Document:

EXHIBIT 10.2

                            ASSIGNMENT AND ACCEPTANCE

     This ASSIGNMENT AND ACCEPTANCE (this "ASSIGNMENT") dated as of February 27,
2001 is made among Foothill Capital Corporation, a California corporation (the
"ASSIGNOR"), K-5 Leisure Products, Inc., a Nevada corporation (the "ASSIGNEE"),
K-Tel International (USA), Inc. ("USA"), Dominion Entertainment, Inc.
("ENTERTAINMENT"), K-Tel Consumer Products, Inc. ("CONSUMER"), K-Tel TV, Inc.
("TV"), K-Tel Video, Inc. ("VIDEO"; and collectively with USA, Entertainment,
Consumer, and TV, hereinafter collectively referred to as "BORROWERS"), and
K-Tel International, Inc. ("INTERNATIONAL"), K-Tel OnLine, Inc.("ONLINE"), and
K-Tel DVD, Inc., ("DVD", and collectively with OnLine and International, the
"GUARANTORS").

                                    RECITALS

     A. The Assignor is party to that certain Loan and Security Agreement, dated
as of November 19, 1997 (as amended, amended and restated, modified,
supplemented or renewed from time to time, the "LOAN AGREEMENT"), with Borrower.
Any terms defined in the Loan Agreement and not defined in this Assignment are
used herein as defined in the Loan Agreement;

     B. As provided under the Loan Agreement, the Assignor has: (i) committed
(the "LOAN COMMITMENT") to make revolving loans ("REVOLVING LOANS") to Borrower,
and (ii) made a term loan to Borrower (the "Term Loan"), and together with the
Revolving Loans, the "Loans");

     C. As provided under the Loan Agreement the Assignor has also committed to
cause to be issued, or to guarantee, Letters of Credit (the "LETTER OF CREDIT
COMMITMENT", and together with the Loan Commitment, the "COMMITMENT"). No
Letters of Credit are outstanding under the Loan Agreement;

     D. The Assignee and International are parties to that certain Credit
Agreement, dated as of September 27, 1999 (the "ASSIGNEE CREDIT AGREEMENT"),
pursuant to which the Assignee, which is an affiliate of Borrowers, has made
certain loans to International, which loans were guaranteed by the other
Borrowers;

     E. The Assignor and the Assignee are parties to that certain Intercreditor
Agreement dated as of September 27, 1999 (as amended, the "INTERCREDITOR
AGREEMENT"), pursuant to Section 6 of which the Assignor has agreed under
certain circumstances to offer to the Assignee the opportunity to purchase the
Loans from the Assignor;

     F. The Assignor, the Borrowers and the Guarantors are parties to that
certain Forbearance Agreement, dated as of November 13, 2000 (as amended, the
"FORBEARANCE AGREEMENT"), pursuant to which the Borrowers acknowledged the
existence of certain Events of Default under the Loan Agreement.

     G. The Assignor has agreed to sell and assign to the Assignee the Loans and
the Loan Documents, and to assign and delegate to Assignee Assignor's
obligations, if any, in respect of the Commitment and under the Loan Documents,
all on the terms and subject to the conditions set forth herein and the Assignee
wishes to purchase and accept assignment of the Loans and the Loan Documents,
and to assume such obligations from the Assignor on such terms and subject to
such conditions.

     NOW THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

<PAGE>

     1. ASSIGNMENT AND ACCEPTANCE.

          (a) Subject to the terms and conditions of this Assignment, (i) the
Assignor hereby sells, transfers, delegates, and assigns to the Assignee, and
(ii) the Assignee hereby purchases, assumes and undertakes from the Assignor,
"AS IS," "WHERE IS," AND WITHOUT REPRESENTATION, WARRANTY OR RECOURSE OF ANY
KIND (except as specifically provided in Section 5 of this Assignment) all of
Assignor's right, title, and interest in, and to and under the Loan Documents
(including the Forbearance Agreement) and the Loans, and all obligations
(including the Commitment) of Assignor arising under the Loan Documents.

