Registered Copyrights in Compilations. The
Borrowers represent and warrant that Schedule 4.16(b) is a true and
complete list of all of the registered copyrights in Compilations which
were owned exclusively by Dominion as of July 22, 1994. The Borrowers
represent and warrant that Dominion is the copyright owner of record in
the U.S. Copyright Office with respect to each of the registered
copyrights in Compilations listed on Schedule 4.16(b).
(c) Registered Copyrights in Sound Recordings and
Compilations which are Owned by Dominion, but were Assigned of Record
by Affiliates of Dominion to Dominion. The Borrowers represent and
warrant that Schedule 4.16(c) is a true and complete list of all
registered copyrights in Sound Recordings and Compilations which were
owned by Dominion as of July 22, 1994, but which on July 22, 1994 were
registered in the U.S. Copyright Office as being owned by an Affiliate
of Dominion. The Borrowers represent and warrant that Dominion's
ownership of each such copyright has now been registered in the U.S.
Copyright Office pursuant to an assignment executed and delivered by
the appropriate Affiliate of Dominion in favor of Dominion for
recording in the U.S. Copyright Office pursuant to Section 3.1(gg) of
the Prior Credit Agreement.
(d) Registered Copyrights in Sound Recordings and
Compilations which are Jointly Owned by Dominion and a Person other
than an Affiliate of Dominion. The Borrowers represent and warrant that
Schedule 4.16(d) is a true and complete list of all of the registered
copyrights in Sound Recordings and Compilations which were owned
jointly or in common by Dominion and a Person other than an Affiliate
of Dominion as of July 22, 1994. The Borrowers represent and warrant
that to the extent Dominion's joint or common ownership of any of such
copyright was previously not registered in the U.S. Copyright Office
but, instead, had an existing registration in the name of an Affiliate
of Dominion, Dominion's common or joint ownership of each such
copyright has been now registered in the U.S. Copyright Office pursuant
to an assignment executed and delivered by the appropriate Affiliate of
Dominion (and such assignment has been consented to by the joint or
common owner of each such copyright if necessary) in favor of Dominion
for recording in the U.S. Copyright Office pursuant to Section 3.1(hh)
of the Prior Credit Agreement.
(e) Dominion's Unregistered Copyrights. The Borrowers
represent and warrant that Schedule 4.16(e) is a true and complete list
of all of the unregistered copyrights in Sound Recordings, Compilations
and Compositions which were exclusively owned by Dominion as of July
22, 1994.
(f) K-Tel USA's Registered Copyrights in Compilations which
are subject to Short-Term License Agreements. The Borrowers represent
and warrant that Schedule 4.16(f) is a true and complete list of all of
the registered copyrights in Compilations which were owned exclusively
by K-Tel USA as of July 22, 1994. The Borrowers represent and warrant
that K-Tel USA is the copyright owner of record in the U.S. Copyright
Office with respect to each of the registered copyrights in
Compilations listed on Schedule 4.16(f). The Borrowers further
represent and warrant that each of the registered copyrights in a
Compilation which is listed in Schedule 4.16(f) includes one or more
Sound Recordings which are subject to a short-term license (having a
term of 5 years or less) between a licensor who is not an Affiliate of
K-Tel USA and K-Tel USA, as licensee.
(g) K-Tel USA's Unregistered Copyrights which are subject to
Short-Term License Agreements. The Borrowers represent and warrant that
Schedule 4.16(g) is a true and complete list of all of the unregistered
copyrights in Compilations which were owned exclusively by K-Tel USA as
of July 22, 1994. The Borrowers further represent and warrant that each
of the unregistered copyrights in a Compilation which is listed in
Schedule 4.16(g) includes one or more Sound Recordings which are
subject to a short-term license (having a term of 5 years or less)
between a licensor who is not an Affiliate of K-Tel USA and K-Tel USA,
as licensee.
(h) Dominion's Long-Term Licenses in Copyrights. The
Borrowers represent and warrant that Schedule 4.16(h) is a true and
complete list of all of the copyrights in Sound Recordings and
Compilations which were subject to long-term licenses (having a term of
more than 5 years) pursuant to which Dominion is the licensee as of
July 22, 1994.
(i) Miscellaneous Representations. The Borrowers represent
and warrant that as of the date of this Agreement no Affiliate of
Dominion (including, without limitation, K-Tel USA and K-Tel
International) owns any registered or unregistered copyrights in Sound
Recordings or Compilations other than (i) K-Tel USA's ownership of the
registered copyrights in Compilations which are subject to short-term
licenses as identified in Schedule 4.16(f), (ii) K-Tel USA's ownership
of the unregistered copyrights in Compilations which are subject to
short-term licenses as identified in Schedule 4.16(g) and (iii) K-Tel
Productions' ownership of copyrights in Sound Recordings, Compositions
and Compilations as contemplated by Section 5.10 of this Agreement. The
Borrowers represent and warrant that as of the date of this Agreement
no Affiliate of Dominion (other than Dominion with respect to the
long-term licenses identified on Schedule 4.16(h)) is a licensor of any
copyright in Sound Recordings or Compilations pursuant to a long-term
license agreement (having a term of more than 5 years).
(j) Compliance with the Provisions of Section 5.12 of the
Prior Credit Agreement. The Borrowers represent and warrant that
Dominion and K-Tel USA have complied with each of the covenants and
obligations set forth in Section 5.12 of the Prior Credit Agreement
during the period from July 22, 1994 through the date of this
Agreement.
ARTICLE V
Affirmative Covenants of the Borrowers
So long as the Note shall remain unpaid or the Commitment
shall be outstanding, the Borrowers will comply with the following requirements,
unless the Bank shall otherwise consent in writing:
Section 5.1 Financial Statements. The Borrowers will deliver
or cause to be delivered to the Bank:
(a) As soon as available, and in any event within 90 days
after the end of the fiscal year of each Borrower, a copy of the annual
audit report of such Borrower with the unqualified opinion of
independent certified public accountants selected by such Borrower and
acceptable to the Bank, which annual report shall include the balance
sheet of such Borrower as at the end of such fiscal year and the
related statements of operations, retained earnings and cash flows of
such Borrower for the fiscal year then ended, all in reasonable detail
and all prepared in accordance with GAAP applied on a basis consistent
with the accounting practices applied in the annual financial
statements referred to in Section 4.5, together with (A) a report
signed by such accountants stating that they understand that the Bank
is relying on such audit report and further stating that in making the
investigations necessary for said opinion they obtained no knowledge,
except as specifically stated, of any Default or Event of Default
hereunder and all relevant facts in reasonable detail to evidence, and
the computations as to whether or not such Borrower is in compliance
with the requirements set forth in Sections 5.7, 5.8 and 5.9 hereof,
and (B) a certificate of the chief financial officer of such Borrower
substantially in the form of Exhibit C hereto, stating (i) that such
financial statements have been prepared in accordance with GAAP applied
on a basis consistent with the accounting practices reflected in the
annual financial statements referred to in Section 4.5 hereof, (ii)
whether or not he or she has knowledge of the occurrence of any Default
or Event of Default hereunder not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect
thereto, and (iii) all relevant information called for in such
certificate to indicate whether such Borrower is in compliance with the
requirements set forth in Sections 5.7, 5.8 and 5.9 hereof.
(b) As soon as available and in any event within 30 days
after the end of each month, the balance sheet of each Borrower as at
the end of such month and related statements of operations and cash
flows of such Borrower (the statements of cash flows shall be required
only as soon as available and in any event within 45 days after the end
of each fiscal quarter of such Borrower) for such month and for the
year to date, in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous year, all
prepared in accordance with GAAP applied on a basis consistent with the
accounting practices reflected in the annual financial statements
referred to in Section 4.5, provided that such financial statements
need not contain the footnotes included in the annual financial
statements referred to in Section 4.5 and such financial statements
shall remain subject to year-end audit adjustments, and accompanied by
a certificate of the chief financial officer of such Borrower
substantially in the form of Exhibit C hereto stating (i) that such
financial statements have been prepared in accordance with GAAP applied
on a basis consistent with the accounting practices reflected in the
annual financial statements referred to in Section 4.5, (ii) whether or
not he or she has knowledge of the occurrence of any Default or Event
of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto and (iii)
all relevant information called for in such certificate to indicate
whether such Borrower is in compliance with the requirements set forth
in Sections 5.7, 5.8 and 5.9 hereof.
(c) As soon as available, and in any event within 90 days
after the end of each fiscal year of K-Tel International, a copy of the
annual audit report (audited as to the consolidated financial
statements) of K-Tel International with the unqualified opinion of
independent certified public accountants selected by K-Tel
International and acceptable to the Bank, which annual report shall
include the consolidated and consolidating balance sheets (such
consolidating balance sheets may be unaudited) of K-Tel International
as at the end of such fiscal year and the related consolidated and
consolidating statements of income, operations and cash flows (such
consolidating statements of income, operations and cash flows may be
unaudited) of K-Tel International for the fiscal year then ended, all
in reasonable detail and all prepared in accordance with GAAP applied
on a basis consistent with the accounting practices applied in the
annual financial statements referred to in Section 4.5, together with
(A) a report signed by such accountants stating that they understand
that the Bank is relying on such audit report, and (B) a certificate of
the chief financial officer of K-Tel International stating that such
financial statements have been prepared in accordance with GAAP applied
on a basis consistent with the accounting practices reflected in the
annual financial statements referred to in Section 4.5 hereof.
(d) As soon as available and in any event within 30 days
after the end of each month, the consolidated balance sheet of K-Tel
International (the statements of cash flows shall be required only as
soon as available and in any event within 45 days after the end of each
fiscal quarter of K-Tel International) as at the end of such month and
related consolidated statements of operations and cash flows of K-Tel
International for such month and for the year to date, in reasonable
detail and stating in comparative form the figures for the
corresponding date and period in the previous year, all prepared in
accordance with GAAP applied on a basis consistent with the accounting
practices reflected in the annual financial statements referred to in
Section 4.5 and subject to year-end audit adjustments, and accompanied
by a certificate of the chief financial officer of K-Tel International
stating that such financial statements have been prepared in accordance
with GAAP applied on a basis consistent with the accounting practices
reflected in the annual financial statements referred to in Section
4.5.
(e) On or before the fifteenth (15th) day of each month, a
Borrowing Base Certificate as of the close of business on the last day
of the preceding month, properly executed by the president or chief
financial officer of each of the Borrowers. At the Borrowers' option,
the Borrowers may update at any time the information contained in any
Borrowing Base Certificate by submitting to the Bank a new Borrowing
Base Certificate (or other information acceptable to the Bank in its
sole discretion) with respect to new Accounts generated since the
Borrowers' most recent Borrowing Base Certificate.
(f) Within fifteen (15) days after the end of each month,
agings of K-Tel USA's Accounts and its accounts payable.
(g) Within thirty (30) days after the end of each fiscal year
of K-Tel USA, a list of names and addresses of the account debtors of
K-Tel USA.
(h) Immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any of the Loan Parties of
the type described in Section 4.7.
(i) As promptly as practicable (but in any event not later
than five Business Days) after an officer of any of the Borrowers
obtains knowledge of the occurrence of any Default or Event of Default,
notice of such occurrence, together with a detailed statement by a
responsible officer of such Borrower of the steps being taken by the
Borrowers to cure the effect of such event.
(j) Promptly upon their distribution, copies of all financial
statements, reports and proxy statements which K-Tel International
shall have sent to its shareholders.
(k) Promptly after the recording or filing thereof, copies of
all regular and periodic financial reports which K-Tel International or
any of the Borrowers shall file with the Securities and Exchange
Commission or any national securities exchange.
(l) Such other information respecting the financial
condition, results of operations and property of any of the Loan
Parties as the Bank may from time to time reasonably request.
Section 5.2 Books and Records; Inspection and Examination.
Each Borrower will keep accurate books of record and account for itself in which
true and complete entries will be made in accordance with GAAP consistently
applied and, upon request of the Bank, will give any representative of the Bank
access to, and permit such representative to examine, copy or make extracts
from, any and all books, records and documents in its possession, to inspect any
of its properties and to discuss its affairs, finances and accounts with any of
its principal officers, all at such times during normal business hours and as
often as the Bank may reasonably request, and will permit the Bank to send and
discuss such Borrower's account debtors requests for verification of amounts
owed to such Borrower, as often as the Bank shall desire. Without limiting the
generality of the foregoing, each Borrower specifically agrees that (a) the Bank
may conduct such audits and inspections of the collateral and operations of such
Borrower during each period of 12 consecutive months, as the Bank shall deem
necessary or desirable in its sole discretion and (b) that such Borrower shall
pay the Bank on demand, all costs and expenses incurred by the Bank in
connection with any such audits or inspections. The Bank's rights under this
Section 5.2 shall be in addition to any rights under any Security Document.
Section 5.3 Compliance with Laws. Each Borrower will comply
with the requirements of applicable laws and regulations, the noncompliance with
which would materially and adversely affect its business or its financial
condition.
Section 5.4 Payment of Taxes and Other Claims. Each Borrower
will pay or discharge when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon any properties belonging to it, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid might by law become a lien or charge
upon any of its properties; provided, that such Borrower shall not be required
to pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings.
Section 5.5 Maintenance of Properties. Each Borrower will keep
and maintain all of its material properties necessary or useful in its business
in good condition, repair and working order.
