**EXHIBIT10.2**

 

AMENDMENT TO LOAN ANDSECURITY AGREEMENT

 

 

                This Amendment(“Amendment”) to the November 19, 1997 Loan and Security Agreement (the“Agreement”) among K-Tel International (USA), Inc., Dominion Entertainment,Inc., K-Tel Consumer Products, Inc., K-Tel TV, Inc., K-Tel Video, Inc.(“Borrowers”) and K-5 Leisure Products, Inc., as assignee of Foothill CapitalCorporation (“Lender”) and $10,000,000 credit facility consisting of a$4,000,000 term loan due on expiration and a $6,000,000 revolving creditfacility, and the Promissory Note from the Borrowers to the Lender datedNovember 19, 1997 (the “Note”) is made as of February 12, 2002.

 

RECITALS

 

                The undersignedBorrowers, K-Tel Entertainment, Inc. and the Lender desire to amend theAgreement and Note as provided in this Amendment.

 

                NOW, THEREFORE,for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the undersigned Borrowers and the Lender agree as follows:

 

                                                1.                                         Definitions.  Unless otherwise defined herein, capitalizedterms used herein shall have the meanings given to them in the Agreement.

 

                                                2.                                       Amendment toAgreement.

 

a.                                       All references toBorrowers shall now mean Dominion Entertainment, Inc., K-Tel Consumer Products,Inc., K-Tel TV, Inc., K-Tel Video, Inc. andK-TelEntertainment, Inc.

 

                                                                                                b                                         Section 3.4 shallbe amended to read as follows:

 

                                                                                                                                                **3.4          Term;Automatic Renewal.**  This Agreementshall become effective upon the execution and delivery hereof by theundersigned Borrowers and Foothill and shall continue in full force and effectfor a term ending on July 20, 2005. The foregoing notwithstanding, Foothillshall have the right to terminate its obligations under the continuation of anEvent of Default.

 

                                                3.                                       DefaultAcknowledgment.  The partiesacknowledge that the Borrowers are in default as follows:

 

                                                a.                                       Withthe exception of Dominion Entertainment, Inc., each Borrower is insolvent whichis a default under Section 5.12 of the Foothill Loan Agreement.

 

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                                                b.                                      TheBorrowers have not delivered the monthly financial statements required bySection 6.3(a) of the Foothill Loan Agreement.

 

                                                c.                                       Thefiling for bankruptcy by K-Tel International (USA), Inc. is a violation ofSection 7.3 of the Foothill Loan Agreement and is hence a default.

 

                                                d.                                      TheParent does not have Tangible Net Worth of at least $8,000,000 which is adefault under Section 7.20 of the Foothill Loan Agreement.

 

                                                e.                                       Thefiling for bankruptcy by K-Tel International (USA), Inc. is a default underSection 8.5 of the Foothill Loan Agreement.

 

                                                f.                                         Aninsolvency proceeding was commenced against K-Tel Marketing, Ltd., a defaultunder Section 8.6 of the Foothill Loan Agreement.

 

                4.             Security.  The undersigned Borrowers and the Lenderconfirm that the Borrowers’ obligations under the Agreement (including thisAmendment) and the Note are secured by the Copyright Security Agreement and theIntellectual Property Security Agreement, as defined in the Agreement.

 

                5.             Borrowers’ Warranties.  The undersigned Borrowers warrant that:  (1) each representation, warranty andcovenant made by them in the Agreement, is true and correct on the date hereofwith the same effect as if made on such date; and (2) as of the date hereof itis not in default under the Agreement, nor has any event occurred which withnotice or lapse of time or both would result in such a default.

 

                6.             Waiver.  Notwithstanding any provision of thisAgreement to the contrary, no provision of this Agreement is intended, or shallbe construed, to be a waiver by the Lender of any rights or remedies that theLender may have due to the occurrence of any default under the Agreement or theNote that may have occurred heretofore or which may occur hereafter.

 

                7.             Borrowers’ Representations.  The undersigned Borrowers hereby representand warrant that (a) as of the date hereof, the undersigned Borrower have nodefenses or rights of setoff against the enforcement by the Lender of theundersigned Borrowers’ obligations under the Agreement or the Note, (b) noevents have occurred which, with the giving of notice or passage of time, orboth, would entitle any of the Borrowers to any such defenses or rights ofsetoff, and (c) the parties executing this Amendment on behalf of theundersigned Borrowers are duly authorized and empowered to do so.

 

                8.             Interpretation.  This Amendment shall be construed with andas part of the Agreement.  In the eventof any conflict between the terms of the Agreement and 

 

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this Amendment, the terms of this Agreement shall be deemed tosupersede and control.

 

                9.             Incorporation of Terms.  The parties agree that except asspecifically modified by this Amendment, all of the terms and conditions of theAgreement and all documents related thereto shall remain in full force andeffect.

 

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                IN WITNESSWHEREOF, this Amendment has been executed as of the day and year first abovewritten.

 
|   |   |   |   |   | DOMINION  ENTERTAINMENT, INC.  |
|--------|--------|--------|--------|--------|--------------------------------|
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Dennis  Ward |
|   |   |   |   |   |                           | Its | Secretary |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | K-TEL  CONSUMER PRODUCTS, INC. |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Dennis  Ward |
|   |   |   |   |   |                           | Its | Secretary |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | K-TEL  TV, INC.                |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Dennis  Ward |
|   |   |   |   |   |                           | Its | Secretary |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | K-TEL  VIDEO, INC.             |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Dennis  Ward |
|   |   |   |   |   |                           | Its | Secretary |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | K-TEL  ENTERTAINMENT, INC.     |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Dennis  Ward |
|   |   |   |   |   |                           | Its  | Secretary |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | K-5  LEISURE PRODUCTS, INC.    |
|   |   |   |   |   |                           |   |
|   |   |   |   |   |                           |   |
|   |   |   |   |   | By                             | /s/ | Philip  Kives |
|   |   |   |   |   |                           | Its | President |
|   |   |   |   |   |                           |   |
|        |        |        |        |        |                                |  |  |  |

 

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