EXHIBIT 10.40
SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Sixth Amendment is made as of this 23rd day of August,
1996, but effective as of July 1, 1996, by and among K-TEL INTERNATIONAL (USA),
INC., a Minnesota corporation, having its principal place of business in
Plymouth, Minnesota ("K-Tel USA"), DOMINION ENTERTAINMENT, INC., a Minnesota
corporation, having its principal place of business in Plymouth, Minnesota
("Dominion"; K-Tel USA and Dominion are sometimes herein collectively referred
to as the "Borrowers" and each is sometimes individually referred to as a
"Borrower"), and TCF BANK MINNESOTA FSB, a federally chartered stock savings
bank (the "Bank").
RECITALS
A. The Borrowers 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 and by a Fifth Amendment to Revolving Credit Agreement
and to Revolving Note dated as of December 28, 1995 (as amended, the "Credit
Agreement"), pursuant to which the Bank, subject to the terms and conditions set
forth therein, agreed to make revolving advances to the Borrowers in the
aggregate amount of up to $2,750,000.
B. The Borrowers' joint and several obligation to repay the
revolving advances made by the Bank under the Credit Agreement is evidenced by
the Borrowers' Revolving Note dated October 2, 1995, payable to the Bank's order
in the original principal amount of $3,500,000, as amended (the "Previous
Note"). As of August 14, 1996, the outstanding principal balance of the Previous
Note was zero and interest thereon has been paid through August 1, 1996.
C. K-Tel, Inc., a Minnesota corporation, having its principal
place of business in Plymouth, Minnesota ("K-Tel") and the Bank have entered
into a Revolving Credit Agreement dated as of January 30, 1995, as amended by a
First Amendment to Revolving Credit Agreement and to Revolving Note dated as of
July 20, 1995, by a Second Amendment to Revolving Credit Agreement dated as of
October 2, 1995, by a Third Amendment to Revolving Credit Agreement and to
Revolving Note dated as of November 28, 1995 and by a Fourth Amendment to
Revolving Credit Agreement and to Revolving Note dated as of December 28, 1995
(as amended, the "K-Tel Credit Agreement"), pursuant to which the Bank, subject
to the terms and conditions set forth therein, agreed to make revolving advances
to K-Tel in the aggregate amount of up to $2,500,000.
D. K-Tel's obligation to repay the revolving advances made by
the Bank under the K-Tel Credit Agreement is evidenced by K-Tel's Revolving Note
dated January 30, 1995, payable to the Bank's order in the original principal
amount of $3,000,000, as amended (the "K-Tel Revolving Note"). As of August 14,
1996, the outstanding principal balance of the K-Tel Revolving Note was zero and
interest thereon has been paid through August 1, 1996.
E. The Borrowers and K-Tel desire to merge K-Tel into K-Tel
USA with K-Tel USA as the surviving corporation.
F. The Borrowers have requested, among other things, that the
Bank (i) consent to the merger of K-Tel into K-Tel USA with K-Tel USA as the
surviving corporation, (ii) amend certain provisions of the Credit Agreement in
view of such merger and (iii) waive certain Events of Default on the part of
K-Tel USA and Dominion.
G. The Bank is willing to grant the Borrowers' requests
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used in this Sixth Amendment, unless
specifically defined herein, shall have the meanings given to such terms in the
Credit Agreement.
2. Events of Default have occurred under Section 7.1(c) of the
Credit Agreement because (i) K-Tel USA did not have a minimum Capital Base of at
least $3,000,000 as of May 31, 1996 and June 30, 1996 as required by Section
5.10 of the Credit Agreement, (ii) K-Tel USA did not have a Debt to Capital Base
Ratio of less than 5.0 to 1.0 as of May 31, 1996 and June 30, 1996 as required
by Section 5.8 of the Credit Agreement and (iii) Dominion did not have a minimum
Capital Base of at least $2,300,000 as of May 31, 1996 and June 30, 1996 as
required by Section 5.11 of the Credit Agreement. Upon the terms and subject to
the conditions set forth in this Sixth Amendment, the Bank hereby waives the
foregoing Events of Default. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this
waiver shall not entitle the Borrower to any other or further waiver in any
similar or other circumstances.
3. The Bank hereby consents to the merger of K-Tel into K-Tel
USA with K-Tel USA as the surviving corporation, subject to the terms and
conditions of this Sixth Amendment.