Section 5.6 Preservation of Corporate Existence. Each
Borrower will preserve and maintain its corporate existence and all of its
rights, privileges and franchises; provided, however, that such Borrower shall
not be required to preserve any of its rights, privileges and franchises if its
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of such Borrower and that the loss
thereof is not disadvantageous in any material respect to the Bank as a holder
of the Note.
Section 5.7 Current Ratio of K-Tel USA. K-Tel USA will
maintain at all times the ratio of its Current Assets to Current Liabilities at
not less than (i) .86 to 1.00 at all times from the Closing Date through June
29, 1997, and (ii) .90 to 1.00 at all times from and after June 30, 1997.
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 (i)
($2,388,000) at all times from the Closing Date through June 29, 1997, and (ii)
($1,444,000) at times from and after June 30, 1997.
Section 5.9 Net Income Before Taxes of K-Tel USA. K-Tel USA
will maintain at all times its Net Income before Taxes in an amount not less
than (i) $1,156,000 at all times from the Closing Date through June 29, 1997 for
the fiscal year-to-date period from July 1, 1996 through the date of
determination, and (ii) $2,100,000 on June 30, 1997 for the fiscal year-to-date
period from July 1, 1996 through June 30, 1997.
Section 5.10 Acquisition or Creation of New Copyrights;
Registration of Newly Acquired or Created Copyrights; Registration of Existing
Unregistered Copyrights; Acquisition of Copyrights Subject to Long-Term
Licenses.
(a) Acquisition or Creation of New Copyrights. The Borrowers
covenant and agree that either Dominion or K-Tel Productions shall be
the exclusive owner of each copyright in a Sound Recording or a
Compilation acquired or created by any Loan Party or any Affiliate of
any Loan Party after July 22, 1994, except that K-Tel USA may be the
owner of copyrights in Compilations which are acquired or created by
K-Tel USA after July 22, 1994 and which include one or more Sound
Recordings subject to a short-term license (having a term of 5 years or
less) between a licensor who is not an Affiliate of K-Tel USA and K-Tel
USA, as licensee, and except for acquisitions by K-Tel International's
subsidiary, K-Tel Entertainment (UK) Ltd. ("K-Tel UK"), which operates
in Europe.
(b) Registration of Newly Acquired or Created Copyrights. The
Borrowers covenant and agree that either Dominion or K-Tel Productions,
as applicable, will promptly, and in any event within 60 calendar days
after the first publication thereof, apply for registration in the U.S.
Copyright Office for each new copyright in a Sound Recording or
Composition which is acquired or created by Dominion or K-Tel
Productions, as applicable, after July 22, 1994. In addition, the
Borrowers covenant and agree that Dominion, K-Tel Productions or K-Tel
USA, as the case may be, may in its discretion determine to apply for
registration of copyrights in Compilations acquired or created after
the date of this Agreement. In connection with the application for
registration of each such newly acquired or created copyright in a
Sound Recording, Composition or Compilation, the Borrowers covenant and
agree that they shall provide to the Bank a copy of each application
for registration of each such copyright and the related correspondence
submitting such application for registration to the U.S. Copyright
Office simultaneously with such submission to the U.S. Copyright
Office. Within 30 days after the Borrowers' receipt from the U.S.
Copyright Office of a registration number with respect to any such
application for registration, the Borrowers shall submit to the Bank a
copy of such application with the registration number stamped thereon
and a related Supplement to Copyright Security Agreement, duly executed
by Dominion, K-Tel Productions or K-Tel USA, as the case may be, in
substantially the form of Exhibit E (for Dominion) Exhibit F (for K-Tel
Productions) or Exhibit G (for K-Tel USA); provided, however, in
connection with K-Tel Productions initial acquisition or creation of a
Sound Recording, Composition or Compilation, simultaneously with such
initial acquisition or creation, K-Tel Productions shall provide to the
Bank (i) K-Tel Productions' Copyright Security Agreement, dated the
date of such acquisition or creation, duly executed on behalf of K-Tel
Productions, (ii) copies of searches of the U.S. Copyright Office with
respect to all Sound Recordings, Compositions and Compilations acquired
by K-Tel Productions, and (iii) such other items as the Bank may
reasonably request. The Bank will, at the Borrowers' sole expense,
undertake to file each such Copyright Security Agreement and/or
Supplement to Copyright Security Agreement with the U.S. Copyright
Office.
(c) Registration of Existing Unregistered Copyrights. The
Borrowers covenant and agree that they may in their discretion
determine to register any unregistered copyright in a Sound Recording,
Composition or Compilation listed in Schedule 4.16(e) or in Schedule
4.16(g). In connection with the registration of each such existing
copyright in a Sound Recording, Composition or Compilation, the
Borrowers covenant and agree that they shall provide to the Bank a copy
of each application for registration of each such copyright and the
related correspondence submitting such application to the U.S.
Copyright Office simultaneously with such submission to the U.S.
Copyright Office. In addition, if the copyright claimant on any such
application is not Dominion or K-Tel USA, as appropriate, then in
addition to the application for registration, the Borrowers shall also
simultaneously submit to the U.S. Copyright Office and provide to the
Bank an assignment from the copyright claimant in favor of Dominion
with respect to those unregistered copyrights listed in Schedule
4.16(e) or an assignment from the copyright claimant in favor of K-Tel
USA with respect to those unregistered copyrights listed in Schedule
4.16(g). Within 30 days after the Borrowers' receipt from the U.S.
Copyright Office of a registration number with respect to each such
application, the Borrowers shall submit to the Bank a copy of such
application with the registration number stamped thereon and a related
Supplement to Copyright Security Agreement, duly executed by Dominion
or K-Tel USA, as the case may be, in substantially the form of Exhibit
E (for Dominion) or Exhibit G (for K-Tel USA). The Bank will, at the
Borrower's sole expense, file each such Supplement to Copyright
Security Agreement with the U.S. Copyright Office.
(d) Acquisition of Copyrights Subject to Long-Term Licenses.
The Borrowers covenant and agree that Dominion or K-Tel Productions
shall be the licensor under any long-term license (having a term of
more than 5 years) in any Sound Recording or Compilation entered into
by any Loan Party or any Affiliate of any Loan Party after the date of
this Agreement, except for licenses by K-Tel UK in connection with the
operation of its business. The Borrowers covenant and agree that they
will provide a copy of each such long-term license to the Bank within
fifteen (15) days after entering into each such long-term license.
Without the prior written consent of the Bank, neither Dominion nor
K-Tel Productions shall enter into any such long-term license unless
such long-term license contains the licensor's acknowledgment that such
long-term license is subject to a security interest in favor of the
Bank and that the Bank may enforce its security interest in such
long-term license and sell the licensee's rights under such long-term
license without the consent of or notice to the licensor, with such
acknowledgment being stated substantially as provided in Schedule
5.10(d).
ARTICLE VI
Negative Covenants
So long as the Note shall remain unpaid or the Commitment
shall be outstanding, the Borrowers agree that, without the prior written
consent of the Bank:
Section 6.1 Liens of the Borrowers. None of the Borrowers
will create, incur, assume or suffer to exist any mortgage, deed of trust,
pledge, lien, security interest, or other charge or encumbrance of any nature on
any of its assets, now owned or hereafter acquired, or assign or otherwise
convey any right to receive income or give its consent to the subordination of
any of its rights or claims to any right or claim of any other Person;
excluding, however, from the operation of the foregoing:
(a) Liens for taxes or assessments or other governmental
charges to the extent not required to be paid by Section 5.4.
(b) Materialmen's, merchants', carriers', worker's,
repairer's, or other like liens arising in the ordinary course of
business to the extent not required to be paid by Section 5.4.
(c) Pledges or deposits to secure obligations under worker's
compensation laws, unemployment insurance and social security laws, or
to secure the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases or to secure statutory
obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business.
(d) Zoning restrictions, easements, licenses, restrictions on
the use of real property or minor irregularities in title thereto,
which do not materially impair the use of such property in the
operation of the business of such Borrower or the value of such
property for the purpose of such business.
(e) Mortgages, liens, pledges and security interests on any
property of K-Tel USA securing any indebtedness for borrowed money in
existence on the date hereof and listed in Schedule 6.1 hereto.
(f) The security interests granted to the Bank under the
Security Documents.
(g) Capital Leases provided that after giving effect to each
such Capital Lease, the Borrowers shall be in compliance with all
provisions of this Agreement.
(h) Short-term nonexclusive licenses (having a term of 5
years or less) in the copyrights of a Borrower granted by such
Borrower, as licensor, to third-party licensees in the ordinary course
of such Borrower's business.
(i) The rights of third-party licensors pursuant to
short-term license agreements (having a term of 5 years or less) under
which a Borrower is the licensee of copyrights of such third-party
licensors.
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
hereof and listed in Schedule 6.2 hereto and renewals thereof.
(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.
(h) Accounts payable to and advances owing to K-Tel USA by
Dominion not to exceed zero in the aggregate at any time.
(i) Accounts payable to and advances owing to K-Tel USA by
K-Tel Productions not to exceed $250,000 in the aggregate at any time;
provided, however, in the event that K-Tel Productions acquires any
music catalogues, the foregoing limitation shall be increased by the
purchase price of each such purchased music catalogue to an aggregate
amount not to exceed at any time $2,250,000.
(j) Accounts payable to and advances owing to K-Tel USA by
K-Tel Video not to exceed $250,000 in the aggregate at any time.
(k) Accounts payable to and advances owing to K-Tel USA by
K-Tel Direct not to exceed $500,000 in the aggregate at any time.
(l) Accounts payable to and advances owing to K-Tel USA by
K-Tel TV not to exceed $250,000 in the aggregate at any time.
(m) Accounts payable to and advances owing to K-Tel USA by
K-Tel Consumer Products not to exceed $1,523,000 in the aggregate at
any time.
(n) Unsecured indebtedness to Philip Kives or an entity
controlled by Philip Kives.
Section 6.3 Guaranties of the Borrowers. None of the
Borrowers will assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except:
(a) The endorsement of negotiable instruments by a Borrower
for deposit or collection or similar transactions in the ordinary
course of business.
(b) Guaranties, endorsements and other direct or contingent
liabilities of K-Tel USA in connection with the obligations of other
Persons in existence on the date hereof and listed in Schedule 6.3
hereto.
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 Moody's 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) K-Tel USA's accounts receivable from and advances due from
Dominion not to exceed zero in the aggregate at any time.
(c) K-Tel USA's accounts receivable from and advances due from
K-Tel Productions not to exceed $250,000 in the aggregate at any time;
provided, however, in the event that K-Tel Productions acquires any
music catalogues, the foregoing limitation shall be increased by the
purchase price of each such purchased music catalogue to an aggregate
amount not to exceed at any time $2,250,000.
(d) K-Tel USA's accounts receivable from and advances due from
K-Tel Video not to exceed $250,000 in the aggregate at any time.
(e) K-Tel USA's accounts receivable from and advances due from
K-Tel Direct not to exceed $500,000 in the aggregate at any time.
(f) K-Tel USA's accounts receivable from and advances due from
K-Tel TV not to exceed $250,000 in the aggregate at any time.
(g) K-Tel USA's accounts receivable from and advances due from
K-Tel Consumer Products not to exceed $1,523,000 in the aggregate at
any time.
(h) K-Tel USA's accounts receivable from and advances due from
K-Tel International not to exceed $200,000 in the aggregate at any
time.
(i) K-Tel USA's accounts receivable from and advances due from
K-Tel Direct, Inc. not to exceed $1,125,000 in the aggregate at any
time.
(j) K-Tel USA's accounts receivable from and advances due from
K-Tel Entertainment (CAN), Inc. not to exceed $55,000 in the aggregate
at any time.
(k) K-Tel USA's accounts receivable from and advances due from
Dominion Vertriebs (Germany) not to exceed $41,000 in the aggregate at
any time.
(l) K-Tel USA's accounts receivable from and advances due from
K-Tel (UK) not to exceed $369,000 in the aggregate at any time.
(m) K-Tel USA's accounts receivable from and advances due from
K-Tel International Limited not to exceed $24,000 in the aggregate at
any time.
(n) K-Tel USA's accounts receivable from and foreign royalties
due from Affiliates (not included in other subsections of this Section
6.4) not to exceed $130,000 in the aggregate at any time.
(o) Travel advances to officers and employees of the Borrowers
in the ordinary course of business.
(p) Advances in the form of progress payments, prepaid rent or
security deposits.
Section 6.5 Restricted Payments. None of the Borrowers will,
during any fiscal year of such Borrower, pay any dividends or distributions on
any shares of any class of stock of such Borrower or directly or indirectly
apply any assets of such Borrower to the redemption, retirement, purchase or
other acquisition of any share of any class of stock of such Borrower, and none
of the Borrowers will make any other cash payment whatsoever to K-Tel
International (whether as a fee for services rendered or the purchase price of
an asset purchased, or for any other purpose; provided, however, that if and to
the extent K-Tel International (the parent corporation of the Borrowers) files
federal and state income tax returns on a consolidated basis and includes the
Borrowers as members, each Borrower may dividend cash to K-Tel International in
an amount not exceeding its share of the combined (without duplication)
liabilities of the Borrowers for federal and state income taxes that would have
been due the taxing authorities had such taxes been computed separately on
separate returns for each of the Borrowers without regard to their inclusion as
members of a consolidated group of corporations.
