-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IkCw1+RPLHNoJo9QaIUuroBWwjnl+0zXeNE6fI9vD9s2XhaixZ4/m8Sxkjl+Hj3X b+AiiSF17zWwzwedvmtQTA== 0000897101-95-000362.txt : 19951002 0000897101-95-000362.hdr.sgml : 19951002 ACCESSION NUMBER: 0000897101-95-000362 CONFORMED SUBMISSION TYPE: 8-K CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950724 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950927 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: K TEL INTERNATIONAL INC CENTRAL INDEX KEY: 0000054193 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 410946588 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07115 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 2605 FERNBROOK LANE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55447-4736 BUSINESS PHONE: 6125596800 MAIL ADDRESS: STREET 1: 15525 MEDINA ROAD STREET 2: 15525 MEDINA ROAD CITY: PLYMOUTH STATE: MN ZIP: 55447 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 24, 1995 K-tel International, Inc. (Exact name of registrant as specified in its charter) Minnesota (State or other jurisdiction of incorporation) 0-6664 41-0946588 Commission File Number (IRS Employer Identification No.) 2605 Fernbrook Lane North, Minneapolis, MN 55447-4736 (Address of principal executive offices) (612) 559-6800 Registrant's Telephone Number Item 5. Other Events On July 24, 1995, the Board of Directors of K-tel International, Inc. (the "Company") approved the sale of its consumer entertainment business to Simitar, Inc. ("Purchaser"), a corporation controlled by the Company's President and Chief Executive Officer, Mickey Elfenbein. The Company will retain and continue to operate its non-entertainment consumer products business, including the two domestic subsidiaries (the "Remaining Subsidiaries") operating the retained business. Upon consummation of the transaction, Mr. Elfenbein and certain of the officers of the Company who will be employed by the Purchaser will resign their positions with the Company. Philip Kives, the Company's major shareholder, will continue as Chairman of the Company. For the year ended June 30, 1995, the net sales from the Company's entertainment products business were approximately 80% of total net sales. The balance of the net sales were from the Remaining Subsidiaries. At closing, the Company will sell to Purchaser three domestic subsidiaries and ten foreign subsidiaries (the "Entertainment Subsidiaries") through which the Company operates its consumer entertainment business and which own the master recording rights to over 2,500 music recordings. The purchase price for the Entertainment Subsidiaries is $25,000,000 payable in immediately available funds at closing subject to the following adjustments: (1) increased by the net profit in excess of $200,000 from the production and distribution of consumer products (other than consumer entertainment products) by the Company and its Remaining Subsidiaries for the period from July 1, 1994 to the date of closing (the "Consumer Products Profit Adjustment"), and (2) increased by the amount by which the agreed value of the net assets of the Company and the Remaining Subsidiaries on a consolidated basis, after giving effect to the sale of the Entertainment Subsidiaries but excluding receipt of the purchase price (the "Remaining Asset Value"), is less than $1,000,000. On the first anniversary of the closing, the purchase price will be increased by up to $400,000 or decreased depending on the disposition of certain consumer product inventory of the Remaining Subsidiaries classified as "slow moving" based on a formula under the purchase agreement. In addition, at closing all intercompany payables will be repaid and certain bank indebtedness will be repaid by the primary obligors of the debt. As of June 30, 1995, the purchase price for the Entertainment Subsidiaries would have been $25,000,000 plus an estimated (1) zero for the Consumer Products Profit Adjustment, and (2) $3,800,000 to bring the Remaining Asset Value to $1,000,000, or a total estimated purchase price of $28,800,000 before any additional adjustment for slow moving inventory on the first anniversary of closing. As of June 30, 1995, the Company and the Remaining Subsidiaries owed approximately $6,100,000 to the Entertainment Subsidiaries and were responsible for approximately $1,500,000 of bank indebtedness. The Company has net operating loss carry forwards which the Company believes will be sufficient to eliminate any federal income tax consequences from the sale of the Entertainment Subsidiaries, except for alternative minimum taxes. If the transaction closed on June 30, 1995, the Company's net cash position would have been increased by an estimated $21,200,000. At closing, the parties will enter into the following additional agreements: (1) a trademark agreement pursuant to which Purchaser and its subsidiaries have certain rights, without any additional payment, to use the Company's K-tel tradenames and trademarks in the United States and certain foreign countries for specified periods of time, (2) sublease agreements pursuant to which the Company will sublease 4,600 square feet of office space and 30,500 square feet of warehouse space in Minneapolis, Minnesota from one of the Entertainment Subsidiaries through March 13, 1996, with an option to extend the sublease for six months, for the Company's consumer products business at a pass-through of the rent and other obligations, and (3) a record license agreement pursuant to which the Company will have the non-exclusive right to utilize the master recordings catalog of the Entertainment Subsidiaries to produce one album for sale by the Company through infomercials for certain royalty fees. Consummation of the transactions contemplated by the purchase agreement is subject to a number of conditions, including Purchaser obtaining satisfactory financing for the acquisition and its working capital needs, no material adverse litigation, no material adverse change in the Entertainment Subsidiaries (other than the discontinuance of certain operations), approval of the transactions by the Company's shareholders, receipt of all necessary consents or approvals, and delivery of a fairness opinion to the Company's Board of Directors. If Purchaser has not obtained a written financing commitment by September 8, 1995 or if the transactions do not close on October 16, 1995, the Company may terminate the purchase agreement unless waived by the Company, extended pursuant to certain automatic extensions in the purchase agreement or otherwise mutually agreed by the parties. The Company has retained Van Kasper & Company ("Van Kasper") as its investment banker. Van Kasper indicated to the Company's Board of Directors when it considered the transactions at its meeting on July 24, 1995 that Van Kasper was in a position to render a fairness opinion on the transaction. Mr. Kives beneficially owns approximately 63% of the Company's outstanding common stock and intends to vote his shares to approve the transactions at the meeting of the Company's shareholders to consider the transactions. There can be no assurance, however, that all of the conditions to the transactions will be satisfied or that the transactions will be consummated. Failure to consummate the transactions will result in material expenses to the Company which will not be reimbursed and, in such event, there may be other operational or management changes to address recent adverse results in certain of the Company's subsidiaries. On the same day as the transactions between the Company and Purchaser are consummated, Mickey Elfenbein, Purchaser and K-5 Leisure Products, Inc. ("K-5") which is controlled by Philip Kives will consummate certain transactions pursuant to a stock transfer and loan repayment agreement among them. K-5 will receive 350,000 shares of the Company's common stock currently owned by Mr. Elfenbein and a note for approximately $1,100,000 from Purchaser in repayment of indebtedness owed by Mr. Elfenbein to K-5 and affiliated entities and in exchange for Purchaser receiving K-5's 53% ownership in Simitar Entertainment, Inc. ("SEI"), a video entertainment production and distribution company. Mr. Elfenbein currently owns 43% of SEI and will contribute his interest in SEI to Purchaser in connection with these other transactions. The sale of the Entertainment Subsidiaries and the transactions contemplated by the stock transfer and loan repayment agreement are conditioned on the simultaneous closings of each other. The foregoing information does not purport to be complete and is qualified in its entirety by reference to the Exhibits in this Report. Item 7. Exhibits. Exhibit No. Description 2 Agreement for Purchase and Sale dated as of June 28, 1995 by and between K-tel International, Inc. and Simitar, Inc. 10.1 Stock Transfer and Repayment Agreement dated as of June 28, 1995 among K-5 Leisure Products, Inc., Simitar, Inc. and Mickey Elfenbein. 99.1 Press Release of K-tel International, Inc. dated July 24, 1995. SIGNATURE 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. Dated: August 15, 1995 K-TEL INTERNATIONAL, INC. By s/s Mark J. Dixon Mark J. Dixon, Vice President-Finance and Chief Financial Officer/Treasurer INDEX TO EXHIBITS Agreement for Purchase and Sale dated as of June 28, 1995 by and between K-tel International, Inc. and Simitar, Inc.......................................................2 Stock Transfer and Repayment Agreement, dated as of June 28, 1995 among K-5 Leisure Products, Inc., Simitar, Inc. and Mickey Elfenbein.........................10.1 Press Release of K-tel International, Inc. dated July 24, 1995........................................................99.1 EX-2 2 Agreement For Purchase And Sale THIS AGREEMENT FOR PURCHASE AND SALE, dated as of June 28, 1995, between SIMITAR, INC., a Minnesota corporation ("Purchaser"), and K-TEL INTERNATIONAL, INC., a Minnesota corporation ("Seller"), RECITALS: WHEREAS, Seller is engaged in the business of developing, marketing and distributing packaged consumer entertainment (music and video) and consumer convenience products worldwide; and WHEREAS, Seller desires to sell to Purchaser all of the outstanding capital stock of certain of its wholly-owned subsidiaries and related assets, upon the terms and conditions set forth herein, and Purchaser desires to purchase such capital stock and assets; NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. SHARES TO BE TRANSFERRED TO PURCHASER. Subject to the terms and conditions set forth in this Agreement: (1) Shares and Assets. Seller agrees to sell to Purchaser, and Purchaser agrees to buy from Seller, on the Closing Date specified in Section 8 and for the consideration set forth in Section 2, all of the issued and outstanding stock of the subsidiaries of Seller listed on Exhibit A hereto (the "Subsidiaries") owned by the Seller (the "Shares"). The shares of K-tel, Inc., K-tel Direct, Inc. and K-tel (Australia) Pty. Ltd. (the "Remaining Subsidiaries") and all other assets of the Seller are specifically excluded from the transaction and shall remain the property of the Seller subject to Section 7(3) hereof; and (2) Qualifying Shares. Seller shall use all commercially reasonable efforts to cause any qualifying shares of the Subsidiaries held by directors of the Subsidiaries to be transferred on Closing to the Purchaser or its nominees. SECTION 2. PURCHASE PRICE. (1) Amount. Subject to the terms and conditions set forth in this Agreement, on the Closing Date, Purchaser shall pay to Seller, the purchase price (the "Purchase Price") equal to the sum of: (a) $25,000,000; and (b) the amount by which the net profit (as determined in accordance with Section 2(3)) from the production and distribution of consumer products (other than consumer entertainment products) by Seller and its subsidiaries in the United States (the "Consumer Products Business") for the period from July 1, 1994 to the Closing Date exceeds $200,000, provided that the amount payable to Seller under this Section 2(1)(b) shall be estimated at Closing by the Chief Financial Officer of the Seller on the basis of the Seller's internal financial statements prepared in the ordinary course of business and the final adjustment shall be made by the mutual agreement of Seller and Buyer within sixty (60) days after Closing or, if such mutual agreement is not reached, by Arthur Andersen & Co. as provided in Section 2(3) (whose determination shall be binding on the parties). (2) Adjustments. The Purchase Price shall be: (a) adjusted by that amount by which the agreed value of the net assets of Seller (excluding income earned under the agreement between the Seller and Beyond Auto Pty. Ltd. dated November 30, 1993 relating to the sale of consumer products in Australia) on a consolidated basis (after giving effect to the sale of the Shares by Seller but excluding receipt of the Purchase Price) (the "Remaining Assets Value") as determined in accordance with the calculations set forth in Exhibit B as of the Closing Date is less than or greater than $1,000,000. If the Remaining Assets Value is greater than $1,000,000, then the Purchase Price shall be reduced by the difference. If the Remaining Assets Value is less than $1,000,000, then the Purchase Price shall be increased by the difference. The amount of the adjustment to be made to the Purchase Price under this Section 2(2)(a) shall be estimated at Closing by the Chief Financial Officer of the Seller on the basis of the Seller's internal financial statements prepared in the ordinary course of business in accordance with Exhibit B hereto and the final adjustment shall be made by mutual agreement of the Seller and Buyer in accordance with Exhibit B, within sixty (60) days after Closing. If such mutual agreement is not reached then the determination of such final adjustments shall be determined by Arthur Andersen & Co. in accordance with Exhibit B, and such determination shall be binding upon the parties; and (b) reduced by the expenses of the Seller referred to in Section 12(1). (3) Determination of Net Profit of Consumer Products Business. For the purposes of Section 2(1)(b), the net profit from the Consumer Products Business shall be the consolidated net income (loss) of (in each case excluding consumer entertainment products): (i) the consumer products division of K-tel International (USA), Inc. for the period July 1, 1994, through January 31, 1995, when it was incorporated as a separate entity; (ii) K-tel Inc. (which is the legal entity for the Consumer Products Business in the United States which was incorporated on October 1, 1994), for the period from February 1, 1995, through the Closing Date; and (iii) K-tel Direct, Inc., the legal entity which handles all direct response activities in the United States which are primarily consumer products, from July 1, 1994, through the Closing Date, determined in accordance with generally accepted accounting principles consistently applied by Seller. If the parties cannot agree, the net profit from the Consumer Product Business shall be determined by Arthur Andersen & Co. and shall be binding upon the parties. SECTION 3. REPRESENTATIONS AND ACKNOWLEDGMENTS OF PURCHASER AND SELLER. (1) Acknowledgement. Each of Purchaser and Seller acknowledge, for itself and for its successors and assigns, its shareholders and any other parties claiming through it, that officers and employees of each of Purchaser and Seller have had full opportunity to make investigation of the properties, books, records, financial accounts and files of the other party with respect to the transactions contemplated herein, and that each is satisfied with the form and content of the transactions contemplated by this Agreement. As a result of such opportunity and the knowledge and experience of the officers of Purchaser and Seller with respect to the business of Seller, there are no warranties and representations of Purchaser and Seller except as set forth in Section 3(2) and 3(3). (2) Seller's Representations. Seller represents and warrants to Purchaser that at Closing: (a) Seller will transfer the Shares to Purchaser free and clear of all liens, encumbrances or restrictions of any nature whatsoever except restrictions on transferability imposed by any applicable securities laws; (b) to the best knowledge of the Seller, the Shares will represent all of the issued and outstanding shares of capital stock of the Subsidiaries except directors' qualifying shares of the Subsidiaries; (c) there will be outstanding no options, warrants or other rights to acquire any shares of capital stock of the Subsidiaries (other than pursuant to this Agreement); and (d) Since January 1, 1994, no Subsidiary has or will have, (i) on the sole authority or with the sole signature of Philip Kives, entered into any agreement, contract or commitment of any nature whatsoever other than in the ordinary course of business, or (ii) to the knowledge of Philip Kives, transferred any assets, property or rights other than in the ordinary course of business and for fair value, subjected any assets, property or rights to any lien claim or encumbrance (other than license agreements entered into in the ordinary course of business), or taken any other action not in the ordinary course of business, except for the sale or discontinuance of its operations in France, New Zealand, Germany and/or Spain. (3) Purchaser's Representations. Purchaser represents and warrants to Seller that since January 1, 1994, no Subsidiary or Remaining Subsidiary has or will have, (i) on the sole authority or with the sole signature of Mickey Elfenbein, entered into any agreement, contract or commitment of any nature whatsoever other than in the ordinary course of business, or (ii) to the knowledge of Mickey Elfenbein, transferred any assets, property or rights other than in the ordinary course of business and for fair value, subjected any assets, property or rights to any lien claim or encumbrance (other than license agreements entered into in the ordinary course of business), or taken any other action not in the ordinary course of business, except for the sale or discontinuance of its operations in France, New Zealand, Germany and/or Spain. SECTION 4. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (1) Regulatory Approval. Regulatory approval for the consummation of the transactions contemplated hereby shall have been obtained from any governmental authority from which approval is required and all applicable statutory or other waiting periods shall have lapsed. The parties agree to use their best efforts to make any required filings and to obtain any regulatory approvals that are required by applicable law. (2) No Injunction. No injunction or other order entered by a court of competent jurisdiction shall have been issued and remain in effect which would prohibit or make illegal the consummation of the transactions contemplated hereby. (3) No Prohibitive Change of Law. There shall have been no law, statute, rule or regulation, domestic or foreign, enacted or promulgated which would prohibit or make illegal the consummation of the transactions contemplated hereby. (4) Tax Matters. Seller shall retain all consolidated net operating loss carryforwards after recognition of gain on the transaction contemplated hereby; provided that Seller and Purchaser make the tax election specified in Section 7(8) below to tax the transaction as if it was an asset sale. (5) Contemporaneous Closing. The closing of the transactions contemplated by the Stock Transfer and Loan Repayment Agreement bearing an even date with this Agreement among K-5 Leisure Products, Inc., the Purchaser and Mickey Elfenbein shall have occurred or be occurring contemporaneously with the Closing of the transactions contemplated by this Agreement. The conditions contained in Section 4 are inserted for the benefit of each of the Purchaser and the Seller and may be waived in whole or in part by the Purchaser or the Seller at any time, but a waiver by the Purchaser or the Seller, as the case may be, shall not constitute a waiver by the other. The Purchaser and the Seller each acknowledge that the waiver by the Purchaser or the Seller on the Closing Date of any condition or any part of any condition shall constitute a waiver only of such condition or such part of such condition, as the case may be, and shall not constitute a waiver of any covenant, agreement, representation or warranty made by the Purchaser or the Seller herein that corresponds or is related to such condition or such part of such condition, as the case may be. If any of the conditions contained in Section 4 are not fulfilled or complied with on the Closing Date, the Purchaser or Seller may, on or prior to the Closing Date, at its option, terminate this Agreement by notice in writing to the other party and in such event the Purchaser and Seller shall be released from all obligations under this Agreement, except for the obligations referred to in Section 12(1) and the rights arising under Section 11 with respect to breaches under this Agreement which occurred prior to termination. If such notice is not delivered on or prior to the Closing Date, then the condition, if not fulfilled or complied with, shall be deemed to have been waived by either of the Purchaser and the Seller. SECTION 5. CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing (unless otherwise specified), of each of the following conditions: (1) Covenant of Philip Kives. The Seller shall have delivered to the Purchaser a covenant of Philip Kives regarding employees substantially in the form of Section 9(3) and (4). (2) Board of Directors' Consent. Seller's board of directors shall have approved this Agreement and the transactions contemplated herein, and such approval shall have occurred on or prior to July 14, 1995. (3) Trademark Agreement. Seller shall have executed and delivered to Purchaser a tradename agreement (the "Trademark Agreement") for the use of Seller's tradenames and trademarks by Purchaser, in the form attached hereto as Exhibit C. (4) Opinion of Counsel to Seller. Purchaser shall have received an opinion dated the Closing Date from Kaplan, Strangis and Kaplan, P.A., counsel to Seller, based on customary reliance and subject to customary qualifications to the effect that: (a) Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota; (b) Seller has the corporate power to consummate the transactions on its part contemplated by this Agreement and the Trademark Agreement. Seller has taken all requisite corporate action to authorize this Agreement and the Trademark Agreement and this Agreement and the Trademark Agreement have been duly executed and delivered by Seller. Assuming it is the valid and binding obligation of Purchaser, this Agreement and the Trademark Agreement constitute the valid and binding obligation of Seller enforceable in accordance with its terms, subject as to the enforcement of remedies to applicable bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors generally and to judicial limitations on the enforcement of the remedy of specific performance; (c) The execution and delivery of this Agreement and the Trademark Agreement by Seller and the consummation of the transactions contemplated hereby will not constitute a breach, default or violation under the articles of incorporation or bylaws of Seller or, to their knowledge: (i) any agreement, arrangement or understanding to which Seller is a party; (ii) any license, franchise or permit affecting Seller; or (iii) any law, regulation, order, judgment or decree applicable to Seller. (d) No authorization, consent or approval of, or filing with, any public body, court or authority is necessary for the consummation by Seller of the transactions contemplated hereby which has not been obtained or made; (e) To their knowledge, there are no actions, proceedings or investigations pending or threatened against Seller which question the validity of the Agreement and the Trademark Agreement or the transactions contemplated thereby. (5) Receipt of Necessary Consents. On or before the Closing Date Purchaser shall have been furnished with written evidence satisfactory to it that Seller has obtained all necessary consents or approvals of third parties to any of the transactions contemplated hereby, the absence of which would either: (a) materially adversely affect Purchaser's rights hereunder, including without limitation consents to assignments of licenses to use intellectual property ; or (b) subject Purchaser to material potential liability. (6) No Adverse Litigation. There shall not be pending or threatened any action or proceeding by or before any court or other governmental body which shall seek to restrain, prohibit or invalidate the sale of the Shares to Purchaser or any other transaction contemplated hereby. (7) Adverse Changes. Since the date of execution of this Agreement, there shall not have occurred any development or event which would have a material adverse effect on the transactions contemplated hereby taken as a whole, except for the sale or discontinuance of operations in France, Germany, Spain and Portugal. (8) Financing. Purchaser shall have obtained a commitment for financing for payment of the Purchase Price and its working capital needs on terms satisfactory to Purchaser, on or before August 29, 1995. (9) Releases of Guaranties. The guaranty of K-tel International (USA), Inc. and Dominion Entertainment, Inc. to TCF Bank Minnesota fsb ("TCF Bank") of the obligations of K-tel, Inc. and the liens associated therewith shall have been released. (10) Performance of Obligations to be Performed At or Prior to Closing. Seller shall have performed all obligations required by this Agreement to be performed by it at or prior to the Closing Date. (11) Representations and Warranties. The representations and warranties of the Seller set forth in this Agreement and in any documents and agreements executed and delivered by the Seller to complete this will be true and accurate as of the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date and such representations and warranties shall be deemed to have been made on and as of the Closing Date. (12) Number of Shares. The Shares will represent all of the issued and outstanding shares of capital stock of the Subsidiaries except director's qualifying shares of the Subsidiaries. The conditions contained in this Section 5 are inserted for the exclusive benefit of the Purchaser and may be waived in whole or in part by the Purchaser at any time. The Seller acknowledges that the waiver by the Purchaser of any condition or any part of any condition shall constitute a waiver only of such condition or such part of such condition, as the case may be, and shall not constitute a waiver of any covenant, agreement, representation or warranty made by the Seller herein that corresponds or is related to such condition or such part of such condition, as the case may be. If any of the conditions contained in Section 5 are not fulfilled or complied with as herein provided, the Purchaser may, on or before the Closing Date, at its option, terminate this Agreement by giving notice in writing to the Seller within ten days after the date on which such condition was required to be fulfilled or complied with as herein provided and in such event the Purchaser and the Seller shall be released from all obligations under this Agreement except for the obligations referred to in Section 12(1) and the rights arising under Section 11 with respect to breaches under this Agreement which occurred prior to termination. If, on or before the Closing Date, such notice is not delivered by the Purchaser to the Seller within 10 days after the date on which such condition was required to be fulfilled or complied with, then the condition, if not fulfilled or complied with, shall be deemed to have been waived by the Purchaser. SECTION 6. CONDITIONS TO THE OBLIGATIONS OF SELLER The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions: (1) Covenant of Mickey Elfenbein. The Purchaser shall have delivered to the Seller a covenant of Mickey Elfenbein regarding employees substantially in the form of Section 9(3) and (4). (2) Certified Resolutions. Purchaser shall have delivered to Seller a copy of resolutions adopted by the Board of Directors of Purchaser authorizing the transactions contemplated by this Agreement, certified as of the Closing Date by a secretary or assistant secretary of Purchaser, on or before July 28, 1995. (3) Board of Directors' Consent. Seller's board of directors shall have approved this Agreement and the transactions contemplated herein, and such approval shall have occurred on or prior to July 14, 1995. (4) Shareholder Approval. This Agreement and the transactions contemplated hereby shall have been approved by the affirmative vote of the holders of the percentage of Seller's capital stock required for such approval under the provisions of the articles of incorporation and bylaws of Seller, at a meeting duly called for the purpose of considering such resolution, on or before the Closing Date. (5) Opinion of Counsel to Purchaser. Seller shall have received an opinion dated the Closing Date from Leonard Street & Deinard, based on customary reliance and subject to customary qualifications to the effect that: (a) Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota; (b) Purchaser has the corporate power to consummate the transactions on its part contemplated by this Agreement and the Trademark Agreement. Purchaser has taken all requisite corporate action to authorize this Agreement and the Trademark Agreement, and each of this Agreement and the Trademark Agreement has been duly executed and delivered by Purchaser. Assuming it is the valid and binding obligation of Seller, each of this Agreement and the Trademark Agreement constitutes the valid and binding obligation of Purchaser enforceable in accordance with its terms, subject as to the enforcement of remedies to applicable bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors generally and to judicial limitations on the enforcement of the remedy of specific performance; (c) The execution and delivery of this Agreement and the Trademark Agreement by Purchaser and the consummation of the transactions contemplated hereby and thereby will not constitute a breach, default or violation under the articles of incorporation or bylaws of Purchaser or, to their knowledge: (i) any agreement, arrangement or understanding to which Purchaser is a party; (ii) any license, franchise or permit affecting Purchaser; or (iii) any law, regulation, order, judgment or decree applicable to