EXHIBIT 10.56


               AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT

            This Amendment Number Two to Loan and Security Agreement
("Amendment") is entered into as of September 23, 1998, by and among FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), and K-TEL
INTERNATIONAL (USA), INC., DOMINION ENTERTAINMENT, INC., K-TEL CONSUMER
PRODUCTS, INC., K-TEL TV, INC. and K-TEL VIDEO, INC., all of which are Minnesota
corporations (jointly "Borrowers"), in light of the following:

            FACT ONE: Borrowers and Foothill have previously entered into that
certain Loan and Security Agreement, dated as of November 20, 1997 (as amended,
the "Agreement").

            FACT TWO: Borrowers and Foothill desire to further amend the
Agreement as provided for and on the conditions herein.

            NOW, THEREFORE, Borrowers and Foothill hereby amend and supplement
the Agreement as follows:

            1. DEFINITIONS. All initially capitalized terms used in this
Amendment shall have the meanings given to them in the Agreement unless
specifically defined herein.

            2. AMENDMENTS.

                  (a) The definition of Intangible Assets in Section 1.1 of the
Agreement is amended to read as follows:

                  "'Intangible Assets' means, with respect to any Person, that
            portion of the book value of all of such Person's assets that would
            be treated as intangibles under GAAP, and specifically including
            such Person's goodwill and prepaid assets."

                  (b) Section 7.20 of the Agreement is amended to read as
follows:

                  "FINANCIAL COVENANTS. Have Parent fail to have Tangible Net
            Worth of at least the following amounts, as of the dates set forth
            below:

                  Minimum Tangible Net Worth      Fiscal Quarter Ending
                  --------------------------      ---------------------

                           $1,300,000             September 30, 1998
                           $1,800,000             December 31, 1998
                           $1,550,000             March 31, 1999
                           $1,550,000             June 30, 1999
                           $7,675,000             September 30, 1999
                           $8,000,000             December 31, 1999 and
                                                     thereafter"


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<PAGE>


            3. REPRESENTATIONS AND WARRANTIES. Borrowers hereby affirms to
Foothill that all of Borrowers' representations and warranties set forth in the
Agreement are true, complete and accurate in all respects as of the date hereof.

            4. NO DEFAULTS. Borrowers hereby affirm to Foothill that no Event of
Default has occurred and is continuing as of the date hereof.

            5. CONDITION PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon the following:

                  (a) Payment by Borrowers to Foothill of an overadvance fee in
the aggregate amount of $2,500 such fee to be charged to Borrowers' loan account
pursuant to Section 2.5(d) of the Agreement; and

                  (b) Receipt by Foothill of an executed copy of this Amendment.

            6. COSTS AND EXPENSES. Borrowers shall pay to Foothill all of
Foothill's out-of-pocket costs and expenses (including, without limitation, the
fees and expenses of its counsel, which counsel may include any local counsel
deemed necessary, search fees, filing and recording fees, documentation fees,
appraisal fees, travel expenses, and other fees) arising in connection with the
preparation, execution, and delivery of this Amendment and all related
documents.

            7. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement, as amended and supplemented hereby, shall remain in full force and
effect.

            8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an original.
All such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.

            IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first set forth above.

                                       FOOTHILL CAPITAL CORPORATION,
                                       a California corporation


                                       By:
                                              ------------------------------
                                       Title:
                                              ------------------------------


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<PAGE>


                                       K-TEL INTERNATIONAL (USA), INC.,
                                       a Minnesota corporation


                                       By:
                                              ------------------------------
                                       Title:
                                              ------------------------------

                                       DOMINION ENTERTAINMENT, INC.,
                                       a Minnesota corporation


                                       By:
                                              ------------------------------
                                       Title:
                                              ------------------------------

                                       K-TEL CONSUMER PRODUCTS, INC.,
                                       a Minnesota corporation


                                       By:
                                              ------------------------------

                                       K-TEL TV, INC.,
                                       a Minnesota corporation


                                       By:
                                              ------------------------------

                                       K-TEL VIDEO, INC.,
                                       a Minnesota corporation


                                       By:
                                              ------------------------------


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<PAGE>


            The undersigned has executed a Continuing Guaranty in favor of
Foothill Capital Corporation ("Foothill") respecting the obligations of the
Borrowers, as defined in the attached Amendment, owing to Foothill. The
undersigned acknowledges the terms of the above Amendment and reaffirms and
agrees that: its Continuing Guaranty remains in full force and effect; nothing
in such Continuing Guaranty obligates Foothill to notify the undersigned of any
changes in the financial accommodations made available to Borrowers or to seek
reaffirmations of the Continuing Guaranty; and no requirement to so notify the
undersigned or to seek reaffirmations in the future shall be implied by the
execution of this reaffirmation.

                                       K-TEL INTERNATIONAL, INC.
                                       a Minnesota corporation


                                       By:
                                              ------------------------------
                                       Name:
                                              ------------------------------
                                       Title:
                                              ------------------------------


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