Section 6.6 Sale or Transfer of Assets; Suspension of any
Borrower's Operations. None of the Borrowers will sell, lease, assign, transfer
or otherwise dispose of (i) all or a substantial part of its assets or (ii) any
collateral of the Bank or any interest therein (whether in one transaction or in
a series of transactions) to any other Person other than (A) a Borrower's sale
of Inventory in the ordinary course of business, (B) a Borrower's granting of
short-term nonexclusive licenses (having a term of 5 years of less) in its
copyrights in the ordinary course of its business and (C) a Borrower's disposal
of obsolete equipment in the ordinary course of business. None of the Borrowers
will liquidate, dissolve or suspend business operations without the prior
written consent of the Bank.
Section 6.7 Consolidation and Merger; Asset Acquisitions.
None of the Borrowers will consolidate with or merge into any Person or permit
any other Person to merge into it or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all of the
assets of any other Person.
Section 6.8 Hazardous Substances. None of the Borrowers will
cause or permit any Hazardous Substance to be disposed of, in any manner which
might result in any material liability to such Borrower on, under or at any real
property which is operated by such Borrower or in which such Borrower has any
interest.
Section 6.9 Restrictions on Nature of Business. None of the
Borrowers will engage in any line of business materially different from that
presently engaged in by such Borrower.
Section 6.10 Change in Ownership. None of the Borrowers will
issue or sell any stock of such Borrower so as to change the percentage of
voting and non-voting stock of the Borrower owned by K-Tel International, which
is the sole shareholder of each Borrower, and none of the Borrowers will permit
or suffer to occur any sale, transfer, assignment, pledge or other disposition
of any or all of the issued and outstanding shares of stock of such Borrower,
except for the pledge of such stock to the Bank under K-Tel International's
Pledge Agreement.
ARTICLE VII
Events of Default, Rights and Remedies
Section 7.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) Default in the payment of any interest on or principal of
the Note when due, including, without limitation, any mandatory
prepayment required under Section 2.7 hereof, or default in the payment
of any Obligation of Reimbursement when due.
(b) Default in the payment of any fees, costs, expenses or
other amounts payable under this Agreement or any other Loan Document
when due.
(c) Default in the performance, or breach, of any covenant or
agreement on the part of the Borrowers or any of them contained in
Sections 5.1, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 6.1, 6.2, 6.3, 6.4, 6.5,
6.6, 6.7, 6.9 or 6.10 hereof.
(d) Default in the performance, or breach, of any covenant or
agreement on the part of any Loan Party contained in any Loan Document
to which it is a party (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section or
elsewhere in such Loan Document specifically dealt with) and the
continuance of such default or breach for a period of 30 days after
written notice thereof has been given by the Bank to the Borrowers.
(e) Any representation or warranty made by any Loan Party in
any Loan Document to which it is a party or by any Loan Party (or any
of its officers) in any certificate, instrument, or statement
contemplated by or made or delivered pursuant to or in connection with
this Agreement or any other Loan Document, shall prove to have been
incorrect in any material respect when made.
(f) A default under any bond, debenture, note or other
evidence of indebtedness of any Loan Party (other than to the Bank) or
under any indenture or other instrument under which any such evidence
of indebtedness has been issued or by which it is governed and the
expiration of the applicable period of grace, if any, specified in such
evidence of indebtedness, indenture or other instrument; provided,
however, that if such default shall be cured by such Loan Party, or
waived by the holders of such indebtedness, in each case as may be
permitted by such evidence of indebtedness, indenture or other
instrument, then the Event of Default hereunder by reason of such
default shall be deemed likewise to have been thereupon cured or
waived.
(g) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement directly or
indirectly securing any obligations of the Borrowers or any of them
hereunder or under the Note.
(h) K-Tel International shall repudiate, purport to revoke,
or fail to perform, when due, any of its obligations under K-Tel
International's Guaranty, K-Tel International's Security Agreement or
K-Tel International's Pledge Agreement.
(i) Default in the payment of any amount owed by the Borrowers
or any of them to the Bank other than hereunder or under the Note.
(j) Any Loan Party shall be adjudicated a bankrupt or
insolvent, or admit in writing its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors; or any Loan
Party shall apply for or consent to the appointment of any receiver,
trustee, or similar officer for it or for all or any substantial part
of its property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of such Loan Party and
such appointment shall continue undischarged for a period of 30 days;
or any Loan Party shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or
otherwise) against any Loan Party; or any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied
against a substantial part of the property of any Loan Party and such
judgment, writ, or similar process shall not be released, vacated or
fully bonded within 30 days after its issue or levy.
(k) A petition shall be filed by or against any Loan Party
under the United States Bankruptcy Code naming such Loan Party as
debtor.
(l) The rendering against any Loan Party of a final judgment,
decree or order for the payment of money in excess of $50,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution.
(m) A writ of attachment, garnishment, levy or similar
process shall be issued against or served upon the Bank with respect to
(i) any property of any Loan Party in the possession of the Bank, or
(ii) any indebtedness of the Bank to any Loan Party.
(n) Any Reportable Event, which the Bank determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
any Loan Party by the Bank; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or any Loan Party shall have filed for a distress termination
of any Plan under Title IV of ERISA; or any Loan Party shall have
failed to make any quarterly contribution required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, which the Bank determines in good faith may by itself, or in
combination with any such failures that the Bank may determine are
likely to occur in the future, result in the imposition of a lien on
the assets of such Loan Party in favor of the Plan.
Section 7.2 Rights and Remedies. If any Event of Default shall
occur and be continuing, the Bank may exercise any one or more of the rights and
remedies set forth below:
(a) The Bank may, by notice to the Borrowers, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate.
(b) The Bank may, by notice to the Borrowers, declare all
indebtedness, interest, fees and other amounts due and payable under
this Agreement, the Note and the other Loan Documents to be forthwith
due and payable, whereupon the same shall be forthwith due and payable,
without presentment, notice of dishonor, protest, or further notice of
any kind, all of which are hereby expressly waived by each of the
Borrowers.
(c) The Bank may, without notice to the Borrowers and without
further action, apply any and all money owing by the Bank to the
Borrowers or any of them to the payment of amounts owing to the Bank
under this Agreement, the Note and the other Loan Documents, including
interest accrued thereon, and of all other sums then owing by the
Borrowers or any of them hereunder.
(d) The Bank may exercise and enforce its rights and remedies
under any one or more of the Loan Documents.
(e) The Bank may exercise any other rights available to it by
law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 7.1(j) or 7.1(k) hereof, the Commitment shall be
automatically terminated and the entire unpaid principal amount of the Note, all
interest accrued and unpaid thereon, and all other amounts payable under this
Agreement and/or the other Loan Documents shall be immediately due and payable
without presentment, demand, protest or notice of any kind all of which are
hereby expressly waived by each of the Borrowers.
ARTICLE VIII
Miscellaneous
Section 8.1 Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by the Borrowers or
any of them therefrom shall in any event be effective unless the same shall be
in writing and signed by the Bank and, in the case of an amendment, by the
Borrowers, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 8.2 Notices, Etc. All notices and other communications
provided for under any Loan Document shall be in writing and mailed or
telecopied or personally delivered or delivered by overnight carrier, to the
applicable party at its address indicated below:
If to the Borrowers:
K-Tel International (USA), Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
Dominion Entertainment, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
K-Tel Productions, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
K-Tel Video, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
K-Tel Direct, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
K-Tel TV, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
K-Tel Consumer Products, Inc.
c/o K-Tel International, Inc.
2605 Fernbrook Lane North
Plymouth, Minnesota 55447
Attention: Chief Financial Officer
Telecopier: (612) 559-6822
If to the Bank:
TCF National Bank Minnesota
801 Marquette Avenue
Minneapolis, Minnesota 55402
Attention: Richard D. Larson
Telecopier: (612) 661-8504
or, as to each party, at such other address or telecopy number as shall be
designated in a written notice to the other party. Each such notice or
communication shall be effective (i) if given by mail, two Business Days after
such notice or communication is deposited in the mail with first class postage
prepaid, addressed as aforesaid, (ii) if given by telecopy, when sent, (iii) if
personally delivered, when personally delivered and (iv) if delivered by
overnight carrier, one Business Day after deposit with the overnight carrier for
next Business Day delivery, addressed as aforesaid; except that notices to the
Bank pursuant to the provisions of Section 2.3 hereof shall not be effective
until received by the Bank.
Section 8.3 No Waiver; Remedies. No failure on the part of
the Bank to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
Section 8.4 Indemnity. In addition to the payment of costs
and expenses pursuant to Section 8.5 hereof, the Borrowers agree to jointly and
severally indemnify, defend and hold harmless the Bank, and any of its
participants, parent corporations, subsidiary corporations, affiliated
corporations, successor corporations, and all present and future officers,
directors, employees and agents of the foregoing (the "Indemnitees"), from and
against (i) any and all transfer taxes, documentary taxes, assessments or
charges made by delivery of this Agreement and the other Loan Documents or the
making of the Advances, and (ii) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel) in connection with any investigative, administrative or judicial
proceedings, whether or not such Indemnitee shall be designated a party thereto,
which may be imposed on, incurred by or asserted against such Indemnitee, in any
manner relating to or arising out of or in connection with the making of the
Advances, this Agreement and all other Loan Documents or the use or intended use
of the proceeds of the Advances (the "Indemnified Liabilities"). If any
investigative, judicial or administrative proceeding arising from any of the
foregoing is brought against any Indemnitee, upon request of such Indemnitee,
the Borrowers, or counsel designated by the Borrowers and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrowers' sole cost and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrowers shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligation of the
Borrowers under this Section 8.4 shall survive the termination of this Agreement
and the discharge of the Borrowers' other obligations under this Agreement.
Section 8.5 Costs, Expenses and Taxes. The Borrowers jointly
and severally agree to pay on demand all costs and expenses related to the
preparation, execution, delivery, filing, recording and administration of the
Loan Documents and the other documents to be delivered under the Loan Documents
and any waiver or consent hereunder or any amendment hereof, including, without
limitation, the fees and expenses of counsel for the Bank (whether outside
counsel, inside counsel, or both) with respect thereto and with respect to
advising the Bank as to its rights and responsibilities under the Loan
Documents, and all costs and expenses (including counsel fees and expenses,
whether outside counsel, inside counsel, or both) in connection with the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents. In addition, the Borrowers shall pay any and all fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of the Loan Documents and the other documents to be
delivered under the Loan Documents (including without limitation, any filing
fees), and agree to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such fees.
Section 8.6 Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default the Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the Bank
to or for the credit or the account of the Borrowers or any of them against any
and all of the obligations of the Borrowers or any of them now or hereafter
existing under any Loan Document, irrespective of whether or not the Bank shall
have made any demand under such Loan Document and although deposits,
indebtedness or such obligations may be unmatured or contingent. The Bank agrees
promptly to notify the Borrowers after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
Section 8.7 Severability of Provisions. Any provision of this
Agreement or of any other Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or thereof or affecting the validity or unenforceability of
such provision in any other jurisdiction.
Section 8.8 Binding Effect; Governing Law. This Agreement
shall be binding upon and inure to the benefit of each of the Borrowers and the
Bank and their respective successors and assigns, except that none of the
Borrowers shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Bank. This Agreement, the Note
and the other Loan Documents shall be governed by, and construed in accordance
with, the substantive laws, other than conflict laws, of the State of Minnesota.
Section 8.9 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same agreement.
Section 8.10 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.11 Jurisdiction and Venue. The Borrowers consent to
the personal jurisdiction of the state and federal courts located in the State
of Minnesota in connection with any controversy related to this Agreement, the
Note, any Security Documents and/or any other Loan Document, waives any argument
that venue in any such forum is not convenient, and agrees that any litigation
initiated by the Borrowers or any of them against the Bank in connection with
this Agreement, the Note, any Security Document and/or any other Loan Document
shall be venued in either the District Court of Hennepin County, Minnesota, or
the United States District Court, District of Minnesota, Fourth Division.
Notwithstanding the foregoing, nothing in this Agreement, the Note, the Security
Documents or any other Loan Document shall affect the right of the Bank to bring
any action or proceeding against the Borrowers or any of them or its property in
the courts of any other jurisdiction.
Section 8.12 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWERS
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED AND THAT THE TIME AND EXPENSE REQUIRED FOR TRIAL BY JURY MAY
EXCEED THE TIME AND EXPENSE REQUIRED FOR TRIAL WITHOUT A JURY. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES,
HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY ACTION,
PROCEEDING, LITIGATION OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, ANY RELATED AGREEMENTS OR THE
PERFORMANCE OR ENFORCEMENT OF ANY OF THE FOREGOING.