Purchaser. (d) No authorization, consent or approval of, or filing with, any public body, court or authority is necessary for the consummation by Purchaser of the transactions contemplated hereby which has not been obtained or made; (e) To their knowledge, there are no actions, proceedings or investigations pending or threatened against Purchaser which question the validity of the Agreement, the Trademark Agreement or the transactions contemplated thereby. (5) Receipt of Necessary Consents. On or before the Closing Date, Seller shall have been furnished with written evidence satisfactory to it that Purchaser has obtained all necessary consents or approvals of third parties to any of the transactions contemplated hereby, the absence of which would either: (a) materially adversely affect Seller's rights hereunder including, without limitation, the consents of the landlords to the subleases attached as Exhibits F and G; or (b) subject Seller to material potential liability. (6) No Adverse Litigation. There shall not be pending or threatened any action or proceeding by or before any court or other governmental body which shall seek to restrain, prohibit or invalidate the sale of the Shares by Seller or any other transaction contemplated hereby. (7) Fairness Opinion. On or before July 14, 1995 Seller shall have received an opinion from a recognized investment banking firm to the effect that the transactions contemplated by this Agreement are fair to Seller's stockholders from a financial point of view, and such opinion shall have been reaffirmed within five days prior to the Closing Date and shall not have been withdrawn as of the Closing. (8) Cancellation of Options. Seller shall have been furnished with evidence satisfactory to it that all options to purchase shares of the common stock of Seller held by Mickey Elfenbein have been surrendered and cancelled. (9) Release of Guaranties. The guaranty of Seller and K-tel, Inc. to TCF Bank of the obligations of Dominion Entertainment, Inc. and K-tel International (USA), Inc. shall have been released and any security agreements and pledge of the shares of K-tel, Inc. K-tel International (USA), Inc., and/or Dominion Entertainment, Inc. to securing its guaranty shall have been released. (10) Financing. The Purchaser shall have delivered to the Seller: (a) a written progress report from the party retained by the Purchaser to obtain financing for the Purchaser relating to the financing for the payment of the Purchase Price on or before July 28, 1995; (b) a second written progress report from the party retained by the Purchaser to obtain financing for the Purchaser relating to the financing for the payment of the Purchase Price on or before August 11, 1995; (c) written confirmation that the Purchaser has obtained a commitment for financing for payment of the Purchase Price and its working capital needs on terms satisfactory to the Purchaser on or before August 29, 1995. (11) Performance of Obligations to be Performed At or Prior to Closing. Purchaser shall have performed all obligations required by this Agreement to be performed by it at or prior to the Closing Date. (12) Representations and Warranties. The representations and warranties of the Purchaser set forth in this Agreement and in any documents and agreements executed and delivered by the Purchaser to complete this transaction are true and accurate as of the Closing Date with the same force and effect as though such representations and warranties had been made on the Closing Date, and such representations and warranties shall be deemed to have been made on and as of the Closing Date. The conditions contained in this Section 6 are inserted for the exclusive benefit of the Seller and may be waived in whole or in part by the Seller at any time. The Purchaser acknowledges that the waiver by the Seller of any condition or any part of any condition shall constitute a waiver only of such condition or such part of such condition, as the case may be, and shall not constitute a waiver of any covenant, agreement, representation or warranty made by the Purchaser herein that corresponds or is related to such condition or such part of such condition, as the case may be. If any of the conditions contained in Section 6 are not fulfilled or complied with as herein provided, the Seller may, on or before the Closing Date, at its option, terminate this Agreement by giving notice in writing to the Purchaser within ten days after the date on which such condition was required to be fulfilled or complied with, as herein provided, and in such event the Seller and the Purchaser shall be released from all obligations under this Agreement except for the obligations referred to in Section 12(1) and the rights under Section 11 with respect to breaches under this Agreement which occurred prior to termination. If, on or before the Closing Date, such notice is not delivered by the Seller to the Purchaser within 10 days after the date on which such condition was required to be fulfilled or complied with then, the condition, if not fulfilled or complied with, shall be deemed to have been waived by the Seller. SECTION 7. ADDITIONAL UNDERTAKINGS (1) Conduct of Business. Between the date hereof and the Closing Date, unless otherwise approved in writing by Purchaser, Seller shall use all commercially reasonable efforts to, and shall cause each of the Subsidiaries to use all commercially reasonable efforts to: (i) carry on its business in substantially the same manner as heretofore carried on; (ii) make normal accounting entries; (iii) preserve its business organization, keep available the services of present employees and preserve the good will of customers and others having business relationships with it; (iv) maintain and keep its properties and facilities in as good condition and working order as at present; (v) keep in full force and effect all insurance presently in effect, in the amounts now in effect, other than changes required in connection with renewals in the ordinary course of business; (vi) consult with Purchaser regarding all significant developments, transactions and proposals relating to the transactions contemplated hereby or the business or affairs of the Subsidiaries; (vii) not make any material change in compensation, benefits or other terms of employment of employees or retain any new employees other than replacement employees, unless such new employees have an annual salary of $50,000 or less; (viii) operate its businesses in the ordinary course, except for the sale or discontinuance of its operations in France, Germany, Spain and Portugal; (ix) not subject any assets, property or rights to any lien, claim or encumbrance of any nature whatsoever (other than licenses and similar agreements in the ordinary course of business); (x) not acquire or transfer any assets, property or rights other than in the ordinary course of business and for fair value; and (xi) not enter into any material agreement, contract or commitment of any nature whatsoever, or take any other action, other than in the ordinary course of business. If Seller seeks in writing the approval of Purchaser to a particular activity which may be inconsistent with the provisions of this Section 7, Purchaser must give its approval in writing or notify Seller of its disapproval within ten business days of receipt of the written request by Seller. If Seller does not receive approval or disapproval within such time period, Purchaser shall be deemed to have given approval. (2) Undertaking of President. The Purchaser shall cause Mickey Elfenbein to execute the letter agreement attached as Exhibit H, as of the date of this Agreement. (3) Assignments. (a) Between the date hereof and the Closing Date, the Purchaser and the Seller shall each assign or cause to be assigned the agreements, litigation and intellectual property listed in Exhibit D to the respective assignees referred to in Exhibit D. The agreement assigning the litigation shall contain the following terms: (i) the assignee shall have full control over all aspects of the litigation; (ii) all costs relating to the litigation shall be born by the assignee and the assignee shall be entitled to all awards and judgments from the litigation; (iii) the assignee shall indemnify the assignor from any liability and costs relating to the litigation; and (iv) the assignor shall cooperate in the defense or prosecution of the litigation if and when required by the assignee, at the expense of the assignee. (b) On Closing the Seller shall undertake to assign and to cause the Remaining Subsidiaries to assign to the Purchaser or its nominee, any assets of the Seller or the Remaining Subsidiaries used principally in connection with the business of the Subsidiaries; (c) On Closing the Purchaser shall undertake to assign and to cause the Subsidiaries to assign to the Seller or its nominee, any assets of the Purchaser or the Subsidiaries used principally in connection with the non-entertainment consumer product business of the Seller or the Remaining Subsidiaries in the United States except for the contract relating to the product known as the "pasta cooker" with Applied Development Corporation, including all rights to refund development costs. (4) Transition Services. The Purchaser and the Seller shall and shall cause the Subsidiaries and the Remaining Subsidiaries to provide each other with such transition administrative services as may be reasonably required to effect the orderly transfer of the Shares and the division of the operations of the Seller resulting from such transfer. (5) Subleases. At the Closing, the Purchaser and the Seller shall enter into Office and Warehouse Subleases in the form attached hereto as Exhibits F and G, subject to the consent of the landlords with respect to the premises being subleased. The Purchaser shall use commercially reasonable efforts to obtain the landlord's consent to such subleases. (6) TCF Loan. TCF Bank has made available a $2,000,000 revolving credit facility to K-tel International (USA), Inc. ("K-tel USA") and Dominion Entertainment, Inc. ("Dominion"), and a $3,000,000 revolving credit facility to K-tel, Inc. ("K-tel, Inc."). In connection with the facilities: (i) Seller has guaranteed the obligations of K-tel USA and Dominion to TCF Bank; (ii) K-tel USA and Dominion have guaranteed the obligations of K-tel, Inc. to TCF Bank; and (iii) Seller had pledged all of the outstanding stock of K-tel USA, Dominion and K-tel, Inc. to secure performance of its obligations under its guaranty. Seller and Purchaser shall make such arrangements mutually satisfactory to Seller and Purchaser to cause TCF Bank at or prior to Closing to: (a) release the pledge by Seller of the outstanding stock of K-tel, Inc., K-tel USA and Dominion and any other security agreements granted by the Seller or the Remaining Subsidiaries to TCF Bank; (b) release of guaranties by Seller and K-tel Inc. of the obligations of Dominion and K-tel USA to TCF Bank; and (c) release the guaranties of Dominion and K-tel USA of the obligations of K-tel, Inc. to TCF Bank. (7) Name Changes. Effective on or immediately after the Closing Date: (a) Purchaser shall change the names of K-tel International (USA), Inc. and K-tel Entertainment (Can) Inc. to such names as Purchaser may designate which do not include the name K-tel. Purchaser acknowledges that it shall have a right to use such names only to the extent provided in the Trademark Agreement; (b) Seller shall cause Simitar Entertainment Inc.: (i) to transfer the right to use the name "Simitar" in Canada to Purchaser or a wholly-owned subsidiary of Purchaser designated by Purchaser pursuant to the agreement attached hereto as Exhibit E (the "Simitar Name Agreement"); and (ii) change its corporate name to a name which does not include the word "Simitar". (8) Tax Election. Seller and Purchaser shall make an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to have the sale of the Shares sold pursuant to this Agreement taxed as if it was an asset sale. (9) Best Efforts. The Seller and the Purchaser shall each use their best efforts to cause the conditions set forth in Sections 4, 5 and 6 to be satisfied on a timely basis. (10) Record License Agreement. At the Closing the Purchaser shall cause Dominion Entertainment Inc. to enter into the Record License Agreement attached hereto as Exhibit I. SECTION 8. CLOSING DATE AND CLOSING PROCEDURES. (1) Closing Date. Subject to the terms and conditions set forth in this Agreement, the closing shall take place at the offices of Kaplan, Strangis and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, at 10:00 a.m. on October 16, 1995, or at such other time, date or place as to which the parties hereto may mutually agree (for the purposes of this Agreement, such event is referred to as the "Closing" and such date and time are referred to as the "Closing Date"). (2) Purchaser's Closing Documents. At the Closing, Purchaser shall deliver to Seller: (a) The Purchase Price required by Section 2 hereof in immediately available funds; (b) A certified copy of the resolutions of the Board of Directors of Purchaser required by Section 6(2); (c) The opinion of counsel to the Purchaser required by Section 6(4); (d) Evidence of the surrender and cancellation of certain stock options required by Section 6(8); (e) The release of guaranty contemplated by Section 6(9); (f) An incumbency certificate signed by a duly authorized officer of Purchaser containing specimen signatures in respect of Purchaser's incumbent officers; (g) Copies of the Articles of Incorporation and Bylaws of Purchaser, certified by the Secretary or Assistant Secretary of Purchaser as being true, correct and complete copies thereof; (h) A current certificate of good standing for Purchaser from the Minnesota Secretary of State; (i) The Trademark Agreement executed by Purchaser; (j) The documents necessary to effect the name changes referred to in Section 7(7)(a); (k) The resignation of Mickey Elfenbein as an officer, director and employee of the Seller and the Remaining Subsidiaries; (l) Agreement terminating the consulting agreement dated January 1, 1986 between the Seller and Elex Resources, Inc.; (m) A certificate confirming that the Purchaser has fulfilled or complied with all of the covenants required to be performed by it under this Agreement; (n) The undertaking referred to in Section 7(3)(c); (o) The subleases attached as Exhibit G and H; (p) The releases referred to in subsection 5(11);and (q) The record license agreement attached as Exhibit I executed by Dominion Entertainment Inc. (3) Seller's Closing Documents. At the Closing, Seller shall deliver to Purchaser: (a) Certificates representing all of the Shares, duly endorsed for transfer or accompanied by duly executed assignments separate from certificate, and such other instruments of transfer as may be necessary to assign, transfer and convey to Purchaser the assets to be transferred to it pursuant to this Agreement; (b) The approvals of the Board of Directors of Seller required by Section 5(2) hereof; (c) Evidence of the approval of the shareholders of Seller required by Section 6(3) hereof; (d) The opinion of counsel to the Seller required by Section 5(4) hereof; (e) The documents necessary to complete the name change described in Section 7(7)(b); (f) An incumbency certificate signed by a duly authorized officer of Seller containing specimen signatures in respect of Seller's incumbent officers; (g) Copies of the Articles of Incorporation and Bylaws of Seller, certified by the Secretary or Assistant Secretary of Seller as being true, correct and complete copies thereof; (h) A current certificate of good standing for Seller from the Minnesota Secretary of State; (i) The Trademark Agreement executed by Seller; (j) The Simitar Name Agreement executed by Simitar Entertainment Inc.; (k) The resignation of Philip Kives as an officer and director of each of the Subsidiaries; (l) A certificate confirming that the Seller has fulfilled or complied with all of the covenants required to be performed by it under this Agreement; (m) The undertaking referred to in Section 7(3)(b); (n) The subleases attached as Exhibit G and H; and (o) The releases referred to in Subsection 6(9). (4) Intercompany Accounts. The parties shall cause the net amount of intercompany accounts owing from or due to the Subsidiaries to or by K-tel and the Remaining Subsidiaries to be paid to Seller or Purchaser, as the case may be, at Closing. (5) Letters of Credit. If any of the Subsidiaries have outstanding on the Closing Date any letters of credit for products or goods ordered by or for Seller or the Remaining Subsidiaries, Seller shall provide cash collateral to secure the reimbursement obligations upon a draw of such letters of credit. SECTION 9. EMPLOYEES OF PURCHASER AND SELLER. (1) Designated Employees. On or before the Closing Date, the Seller shall deliver to the Purchaser a list of employees who will be employed by the Seller (the "Seller's Designated Employees"). The Seller's Designated Employees shall not include the employees referred to in the list of protected personnel dated May 22, 1995, provided by the Purchaser to the Seller or Jeffrey Koblick and shall include the list of employees dated June 15, 1995 provided by the Seller to the Purchaser. The employees of the Seller, the Subsidiaries and the Remaining Subsidiaries, other than the Seller's Designated Employees and Jeffrey Koblick, will become the employees of the Purchaser on the Closing Date (the "Purchaser's Designated Employees"). Notwithstanding the foregoing, the Seller shall give written notice to the Purchaser on or before August 14, 1995 if the Seller intends to include Bruce Feinstein as one of the Seller's Designated Employees. (2) Assumption of Benefits. After Closing, each of Seller and Purchaser shall assume all accrued vacation and other compensation or fringe benefits incurred in the ordinary course of business and outstanding at Closing and owing from and after the Closing Date (other than employee stock options on Seller's stock which shall be governed by their terms) for their respective Designated Employees . (3) No Solicitation of Employees. For a period of two years following the Closing Date, each of Purchaser and Seller agree that it will not, for whatever reason, directly or indirectly, on its own behalf or on behalf of or through itself or any entity controlling it, controlled by it or under common control with it or related to its principal shareholder or by or on behalf of any entity providing services to it or to any entity or related to its principal shareholder controlled by it or under common control with it or related to its principal shareholder, employ (directly or indirectly as a consultant or otherwise) solicit, divert or hire away, or in any manner attempt to employ (directly or indirectly as a consultant or otherwise) solicit, divert or hire away to itself or to such related entity any person who is a Designated Employee of the other party. (4) No Employment of Former Employees. For a period of two years following the Closing Date, each of Purchaser and Seller agree that it will not, for whatever reason, directly or indirectly, on its own behalf or on behalf of or through itself or any entity controlling it, controlled by it or under common control with it or related to its principal shareholder or by or on behalf of any entity providing services to it or to any entity or related to its principal shareholder controlled by it or under common control with it or related to its principal shareholder, employ or otherwise retain the services (directly or indirectly as a consultant or otherwise) of any person who was an employee of the other party or any of its subsidiaries at any time within six months prior to such employment or retention of such person, other than Jeffrey Koblick. SECTION 10. TERMINATION (1) Events of Termination. This Agreement may be terminated: (a) by either Purchaser or Seller, if any of the conditions set forth in Section 4 have not been satisfied or waived in writing on or before the Closing Date, provided that, in accordance with Section 4, the Purchaser or the Seller gives written notice to terminate this Agreement to the other parties prior to the Closing Date; (b) by the Seller, if any of the conditions set forth in Section 6 have not been satisfied or waived in writing on or before the date on which such condition is required to be satisfied, provided that in accordance with Section 6, on or before the Closing Date, the Seller gives written notice to terminate this Agreement to the Purchaser within ten days after the date on which such condition was required to be fulfilled or complied with as set forth in Section 6; (c) by the Purchaser if any of the conditions set forth in Section 5 have not been satisfied or waived in writing on or before the date on which such condition is required to be satisfied, provided that in accordance with Section 5, on or before the Closing Date, the Purchaser gives written notice to terminate this Agreement to the Seller within ten days of the date on which such condition was required to be fulfilled or complied with as set forth in Section 5; (d) by either Purchaser or Seller, if the Closing Date is not on or before November 30, 1995 (unless the failure shall be due to the action or failure to act of the party seeking to terminate this Agreement in breach of such party's obligations under this Agreement); (e) by Seller, if: (i) any corporation, partnership, person, other entity or group, as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act") (other than Purchaser or any affiliate of Purchaser) (a "Person"), shall have commenced (as such term is used in Rule 14d-2(b) under the 1934 Act) a bona fide tender offer for all outstanding shares of Seller's common stock or any Person shall have made a bona fide written offer involving a merger or consolidation of Seller or the acquisition of all or substantially all of its assets; (ii) Seller's Board of Directors shall determine, after consultation with Seller's independent financial advisors, that such offer is a material economic improvement to the Seller's shareholders when compared to the transactions contemplated by this Agreement; and (iii) Seller's Board of Directors determines upon the advice of its legal counsel that if they failed to recommend such offer or accept such proposal then such failure would be likely to result in a breach of the directors' fiduciary or legal duties, provided that Seller may not terminate the Agreement pursuant to this paragraph until the expiration of five (5) business days after written notice of any such offer or proposal referenced in this paragraph has been delivered to Purchaser, together with a summary of the terms of any such offer or proposal. (f) by Purchaser if, after the date hereof, any Person shall have commenced (as such term is used in Rule 14d-2(b) under the Act) a bona fide tender offer or exchange offer to acquire at least 25% of the then outstanding shares of Seller's common stock and thereafter Seller's Board of Directors shall have withdrawn or materially adversely modified or changed its recommendation of this Agreement to Seller's shareholders. (2) Effect of Termination. In the event this Agreement is properly terminated as provided in Subsection 10(1), then, subject to Subsection 10(3), this Agreement shall be void and have no further force or effect and each of the parties shall be released from all obligations set forth in this Agreement, subject to Subsection 12(1) and the rights arising under Section 11 with respect to breaches under this Agreement which occurred prior to termination. (3) Willful Breach. If this Agreement is terminated by reason of a willful breach by a party, then the breaching party shall be liable to the non-breaching party for all actual, consequential and incidental damages suffered by the non-breaching party arising from such willful breach. (4) Equitable Relief. Notwithstanding anything in this Agreement to the contrary and except as provided below, the parties hereto agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. SECTION 11. INDEMNIFICATION. (1) Indemnification by Seller. Seller agrees to indemnify and hold harmless Purchaser, the Subsidiaries and their respectively officers, directors, employees and agents from, against and in respect of: (a) Any and all losses, liabilities, expenses or damages incurred or suffered by Purchaser or any of the Subsidiaries as a result of any and all untrue representations, breaches of any warranty or nonfulfillment of any covenant by Seller made or contained in this Agreement; (b) Any and all losses, liabilities, expenses or damages incurred or suffered from or after the Closing Date by Purchaser or any of the Subsidiaries by reason of consumer products sold by Seller, the Subsidiaries or the Remaining Subsidiaries prior to the Closing Date; (c) Any and all losses, liabilities, expenses or damages arising with respect to any litigation, agreements, intellectual property or assets assigned to the Seller pursuant to Section 7(3) of this Agreement; and (d) The reasonable costs and expenses incident to any and all actions, suits, proceedings, claims, demands, assessments or judgments in respect of any matter for which Purchaser or any of the Subsidiaries is indemnified under Section 11(1)(a), (b) or (c) above, including legal and accounting fees and expenses. (2) Indemnification by Purchaser. Purchaser agrees to indemnify and hold harmless Seller, the Remaining Subsidiaries and their respective officers, directors, employees or agents from, against and in respect of: (a) Any and all losses, liabilities, expenses or damages incurred or suffered by Seller or any of the Remaining Subsidiaries as a result of any breaches of any covenant by Purchaser made or contained in this Agreement; (b) Any and all losses, liabilities, expenses or damages incurred or suffered from or after the Closing Date by Seller or any of the Remaining Subsidiaries by reason of entertainment products sold by Seller, the Subsidiaries or the Remaining Subsidiaries prior to the Closing Date; (c) Any and all losses, liabilities, expenses or damages arising with respect to any litigation, agreements, intellectual property or assets assigned to the Purchaser pursuant to Section 7(3) of this Agreement; and (d) The reasonable costs and expenses incident to any and all actions, suits, proceedings, claims, demands, assessments or judgments in respect of the matter for which Seller is indemnified under Section 11(2)(a), (b) or (c) above, including legal and accounting fees and expenses. (3) Procedures Concerning Claims for Indemnification. If any third party shall assert a claim, action or proceeding (a "Claim") against a party entitled to indemnification under this Section 11 (the "Indemnified Party"), the Indemnified Party shall give prompt written notice thereof to the party obligated to provide indemnification (the "Indemnifying Party") and the Indemnifying Party: (a) may assume the defense of such Claim; (b) shall have the right to retain counsel reasonably acceptable to the Indemnified Party to represent to the Indemnified Party; and (c) shall pay all costs and expenses relating to the defense of the Claim, including attorneys fees. The failure to give such written notice of a Claim shall not affect the Indemnified Party's ability to seek reimbursement unless such failure has materially and adversely affected the Indemnifying Party's ability to defend successfully the Claim. In any proceeding for such Claim, the Indemnified Party shall have the right to participate in the defense thereof and be represented, at its own expense, by counsel to be selected by the Indemnified Party, unless both the Indemnified Party and the Indemnifying Party are named parties in any such proceeding and counsel to the Indemnified Party shall advise the Indemnified Party that representation of both the Indemnified Party and the Indemnifying Party would be inappropriate under the rules of professional conduct, in which case the Indemnifying Party shall reimburse the Indemnified Party for the reasonable fees and expenses of the Indemnified Party's separate counsel; provided, however, that, in any event, the Indemnified Party agrees not to settle a claim without the Indemnifying Party's prior written consent which consent shall not be unreasonably delayed, withheld or conditioned. The Indemnifying Party agrees not to settle any Claim without the prior written consent of the Indemnified Party if such settlement would have an effect on the Indemnified Party and the Indemnified Party shall not unreasonably condition, delay or withhold its consent. If the Indemnified Party unreasonably conditions, delays or withholds its consent, then the Indemnifying Party: (i) shall be excused from any obligation to continue such defense; (ii) shall be excused from any further costs and expenses for such defense; and (iii) shall be obligated to indemnify the Indemnified Party for the lesser of: (A) the amount of such proposed settlement; or (B) the Indemnified Party's liability with respect to such Claim (including reasonable costs and expenses incurred by the Indemnified Party in pursuing the defense of such Claim) as determined by a court of competent jurisdiction or pursuant to a negotiated settlement. The Indemnified Party may settle any claim without the Indemnifying Party's prior written consent if such settlement does not affect the Indemnifying Party. If the Indemnifying Party shall, within twenty (20) days after notice of Claim by the Indemnified Party as provided above, fail to notify the Indemnified Party that it will assume the defense of such Claim, then the Indemnified Party shall have the right, but not the obligation, to undertake the defense of, and compromise or settle (exercising reasonable business judgment), the Claim or other matter on behalf of, for the account of and at the risk of the Indemnifying Party. SECTION 12. MISCELLANEOUS (1) Expenses. The expenses of the transactions contemplated hereunder, including income taxes, legal, accounting, investment banking and appraisal fees, if any, shall be borne by the party incurring the expense, whether or not the transactions contemplated under this Agreement shall be consummated, except that: (a) one-half of the legal fees and disbursements of Kaplan, Strangis and Kaplan and the accounting fees and disbursements of Arthur, Andersen & Co. expenses incurred by the Seller in connection with the transactions referred to in this Agreement up to April 17, 1995, shall be paid by the Purchaser; and (b) each of the Seller and the Purchaser shall pay one-half of the costs incurred to retain Arthur Andersen & Co. to determine the amounts referred to in Section 2(1)(b) and Section 2(2)(a). (2) Brokers' Commissions. Each party will indemnify and hold the other harmless from the commission, fee or claim of any person, firm or corporation employed or retained or claiming to be employed or retained by such party to bring about or to represent it in the transactions contemplated hereby. (3) Waiver. No term or provision hereof will be considered waived by either party, and no breach excused by either party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted. No consent by either party to, or waiver of, a breach by either party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different or subsequent breach by either party. (4) Severability. If any part of this Agreement is found to be invalid or unenforceable, that part will be amended to achieve as nearly as possible the same economic effect as the original provision and the remainder of this Agreement will remain in full force and effect. (5) Choice of Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Minnesota as applied to agreements entered into and to be performed entirely within Minnesota between Minnesota residents. (6) Choice of Forum. Subject to Section 12(10) below, the parties hereby submit to the jurisdiction of and waive any venue objections against, the United States District Court for the District of Minnesota and the trial courts of the State of Minnesota, in any litigation arising out of the Agreement or the Trademark Agreement and each party hereby consents to the personal jurisdiction of such courts for purposes of this Agreement, including entry or enforcement of any arbitration award or judgment. (7) Notices. Any notice provided for or permitted under this Agreement will be treated as having been given when: (i) delivered personally; (ii) sent by confirmed telex or telecopy; (iii) sent by commercial overnight courier with written verification or receipt; or (iv) received postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth below, or at such other place of which the other party has been notified in accordance with the provisions of this Section 12. If to Purchaser: Simitar, Inc. 2605 Fernbrook Lane North Minneapolis, Minnesota 55447-4736 Attn.: Mickey Elfenbein Fax: (612) 559-6885 with a copy to: Leonard Street & Deinard 150 South Fifth Street Minneapolis, Minnesota 55402 Attn.: Stephen DeRuyter Fax: (612) 335-1657 If to a Seller: K-tel International, Inc. Suite O, 2605 Fernbrook Lane North Minneapolis, Minnesota 55447-4736 Attn.: Philip Kives, Chairman Fax: (612) 559-6815 with a copy to: Kaplan, Strangis and Kaplan, P.A. 5500 Norwest Center 90 South Seventh Street Minneapolis, Minnesota 55402 Attn: Ralph Strangis Fax: (612) 375-1143 (8) Entire Agreement. This Agreement, including all Exhibits to this Agreement, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations and agreements, whether written or oral. (9) Amendment. This Agreement may be amended or supplemented only by a writing that refers explicitly to this Agreement, and that is signed on behalf of both parties. (10) Arbitration. Any claim, dispute or controversy arising out of or in connection with or relating to this Agreement or the Trademark Agreement or the breach or alleged breach thereof shall be submitted by the parties to arbitration by the American Arbitration Association ("AAA") in the City of Minneapolis, Minnesota, under the commercial rules then in effect for the Association except as provided herein. A transcribed record shall be prepared. The AAA shall recommend three (3) arbitrators who are knowledgeable in the field in dispute. The parties shall agree upon one (1) of the three within twenty (20) days. If no arbitrator is mutually agreed upon, the AAA shall make such appointment within thirty (30) days of such failure. Each party shall have the right to request the arbitrator to order reasonable and limited discovery. The award rendered by the arbitrator shall include costs of arbitration, reasonable attorneys' fees and reasonable costs for expert and other witnesses, but shall not include punitive damages against either party. Judgment on such award may be entered as provided in paragraph (6) of this Section 12, provided that nothing in this paragraph (10) shall be deemed as preventing either party from seeking relief from the courts as necessary to protect either party's name, proprietary information, trade secrets, know-how or any other appropriate provisional remedy. (11) Currency. All dollar amounts referred to in this Agreement are expressed in United States funds. (12) Survival. Sections 7(3), 7(4), 7(6), 7(7), 9, 11, 12(1), 12(2) and 12(10) will survive the Closing of this Agreement. (13) Assignment. This Agreement may not be assigned except with the prior written approval of the other party, which approval shall not be unreasonably withheld. Except as so provided, this Agreement shall be binding upon and inure to the benefit of Purchaser and Seller and their respective successors. (14) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. PURCHASER: SIMITAR, INC. By: /s/ Mickey Elgenbein SELLER: K-TEL INTERNATIONAL, INC. By: /s/ Raymond Kives Chairman EXHIBIT A DESCRIPTION OF ACQUIRED SUBSIDIARIES K-tel International (USA), Inc. Dominion Entertainment, Inc. U.S. Distribution Services, K-tel Entertainment (CAN) Inc. K-tel International Finland OY K-tel International (FRANCE) SARL Dominion Vertriebs, GmbH K-tel Ireland Ltd. K-tel International (SPAIN) SL K-tel Entertainment (UK), Ltd. K-tel International (Sweden) AB K-tel Ireland (Exports) Ltd. K-tel International GmbH EXHIBIT B METHOD OF CALCULATION OF THE REMAINING ASSETS VALUE Assets All assets shall be valued at actual book value calculated in accordance with generally accepted accounting principals, consistently applied as at the Closing Date, except as follows: Inventory 1. The Inventory referred to in Schedule 1 (the "Slow Inventory") shall be valued at the amounts referred to in Schedule 1 (the "Schedule Value"). The value of the Slow Inventory shall be adjusted as follows: (a) If, on the first anniversary of the Closing Date (the "First Anniversary Date"), the aggregate proceeds of sale from the Slow Inventory from and after May 17, 1995, is less than the aggregate Schedule Value of all Slow Inventory, then the Purchaser shall pay to the Seller an amount equal to the lesser of: (i) the difference between the aggregate Schedule Value of all Slow Inventory, and the aggregate proceeds of sale of the Slow Inventory as at the First Anniversary Date; and (ii) $400,000. (b) If, on the First Anniversary Date, the aggregate proceeds of sale of the Slow Inventory from and after May 17, 1995 is greater than the aggregate Schedule Value of all Slow Inventory, then the Seller shall pay to the Purchaser an amount equal to all profits earned on the sale of the Slow Inventory as of the First Anniversary Date. 2. For the purposes of subsection 1(b) of this Exhibit B, the term "profit" means the proceeds of sale of the Slow Inventory minus the aggregate of: (a) the Schedule Value of all of the Slow Inventory; (b) 8% of the proceeds of sale of the Slow Inventory sold; and (c) all commissions paid to third parties on the sale of Slow Inventory sold. 3. The Seller shall not sell: (a) any products known as the "pasta cooker" at a price lower than 90% of its Schedule Value prior to September 1, 1996; and (b) any other Slow Inventory at a price lower than the Schedule Value prior to the First Anniversary Date' unless the prior consent of the Purchaser has been obtained. 4. Prior to the First Anniversary Date, the Purchaser shall be entitled to purchase all or any part of the unsold Slow Inventory from time to time at a price equal to the value of such inventory referred to in Schedule 1. 5. The Purchaser shall have a right of first refusal on the sale of all Slow Inventory , at a price and on terms such Slow Inventory would otherwise be sold to a third party, prior to the First Anniversary which right of first refusal shall be exercised within 24 hours of receipt of written notice of a proposed sale of Slow Inventory. 6. The Purchaser shall be entitled to inspect the records of the Seller relating to the sale of Slow Inventory at the premises of the Seller during normal business hours. The Purchaser shall be entitled to conduct such inspections once each quarter prior to the first anniversary of the First Anniversary Date. The Purchaser shall give the Seller ten days prior written notice of the inspection. The Purchaser shall treat such information disclosed during such inspection as confidential and shall not use it for any purpose other than to verify the payments required to be made by the Seller under this Agreement, or disclose it to any third party. 7. There shall be no obsolescence reserve with respect to inventory. Property and Equipment 8. Property and equipment shall be valued at $68,900 as shown on Schedule 2. Goodwill, Etc. 9. Goodwill and other intangibles shall be valued at zero. Net Operating Losses 10. Net operating losses shall be valued at zero. Liabilities 11. All liabilities shall be paid or assumed by the Purchaser prior to the Closing Date, except for accrued royalties payable to the Seller, K-tel International Ltd. or any of their related corporations, which shall be paid prior to Closing, and the following, which shall be valued at actual book value calculated in accordance with generally accepted accounting principals consistently applied as at the Closing Date: (a) Return Reserves; (b) Intercompany Debt owed to the Seller, the Remaining Subsidiaries or any corporation related to Philip Kives. 12. All intercompany debt between the Subsidiaries on the one hand, and the Seller and the Remaining Subsidiaries, on the other hand, shall be paid at the Closing. EXHIBIT "B" SCHEDULE 1 ---------- K-TEL CONSUMER PRODUCTS LIST OF SLOW INVENTORY
ITEM CODE PRODUCT DESCRIPTION UNITS VALUE FINISHED GOODS 485680314 1-TOUCH COMBO 8" & 10" 2,545 $ 39,931 485680330 TWIST 'N SKI 5 102 485680331 FIRM FLEX 85 5,525 1111100070 SLICE-O-MATIC - SPANISH 6,600 0 1111180082 AEROBI-SLIDE - SPANISH 1,490 8,419 2277500048 MIRACLE KLEEN 42 0 2277500060 FORMULA 7 168 0 2277500082 POWER CUTTER 787 938 2277501013 MINI M BRUSH/SKIN PK 222 0 2277501160 MIRACLE ROLLER 7,496 0 2277504270 GOLF KING MS 168 0 2277508960 DRY COOKER 13,226 33,950 2277508970 MINI FISHERMAN MS 846 0 2277580011 2 PIECE FOOD STORAGE 3,423 0 2277580014 SCRAPPY SCRUBBER BRI 2,822 0 2277580015 SCRAPPY SCRUBBER PUF 3,863 0 2277580016 4 PIECE FOOD STORAGE 32 0 2277580017 3 PIECE FOOD STORAGE 485 0 2277580023 SERVE-N-STORE BOWLS 158 0 2277580025 CELESTIAL NAVIGATION 20 0 2277580027 CONWAY TWITTY-EARLY 3,194 0 2277580030 SCRAPPY SCRUBBER 7,777 0 2277580032 RAIN GUARD 79 0 2277580036 WOOD BROTHERS VHS VIDEO 7 0 2277580037 MICRO STEAM COOKER 5,606 17,943 2277580044 FASHION DAZZLER 736 0 2277580048 ROTOFLEX IN INDIVIDUAL 2,951 23,724 2277500049 THE CLAW 7 0 2277580057 ROTOFLEX SYSTEM 2,582 21,954 2277580058 ROTOFLEX BUFFING PAD SET 5,729 11,377 2277580059 ROTOFLEX COARSE DISC SET 3,138 3,664 2277580061 ROTOFLEX MEDIUM DISC SET 3,116 3,449 2277580062 ROTOFLEX FINE DISC SET 3,148 3,485 2277580063 ROTOFLEX VERY FINE D SET 4,310 4,791 2277580064 ROTOFLEX VERY FINE W SET 4,299 4,197 2277580069 THIGH TONER BULK 15 0 2277580076 FLEX BOARD 2,130 1,387 2277580077 KLEENSILVER 304 615 2277580079 FOREVER SHARP KNIFE 4,716 20,515 2277580080 THIGH TONER PACKAGED 11,993 67,671 2277580081 POWER STEPPER 123 0 2277580082 AEROBI-SLIDE 1,363 7,693 2277580083 AEROBI-SLIDE BOOTIES 88 0 2277580085 25 IN 1 WONDER TOOL 3,832 21,804 2277580087 ROTO STRIP 3,280 12,005 2277580089 KLEENSILVER REFILL 2,789 3,930 2277580100 FAMILY SIZE MICRO STEAM 2,783 14,110 2277580101 BUTTONMATE 2,088 2,694 2277580107 25 IN 1 WONDER TOOL 4,069 24,170 2277580109 LOBSTER LAB 2,293 48,595 2277580111 MULTI KLEENER MOP 60 390 2277580115 MULTI KLEENER REPLACEMENT 27 81 2277580118 VAC-U-SAVE 2,658 16,975 2277580119 LOBSTER LAB CAVE 4 88 2277580125 AMBERGUARD SUNGLASSES 2,484 2,409 2277580195 SRX-11 29,574 92,501 2277580198 PASTA MAKER 24,701 796,768 2277580206 PUMP 'N SEAL 8 0 2277580251 BUTTONMATE ACCESSORIES 3 0 2277580601 MOTOBRELLA MS 7 0 8255100096 AEROBI-SLIDE FRENCH/ENG 2,310 0 $1,317,850 PARTS 2277501200 POWER CUTTER DISPLAY 497 $ 0 485680303001 BULK 1-TOUCH 8" ADJUST 2,455 17,406 485680303002 1-TOUCH 8" ADJUST WR 1,000 40 485680304001 BULK 1-TOUCH 10" ADJUST 2,455 20,303 485680304002 1-TOUCH 10" ADJUST WR 1,000 40 485680314001 COMBO 8" & 10" ADJ WR 205 61 2277500070005 SLICE-O-MATIC CORRUG 825 0 2277500070006 SLICE-O-MATIC 12 PAC 745 0 2277500070007 SLICE-O-MATIC 24 PAC 135 0 2277500070009 SLICE-O-MATIC D/O PROD 6,490 0 2277500070011 SLICE-O-MATIC GRATE 3,190 0 2277500070012 SLICE-O-MATIC BASE M 1,141 0 2277500070013 SLICE-O-MATIC TEND 2,960 0 2277500070016 SLICE-O-MATIC PIZZA 5,640 0 2277500070017 SLICE-O-MATIC SPANISH 3,400 0 2277500070018 SLICE-O-MATIC ENG/SP 416 0 2277501007112 12 MASTER MIR BRUSH BOXED 2,260 0 2277501010006 FLAT HEAD OVAL MIR BRUSH 14,106 0 2277501010007 FOAM PAD / MIRACLE BRUSH 210,000 0 2277501010008 MIRACLE BRUSH CLOTH 34,560 0 2277501010112 12 MASTER/MIR BRUSH (OBS) 273 0 2277501012002 MIRACLE BRUSH SKIN C 2,080 0 2277501012106 6 MASTER/MIRACLE BRUSH 5,175 0 2277501012112 12 MASTER/SKIN MIR BRUSH 2,598 0 ITEM CODE PRODUCT DESCRIPTION UNITS VALUE 2277501013003 MINI MIRACLE BRUSH 3,716 0 2277501013112 12 MASTER/M MIR BR SKIN M 1,474 0 2277501130001 MIRACLE SWEEPER INDI 4,070 0 2277511130002 MIRACLE SWEEPER INSERT 750 0 2277501130006 MIRACLE SWEEPER POLY 283 0 2277501130007 MIRACLE SWEEPER TOP 211 0 2277501130008 MIRACLE SWEEPER BOTTOM 950 0 2277501150004 MIRACLE ROLLER SKIN 3,120 0 2277508960001 DRY COOKER CARTONS 420 0 2277508960001 DRY COOKER PART 150 0 2277580057001 ROTOFLEX METAL CLAMP 4,500 10,301 2277580057002 ROTOFLEX FLEXIBLE DI 50 102 2277580057003 ROTOFLEX VELCRO PADS 3,924 2,819 2277580057004 ROTOFLEX INSTRUCTION 21,464 0 2277580057005 ROTOFLEX WARRANTY CARDS 19,564 0 2277580057006 ROTOFLEX TRAY MS 10,100 1,256 2277580057007 ROTOFLEX INDIVIDUAL 10,760 4,775 2277580057008 ROTOFLEX 4 PACK MAST 3,741 1,283 2277580057009 ROTOFLEX SINGLE MAI 1,280 211 2277580057010 ROTOFLEX RE-ORDER FORM 43,364 0 2277580057011 ROTOFLEX ALLEN WRENCH 14,739 0 2277580057012 ROTOFLEX BLISTER CARDS 2,869 648 2277580057013 ROTOFLEX BLISTER CARDS 1,250 282 2277580057014 ROTOFLEX BLISTER CARDS 1,749 395 2277580057015 ROTOFLEX BLISTER CARDS 2,867 647 2277580057016 ROTOFLEX BLISTER CARDS 2,763 624 2277580057017 ROTOFLEX BLISTER CARDS 1,250 282 2277580057018 ROTOFLEX PLASTIC FOR SANDING 44 5 2277580057019 ROTOFLEX PLASTIC FOR BUFFING 2,119 246 2277580076001 FLEXBOARD MASTER CARTON 410 0 2277580056002 HOOK TABS FOR FLEXBOARD 6,000 0 2277580076003 FLEXBOARD 4 COLOR SH 17,025 0 2277580077004 KLEENSILVER RE-ORDER 3,515 0 2277580077012 KLEENSILVER MEASURING 3,415 171 2277580077013 KLEENSILVER 32 OZ BOX 1,996 812 2277580077014 KLEENSILVER MASTER 100 0 2277580077015 KLEENSILVER REFILL MASTER 399 150 2277580077016 KLEENSILVER 32 OZ IN 2,289 168 2277580077017 KLEENSILVER ALUMINUM 1,600 0 2277580077018 KLEENSILVER INDIVIDUAL 3,450 0 2277580077019 KLEENSILVER REFILL 6,750 1,701 2277580080001 THIGH TONER PURPLE T 27,472 9,718 2277580080003 THIGH TONER SPRINGS 13,897 1,499 2277580080004 THIGH TONER INSERTS 5,972 961 2277580080005 THIGH TONER 10 X 5/8 35,816 408 2277580080006 THIGH TONER 10-24 1 4,186 32 2277580080007 THIGH TONER 10-24 HE 5,553 30 2277580080008 THIGH TONER #10 WASHER 3,350 6 2277580080009 THIGH TONER 5/16 WASHER 39,937 281 2277580080010 THIGH TONER PIVOT SL 5,206 798 2277580080011 THIGH TONER CAPS MS 2,022 284 2277580080012 THIGH TONER SLEEVES 14,132 3,180 2277580080015 THIGH TONER BASES MS 13,932 1,428 2277580080016 THIGH TONER COVERS M 10,962 1,124 2277580080022 THIGH TONER LABELS 1,872 108 2277580080023 THIGH TONER INSTRUCTIONS 8,500 0 2277580080024 THIGH TONER 6 PACK MASTER 1,156 1,138 2277580080025 THIGH TONER RETAIL BOX 5,472 3,241 2277580080100 THIGH TONER MAILER M 5,000 0 2277580082001 AEROBI-SLIDE / DIE CUT 250 0 2277580082002 AEROBI-SLIDE / RUBBER 8 2,260 0 2277580082003 AEROBI-SLIDE / END SETS 4,536 0 2277580082005 AEROBI-SLIDE / BOOTIES 33,772 0 2277580082011 AEROBI-SLIDE / INSTRUCTIONS 1,875 0 2277580082012 AEORBI-SLIDE INST FRENCH/ENG 4,510 0 2277580082013 AEROBI-SLIDE INST SPAN/ENG 3,000 0 2277580082014 AEROBI-SLIDE INST SPANISH 2,340 0 2277580082015 AEROBI-SLIDE BOOTIE I 7,125 0 2277580091001 ROTOFLEX SANDING DISC-COARSE 27,395 6,148 2277580091002 ROTOFLEX SANDING DISC-MEDIUM 26,959 6,050 2277580091003 ROTOFLEX SANDING DISC-FINE 44,089 9,954 2277580091004 ROTOFLEX SANDING DISC-X-FINE 13,142 2,949 2277580091005 ROTOFLEX SANDING DISC-ULTRA 11,883 30 2277580091006 ROTOFLEX BUFFING PADS 11,180 11,377 2277580101001 BUTTONMATE 12 PACK MASTERS 174 0 2277580195003 BRX-11 SPONGES 800 600 2277580601001 MOTOBRELLA HOOK MS 3,040 0 2277580601002 MOTOBRELLA VELCRO 700 0 2277580601005 MOTOBRELLA #10 X 5/8 10,752 0 $126,072 TOTAL SLOW INVENTORY $1,443,922
EXHIBIT "B" SCHEDULE 2 K-TEL CONSUMER PRODUCTS COMPANIES FIXED ASSETS Quantity Value All old video tapes/including vault items $ - related to the Consumer Products Division Supplies: Assorted office supplies-existing $ - inventory related to the Consumer Products Division Supply cabinets (black, 6' high x 3.5' wide) 3 $ 250 Filing cabinets-general and personal 24 $ 1,500 Credenzas 8 $ 750 Executive desks 8 $ 1,250 Desks-other 10 $ 1,250 Executive and secretarial chairs 18 $ 900 Side chairs (2) and small table for 8 offices 8 $ 500 Simitar computers- Personal computer tower 486/33 1 Simitar computers- TM tower 386/40 1 Simitar computers- Printers-Okidata 2 Simitar computers- Workstations 15 --$ 6,250 Simitar computers- Unix operating system 1 software 486/33 Simitar computers- Novell Software 386/40 1 Simitar phone system 1 $ 2,500 Fax machine 1 $ 100 Copier (on lease) 1 $ - Light box 1 $ - Drafting table 1 $ - Creative computer (quadra 650) 1 $ 750 Gold records 6 $ - Company pictures 3 $ - TV/VCR with PAL, NTSC capability 1 $ 750 Forklifts 2 $ 1,500 Hand Jacks 3 $ 250 Office partitions--all current partitions at 20 $ 500 Medina Road building Conference table 1 $ 250 Conference room chairs 8 $ 250 Show booth-old 1 $ 0 Glass coffee table-lobby 1 $ - Freiden parcel post scale/system 1 $ - Letterhead/stationery and all K-tel forms $ - Molds for existing/old products $ - CPD contracts/right/legal papers $ - CPD HR files $ - K-tel building sign $ - Postage meter $ - Warehouse Racking (470 linear feet, single row, $ 0 three high racking) Subtotal $19,500 Apple computer peripherals: Upgrade to 40 MB Ram $ 625 Monitor $ 250 Keyboard $ 50 512 VRam $ 25 Syquest 88 MB Drive $ 200 Optical Drive $ 250 Laserwriter (Printer) $ 1,000 Colorpoint Printer (Selko) $ 2,500 Color Scanner $ 1,500 Weldotron L Bar Sealer with Conveyor $ - Simitar Open System accounting software $ - Simitar creative software $ - All packaging, sales material, operating negative and $ - artwork relating to the Consumer Product Division and its Products Subtotal $ 6,400 Total $ 25,900 Show booth-new $ 43,000 GRAND TOTAL $ 68,900 EXHIBIT C TRADEMARK AGREEMENT THIS AGREEMENT, made effective as of the closing date, which is the _______ day of _______________, 1995 between K-TEL INTERNATIONAL, INC., a Minnesota Corporation ("K-TEL"), K-TEL INTERNATIONAL LTD., a Manitoba Corporation ("K-tel Ltd.") SIMITAR, INC., a Minnesota Corporation (" SIMITAR"), K-TEL INTERNATIONAL (USA), INC. ("K-tel (USA)"), a Minnesota Corporation and K-TEL ENTERTAINMENT (CAN) INC., a Manitoba Corporation ("K-tel (Can)"). WHEREAS, SIMITAR has acquired the packaged consumer entertainment business (music and video) of K-TEL; and WHEREAS, SIMITAR desires to market and distribute Consumer Entertainment Product(s) (as defined below) using certain of the tradenames and trademarks of K-TEL; NOW, THEREFORE, in consideration of SIMITAR'S purchase of the entertainment business of K-TEL, and in consideration of the mutual agreements contained herein, and for One Dollar ($1.00) and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. (a) Consumer Entertainment Product(s) means films, videos and recorded music products, sheet music, tape and book packages, CD-ROM disks, computer software, video CD's, 3DO disks, CDI disks, or any other format, whether known or unknown at this time, and whether sold as albums, cassettes, books, floppy disks, hard disks, compact disks, optical disks, or any other media, on-line computer distribution or any other electronic or digital distribution system whether such media or distribution system is known or unknown at this time. (b) K-TEL Marks means the name and mark "K-TEL" and the combination mark, which consists of the "K-TEL" mark and the "K-logo" mark used together (the "K-logo" mark and the combination mark both being shown on Schedule 1 attached hereto) which marks are registered in the jurisdictions listed in Schedule 1. (c) "Former Soviet Block Countries" means all countries formerly forming part of the Union of Soviet Socialist Republics and the former "Warsaw Pact" including, without limitation, Poland, Hungary, Czech Republic, Slovakia and the former Yugoslavia, Romania and Cuba but excluding East Germany. (d) Term. The "Term" of this Agreement shall be for a period of eight (8) years from the date hereof. (e) Other Product(s) means all products and services other than Consumer Entertainment Product(s) as defined in paragraph l(a) above. 2. K-TEL Marks, Territory, Exclusivity and Term. Subject to the existing third party licenses of the K-TEL Marks in effect at the execution of this Agreement, as set out in Schedule 2 to this Agreement, which licenses shall remain in force until the end of their respective terms (including any renewals thereof), the parties agree as follows: (a) United States: (i) SIMITAR and its sublicensees shall, subject to Paragraph 2(a)(ii) below, have the following rights and licenses to use the K-TEL Marks, as a brand or product mark only but not for use as part of a corporate or trade name, for Consumer Entertainment Product(s) in the United States: (A) the exclusive right to release, manufacture distribute, market, promote, sell and license any new and existing Consumer Entertainment Product(s) under the K-tel Marks for the first four (4) years of the Term; and (B) the non-exclusive right to sell off under the K-TEL Marks, any inventory manufactured under paragraph 2(a)(i)(A) and not sold under paragraph 2(a)(i)(A) together with customer returns beginning with the fourth anniversary of the date hereof and through the eighth anniversary of the date hereof. (ii) K-TEL shall, however, retain the right to use the K-TEL Marks to distribute, market, promote and sell Consumer Entertainment Product(s) in the United States via direct response advertising. K-TEL will be prohibited from selling Consumer Entertainment Product(s) under the K-TEL Marks through any distribution means other than direct response advertising and from granting any rights to use the K-tel Marks for Consumer Entertainment Products to any third party during the first four (4) years of the Term. (iii) K-TEL shall retain the right to use the K-TEL Marks for all other purposes and for Other Product(s) in the United States. (iv) K-tel (USA), shall have the non-exclusive right to continue to: (A) manufacture Consumer Entertainment Products currently manufactured by it as of the date of this Agreement, bearing the legend "distributed by K-tel International, (USA) Inc.", for the first two years of the Term; and (B) sell its current inventory of Consumer Entertainment Products as of the date of this Agreement and any Consumer Entertainment Products manufactured under subparagraph 2(a)(iv)(A) bearing the legend "distributed by K-tel International, (USA) Inc.", for the first four years of the Term. (b) Mexico, Canada and Asia (i) SIMITAR and its sublicensees shall have the following non-exclusive right and license to use the K-TEL Marks, as a brand or product mark only and not for use as part of a corporate or trade name for Consumer Entertainment Product(s), in Mexico: (A) the non-exclusive right to release under the K-tel Marks any new Consumer Entertainment Products for the first three (3) years of the Term; (B) the non-exclusive right to manufacture new Consumer Entertainment Products, but only during the first four (4) years of the Term; (C) the non-exclusive right to distribute, market, promote, sell and license under the K-TEL Marks, any new Consumer Entertainment Product(s) for the first four (4) years of the Term; and (D) the non-exclusive right to sell off under the K-TEL Marks, any inventory manufactured under paragraph 2(b)(i)(B) and not sold under paragraph 2(b)(i)(C) together with customer returns beginning on the fourth anniversary of the date hereof and through the eighth anniversary of the date hereof. (ii) Simitar and its sublicensees shall have a non-exclusive right and a license to use the K-tel Mark for Consumer Entertainment Products in Asia and Canada, as a brand or product mark only and not for use as part of a corporate or trade name as follows: (A) the non-exclusive right to release, manufacture, distribute, market, promote, sell and license new Consumer Entertainment Products for the first two years of the Term; (B) the non-exclusive right to sell off under the K-tel Marks any inventory manufactured under paragraph 2(b)(ii)(A) and not sold under such paragraph together with customer returns beginning on the second anniversary of the date hereof and through to the fourth anniversary of the date hereof. (iii) K-TEL shall retain the right to use the K-TEL Marks for Consumer Entertainment Products and all other purposes and for all Other Products in Mexico, Asia and Canada. (iv) K-tel Entertainment (Can) Inc. shall have the non-exclusive right to continue to: (A) manufacture Consumer Entertainment Products currently manufactured by it as of the date of this Agreement, bearing the legend "distributed by K-tel Entertainment (Can) Inc." for the first two years of the Term; and (B) sell its current inventory of Consumer Entertainment Products as of the date of this Agreement and any Consumer Entertainment Products manufactured under sub paragraph 2(b)(iv)(A) bearing the legend "distributed by K-tel Entertainment (Can) Inc.", for the first four years of the Term. (c) Europe, Former Soviet Block Countries, Middle East and Africa. (i) K-TEL shall assign, sell, transfer and convey and does hereby assign, sell, transfer and convey to SIMITAR, K-TEL's entire right, title and interest, and SIMITAR shall own and have the exclusive right in perpetuity to the K-TEL Marks, the goodwill and the business associated therewith, and all uses thereof in Europe, all Former Soviet Block Countries, Middle East and Africa (including, without limitation, rights to the word "K-tel" as part of a corporate or business name). K-TEL further agrees, at SIMITAR's expense, to execute such documents as SIMITAR may request to memorialize this assignment, sale, transfer and conveyance. (ii) K-TEL shall have a non-exclusive right and license to use the K-TEL Marks for Other Products and the word "K-tel" as part of a corporate or business name in the Soviet Block Countries, Middle East and Africa as follows: (A) the non-exclusive right to manufacture, distribute, market, promote, sell and license Other Products for the first four (4) years of the Term; (B) the non-exclusive right to sell off under the K-tel Marks, any remaining inventory of Other Products during the last four years of the Term. Remaining inventory shall mean all inventory of Other Product(s) owned by K-TEL, K-5 Leisure Products, Inc. ("K-5 "), K-TEL Ltd., or related parties at the end of the first four (4) year period of the Term. World wide sales of K-TEL, K-5, K-TEL Ltd. or related parties shall be counted against remaining inventory during the four (4) year inventory sell-off period.; (iii) Subject to Subsection 2(k), K-tel shall have a non-exclusive right and license to use the K-tel Marks for Other Products in Europe and, subject to Subsection 2(e)(iii) the word "K-tel" as part of a corporate or business name in Europe as follows: (A) the non-exclusive right to manufacture, distribute, market, promote and sell Other Products for the first two (2) years of the Term; (B) the non-exclusive right to sell off under the K-tel Marks, any remaining inventory of Other Products during the two years of the Term beginning on the second anniversary of the date of this Agreement and terminating on the fourth anniversary of the date of this Agreement. Remaining inventory shall mean all inventory of Other Product(s) owned by K-TEL, K-5 Leisure Products, Inc. ("K-5"), K-TEL Ltd., or related parties at the end of the first two (2) year period of the Term. World wide sales of K-TEL, K-5, K-TEL Ltd. or related parties shall be counted against remaining inventory during the two (2) year inventory sell-off period. (iv) During the first four years of the Term, Simitar shall not sell, transfer, assign or otherwise dispose of any interest in the K-Tel Marks in Europe, all Former Soviet Block Countries, the Middle East or Africa, or any part thereof, except: (A) licenses granted in the ordinary course of business to use the K-tel Marks to advertise, market or Sell products; and (B) grants of security interests in the K-tel Marks as security for, or sales, transfers and other assignments of the K-tel Marks in connection with the financing required by Simitar to complete the agreement of purchase and sale between Simitar and K-tel dated as of June 28, 1995 (the "Agreement of Purchase and Sale") unless SIMITAR has first offered to sell the interest to K-tel as follows: (C) If SIMITAR receives a bona fide offer from an arm's length third party to acquire an interest in the K-tel Marks, in the territories referred to in this Paragraph, 2(c)(iv), which it intends to accept, then, SIMITAR shall notify K-TEL in writing and provide K-TEL with a copy of the offer; (D) K-TEL shall have thirty (30) days after receipt of such notice and offer to exercise its right of first refusal to acquire the interest in the K-TEL Mark on terms the same as the proposed offer by giving SIMITAR written notice thereof; (E) In the event K-TEL does not exercise its right of first refusal, then SIMITAR may proceed to accept the original offer within ninety (90) days after the expiration of K-TEL's right of first refusal as to such original offer on such terms; (F) In the event the original offer received by SIMITAR is not accepted within said 