4. Section 1.1 of the Credit Agreement is hereby amended by
deleting the existing definitions of "Commitment Amount", "Loan Documents" and
"Returns" and by substituting therefor the following new definitions:
"'Commitment Amount' means $5,000,000."
"'Loan Documents' means this Agreement, the Note, the Security
Documents and the Letter of Credit Applications."
"'Returns' means, as of the date of determination, the sum of
(i) 20% of K-Tel USA's billed and unpaid Accounts generated from the
sale of music products, plus (ii) 10% of K-Tel USA's billed and unpaid
Accounts generated from the sale of all other products, including,
without limitation, consumer products."
5. Section 1.1 of the Credit Agreement is hereby amended by
adding the following new definitions of "L/C Amount", "Letter of Credit",
"Letter of Credit Applications", "Obligation of Reimbursement", "Previous Note",
"Sixth Amendment" and "Special Account" in the appropriate alphabetical
locations:
"'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 2.11
hereof."
"'Letter of Credit Applications' has the meaning specified in
Section 2.11 hereof."
"'Obligation of Reimbursement' has the meaning specified in
Section 2.11 hereof."
"'Previous Note' means that certain promissory note issued by
the Borrowers, payable to the order of the Bank, in the principal
amount of $3,500,000, dated as of October 2, 1995, as amended, which
was issued in substitution for, and in replacement of, not in payment
of the Borrowers' revolving note dated as of January 30, 1995, payable
to the Bank's order in the original principal amount of $2,000,000."
"'Sixth Amendment' means that certain Sixth Amendment to
Revolving Credit Agreement dated as of August __, 1996, but effective
as of July 1, 1996, between the Bank and the Borrowers."
"'Special Account' means a cash collateral account maintained
by the Bank in connection with Letters of Credit, as contemplated by
Section 2.11."
6. Section 2.1 of the Credit Agreement is hereby amended to
read as follows:
"Section 2.1 The Advances. The Bank agrees, on the terms and
conditions here 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 2.7 and reborrow under this Section 2.1. The Borrowers'
obligation to pay the Advances made by the Bank shall be evidenced by a
single promissory note of the Borrowers, dated as of the date of the
Sixth Amendment, payable to the order of the Bank appropriately
completed in substantially the form of Exhibit A attached to the Sixth
Amendment, as the same may be renewed, extended, amended or any note
shall be issued in substitution therefor from time to time (the
"Note"). The Note has been issued in substitution for, and in
replacement of, but not in payment of, the Previous Note. The Note
shall bear interest in accordance with Section 2.3 hereof and principal
of and interest on the Note shall be due and payable as provided in
Section 2.5 hereof."
7. Section 2.6 of the Credit Agreement is hereby amended to
read as follows:
"Section 2.6 Mandatory Prepayments. 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 2.6 exceeds the Borrowing Base set forth in such Borrowing Base
Certificate."
8. Section 2.10 of the Credit Agreement is hereby amended to
read as follows:
"Section 2.10 Use of Loan Proceeds. The Borrowers shall use
the proceeds of each Advance for general working capital purposes 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."
9. Article II of the Credit Agreement is hereby amended by
adding the following new Section 2.11 immediately following Section 2.10:
"Section 2.11 Letters of Credit.
(a) Subject to the terms and conditions set forth in
this Section 2.11 and in Article III, the Bank shall issue one
or more letters of credit for the account of the Borrowers
(each 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) $2,000,000 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 2.11 include all
letters of credit existing as of the date of this Sixth
Amendment and listed on Schedule 2.11 attached to the Sixth
Amendment (the "Existing Letters of Credit"). The Borrowers
further acknowledge that they are jointly and severally liable
for all reimbursement and other obligations with respect to
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 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 letter
of credit applications executed in connection with the
Existing Letters of Credit and (ii) the Borrowers are jointly
and severally liable with respect to all obligations under the
letter of credit applications executed in connection with the
Existing Letters of Credit. 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 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 2.11
shall be deemed to be a representation by the Borrowers that
(i) the conditions set forth in this Section 2.11 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 2.11,
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 2.3 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 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 2.1 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 or earlier
termination of the Commitment, 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."
10. Section 3.2 of the Credit Agreement is hereby amended to
read as follows:
"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, as the
case may be, 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 or such Letter of Credit 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."
