**Exhibit10**

 

**K-TELINTERNATIONAL, INC.**

**NON-QUALIFIEDSTOCK OPTION AGREEMENT**

**OUTSIDETHE 1997 STOCK OPTION PLAN**

 

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Number of shares subjectto Option:            

 

THIS AGREEMENT, made andentered into as of November 27, 2002, between K-tel International, Inc., aMinnesota corporation (herein called the “Company”) and                                  (herein called the “Optionee”).

 

W I T N E S S E TH :

 

WHEREAS, the Company desires to afford the Optionee anopportunity to purchase shares of its common stock, (herein called the “CommonStock”), as provided in this Agreement; and

 

WHEREAS, the Board of Directors of the Company (hereincalled the “Board”) has authorized and approved the granting of the option topurchase the number of shares of Common Stock on the terms set forth in thisAgreement,

 

NOW, THEREFORE, in consideration of the mutualcovenants hereinafter set forth and for other good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged, the parties heretohave agreed, and do hereby agree, as follows:

 

1.                                       Grantof Option.  The Company herebyirrevocably grants to the Optionee on November 27, 2002, the right and option(herein called the “Option”) to purchase all or any part of an aggregate of                  ****sharesof Common Stock (the “Shares”) at the purchase price of $0.05 per share, suchoption to be exercised as hereinafter provided.

 

2.                                       Exerciseof Option.  It is understood andagreed that the option evidenced hereby is subject to the following terms and conditions:

(a)                                  ExpirationDate.  The Option shall expire tenyears after the date of grant specified in Section 1 above.

 

(b)                                 Exercisability.  Subject to the other terms of this Agreementregarding the exercisability of this Option, this Option shall be exercisablein full as of the date of grant indicated in Section 1 above.

 

(c)                                  WrittenNotice of Exercise.  Any exerciseshall be accompanied by a written notice to the Company specifying the numberof shares of Stock as to which the Option is being exercised.  Notation of any partial exercise shall bemade by the Company on Schedule I hereto.

 

(d)                                 Paymentof Purchase Price.  The purchaseprice of the shares as to which the Option may be exercised shall be paid infull in cash at the time of exercise.

 

3.                                       Adjustments.  If the number or type of shares of CommonStock outstanding shall be changed or if the Company distributes to the holdersof its Common Stock any stock of the Company or any security convertible intostock of the Company, as a result of recapitalization, stock split, stockdividend, exchange, consolidation, combination of shares, or reorganization orother event in which the Company is the surviving corporation, the Board shallmake such proportionate increase or decrease in the

 

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number, kind and price of the shares subject to the Option as it maydeem appropriate, and in doing so may eliminate any fractional shares whichmight result from such proportionate increase or decrease.

 

4.                                       Nota Stockholder.  The holder of theOption shall not have any of the rights of a stockholder of the Company withrespect to the shares covered by the Option except to the extent that thecertificate or certificates for such shares shall be delivered to him upon thedue exercise of the Option.

 

5.                                       Non-Transferabilityof Option.  Except as otherwiseprovided herein, this Option and the rights and privileges conferred herebyshall not be sold, pledged or otherwise transferred (except by reason of death)and shall not be subject to sale under execution, attachment, levy or similarprocess.

 

6.                                       Terminationof Service.

 

(a)                                  Ifthe Optionee’s service on the Company’s board of directors terminates for anyreason (including, but not limited to, death or disability), then thisAgreement shall expire on the earlier of the expiration date of this Agreementdetermined pursuant to Section 2(a) above or the date twelve (12) months afterthe termination of the Optionee’s service. The Optionee may exercise all or part of this Option at any time beforeits expiration under the preceding sentence.