90-day period, then K-TEL's right of first refusal shall continue to apply; (G) The right of first refusal under this paragraph shall not apply to any sale of Dominion Vertriebs and GmbH or K-tel International (SPAIN) SL and any assignment of rights to use the K-tel Marks in connection with such sales. (d) Rest of the World. K-TEL shall retain all rights to use of the K-TEL Marks for all purposes and for both Consumer Entertainment Product(s) and Other Product(s) in all other countries and territories not identified or listed above. (e) Use of Corporate Name. (i) Except as otherwise provided in Section 2(c), K-tel shall retain all rights throughout the world, to use the word "K-tel" as part of a corporate name (except with respect to the territories subject to Section 2(c)) and to produce and sell products marked with the legend "distributed by" or "manufactured by" entities using the word "K-tel" as part of their name, provided that the words "K-tel shall not be printed on any Consumer Entertainment Products distributed by K-tel in the United States in larger than 14 point type; (ii) Except to the extent K-tel retained rights in Section 2(c), neither K-tel nor any of its affiliates shall produce or sell products in the territories subject to Section 2(c) marked with any reference to the word "K-tel"; (iii) The right to use the word "K-tel" as part of a corporate or business name in Europe the Former Soviet Block, the Middle East and Africa is restricted to the distribution, marketing, promotion and sale of Other Products by K-tel to customers in those territories. K-tel shall not be entitled to use the word "K-tel" as part of a corporate or business name of a corporation or business having a place of business in Europe, the Former Soviet Block, the Middle East and Africa. (f) Protection of K-TEL Marks. SIMITAR agrees that it will notify K-TEL promptly upon determining that any person or entity has engaged in an unauthorized use of or has infringed upon the K-TEL Marks in any territory for which K-TEL retains rights to the K-TEL Marks. At the request and expense of K-TEL, SIMITAR will cooperate with K-TEL in the filing, prosecution, maintenance and enforcement of any applications for registration of the K-TEL Marks filed by K-TEL. SIMITAR shall notify K-TEL of any adverse use of the K-TEL Marks or other designation similar to any trademarks or "logos" owned and/or controlled by K-TEL, of which SIMITAR is or becomes aware. (g) Trademark Quality Assurance (i) A party to this Agreement, who is exercising or who seeks to exercise a right and license to use the K-tel Marks, under paragraphs 2(a), 2(b), 2(c) and 2(d) of this Agreement, agrees that each product which is sold under the K-tel Marks shall always be of a high quality and shall be sold, advertised, marketed and promoted in a manner to maintain the current image of quality and the fine reputation enjoyed by the K-tel marks. More specifically, the party shall only sell, advertise, market and promote products under the K-tel Marks that are of a quality that is equal to or exceeds the quality of comparable products, or types of products currently being marketed and sold under the K-tel Marks. (ii) If the party wishes to sell, market, advertise and promote a product under the K-tel Marks that will have a lower quality (herein referred to as the "Different Products") than that of comparable products, or types of products, currently being marketed under K-tel Marks, then the party agrees to submit representative samples of the Different Products (herein referred to as the "INITIAL SAMPLES" to the other party for approval before manufacture of the Different Products commences. Recognizing that time is very critical in successfully introducing all products into the marketplace, the other party agrees to inspect expeditiously the INITIAL SAMPLES and to notify the party whether the quality of the INITIAL SAMPLES is approved within ten (10) days of the receipt of the INITIAL SAMPLES and if not approved, to advise the party, in writing, of any and all corrections reasonably required to be made in order for the INITIAL SAMPLES to be approved. Failure of the other party to so notify and advise the party within this ten (10) day period shall be deemed to constitute approval by the other party of the INITIAL SAMPLES. The other party further agrees to consult and cooperatively work with the party in making INITIAL SAMPLES that can be approved by the other party. (iii) After the other party has approved the quality of the INITIAL SAMPLES, the party shall have the right to sell, advertise, market and promote the Different Products, under the K-tel Marks, that meet or exceed the quality of the corresponding INITIAL SAMPLES. The party agrees that it will not knowingly use the K-tel Marks for or in connection with the sale, advertisement, marketing and promotion of a Different Product whose quality does not meet or exceed the quality of the corresponding approved INITIAL SAMPLES. (iv) The party agrees that any advertisement and promotional materials for products sold under K-tel Marks shall be done with the same good taste and quality as current advertisements and promotional materials for products currently sold under the K-tel Marks. (h) Ownership of K-TEL Marks (i) Except for the territories identified and listed in paragraph 2(c) above, K-TEL expressly reserves the sole and exclusive ownership of the K-TEL Marks. Any rights in and to the K-TEL Marks which are not specifically granted to SIMITAR hereunder are expressly reserved by K-TEL. (ii) In the Territories and countries identified and listed in paragraph 2(c) above, SIMITAR shall be the sole and exclusive owner of the K-TEL Marks. Any rights in and to the K-TEL Marks in such Territories and countries are expressly reserved by SIMITAR. (i) Actions Upon Expiration of the Term of this Agreement. Upon the expiration of the term of any license hereunder, with respect to the K-TEL Marks, SIMITAR agrees to execute and deliver to K-TEL, without additional consideration, a document assigning to K-TEL all of SIMITAR'S rights, if any, in and to the K-TEL Marks. In the event SIMITAR fails to execute and deliver such document, K-TEL shall have the right to execute the same as SIMITAR'S attorney-in-fact, and SIMITAR does hereby irrevocably appoint K-TEL its true and lawful attorney-in-fact only for the purpose of executing such document. K-TEL makes the same agreements and appointment with respect to any license or right which K-TEL may exercise under paragraph 2(c)(ii). (j) Slow Inventory Notwithstanding the provisions of this paragraph 2, K-tel shall be entitled to sell the Slow Inventory (as defined in the Agreement of Purchase and Sale throughout the world without restriction). (k) The rights referred to in Section 2(k) shall cease 60 days after the day that Philip Kives, his spouse and/or children or a trust established for the principal benefit of Philip Kives, his spouse and/or his children cease to directly or indirectly control K-tel. 3. Representations and Warranties (a) K-TEL Representations and Warranties. K-TEL represents and warrants that in all territories and countries where K-TEL has a registration(s) for the K-TEL Marks, or some of them, as indicated on attached Schedule 1, it owns or has a license to all rights granted and/or assigned to SIMITAR in this Agreement to the extent covered by these Registrations, including without limitation the trademark rights in the K-TEL Marks, free of all claims of any kind except as disclosed to SIMITAR on Schedule 3 hereto, and that it has not granted to any other person any right granted to SIMITAR under this Agreement or executed any agreement in conflict with this Agreement, except as disclosed in Schedule 2. (b) SIMITAR Representation and Warranties. Except as otherwise provided herein, SIMITAR represents and warrants that it will not, directly or indirectly, at any time do or cause to be done any act or thing disputing, attacking or in any way impairing or tending to impair K-TEL'S right, title or interest in and to the K-TEL Marks and/or in and to any rights licensed to SIMITAR under this Agreement. 4. Indemnification (a) Indemnification by K-TEL. K-TEL shall defend and hold SIMITAR and its officers, directors, customers and agents harmless from and against any suit, claim or proceeding brought against SIMITAR, its officers, directors, customers or agents and any and all costs and awarded damages (including court costs, attorneys' fees and litigation expenses for any trial and related appeal) which (i) result from, arise in connection with or relate in any way to any breach by it of its representations and warranties contained in this Agreement, or (ii) are based on any misappropriation or infringement claim of any third party with respect to the use of the K-TEL Mark(s), other than and except for those claims arising out of any activities of SIMITAR which are in breach of its obligations under this Agreement. (b) Indemnification by SIMITAR. SIMITAR shall defend and hold K-TEL and its officers, directors, customers and agents harmless from and against any suit, claim or proceeding brought against K-TEL, its officers, directors, customers or agents and any and all costs and awarded damages (including court costs, attorneys' fees and litigation expenses for any trial and related appeal) which (i) result from, arise in connection with or relate in any way to any breach by it of its representations and warranties contained in this Agreement, or (ii) are based on any misappropriation or infringement claim of any third party with respect to the K-TEL Marks arising out of any activities of SIMITAR which are in breach of its obligations under this Agreement. 5. Termination. This Agreement shall not be subject to termination for any reason whatsoever with respect to the rights assigned, transferred, sold and conveyed in paragraph 2(c)(i) hereof, without the written and signed agreement of K-TEL and SIMITAR. (a) Causes of Termination. With respect only to the rights and licenses other than those conveyed pursuant to paragraph 2(c)(i) above, this Agreement may be terminated with respect to a specific right or license granted for a specific country or territory herein identified or listed, by the non-defaulting party as follows: (i) Effective immediately upon delivery of written notice of such termination, if a material breach of this Agreement with respect to a specific right or license in a specific country or territory has occurred and reasonably prudent and effective measures have not been taken to cure the breach by the breaching party within thirty (30) days after receiving written notice of the breach; (ii) Effective immediately upon delivery of written notice of such termination, if in a specific country or territory and for any reason a party ceases to conduct its business in such country or territory in the normal course, becomes insolvent or bankrupt, makes a general assignment for the benefit of its creditors, admits in writing its inability to pay its debts as they mature, suffers or permits the appointment of a receiver for its business or assets, or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors and such proceeding is not dismissed within 60 days of its filing; (iii) Effective 10 days after delivery of written notice, if a claim of misappropriation or infringement of a third party right cannot be reasonably avoided or cured; or (iv) Effective immediately upon delivery of a written notice of termination, if any right granted by a party under this Agreement is attached or levied upon by a creditor or claimant of the party, and such attachment or levy is not released within 10 days after receipt of written notice thereof. (b) Effect of Termination. (i) Upon termination of a specific license for a specific country or territory under this Agreement, all of a party's prospective rights with respect thereto shall cease immediately. Termination shall not affect the rights of any customers or sublicensees of SIMITAR, including end-users, who have ordered the licensed products prior to the effective date of such termination, nor shall it affect SIMITAR'S specific rights or licenses in those countries and territories for which the termination does not apply. (ii) Upon termination, if the license for the K-TEL Marks in a specific country or territory has been terminated, SIMITAR shall not have the right to sell off existing inventory bearing the K-TEL Marks in such specific country or territory. 6. Right of First Refusal. SIMITAR shall have a right of first refusal regarding any assignment of the K-TEL Mark for (a) Consumer Entertainment Products in the United States, Mexico and Canada for the first four years of the Term and (b) Other Products in any country in which Simitar does not have the exclusive right to use the K-tel Marks for Other Products for the first four years of the Term as follows: (i) In the event K-TEL receives a bona fide offer from an arm's length third party to acquire an interest in the K-TEL Marks in the territories and for the products referred to in paragraphs 6(a) or (b); K-TEL shall notify SIMITAR in writing and provide SIMITAR with a copy of the offer; and (ii) SIMITAR shall have thirty (30) days after receipt of such notice, and offer to exercise its right of first refusal to acquire the interest in the K-TEL Mark on terms the same as the proposed offer by giving K-TEL written notice thereof; (iii) In the event SIMITAR does not exercise its right of first refusal, then K-TEL may proceed to accept the original offer within ninety (90) days after the expiration of SIMITAR's right of first refusal as to such original offer on such terms; (iv) In the event the original offer received by K-TEL is not accepted within said 90-day period, then SIMITAR's right of first refusal shall continue to apply. 7. General (a) Waiver. No term or provision of this Agreement will be considered waived by any party, and no breach excused by any party, unless such waiver or excuse is in writing and signed on behalf of the party against whom the waiver is asserted. (b) Severability. If any part of this Agreement is found invalid or unenforceable, that part will be amended to achieve as nearly as possible the same economic effect as the original provision and the remainder of this Agreement will remain in full force. (c) Arbitration. Any claim, dispute or controversy arising out of or in connection with or relating to this Agreement or the breach or alleged breach thereof shall be submitted by the parties to arbitration by the American Arbitration Association ("AAA") in the City of Minneapolis, Minnesota under the commercial rules then in effect and modified as provided herein. A transcribed record of any proceeding shall be prepared. The AAA shall recommend three arbitrators who are knowledgeable in the field in dispute. The parties shall agree upon one of the three arbitrators within 20 days. If no arbitrator is mutually agreed upon, the AAA shall appoint one of the three arbitrators within 30 days. Each party shall have the right to request the arbitrator to include costs of arbitration, reasonable attorneys' fees and reasonable costs for expert and other witnesses, but shall not include punitive damages. Judgement on such award may be entered as provided in paragraph (e) of this Section. Any party may seek relief from the courts as necessary to protect its name, proprietary information, trade secrets, know-how or any other appropriate provisional remedy. (d) Choice of Law. This Agreement and any arbitration conducted under paragraph 7(c) herein will be governed by and construed in accordance with the substantive, procedural and evidentiary laws and rules of the State of Minnesota. (e) Choice of Forum. Subject to paragraph 7(c), the parties hereby submit to the jurisdiction of, and waive any venue objections against, the United States District Court for the District of Minnesota and the trial courts of the State of Minnesota, in any litigation and/or arising out of this Agreement, and each party hereby consents to the personal jurisdiction of such courts for purposes of this Agreement, including entry of enforcement of any arbitration award or judgment. (f) Notices. Any notice provided for or permitted under this Agreement will be treated as having been given when (i) delivered personally, (ii) sent by mail, confirmed telex or telecopy, (iii) sent by commercial overnight courier with written verification or receipt, or (iv) received postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth below, or at such other place of which the other party has been notified in accordance with the provisions of this paragraph. If to K-TEL: K-TEL INTERNATIONAL, INC. 2605 Fernbrook Lane North, Suite O Minneapolis, Minnesota. 55447-4736 Attn: Philip Kives, Chairman Fax: (612) 559-6815 If to SIMITAR: SIMITAR, INC. 2605 Fernbrook Lane North Minneapolis, Minnesota 55447-4736 Attn: Mickey Elfenbein, President Fax: (612) 559-6815 (g) Entire Agreement. This Agreement, including all exhibits, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations and agreements, whether written or oral. (h) Amendment. This Agreement may be amended or supplemented only by a writing that refers explicitly to this Agreement and that is signed on behalf of all parties. (i) Survival. Paragraph 2(c)(i), 3 and 4 will survive the termination of this Agreement. (j) Assignment. Any party may assign this Agreement in the course of any merger or acquisition or in connection with any sale of all or substantially all of its assets, provided that prior to such transaction, the acquiring party agrees in writing to be bound by all of the terms and conditions of this Agreement and prompt notification is given to the other parties. (k) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (l) No Joint Venture. Each of the parties hereto acknowledges that no joint venture or partnership exists between or among K-TEL and SIMITAR, and that K-TEL and SIMITAR are each acting as independent contractors. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. K-TEL INTERNATIONAL, INC. By: _________________________________ _________________________________ Witness Its ____________________________ K-TEL INTERNATIONAL, LTD. By: _________________________________ _________________________________ Witness Its ____________________________ SIMITAR, INC. By: _________________________________ _________________________________ Witness Its ____________________________ K-TEL INTERNATIONAL (USA), INC. By: _________________________________ _________________________________ Witness Its ____________________________ K-TEL ENTERTAINMENT (CAN) INC. By: _________________________________ _________________________________ Witness Its ____________________________ THE K-LOGO MARK INCLUDED IN THE "K-TEL MARKS" IS: AN EXAMPLE OF THE LICENSED COMBINATION "K-TEL" AND "K-LOGO" MARKS INCLUDED IN THE "K-TEL MARKS" IS: Int. Cl.: 21 Prior U.S. Cl.: 29 Reg. No. 1,075,934 United States Patent Office Registered Oct. 25, 1977 TRADEMARK Principal Register (Specimen of Logo -- Stylized letter "K" in a circle) K-Tel International, Inc. For: BRUSH FOR CLEANING (Minnesota corporation) FABRICS, in CLASS 21 1311 K-Tel Drive (U.S. CL. 29). Minnetonka, Minn. 55343 First Use Nov. 9. 1976; in commerce Nov. 9, 1976. The mark consists of a stylized letter "K" in a circle. Owner of Reg. No. 944,141. Set. No. 111,076, filed December 29, 1976. G. E. Pence, Examiner Int. Cl.: 21 Prior U.S. Cl.: 29 Reg. No. 991,970 United States Patent Office Registered Aug. 27, 1974 TRADEMARK Principal Register (Specimen of Logo -- Stylized letter "K" in a circle) K-Tel International, Inc. For: BRUSH FOR REMOVING (Minnesota corporation FOREIGN MATERIALS FROM 421 Wilson St. N.E. FABRICS IN CLASS 29 (INT. Minneapolis, Minn. 55413 CL. 21). First use no later than January 1972; in commerce no later than January 1972. Set. NO. 438,070, filed Oct. 11, 1972. SCHEDULE 1 LIST OF JURISDICTIONS WHERE K-TEL MARKS ARE REGISTERED K-TEL TRADEMARK INVENTORY REPORT
COUNTRY MARK CLASSES Argentina K-tel 9 Australia K-tel 9,8,20,11,34 21,28,3,14 K-logo 21,9 Austria K-tel 3,9,21 K-logo 3,9,21 Austria K-tel 3,8,9,14,16 (GMBH) 18,20,21,28 K-logo 3,8,9,14,16 20,21,28 Benelux K-logo 9 K-tel 9 ______ K-logo 3,8,9,14,16 (GMBH) 18,20,21,28 K-tel 3,8,9,14,16 18,20,21,28 Brazil K-tel/K-logo 9,40 K-logo 9,40 K-tel 9,40 Denmark K-tel/K-logo 9,21 K-tel/K-logo 16 Finland K-tel/K-logo 9,21 K-tel International 9,21 K-tel/K-logo 9 France K-logo 6,9,16,20,21 K-tel 6,9,16,21,21 France K-logo 3,8,9,14,16 (GMBH) 18,20,21,28 K-tel 3,8,9,14,16 18,20,21,28 Germany K-tel/K-logo 21,3 K-tel 9 Video cassette K-tel 9 Electrical and Scientific Apparatus K-logo 9 Germany K-logo 3,8,9,14,16,18 (GMBH) 20,21,28 K-tel 3,8,9,14,16,18 20,21,28 K-logo 9,3,8,14,16,18 21,28 K-tel 9,3,8,14,16,18 21,28 Great Britian K-logo 9 K-tel/Katel 9 Greece K-logo 8,9,21,28 K-tel 8,9,21,28 Hong Kong K-tel 9 Ireland K-tel 9 K-tel 16 Italy K-tel International 7,8,9,21 K-logo 7,8,9,21 K-tel 7,8,9,21 K-logo 7,8,9,21 K-tel 7,8,9,21 K-logo 7,8,9,21 Italy K-logo 3,8,9,14,16,18 (GMBH) 20,21,28 K-tel 3,8,9,14,16,18 20,21,28 Japan K-logo 9 K-tel 9 Japan K-logo 24 K-tel (Japanese Letters) 24 K-tel 24 Mexico K-logo 9,15,20 K-tel 9,15,20 Monaco K-logo 3,8,9,14,16,18 (GMBH) 20,21,28 K-tel 3,8,9,14,16,18 20,21,28 New Zealand K-tel 23 K-logo 9 K-tel 9 K-tel 21 K-logo 21 K-logo 8 K-tel 8 K-tel 28 K-logo 28 Norway K-tel International 9 K-logo 9 Portugal K-tel 9 K-tel 3 K-tel 21 K-tel 28 Singapore K-tel 9 South Korea K-tel 39 Spain K-logo 21 K-logo 9 K-tel 9 K-tel 21 Spain K-tel/K-logo 8 (K-tel Spain) K-tel/K-logo 35 K-tel/K-logo 39 K-tel/K-logo 41 RELATED ENTITIES COUNTRY MARK CLASSES Spain K-tel* 3,18,20,28 *Owner: K-tel GmbH (owned by receiver estate closed) K-logo* 3,8,9,14,16,18 20,21,28 *Owner: K-tel GmbH (owned by receiver estate closed) Switzerland K-tel/K-logo 8,9,21 Switzerland K-logo 3,8,9,14,16,18 20,21,28 K-tel 3,8,9,14,16,18 20,21,28 K-tel/K-logo 9,16 Venezuela K-tel 36 K-logo 36
SCHEDULE 2
SCHEDULE OF EXISTING THIRD PARTY LICENSES OF K-TEL MARKS LICENSEE COUNTRY TERM CASTLE AUSTRALIA 4 YEARS, COMMENCING 3/1/90 NEW ZEALAND (EXTENSION UNSIGNED) P.T. INDO SEMAR SAKTI INDONESIA 3 YEARS, COMMENCING 6/17/93 SWISS TEO HONG KONG 3 YEARS, COMMENCING 2/1/94 MALAYSIA PLUS OPTION TO EXTEND FOR PHILIPPINES ADDITIONAL 1 YEAR PERIOD SINGAPORE SOUTH KOREA TAIWAN THAILAND MICROFON ARGENTINA 2 YEARS, COMMENCING 8/3/94 TELSTAR BRAZIL 7 YEARS, COMMENCING 1/31/95 (UNSIGNED) K-TEL SWITZERLAND
SCHEDULE 3 CLAIMS AGAINST K-TEL MARKS SPAIN K-tel (C1.9) Registration rejected. The mark is confusingly similar to trademark "CATEC" for the same classification of goods. Power of Attorney submitted in order to file contentious administrative appeal. BRAZIL K-tel (C1.9) Associate awaiting "K-tel's" instruction regarding the opposition against the mark LK TEL owned Comercio e Represenracoes Ltda. EXHIBIT D LIST OF AGREEMENTS TO BE ASSIGNED Contracts to be Assigned to Seller 1. Aquatic Farms (Lobster Farm) 2. Auto Evolution (Glareblocker) 3. Haus (Shovel Buddy) 4. Agreement between K-tel International (USA), Inc. and Beyond Auto Pty. Ltd. dated November 30, 1993 5. Employment agreement between K-tel International (USA), Inc. and Ottario DeBoni, Michael Getzkin, Marshall Masko, Rich Mier, Michael Moran and Anthony Pecoraro Contracts to be Assigned to K-tel International (USA), Inc. 1. Creative Ventures (101 Country) 2. Tri-Crown (101 Country) 3. License agreement between K-tel International, Inc. and K-tel International (Switzerland) Ltd. relating to the K-tel Mark LIST OF LITIGATION TO BE ASSIGNED 1. Litigation to be assigned to the Purchaser: Cooperfield Music v. K-tel International (USA), Inc. Davidson County Chancery Court, Tennessee, 94-1539111. Cooperfield Music v. K-tel International (USA), Inc. Davidson County Chancery Court, Tennessee, 95-1423 1. Moore v. AFTRA [K-tel International (USA), Inc.] United States District Court, N.D. Georgia, 1:93-CV-2358-CC Moore v. AFTR [K-tel International (USA), Inc.] United States District Court, S.D. New York - 95 CIV 1221 Osborne v. K-tel International, Inc. Hennepin County District Court, Minnesota 95-3698 White v. Capital Records [Dominion Entertainment, Inc.] USDC ND CA 94-3664-SBA K-tel International, Inc., Commonwealth Music d/b/a K-tel International, Inc., Ernest Evans Corporation v. San Juan Music Group Ltd., et al. 94-1840(DRD) M.T. Industries v. Dominion Entertainment, Inc. 89 CIV 8028(WK) Donald Storball and Florence Jackson v. Twentieth Centruy Fox Film Corporation [Dominion Entertainment, Inc.] 94-55167 U.S. Court of Appeals K-tel International, Inc., K-tel International (UK), Ltd. v. Tring et al. CH 1993-K-No. 7395 San Juan Music v. Bellaphon-Germany [Dominion Entertainment, Inc.] K-tel International, Inc., K-tel International, Inc., d/b/a Commonwealth Music Inc., Ernest Evans Corporation v. William Chester Carr d/b/a Billy Carr Productions 6:92cv480; Judgement awarded January, 1994 2. Litigation to be assigned to the Seller: Project Strategies v. K-tel, Inc. United States District Court, A.D. Wisconsin 95-C-0048 Skew Products v. K-tel International, Inc. United States District Court, S.D. new York 94-CIV 5508 K-tel International Ltd., K-tel Entertainment (UK) Ltd. v. Pierre Benoit, David Gareau, 133064 Canada Inc., d/b/a Multirox Productions, Les Distributions Muralex Inc., 175869 Canada Inc., and US Nordic Importing and Exporting Company Federal Court of Canada Trial Division, Court No. 7-2685-94 EXHIBIT E This Assignment is made and delivered as of the _____ day of ___________, 1995 by Simitar Entertainment Inc., a corporation organized under the laws of ___________ ("Assignor"), in favor of Simitar Entertainment, Inc., a corporation organized under the laws of the State of Minnesota ("Assignee"). WITNESSETH, THAT FOR $1.00 AND OTHER GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby bargains, sells, grants, assigns, transfers and conveys unto Assignee, its successors and assigns all of Assignor's right, title and interest in and to the name "Simitar" in Canada, and all good will associated therewith (the "Assets"). TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns forever. IN ADDITION, from time to time after the date hereof, without further consideration Assignor shall execute and deliver such other instruments of assignment, transfer and conveyance and shall take such other actions as Assignee may reasonably request in order more effectively to assign, transfer and convey to Assignee, and to place Assignee in possession and control of, the Assets, and to enable it to exercise and enjoy all rights and benefits of Assignor with respect thereto. Assignor hereby represents and warrants to, and covenants with, Assignee, its successors and assigns that immediately prior to the delivery of this Assignment, Assignor was the sole owner of the Assets, and that the Assets are conveyed to Assignee free and clear of all mortgages, pledges, liens, claims, security interests, leases, conditional sale agreements, charges, restrictions and any other encumbrance of any nature whatsoever; and that Assignor will warrant the title hereby conveyed to Assignee against the claims of all persons whomsoever. This Assignment shall inure to the benefit of and be binding upon Assignor and Assignee and their respective successors and assigns. IN WITNESS WHEREOF, Assignor has caused this Assignment to be executed and delivered by its duly authorized representative as of the day and year first above written. SIMITAR ENTERTAINMENT INC. By: Its ACCEPTED: SIMITAR ENTERTAINMENT, INC. By Its EXHIBIT F OFFICE SUBLEASE THIS SUBLEASE is made and entered as of ___________, 1995, by and between K-TEL INTERNATIONAL (USA), INC. (the "Sublessor") and K-TEL INTERNATIONAL, INC. (the "Sublessee"). W I T N E S S E T H: WHEREAS, Sublessor is the owner of the tenant's interest of that certain lease agreement dated March 3, 1995 by and between First Industrial, L.P., as landlord (the "Landlord") and Sublessor as tenant, a copy of which is attached as Attachment "1" hereto (the "Prime Lease"), which demises certain "leased premises" in the building commonly known as Plymouth Corporate Center, Minnesota; and WHEREAS, the parties hereto desire that Sublessee sublease and take possession of a portion of the leased premises described in the Prime Lease pursuant to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows: 1. Sublessor does hereby demise and sublease to Sublessee and Sublessee does hereby accept and lease from Sublessor that portion of the leased premises described in the Prime Lease outlined on Attachment "2" attached hereto being approximately 4,600 square feet in size (the "Demised Premises"), to have and to hold the same for a term commencing on October 14, 1995 and ending on March 13, 1996. For the Demised Premises, Sublessee shall pay Sublessor, in lawful money of the United States, the following amounts payable in advance on the first day of each month during the term of this Sublease and, in the event of any partial month, pro rated based on the number of days during the month within such term and the total number of days during such month: (a) Base Monthly Rental. Base monthly rent (referred to as Base Rent in Prime Lease) of $2,591.10 (.177 x $14,639.00); (b) Additional Rent. Additional rent equal to 17.7% of the additional rent payable by Sublessor under Prime Lease (see Article 2 of Prime Lease). Any utility charges payable by Sublessor that are not reflected in additional rent, shall be billed monthly to Sublessee and payable within ten (10) days. The amount charged shall equal 17.7% of the payable utility charges of Sublessor. In the event that Sublessee fails to pay any installment of rent or utility charges within five (5) days of when due, Sublessee shall pay to Sublessor on demand a late charge in an amount equal to five percent (5%) each month thereafter until paid in full. 2. Provided Sublessee is not in default and has performed all of its covenants and obligations, Sublessee shall have the option to renew this Sublease for an additional six (6) months under the same terms and conditions in this Sublease. Sublessee shall give sixty (60) days prior written notice of its option to renew. 3. Sublessor does hereby covenant and agree with Sublessee that it shall keep, observe and perform in a timely manner each of its obligations to be kept and performed as set forth in the Prime Lease with respect to the leased premises under the Prime Lease other than the Demised Premises which are subject to this Sublease, and Sublessor shall indemnify Sublessee and hold it harmless of, from and against any and all costs or expenses, including reasonable attorneys' fees, demands or liabilities arising out of or relating to Sublessor's failure to perform as aforesaid. 