Document:

ncb/zimmerman reed/third amendment to august 21, 1998 amended and

restated loan agreement

EXHIBIT

10.2

 

AMENDMENT TO LOAN AND

SECURITY 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 Capital

Corporation (“Lender”) and $10,000,000 credit facility consisting of a

$4,000,000 term loan due on expiration and a $6,000,000 revolving credit

facility, and the Promissory Note from the Borrowers to the Lender dated

November 19, 1997 (the “Note”) is made as of February 12, 2002.

 

RECITALS

 

                The undersigned

Borrowers, K-Tel Entertainment, Inc. and the Lender desire to amend the

Agreement and Note as provided in this Amendment.

 

                NOW, THEREFORE,

for good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, the undersigned Borrowers and the Lender agree as follows:

 

                                                1.                                         Definitions.  Unless otherwise defined herein, capitalized

terms used herein shall have the meanings given to them in the Agreement.

 

                                                2.                                       Amendment to

Agreement.

 

a.                                       All references to

Borrowers shall now mean Dominion Entertainment, Inc., K-Tel Consumer Products,

Inc., K-Tel TV, Inc., K-Tel Video, Inc. and K-Tel

Entertainment, Inc.

 

                                                                                                b                                         Section 3.4 shall

be amended to read as follows:

 

                                                                                                                                                3.4          Term;

Automatic Renewal.  This Agreement

shall become effective upon the execution and delivery hereof by the

undersigned Borrowers and Foothill and shall continue in full force and effect

for a term ending on July 20, 2005. The foregoing notwithstanding, Foothill

shall have the right to terminate its obligations under the continuation of an

Event of Default.

 

                                                3.                                       Default

Acknowledgment.  The parties

acknowledge that the Borrowers are in default as follows:

 

                                                a.                                       With

the exception of Dominion Entertainment, Inc., each Borrower is insolvent which

is a default under Section 5.12 of the Foothill Loan Agreement.

 

1

 

                                                b.                                      The

Borrowers have not delivered the monthly financial statements required by

Section 6.3(a) of the Foothill Loan Agreement.

 

                                                c.                                       The

filing for bankruptcy by K-Tel International (USA), Inc. is a violation of

Section 7.3 of the Foothill Loan Agreement and is hence a default.

 

                                                d.                                      The

Parent does not have Tangible Net Worth of at least $8,000,000 which is a

default under Section 7.20 of the Foothill Loan Agreement.

 

                                                e.                                       The

filing for bankruptcy by K-Tel International (USA), Inc. is a default under

Section 8.5 of the Foothill Loan Agreement.

 

                                                f.                                         An

insolvency proceeding was commenced against K-Tel Marketing, Ltd., a default

under Section 8.6 of the Foothill Loan Agreement.

 

                4.             Security.  The undersigned Borrowers and the Lender

confirm that the Borrowers’ obligations under the Agreement (including this

Amendment) and the Note are secured by the Copyright Security Agreement and the

Intellectual Property Security Agreement, as defined in the Agreement.

 

                5.             Borrowers’ Warranties.  The undersigned Borrowers warrant that:  (1) each representation, warranty and

covenant made by them in the Agreement, is true and correct on the date hereof

with the same effect as if made on such date; and (2) as of the date hereof it

is not in default under the Agreement, nor has any event occurred which with

notice or lapse of time or both would result in such a default.

 

                6.             Waiver.  Notwithstanding any provision of this

Agreement to the contrary, no provision of this Agreement is intended, or shall

be construed, to be a waiver by the Lender of any rights or remedies that the

Lender may have due to the occurrence of any default under the Agreement or the

Note that may have occurred heretofore or which may occur hereafter.

 

                7.             Borrowers’ Representations.  The undersigned Borrowers hereby represent

and warrant that (a) as of the date hereof, the undersigned Borrower have no

defenses or rights of setoff against the enforcement by the Lender of the

undersigned Borrowers’ obligations under the Agreement or the Note, (b) no

events have occurred which, with the giving of notice or passage of time, or

both, would entitle any of the Borrowers to any such defenses or rights of

setoff, and (c) the parties executing this Amendment on behalf of the

undersigned Borrowers are duly authorized and empowered to do so.

 

                8.             Interpretation.  This Amendment shall be construed with and

as part of the Agreement.  In the event

of any conflict between the terms of the Agreement and 

 

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this Amendment, the terms of this Agreement shall be deemed to

supersede and control.

 

                9.             Incorporation of Terms.  The parties agree that except as

specifically modified by this Amendment, all of the terms and conditions of the

Agreement and all documents related thereto shall remain in full force and

effect.

 

3

 

                IN WITNESS

WHEREOF, this Amendment has been executed as of the day and year first above

written.

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

  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

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
									

 

4(Begin typing here)

November 16, 2001

 

VIA HAND DELIVERY

 

Mike Emley

 

Dear Mike:

 

This letter sets forth

the substance of the separation agreement (the “Agreement”) that Pharsight

Corporation (the “Company”) is offering to you to aid in your employment

transition.