11. Section 5.1(a) of the Credit Agreement is hereby amended
by deleting the words "a certificate of the chief financial officer of such
Borrower substantially in the form of Exhibit I to the First Amendment" as it
appears in the twenty-second through twenty-fourth lines thereof and by
substituting therefor the words "a certificate of the chief financial officer of
such Borrower substantially in the form of Exhibit B to the Sixth Amendment".
12. Section 5.1(b) of the Credit Agreement is hereby amended
by deleting the words "a certificate of the chief financial officer of such
Borrower substantially in the form of Exhibit I to the First Amendment" as it
appears in the seventeenth through nineteenth lines thereof and by substituting
therefor the words "a certificate of the chief financial officer of such
Borrower substantially in the form of Exhibit B to the Sixth Amendment."
13. Section 5.8 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.8 Debt to Capital Base Ratio of K-Tel USA. K-Tel
USA will maintain at all times the ratio of its Debt to Capital Base at
not more than 13.0 to 1.0."
14. Section 5.9 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.9 Debt to Capital Base Ratio of Dominion. Dominion
will maintain at all times the ratio of its Debt to Capital Base at not
more than 0.50 to 1.00."
15. Section 5.10 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.10 Capital Base of K-Tel USA. K-Tel USA will
maintain at all times its Capital Base in an amount not less than
$1,500,000."
16. Section 5.11 of the Credit Agreement is hereby amended to
read as follows:
"Section 5.11 Capital Base of Dominion. Dominion will maintain
at all times its Capital Base in an amount not less than $1,800,000."
17. Article V of the Credit Agreement is hereby amended by
adding the following new Section 5.12 immediately following existing Section
5.11:
"Section 5.12 Minimum Inventory Reserve for Non-Music
Products. K-Tel USA shall at all times maintain an inventory reserve
with respect to all non-music inventory, in an amount not less than
$300,000."
18. Section 6.7(b) of the Credit Agreement is hereby amended
to read as follows:
"(b) Accounts receivable from and advances to Affiliates of
K-Tel USA; provided, however, without the Bank's prior written consent,
the aggregate amount of accounts receivable from and advances to all
Affiliates of K-Tel USA shall not exceed $5,000,000 in the aggregate at
any time."
19. Section 6.8 of the Credit Agreement is hereby amended to
read as follows:
"Section 6.8 Investments of Dominion. Dominion will not
purchase or hold beneficially any stock or other securities or evidence
of indebtedness of, make or permit to exist any loans 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 "P-1" or "P-2"
by Moody's Investors Service or certificates of deposit or
bankers' acceptances having a maturity or one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000.
(b) Accounts receivable from and advances to
Affiliates of Dominion; provided, however, without the Bank's
prior written consent, the aggregate amount of accounts
receivable from and advances to all Affiliates of Dominion
shall not exceed $2,300,000 at any time."
20. Section 6.13 of the Credit Agreement is hereby amended to
read as follows:
"Section 6.13 Capital Expenditures to Acquire Copyrights in
Sound Recordings, Compilations and Compositions. K-Tel USA will not
make any Capital Expenditure to acquire copyrights in Sound Recordings,
Compilations and/or Compositions or long-term licenses (having a term
of more than 5 years) of copyrights. Dominion will not make any Capital
Expenditure to acquire copyrights in Sound Recordings, Compilations
and/or Compositions or long-term licenses (having a term of more than 5
years) of copyrights if, after giving effect to any such Capital
Expenditure, (i) the aggregate amount of Capital Expenditures made by
Dominion to acquire copyrights in Sound Recordings, Compilations,
Compositions and/or long-term licenses of copyrights would exceed
$2,500,000 during the period from July 22, 1994 through the Commitment
Termination Date or (ii) the Borrowers would not be in compliance with
all provisions of this Agreement."
21. Section 7.1(a) of the Credit Agreement is hereby amended
to read as follows:
"(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 2.6 hereof, or default in the payment
of any Obligation of Reimbursement when due."
22. This Sixth Amendment shall not become effective until the
Bank shall have received each of the following in form and substance acceptable
to the Bank:
(a) The Note, duly executed on behalf of the Borrowers.