4. Sublessee agrees to assume and perform Sublessor's obligations under the Prime Lease as they apply to the Demised Premises with regard to the terms, covenants and conditions set forth in the Prime Lease, which are incorporated herein by this reference thereto, and which the parties agree shall be kept and performed by the parties hereto as if Sublessor was the Landlord thereof and Sublessee was the Tenant. 5. Sublessee shall be obligated to comply with all provisions of the Prime Lease regarding alterations to the Demised Premises if satisfactory arrangements and agreements can be reached with Landlord and Tenant. 6. Sublessor and Sublessee agree that in the event the Demised Premises, the building of which it is a part or the Demised Equipment is damaged or destroyed by fire or other casualty included under so called extended coverage, the right, if any, of each party against the other with respect to such damage or destruction whether caused by negligent act or omission or otherwise to the extent that such damage or destruction is recovered from the insurer of policies or insurance, are waived. 7. Sublessee will, during the Sublease term, continuously maintain public liability insurance with respect to death or injury to persons and damage to or destruction of property occurring at or about the Demised Premises. Such insurance shall be in amount(s) and in form(s) required by the Prime Lease, and shall name Sublessor and the Landlord as additional insureds. Sublessee agrees to indemnify and hold harmless Sublessor from, and shall reimburse Sublessor for, all costs and expenses, including reasonable attorneys' fees, incurred by Sublessor in connection with the defense of all claims and demands of third persons, including but not limited to those for death, personal injuries, or property damage, arising out of any default of Sublessee in performing or observing any term, covenant, condition or provision of this Sublease, or out of any of the acts or omissions of Sublessee, its agents, representatives, employees, customers, guests, invitees or other persons who are doing business with Sublessee or who are at the Demised Premises with Sublessee's consent. 8. This Sublease shall terminate at the end of the term hereof, without the necessity of any notice. The Subtenant shall be entitled to terminate this Sublease at any time during the term of this Sublease or any renewal thereof upon 90 days prior written notice to the Sublandlord. Sublessee will peacefully and quietly vacate and surrender the Demised Premises to Sublessor at the expiration of the Sublease term, in the condition called for under the Prime Lease. 9. If Sublessee defaults in its obligations under this Sublease, Sublessor shall have all of the same rights and remedies against Sublessee consistent with these Sublease obligations as would be available to the Prime Landlord against Sublessor if Sublessor were in default under the Prime Lease, as fully as if such rights and remedies were set forth in this Sublease. 10. Sublessee shall be entitled to fourteen (14) parking spaces in the southeast corner of Sublessor's parking area. 11. Sublessee shall not assign this Sublease Agreement or sublet the Demised Premises without the prior written consent of Sublessor. 12. Sublessee shall deposit with Sublessor $2,591.10 to secure the faithful performance of Sublessee's promises and duties contained in this Sublease. Sublessor shall not be required to pay any interest on the deposit to Sublessee. On termination, Sublessor may deduct from the security deposit amounts sufficient to pay for: (i) damages sustained by Sublessor as a result of Sublessee's non-payment of rent; (ii) damages to the Demised Premises for which Sublessee is responsible; (iii) unpaid bills that become a lien against the Demised Premises due to Sublessee's occupancy; (iv) costs of re-renting the Demised Premises after a breach of this Sublease Agreement by Sublessee; (v) court costs incurred by Sublessor in connection with terminating the tenancy; and (vi) other damages of Sublessor that may then be a permitted use of the security deposit under the laws of the State of Minnesota. 13. Any notice or demand to be given to or served upon either Sublessor or Sublessee in connection with this Sublease, shall be deemed to have been sufficiently given or served for all purposes if it is personally served or if it is sent certified mail, return receipt requested, postage prepaid, as follows: To Sublessor: K-tel International (USA), Inc. 2605 Fernbrook Lane North Minneapolis, MN 55447-4736 To Sublessee: K-tel International, Inc. 2605 Fernbrook Lane North, Suite O Minneapolis, MN 55447-4736 Either party may change the place to which notice is to be sent by sending a written notice thereof to the other in the same manner herein above provided. IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be executed as of the day and year first above written. K-TEL INTERNATIONAL (USA), INC. By_______________________________ Its____________________________ K-TEL INTERNATIONAL, INC. By_______________________________ Its____________________________ STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this ___ day of ______________, 1995 by ____________________, the __________________ of K-tel International (USA), Inc., a corporation under the laws of the State of Minnesota, on behalf of the corporation. ____________________________ Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this ___ day of ______________, 1995 by ____________________, the __________________ of K-tel International, Inc., a corporation under the laws of the State of Minnesota, on behalf of the corporation. ____________________________ Notary Public EXHIBIT G WAREHOUSE SUBLEASE THIS SUBLEASE is made and entered as of ___________, 1995, by and between K-TEL INTERNATIONAL (USA), INC. (the "Sublessor") and K-TEL INTERNATIONAL, INC. (the "Sublessee"). W I T N E S S E T H: WHEREAS, Sublessor is the owner of the tenant's interest of that certain Assignment and Assumption of Lease Agreement dated February 10, 1995 by and between Thomas Edmund Ltd. Partnership as landlord (the "Landlord"), Damark International, Inc. as Assignor, and Sublessor as tenant, a copy of which is attached as Attachment "1" hereto (the "Prime Lease"), which demises certain "leased premises" in the building commonly known as the K-tel Drive Warehouse, Minnesota; and WHEREAS, the parties hereto desire that Sublessee sublease and take possession of a portion of the leased premises described in the Prime Lease pursuant to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows: 1. Sublessor does hereby demise and sublease to Sublessee and Sublessee does hereby accept and lease from Sublessor that portion of the leased premises described in the Prime Lease outlined on Attachment "2" attached hereto being approximately 30,500 square feet in size (the "Demised Premises"), to have and to hold the same for a term commencing on October 14, 1995 and ending on March 13, 1996. For the Demised Premises, Sublessee shall pay Sublessor, in lawful money of the United States, the following amounts payable in advance on the first day of each month during the term of this Sublease and, in the event of any partial month, pro rated based on the number of days during the month within such term and the total number of days during such month: (a) Base Monthly Rental. Base monthly rent (referred to as Net Rent in Assignment and Prime Lease) of $6,859.97 (.363 x $18,897.98); (b) Additional Rent. Additional rent equal to 36.3% of the additional rent payable by Sublessor under the Prime Lease (see Exhibit B of Prime Lease). Any utility charges payable by Sublessor that are not reflected in additional rent, shall be billed monthly to Sublessee and payable within ten (10) days. The amount charged shall equal 36.3% of the payable utility charges of Sublessor. In the event that Sublessee fails to pay any installment of rent or utility charges within five (5) days of when due, Sublessee shall pay to Sublessor on demand a late charge in an amount equal to five percent (5%) each month thereafter until paid in full. 2. Provided Sublessee is not in default and has performed all of its covenants and obligations, Sublessee shall have the option to renew this Sublease for an additional six (6) months under the same terms and conditions in this Sublease. Sublessee shall give sixty (60) days prior written notice of its option to renew. 3. Sublessor does hereby covenant and agree with Sublessee that it shall keep, observe and perform in a timely manner each of its obligations to be kept and performed as set forth in the Prime Lease with respect to the leased premises under the Prime Lease other than the Demised Premises which are subject to this Sublease, and Sublessor shall indemnify Sublessee and hold it harmless of, from and against any and all costs or expenses, including reasonable attorneys' fees, demands or liabilities arising out of or relating to Sublessor's failure to perform as aforesaid. 4. Sublessee agrees to assume and perform Sublessor's obligations under the Prime Lease as they apply to the Demised Premises with regard to the terms, covenants and conditions set forth in the Prime Lease, which are incorporated herein by this reference thereto, and which the parties agree shall be kept and performed by the parties hereto as if Sublessor was the Landlord thereof and Sublessee was the Tenant. 5. Sublessee shall be obligated to comply with all provisions of the Prime Lease regarding alterations to the Demised Premises if satisfactory arrangements and agreements can be reached with Landlord and Tenant. 6. Sublessor and Sublessee agree that in the event the Demised Premises, the building of which it is a part or the Demised Equipment is damaged or destroyed by fire or other casualty included under so called extended coverage, the right, if any, of each party against the other with respect to such damage or destruction whether caused by negligent act or omission or otherwise to the extent that such damage or destruction is recovered from the insurer of policies or insurance, are waived. 7. Sublessee will, during the Sublease term, continuously maintain public liability insurance with respect to death or injury to persons and damage to or destruction of property occurring at or about the Demised Premises. Such insurance shall be in amount(s) and in form(s) required by the Prime Lease, and shall name Sublessor and the Landlord as additional insureds. Sublessee agrees to indemnify and hold harmless Sublessor from, and shall reimburse Sublessor for, all costs and expenses, including reasonable attorneys' fees, incurred by Sublessor in connection with the defense of all claims and demands of third persons, including but not limited to those for death, personal injuries, or property damage, arising out of any default of Sublessee in performing or observing any term, covenant, condition or provision of this Sublease, or out of any of the acts or omissions of Sublessee, its agents, representatives, employees, customers, guests, invitees or other persons who are doing business with Sublessee or who are at the Demised Premises with Sublessee's consent. 8. This Sublease shall terminate at the end of the term hereof, without the necessity of any notice. The Subtenant shall be entitled to terminate this Sublease at any time during the term of this Sublease or any renewal thereof upon 90 days prior written notice to the Sublandlord. Sublessee will peacefully and quietly vacate and surrender the Demised Premises to Sublessor at the expiration of the Sublease term, in the condition called for under the Prime Lease. 10. If Sublessee defaults in its obligations under this Sublease, Sublessor shall have all of the same rights and remedies against Sublessee consistent with these Sublease obligations as would be available to the Prime Landlord against Sublessor if Sublessor were in default under the Prime Lease, as fully as if such rights and remedies were set forth in this Sublease. 11. Sublessee shall be responsible to construct a partition segregating Sublessee's space from Sublessor's space that, to Sublessor's satisfaction, adequately protects Sublessor's security concerns. 12. Sublessee shall not assign this Sublease Agreement or sublet the Demised Premises without the prior written consent of Sublessor. 13. Sublessee shall deposit with Sublessor $6,859.97 to secure the faithful performance of Sublessee's promises and duties contained in this Sublease. Sublessor shall not be required to pay any interest on the deposit to Sublessee. On termination, Sublessor may deduct from the security deposit amounts sufficient to pay for: (i) damages sustained by Sublessor as a result of Sublessee's non-payment of rent; (ii) damages to the Demised Premises for which Sublessee is responsible; (iii) unpaid bills that become a lien against the Demised Premises due to Sublessee's occupancy; (iv) costs of re-renting the Demised Premises after a breach of this Sublease Agreement by Sublessee; (v) court costs incurred by Sublessor in connection with terminating the tenancy; and (vi) other damages of Sublessor that may then be a permitted use of the security deposit under the laws of the State of Minnesota. 14. Any notice or demand to be given to or served upon either Sublessor or Sublessee in connection with this Sublease, shall be deemed to have been sufficiently given or served for all purposes if it is personally served or if it is sent certified mail, return receipt requested, postage prepaid, as follows: To Sublessor: K-tel International (USA), Inc. 2605 Fernbrook Lane North Minneapolis, MN 55447-4736 To Sublessee: K-tel International, Inc. 2605 Fernbrook Lane North, Suite O Minneapolis, MN 55447-4736 Either party may change the place to which notice is to be sent by sending a written notice thereof to the other in the same manner herein above provided. IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be executed as of the day and year first above written. K-TEL INTERNATIONAL (USA), INC. By_______________________________ Its____________________________ K-TEL INTERNATIONAL, INC. By_______________________________ Its____________________________ STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this ___ day of ______________, 1995 by ____________________, the __________________ of K-tel International (USA), Inc., a corporation under the laws of the State of Minnesota, on behalf of the corporation. ____________________________ Notary Public STATE OF MINNESOTA ) ) ss. COUNTY OF HENNEPIN ) The foregoing instrument was acknowledged before me this ___ day of ______________, 1995 by ____________________, the __________________ of K-tel International, Inc., a corporation under the laws of the State of Minnesota, on behalf of the corporation. ____________________________ Notary Public EXHIBIT H (Letterhead of K-tel International, Inc.) [date] Mickey Elfenbein [address] Dear Mr. Elfenbein: Re: Agreement for the Purchase and Sale of Shares and Assets between K-tel International, Inc. ("K-tel") and Simitar, Inc. dated as of [date] (the "Agreement") This letter will acknowledge that the Agreement has been executed and that Simitar, Inc. will now be arranging the financing required to complete the purchase of shares and assets referred to in the Agreement. Between the date hereof and the Closing Date, you will have the authority to operate, and you shall operate the businesses of K-tel and the Subsidiaries (as defined in the Agreement), as President and Chief Executive Officer, in the ordinary course and unless otherwise approved in writing by me, you shall use all commercially reasonable efforts to cause each of K-tel and the Subsidiaries to: (i) carry on its business in substantially the same manner as heretofore carried on; (ii) make normal accounting entries; (iii) preserve its business organization, keep available the services of present employees and preserve the good will of customers and others having business relationships with it; (iv) maintain and keep its properties and facilities in as good condition and working order as at present; (v) keep in full force and effect all insurance presently in effect, in the amounts now in effect, other than changes required in connection with renewals in the ordinary course of business, and provide me with prior written notice of all amendments; (vi) consult with me regarding all significant developments, transactions and proposals relating to the transactions contemplated hereby or the business or affairs of the Subsidiaries; (vii) not make any material change in compensation, benefits or other terms of employment of employees or retain any new employees, other than replacement employees unless, such new employees have an annual salary of $50,000 or less and you have provided me with prior written notice; (viii) operate its businesses in the ordinary course, except for the sale or discontinuance of its operations in France, Germany, Spain and Portugal; (ix) not subject any assets, property or rights to any lien, claim or encumbrance of any nature whatsoever (other than licenses and similar agreements in the ordinary course of business); (x) not acquire or transfer any assets, property or rights other than in the ordinary course of business and for fair value; and (xi) not enter into any material agreement, contract or commitment of any nature whatsoever, or take any other action, other than in the ordinary course of business. This letter will also confirm that you will provide me with all information requested by me relating to the operations of K-tel and its subsidiaries, within a reasonable time. This letter will also confirm that if you do not comply with the terms of this letter, I will be entitled to tender the resignation as Chief Executive Officer which you have submitted to me, to the directors of K-tel. Yours very truly, Chairman K-tel International, Inc. A C C E P T A N C E I, Mickey Elfenbein, hereby agree to the foregoing. DATED: June , 1995. ______________________________________________ Mickey Elfenbein EXHIBIT I RECORD LICENSE AGREEMENT Dated as of the ___ day of ___________, 1995 Between And DOMINION ENTERTAINMENT, INC. K-TEL INTERNATIONAL, INC. 2605 Fernbrook Lane North 2605 Fernbrook Lane North Minneapolis, MN 55447 Suite O (the "Licensor") Minneapolis, MN 55447 (the "Licensee") W I T N E S S E T H In consideration of the mutual promises and covenants herein contained, the parties hereby agree as follows: GRANT AND SCOPE OF RIGHTS (a) Subject to all limitations contained herein, Licensor hereby grants to Licensee for the Term (as defined in Clause 4) and in the Territory (as defined in Clause 22) the non-exclusive right to use master recordings contained in the Dominion re-record catalog which have been approved in writing by Licensor (hereinafter called the "Licensed Masters") in connection with the exploitation of one Album for sale by Licensee via infomercials. (b) The rights hereby granted by Licensor to Licensee include the following: (i) The right to exploit the Album through television infomercial sales only. (ii) The right to use the approved name likeness and biography of each artist whose performance is embodied in the said Licensed Masters in connection with the advertising, publicizing or sale of the Albums. (iii) The right, subject to Clause 9(c) hereof and to the extent permitted by the applicable laws of the Territory, to perform publicly or to permit the public performance by means of radio or television broadcast or otherwise of records manufactured from the said Licensed Masters for the purposes only of advertising the sale of the Albums. (iv) The right to use and control the use of the said Licensed Masters the matrices, mothers, stampers or other copies or derivatives and records manufactured from the master recordings and the performance(s) embodied therein for the purposes hereof only. 2. LIMITATIONS OF RIGHTS (a) Notwithstanding anything to the contrary contained herein: (i) Licensee shall only embody the Licensed Masters on the said Albums and shall not make any second or other use thereof. (ii) It is acknowledged that all Licensed Masters hereunder are not the original recordings but rather a re-recorded version of the original recording and Licensee shall clearly designate such Licensed Masters as re-recordings on all Album jackets, sleeves, inlay cards, and any packaging related thereto. The obligation to so designate such Licensed Masters is of the essence of this Agreement. (iii) The rights herein granted to Licensee shall be limited to the extent that Licensor owns or controls such rights, and Licensor specifically states that it does not own or control the exclusive rights in the Territory to each and every Licensed Master comprising the Albums. (b) Except as described in paragraph (c) of this Clause 2, Licensor reserves exclusively to itself and its successors, licensees and assigns all rights and uses in and to the Licensed Masters whether now or hereafter known or in existence, except the limited use expressly licensed hereunder. By way of illustration and not of limitation, Licensee shall not: (i) Exploit the Album hereunder at any price other than in the so-called "full-priced" category. (ii) Use the Licensed Masters or dispose of or use in any way records or tapes manufactured therefrom except for commercial manufacture and sale of the records as herein provided. (iii) [Intentionally Deleted] (iv) Edit or alter the Licensed Masters. Licensee shall only employ the Licensed Masters in the manner and for the purpose originally recorded by or for Licensor. (v) Sub-license or otherwise convey any rights under this Agreement. (vi) Exploit the Album in any retail channels of trade either directly or indirectly. (vii) Undertake or knowingly permit the manufacture, advertising, distribution or sale of any Licensed Master or the Album outside the Territory. 3. RESERVATION OF RIGHTS (a) The following shall be and remain the property of Licensor: (i) The Licensed Masters supplied by Licensor under this Agreement as well as all mothers and stampers produced therefrom by or for Licensee; (ii) Licensor's copyright and other property rights under statutory and/or common law in the Licensed Masters, tapes, matrices, and mothers and stampers; (iii) Any and all copyrights, trademarks or other similar rights or other property rights which may otherwise accrue to Licensee or to any of its distributors, agents or representatives by reason of the exercise of the rights granted by this Agreement; (iv) The exclusive right to use or license the Licensed Masters or the performance embodied thereon for use in connection with the synchronization of said performance with television productions and/or motion pictures, including any soundtrack albums derived therefrom, whether produced in the Territory or otherwise. (b) Licensee will, upon request, execute or cause to be executed, and will deliver to Licensor, all documents necessary to establish and effectuate Licensor's unencumbered ownership of all such rights. (c) Licensee shall take all precautions necessary, including but not limited to placing the appropriate "P" line credit on all Album jackets, sleeves, labels or inlay cards, to preserve and protect the copyright in the Licensed Masters in Licensor's name and to prevent same from falling into the public domain. (d) All records manufactured under the authority of this Agreement shall be distributed in packaging materials bearing a Universal Product Code (UPC) that will enable retail stores equipped with devices that identify bar codes at the point of sale to report the number of records sold to SoundScan, Inc. for tabulation if applicable. 4. TERM The Term of this Agreement shall be for a period of five (5) years commencing with the Closing Date of the agreement or when otherwise terminated under Section 18 below. Each year of the Term may hereinafter be referred to as a "Contract Year". 5. ADVANCES [Intentionally deleted] 6. ROYALTIES In consideration of the license and rights herein granted to Licensee, Licensee hereby agrees to pay all of the following to Licensor: (a) A royalty of eight (8%) percent based on the actual selling price to the consumer, such royalty being accruable on one hundred percent (100%) of all copies of the Albums which are exploited hereunder which amount shall in no event be less than US $.04 per master recording on cassettes and US $.06 per master recording on compact disc. Royalties on "bonus" or "free" records shall be US $.04 per master recording on cassettes and US $.06 per master recording on compact disc. (b) In computing the number of Albums manufactured and sold hereunder Licensee shall have the right to deduct returns and credits on account of defective merchandise, errors in billing and errors in shipment. 7. ACCOUNTING STATEMENTS (a) During the Term of this Agreement and thereafter as long as Licensee continues to sell the Album hereunder, Licensee agrees to keep all usual and proper records and books of account and make all usual and proper entries therein relating to the exploitation of the Album. (b) Licensee shall deliver to Licensor within thirty (30) days following the last day of March, June, September and December of each year detailed written statements, showing sales of records hereunder during such period. Licensee shall in said statements advise Licensor in writing of the identity of each Album manufactured hereunder and identify each Licensed Master embodied thereon. Such statements shall include the following information: (i) The number of copies of the Album sold within the Territory during the accounting period; and (ii) The amount of royalties and other payments due to Licensor pursuant to this Agreement. (c) Simultaneously with the delivery of the accounting statements referred to above, Licensee shall pay to Licensor, at the above written address, all sums shown to be due to Licensor by such statements. All payments shall be made in United States Dollars (where applicable computed at the rate of exchange existing on the date the payments are required to be made pursuant to the terms of this Agreement). (d) In the event Licensee does not pay to Licensor the amount shown to be due by any accounting statement on the date the payment is required to be made pursuant to the terms of this Agreement then: (i) Licensor may at its election terminate this Agreement hereunder pursuant to Clause 18(b) or (c) below; and/or (ii) Licensor may charge interest at the rate of three percent (3%) above the then current Prime Lending Rate to and payable by Licensee for the period commencing upon the date such payment was due until the date such payment is made. (e) In the event that Licensee is unable because of governmental restrictions to make payment in the manner described in this Clause and if Licensor agrees to accept payment in a currency other than United States Dollars, Licensee shall deposit (at Licensee's expense) to Licensor's credit or account or to such other account as Licensor may from time to time designate, in a depository selected by Licensor, all sums payable to Licensor hereunder. Notwithstanding, in the event that Licensee in unable because of governmental restrictions to make payment to Licensor in the United States or in United States Dollars, Licensor shall have the right to terminate this Agreement upon thirty (30) days written notice, without prejudice to Licensor's rights. 8. INSPECTION (a) Licensee shall permit Licensor or its duly authorized representative to inspect, audit, abstract and copy such of Licensee's books and records as reasonably relate to the subject matter of this Agreement. Such inspection shall be allowed twice during each calendar year for as long as Licensee continues to distribute or sell the Album, and twice in each of the two (2) years thereafter, upon thirty (30) days written notice, and may be conducted at Licensee's regular place of business in the United States or where books and records are maintained. In the event calculation of royalty payments is determined by a computer based system, Licensor shall be permitted to examine the machine sensible data utilized by such system and the related documentation describing such system and Licensee agrees to retain such data for at least two (2) years after the expiration of this Agreement. (b) Any inspection undertaken by Licensor shall be at Licensor's expense provided, however, that if an underpayment equal to or in excess of five (5%) percent of the royalties properly due and payable to Licensor is discovered, Licensee shall reimburse Licensor for the expense of such inspection in addition to remitting the amount determined to be properly due plus accrued interest at the rate of three percent (3%) above the then current Prime Lending Rate. (c) This Clause shall survive the termination of this Agreement or any subsequent agreement between the parties hereto covering generally the subject matters covered herein. 9. THIRD PARTY PAYMENTS (a) With respect to royalties payable to copyright proprietors by reason of Licensee's exercise of its rights hereunder, Licensee agrees to secure licenses from such copyright proprietors or their agents in the Territory and to make payments directly to such proprietors or agents. No rights to manufacture and exploit the Licensed Masters are granted hereunder until Licensee secures such copyright licenses. (b) Licensee shall be responsible for the payment of any sums that may be payable to the Special Payments Fund and the Music Performance Trust Fund of the American Federation of Musicians (the "AFofM") or any other union or guild (including AFTRA) based upon the manufacture and sale of the Licensed Masters as contained on the Albums. Licensee shall pay to Licensor an additional royalty of one (1%) percent of the actual selling price to the consumer for the "AFofM" royalty, said royalty being payable by Licensee to Licensor in accordance with paragraph 7 herein. (c) Licensee shall be responsible for any amounts properly becoming due to any union or guild having jurisdiction in the nature of so-called "re-use" fees arising as a result of Licensee's use of the performances embodied on the Masters hereunder, including but not limited to commercial advertisements for the sale of the Licensed Masters as contained on the Albums. (d) Subject to subsections (a), (b), and (c) above, Licensor shall pay all other royalties and payments, if any, which may become due to artists, producers and other contributors to the performances embodied on the Licensed Masters. (e) Within thirty (30) days of receipt of Licensor's invoice Licensee shall pay to Licensor costs incurred by Licensor relating to copying, packaging and shipping of the Licensed Masters, negatives, advertising, promotional, display and any other materials supplied or caused to be supplied by Licensor. 