 

1.     Resignation.  You have

tendered your resignation to the Company, which it hereby accepts.  Your employment resignation date will be

November 30, 2001(the “Separation Date”).

 

2.     Accrued Salary and Paid Time Off. 

On the Separation Date, the Company will pay you all accrued salary, and

all accrued and unused vacation, earned through the Separation Date, less

standard payroll deductions and withholdings. 

You are entitled to these payments regardless of whether you sign this Agreement.

 

3.     Severance

Benefits.  Although the

Company has no policy or procedure for providing severance benefits, if you

accept this Agreement, the Company will make severance payments to you in the

amount of your base salary in effect as of the Separation Date for four (4)

months following the Separation Date (the “Initial Severance Period”).  You will also be eligible for sales

commissions according to the Pharsight Sales plan for the months of November

and December 2001.   In addition, the

Company will make severance payments to you in the amount of your base salary

in effect as of the Separation Date for up to an additional two (2) months (the

“Additional Severance Period”) following the end of the Initial Severance

Period, if you have not obtained other employment by that time.  The Company’s obligation to make severance

payments during the Additional Severance Period ceases immediately and in full

upon your commencement of new employment. 

Therefore, you hereby agree to notify the Company as soon as you obtain

new employment, if such employment will commence during the Initial Severance

Period or the Additional Severance Period. 

The severance payments will be made on the Company’s ordinary payroll

dates, and will be subject to standard payroll deductions and

withholdings.  Notwithstanding the

above, the Company’s obligation to make any severance payments, during both the

Initial Severance Period and the Additional Severance Period, will cease

immediately if you

refuse to fulfill your obligations under this Agreement or materially breach

this Agreement in any other respect

 

4.     Health Insurance. 

Your group health insurance coverage will continue until your separation

date, November 30, 2001.  To the extent

provided by the federal COBRA law or, if applicable, state insurance laws, and

by the Company’s current group health insurance policies, you will be eligible

to continue your group health insurance benefits at your own expense after 

 

1

 

November 30, 2001.  Later, you may be able to convert to an

individual policy through the provider of the Company’s health insurance, if

you wish.  If you timely elect continued

coverage under COBRA, the Company, as part of this Agreement and as an

additional severance benefit, will reimburse you for your COBRA premiums during

the Initial Severance Period and the Additional Severance Period.  The Company’s obligation to reimburse you

will cease immediately if either of the following occurs:  (a) you refuse to fulfill your obligations

under this Agreement or materially breach this Agreement in any other respect;

or (b) you become eligible for other health insurance benefits at the expense

of a new employer.  You agree to notify

the Company immediately, in writing, of the availability of health insurance

upon your acceptance of new employment.

 

5.     Stock Options. Accelerated Vesting of Stock Option Grant.  The shares in your stock option grant

#OP-105,

dated June 18, 1999, which were granted under the 1997 stock option plan, and

that are unvested as of the Separation Date, will be subject to accelerated

vesting, so that your stock option grant will be fully exercisable effective as

of the Separation Date.  You will be

able to exercise your vested shares within ninety (90) days after the

Separation Date in accordance with the terms of your stock option grant.

 

6.     Other Compensation or Benefits. 

You acknowledge that, except as expressly provided in this Agreement,

you will not receive

any additional compensation, vesting, severance or benefits after the

Separation Date.

 

7.     Expense Reimbursements. 

You agree that, by the Separation Date, you will submit your final

documented expense reimbursement

statement reflecting all business expenses you incurred through the Separation

Date, if any, for which you seek reimbursement.  The Company will reimburse you for these expenses pursuant to its

regular business practices.

 

8.     Return

of Company Property.  You agree to return to the Company, no later

than the Separation Date, all Company documents (and all copies thereof) and other

Company property that you have had in your possession at any time, including,

but not limited to, Company files, notes, drawings, records, business plans and

forecasts, financial information, specifications, computer-recorded

information, tangible property (including, but not limited to, computers,

cellular phones, etc.), credit cards, entry cards, identification badges and

keys; and, any materials of any kind that contain or embody any proprietary or

confidential information of the Company (and all reproductions thereof).  Your timely return of all Company property

is a condition precedent to the Company’s payment of any severance payments.

 

9.     Proprietary

Information Obligations. 

You acknowledge your continuing obligations under your Proprietary Information

and Inventions Agreement, a copy of which is attached hereto as Exhibit A.

 

10.  Confidentiality.  The

provisions of this Agreement will be held in strictest confidence by you and

the Company and will not be publicized or disclosed in any manner whatsoever; provided,

however, that:  (a) you may

disclose this Agreement in confidence to your immediate family; (b) the parties

may disclose this Agreement in confidence to their respective attorneys,

accountants, auditors, tax preparers, and financial advisors; (c) the Company

may disclose this Agreement as necessary to fulfill standard or legally

required corporate reporting or disclosure requirements; and (d) the parties

may disclose this Agreement insofar as such disclosure may be necessary to

enforce its terms or as otherwise required by law.  In particular, and without limitation, you agree not to disclose

the terms of this Agreement to any current or former employee, consultant or

independent contractor of the Company.