Section 8.13 Restatement of Prior Credit Agreement. This
Agreement constitutes an amendment to, and a complete restatement of, the Prior
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
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________________________________
<TABLE>
<CAPTION>
SCHEDULES TO REVOLVING CREDIT AGREEMENT
<S> <C>
Schedule 2.11 Existing Letters of Credit
Schedule 4.4 Subsidiaries of K-Tel International
Schedule 4.7 Litigation
Schedule 4.16(a) Dominion's Registered Copyrights in Sound Recordings and Compositions
Schedule 4.16(b) Dominion's Registered Copyrights in Compilations
Schedule 4.16(c) Registered Copyrights in Sound Recordings and Compilations which are
Owned by Dominion, but must be Assigned of Record by Affiliates of Dominion to
Dominion
Schedule 4.16(d) Registered Copyrights in Sound Recordings and Compilations which are
Jointly Owned by Dominion and a Person other than an Affiliate of Dominion
Schedule 4.16(e) Dominion's Unregistered Copyrights in Sound Recordings, Compositions
and Compilations
Schedule 4.16(f) K-Tel USA's Registered Copyrights in Compilations which are subject
to Short-Term License Agreements
Schedule 4.16(g) K-Tel USA's Unregistered Copyrights in Compilations which are subject
to Short-Term License Agreements
Schedule 4.16(h) Dominion's Long-Term Licenses in Copyrights
Schedule 5.10(d) Form of Acknowledgment for Long-Term Licenses
Schedule 6.1 Permitted Liens of K-Tel USA
Schedule 6.2 Permitted Indebtedness of K-Tel USA
Schedule 6.3 Permitted Guaranties of K-Tel USA
EXHIBITS TO REVOLVING CREDIT AGREEMENT
Exhibit A Note
Exhibit B Borrowing Base Certificate
Exhibit C Form of Compliance Certificate for Borrowers
Exhibit D Form of K-Tel Productions' Copyright Security Agreement
Exhibit E Form of Supplement to Dominion's Copyright Security Agreement
Exhibit F Form of Supplement to K-Tel Production's Copyright Security
Agreement
Exhibit G Form of Supplement to K-Tel USA's Copyright Security
Agreement
</TABLE>
SCHEDULE 2.11
TO
REVOLVING CREDIT AGREEMENT
STANDBY
NUMBER DATE AMOUNT BENEFICIARY EXPIRATION
96-004 05/20/95 $20,000.00 BMG Music 05/31/97
DOCUMENTARY
NUMBER DATE AMOUNT BENEFICIARY EXPIRATION
160436 01/15/97 $142,515.40 P & C Creative 04/06/97
160630 01/31/97 $24,613.51 Wellcare, Ltd. 03/30/97
160643 02/06/97 $115,506.00 Hung Mei Brush 05/05/97
160655 02/10/97 $29,760.00 Kayee MO House 03/15/97
160682 02/24/97 $12,215.70 Kayee MO House 03/25/97
160736 03/07/97 $29,760.00 Kayee MO House 04/08/97
160774 03/21/97 $31,000.00 Teamwell Elect. 04/19/97
160775 03/21/97 $7,300.00 So. Asia Int. 04/19/97
160825 04/01/97 $13,527.00 Kayee MO House 04/23/97
--* 04/07/97 $41,580.00 Kayee MO House 05/08/97
--* 04/07/97 $24,336.00 Teamwell Elect. 05/10/97
- --------------------------------------------------------------------------------
* These last two were submitted to First Chicago NBD on Monday, April 7, for
issuance and do not yet have L/C numbers assigned to them (they are assigned by
First Chicago).
- --------------------------------------------------------------------------------
SCHEDULE 4.4
TO
REVOLVING CREDIT AGREEMENT
[TO BE PROVIDED BY BORROWER]
SCHEDULE 4.7
TO
REVOLVING CREDIT AGREEMENT
[TO BE PROVIDED BY BORROWER]
SCHEDULE 4.16(a)
TO
REVOLVING CREDIT AGREEMENT
Dominion's Registered Copyrights in
Sound Recordings and Compositions
as of July 22, 1994
Dominion's Individual Sound Recordings
<TABLE>
<CAPTION>
Title of Work Artist Registration No.
------------- ------ ----------------
<S> <C> <C>
Abilene George Hamilton IV SR 151772
Don't Pull Your Love Hamilton, Joe Frank & Reynolds SR 117409
Fallin' In Love Hamilton, Joe Frank & Reynolds SR 115749
Batman Theme The Marketts SR 108810
No Matter What Your Shape The T-Bones SR 114081
(Your Stomach's In)
Let's Go The Routers SR 118331
Monster Mash Bobby "Boris" Pickett SR 141067
Turn Your Radio On The Jordanaires SR 140329
Why Me Lord The Jordanaires SR 140330
Wings Of A Dove The Jordanaires SR 140331
Crying In The Chapel The Jordanaires SR 140332
God Bless The USA/America
The Beautiful The Jordanaires SR 140333
Just A Closer Walk With Thee The Jordanaires SR 141416
Will The Circle Be Unbroken The Jordanaires SR 141415
Peace In The Valley The Jordanaires SR 141414
Uncloudy Day The Jordanaires SR 141417
How Great Thou Art The Jordanaires SR 141412
Amazing Grace The Jordanaires SR 141413
Complete Albums
(including Frontline)
Title of Work Artist Registration No.
------------- ------ ----------------
Celestial Navigations II Celestial Navigations SR 108018
Bluegrass Favorites The Wood Brothers SR 166623
New Frontier Rick Zunigar SR 108799
For My Friends Greg Mathieson SR 108805
Don't Look Back Don Randi And Quest SR 108798
Gary Herbig Gary Herbig SR 108577
Friends To Lovers Gary Herbig SR 108803
Jules Broussard Jules Broussard SR 112338
Sweet Innocence Vinny Bianchi & Providence SR 108804
And It Rained All Through The
Night Bill Wolfer SR 108802
Celestial Navigations Celestial Navigations SR 108814
Live At Alfonse's Dave Pell Octet SR 108794
Cool Saturdays Tommy Wiggins SR 112678
Caught In The Blue Light Bill Wolfer SR 117440
You Ought to Think About Me Jimmy McGriff SR 121447
Diamond Jubilee Frank Yankovic SR 121446
From Me To You Tom Coster SR 120960
Crazy Z Jaye Ebony Lover & D.J. SR 118678
Silent Night Bill Wolfer SR 124210
Seasonings Various Artists SR 124199
Wind & Sea Don Randi & Quest SR 124273
In A Blue Mood Jimmy McGriff SR 136544
How Fast Forever Goes Gary LeMel SR 139037
ICE - Chapter III Celestial Navigations SR 141406
The Wood Brothers The Wood Brothers SR 145720
Memories And Me Paul Hale SR 157084
Hooked On Big Bands Joe Fingers Webster SR 157079
Hooked On Romance Starsound Orchestra SR 147678
Hooked On A Beatles Tribute Dr. Fink & The Mystery Band SR 141405
Hooked On Dixie 2 Joe Fingers Webster SR 136412
Hooked On Country Wood Brothers SR 130767
Hooked On Polkas Joey Miskulin SR 108806
Hooked On Bluegrass Wood Brothers SR 108812
Ray Price - Greatest Hits Ray Price SR 184402
The Old Rugged Cross Ray Price SR 183434
Artistically Beatles SR 157076
Time For Dreaming SR 146675
Songs For Your Wedding SR 145437
America Proud SR 133133
90's Movie Hits SR 135106
Screeches, Clanks & Howls SR 171969
</TABLE>
SCHEDULE 4.16(b)
TO
REVOLVING CREDIT AGREEMENT
Dominion's Registered Copyrights in Compilations
as of July 22, 1994
<TABLE>
<CAPTION>
Title of Work Artist Registration No.
------------- ------ ----------------
<S> <C> <C>
Martha Reeves/Etta James Martha Reeves/Etta James SR 112687
The Gospel Soul of Etta James Etta James SR 112686
Back To The Early 50's SR 119493
Back To The 50's - Vol. II SR 119479
Back To The 50's - Vol. III SR 118079
Back To The 60's Rock `N Roll SR 119490
Back To The 60's Country SR 119480
Back To The 60's Soul SR 123309
Back To The 60's Soul - Vol. II SR 118068
Back To The 60's - Vol. II SR 119475
Back To The 60's - Vol. III SR 119477
Back To The 60's - Vol. IV SR 119472
Back To The 60's - Vol. V SR 119482
Back To The 70's Country SR 119478
Back To The 70's SR 118097
Back To The 70's - Vol. II SR 119491
Jan & Dean - Surf City Jan & Dean SR 120062
Little Richard - His Best Little Richard SR 119484
The Best of B.J. Thomas B.J. Thomas SR 120057
The Best of Connie Smith Connie Smith SR 119474
Drifters/Coasters Drifters/Coasters SR 119473
Frankie Laine/Johnnie Ray Frankie Laine/Johnnie Ray SR 119485
The Impressions/Jerry Butler The Impressions/Jerry Butler SR 119471
Patti Page/Rosemary Clooney Patti Page/Rosemary Clooney SR 119483
The Grass Roots Gary Lewis & The Playboys SR 119476
Soul Of Sam & Dave Sam & Dave SR 119488
Tommy Roe/Bobby Vee Tommy Roe/Bobby Vee SR 118078
Lynn Anderson/Donna Fargo Lynn Anderson/Donna Fargo SR 119492
Goofy Greats SR 119486
More Gospel Country SR 119489
Country Ladies SR 119481
Best of Christmas SR 119487
50's Dance Party - Vol. II SR 112790
60's Dance Party - Vol. II SR 112781
Originals Still The Greatest - Vol. III SR 117400
Originals Still The Greatest - Vol. IV SR 117401
Golden Years I - 1955 SR 121364
Golden Years II - 1956 SR 121039
Golden Years III - 1957 SR 121061
Golden Years IV - 1958 SR 121051
Golden Years V - 1959 SR 121050
Golden Years VI - 1960 SR 121071
Golden Years VII - 1961 SR 121072
Golden Years VIII - 1962 SR 121040
Golden Years IX - 1963 SR 121041
Golden Years X - 1964 SR 121045
Rhythm Classical Intermediate - Vol. I SR 121241
Rhythm Classical Intermediate - Vol. II SR 121242
Rhythm Classical Advanced - Vol. I SR 122213
Rhythm Classical Advanced - Vol. II SR 121243
Rhythm Country Intermediate - Vol. I SR 122114
Rhythm Country Intermediate - Vol. II SR 121244
Rhythm Country Advanced - Vol. I SR 121247
Rhythm Country Advanced - Vol. II SR 122218
Rhythm Oldies Intermediate - Vol. I SR 122217
Rhythm Oldies Intermediate - Vol. II SR 122215
Rhythm Oldies Advanced - Vol. I SR 122219
Rhythm Oldies Advances - Vol. II SR 122222
Remembering Johnnie Ray SR 120968
Golden Years - 1965 SR 124202
Golden Years - 1966 SR 124200
Golden Years - 1967 SR 124203
Golden Years - 1968 SR 124207
Golden Years - 1969 SR 124205
Golden Years - 1970 SR 124209
Golden Years - 1971 SR 124201
Golden Years - 1972 SR 124204
Golden Years - 1973 SR 124206
Golden Years - 1974 SR 124208
The Ink Spots SR 126579
Love Letters Pat Boone SR 126580
The Best of Brook Benton Brook Benton SR 129580
Back To The 70's - Vol. III SR 124539
The Best Of Redbone Red Bone SR 124552
Gospel's Brightest Hits SR 124553
Drifters Greatest Hits The Drifters SR 127571
Country Spotlight Lynn Anderson SR 128637
Country Spotlight Johnny Paycheck SR 128639
Country Spotlight Jimmy Dean SR 128638
Christmas Favorites SR 128636
Country Spotlight Roger Miller SR 131553
Country Spotlight Patsy Cline SR 131554
The Fabulous 50's SR 133112
The Fabulous 60's SR 133108
Country Spotlight Kitty Wells SR 135535
Country Spotlight Faron Young SR 135536
The Beach Boys/Jan & Dean The Beach Boys/Jan & Dean SR 145474
Country Spotlight Donna Fargo SR 145802
Country Spotlight Don Gibson SR 145721
Country Jukebox SR 147675
Country Chart-Toppers SR 147635
Super Box of Rock SR 148589
Country Superstars SR 149166
Country Time SR 148616
Johnny Russell-Greatest Hits Johnny Russell SR 175663
Super 70's - Vol. I SR 182924
Super Box Of Rock - Vol. II SR 185030
Music To Remember SR 183464
Fabulous 50's - Vol. III SR 183435
Sensational 60's - Vol. II SR 183423
Super 70's - Vol. II SR 183431
Musical Meditations SR 182914
</TABLE>
SCHEDULE 4.16(c)
TO
REVOLVING CREDIT AGREEMENT
Registered Copyrights in Sound Recordings and
Compilations which were Owned by Dominion as of July 22, 1994
and which have been Assigned
of Record by Affiliates of Dominion to Dominion
Individual Recordings
<TABLE>
<CAPTION>
Title of Work Artist Registration Registered Owner
------------- ------ ------------ ----------------
No.