10. DELIVERY AND QUALITY OF LICENSED MASTERS (a) Licensor shall use its best efforts to deliver or cause to be delivered within twenty (20) days after acceptance of Licensee's request therefor and receipt of copies of Licensee's mechanical copyright licenses, copy master tapes of those Licensed Masters then agreed to be licensed hereunder. Such copy master tapes shall be of suitable quality for use in the commercial production of records for general sale. Any Licensed Masters delivered to Licensee hereunder, shall be deemed to be technically satisfactory for the purposes hereunder, unless Licensor has been notified to the contrary within ten days (10) after receipt of the said Licensed Masters. Any such notification must contain a written technical report from the laboratory of Licensee which specifically details and describes any technical defects in the material. Upon receipt of such notification, Licensor shall attempt to have the defects corrected, at its expense, and reship the corrected Licensed Masters promptly thereafter. (b) Licensor shall supply to Licensee in writing the correct title of the recorded work(s), the names of the author and composer thereof, the names of the recording artists as Licensor desires to have them displayed on the label of the Album, and any other relevant copyright information available to Licensor. 11. SUBSTITUTIONS (a) In the event Licensor is not reasonably able to correct the noticed defects pursuant to Clause 10 above, or in the event the Licensor's ownership of or otherwise control of the rights of any Licensed Master has become encumbered, restricted or terminated, the Licensor, in its sole discretion, reserves the right to substitute a Licensed Master. (b) Licensee's sole remedy, in the event of Licensor's failure to provide a substitute Licensed Masters referred to above, shall be the refund of monies paid as advances for such Licensed Master and no other. 12. LABEL CREDIT The labels, sleeves and inlay cards of all Records shall bear a credit to Licensor in such form as indicated on the Schedules. 13. SAMPLES Licensee shall provide Licensor, prior to the distribution thereof, with three (3) sample copies of the Albums. 14. LICENSEE'S WARRANTIES Licensee warrants and represents that: (a) Licensee possesses the full right, power and authority to enter into this Agreement. (b) Prior to the delivery of the master tapes and prior to the manufacture of records, Licensee shall have obtained all mechanical copyright licenses relating to the musical compositions embodied on the Licensed Masters contained on such Album and shall remit copies of such mechanical licenses to Licensor. This warranty is of the essence of this Agreement. (c) All Albums manufactured by Licensee hereunder shall be of the highest quality and shall be consistent with the standards of the record industry. (d) All Albums manufactured by Licensee hereunder shall be exploited by Licensee in strict compliance with all the terms and conditions of this Agreement. In particular, but without limitation, Licensee hereby expressly warrants that no Album may be exported for sale outside the Territory nor shall Licensee knowingly sell any Album manufactured hereunder to any third party intending to resell same outside the Territory. (e) Neither Licensee nor anyone claiming rights through Licensee shall sell, assign, transfer, mortgage, hypothecate or subject to any lien or encumbrance the Licensed Masters or any of the above rights, and any attempt thereto shall cause the immediate termination of this Agreement and/or be deemed null and void and of no force and effect whatsoever. 15. LICENSOR'S WARRANTIES Licensor warrants and represents that: (a) Licensor possesses the full right, power and authority to enter into and to perform this Agreement. (b) At the time of delivery of the Licensed Masters Licensor will be the exclusive owner of or otherwise control the rights herein granted to Licensee in such Licensed Masters. (c) The Licensed Masters were recorded and otherwise prepared in all respects in accordance with the rules and regulations of all unions and similar associations having jurisdiction. 16. INDEMNIFICATION (a) Each of the parties hereto shall indemnify, save and hold the other harmless from loss or damage arising out of or connected with any claim by a third party which is inconsistent with any of the recitals, agreements, representations or warranties herein. Either party shall reimburse the other on demand for any payment made by the demanding party at any time after the date hereof in respect of any liability or claim to which this indemnity relates and which has resulted in an adverse final judgment against the demanding party, or a settlement approved by both parties, in which it is determined that the ultimate liability is that of the indemnifying party. Prompt notice shall be given to the indemnifying party of any claim to which this indemnity relates and the indemnifying party shall have the right, at its own expense to control the defense thereof, provided that: (i) The demanding party shall have the right to cooperate in such defense at its own expense. (ii) If the indemnifying party shall not exercise its right to control the defense, then the demanding party shall, in addition to any other indemnity hereunder, be reimbursed for its reasonable expenses (including reasonable attorney's fees), if any, incurred in the defense if it shall be determined that the ultimate liability is that of the indemnifying party; and (b) Nothing herein is to be construed so as to permit Licensee the right to withhold royalties payable hereunder. 17. ASSIGNMENT Neither this Agreement nor the rights granted to Licensee hereunder may be assigned by Licensee without the written consent of Licensor. Licensor shall be entitled to assign this Agreement including its rights hereunder to any parent, affiliated or subsidiary company or corporation, or to anyone owning or acquiring substantially all of the capital stock or assets of Licensor. 18. TERMINATION OR EXPIRATION (a) Bankruptcy and Insolvency. In the event Licensee shall be adjudged a bankrupt or in the event that any insolvency proceedings are instituted by or against Licensee and are not dismissed within thirty (30) days after the institution thereof, or in the event a trustee or receiver is appointed to take over all or a substantial part of Licensee's assets, Licensee's rights under this Agreement shall automatically terminate, and such termination shall be deemed effective as of the commencement of the event which gave rise to such termination. In the event of such termination, all monies due and unpaid by Licensee pursuant to this Agreement shall there upon become due and payable. Further, all Licensed Masters and all copies thereof, all color separations and other artwork and all other property of Licensor shall be returned to Licensor at Licensee's expense, and in no event shall the title thereto or any rights therein be acquired by or vest in any trustee, receiver or in any other party by reason of any such insolvency, bankruptcy or other such occurrence affecting Licensee. (b) Breaches. Without prejudice to any other rights or claims which Licensor may have, Licensor may, at its option, terminate this Agreement upon giving not less than fifteen (15) days written notice and period to cure to Licensee, in the event of any of the following, which shall constitute a material breach of this Agreement: (i) Licensee shall fail to account and make payments hereunder or shall fail to perform any other of its material obligations required of it hereunder. (ii) Licensee, through act or omission, shall violate or knowingly permit the violation of any of its warranties and representations hereunder. (iii) Licensee utilizes or duplicates Licensor's mark in violation of the applicable terms of this Agreement. (iv) Licensee denies Licensor the right granted hereunder to audit Licensee's books. (c) Immediate Termination. Notwithstanding Section 18(b) above, and without prejudice to any other rights or claims which Licensor may have, Licensor shall have the right to immediately terminate this license without any written notice to Licensee in the event of any of the following: (i) Licensee has failed to timely account and make payments hereunder a total of four (4) times, whether or not prior delinquent accountings and payments have been made. (ii) Licensee has willfully reported inaccurate accountings of payments due hereunder. (iii) Licensee knowingly exports, distributes or licenses any Licensed Master or Album outside the Territory. (d) Death or change in ownership. In the event of: (i) the death of Philip Kives; or (ii) discontinuance of Philip Kives as an active senior officer or manager of Licensee; or (iii) a change in the ownership of fifty percent (50%) or more of the Licensee, Licensor may terminate this Agreement by giving the Licensee fifteen (15) days' written notice. In such event Licensee shall have a six (6) month period in which to sell off existing inventory of the Albums. (e) Termination/Expiration Procedure. (i) In the event of the termination of this Agreement, all rights herein granted by Licensor to Licensee shall immediately terminate and shall thereupon revert to Licensor, free and clear of any claims by Licensee. Licensee shall continue, nevertheless, to be responsible for accounting and payments as set forth in this Agreement, and upon notification from Licensor will return to Licensor or to Licensor's designee at Licensee's expense, all tapes, matrices, duplicate tapes, masters, mothers and stampers supplied by Licensor hereunder that are in Licensee's possession or control. (ii) If this Agreement expires by expiration of the Term then, at the end of the Term, all Licensed Masters, tapes or matrices supplied to Licensee and all derivatives of said tapes and matrices, including duplicate tapes, masters, mothers and stampers provided to Licensee pursuant to the License Agreement, shall at Licensor's election either be destroyed in the presence of one of Licensor's duly authorized representatives, or delivered to Licensor free of cost to Licensor. (f) Sell-off. (i) Licensee shall advise Licensor in writing, upon the expiration of the term, the quantity of Albums that are in Licensee's stock at the time of said expiration. (ii) Provided Licensee supplies Licensor with the aforesaid information Licensee shall be entitled to sell-off, for a period of six (6) months thereafter, all existing stocks of the applicable Album subject to the continuing obligation to account for and pay royalties on such sales in accordance with the terms hereof. (iii) Upon the expiration of the sell-off period Licensee shall, at its sole cost and expense, destroy all of its existing inventory of Albums and shall furnish Licensor with an affidavit of destruction executed by an officer of Licensee. 19. NOTICES All accounting or payment which Licensee is hereto required to give to Licensor shall be addressed to the addresses first above written. All other notices and other items from one party to the other hereunder will, unless herein indicated to the contrary, be addressed as follows; To Licensee: At Licensee's address as set forth on the first page hereof; To Licensor: At Licensor's address as set forth on the first page hereof, directed to the attention of: Vice President, Business Affairs or to such other address as either party shall designate in writing to the other party from time to time. Unless otherwise set forth in this Agreement, all notices shall be deemed duly given on the date of mailing. 20. MANUFACTURING Licensor shall be afforded the right of first refusal to manufacture all of the product which include master recordings hereunder. The right of first refusal shall be exercised within five (5) business days of receipt of a written notice of third party offer to manufacture. 21. MISCELLANEOUS (a) This Agreement set forth the entire understanding between Licensor and Licensee with respect to the subject matter hereof, all prior negotiations or alleged understandings are merged herein, and no amendment to or modification of this Agreement or any provision hereof shall be binding upon Licensor and Licensee unless confirmed by a written instrument signed by an Officer of Licensee and Licensor's authorized signatory. Any process in any action, suit or proceeding arising out of or relating to this agreement may, among other methods, be served upon Licensee by delivering it or mailing it in accordance with Clause 19 above. No waiver of any provision of or default under this Agreement shall affect Licensee's or Licensor's rights, as the case may be, thereafter to enforce such provision or to exercise any right or remedy in the event of any other default, whether or not similar. (b) Any act or failure to act by either party shall not be construed as a waiver of any of such party's rights hereunder unless a memorandum thereof, expressing the intention to waive, signed by the party to be charged, is made and delivered to the other party. Any such waiver shall not be deemed to be a waiver of any past or future breach of the same or any other provision of this Agreement. (c) If any part of this Agreement shall be determined to be invalid or unenforceable by a court of competent jurisdiction or by any other legally constituted body having jurisdiction to make such determination, the remainder of this Agreement shall remain in full force and effect. (d) The captions herein are for convenience only, do not constitute a part of this Agreement, and are not to be used in the construction thereof. (e) This agreement and any arbitration conducted under paragraph (g) of this Clause 21 will be governed by and construed in accordance with the substantive, procedural and evidentiary laws and rules of the State of Minnesota. (f) Subject to paragraph (g) of this Clause 21, the parties hereby submit to the jurisdiction of, and waive any venue objections against, the United States District Court for the District of Minnesota and the trail courts of the State of Minnesota, in any litigation and/or arbitration arising out of this Agreement, and each party hereby consents to the personal jurisdiction of such courts for purposes of this Agreement, including entry of enforcement of any arbitration award or judgment. (g) Any claim, dispute, or controversy arising out of or in connection with or relating to this Agreement or the breach or alleged breach thereof shall be submitted by the parties to arbitration by the American Arbitration Association ("AAA") in the City of Minneapolis, Minnesota, under the commercial rules then in effect for the Association except as provided herein. A transcribed record shall be prepared. The AAA shall recommend three (3) arbitrators who are knowledgeable in the field in dispute. The parties shall agree upon one (1) of the three within twenty (20) days. If no arbitrator is mutually agreed upon, the AAA shall make such appointment within thirty (30) days of such failure. Each party shall have the right to request the arbitrator to order reasonable and limited discovery. The award rendered by the arbitrator shall include costs of arbitration, reasonable attorneys' fees and reasonable costs for expert and other witnesses, but shall not include punitive damages against either party. Judgment on such award may be entered as provided in paragraph (f) of this Clause 21, provided that nothing in this paragraphs (g) shall be deemed as preventing either party from seeking relief from the courts as necessary to protect either party`s name, proprietary information, trade secrets, know-how, or any other appropriate provisional remedy. (h) Clause 6, 7, 8, 9, 12, 14, 16, 18(f) and 21 will survive the termination of this Agreement. 22. DEFINITIONS As used in this Agreement, the following terms shall have the indicated meanings: (a) "master recordings" - recordings which embody sound alone and are intended for reproduction in the form of records or otherwise. (b) "Record" or "record" means any reproduction of a master recording in the form of analog cassette tapes and compact discs. (c) "exploit" - shall mean the manufacture, distribution, advertising, promotion and sale of the Album pursuant to the terms hereof. (d) "Album" - that record (which shall contain all of the Licensed Masters) manufactured, distributed and sold by Licensee hereunder which shall contain up to one hundred and fifty (150) master recordings on one or more Records. (e) "Records sold", "record sales" and "sales" mean one hundred (100%) percent of those records shipped by Licensee hereunder and not returned. (f) "Infomercial" - shall mean a minimum of a twenty (28) eight minute television broadcast show as customary in the industry. (g) "Territory" - United States (h) "this Agreement" - shall mean this agreement and the Schedule "A" annexed hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. DOMINION ENTERTAINMENT, INC. K-TEL INTERNATIONAL, INC. BY_______________________ BY__________________________ An authorized signatory An authorized signatory NAME__________________________ NAME________________________ Please print or type Please print or type TITLE_________________________ TITLE_______________________ SCHEDULE A Annexed to and forming part of Agreement dated _________________ , 1995 ALBUM TITLE: HEARTBREAKER CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST RAINDROPS KEEP FALLING ON MY HEAD B.J. THOMAS JEAN OLIVER CRYSTAL CHANDELIERS VIC DANNA I BELIEVE FRANKIE LAINE JUST WALKING IN THE RAIN JOHNNY RAY LOVE LETTERS IN THE SAND PAT BOONE RED ROSES FOR A BLUE LADY VIC DANNA CARA MIA JAY BLACK BESAME MUCHO TRINI LOPEZ LOVE IS A MANY SPLENDORED THING FOUR ACES VENUS* FRANKIE AVALON MR. BLUE FLEETWOODS YOUNG GIRL GARY PUCKET AND THE UNION GAP JESAMINE CASUALS HAPPY TOGETHER* TURTLES LOVE IS ALL AROUND TROGGS WISHING AND HOPING MERSEYBEATS YOU WERE ON MY MIND CRISPIAN ST. PETERS SILENCE IS GOLDEN TREMELOES A GROOVY KIND OF LOVE WAYNE FONTANA FERRY 'CROSS THE MERSEY GERRY & THE PACEMAKERS YOU'VE GOT YOUR TROUBLES I'VE GOT MINE FORTUNES IF YOU GOTTA MAKE A FOOL OF SOMEBODY FREDDY & THE DREAMERS TRAINS & BOATS & PLANES BILLY J. KRAMER REFLECTIONS OF MY LIFE MARMALADE THE END OF THE WORLD SKEETER DAVIS WILL YOU STILL LOVE ME TOMORROW SHIRELLES I WILL FOLLOW HIM SANDY POSEY DOWN IN THE BOONDOCKS BILLY JOE ROYAL LEADER OF THE PACK SHANGRI-LAS RUNAWAY DEL SHANNON CORINNA CORINNA RAY PETERSEN VENUS IN BLUE JEANS JIMMY CLANTON IT'S MY PARTY LESLEY GORE DEDICATED TO THE ONE I LOVE SHIRELLES HEY PAULA* PAUL & PAULA TELL LAURA I LOVE HER RAY PETERSEN TEEN ANGEL MARK DINING CHAPEL OF LOVE DIXIE CUPS ROSEGARDEN LYNN ANDERSON HEARTACHES BY THE NUMBER GUY MITCHELL THE HAPPIEST GIRL IN THE WHOLE USA DONNA FARGO WHAT IN THE WORLD'S COME OVER YOU JACK SCOTT LUCKENBACH TEXAS JOHNNY RUSSELL HELP ME MAKE IT THROUGH THE NIGHT SAMMI SMITH TENNESSEE WALTZ PATTI PAGE HIGH NOON FRANKIE LAINE SLIDE OFF YOUR SATIN SHEETS JOHNNY PAYCHECK WILL THE CIRCLE BE UNBROKEN NED MILLER I CAN'T STOP LOVING YOU KITTY WELLS NO CHARGE MELBA MONTGOMERY YOU LIGHT UP MY LIFE MARGO SMITH GREEN GREEN GRASS OF HOME PORTER WAGONER **MY SPECIAL PRAYER PERCY SLEDGE GREAT PRETENDER PLATTERS MAKE THE WORLD GO AWAY TIMI YURO ALL I COULD DO WAS CRY ETTA JAMES **SMOKE GETS IN YOUR EYES PLATTERS SPANISH HARLEM BEN E. KING WHEN A MAN LOVES A WOMAN PERCY SLEDGE WARM AND TENDER LOVE PERCY SLEDGE STAND BY ME BEN E. KING ONLY YOU PLATTERS HURT TIMI YURO **HEY THERE LONELY GIRL EDDIE HOLMAN **BRING IT ON HOME TO ME EDDIE FLOYD IF YOU DON'T KNOW ME BY NOW HAROLD MELVIN & THE BLUENOTES ***SINGING THE BLUES GUY MITCHELL ***I'LL BE HOME PAT BOONE ***ROCKY DICKEY LEE ***OH LONESOME ME DON GIBSON (**) -- CASSETTE/LP ONLY (***) -- COMPACT DISC ONLY (**) -- CASSETTE/LP ONLY (***) -- COMPACT DISC ONLY TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ SCHEDULE B Annexed to and forming part of Agreement dated _________________ , 1995 ALBUM TITLE: ROCK BOX CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST YAKETY YAK THE COASTERS ALLEY OOP* HOLLYWOOD ARGYLES MR. CUSTER* LARRY VERN PAPA-OOM MOW MOW RIVINGTONS SEVEN LITTLE GIRLS PAUL EVANS (SITTING IN THE BACK SEAT) DOES YOUR CHEWING GUM LOSE ITS FLAVOR LONNIE DONEGAN ON THE BEDPOST OVERNIGHT? THE BIRDS & THE BEES* JEWEL AKENS SURFIN' BIRD TRASHMEN MONSTER MASH SHA NA NA WILD THING THE TROGGS HE'S SO FINE CHIFFONS KEEP A KNOCKIN' LITTLE RICHARD SHEILA TOMMY ROE SPLISH SPLASH SHA NA NA PERSONALITY LLOYD PRICE THE GREAT PRETENDER THE PLATTERS WILD ONE BOBBY RYDELL HEY LITTLE GIRL (IN THE HIGH DEE CLARK SCHOOL SWEATER) LITTLE DARLIN' THE DIAMONDS HE'S A REBEL CRYSTALS THE LETTER THE BOX TOPS LET'S HAVE A PARTY WANDA JACKSON DA DOO RON RON CRYSTALS LONG TALL SALLY LITTLE RICHARD STAGGER LEE LLOYD PRICE JAMBALAYA JOHNNY RUSSELL SLOW TWISTIN' CHUBBY CHECKER RED RIVER ROCK JOHNNY & THE HURRICANES THE STROLL THE DIAMONDS DO YOU WANNA DANCE? BOBBY FREEMAN MASHED POTATO TIME DEE DEE SHARP PEPPERMINT TWIST JOEY DEE & THE STARLITERS SHAKIN' ALL OVER CHAD ALLEN (FORMERLY OF THE GUESS WHO) BRISTOL STOMP DOVELLS LUCILLE LITTLE RICHARD LEADER OF THE PACK SHANGRI-LAS BLUE MOON THE MARCELS AIN'T THAT A SHAME PAT BOONE CHAPEL OF LOVE DIXIE CUPS PARTY DOLL BUDDY KNOX HIPPY HIPPY SHAKE SWINGIN' BLUE JEANS REBEL ROUSER DUANE EDDY TELL HIM THE EXCITERS UNDER THE BOARDWALK THE DRIFTERS MY BOYFRIEND'S BACK THE ANGELS STAND BY ME BEN E. KING GOOD GOLLY MISS MOLLY LITTLE RICHARD RUNAWAY DEL SHANNON HEY PAULA* PAUL & PAULA WHEN A MAN LOVES A WOMAN PERCY SLEDGE HURT TIMI YURO THEN HE KISSED ME THE CRYSTALS SAVE THE LAST DANCE FOR ME THE DRIFTERS MY GUY MARY WELLS ONE FINE DAY THE CHIFFONS PATCHES CLARENCE CARTER MY TRUE LOVE JACK SCOTT GOIN OUT OF MY MIND LITTLE ANTHONY DEDICATED TO THE ONE I LOVE THE SHIRELLES MY HEART IS AN OPEN BOOK CARL DOBKINS WHISPERING GRASS INK SPOTS VENUS* FRANKIE AVALON RAINDROPS KEEP FALLING ON MY HEAD B.J. THOMAS CHARLIE BROWN THE COASTERS OH BOY WANDA JACKSON THE HUCKLEBUCK CHUBBY CHECKER PEPINO THE ITALIAN MOUSE JOEY CHEDDAR STUPID CUPID WANDA JACKSON HATS OFF TO LARRY DEL SHANNON SUSIE DARLING ROBIN LUKE LET'S TWIST AGAIN CHUBBY CHECKER SPEEDY GONZALES PAT BOONE IF I HAD A HAMMER TRINI LOPEZ TEQUILA ACE CANNON COME SOFTLY TO ME FLEETWOODS JUST WALKING IN THE RAIN JOHNNY RAY RHYTHM OF THE RAIN CASCADES WHAT'S A MATTER BABY TIMI YURO TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ SCHEDULE C Annexed to and forming part of Agreement dated ________________________ , 1995 ALBUM TITLE: POP HISTORY CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST SUGAR BABY LOVE RUBETTES BEAUTIFUL SUNDAY DANIEL BOONE LOVE GROWS WHERE MY ROSEMARIE GOES EDISON LIGHTHOUSE COME AND GET IT BADFINGER UNDERCOVER ANGEL ALAN O'DAY EVERLASTING LOVE ROBERT KNIGHT HOOKED ON A FEELING B.J. THOMAS *DANCING ON A SATURDAY NIGHT BARRY BLUE THE NIGHT CHICAGO DIED PAPER LACE INDIAN RESERVATION DON FARDON ARIZONA MARK LINDSAY BILLY DON'T BE A HERO PAPER LACE ME AND YOU AND A DOG NAMED BOO LOBO SAN BERNADINO CHRISTIE YELLOW RIVER CHRISTIE I'D LOVE YOU TO WANT ME LOBO DON'T EXPECT ME TO BE YOUR FRIEND LOBO IF YOU DON'T KNOW ME BY NOW HAROLD MELVIN & THE BLUENOTES DON'T LET THE SUN CATCH YOU CRYING GERRY & THE PACEMAKERS GOODBYE MARY HOPKINS MR. BOJANGLES GLENN YARBOROUGH ONE TIN SOLDIER ORIGINAL CASTE DO YOU WANNA MAKE LOVE? PETER MCCANN DRIFT AWAY DOBIE GRAY RIDE CAPTAIN RIDE BLUES IMAGE SOONER OR LATER GRASSROOTS PIED PIPER CHRISTIAN ST. PETERS BEG STEAL OR BORROW NEW SEEKERS *IT AIN'T ME BABE TURTLES *ELENORE TURTLES LAY DOWN MELANIE OB LA DI OB LA DA MARMALADE THE LETTER THE BOX TOPS HERE COMES MY BABY TREMELOES BUILD ME UP BUTTERCUP FOUNDATIONS LADY WILLPOWER GARY PUCKET & THE UNION GAP GOOD MORNING STARSHINE OLIVER IN THE SUMMERTIME MUNGO JERRY JUDY IN DISGUISE JOHN FRED & HIS PLAYBOY BAND BABY COME BACK EQUALS BEND ME SHAPE ME AMERICAN BREED DIZZY TOMMY ROE **LIGHTNING STRIKES LOU CHRISTIE **SATISFACTION GUARANTEED HAROLD MELVIN & THE BLUENOTES ***SURF CITY JAN & DEAN ***HITCHIN' A RIDE VANITY FAIR TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ EX-10.1 3 STOCK TRANSFER AND LOAN REPAYMENT AGREEMENT STOCK TRANSFER AND LOAN REPAYMENT AGREEMENT This Stock Transfer and Loan Repayment Agreement dated as of June 28, 1995 is made and entered into by and among K-5 Leisure Products, Inc., a Minnesota corporation ("K-5"), Simitar, Inc., a Minnesota corporation ("Simitar"), and Mickey Elfenbein ("Elfenbein"), a resident of Medina, Minnesota, RECITALS WHEREAS, Elfenbein is indebted to K-5 in an amount that, as of the Closing Date (as hereinafter defined) will be approximately $927,263 pursuant to a loan in the principal amount of $448,000 made by K-5 to Elfenbein and a loan in the principal amount of $120,575 made by National Developments Ltd. ("National Developments") to Elfenbein (National Developments' rights with respect to which were previously assigned to K-5) (collectively, the "K-5 Indebtedness"); and WHEREAS, the K-5 Indebtedness is in part the subject of that certain agreement (the "Debt Agreement") dated April 27, 1988 by and among Elfenbein, K-5, Qwil Resources, Inc. ("Qwil"), Bradley Investments, Inc. ("Bradley"), National Celebrity Video, Inc. ("NCV"), and Simitar Entertainment, Inc. ("Simitar Entertainment") and a related pledge agreement (the "Pledge Agreement"), of even date therewith, between Elfenbein and K-5; and WHEREAS, Elfenbein is the sole shareholder of Simitar, and the record and beneficial owner of 362,611 shares of the common stock of K-tel International, Inc. ("K-tel") and 430 common shares and 50 preferred shares of the capital stock of Simitar Entertainment; and WHEREAS, K-5 is the record and beneficial owner of 520 common shares and 50 preferred shares of the capital stock of Simitar Entertainment (collectively, the "Simitar Entertainment Shares"); and WHEREAS, the parties hereto desire to provide for the payment of the K-5 Indebtedness and for the exchange of the Simitar Entertainment Shares for certain common shares in K-tel and a promissory note, on the terms and subject to the conditions contained in this Agreement, NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. REPAYMENT OF K-5 INDEBTEDNESS. At the Closing (as hereinafter defined) and on the Closing Date (as hereinafter defined), Elfenbein shall assign, transfer and convey to K-5 231,816 shares of the common stock of K-tel (the "K-tel Repayment Shares") free and clear of any lien, claim or encumbrance of any nature whatsoever, and K-5 shall accept such shares as payment in full of all amounts owing by Elfenbein to K-5. 2. EXCHANGE OF SIMITAR ENTERTAINMENT SHARES FOR NOTE AND K-TEL SHARES. On or prior to the Closing, Elfenbein shall assign, transfer and convey to Simitar, as a capital contribution, 118,184 common shares of K-tel (the "K-tel Exchange Shares") and all of the common and preferred shares in Simitar Entertainment held of record or beneficially by Elfenbein. At the Closing and on the Closing Date, K-5 shall assign, transfer and convey to Simitar, free and clear of any lien, claim or encumbrance of any nature whatsoever, all of the common and preferred shares in Simitar Entertainment held of record or beneficially by K-5 and, in exchange therefor, Simitar shall assign, transfer and convey to K-5, free and clear of any lien, claim or encumbrance of any nature whatsoever, the K-tel Exchange Shares and Simitar's promissory note in the form attached hereto as Exhibit A (the "Note"). 