 

2

 

11.  Duty Of Cooperation.  During

the Initial

and Additional Severance Periods, you agree to reasonably cooperate with the

Company’s requests for information or assistance in transitioning activities,

if any.  You and the Company agree that

if you fail to comply with this Section, or if you materially breach this

Agreement in some other respect, the Company’s obligation to provide you with

the severance payments and other benefits provided in this Agreement will

immediately cease.

 

12.  Nondisparagement. 

Both you and the Company agree not to disparage the other party, and you

further agree not to disparage the Company’s officers, directors, employees,

shareholders and agents, in any manner likely to be harmful to them or their

business, business reputation or personal reputation; provided that both you

and the Company will respond accurately and fully to any question, inquiry or

request for information when required by legal process.

 

13.  Release of

Claims.  In exchange for the payments and other

consideration under this Agreement to which you would not otherwise be

entitled, you hereby release, acquit and forever discharge the Company, its

parents and subsidiaries, and its and their respective officers, directors,

agents, servants, employees, attorneys, shareholders, successors, assigns and

affiliates, of and from any and all claims, liabilities, demands, causes of

action, costs, expenses, attorneys’ fees, damages, indemnities and obligations

of every kind and nature, in law, equity, or otherwise, known and unknown,

suspected and unsuspected, disclosed and undisclosed, arising out of or in any

way related to agreements, events, acts or conduct at any time prior to and

including the execution date hereof, including but not limited to: any and all

such claims and demands directly or indirectly arising out of or in any way

connected with your employment with the Company or the termination of that

employment; claims or demands related to salary, bonuses, commissions, stock,

stock options, or any other ownership interests in the Company, vacation pay,

fringe benefits, expense reimbursements, sabbatical benefits, severance

benefits, or any other form of compensation; claims pursuant to any federal,

state, local law, statute or cause of action including, but not limited to, the

federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in

Employment Act of 1967, as amended; the federal Americans with Disabilities Act

of 1990; the California Fair Employment and Housing Act, as amended; California

Labor Code section 132a, as amended; tort law; contract law; wrongful

discharge; discrimination; fraud; defamation; harassment; emotional distress;

and breach of the implied covenant of good faith and fair dealing.  You represent that you have no lawsuits,

claims or actions pending in your name or on behalf of any other person or

entity, against the Company or any other person or entity subject to the

release granted in this paragraph.  You

agree that in the event you bring a claim covered by this release in which you

seek damages against the Company or in the event you seek to recover against

the Company in any claim brought by a governmental agency on your behalf, this

Agreement shall serve as a complete defense to such claims.

 

3

 

14.  Section 1542 Waiver. 

In granting the release herein, you acknowledge that you understand that

you are waiving the benefit of any provision of law in any jurisdiction to the

following effect:

 

A general release does not extend to claims which the creditor does not

know or suspect to exist in his favor at the 

time of executing the release, which if known by him must have materially

affected his settlement with the debtor.

(California Civil Code Section 1542.)

 

You hereby

expressly waive and relinquish all rights and benefits under that section and

any law or legal principle of similar effect in any jurisdiction with respect

to the release of unknown and unsuspected claims granted in this Agreement.

 

15.  Miscellaneous.  This Agreement, including Exhibits A,

constitutes the complete, final and exclusive embodiment of the entire

agreement between you and the Company with regard to its subject matters.  It is entered into without reliance on any

promise or representation, written or oral, other than those expressly

contained herein, and it supersedes any other such promises, warranties or

representations.  This Agreement may not

be modified or amended except in a writing signed by both you and a duly

authorized officer of the Company.  This

Agreement will bind the heirs, personal representatives, successors and assigns

of both you and the Company, and inure to the benefit of both you and the

Company, their heirs, successors and assigns. 

If any provision of this Agreement is determined to be invalid or

unenforceable, in whole or in part, this determination will not affect any

other provision of this Agreement and the provision in question will be

modified by the court so as to be rendered enforceable.  This Agreement will be deemed to have been

entered into and will be construed and enforced in accordance with the laws of

the State of California as applied to contracts made and to be performed

entirely within California.

 

The Company’s offer to

enter into this Agreement will expire if you do not accept it on or by November

21, 2001.

 

If this

Agreement is acceptable to you, please sign below and return the original to

me.  I wish you good luck in your future

endeavors.

 

Sincerely,

 

Pharsight

Corporation

 

	

  By:__________________________________

  	

   

  
	

   

  	

  Art Reidel

  
	

   

  	

  President and Chief

  Executive Officer

  
			

 

I have read,

understand and agree fully to the foregoing Agreement.

 

	

   

  	

   

  	

   

  	

   

  
	

  Mike Emley

  	

   

  	

  Date

  	

   

  

 

4

 

Exhibit A

 

PROPRIETARY

INFORMATION AND INVENTIONS AGREEMENT

 

5

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