---
<S> <C> <C> <C>
Rubber Ball Bobby Vee SR 142397 Commonwealth Music
My True Love Jack Scott SR 142428 Commonwealth Music
Honeycomb Jimmie Rogers SR 142403 Commonwealth Music
Blue Moon The Marcels SR 142422 Commonwealth Music
One Track Mind Bobby Lewis SR 142423 Commonwealth Music
Sugar Shack Jimmy Gilmer SR 142396 Commonwealth Music
Do You Wanna Dance Bobby Freeman SR 142402 Commonwealth Music
Sea Cruise Frankie Ford SR 142400 Commonwealth Music
Tell Him The Exciters SR 142424 Commonwealth Music
You Can't Sit Down The Dovells SR 142395 Commonwealth Music
Da Doo Ron Ron The Crystals SR 142426 Commonwealth Music
Raindrops Dee Clark SR 142405 Commonwealth Music
Just A Dream Jimmy Clanton SR 142399 Commonwealth Music
He's So Fine The Chiffons SR 142398 Commonwealth Music
One Fine Day The Chiffons SR 142425 Commonwealth Music
The Letter The Box Tops SR 142421 Commonwealth Music
My Boyfriend's Back The Angels SR 142404 Commonwealth Music
My Guy Mary Wells SR 142412 K-tel Int'l
You Beat Me To The Punch Mary Wells SR 142408 K-tel Int'l
A Night Has A Thousand Eyes Bobby Vee SR 142392 K-tel Int'l
Runaway Del Shannon SR 142407 K-tel Int'l
Hats Off To Larry Del Shannon SR 142389 K-tel Int'l
Wooly Bully Sam The Sham & The Pharaohs SR 142409 K-tel Int'l
Soul Man Sam & Dave SR 142386 K-tel Int'l
Smoke Gets In Your Eyes The Platters SR 142419 K-tel Int'l
Good Morning Starshine Oliver SR 142394 K-tel Int'l
Ooh! My Soul Little Richard SR 142383 K-tel Int'l
Send Me Some Lovin' Little Richard SR 142378 K-tel Int'l
She's Got It Little Richard SR 142373 K-tel Int'l
The Girl Can't Help It Little Richard SR 142376 K-tel Int'l
Good Golly Miss Molly Little Richard SR 142418 K-tel Int'l
Long Tall Sally Little Richard SR 142381 K-tel Int'l
Tutti Frutti Little Richard SR 142382 K-tel Int'l
Slippin' & Slidin' Little Richard SR 142370 K-tel Int'l
Rip It Up Little Richard SR 142371 K-tel Int'l
Keep A Knockin' Little Richard SR 142379 K-tel Int'l
Baby Face Little Richard SR 142375 K-tel Int'l
Jenny, Jenny Little Richard SR 142380 K-tel Int'l
Ready Teddy Little Richard SR 142374 K-tel Int'l
By The Light Of The Silvery Little Richard SR 142377 K-tel Int'l
Moon
Miss Ann Little Richard SR 142372 K-tel Int'l
Goin' Out Of My Head Little Anthony & The Imperials SR 142411 K-tel Int'l
Tossin' & Turnin' Bobby Lewis SR 142413 K-tel Int'l
Surf City Jan & Dean SR 142393 K-tel Int'l
This Diamond Ring Gary Lewis & The Playboys SR 142410 K-tel Int'l
Everybody Loves A Clown Gary Lewis & The Playboys SR 142387 K-tel Int'l
C'mon And Swim Bobby Freeman SR 142415 K-tel Int'l
Rebel Rouser Duane Eddy SR 142364 K-tel Int'l
Up On The Roof The Drifters SR 142390 K-tel Int'l
Little Darlin' The Diamonds SR 142366 K-tel Int'l
Rockin' Robin Bobby Day SR 142365 K-tel Int'l
Charlie Brown The Coasters SR 142367 K-tel Int'l
Yakety Yak The Coasters SR 142420 K-tel Int'l
Hey Little Girl Dee Clark SR 142369 K-tel Int'l
Venus In Blue Jeans Jimmy Clanton SR 142414 K-tel Int'l
Sweet Talkin' Guy The Chiffons SR 142391 K-tel Int'l
Then You Can Tell Me Goodbye The Casinos SR 142385 K-tel Int'l
Worst That Could Happen Brooklyn Bridge SR 142388 K-tel Int'l
Song For My Father Sherry Winston SR 103996
Symphonic Rock Suite #2 Sherry Winston SR 103997
That's The Way Of The World Sherry Winston SR 103998
Hit It Hard Sherry Winston SR 103999
Shall We Sherry Winston SR 104000
Crazy Ladies Sherry Winston SR 104001
Love Mission Sherry Winston SR 104002
Love Madness Sherry Winston SR 104003
Anniversary Song Sherry Winston SR 104004
Metro North Sherry Winston SR 104005
Stride Sherry Winston SR 104006
Truckstar Music SR 123406 Era Records
Moments To Remember SR 120144 K-tel Int'l
Motor City Sound SR 113811 K-tel Int'l
Pure Pop SR 113864 K-tel Int'l
Street Corner Singin' SR 113834 K-tel Int'l
After Dusk SR 113861 K-tel Int'l
The Baroque Connection SR 37998 K-tel Int'l
Havin' An Oldies Party With SR 126582 K-tel Int'l
Sha Na Na
Originals Still The Greatest SR 129398 K-tel Int'l
Vol. I 1957-1960
Back To The 60's SR 124415 K-tel Int'l
Back To The 50's SR 124414 K-tel Int'l
Chubby's Dance Party SR 118432 K-tel Int'l
Originals Still The Greatest SR 113870 K-tel Int'l
Vol. II 1960-1962
Love Songs Of The Rock & Roll SR 123417 Era Records
Era
Gospel Country SR 123391 Era Records
Great Rock & Roll Love Songs SR 123407 Era Records
Surfin' USA SR 123440 Era Records
Inspirations SR 123386 Era Records
The Very Best In Country Music SR 123425 Era Records
Songs of Truth SR 123444 Era Records
Gentle Side of Country SR 123423 Era Records
All Time Country Superstars SR 123424 Era Records
The Association/Turtles The Association/Turtles SR 123404 Era Records
50's Dance Party SR 123403 Era Records
Country Heartbreak SR 123395 Era Records
Juke Box Favorites SR 123405 Era Records
Soft Sounds Of The 50's SR 124027 Era Records
60's Dance Party SR 124017 Era Records
Hooked On Instrumentals SR 126815 K-tel Int'l
</TABLE>
HOOKED ON ALBUMS
TO BE ASSIGNED FROM 3RD PARTY
<TABLE>
<CAPTION>
Registered
Title of Work Artist Registration No. Owner
------------- ------ ---------------- -----------
<S> <C> <C> <C>
Hooked On Classics Louis Clark SR 32919 RCA Records
Hooked On Classics II Louis Clark SR 39857 RCA Records
Hooked On Classics III Louis Clark SR 45398 RCA Records
Hooked On Swing Larry Elgart SR 45953 RCA Records
Hooked On Rock Classics SR 46187 RCA Records
Hooked On Swing II Larry Elgart SR 46188 RCA Records
Hooked On Swing III Larry Elgart SR 51127 RCA Records
</TABLE>
SCHEDULE 4.16(d)
TO
REVOLVING CREDIT AGREEMENT
Registered Copyrights in Sound Recordings and Compilations
which are Jointly Owned by Dominion and a Person
other than an Affiliate of Dominion as of July 22, 1994
<TABLE>
<CAPTION>
Registration Name of Other Registered
Title of Work Artist Number Person Owner
------------- ------ ------ ------ -----
<S> <C> <C> <C> <C>
Hooka Tooka Chubby Checker SR 147217 Ernest Evans K-tel Int'l/Ernest Evans
Loddy Lo Chubby Checker SR 147218 Ernest Evans K-tel Int'l/Ernest Evans
Twist It Up Chubby Checker SR 147219 Ernest Evans K-tel Int'l/Ernest Evans
Let's Limbo Some Chubby Checker SR 147220 Ernest Evans K-tel Int'l/Ernest Evans
More
Dancin' Party Chubby Checker SR 147221 Ernest Evans K-tel Int'l/Ernest Evans
Hey, Bobba Needle Chubby Checker SR 147223 Ernest Evans K-tel Int'l/Ernest Evans
Birdland Chubby Checker SR 147224 Ernest Evans K-tel Int'l/Ernest Evans
Popeye The Chubby Checker SR 147225 Ernest Evans K-tel Int'l/Ernest Evans
Hitchhiker
Slow Twistin' Chubby Checker SR 142384 Ernest Evans K-tel Int'l/Ernest Evans
I Burn For You 12" 10db SR 105962 Crush Music Dominion
Steppin' Out 10db SR 106648 Crush Music Dominion
Tonight 12"
I Second That 10db SR 106647 Crush Music Dominion
Emotion 12"
I Second That 10db SR 106148 Crush Music Dominion
Emotion
Steppin' Out 10db SR 106149 Crush Music Dominion
Tonight
You Could've Been 10db SR 106150 Crush Music Dominion
My Lady
Go-Go World 10db SR 106151 Crush Music Dominion
Take Our Time 10db SR 106152 Crush Music Dominion
Midsummer Slow Cut 10db SR 106153 Crush Music Dominion
Inside Your Love 10db SR 106154 Crush Music Dominion
I Burn For You 10db SR 106155 Crush Music Dominion
Givin' Up On Love Lenny Williams SR 107474 Crush Music Dominion
12"
Master Plan - Master Plan SR 107476 Crush Music Dominion
Stomp 12"
Layin' In Wait Lenny Williams SR 114169 Crush Music Dominion/Crush Music
Smooth & Legit 12" MC Smooth SR 114451 Crush Music Dominion/Crush Music
Here's A Ticket 12" Lenny Williams SR 114452 Crush Music Dominion/Crush Music
Smooth & Legit MC Smooth SR 117441 Crush Music Dominion/Crush Music
Gotta Lotta Luv 12" Lenny Williams SR 120308 Crush Music Dominion/Crush Music
2 Bigg MC 2 Bigg MC SR 122781 Crush Music Dominion/Crush Music
</TABLE>
SCHEDULE 4.16(e)
TO
REVOLVING CREDIT AGREEMENT
Dominion's Unregistered Copyrights in Sound Recordings,
Compositions and Compilations as of July 22, 1994
Title of Work Artist or Author (if Sound Sound Recording,
Recording of Composition) Composition or Compilation
[TO BE COMPLETED BY BORROWERS]
SCHEDULE 4.16(f)
TO
REVOLVING CREDIT AGREEMENT
K-Tel USA's Registered Copyrights in Compilations
which are subject to Short-Term License Agreements
as of July 22, 1994
Title of Work Registration No.