 

(b)                                 Inthe event that the Optionee’s service terminates by reason of death or theOptionee dies after termination of service but before the expiration of thisAgreement, all or part of this Option may be exercised (prior to expirationunder Section 6(a)) above by the executors or administrators of the Optionee’sestate or by any person who has acquired this Option directly from the Optioneeby beneficiary designation, bequest or inheritance.  Any such exercise shall be made by providing the Company withsuch evidence as the Company may request to demonstrate that the person orpersons exercising the Option has or have the right to do so and that all taxesor other assessments with respect to the Common Stock issuable upon exercise ofthe Option have been paid or adequate provision for such payment has beenmade.  Upon being satisfied that theperson or persons exercising the Option has or have right to do so and that alltaxes or other assessments with respect to the Common Stock covered therebyhave been paid or provided for, the Company shall (subject to the terms andconditions of this Agreement) issue certificates for such shares in suchdenominations as the person or persons exercising the Option may direct, andshall deliver such shares in accordance with reasonable instructions containedin the notice.

 

7.                                       Methodof Exercising Option.

 

(a)                                  Subjectto the terms and conditions of this Agreement, the Option may be exercised, atany time prior to the expiration date, by written notice to the Company at itsexecutive offices.  Such notice shallstate the election to exercise the Option and the number of shares in respectof which it is being exercised, shall be signed by the person or persons soexercising the Option, and shall be accompanied by payment of the full purchaseprice of such shares.  The Company shalldeliver a certificate or certificates representing such shares as soon aspracticable after the notice shall be received.  Payment of such purchase price shall be made by a certified checkpayable to the order of the Company. The certificate or certificates for the shares as to which the Optionshall have been so exercised shall be registered in the name of the person orpersons so exercising the Option (or, if the Option shall be exercised by theOptionee and if the Optionee shall so request in the notice exercising theOption, shall be registered in the name of the Optionee and another personjointly, with right of survivorship) and shall be delivered as provided aboveto or upon the written order of the Optionee exercising the Option.  In the event the Option shall be exercisedpursuant to Section 6(b) of this Agreement by any person or persons other thanthe Optionee, such notice shall be accompanied by appropriate proof of theright of such person or persons to exercise the Option as required by Section6(b).  All shares that shall bepurchased upon the exercise of the Option as provided herein shall be fullypaid and non-assessable.

 

(b)                                 Itshall be a condition to the obligation of the Company to issue or transfershares of Common Stock upon exercise of the Option granted under the plan bydelivery of shares,

 

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that the Optionee (or anyauthorized representative) pay to the Company, upon its demand, such amount asmay be requested by the Company for the purpose of satisfying its liability towithhold federal, state or local income or other taxes incurred by reason ofthe exercise of the Option or the transfer of shares upon such exercise.  If the amount requested is not paid, theCompany may refuse to issue or transfer shares of Common Stock upon exercise ofthe Option.

 

(c)                                  TheCompany shall not be required to issue or transfer any certificates for sharespurchased upon exercise of this Option until all applicable requirements of lawhave been complied with and such shares have been listed on any securitiesexchange or system on which the Common Stock may then be listed.

 

8.                                       Reservationof Shares.  The Company shall at alltimes during the term of the Option reserve and keep available such number ofshares of Common Stock as will be sufficient to satisfy the requirements ofthis Agreement, shall pay all original issue and transfer taxes with respect tothe issue and transfer of shares pursuant hereto and all other fees andexpenses necessarily incurred by the Company in connection therewith, and willfrom time to time use its best efforts to comply with all laws and regulationswhich, in the opinion of counsel for the Company, shall be applicable thereto.

 

9.                                                                                        Restrictionson Transfer.

 

(a)                                  SecuritiesLaw Restrictions.  Regardless ofwhether the offering and sale of Common Stock under this Agreement have beenregistered under the Securities Act of 1933 (the “Act”) or have been registeredor qualified under the securities laws of any state, the Company at itsdiscretion may impose restrictions upon the sale, pledge or other transfer ofsuch Common Stock (including the placement of appropriate legends on stockcertificates or the imposition of stop-transfer instructions) if, in thejudgment of the Company, such restrictions are necessary or desirable in orderto achieve compliance with the Act, the securities laws of any state or anyother law.

