AMENDMENT NUMBER ONE TO FORBEARANCE AGREEMENT
THIS AMENDMENT NUMBER ONE TO FORBEARANCE AGREEMENT (this
"Amendment"), dated as of January 12, 2001, is entered into by and among
Foothill Capital Corporation, a California corporation ("Foothill"), on the one
hand, and K-Tel International (USA), Inc. ("USA"), Dominion Entertainment, Inc.
("Entertainment"), K-Tel Consumer Products, Inc. ("Consumer"), K-Tel TV, Inc.
("TV"), K-Tel Video, Inc. ("Video"; and collectively with USA, Entertainment,
Consumer, and TV, hereinafter collectively referred to as "Borrowers"), and
K-Tel International, Inc. ("International") and K-Tel OnLine, Inc. ("OnLine, and
collectively with International, "Original Guarantors"), and K-Tel DVD, Inc.,
("DVD", and collectively with Original Guarantors, the "Guarantors") in light of
the following:
A. Foothill, Borrowers, and Original Guarantors have entered
into that certain Forbearance Agreement, dated as of November 13, 2000 (the
"Forbearance Agreement"), providing for a forbearance period terminating on
January 12, 2001 unless certain conditions were met to extend such period.
B. The conditions to extend the forbearance period have not
been met, but Borrowers and Guarantors have requested, and Foothill has agreed
to, the extension of the forbearance period for a limited time, subject to the
terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
Unless expressly defined herein, all terms used
herein shall have the meanings assigned thereto in the Forbearance Agreement.
2. AMENDMENT OF FORBEARANCE AGREEMENT.
a. Section 4(b) of the Forbearance Agreement is
hereby amended to read as follows:
(b) The foregoing forbearance agreement shall expire upon the
earlier of (i) April 30, 2001, or (ii) the occurrence of any Event of Default
other than the Existing Default ("Forbearance Period").
b. Section 5(d) of the Forbearance Agreement is
hereby amended by adding the additional paragraphs thereto:
(6) On or before the first day of each calendar month during
the Forbearance Period (commencing with February 1, 2001), deliver to Foothill
an availability forecast substantially in the form of EXHIBIT 5(d)(6) attached
hereto, and otherwise satisfactory to Foothill showing the Borrowing Base and
Borrowers' estimated cash flows for each business day of that month.
(7) On the date of the execution of Amendment Number One to
this Agreement (the "Amendment Date"), Borrowers shall pay to Foothill by wire
transfer for application to the Term Loan, the sum of $250,000, and on the tenth
calendar day after the Amendment Date, Borrowers shall pay to Foothill by wire
transfer for further application to the Term Loan, an additional sum of
$250,000.
(8) Notwithstanding anything to the contrary contained in the
definition of Eligible Accounts set forth in the Loan Agreement, no otherwise
Eligible Accounts owed by Best Buy, Target or Musicland will be deemed
ineligible by Foothill under clause (h) of that definition to the extent that
such Accounts do not exceed, for any such account debtor, 25% of all Eligible
Accounts.
3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment and the
continuation of Foothill's agreement to forbear as provided in the Forbearance
Agreement is expressly conditioned upon delivery to Foothill of each and all of
the following:
a. A fully executed copy of this Amendment.
b. the first $250,000 repayment applicable to
the Term Loan.
4. EVENTS OF DEFAULT. Borrowers and Guarantors hereby
affirm that no Event of Default (other than the Existing Default) has occurred
and is continuing as of this date.
5. COSTS AND EXPENSES. Borrowers shall pay to Foothill
all of Foothill's out-of-pocket costs and expenses (including, without
limitation, the fees and expenses of its counsel, which counsel may include
any local counsel deemed necessary, search fees, filing and recording fees,
documentation fees, appraisal fees, travel expenses, and other fees) arising
in connection with the preparation, execution, and delivery of this Amendment
and all related documents.
6. LIMITED EFFECT. In the event of a conflict between
the terms and provisions of this Amendment and the terms and provisions of the
Forbearance Agreement or the Loan Agreement, the terms and provisions of this
Amendment shall govern. In all other respects, the Forbearance Agreement, as
amended and supplemented hereby, and the Loan Agreement, as amended and
supplemented by the Forbearance Agreement and hereby, shall remain in full
force and effect.
7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original. All such counterparts, taken together, shall constitute but
one and the same Amendment. This Amendment shall become effective upon the
execution of a counterpart of this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first set forth above.
FOOTHILL CAPITAL CORPORATION ("Foothill"),
a California corporation
By
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Its
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BORROWERS:
K-TEL INTERNATIONAL (USA), INC.,
a Minnesota corporation
By
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Its
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DOMINION ENTERTAINMENT, INC.,
a Minnesota corporation
By
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Its
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K-TEL CONSUMER PRODUCTS, INC.,
a Minnesota corporation
By
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Its
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K-TEL TV, INC.,
a Minnesota corporation
By
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Its
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K-TEL VIDEO, INC.,
a Minnesota corporation
By
Its
GUARANTORS:
K-TEL INTERNATIONAL, INC.,
a Minnesota corporation
By
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Its
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K-TEL ONLINE, INC.,
a Minnesota corporation
By
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Its
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K-TEL DVD, INC.,
a Minnesota corporation
By
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Its
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