------------- ----------------
Awakening SR 112684
Rock N' Roll Guitar Classics SR 112688
Country Love SR 112689
The Class Of Country SR 112685
Battle Of The Bands - Vol. II SR 112681
The Best Of Christian Rock SR 114200
Yo! Mo Rap SR 114197
Country Stars/Inspirational Hits SR 114195
House Afire SR 114199
More 50's Jukebox Favorites SR 114196
More 60's Jukebox Favorites SR 112679
Dance Power SR 112680
Power In The Spirit SR 114194
Great Ladies Of Jazz SR 114198
The Edge Of Rock SR 112780
Lambada SR 114424
Rap Wit'Cha SR 114426
Rap Wit'Cha - Vol. 2 SR 114427
Hot Ladies Of The 80's SR 117439
Slow Dancin' SR 117438
Twisted Metal SR 119258
Battle Of The Bands - Vol. 4 SR 119256
Battle Of The Bands - Vol. 3 SR 119257
Country Music Classics - Vol. I SR 120923
Country Music Classics - Vol. II SR 120924
Country Music Classics - Vol. III SR 120925
Country Music Classics - Vol. IV SR 120926
Country Music Classics - Vol. V SR 120927
On The House SR 121442
Stars Of Christian Rock SR 121440
The Best Of Bobby Jimmy & The Critters SR 121450
Pop Goes The Gospel SR 121448
The Chuck Wagon Gang - Greatest Hits Vol. I SR 121036
Rap's Biggest Hits SR 126306
The Soft Sound of Chad & Jeremy SR 122786
Rap Attack SR 122758
The Future Of Rock SR 122784
Rock Classics III SR 122777
Blues - The New Breed SR 124222
Hooked On Classics Collection SR 127395
Hooked On Swing Collection SR 126577
Rappin' His Word SR 124546
Romantic Hits Of The 80's SR 124535
100 Proof Hits SR 124534
Rock Radio Vietnam SR 124551
Contemporary Christian Hits SR 126700
1910 Fruitgum Co./Ohio Express SR 126583
Inspirational Christian Hits SR 127570
Old Times Hymns - Vol. II SR 127569
Righteous Metal - Vol. II SR 129498
East Vs. West SR 129829
U Rap 2 It SR 129731
Music For All Occasions SR 130776
60's Sock Hop SR 133140
50's Sock Hop SR 132337
Singin' The Good News SR 133132
Tuesday's Just As Bad SR 133134
Gospel Celebration SR 150436
Frankie Avalon/Annette Funicello SR 135109
A Tribute To Elvis SR 135136
Havin' A 60' Hootenanny SR 135557
Best Of Southern Gospel SR 135538
Best Of Bluegrass SR 136411
Today's Best Country SR 136543
Best Of Gene Pitney SR 136408
Rap's Most Wanted SR 136403
Nasty Wax SR 136404
Super Bad Is Back SR 136407
Super Bad SR 136406
Son of Super Bad SR 136405
Country Gospel Greats SR 137797
Great Ladies of Jazz II SR 137800
Wacky Weirdos SR 145476
Goofy Greats SR 141537
Silly Songs SR 145473
Rap: On The Lighter Tip SR 145498
Rap: Hall Of Fame SR 141534
Rap: Most Valuable Players SR 141532
Rap: Straight Outta The Ghetto SR 141531
Country Music Classics VI SR 141536
Country Music Classics VII SR 141538
The Statler Brothers/The Jordanaires SR 141136
The Jordanaires Sing Gospel SR 141512
Today's Christian Favorites SR 141409
Southern Fried Rock SR 141408
Comedy Classics SR 144059
Gospel's Finest SR 144060
Zydeco Party SR 144058
Cajun Party SR 143695
Oak Ridge Boys/J.D. Sumner & The Stamps SR 143758
1st Ladies of Rap SR 143759
Rockin' Rebels SR 145719
Saxy Rock SR 145750
Best Of The Box Rap SR 146658
Rap Beat From The Street SR 146896
Today's Hot Country SR 147680
Great Ladies Of Country SR 147674
Charlie Daniels Bank/The Marshall Tucker Band SR 148281
The Gospel Side Of Ray Stevens SR 148299
Glory Bound SR 148298
That Gospel Feeling SR 149404
60's Sound Explosion SR 149070
Solid Gold Rock N' Roll SR 149365
Country Dance Party SR 153046
Cowboy Gospel Classics SR 153047
Country Music Classics - Vol. XVII SR 153058
Country Music Classics - Vol. XVIII SR 153045
Country Comedy Classics SR 168361
Classic Country Instrumentals SR 157069
Discomania SR 153589
Gospel Soul SR 157070
Country Line Dance Jubilee SR 153593
Best Of The Choirs SR 172212
Rap: Today's Greatest Hits SR 171968
Rap: Bass Assault SR 172213
Let's Worship Him SR 169947
Best Of The Blues SR 169925
Country Music Classics - Vol. XIX SR 169945
Country Music Classics - Vol. XX SR 169934
Footprints In The Sand SR 169935
How Great Thou Art SR 169937
Southern Fried Rock - Second Helping SR 169936
Those Wonderful Instruments SR 175511
Country Music Classics - Vol. XXI SR 175680
Country Music Classics - Vol. XXII SR 175514
Go Tell It On The Mountain SR 172047
Dumb Dittie SR 175667
Hit Parader Salutes 20 Years Of Metal SR 182925
Best Of Reggae SR 183750
Precious Memories SR 183436
Working Man's Country SR 183415
Psychedelic Mind Trip SR 183413
Country's Greatest Singer/Songwriters SR 183414
The Brill Building Sound SR 185413
Dance X-Theme SR 185070
Club/House Explosion SR 185362
World Dance Beat SR 185463
GMA: Today's Top Christian Hits SR 157071
GMA: 23rd Annual Dove Awards SR 147677
GMA: Top Ten Christian Hits SR 145442
Noche Caliente - I SR 182917
Noche Caliente - II SR 182918
Having A "T" Party SR 133136
Rap Beginnings - I SR 112683
Rap Beginning - II SR 112682
Best Of Chad & Jeremy SR 124538
SCHEDULE 4.16(g)
TO
REVOLVING CREDIT AGREEMENT
K-Tel USA's Unregistered Copyrights in
Compilations which are subject to Short-Term License
Agreements as of July 22, 1994
Title of Work
- -------------
[TO BE COMPLETED BY BORROWERS]
SCHEDULE 4.16(h)
TO
REVOLVING CREDIT AGREEMENT
Dominion's Long-Term Licenses in Copyrights
as of July 22, 1994
<TABLE>
<CAPTION>
Date of License Copyright Subject Name of Licensee
Agreement to License Agreement Name of Licensor (before assignment)
--------- -------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
[TO BE COMPLETED BY BORROWERS]
SCHEDULE 5.10(d)
TO
REVOLVING CREDIT AGREEMENT
Form of Acknowledgment to be included
in Long-Term Licenses of which Dominion or K-Tel Productions
is the Licensee
[Licensor] acknowledges that [Licensee] has granted a security
interest in [this License] and all rights of [Licensee] under this [License] in
favor of TCF National Bank Minnesota or in favor of any subsequent financial
institution which shall have provided financing to [Licensee]. [Licensor] hereby
consents to such security interest and agrees that following the occurrence of
an event of default in connection with such financing such financial institution
is entitled to the benefit of all rights under this [License] and may sell or
assign its interest in this [License] and the rights under this [License]
without the consent of or notice to [Licensor].
SCHEDULE 6.1
TO
REVOLVING CREDIT AGREEMENT
Schedule of Permitted Liens of K-Tel USA
1. Lease Agreement dated September 4, 1991 with Bell 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. Lien in favor of Simitar Entertainment, Inc. on video production rights
purchased from Simitar Entertainment, Inc. securing remaining balance
of approximately $125,000.
SCHEDULE 6.2
TO
REVOLVING CREDIT AGREEMENT
Schedule of Permitted Indebtedness of Borrower
1. Lease Agreement dated September 4, 1991 with Bell 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.
SCHEDULE 6.3
TO
REVOLVING CREDIT AGREEMENT
Schedule of Permitted Guaranties of K-Tel USA
None
EXHIBIT A TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
REVOLVING NOTE
$1,000,000.00 April 10, 1997
FOR VALUE RECEIVED, the undersigned, K-TEL INTERNATIONAL
(USA), INC., a Minnesota corporation ("K-Tel USA"), DOMINION ENTERTAINMENT,
INC., a Minnesota corporation ("Dominion"), K-TEL PRODUCTIONS, INC., a Minnesota
corporation ("K-Tel Productions"), K-TEL VIDEO, INC., a Minnesota corporation
("K-Tel Video"), K-TEL DIRECT, INC., a Minnesota corporation ("K-Tel Direct"),
K-TEL TV, INC., a Minnesota corporation ("K-Tel TV"), K-TEL CONSUMER PRODUCTS,
INC., a Minnesota corporation ("K-Tel Consumer Products"; collectively K-Tel
USA, Dominion, K-Tel Productions, K-Tel Video, K-Tel Direct, K-Tel TV and K-Tel
Consumer Products are called the "Borrowers"), hereby jointly and severally
promise to pay to the order of 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"), on July 31, 1997, the principal sum
of One Million Dollars ($1,000,000.00) or, if less, the aggregate unpaid
principal amount of all Advances (as defined in the Credit Agreement) made by
the Bank to the Borrowers under the Credit Agreement (defined below), together
with interest on the unpaid principal amount of the Advances until such
principal amount is paid in full at the interest rate and on the dates specified
in the Credit Agreement.
This Note is the Note referred to in, and is entitled to the
benefits of, and is subject to the terms of, the Amended and Restated Revolving
Credit Agreement of even date herewith by and between the Borrowers and the Bank
(such Amended and Restated Credit Agreement, as amended, supplemented, modified
or restated from time to time herein called the "Credit Agreement"), which
Credit Agreement, among other things (i) provides for the making of Advances by
the Bank to the Borrowers subject to the terms of the Credit Agreement and (ii)
contains provisions for the mandatory prepayment hereof and for acceleration of
the maturity hereof upon the happening of certain stated events.
This Note is issued in substitution for, and in replacement
of, but not in payment of, the Revolving Note of K-Tel USA and Dominion dated
August 23, 1996, payable to the order of the Bank in the original principal
amount of $5,000,000, as amended.
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___________________________________
EXHIBIT B TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
BORROWING BASE CERTIFICATE
AS OF
--------------------------
This Borrowing Base Certificate relates to the Amended and
Restated Revolving Credit Agreement dated as of April 10, 1997, as the same may
have been amended, supplemented, modified or restated from time to time (the
"Credit Agreement"), by and between TCF National Bank Minnesota, formerly known
and organized as TCF Bank Minnesota fsb (the "Bank") and K-Tel International
(USA), Inc. ("K-Tel USA"), Dominion Entertainment, Inc. ("Dominion"), K-Tel
Productions, Inc. ("K-Tel Productions"), K-Tel Video, Inc. ("K-Tel Video"),
K-Tel Direct, Inc. ("K-Tel Direct"), K-Tel TV, Inc. ("K-Tel TV"), K-Tel Consumer
Products, Inc. ("K-Tel Consumer Products") (collectively, K-Tel USA, Dominion,
K-Tel Productions, K-Tel Video, K-Tel Direct, K-Tel TV and K-Tel Consumer
Products are called the "Borrowers"). Terms not defined herein which are defined
in the Credit Agreement shall have the same meaning herein as specified in the
Credit Agreement.
As of the date set forth above, the Borrowers, after due
investigation by the duly authorized officer or Chief Financial Officer
executing this certificate, hereby warrant and certify, to the best of their
knowledge: that the Borrowers hold subject to the security interest of the Bank,
the accounts receivable set forth below and that all information contained
herein is true and correct.
COLLATERAL AND AVAILABLE ADVANCE CALCULATION ($'S IN 000'S)
Accounts Receivable of K-Tel USA as of: ___________________, ____.
Total
Less than 61 days past due _____
Less 10% Rule Eliminations (_____)
Less Other Eliminations (_____)
Less 20% Return Offset (_____)
Eligible Accounts Receivable _____
x 75% (available for advance) _____
Total Borrowing Base
=====
As of the date hereof, the Borrowers, to the best of their
knowledge, certify that all representations and warranties made by the Borrowers
in the Credit Agreement are reaffirmed and remade; that no Default or Event of
Default exists under the Credit Agreement; and that there has been no material
change except as noted in any of the amounts indicated herein and since any of
the computation dates indicated herein that would materially reduce the
collateral amounts shown above as they would be computed as of the date of this
certificate.
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___________________________________
EXHIBIT C TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
COMPLIANCE CERTIFICATE
In accordance with our Amended and Restated Revolving Credit
Agreement dated as of April 10, 1997, as amended (such Revolving Credit
Agreement, together with any and all amendments, supplements or modifications
thereto or restatements thereof is herein called the "Credit Agreement"),
attached are the financial statements of K-TEL INTERNATIONAL (USA), INC. ("K-Tel
USA"), DOMINION ENTERTAINMENT, INC. ("Dominion"), K-TEL PRODUCTIONS, INC.
("K-Tel Productions"), K-TEL VIDEO, INC. ("K-Tel Video"), K-TEL DIRECT, INC.
("K-Tel Direct"), K-TEL TV, INC. ("K-Tel TV"), K-TEL CONSUMER PRODUCTS, INC.
("K-Tel Consumer Products") (collectively, K-Tel USA, Dominion, K-Tel
Productions, K-Tel Video, K-Tel Direct, K-Tel TV and K-Tel Consumer Products are
called the "Borrowers") as of and for the month and year-to-date period ended
________________, ____ (the "Current Financials").
I certify that the Current Financials have been prepared in
accordance with generally accepted accounting principles, subject to year-end
audit adjustments.
Defaults and Events of Default. (check one)
|_| I have no knowledge of the occurrence of any Default or Event
of Default under the Credit Agreement which has not previously
been reported to you and remedied.
|_| Attached is a detailed description of all Defaults and Events
of Default of which I have knowledge and which have not
previously been reported to you and remedied.
For the date and periods covered by the Current Financials,
the Borrowers are in compliance with the covenants set forth in Sections 5.7,
5.8 and 5.9 of the Credit Agreement, except as indicated below.
The calculations made to determine compliance are as follows:
Covenant Actual Requirement
5.7) Current Ratio of K-Tel USA
As of month ending
________________________ ____ to 1 Minimum ___ to 1
5.8) Capital Base of K-Tel USA
As of month ending
________________________ $________ Minimum $_______
5.9) Net Income Before Taxes of K-Tel USA
As of month ending
________________________ $________ Minimum $_______
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___________________________________
EXHIBIT D TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
COPYRIGHT SECURITY AGREEMENT
(K-Tel Productions, Inc.)
This Agreement is made as of the ____ day of _______________,
____, by K-TEL PRODUCTIONS, INC., a Minnesota corporation (the "Debtor") having
a principal place of business at 2605 Fernbrook Lane North, Plymouth, Minnesota
55447, for the benefit of TCF NATIONAL BANK MINNESOTA, a national banking
association, formerly known and organized as TCF Bank Minnesota fsb, a federally
chartered stock savings bank (the "Secured Party") having a principal place of
business at 801 Marquette Avenue, Minneapolis, Minnesota 55402.
The Debtor, Dominion Entertainment, Inc., a Minnesota
corporation ("Dominion"), K-Tel International (USA), Inc., a Minnesota
corporation ("K-Tel USA"), K-Tel Video, Inc., a Minnesota corporation ("K-Tel
Video"), K-Tel Direct, Inc., a Minnesota corporation ("K-Tel Direct"), K-Tel TV,
Inc., a Minnesota corporation ("K-Tel TV") and K-Tel Consumer Products, Inc., a
Minnesota corporation ("K-Tel Consumer Products") (collectively, the Debtor,
K-Tel USA, Dominion, K-Tel Video, K-Tel Direct, K-Tel TV and K-Tel Consumer
Products are herein called the "Borrowers") and the Secured Party have entered
into an Amended and Restated Revolving Credit Agreement dated as of April 10,
1997 (such Amended and Restated Revolving Credit Agreement, together with any
and all amendments, supplements or modifications thereto or restatements
thereof, is herein called the "Credit Agreement") setting forth the terms on
which the Secured Party may now or hereafter make certain advances or other
financial accommodations available to the Borrowers.
As a further condition to making any advance or other
financial accommodation available under the Credit Agreement, the Secured Party
has required that the Debtor execute and deliver a Security Agreement of even
date herewith (such Security Agreement, together with any and all amendments,
supplements or modifications thereto or restatements thereof, is herein called
the "Security Agreement"), granting the Secured Party a security interest in
property generally described as all of the Debtor's inventory, accounts,
equipment and general intangibles, all for the purpose of securing the
Obligations (as defined below).