 

(b)                                 MarketStand-Off.  In connection with anyunderwritten public offering by the Company of its equity securities pursuantto an effective registration statement filed under the Act, the Optionee or anytransferee shall not directly or indirectly sell, make any short sale of, loan,hypothecate, pledge, offer, grant or sell any option or other contract for thepurchase of, purchase any option or other contract for the sale of, orotherwise dispose of or transfer, or agree to engage in any of the foregoingtransactions with respect to, any Common Stock acquired under this Agreementwithout the prior written consent of the Company or its underwriters.  Such restriction (the “Market Stand-Off”)shall be in effect for such period of time following the date of the finalprospectus for the offering as may be requested by the Company or suchunderwriters.  In no event, however,shall such period exceed 180 days.  Inthe event of the declaration of a stock dividend, a spin-off, a stock split, anadjustment in conversion ratio, a recapitalization or a similar transactionaffecting the Company’s outstanding securities without receipt ofconsideration, any new, substituted or additional securities which are byreason of such transaction distributed with respect to any Common Stock subjectto the Market Stand-Off, or into which such Common Stock thereby becomeconvertible, shall immediately be subject to the Market Stand-Off.  In order to enforce the Market Stand-Off,the Company may impose stop-transfer instructions with respect to the CommonStock acquired under this Agreement until the end of the applicable stand-offperiod.  The Company’s underwritersshall be beneficiaries of the agreement set forth in this Subsection (b).  The Optionee or any transferee shall besubject to this Subsection (b) only if the directors and officers of theCompany are subject to similar arrangements.

 

(c)                                  InvestmentIntent at Grant.  The Optioneerepresents and agrees that the Shares to be acquired upon exercising thisAgreement will be acquired for investment, and not with a view to the sale ordistribution thereof.

 

(d)                                 InvestmentIntent at Exercise.  In the eventthat Common Stock issued under this Agreement is not registered under the Actbut an exemption is available which requires an

 

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investment representationor other representation, the Optionee shall represent and agree at the time ofexercise that the Common Stock being acquired upon exercising this Option isbeing acquired for investment, and not with a view to the sale or distributionthereof, and shall make such other representations as are deemed necessary orappropriate by the Company and its counsel.

 

(e)                                  Legends.  All certificates evidencing Shares issuedunder this Agreement in an unregistered transaction shall bear the followinglegend (and such other restrictive legends as are required or deemed advisableunder the provisions of any applicable law):

 

“THE SHARES REPRESENTEDHEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVEREGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TOTHE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(f)                                    Removalof Legends.  If, in the opinion ofthe Company and its counsel, any legend placed on a stock certificaterepresenting Shares issued under this Agreement is no longer required, theholder of such certificate shall be entitled to exchange such certificate for acertificate representing the same number of shares of Common Stock but withoutsuch legend.

 

(g)                                 Administration.  Any determination by the Company and itscounsel in connection with any of the matters set forth in this section shallbe conclusive and binding on the Optionee and all other persons.

 

10.                                 GoverningLaw.  This Agreement shall begoverned by and construed in accordance with the laws of the State ofMinnesota.

 

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IN WITNESS WHEREOF, K-tel International, Inc. hascaused this Agreement to be executed by the officer named below and theOptionee has executed this Agreement, both as of the day and year first abovewritten.

 

 
|   |   |   |   | K-TEL INTERNATIONAL, INC.          |   |
|--------|--------|--------|--------|------------------------------------|--------|
|   |   |   |   |                               |   |
|   |   |   |   |                               |
|   |   |   |   | By  Philip  Kives             |   |
|   |   |   |   | Its  Chief  Executive Officer |   |
|   |   |   |   |                               |   |
|   |   |   |   |                               |   |
|   |   |   |   |                               |   |
|   |   |   |   |                               |   |
|   |   |   |   |                               |   |
|   |   |   |   |                               |   |

 

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**SCHEDULEI**

**NOTATIONSAS TO PARTIAL EXERCISE**

 

| **Date of  Exercise** |   | **Number of  Purchased  Shares** |   | **Balance of  Shares on  Option** |   | **Authorized  Signature** |   | **Notation  Date** |
|-----------------------|--------|----------------------------------|--------|-----------------------------------|--------|---------------------------|--------|--------------------|

 

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