3. CLOSING DATE AND CLOSING PROCEDURES. (1) The Closing of the transactions contemplated herein shall take place at the offices of Kaplan, Strangis and Kaplan, P.A., 5500 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota 55402, at 10:00 a.m. on October 16, 1995, or at such other time, date or place as to which the parties hereto may mutually agree (for purposes of this Agreement, such event is referred to as the "Closing" and such date and time are referred to as the "Closing Date"). (2) At the Closing, the parties shall take the following actions: (a) Elfenbein shall deliver to K-5 the certificate or certificates representing the K-tel Repayment Shares, duly endorsed for transfer; (b) K-5 shall execute and deliver to Elfenbein a receipt acknowledging receipt of the K-tel Repayment Shares as payment in full of all amounts owing by Elfenbein to K-5; (c) Elfenbein, K-5, Qwil, Bradley, NCV, Simitar Entertainment and National Developments shall execute a termination and release acknowledging termination of the Debt Agreement and the Pledge Agreement and the repayment in full of all amounts owing by Simitar Entertainment, Elfenbein, NCV and/or Bradley to National Developments, K-5 and/or Qwil and all amounts owing by NCV to Elfenbein; (d) K-5 shall deliver to Simitar the certificates representing the Simitar Entertainment Shares, duly endorsed for transfer; (e) Simitar shall deliver to K-5 the certificate or certificates representing the K-tel Exchange Shares, duly endorsed for transfer, and the Note; (f) Each of Elfenbein and Simitar, on the one hand, and K-5, on the other hand, shall deliver to the other a certificate stating that the representations and warranties made herein were true and correct on the date hereof and are true and correct on the Closing Date and evidencing the due authorization of their execution, delivery and performance of this Agreement by their respective boards of directors; (g) Philip Kives, the principal shareholder of K-5, shall submit his resignation as a director and officer of Simitar Entertainment; (h) K-5, Simitar and Elfenbein shall, and K-5 shall cause Philip Kives to, execute and deliver a release in the form attached hereto as Exhibit B; and (i) K-5 shall enter into a record license agreement with Dominion Entertainment, Inc. in the form attached hereto as Exhibit C. 4. REPRESENTATIONS AND WARRANTIES. (1) Representations and Warranties of Simitar and Elfenbein. In order to induce K-5 to enter into this Agreement and to consummate the transactions contemplated herein, Simitar and Elfenbein, jointly and severally, make the following representations and warranties to K-5: (a) Elfenbein is the sole record and beneficial owner of the K-tel Repayment Shares and the K-tel Exchange Shares, with full right, power and authority to transfer the same as contemplated in this Agreement, free and clear of any lien, claim or encumbrance of any nature whatsoever (other than compliance with applicable securities laws). As of the Closing Date, Simitar shall be the sole record and beneficial owner of the K-tel Exchange Shares, with the full right, power and authority to transfer the same as contemplated in this Agreement, free and clear of any lien, claim or encumbrance of any nature whatsoever (other than compliance with applicable securities laws). Between the date hereof and the Closing Date, Elfenbein shall not assign, transfer, convey, pledge, mortgage, hypothecate or otherwise transfer the K-tel Repayment Shares or the K-tel Exchange Shares, or any interest in either of the foregoing, except pursuant to this Agreement. (b) Simitar and Elfenbein have each received or had access to all information with respect to K-tel and Simitar Entertainment that they believe is necessary or appropriate to evaluate the merits and risks of the transactions contemplated herein. Elfenbein and Simitar are each sufficiently sophisticated and experienced in financial and business matters to evaluate such merits and risks. (c) Simitar is acquiring the Simitar Entertainment Shares without a view to the distribution thereof, solely for Simitar's own account and not for the account of any other person or persons, and Simitar shall not sell or otherwise dispose of such shares except in compliance with all applicable securities laws. (d) Elfenbein does not hold or have any direct or indirect interest in any securities, options or rights to acquire debt of K-tel, except 362,611 shares of common stock of K-tel (231,816 of which constitute the K-tel Repayment Shares and 118,184 of which constitute the K-tel Exchange Shares), and except for rights arising as a result of his employment as an officer and director of K-tel. (2) REPRESENTATIONS AND WARRANTIES OF K-5. In order to induce Elfenbein and Simitar to enter into this Agreement and to consummate the transactions contemplated herein, K-5 represents and warrants to Elfenbein and Simitar as follows: (a) K-5 is the sole record and beneficial owner of the Simitar Entertainment Shares, with full right, power and authority to transfer the same as contemplated in this Agreement, free and clear of any lien, claim or encumbrance of any nature whatsoever. Between the date hereof and the Closing Date, K-5 shall not assign, transfer, convey, pledge, mortgage, hypothecate or otherwise transfer the Simitar Entertainment Shares, K-5's rights with respect to any amounts owing by Elfenbein to K-5, or any interest in either of the foregoing, except pursuant to this Agreement. (b) K-5 has received or had access to all information with respect to K-tel and Simitar Entertainment that it believes is necessary or appropriate to evaluate the merits and risks of the transactions contemplated herein. K-5 is sufficiently sophisticated and experienced in financial and business matters to evaluate such merits and risks. (c) K-5 is acquiring the K-tel Repayment Shares and the K-tel Exchange Shares without a view to the distribution thereof, solely for K-5's own account and not for the account of any other person or persons, and K-5 shall not sell or otherwise dispose of such shares except in compliance with all applicable securities laws. (d) Neither K-5 nor its principal shareholder, Philip Kives, holds or has any direct or indirect interest in any securities, options or rights to acquire debt of Simitar Entertainment, except the Simitar Entertainment Shares. 5. CONDITIONS PRECEDENT. The obligation of each of the parties to close on the transactions contemplated herein is subject to the fulfillment at or prior to the Closing Date of each of the following conditions: (1) ACCURACY OF REPRESENTATIONS AND WARRANTIES IN COMPLIANCE WITH OBLIGATIONS. The representations and warranties of the other parties hereto contained in this Agreement shall have been true and correct at and as of the date hereof, and they shall be true and correct at and as of the Closing Date with the same force and effect as though made at and as of that time. Each of the other parties shall have performed and complied with all of their obligations required by this Agreement to be performed or complied with at or prior to the Closing Date. (2) PURCHASE AND SALE TRANSACTION. The closing of the transactions contemplated by that certain Agreement for Purchase and Sale of even date herewith by and among Simitar and K-tel International, Inc. shall have occurred or be occurring contemporaneously with the Closing of the transactions contemplated herein. 6. EXPENSES. The expenses of the transactions contemplated hereunder, including legal and accounting fees, if any, shall be borne by the party incurring the expense, whether or not the transactions contemplated under this Agreement shall be consummated. 7. FURTHER ASSURANCES. From and after the Closing, each of the parties hereto shall execute, acknowledge and deliver all such further assignments, assurances and other instruments as may be reasonably necessary to perfect the conveyances contemplated in this Agreement. 8. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings among them with respect thereto. This Agreement may be amended, modified or supplemented only pursuant to a written instrument signed by each of the parties hereto. 9. TERMINATION. This Agreement may be terminated and the transactions contemplated herein abandoned by either party hereto in the event that the Closing shall not have taken place by November 30, 1995, but any such termination shall be without prejudice to any other rights or remedies of any party hereto with respect to any breach of this Agreement occurring prior to such termination. 10. BROKER'S COMMISSION. Each of the parties hereto shall indemnify and hold harmless the other from the commission, fee or claim of any person, firm or corporation employed or retained or claiming to be employed or retained by such party to bring about, or to represent it in, the transactions contemplated hereby. 11. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and legal representatives. 12. NOTICES. Any notice, request, information or other document to be given hereunder to any of the parties by any other party shall be in writing and delivered personally, or sent by registered or certified mail or nationally recognized overnight carrier, postage prepaid, or by facsimile transmission, as follows: If to Simitar or 2605 Fernbrook Lane North Elfenbein: Minneapolis, MN 55447-4736 Attention: Mickey Elfenbein Facsimile No. 612-559-6885 with a copy to: Leonard, Street and Deinard 150 South Fifth Street, Suite 2300 Minneapolis, Minnesota 55402 Attention: Steven D. DeRuyter Facsimile No. 612-335-1657 If to K-5: 2605 Fernbrook Lane North Suite O Minneapolis, Minnesota 55447-4736 with a copy to: Taylor McCaffrey 9th Floor, 400 St. Mary Avenue Winnipeg, Manitoba Canada R3C 4K5 Attention: Jacqueline A. Lowe Facsimile No. 204-957-0945 A notice, request, information or other document shall be deemed to have been given (i) when personally delivered, (ii) five days after having been placed in the mail, if delivered by registered or certified mail, (iii) the day after having been placed with a nationally recognized overnight carrier, if delivered by a nationally recognized overnight carrier, and (iv) when transmitted with electronic confirmation of receipt, if transmitted by facsimile. Any party may change the address to which communications hereunder are to be sent to it by giving written notice of such change of address in the manner herein provided for giving notice. 13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and to be performed therein. IN WITNESS WHEREOF, the undersigned have executed this Stock Transfer Agreement on the date first written above. K-5 LEISURE PRODUCTS, INC. By ________________________________________ Its _____________________________________ /s/ Mickey Elfenbein Mickey Elfenbein SIMITAR, INC. By /s/ Mickey Elfenbein Mickey Elfenbein Its President Exhibit A PROMISSORY NOTE [See Attachment] Dated: __________, 1995 Minneapolis, Minnesota FOR VALUE RECEIVED, Simitar, Inc., a Minnesota corporation (the "Borrower"), K-tel International (USA), Inc., Dominion Entertainment, Inc., US Distribution Services, Inc., and Simitar Entertainment, Inc., jointly and severally, promise to pay to the order of K-5 Leisure Products, Inc., a Minnesota corporation (the "Holder"), at the Holder's principal office located at 2605 Fernbrook Lane North, Suite O, Minneapolis, Minnesota 55447-4736, or at such other place as the Holder of this Note may from time to time designate, the principal sum of [see attachment], plus interest on the principal balance remaining unpaid from time to time at the Prime Rate (as hereinafter defined) as of the date of this Note, and as adjusted on _______________ and _______________ [semi-annual adjustment dates] of each year thereafter (the "Adjustment Dates"). As used in this Note, "Prime Rate" means the rate designated as the "Prime Rate" in the "Money Rates" section (or any successor thereto) of the Wall Street Journal as of the applicable Adjustment Date (or, if the applicable Adjustment Date is not a business day, as of the business day immediately preceding the applicable Adjustment Date). The entire outstanding principal balance of this Note and all accrued but unpaid interest thereon shall be due and payable in full upon the first to occur of the following events (the occurrence of any such event, or other payment in full of all amounts owing under this Note, being hereinafter referred to as the "Maturity" of this Note): 1. The completion by the Borrower, any of its subsidiaries, or any other corporation that controls all or substantially all of the issued and outstanding capital stock of the Borrower, of a registered public offering of its equity securities; 2. The Borrower, K-tel International (USA) Inc., Dominion Entertainment, Inc. or Simitar Entertainment, Inc. becoming insolvent or any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law being commenced in respect of any of the foregoing corporations and remaining for 60 days undismissed; 3. The Borrower or any of its subsidiaries transferring to a third party assets having a fair market value greater than $1,000,000, other than sales in the ordinary course of business, sales of the stock or any assets of Dominion Vertriebs, GmbH, K-tel International (FRANCE) SARL, and K-tel International (SPAIN) SL, and sales and other transfers of assets in connection with the Borrower's financing of its acquisition as of the date hereof of the other makers of this Note; 4. The cumulative retained earnings of the Borrower (determined in accordance with generally accepted accounting principles consistently applied) increasing from and after the date hereof by $5,000,000 (provided that any payment of principal or interest by reason of the occurrence of the event set forth in this subparagraph 4 shall be subject to any restrictions or limitations binding upon the Borrower in favor of the Borrower's lenders or equity security holders); or 5. Mickey Elfenbein selling or otherwise disposing of any of his shares of the capital stock of the Borrower or any interest in such shares other than: (a) a transfer of such shares or any interest therein to a spouse or child of Mickey Elfenbein or a trust established for the principal benefit of Mickey Elfenbein or a spouse or child of Mickey Elfenbein; (b) a transfer of such shares or interest to an employee of the Borrower or any of its affiliates; and (c) a grant of a security interest in such shares or any interest therein to any party providing financing to the Borrower or any of its affiliates; provided that such transfer or grant of a security interest does not result in Mickey Elfenbein being the registered and beneficial owner of less than 50 percent of the issued and outstanding shares of the capital stock of the Borrower of which he is the record and beneficial owner as of the date of this Note. Prior to the Maturity of this Note or the Amortization Commencement Date (as hereinafter defined), the Borrower shall pay to the Holder, as prepayments of amounts owing hereunder: 1. an amount equal to the Profits (as hereinafter defined) of K-tel International, Inc. ("K-tel") or its affiliates up to the date hereof with respect to the product known as the "101 Country Hits", payable within 60 days of the date hereof; 2. an amount equal to the Profits earned by the Borrower, or the Borrower's affiliates with respect to the product known as the "101 Country Hits" from and after the date hereof and prior to the Maturity of this Note, payable in installments within 60 days following the end of each calendar quarter; and 3. an amount equal to all royalties due and owing by the Holder (excluding American Federation of Musicians' payments and other expense reimbursements and non-royalty payments, if any) prior to the maturity of this Note to Dominion Entertainment, Inc. ("Dominion") pursuant to that certain record license agreement of even date herewith between Dominion and the Holder (the "Record License Agreement"), less one cent per track and less all income and similar taxes owing by Dominion with respect thereto, payable as an offset against amounts owing by the Holder to Dominion pursuant to the Record License Agreement. As used in this Note, "Profits" means gross receipts from the sale of the "101 Country Hits" box set, any individual compact discs or cassette tapes with respect thereto and all "upsales" made in connection with direct response sales thereof (collectively, the "Products"), less (i) reserves for returns and bad debts with respect to the Products, determined in accordance with the methods used by Borrower to determine such reserves generally (the reserve for returns being 10 percent of shipped orders), (ii) the costs set forth on Exhibit A attached hereto and incorporated herein by reference and corresponding costs with respect to "upsales", (iii) other amounts paid to third parties in connection with the production, manufacturing, promotion, marketing, sale or distribution of the Products (excluding commissions on sales to retail outlets), and (iv) in the case of sales to retail outlets, 10 percent of the selling price. The Holder shall have the right to audit the books and records of the Borrower with respect to the Products, during normal business hours and on reasonable prior written notice, at anytime prior to the Amortization Commencement Date (but not more often than once per calendar quarter), for the purpose of identifying the calculation of "Profits" pursuant to the proceeding paragraph (including, without limitation, the product costs set forth on Exhibit A attached hereto); provided, however, that (i) the royalties paid by Borrower to third parties shall be assumed to have been based on a $90.00 selling price, whether or not the amounts actually paid were so based, (ii) the royalties paid to the Borrower and its subsidiaries shall be assumed to have been $.03 per track, regardless of the amount actually paid, and (iii) the freight and handling costs shall be assumed to have been $2.02 or $2.03, as shown on Exhibit A, regardless of the amount actually paid. The Holder shall maintain all information received in such audit in strict confidence, and not disclose such information to any third party or use such information for any purpose other than enforcing its rights under this Note. The Borrower may otherwise prepay amounts owing hereunder, in whole or in part, at any time and from time to time, without premium or penalty. All prepayments shall be applied first in reduction of the accrued but unpaid interest owing hereunder and thereafter in reduction of the principal balance hereof. Interest accruing hereunder from the date of this Note through the fifth anniversary hereof (the "Amortization Commencement Date"), to the extent not prepaid pursuant to the preceding paragraphs, shall be paid in annual installments on each anniversary of the date of this Note. The entire principal balance of this Note outstanding as of the Amortization Commencement Date, together with all interest accrued but unpaid as of such date or thereafter accruing, shall be paid in five equal annual installments, one on each of the five anniversaries of the Amortization Commencement Date. The Borrower hereby waives: (a) presentment, protest and demand, and (b) notice of protest, demand, dishonor and nonpayment of this Note. The obligation evidenced by this Note was negotiated, delivered and accepted in the State of Minnesota, the laws of which state shall in all respects be controlling in the interpretation and validity of this Note and all obligations evidenced hereby. SIMITAR, INC. By ________________________________________ Mickey Elfenbein Its President K-TEL INTERNATIONAL (USA), INC. By ________________________________________ Its _____________________________________ DOMINION ENTERTAINMENT, INC. By ________________________________________ Its _____________________________________ US DISTRIBUTION SERVICES, INC. By ________________________________________ Its _____________________________________ SIMITAR ENTERTAINMENT, INC. By ________________________________________ Its _____________________________________ Exhibit A 101 COUNTRY SONGS - SET 6/9/95 101 COUNTRY SONGS PRODUCT #80184/80182 INITIAL SRLP: DIRECT RESPONSE: $69.95 $89.95 SHIPPING & HANDLING: $8.95 $8.95 DIRECT RESPONSE CASS CD 1) FOREVER COUNTRY $1.67 $2.31 2) COUNTRY SUNSHINE $1.66 $2.30 3) EASY COUNTRY $1.27 $1.71 4) MELLOW COUNTRY $1.59 $2.19 5) COUNTRY MEMORIES $1.26 $1.70 6) TIMELESS COUNTRY $1.50 $2.06 7) COUNTRY NIGHTS $1.41 $1.91 8) COUNTRY ROMANCE $1.51 $2.07 9) COUNTRY CLASSICS $1.30 $1.76 10) COUNTRY ROADS $1.55 $2.13 $14.72 $20.14 BOX $0.15 $0.15 ASSEMBLY (HANDS) $0.17 $0.17 TOTAL 10 CD SET COST $15.04 $20.46 PATSY CLINE $1.32 $1.84 GREATEST WESTERN THEMES $1.75 $2.11 ACM ROYALTY $0.70 $0.90 EDDIE RABBITT ROYALTY $1.05 $1.35 FREIGHT & HANDLING $2.02 $2.03 MAILER $0.15 $0.15 TOTAL: $22.03 $28.84 ATTACHMENT CALCULATION OF PROMISSORY NOTE PRINCIPAL BALANCE
Principal Start Date Per Diem Interest K-5 Loan to Elfenbein 448,000 October 25, 1995 $98.19 (8%/annum) National Development, Ltd. 118,376 December 12, 1994 $14.28 (8%/annum on $65,169) Loan to Elfenbein K-5 Letter of 140,000 December 31, 1994 $30.68 (8%/annum) Credit Expenses
Original principal amount of loan will be sum of principal balances plus per diems from the respective start dates to the closing date. Exhibit B MUTUAL RELEASE EXHIBIT B MUTUAL RELEASE This instrument is made and entered into as of the ____ day of __________, 1995 by and among K-5 Leisure Products, Inc. ("K-5"), a Minnesota corporation, Simitar, Inc. ("Simitar"), a Minnesota corporation, Mickey Elfenbein ("Elfenbein"), a resident of Medina, Minnesota, and Philip Kives ("Kives"), a resident of Winnepeg, Manitoba pursuant to that certain stock transfer and loan payment agreement dated _______________, 1995 by and among K-5, Simitar and Elfenbein (the "Stock Transfer Agreement"). Capitalized terms used but not otherwise defined in this instrument are used in this instrument as defined in the Stock Transfer Agreement. A. KNOW ALL MEN BY THESE PRESENTS that Simitar and Elfenbein (collectively, the "Elfenbein Parties"), for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for themselves and for their heirs, predecessors, successors and assigns, do hereby remise, release and forever discharge K-5 and Kives (collective, the "Kives Parties") and their heirs, predecessors, successors and assigns of and from any and all manner of actions, suits, claims, demands, advances, indemnifications, damages, judgments, levies, and executions, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, fixed or contingent, direct or indirect, at law or in equity, that any one or more of the Elfenbein Parties, or their heirs, predecessors, successors or assigns, ever had, has or ever can, shall or may have or claim to have against any one or more of the Kives Parties for, upon, or by reason of any matter, fact or thing prior to the date of these presents relating to or arising out of the debt agreement, the pledge agreement, or the business of K-5, Simitar, Qwil, Bradley, NCV, or Simitar Entertainment, other than claims arising out of the Stock Transfer Agreement, that certain agreement for purchase and sale dated ___________, 1995 between Simitar and K-tel International, Inc., and any promissory note, certificate, agreement or other instrument issued pursuant to or in connection with either of the foregoing. B. KNOW ALL MEN BY THESE PRESENTS that the Kives Parties, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, for themselves and for their heirs, predecessors, successors and assigns, do hereby remise, release and forever discharge the Elfenbein Parties and their heirs, predecessors, successors and assigns of and from any and all manner of actions, suits, claims, demands, advances, indemnifications, damages, judgments, levies, and executions, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, fixed or contingent, direct or indirect, at law or in equity, that any one or more of the Kives Parties, or their heirs, predecessors, successors or assigns, ever had, has or ever can, shall or may have or claim to have against any one or more of the Elfenbein Parties for, upon, or by reason of any matter, fact or thing prior to the date of these presents relating to or arising out of the debt agreement, the pledge agreement, or the business of K-5, Simitar, Qwil, Bradley, NCV, or Simitar Entertainment, other than claims arising out of the Stock Transfer Agreement, that certain agreement for purchase and sale dated ___________, 1995 between Simitar and K-tel International, Inc., and any promissory note, certificate, agreement or other instrument issued pursuant to or in connection with either of the foregoing. C. The undersigned, by execution hereof, state that they have been duly represented by counsel of their own selection in the premises, and that this Mutual Release has been read by the undersigned and their counsel, and that the undersigned understand and fully agree to each, all and every provision hereof, hereby acknowledging receipt of a copy hereof. K-5 LEISURE PRODUCTS, INC. Dated: ___________, 1995 By _____________________________ Its _________________________ SIMITAR, INC. Dated: ___________, 1995 By _____________________________ Its _________________________ Dated: ___________, 1995 ________________________________ Mickey Elfenbein Dated: ___________, 1995 ________________________________ Philip Kives EXHIBIT C RECORD LICENSE AGREEMENT Dated as of the ___ day of ___________, 1995 Between And DOMINION ENTERTAINMENT, INC. K-TEL INTERNATIONAL, INC. 2605 Fernbrook Lane North 2605 Fernbrook Lane North Minneapolis, MN 55447 Suite O (the "Licensor") Minneapolis, MN 55447 (the "Licensee") W I T N E S S E T H In consideration of the mutual promises and covenants herein contained, the parties hereby agree as follows: GRANT AND SCOPE OF RIGHTS (a) Subject to all limitations contained herein, Licensor hereby grants to Licensee for the Term (as defined in Clause 4) and in the Territory (as defined in Clause 22) the non-exclusive right to use master recordings contained in the Dominion re-record catalog which have been approved in writing by Licensor (hereinafter called the "Licensed Masters") in connection with the exploitation of one Album for sale by Licensee via infomercials. (b) The rights hereby granted by Licensor to Licensee include the following: (i) The right to exploit the Album through television infomercial sales only. (ii) The right to use the approved name likeness and biography of each artist whose performance is embodied in the said Licensed Masters in connection with the advertising, publicizing or sale of the Albums. (iii) The right, subject to Clause 9(c) hereof and to the extent permitted by the applicable laws of the Territory, to perform publicly or to permit the public performance by means of radio or television broadcast or otherwise of records manufactured from the said Licensed Masters for the purposes only of advertising the sale of the Albums. (iv) The right to use and control the use of the said Licensed Masters the matrices, mothers, stampers or other copies or derivatives and records manufactured from the master recordings and the performance(s) embodied therein for the purposes hereof only. 2. LIMITATIONS OF RIGHTS (a) Notwithstanding anything to the contrary contained herein: (i) Licensee shall only embody the Licensed Masters on the said Albums and shall not make any second or other use thereof. (ii) It is acknowledged that all Licensed Masters hereunder are not the original recordings but rather a re-recorded version of the original recording and Licensee shall clearly designate such Licensed Masters as re-recordings on all Album jackets, sleeves, inlay cards, and any packaging related thereto. The obligation to so designate such Licensed Masters is of the essence of this Agreement. (iii) The rights herein granted to Licensee shall be limited to the extent that Licensor owns or controls such rights, and Licensor specifically states that it does not own or control the exclusive rights in the Territory to each and every Licensed Master comprising the Albums. (b) Except as described in paragraph (c) of this Clause 2, Licensor reserves exclusively to itself and its successors, licensees and assigns all rights and uses in and to the Licensed Masters whether now or hereafter known or in existence, except the limited use expressly licensed hereunder. By way of illustration and not of limitation, Licensee shall not: (i) Exploit the Album hereunder at any price other than in the so-called "full-priced" category. (ii) Use the Licensed Masters or dispose of or use in any way records or tapes manufactured therefrom except for commercial manufacture and sale of the records as herein provided. (iii) [Intentionally Deleted] (iv) Edit or alter the Licensed Masters. Licensee shall only employ the Licensed Masters in the manner and for the purpose originally recorded by or for Licensor. (v) Sub-license or otherwise convey any rights under this Agreement. (vi) Exploit the Album in any retail channels of trade either directly or indirectly. (vii) Undertake or knowingly permit the manufacture, advertising, distribution or sale of any Licensed Master or the Album outside the Territory. 3. RESERVATION OF RIGHTS (a) The following shall be and remain the property of Licensor: (i) The Licensed Masters supplied by Licensor under this Agreement as well as all mothers and stampers produced therefrom by or for Licensee; (ii) Licensor's copyright and other property rights under statutory and/or common law in the Licensed Masters, tapes, matrices, and mothers and stampers; (iii) Any and all copyrights, trademarks or other similar rights or other property rights which may otherwise accrue to Licensee or to any of its distributors, agents or representatives by reason of the exercise of the rights granted by this Agreement; (iv) The exclusive right to use or license the Licensed Masters or the performance embodied thereon for use in connection with the synchronization of said performance with television productions and/or motion pictures, including any soundtrack albums derived therefrom, whether produced in the Territory or otherwise. (b) Licensee will, upon request, execute or cause to be executed, and will deliver to Licensor, all documents necessary to establish and effectuate Licensor's unencumbered ownership of all such rights. (c) Licensee shall take all precautions necessary, including but not limited to placing the appropriate "P" line credit on all Album jackets, sleeves, labels or inlay cards, to preserve and protect the copyright in the Licensed Masters in Licensor's name and to prevent same from falling into the public domain. (d) All records manufactured under the authority of this Agreement shall be distributed in packaging materials bearing a Universal Product Code (UPC) that will enable retail stores equipped with devices that identify bar codes at the point of sale to report the number of records sold to SoundScan, Inc. for tabulation if applicable. 4. TERM The Term of this Agreement shall be for a period of five (5) years commencing with the Closing Date of the agreement or when otherwise terminated under Section 18 below. Each year of the Term may hereinafter be referred to as a "Contract Year". 5. ADVANCES [Intentionally deleted] 6. ROYALTIES In consideration of the license and rights herein granted to Licensee, Licensee hereby agrees to pay all of the following to Licensor: (a) A royalty of eight (8%) percent based on the actual selling price to the consumer, such royalty being accruable on one hundred percent (100%) of all copies of the Albums which are exploited hereunder which amount shall in no event be less than US $.04 per master recording on cassettes and US $.06 per master recording on compact disc. Royalties on "bonus" or "free" records shall be US $.04 per master recording on cassettes and US $.06 per master recording on compact disc. (b) In computing the number of Albums manufactured and sold hereunder Licensee shall have the right to deduct returns and credits on account of defective merchandise, errors in billing and errors in shipment. 