As a condition to making any advance or other financial
accommodation available under the Credit Agreement, the Secured Party has
required the execution and delivery of this Agreement by the Debtor.
ACCORDINGLY, in consideration of the mutual covenants
contained in the Credit Agreement and herein, the parties hereby agree as
follows:
1. Definitions. All terms defined in the Credit Agreement that
are not otherwise defined herein shall have the meanings given them in the
Credit Agreement. In addition, the following terms have the meanings set forth
below:
"Copyrights" means all of the Debtor's right, title and
interest in and to all copyrightable works and all copyrights of the
Debtor, whether presently existing or hereafter arising, including but
not limited to all registered copyrights, including the registered
copyrights listed on Schedule A, all applications to register
copyrights and all unregistered copyrights, and all licenses of
copyrights in favor of the Debtor (excluding only any short-term
license (having a term of five years or less) of a copyright in favor
of Debtor, whether presently existing or hereafter acquired, which by
its terms is not assignable).
"Obligations" means each and every debt, liability and
obligation of every type and description which the Borrowers or either
of the Borrowers may now or at any time hereafter owe to the Secured
Party, whether such debt, liability or obligation now exists or is
hereafter created or incurred and whether it is or may be direct or
indirect, due or to become due, absolute or contingent, primary or
secondary, liquidated or unliquidated, or sole, joint, several or joint
and several. Without limiting the generality of the foregoing, the term
"Obligations" includes all indebtedness, liabilities and obligations of
the Borrowers to the Secured Party which arise under or out of the
Credit Agreement.
"Security Agreement" has the meaning specified in the third
paragraph on the first page of this Agreement.
2. Security Interest. The Debtor hereby confirms and
acknowledges that to secure payment of the Obligations the Debtor has granted
and created (and, to the extent not previously granted under the Security
Agreement, does hereby irrevocably grant and create) a security interest (the
"Security Interest"), with power of sale to the extent permitted by law, in the
Copyrights and in each and every account, royalty and other right to payment
which now exists or hereafter arises from or in connection with any of the
Copyrights, whether such account or right to payment arises out of a sale,
lease, license or other disposition of any of the Copyrights or otherwise arises
under any contract or agreement relating to any of the Copyrights, whether such
account, royalty or other right to payment is or is not already earned by
performance, and howsoever such account, royalty or other right to payment may
be evidenced, together with all other rights and interest which the Debtor may
at any time have by law or against any account debtor or obligor obligated to
make any such payment of against any of the property of such account debtor or
other obligor, together with all proceeds thereof. The Security Interest is in
any and all rights of Debtor that may exist or hereafter arise under any
copyright law now or hereinafter in effect in the United States of America or in
any other country. This Agreement and the security interest created hereby
include and cover any and all future advances which constitute Obligations. The
Obligations are also secured by after-acquired Copyrights of the Debtor.
3. Representations and Warranties. The Debtor represents and
warrants that the Debtor owns each of the Copyrights free and clear of any
security interest, lien or claim, other than (i) the security interest created
by the Security Agreement and evidenced by this Agreement, (ii) short-term
nonexclusive licenses (having a term of 5 years or less) granted by the Debtor,
as licensor, to third parties, as licensees, in the ordinary course of business,
(iii) the rights of licensors pursuant to short-term license agreements (having
a term of 5 years or less) under which the Debtor is the licensee, and (iv)
perpetual nonexclusive licenses granted by the Debtor for use of Copyrights in
film, television and theatrical products.
4. Satisfaction. Upon full payment or satisfaction of the
Obligations, termination of any obligation of the Secured Party to make advances
to the Borrowers or either of the Borrowers and termination of any credit
facility between the Borrowers or either of the Borrowers and the Secured Party,
this Agreement, and the rights granted hereunder to the Secured Party, shall be
terminated upon demand by a written termination statement executed by the
Secured Party and providing that the Secured Party no longer claims a security
interest under this Agreement.
5. Administration of Copyrights. Prior to the occurrence of
an Event of Default, the Debtor may control and manage the Copyrights, including
the right to make and distribute copies of the works covered thereby and to
enter into short-term nonexclusive licenses (having a term of 5 years or less)
granted by the Debtor, as licensor, to third parties in the ordinary course of
business, and may receive and use the income, revenue, profits, and royalties
that arise from the use of the Copyrights and any licenses thereunder, in the
same manner and to the same extent as if this Agreement had not been entered
into. The Debtor shall give the Secured Party prompt notice of any change in the
status of any of the Copyrights or the Debtor's rights thereunder.
6. Protection of Copyrights. The Debtor covenants that it
will at its own expense protect, defend and maintain the Copyrights to the
extent reasonably advisable in its business, and if the Debtor fails to do so,
the Secured Party may (but shall have no obligation to) do so in the Debtor's
name or in the Secured Party's name, but at the Debtor's expense, and the Debtor
hereby agrees to reimburse the Secured Party in full for all expenses, including
attorney's fees incurred by the Secured Party in protecting, defending and
maintaining the Copyrights.
7. Events of Default. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"): (i) an Event of Default shall exist under and as defined in the
Credit Agreement; (ii) the Debtor shall fail to observe or perform any covenant
or agreement herein binding on it; or (iii) any representation or warranty by
the Debtor herein or in any certificate, instrument, or statement contemplated
by or made or delivered pursuant to or in connection with this Agreement, shall
prove to have been incorrect in any material respect when made.
8. Remedies. Upon the occurrence of an Event of Default and
at any time thereafter while such Event of Default exists, the Secured Party may
exercise any one or more of the following remedies: (a) exercise all rights and
remedies available under the Uniform Commercial Code, as then in effect in the
State of Minnesota, or under any applicable law; (b) sell, assign, transfer,
pledge, encumber or otherwise dispose of any Copyright and any account, royalty
or other right to payment or proceeds thereof related to any Copyright; (c)
enforce any Copyright, and any licenses thereunder, and any account, royalty or
other right to payment or proceeds thereof related to any Copyright; and (d)
exercise or enforce any or all other rights or remedies available to the Secured
Party by law or agreement against the Copyrights or any account, royalty or
other right to payment or proceeds thereof related to any Copyright, against the
Debtor or against any other person or property. Upon the exercise of any remedy
by the Secured Party hereunder, the Debtor shall be deemed to have waived all of
the Debtor's rights provided in 17 U.S.C. ss. 106A or any other "moral rights of
authors." If the Secured Party shall exercise any right or remedy under this
Agreement, the Debtor shall, at the request of the Secured Party, do any and all
lawful acts and execute any and all proper documents required by the Secured
Party in aid of thereof. For the purposes of this paragraph, the Debtor appoints
the Secured Party as the Debtor's attorney with the right, but not the duty, to
endorse the Debtor's name on all applications, documents, papers and instruments
necessary for the Secured Party to (i) act in its own name or enforce or use the
Copyrights, (ii) grant or issue any exclusive or non-exclusive licenses under
the Copyrights to any third party, and/or (iii) sell, assign, transfer, pledge,
encumber or otherwise transfer title in or dispose of any Copyright. The Debtor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney shall be irrevocable until satisfaction of
this Agreement in accordance with paragraph 4. The Debtor shall reimburse the
Secured Party for all attorney's fees and expenses of all types incurred by the
Secured Party, or its counsel, in connection with the exercise of the rights of
the Secured Party under this Agreement, together with interest thereon from the
date or dates the same were incurred at the highest rate of interest then
applicable with respect to any of the Obligations.
IN WITNESS WHEREOF, the Debtor has executed this Agreement as
of the date and year first above-written.
K-TEL INTERNATIONAL (USA), INC.
By__________________________________________
Its_______________________________________
STATE OF MINNESOTA )
)ss.
COUNTY OF HENNEPIN )
_________The foregoing instrument was acknowledged before me this ___
day of __________________, ____, by ________________________________, the
____________________ of K-Tel Productions, Inc., a Minnesota corporation, on
behalf of the corporation.
_________________________________________________
Notary Public
SCHEDULE A
[TO BE COMPLETED]
EXHIBIT E TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
(Dominion Entertainment, Inc.)
This Supplement is made as of the ____ day of _______________,
____, by DOMINION ENTERTAINMENT, INC., a Minnesota corporation (the "Debtor")
having a principal place of business at 2605 Fernbrook Lane North, Plymouth,
Minnesota 55447, for the benefit of TCF NATIONAL BANK MINNESOTA, a national
banking association, formerly known and organized as TCF Bank Minnesota fsb, a
federally chartered stock savings bank (the "Secured Party") having a principal
place of business at 801 Marquette Avenue, Minneapolis, Minnesota 55402.
The Debtor, K-Tel International (USA), Inc., a Minnesota
corporation ("K-Tel USA"), K-Tel Productions, Inc., a Minnesota corporation
("K-Tel Productions"), K-Tel Video, Inc., a Minnesota corporation ("K-Tel
Video"), K-Tel Direct, Inc., a Minnesota corporation ("K-Tel Direct"), K-Tel TV,
Inc., a Minnesota corporation ("K-Tel TV"), K-Tel Consumer Products, Inc., a
Minnesota corporation ("K-Tel Consumer Products") (collectively, the Debtor,
K-Tel USA, K-Tel Productions, K-Tel Video, K-Tel Direct, K-Tel TV and K-Tel
Consumer Products are herein called the "Borrowers") and the Secured Party have
entered into an Amended and Restated Revolving Credit Agreement dated as of
April 10, 1997 (such Revolving Credit Agreement, together with any and all
amendments, supplements or modifications thereto or restatements thereof, is
herein called the "Credit Agreement") setting forth the terms on which the
Secured Party may now or hereafter make certain advances or other financial
accommodations available to the Borrowers.
As a condition to making advances or other financial
accommodations, the Secured Party required, among other things, the execution
and delivery of a Copyright Security Agreement dated as of July 22, 1994 from
the Debtor in favor of the Secured Party (such Copyright Security Agreement,
together with any and all amendments, supplements or modifications thereto or
restatements thereof, is herein called the "Security Agreement").
The Debtor and the Secured Party desire to supplement the
Security Agreement by adding additional registered copyrights to Schedule A
attached thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereby agree as
follows:
1. Schedule A of the Security Agreement is hereby supplemented
by adding to such Schedule A the registered copyrights identified on Exhibit A
attached to this Supplement.
2. This Supplement shall constitute a supplement to the
Security Agreement to the extent necessary to subject the copyrights identified
on Exhibit A to this Supplement to all of the terms, covenants and conditions
contained in the Security Agreement.
3. Each and every reference in the Security Agreement to "this
Security Agreement" and in the Credit Agreement and the other Loan Documents to
"Dominion's Copyright Security Agreement" shall hereafter be deemed to refer to
the Security Agreement as supplemented by this Supplement.
4. All other terms and conditions of the Security Agreement
not specifically amended by this Supplement shall remain in full force and
effect.
5. The execution of this Supplement shall not be deemed a
waiver of any Event of Default or event which, with the giving of notice or
passing of time, or both, would be such an Event of Default under the Security
Agreement.
6. The Debtor hereby agrees to reimburse the Secured Party for
all fees and disbursements of counsel to the Secured Party for the services
performed by such counsel in connection with the preparation and negotiation of
this Supplement and for any and all fees payable to public officials in
connection with this Supplement and the recording hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed as of the day and year first above written.
DOMINION ENTERTAINMENT, INC.
By______________________________________
Its___________________________________
TCF NATIONAL BANK MINNESOTA
By______________________________________
Its___________________________________
And
By______________________________________
Its___________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____
day of ________________________, 19__, by _______________________, the
____________________ of Dominion Entertainment, Inc., a Minnesota corporation,
on behalf of said corporation.
________________________________________
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____
day of ____________________, 19__, by ________________________ and
________________________, respectively, the _________________ and
_________________ of TCF National Bank Minnesota, a national banking
association, on behalf of said association.
________________________________________
Notary Public
EXHIBIT A
TO
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
Additional Registrations
Title of Work Artist Registration No.
- ------------- ------ ----------------
EXHIBIT F TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
(K-Tel Productions, Inc.)
This Supplement is made as of the ____ day of ________, 19__,
by K-TEL PRODUCTIONS, INC., a Minnesota corporation (the "Debtor") having a
principal place of business at 2605 Fernbrook Lane North, Plymouth, Minnesota
55447, for the benefit of TCF NATIONAL BANK MINNESOTA, a national banking
association, formerly known and organized as TCF Bank Minnesota fsb, a federally
chartered stock savings bank (the "Secured Party") having a principal place of
business at 801 Marquette Avenue, Minneapolis, Minnesota 55402.
The Debtor, Dominion Entertainment, Inc., a Minnesota
corporation ("Dominion"), K-Tel International (USA), Inc., a Minnesota
corporation (K-Tel USA"), K-Tel Video, Inc., a Minnesota corporation ("K-Tel
Video"), K-Tel Direct, Inc., a Minnesota corporation ("K-Tel Direct"), K-Tel TV,
Inc., a Minnesota corporation ("K-Tel TV"), K-Tel Consumer Products, Inc., a
Minnesota corporation ("K-Tel Consumer Products") (collectively, the
"Borrowers") and the Secured Party have entered into an Amended and Restated
Revolving Credit Agreement dated as of April __, 1997 (such Revolving Credit
Agreement, together with any and all amendments, supplements or modifications
thereto or restatements thereof, is herein called the "Credit Agreement")
setting forth the terms on which the Secured Party may now or hereafter make
certain advances or other financial accommodations available to the Borrowers.