(b) A certified copy of the resolutions of the Board of
Directors of K-Tel USA evidencing approval of this Sixth Amendment and
the Note and other matters contemplated hereby, certified by the
Secretary or Assistant Secretary of K-Tel USA 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 USA certifying the names and true signatures of the
officers of K-Tel USA authorized to sign this Sixth Amendment and the
Note and the other documents to be delivered by K-Tel USA hereunder.
(c) A certified copy of the resolutions of the Board of
Directors of Dominion evidencing approval of this Sixth Amendment and
the Note and other matters contemplated hereby, certified by the
Secretary or Assistant Secretary of Dominion 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 Dominion certifying the names and true signatures of the
officers of Dominion authorized to sign this Sixth Amendment and the
Note and the other documents to be delivered by Dominion hereunder.
(d) A Certificate of the Secretary of K-Tel USA certifying as
to the fact that the articles of incorporation and bylaws of K-Tel USA,
which were previously certified and delivered to the Bank continue in
full force and effect and have not been amended or otherwise modified
except as set forth in the Certificate to be delivered.
(e) A Certificate of the Secretary of Dominion certifying as
to the fact that the articles of incorporation and bylaws of Dominion,
which were previously certified and delivered to the Bank continue in
full force and effect and have not been amended or otherwise modified
except as set forth in the Certificate to be delivered.
(f) A copy of the Articles of Merger, certified by the
Minnesota Secretary of State, pursuant to which K-Tel was merged into
K-Tel USA, with K-Tel USA as the surviving corporation.
(g) The Acknowledgment and Agreement of Guarantor attached
below.
(h) An Opinion of Counsel to the Borrowers and the Guarantor.
(i) Such other items as the Bank may require.
23. References. From and after the date of this Sixth
Amendment: (i) all references in the Loan Documents to "the Note" shall be
deemed to refer to the Note as defined in, and delivered under, this Sixth
Amendment; and (ii) all references in the Credit Agreement to "this Agreement"
shall be deemed to refer to the Credit Agreement as amended by this Sixth
Amendment.
24. No Other Changes. Except as explicitly amended by this
Sixth Amendment, all of the original terms and conditions of the Credit
Agreement shall remain in full force and effect.
25. No Other Waiver. Except as explicitly set forth in
paragraph 2 of this Sixth Amendment, the execution of this Sixth Amendment and
acceptance of any documents related thereto shall not be deemed to be a waiver
of any Default or Event of Default under the Credit Agreement or any other Loan
Document, whether or not known to the Bank and whether or not such Default or
Event of Default exists on the date of this Sixth Amendment.
26. Release. The Borrowers and K-Tel International, Inc. by
signing the Acknowledgment and Agreement of Guarantor set forth below, each
hereby absolutely and unconditionally releases and forever discharges the Bank,
and any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of any of the foregoing, from any and all claims, demands or causes of
action of any kind, nature or description, whether arising in law or equity or
upon contract or tort or under any state or federal law or otherwise, which the
Borrowers or any Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Sixth Amendment, whether such claims, demands and causes of action are matured
or unmatured or known or unknown.
27. Expenses. The Borrowers hereby reaffirm their agreement
under Section 8.5 of the Credit Agreement. Without limiting the generality of
the foregoing, the Borrowers specifically agree to pay all fees and
disbursements of counsel to the Bank for the services performed by such counsel
in connection with the preparation of this Sixth Amendment and the documents and
instruments incidental thereto.
28. Counterparts. This Sixth Amendment and the Acknowledgment
and Agreement of Guarantor may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Amendment to be duly executed as of the date first above written.
K-TEL INTERNATIONAL (USA), INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
DOMINION ENTERTAINMENT, INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
TCF BANK MINNESOTA fsb
By /S/ Richard D. Larson
-------------------------------------
Its Vice President
And
By /S/ Milli A. Navara
-------------------------------------
Its Assistant Vice President
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, K-Tel International, Inc., a guarantor of the
indebtedness of K-Tel International (USA), Inc. and Dominion Entertainment, Inc.