7. ACCOUNTING STATEMENTS (a) During the Term of this Agreement and thereafter as long as Licensee continues to sell the Album hereunder, Licensee agrees to keep all usual and proper records and books of account and make all usual and proper entries therein relating to the exploitation of the Album. (b) Licensee shall deliver to Licensor within thirty (30) days following the last day of March, June, September and December of each year detailed written statements, showing sales of records hereunder during such period. Licensee shall in said statements advise Licensor in writing of the identity of each Album manufactured hereunder and identify each Licensed Master embodied thereon. Such statements shall include the following information: (i) The number of copies of the Album sold within the Territory during the accounting period; and (ii) The amount of royalties and other payments due to Licensor pursuant to this Agreement. (c) Simultaneously with the delivery of the accounting statements referred to above, Licensee shall pay to Licensor, at the above written address, all sums shown to be due to Licensor by such statements. All payments shall be made in United States Dollars (where applicable computed at the rate of exchange existing on the date the payments are required to be made pursuant to the terms of this Agreement). (d) In the event Licensee does not pay to Licensor the amount shown to be due by any accounting statement on the date the payment is required to be made pursuant to the terms of this Agreement then: (i) Licensor may at its election terminate this Agreement hereunder pursuant to Clause 18(b) or (c) below; and/or (ii) Licensor may charge interest at the rate of three percent (3%) above the then current Prime Lending Rate to and payable by Licensee for the period commencing upon the date such payment was due until the date such payment is made. (e) In the event that Licensee is unable because of governmental restrictions to make payment in the manner described in this Clause and if Licensor agrees to accept payment in a currency other than United States Dollars, Licensee shall deposit (at Licensee's expense) to Licensor's credit or account or to such other account as Licensor may from time to time designate, in a depository selected by Licensor, all sums payable to Licensor hereunder. Notwithstanding, in the event that Licensee in unable because of governmental restrictions to make payment to Licensor in the United States or in United States Dollars, Licensor shall have the right to terminate this Agreement upon thirty (30) days written notice, without prejudice to Licensor's rights. 8. INSPECTION (a) Licensee shall permit Licensor or its duly authorized representative to inspect, audit, abstract and copy such of Licensee's books and records as reasonably relate to the subject matter of this Agreement. Such inspection shall be allowed twice during each calendar year for as long as Licensee continues to distribute or sell the Album, and twice in each of the two (2) years thereafter, upon thirty (30) days written notice, and may be conducted at Licensee's regular place of business in the United States or where books and records are maintained. In the event calculation of royalty payments is determined by a computer based system, Licensor shall be permitted to examine the machine sensible data utilized by such system and the related documentation describing such system and Licensee agrees to retain such data for at least two (2) years after the expiration of this Agreement. (b) Any inspection undertaken by Licensor shall be at Licensor's expense provided, however, that if an underpayment equal to or in excess of five (5%) percent of the royalties properly due and payable to Licensor is discovered, Licensee shall reimburse Licensor for the expense of such inspection in addition to remitting the amount determined to be properly due plus accrued interest at the rate of three percent (3%) above the then current Prime Lending Rate. (c) This Clause shall survive the termination of this Agreement or any subsequent agreement between the parties hereto covering generally the subject matters covered herein. 9. THIRD PARTY PAYMENTS (a) With respect to royalties payable to copyright proprietors by reason of Licensee's exercise of its rights hereunder, Licensee agrees to secure licenses from such copyright proprietors or their agents in the Territory and to make payments directly to such proprietors or agents. No rights to manufacture and exploit the Licensed Masters are granted hereunder until Licensee secures such copyright licenses. (b) Licensee shall be responsible for the payment of any sums that may be payable to the Special Payments Fund and the Music Performance Trust Fund of the American Federation of Musicians (the "AFofM") or any other union or guild (including AFTRA) based upon the manufacture and sale of the Licensed Masters as contained on the Albums. Licensee shall pay to Licensor an additional royalty of one (1%) percent of the actual selling price to the consumer for the "AFofM" royalty, said royalty being payable by Licensee to Licensor in accordance with paragraph 7 herein. (c) Licensee shall be responsible for any amounts properly becoming due to any union or guild having jurisdiction in the nature of so-called "re-use" fees arising as a result of Licensee's use of the performances embodied on the Masters hereunder, including but not limited to commercial advertisements for the sale of the Licensed Masters as contained on the Albums. (d) Subject to subsections (a), (b), and (c) above, Licensor shall pay all other royalties and payments, if any, which may become due to artists, producers and other contributors to the performances embodied on the Licensed Masters. (e) Within thirty (30) days of receipt of Licensor's invoice Licensee shall pay to Licensor costs incurred by Licensor relating to copying, packaging and shipping of the Licensed Masters, negatives, advertising, promotional, display and any other materials supplied or caused to be supplied by Licensor. 10. DELIVERY AND QUALITY OF LICENSED MASTERS (a) Licensor shall use its best efforts to deliver or cause to be delivered within twenty (20) days after acceptance of Licensee's request therefor and receipt of copies of Licensee's mechanical copyright licenses, copy master tapes of those Licensed Masters then agreed to be licensed hereunder. Such copy master tapes shall be of suitable quality for use in the commercial production of records for general sale. Any Licensed Masters delivered to Licensee hereunder, shall be deemed to be technically satisfactory for the purposes hereunder, unless Licensor has been notified to the contrary within ten days (10) after receipt of the said Licensed Masters. Any such notification must contain a written technical report from the laboratory of Licensee which specifically details and describes any technical defects in the material. Upon receipt of such notification, Licensor shall attempt to have the defects corrected, at its expense, and reship the corrected Licensed Masters promptly thereafter. (b) Licensor shall supply to Licensee in writing the correct title of the recorded work(s), the names of the author and composer thereof, the names of the recording artists as Licensor desires to have them displayed on the label of the Album, and any other relevant copyright information available to Licensor. 11. SUBSTITUTIONS (a) In the event Licensor is not reasonably able to correct the noticed defects pursuant to Clause 10 above, or in the event the Licensor's ownership of or otherwise control of the rights of any Licensed Master has become encumbered, restricted or terminated, the Licensor, in its sole discretion, reserves the right to substitute a Licensed Master. (b) Licensee's sole remedy, in the event of Licensor's failure to provide a substitute Licensed Masters referred to above, shall be the refund of monies paid as advances for such Licensed Master and no other. 12. LABEL CREDIT The labels, sleeves and inlay cards of all Records shall bear a credit to Licensor in such form as indicated on the Schedules. 13. SAMPLES Licensee shall provide Licensor, prior to the distribution thereof, with three (3) sample copies of the Albums. 14. LICENSEE'S WARRANTIES Licensee warrants and represents that: (a) Licensee possesses the full right, power and authority to enter into this Agreement. (b) Prior to the delivery of the master tapes and prior to the manufacture of records, Licensee shall have obtained all mechanical copyright licenses relating to the musical compositions embodied on the Licensed Masters contained on such Album and shall remit copies of such mechanical licenses to Licensor. This warranty is of the essence of this Agreement. (c) All Albums manufactured by Licensee hereunder shall be of the highest quality and shall be consistent with the standards of the record industry. (d) All Albums manufactured by Licensee hereunder shall be exploited by Licensee in strict compliance with all the terms and conditions of this Agreement. In particular, but without limitation, Licensee hereby expressly warrants that no Album may be exported for sale outside the Territory nor shall Licensee knowingly sell any Album manufactured hereunder to any third party intending to resell same outside the Territory. (e) Neither Licensee nor anyone claiming rights through Licensee shall sell, assign, transfer, mortgage, hypothecate or subject to any lien or encumbrance the Licensed Masters or any of the above rights, and any attempt thereto shall cause the immediate termination of this Agreement and/or be deemed null and void and of no force and effect whatsoever. 15. LICENSOR'S WARRANTIES Licensor warrants and represents that: (a) Licensor possesses the full right, power and authority to enter into and to perform this Agreement. (b) At the time of delivery of the Licensed Masters Licensor will be the exclusive owner of or otherwise control the rights herein granted to Licensee in such Licensed Masters. (c) The Licensed Masters were recorded and otherwise prepared in all respects in accordance with the rules and regulations of all unions and similar associations having jurisdiction. 16. INDEMNIFICATION (a) Each of the parties hereto shall indemnify, save and hold the other harmless from loss or damage arising out of or connected with any claim by a third party which is inconsistent with any of the recitals, agreements, representations or warranties herein. Either party shall reimburse the other on demand for any payment made by the demanding party at any time after the date hereof in respect of any liability or claim to which this indemnity relates and which has resulted in an adverse final judgment against the demanding party, or a settlement approved by both parties, in which it is determined that the ultimate liability is that of the indemnifying party. Prompt notice shall be given to the indemnifying party of any claim to which this indemnity relates and the indemnifying party shall have the right, at its own expense to control the defense thereof, provided that: (i) The demanding party shall have the right to cooperate in such defense at its own expense. (ii) If the indemnifying party shall not exercise its right to control the defense, then the demanding party shall, in addition to any other indemnity hereunder, be reimbursed for its reasonable expenses (including reasonable attorney's fees), if any, incurred in the defense if it shall be determined that the ultimate liability is that of the indemnifying party; and (b) Nothing herein is to be construed so as to permit Licensee the right to withhold royalties payable hereunder. 17. ASSIGNMENT Neither this Agreement nor the rights granted to Licensee hereunder may be assigned by Licensee without the written consent of Licensor. Licensor shall be entitled to assign this Agreement including its rights hereunder to any parent, affiliated or subsidiary company or corporation, or to anyone owning or acquiring substantially all of the capital stock or assets of Licensor. 18. TERMINATION OR EXPIRATION (a) Bankruptcy and Insolvency. In the event Licensee shall be adjudged a bankrupt or in the event that any insolvency proceedings are instituted by or against Licensee and are not dismissed within thirty (30) days after the institution thereof, or in the event a trustee or receiver is appointed to take over all or a substantial part of Licensee's assets, Licensee's rights under this Agreement shall automatically terminate, and such termination shall be deemed effective as of the commencement of the event which gave rise to such termination. In the event of such termination, all monies due and unpaid by Licensee pursuant to this Agreement shall there upon become due and payable. Further, all Licensed Masters and all copies thereof, all color separations and other artwork and all other property of Licensor shall be returned to Licensor at Licensee's expense, and in no event shall the title thereto or any rights therein be acquired by or vest in any trustee, receiver or in any other party by reason of any such insolvency, bankruptcy or other such occurrence affecting Licensee. (b) Breaches. Without prejudice to any other rights or claims which Licensor may have, Licensor may, at its option, terminate this Agreement upon giving not less than fifteen (15) days written notice and period to cure to Licensee, in the event of any of the following, which shall constitute a material breach of this Agreement: (i) Licensee shall fail to account and make payments hereunder or shall fail to perform any other of its material obligations required of it hereunder. (ii) Licensee, through act or omission, shall violate or knowingly permit the violation of any of its warranties and representations hereunder. (iii) Licensee utilizes or duplicates Licensor's mark in violation of the applicable terms of this Agreement. (iv) Licensee denies Licensor the right granted hereunder to audit Licensee's books. (c) Immediate Termination. Notwithstanding Section 18(b) above, and without prejudice to any other rights or claims which Licensor may have, Licensor shall have the right to immediately terminate this license without any written notice to Licensee in the event of any of the following: (i) Licensee has failed to timely account and make payments hereunder a total of four (4) times, whether or not prior delinquent accountings and payments have been made. (ii) Licensee has willfully reported inaccurate accountings of payments due hereunder. (iii) Licensee knowingly exports, distributes or licenses any Licensed Master or Album outside the Territory. (d) Death or change in ownership. In the event of: (i) the death of Philip Kives; or (ii) discontinuance of Philip Kives as an active senior officer or manager of Licensee; or (iii) a change in the ownership of fifty percent (50%) or more of the Licensee, Licensor may terminate this Agreement by giving the Licensee fifteen (15) days' written notice. In such event Licensee shall have a six (6) month period in which to sell off existing inventory of the Albums. (e) Termination/Expiration Procedure. (i) In the event of the termination of this Agreement, all rights herein granted by Licensor to Licensee shall immediately terminate and shall thereupon revert to Licensor, free and clear of any claims by Licensee. Licensee shall continue, nevertheless, to be responsible for accounting and payments as set forth in this Agreement, and upon notification from Licensor will return to Licensor or to Licensor's designee at Licensee's expense, all tapes, matrices, duplicate tapes, masters, mothers and stampers supplied by Licensor hereunder that are in Licensee's possession or control. (ii) If this Agreement expires by expiration of the Term then, at the end of the Term, all Licensed Masters, tapes or matrices supplied to Licensee and all derivatives of said tapes and matrices, including duplicate tapes, masters, mothers and stampers provided to Licensee pursuant to the License Agreement, shall at Licensor's election either be destroyed in the presence of one of Licensor's duly authorized representatives, or delivered to Licensor free of cost to Licensor. (f) Sell-off. (i) Licensee shall advise Licensor in writing, upon the expiration of the term, the quantity of Albums that are in Licensee's stock at the time of said expiration. (ii) Provided Licensee supplies Licensor with the aforesaid information Licensee shall be entitled to sell-off, for a period of six (6) months thereafter, all existing stocks of the applicable Album subject to the continuing obligation to account for and pay royalties on such sales in accordance with the terms hereof. (iii) Upon the expiration of the sell-off period Licensee shall, at its sole cost and expense, destroy all of its existing inventory of Albums and shall furnish Licensor with an affidavit of destruction executed by an officer of Licensee. 19. NOTICES All accounting or payment which Licensee is hereto required to give to Licensor shall be addressed to the addresses first above written. All other notices and other items from one party to the other hereunder will, unless herein indicated to the contrary, be addressed as follows; To Licensee: At Licensee's address as set forth on the first page hereof; To Licensor: At Licensor's address as set forth on the first page hereof, directed to the attention of: Vice President, Business Affairs or to such other address as either party shall designate in writing to the other party from time to time. Unless otherwise set forth in this Agreement, all notices shall be deemed duly given on the date of mailing. 20. MANUFACTURING Licensor shall be afforded the right of first refusal to manufacture all of the product which include master recordings hereunder. The right of first refusal shall be exercised within five (5) business days of receipt of a written notice of third party offer to manufacture. 21. MISCELLANEOUS (a) This Agreement set forth the entire understanding between Licensor and Licensee with respect to the subject matter hereof, all prior negotiations or alleged understandings are merged herein, and no amendment to or modification of this Agreement or any provision hereof shall be binding upon Licensor and Licensee unless confirmed by a written instrument signed by an Officer of Licensee and Licensor's authorized signatory. Any process in any action, suit or proceeding arising out of or relating to this agreement may, among other methods, be served upon Licensee by delivering it or mailing it in accordance with Clause 19 above. No waiver of any provision of or default under this Agreement shall affect Licensee's or Licensor's rights, as the case may be, thereafter to enforce such provision or to exercise any right or remedy in the event of any other default, whether or not similar. (b) Any act or failure to act by either party shall not be construed as a waiver of any of such party's rights hereunder unless a memorandum thereof, expressing the intention to waive, signed by the party to be charged, is made and delivered to the other party. Any such waiver shall not be deemed to be a waiver of any past or future breach of the same or any other provision of this Agreement. (c) If any part of this Agreement shall be determined to be invalid or unenforceable by a court of competent jurisdiction or by any other legally constituted body having jurisdiction to make such determination, the remainder of this Agreement shall remain in full force and effect. (d) The captions herein are for convenience only, do not constitute a part of this Agreement, and are not to be used in the construction thereof. (e) This agreement and any arbitration conducted under paragraph (g) of this Clause 21 will be governed by and construed in accordance with the substantive, procedural and evidentiary laws and rules of the State of Minnesota. (f) Subject to paragraph (g) of this Clause 21, the parties hereby submit to the jurisdiction of, and waive any venue objections against, the United States District Court for the District of Minnesota and the trail courts of the State of Minnesota, in any litigation and/or arbitration arising out of this Agreement, and each party hereby consents to the personal jurisdiction of such courts for purposes of this Agreement, including entry of enforcement of any arbitration award or judgment. (g) Any claim, dispute, or controversy arising out of or in connection with or relating to this Agreement or the breach or alleged breach thereof shall be submitted by the parties to arbitration by the American Arbitration Association ("AAA") in the City of Minneapolis, Minnesota, under the commercial rules then in effect for the Association except as provided herein. A transcribed record shall be prepared. The AAA shall recommend three (3) arbitrators who are knowledgeable in the field in dispute. The parties shall agree upon one (1) of the three within twenty (20) days. If no arbitrator is mutually agreed upon, the AAA shall make such appointment within thirty (30) days of such failure. Each party shall have the right to request the arbitrator to order reasonable and limited discovery. The award rendered by the arbitrator shall include costs of arbitration, reasonable attorneys' fees and reasonable costs for expert and other witnesses, but shall not include punitive damages against either party. Judgment on such award may be entered as provided in paragraph (f) of this Clause 21, provided that nothing in this paragraphs (g) shall be deemed as preventing either party from seeking relief from the courts as necessary to protect either party`s name, proprietary information, trade secrets, know-how, or any other appropriate provisional remedy. (h) Clause 6, 7, 8, 9, 12, 14, 16, 18(f) and 21 will survive the termination of this Agreement. 22. DEFINITIONS As used in this Agreement, the following terms shall have the indicated meanings: (a) "master recordings" - recordings which embody sound alone and are intended for reproduction in the form of records or otherwise. (b) "Record" or "record" means any reproduction of a master recording in the form of analog cassette tapes and compact discs. (c) "exploit" - shall mean the manufacture, distribution, advertising, promotion and sale of the Album pursuant to the terms hereof. (d) "Album" - that record (which shall contain all of the Licensed Masters) manufactured, distributed and sold by Licensee hereunder which shall contain up to one hundred and fifty (150) master recordings on one or more Records. (e) "Records sold", "record sales" and "sales" mean one hundred (100%) percent of those records shipped by Licensee hereunder and not returned. (f) "Infomercial" - shall mean a minimum of a twenty (28) eight minute television broadcast show as customary in the industry. (g) "Territory" - United States (h) "this Agreement" - shall mean this agreement and the Schedule "A" annexed hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. DOMINION ENTERTAINMENT, INC. K-TEL INTERNATIONAL, INC. BY_______________________ BY__________________________ An authorized signatory An authorized signatory NAME__________________________ NAME________________________ Please print or type Please print or type TITLE_________________________ TITLE_______________________ SCHEDULE A Annexed to and forming part of Agreement dated _________________ , 1995 ALBUM TITLE: HEARTBREAKER CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST RAINDROPS KEEP FALLING ON MY HEAD B.J. THOMAS JEAN OLIVER CRYSTAL CHANDELIERS VIC DANNA I BELIEVE FRANKIE LAINE JUST WALKING IN THE RAIN JOHNNY RAY LOVE LETTERS IN THE SAND PAT BOONE RED ROSES FOR A BLUE LADY VIC DANNA CARA MIA JAY BLACK BESAME MUCHO TRINI LOPEZ LOVE IS A MANY SPLENDORED THING FOUR ACES VENUS* FRANKIE AVALON MR. BLUE FLEETWOODS YOUNG GIRL GARY PUCKET AND THE UNION GAP JESAMINE CASUALS HAPPY TOGETHER* TURTLES LOVE IS ALL AROUND TROGGS WISHING AND HOPING MERSEYBEATS YOU WERE ON MY MIND CRISPIAN ST. PETERS SILENCE IS GOLDEN TREMELOES A GROOVY KIND OF LOVE WAYNE FONTANA FERRY 'CROSS THE MERSEY GERRY & THE PACEMAKERS YOU'VE GOT YOUR TROUBLES I'VE GOT MINE FORTUNES IF YOU GOTTA MAKE A FOOL OF SOMEBODY FREDDY & THE DREAMERS TRAINS & BOATS & PLANES BILLY J. KRAMER REFLECTIONS OF MY LIFE MARMALADE THE END OF THE WORLD SKEETER DAVIS WILL YOU STILL LOVE ME TOMORROW SHIRELLES I WILL FOLLOW HIM SANDY POSEY DOWN IN THE BOONDOCKS BILLY JOE ROYAL LEADER OF THE PACK SHANGRI-LAS RUNAWAY DEL SHANNON CORINNA CORINNA RAY PETERSEN VENUS IN BLUE JEANS JIMMY CLANTON IT'S MY PARTY LESLEY GORE DEDICATED TO THE ONE I LOVE SHIRELLES HEY PAULA* PAUL & PAULA TELL LAURA I LOVE HER RAY PETERSEN TEEN ANGEL MARK DINING CHAPEL OF LOVE DIXIE CUPS ROSEGARDEN LYNN ANDERSON HEARTACHES BY THE NUMBER GUY MITCHELL THE HAPPIEST GIRL IN THE WHOLE USA DONNA FARGO WHAT IN THE WORLD'S COME OVER YOU JACK SCOTT LUCKENBACH TEXAS JOHNNY RUSSELL HELP ME MAKE IT THROUGH THE NIGHT SAMMI SMITH TENNESSEE WALTZ PATTI PAGE HIGH NOON FRANKIE LAINE SLIDE OFF YOUR SATIN SHEETS JOHNNY PAYCHECK WILL THE CIRCLE BE UNBROKEN NED MILLER I CAN'T STOP LOVING YOU KITTY WELLS NO CHARGE MELBA MONTGOMERY YOU LIGHT UP MY LIFE MARGO SMITH GREEN GREEN GRASS OF HOME PORTER WAGONER **MY SPECIAL PRAYER PERCY SLEDGE GREAT PRETENDER PLATTERS MAKE THE WORLD GO AWAY TIMI YURO ALL I COULD DO WAS CRY ETTA JAMES **SMOKE GETS IN YOUR EYES PLATTERS SPANISH HARLEM BEN E. KING WHEN A MAN LOVES A WOMAN PERCY SLEDGE WARM AND TENDER LOVE PERCY SLEDGE STAND BY ME BEN E. KING ONLY YOU PLATTERS HURT TIMI YURO **HEY THERE LONELY GIRL EDDIE HOLMAN **BRING IT ON HOME TO ME EDDIE FLOYD IF YOU DON'T KNOW ME BY NOW HAROLD MELVIN & THE BLUENOTES ***SINGING THE BLUES GUY MITCHELL ***I'LL BE HOME PAT BOONE ***ROCKY DICKEY LEE ***OH LONESOME ME DON GIBSON (**) -- CASSETTE/LP ONLY (***) -- COMPACT DISC ONLY (**) -- CASSETTE/LP ONLY (***) -- COMPACT DISC ONLY TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ SCHEDULE B Annexed to and forming part of Agreement dated _________________ , 1995 ALBUM TITLE: ROCK BOX CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST YAKETY YAK THE COASTERS ALLEY OOP* HOLLYWOOD ARGYLES MR. CUSTER* LARRY VERN PAPA-OOM MOW MOW RIVINGTONS SEVEN LITTLE GIRLS PAUL EVANS (SITTING IN THE BACK SEAT) DOES YOUR CHEWING GUM LOSE ITS FLAVOR LONNIE DONEGAN ON THE BEDPOST OVERNIGHT? THE BIRDS & THE BEES* JEWEL AKENS SURFIN' BIRD TRASHMEN MONSTER MASH SHA NA NA WILD THING THE TROGGS HE'S SO FINE CHIFFONS KEEP A KNOCKIN' LITTLE RICHARD SHEILA TOMMY ROE SPLISH SPLASH SHA NA NA PERSONALITY LLOYD PRICE THE GREAT PRETENDER THE PLATTERS WILD ONE BOBBY RYDELL HEY LITTLE GIRL (IN THE HIGH DEE CLARK SCHOOL SWEATER) LITTLE DARLIN' THE DIAMONDS HE'S A REBEL CRYSTALS THE LETTER THE BOX TOPS LET'S HAVE A PARTY WANDA JACKSON DA DOO RON RON CRYSTALS LONG TALL SALLY LITTLE RICHARD STAGGER LEE LLOYD PRICE JAMBALAYA JOHNNY RUSSELL SLOW TWISTIN' CHUBBY CHECKER RED RIVER ROCK JOHNNY & THE HURRICANES THE STROLL THE DIAMONDS DO YOU WANNA DANCE? BOBBY FREEMAN MASHED POTATO TIME DEE DEE SHARP PEPPERMINT TWIST JOEY DEE & THE STARLITERS SHAKIN' ALL OVER CHAD ALLEN (FORMERLY OF THE GUESS WHO) BRISTOL STOMP DOVELLS LUCILLE LITTLE RICHARD LEADER OF THE PACK SHANGRI-LAS BLUE MOON THE MARCELS AIN'T THAT A SHAME PAT BOONE CHAPEL OF LOVE DIXIE CUPS PARTY DOLL BUDDY KNOX HIPPY HIPPY SHAKE SWINGIN' BLUE JEANS REBEL ROUSER DUANE EDDY TELL HIM THE EXCITERS UNDER THE BOARDWALK THE DRIFTERS MY BOYFRIEND'S BACK THE ANGELS STAND BY ME BEN E. KING GOOD GOLLY MISS MOLLY LITTLE RICHARD RUNAWAY DEL SHANNON HEY PAULA* PAUL & PAULA WHEN A MAN LOVES A WOMAN PERCY SLEDGE HURT TIMI YURO THEN HE KISSED ME THE CRYSTALS SAVE THE LAST DANCE FOR ME THE DRIFTERS MY GUY MARY WELLS ONE FINE DAY THE CHIFFONS PATCHES CLARENCE CARTER MY TRUE LOVE JACK SCOTT GOIN OUT OF MY MIND LITTLE ANTHONY DEDICATED TO THE ONE I LOVE THE SHIRELLES MY HEART IS AN OPEN BOOK CARL DOBKINS WHISPERING GRASS INK SPOTS VENUS* FRANKIE AVALON RAINDROPS KEEP FALLING ON MY HEAD B.J. THOMAS CHARLIE BROWN THE COASTERS OH BOY WANDA JACKSON THE HUCKLEBUCK CHUBBY CHECKER PEPINO THE ITALIAN MOUSE JOEY CHEDDAR STUPID CUPID WANDA JACKSON HATS OFF TO LARRY DEL SHANNON SUSIE DARLING ROBIN LUKE LET'S TWIST AGAIN CHUBBY CHECKER SPEEDY GONZALES PAT BOONE IF I HAD A HAMMER TRINI LOPEZ TEQUILA ACE CANNON COME SOFTLY TO ME FLEETWOODS JUST WALKING IN THE RAIN JOHNNY RAY RHYTHM OF THE RAIN CASCADES WHAT'S A MATTER BABY TIMI YURO TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ SCHEDULE C Annexed to and forming part of Agreement dated ________________________ , 1995 ALBUM TITLE: POP HISTORY CATALOG NUMBER: LICENSED MASTERS: TITLE ARTIST SUGAR BABY LOVE RUBETTES BEAUTIFUL SUNDAY DANIEL BOONE LOVE GROWS WHERE MY ROSEMARIE GOES EDISON LIGHTHOUSE COME AND GET IT BADFINGER UNDERCOVER ANGEL ALAN O'DAY EVERLASTING LOVE ROBERT KNIGHT HOOKED ON A FEELING B.J. THOMAS *DANCING ON A SATURDAY NIGHT BARRY BLUE THE NIGHT CHICAGO DIED PAPER LACE INDIAN RESERVATION DON FARDON ARIZONA MARK LINDSAY BILLY DON'T BE A HERO PAPER LACE ME AND YOU AND A DOG NAMED BOO LOBO SAN BERNADINO CHRISTIE YELLOW RIVER CHRISTIE I'D LOVE YOU TO WANT ME LOBO DON'T EXPECT ME TO BE YOUR FRIEND LOBO IF YOU DON'T KNOW ME BY NOW HAROLD MELVIN & THE BLUENOTES DON'T LET THE SUN CATCH YOU CRYING GERRY & THE PACEMAKERS GOODBYE MARY HOPKINS MR. BOJANGLES GLENN YARBOROUGH ONE TIN SOLDIER ORIGINAL CASTE DO YOU WANNA MAKE LOVE? PETER MCCANN DRIFT AWAY DOBIE GRAY RIDE CAPTAIN RIDE BLUES IMAGE SOONER OR LATER GRASSROOTS PIED PIPER CHRISTIAN ST. PETERS BEG STEAL OR BORROW NEW SEEKERS *IT AIN'T ME BABE TURTLES *ELENORE TURTLES LAY DOWN MELANIE OB LA DI OB LA DA MARMALADE THE LETTER THE BOX TOPS HERE COMES MY BABY TREMELOES BUILD ME UP BUTTERCUP FOUNDATIONS LADY WILLPOWER GARY PUCKET & THE UNION GAP GOOD MORNING STARSHINE OLIVER IN THE SUMMERTIME MUNGO JERRY JUDY IN DISGUISE JOHN FRED & HIS PLAYBOY BAND BABY COME BACK EQUALS BEND ME SHAPE ME AMERICAN BREED DIZZY TOMMY ROE **LIGHTNING STRIKES LOU CHRISTIE **SATISFACTION GUARANTEED HAROLD MELVIN & THE BLUENOTES ***SURF CITY JAN & DEAN ***HITCHIN' A RIDE VANITY FAIR TERRITORY: MEXICO ADVANCE: $.0 ROYALTY: $.04 Per Licensed Master per Album CONFIGURATION: Audio cassettes and compact discs RELEASE DATE: LABEL CREDIT: Courtesy of Dominion Entertainment, Inc. DOMINION ENTERTAINMENT, INC. K-5 LEISURE PRODUCTS BY __________________________________ BY _________________________________ EX-99.1 4 Press Release of K-tel International, Inc. dated July 24, 1995 CONTACT: Mark Dixon Chief Financial Officer (612-559-6820) FOR IMMEDIATE RELEASE K-TEL INTERNATIONAL, INC. ANNOUNCES SALE OF ENTERTAINMENT ASSETS Plymouth, MN, July 24, 1995 - K-tel International, Inc. (Nasdaq: KTEL), today announced that its Board of Directors has approved an agreement to sell its consumer entertainment business to a group ("Purchaser") led by the Company's current CEO, Mickey Elfenbein for $25,000,000, subject to certain adjustments, payable in cash at closing. The transaction involves the sale of three domestic music based subsidiaries and ten foreign subsidiaries. The Company will retian and continue its consumer product business, which is operated through two domestic subsidiaries, and will be led by its current Chairman, Philip Kives. The trnasaction is subject to the Purchaser obtaining financing and various other conditions, including approval of the transaction by the Company's sharehodlers and fairness opinions. Subject to satisfying the conditions, the transaction is expected to occur by December 31, 1995. K-tel International, Inc. develops, markets and distributes a variety of packaged consumer entertainment (music and video) and consumer convenience products worldwide. The Company markets it product lines either to retailers, or through mail order (TV or print), or through licenses throughout the world. K-tel has active companies/operations in the USA, Canada, UK, Germany, Spain, Finland and Ireland. -----END PRIVACY-ENHANCED MESSAGE-----