As a condition to making any advance or other financial
accommodation available under the Credit Agreement, the Secured Party required,
among other things, the execution and delivery of a Copyright Security Agreement
dated as of July 22, 1994 from the Debtor in favor of the Secured Party (such
Copyright Security Agreement, together with any and all amendments, supplements
or modifications thereto or restatements thereof, is herein called the "Security
Agreement").
The Debtor and the Secured Party desire to supplement the
Security Agreement by adding additional registered copyrights to Schedule A
attached thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereby agree as
follows:
1. Schedule A of the Security Agreement is hereby supplemented
by adding to such Schedule A the registered copyrights identified on Exhibit A
attached to this Supplement.
2. This Supplement shall constitute a supplement to the
Security Agreement to the extent necessary to subject the copyrights identified
on Exhibit A to this Supplement to all of the terms, covenants and conditions
contained in the Security Agreement.
3. Each and every reference in the Security Agreement to "this
Security Agreement" and in the Credit Agreement and the other Loan Documents to
"Dominion's Copyright Security Agreement" shall hereafter be deemed to refer to
the Security Agreement as supplemented by this Supplement.
4. All other terms and conditions of the Security Agreement
not specifically amended by this Supplement shall remain in full force and
effect.
5. The execution of this Supplement shall not be deemed a
waiver of any Event of Default or event which, with the giving of notice or
passing of time, or both, would be such an Event of Default under the Security
Agreement.
6. The Debtor hereby agrees to reimburse the Secured Party for
all fees and disbursements of counsel to the Secured Party for the services
performed by such counsel in connection with the preparation and negotiation of
this Supplement and for any and all fees payable to public officials in
connection with this Supplement and the recording hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed as of the day and year first above written.
K-TEL PRODUCTIONS, INC.
By______________________________________
Its___________________________________
TCF NATIONAL BANK MINNESOTA
By______________________________________
Its___________________________________
And
By______________________________________
Its___________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____
day of ____________, 19__, by _______________________, the ____________________
of K-Tel Productions, Inc., a Minnesota corporation, on behalf of said
corporation.
________________________________________
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____
day of ____________, 19__, by ________________________ and
________________________, respectively, the _________________ and
_________________ of TCF National Bank Minnesota, a national banking
association, on behalf of said association.
________________________________________
Notary Public
EXHIBIT A
TO
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
Additional Registrations
Title of Work Artist Registration No.
- ------------- ------ ----------------
EXHIBIT G TO
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
(K-Tel International (USA), Inc.)
This Supplement is made as of the ____ day of ________, ____,
by K-TEL INTERNATIONAL (USA), INC., a Minnesota corporation (the "Debtor")
having a principal place of business at 2605 Fernbrook Lane North, Plymouth,
Minnesota 55447, for the benefit of TCF NATIONAL BANK MINNESOTA, a national
banking association, formerly known and organized as TCF Bank Minnesota fsb, a
federally chartered stock savings bank (the "Secured Party") having a principal
place of business at 801 Marquette Avenue, Minneapolis, Minnesota 55402.
The Debtor, Dominion Entertainment, Inc., a Minnesota
corporation ("Dominion"), K-Tel Productions, Inc., a Minnesota corporation
("K-Tel Productions"), K-Tel Video, Inc., a Minnesota corporation ("K-Tel
Video"), K-Tel Direct, Inc., a Minnesota corporation ("K-Tel Direct"), K-Tel TV,
Inc., a Minnesota corporation ("K-Tel TV"), K-Tel Consumer Products, Inc., a
Minnesota corporation ("K-Tel Consumer Products") (collectively, the Debtor,
Dominion, K-Tel Productions, K-Tel Video, K-Tel Direct, K-Tel TV, K-Tel Consumer
Products are herein called the "Borrowers") and the Secured Party have entered
into an Amended and Restated Revolving Credit Agreement dated as of April 10,
1997 (such Revolving Credit Agreement, together with any and all amendments,
supplements or modifications thereto or restatements thereof, is herein called
the "Credit Agreement") setting forth the terms on which the Secured Party may
now or hereafter make certain advances or other financial accommodations
available to the Borrowers.
As a condition to making any advances or other financial
accommodations, the Secured Party required, among other things, the execution
and delivery of a Copyright Security Agreement dated as of July 22, 1994 from
the Debtor in favor of the Secured Party (such Copyright Security Agreement,
together with any and all amendments, supplements or modifications thereto or
restatements thereof, is herein called the "Security Agreement").
The Debtor and the Secured Party desire to supplement the
Security Agreement by adding additional registered copyrights to Schedule A
attached thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties hereby agree as
follows:
1. Schedule A of the Security Agreement is hereby supplemented
by adding to such Schedule A the registered copyrights identified on Exhibit A
attached to this Supplement.
2. This Supplement shall constitute a supplement to the
Security Agreement to the extent necessary to subject the copyrights identified
on Exhibit A to this Supplement to all of the terms, covenants and conditions
contained in the Security Agreement.
3. Each and every reference in the Security Agreement to "this
Security Agreement" and in the Credit Agreement and the other Loan Documents to
"Dominion's Copyright Security Agreement" shall hereafter be deemed to refer to
the Security Agreement as supplemented by this Supplement.
4. All other terms and conditions of the Security Agreement
not specifically amended by this Supplement shall remain in full force and
effect.
5. The execution of this Supplement shall not be deemed a
waiver of any Event of Default or event which, with the giving of notice or
passing of time, or both, would be such an Event of Default under the Security
Agreement.
6. The Debtor hereby agrees to reimburse the Secured Party for
all fees and disbursements of counsel to the Secured Party for the services
performed by such counsel in connection with the preparation and negotiation of
this Supplement and for any and all fees payable to public officials in
connection with this Supplement and the recording hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplement to be executed as of the day and year first above written.
K-TEL INTERNATIONAL (USA), INC.
By______________________________________
Its___________________________________
TCF NATIONAL BANK MINNESOTA
By______________________________________
Its___________________________________
And
By______________________________________
Its___________________________________
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____
day of ____________, 19__, by _______________________, the ____________________
of K-Tel International (USA), Inc., a Minnesota corporation, on behalf of said
corporation.
________________________________________
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this _____
day of ____________, 19__, by ________________________ and
________________________, respectively, the _________________ and
_________________ of TCF National Bank Minnesota, a national banking
association, on behalf of said association.
________________________________________
Notary Public
EXHIBIT A
TO
SUPPLEMENT TO COPYRIGHT SECURITY AGREEMENT
Additional Registrations
Title of Work Artist Registration No.
- ------------- ------ ----------------
EXHIBIT 10.47
K-TEL INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of November 18, 1996, by and
between K-TEL INTERNATIONAL, INC., a Minnesota corporation (the "Company"), and
PHILIP KIVES, a Canadian resident (the "Optionee");
W I T N E S S E T H:
WHEREAS, the Optionee has served as the Company's Chairman and Chief
Executive Officer for a number of years without compensation; and
WHEREAS, the Company desires to award Optionee the non-qualified stock
option to purchase 200,000 shares of the Company's common stock, par value $.01,
(the "Common Stock") in recognition of Optionee's past services,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right
and option (hereinafter called the "Option") to purchase all or any part of an
aggregate of two hundred thousand (200,000) shares of Common Stock (the "Option
Shares") (such number being subject to adjustment as provided in Paragraph 4
hereof) on the terms and conditions herein set forth. The Option is a
non-qualified stock option under the Internal Revenue Code of 1986, as amended.
2. Purchase Price. Subject to the provisions of Paragraph 4 hereof, the
purchase price for the Option Shares shall be $4.00 per share, which has been
determined to be the fair market value of the Option Shares at the date of grant
of the Option.
3. Term and Vesting of Option. The Option shall be completely vested on
the date hereof and shall expire (the "Expiration Date") upon the earlier to
occur of: (a) the close of business on the tenth anniversary of the date hereof
or (b) five (5) years after the date on which the Optionee is no longer employed
by the Company. Notwithstanding the foregoing, the Option may in no event be
exercised by anyone to any extent in the event of a voluntary dissolution,
liquidation or winding up of the affairs of the Company, after the close of
business on the later of (i) the date of the twentieth day after the mailing of
written notice of such dissolution, liquidation or winding up, and (ii) the
record date for determination of holders of Common Stock entitled to participate
therein.
4. Adjustments for Changes in Capital Structure. If all or any portion
of this Option shall be exercised subsequent to any share dividend,
recapitalization, merger, consolidation, exchange of shares or reorganization as
a result of which shares of any class shall be issued in respect to outstanding
Common Stock, or if Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes, the person so
exercising this Option shall receive, for the aggregate price paid upon such
exercise, the aggregate number and class of shares to which they would have been
entitled if Common Stock (as authorized at the date hereof) had been purchased
at the date hereof for the same aggregate price (on the basis of the price per
share set forth in Paragraph 2 hereof) and had not been disposed of. No
fractional share shall be issued upon any such exercise and the aggregate price
paid shall be appropriately reduced on account of any fractional share not
issued.
5. Method Exercise. Subject to the terms and conditions of this
Agreement, the Option may be exercised by written notice to the Company at its
principal office and place of business in the State of Minnesota. Such notice
shall state the election to exercise the Option and the number of Option Shares
in respect of which it is being exercised, and shall be signed by the person so
exercising the Option. Such notice shall be accompanied by the payment of the
full purchase price of such Option Shares and the delivery of such payment to
the Treasurer of the Company. The certificate for the Option Shares as to which
the Option shall have been so exercised shall be registered in the name of the
person exercising the Option. If the Optionee shall so request in the notice
exercising the Option, the certificate shall be registered in the name of the
Optionee and another person jointly with right of survivorship, and shall be
delivered as provided above to or upon the written order of the person
exercising the Option. In the event the Option shall be exercised by any person
other than Optionee, such notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.
6. Reservation of Shares. The Company shall, at all times during the
term of the Option, reserve and keep available such number of shares of its
capital stock as will be sufficient to satisfy the requirements of this
Agreement, and shall pay all original issue and transfer taxes with respect to
the issue and transfer of Option Shares pursuant hereto, and all other fees and
expenses necessarily incurred by the Company in connection therewith.
7. No Rights as Stockholder. The holder of the Option shall not have
any of the rights of a stockholder with respect to the Option Shares covered by
the Option except to the extent that one or more certificates for shares shall
be delivered to him upon the due exercise of the Option.
8. Registration and Investment Purpose. The Company shall use
reasonable efforts to have the shares issuable upon the exercise of this Option
registered on a Form S-8 Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. Unless the Option
Shares have been so registered, the Option is granted on the condition that the
acquisition of shares hereunder shall be for investment purposes only and the
person acquiring Option Shares upon exercise of the Option must bear the
economic risk of the investment for an indefinite period of time since the
shares so acquired cannot be sold unless they are subsequently registered or an
exemption from such registration is available. Optionee agrees that a legend may
be placed on the stock certificates acknowledging the restrictions on subsequent
distribution of the shares issued upon exercise of this Option.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, assigns and
representatives and shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
K-TEL INTERNATIONAL, INC.
By /s/ David Weiner
------------------------------
David Weiner, President
/s/ Philip Kives
------------------------------
Philip Kives
Exhibit 11
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
For the Quarters ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Primary earnings per share --
Weighted average number of issued shares outstanding 3,762 3,730
Effect of:
Stock Incentive Plan 313 66
------ ------
Shares outstanding used to compute primary earnings per share 4,075 3,796
====== ======
Net Income (Loss) $ 510 $ 456
====== ======
Primary earnings (Loss) per share $ .13 $ .12
====== ======
Fully diluted earnings per share --
Weighted average number of shares used for primary earnings per share 3,762 3,796
Effect of:
Stock Incentive Plan 309 ---
------ ------
Shares outstanding used to compute fully diluted earnings per share 4,071 3,796
====== ======
Net Income (Loss) $ 510 $ 456
====== ======
Fully diluted earnings (Loss) per share $ .13 $ .12
====== ======
</TABLE>
Exhibit 11
K-TEL INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Amounts)
For the nine months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Primary earnings per share --
Weighted average number of issued shares outstanding 3,752 3,725
Effect of:
Stock Incentive Plan 143 79
------ ------
Shares outstanding used to compute primary earnings per share 3,895 3,804
====== ======
Net Income $3,114 $ 679
====== ======
Primary earnings per share $ .80 $ .18
====== ======
Fully diluted earnings per share --
Weighted average number of shares used for primary earnings per share 3,752 3,804
Effect of:
Stock Incentive Plan 192 ---
------ ------
Shares outstanding used to compute fully diluted earnings per share 3,944 3,804
====== ======
Net Income $3,114 $ 679
====== ======
Fully diluted earnings per share $ .80 $ .18
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,535
<SECURITIES> 0
<RECEIVABLES> 14,436
<ALLOWANCES> 0
<INVENTORY> 5,714
<CURRENT-ASSETS> 27,429
<PP&E> 3,121
<DEPRECIATION> (2,123)
<TOTAL-ASSETS> 29,548
<CURRENT-LIABILITIES> 24,993
<BONDS> 0
0
0
<COMMON> 3,895
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,548
<SALES> 51,230
<TOTAL-REVENUES> 0
<CGS> 25,520
<TOTAL-COSTS> 47,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (26)
<INCOME-PRETAX> 3,318
<INCOME-TAX> (204)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,114
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
</TABLE>