(together, the "Borrowers") to the Bank pursuant to its Guaranty dated as of
July 22, 1994 (the "Guaranty), hereby (i) acknowledges receipt of the foregoing
Sixth Amendment; (ii) consents to the terms (including without limitation the
release set forth in paragraph 26 of the foregoing Sixth Amendment) and
execution thereof; (iii) reaffirms its obligations to the Bank pursuant to the
terms of its Guaranty, its Amended and Restated Collateral Pledge Agreement (the
"Pledge Agreement") dated as of January 30, 1995 and its Amended and Restated
Security Agreement dated as of January 30, 1995 (the "Security Agreement"); and
(iv) acknowledges and agrees that the Bank may amend, restate, extend, renew or
otherwise modify the Credit Agreement and any indebtedness or agreement of the
Borrowers, or enter into any agreement or extend additional or other credit
accommodations, without notifying or obtaining the consent of the undersigned
and without impairing the liability of the undersigned under its Guaranty,
Pledge Agreement and/or its Security Agreement for all of the present and future
indebtedness of the Borrowers to the Bank.
K-TEL INTERNATIONAL, INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
SCHEDULE 2.11 TO
SIXTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
Schedule of Existing Letters of Credit
as of the Date of the Sixth Amendment
L/C NUMBER DATE ISSUED AMOUNT EXPIRY DATE
---------- ----------- ------ -----------
I147157 6/20/96 $222,480.00 8/30/96
I147610 7/15/96 $41,488.80 8/15/96
I147761 7/19/96 $185,400.00 9/13/96
I148016 7/26/96 $44,550.00 8/30/96
I148017 7/26/96 $32,625.00 8/23/96
96-004 5/20/95 $20,000.00 5/31/97
EXHIBIT A TO SIXTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
REVOLVING NOTE
(K-TEL INTERNATIONAL (USA), INC.
AND DOMINION ENTERTAINMENT, INC.)
$5,000,000.00 August 23, 1996
FOR VALUE RECEIVED, the undersigned, K-TEL INTERNATIONAL
(USA), INC., a Minnesota corporation ("K-Tel USA"), and DOMINION ENTERTAINMENT,
INC., a Minnesota corporation ("Dominion"; collectively K-Tel USA and Dominion
are called the "Borrowers"), hereby jointly and severally promise to pay to the
order of TCF BANK MINNESOTA fsb (the "Bank"), on November 30, 1996, the
principal sum of Five Million Dollars ($5,000,000.00) 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 from the
date hereof 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 Revolving Credit Agreement
dated as of July 22, 1994, by and between the Borrowers and the Bank, as amended
by a First Amendment to Revolving Credit Agreement dated as of January 30, 1995,
a Second Amendment to Revolving Credit Agreement and to Revolving Note dated as
of July 20, 1995, a Third Amendment to Revolving Credit Agreement dated as of
October 2, 1995, a Fourth Amendment to Revolving Credit Agreement and to
Revolving Note dated as of November 28, 1995, a Fifth Amendment to Revolving
Credit Agreement and to Revolving Note dated as of December 28, 1995 and by a
Sixth Amendment to Revolving Credit Agreement of even date herewith, (such
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 Borrowers' Revolving Note dated October 2, 1995,
payable to the order of the Bank in the original principal amount of $3,500,000,
as amended, and the Revolving Note of K-Tel, Inc. dated January 30, 1995,
payable to the order of the Bank in the original principal amount of $3,000,000,
as amended.
K-TEL INTERNATIONAL (USA), INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
DOMINION ENTERTAINMENT, INC.
By /S/ Mark Dixon
-------------------------------------
Its V.P.
EXHIBIT B TO SIXTH AMENDMENT
TO REVOLVING CREDIT AGREEMENT
COMPLIANCE CERTIFICATE
In accordance with our Revolving Credit Agreement dated as of
July 22, 1994, 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") and of DOMINION ENTERTAINMENT,
INC. ("Dominion"; collectively, K-Tel USA and Dominion are called the
"Borrowers") as of and for the month and year-to-date period ended
_______________ __, 1996 (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, 5.9, 5.10, 5.11 and 6.13 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 1.0 to 1
5.8) Debt to Capital Base Ratio of
K-Tel USA
As of month ending
________________________ ____ to 1 Minimum 13.0 to 1
5.9) Debt to Capital Base Ratio
of Dominion
As of month ending
________________________ ____ to 1 Maximum .50 to 1
5.10) Capital Base of K-Tel USA
As of month ending
________________________ $________ Minimum $1,500,000
5.11) Capital Base of Dominion
As of month ending
________________________ $________ Minimum $1,800,000
K-TEL INTERNATIONAL (USA), INC.
By
-------------------------------------
Its
DOMINION ENTERTAINMENT, INC.
By
-------------------------------------
Its