          (b) With effect on and after the Effective Date (as defined in Section
5 hereof), (i) the Assignee shall be a party to the Loan Agreement and each
other of the Loan Documents to which the Assignor was a party, and succeed to
all of the rights and be obligated to perform all of the obligations of Assignor
under the Loan Agreement and any such other Loan Documents (including the
Forbearance Agreement), and (ii) the Assignor shall relinquish all of its rights
and be released from all of its obligations (including the Commitment) under the
Loan Documents. The Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan Documents
(including the Forbearance Agreement) are required to be performed by the
Assignor.

     2. PAYMENTS.

     As consideration for the sale, assignment and transfer contemplated in
Section 1 hereof, the Assignee shall: pay to the Assignor on the Effective Date
in immediately available funds an amount equal to $3,479,544.85, (the "PURCHASE
PRICE") representing the principal amount of all Loans as of the Effective Date,
together with any interest, fees and other payments accrued under the Loan
Documents, but unpaid as of the Effective Date. A detailed calculation of the
Purchase Price is set forth on SCHEDULE A attached hereto.

     3. INDEPENDENT CREDIT DECISION.

     The Assignee (a) acknowledges that it is an affiliate under common
ownership with Borrowers and that it is familiar with the financial condition of
Borrowers, (b) acknowledges that it has received a copy of the Loan Agreement,
the Forbearance Agreement, and the Loan Documents, and such other documents and
information as it has deemed appropriate to make its own credit and legal
analysis and decision to enter into this Assignment; and (c) agrees that it has
made and that it will continue to make, independently and without reliance upon
the Assignor, and based on such documents and information as it shall deem
appropriate at the time, its own credit and legal decisions in taking or not
taking action under the Loan Documents.

     4. EFFECTIVE DATE.

     As between the Assignor and the Assignee, the effective date for this
Assignment (the "EFFECTIVE DATE") shall be the later of: (i) February 27, 2001;
and (ii) the first day on which the following conditions precedent have been
satisfied:

               (i) this Assignment shall be executed and delivered by the
Assignor, the Assignee, the Borrowers, and the Guarantors, and

               (ii) the Assignee shall pay to the Assignor the Purchase Price.
                                        2

<PAGE>

     5. REPRESENTATIONS AND WARRANTIES.

          (a) The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder, that such
interest has not been sold, assigned, subordinated or encumbered by the Assignor
and is free and clear of any lien or other adverse claim created by the
Assignor.

          (b) The Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents or the Forbearance Agreement,
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or the Forbearance Agreement, or any other
instrument or document furnished pursuant thereto. The Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to: (i) the financial condition of the Borrowers or any Guarantor,
(ii) the performance or observance by the Borrowers or any Guarantor of any of
their obligations under the Loan Documents or any other instrument or document
furnished in connection therewith, (iii) the state of title to any assets in
which the Assignor has a security interest, or the extent of, perfection of, or
priority of such security interest.

          (c) The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and any other documents
required or permitted to be executed or delivered by it in connection with this
Assignment, and to fulfill its obligations hereunder; (ii) no notices to, or
consents, authorizations or approvals of, any person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment; and no further action by, or notice to, or filing with any
person is required of it for such execution, delivery or performance; (iii) this
Assignment has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of the Assignee, enforceable against the Assignee
in accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
Assignee represents and acknowledges that it is taking the Loan Documents as is,
without the benefit of any representations and warranties, except as expressly
stated in subsection 5(a) above.

          (d) The Borrowers represent and warrant that the amounts set forth on
Schedule A are the true and correct amounts of principal, interest, and fees
accrued and owing under the Loan Agreement as of this date.

     6. FURTHER ASSURANCES.

     The Assignor and the Assignee each hereby agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Assignment,
including the delivery of any UCC or real property assignments and the delivery
to Assignee of any possessory Collateral, provided, however, that any and all
fees, costs, or expenses of the Assignor or the Assignee incurred after the
Effective Date arising out of this Section 6 (including all attorneys fees and
costs) shall be at the sole cost of the Borrower.

     7. RELEASE BY ASSIGNEE.

     The Assignee, for itself and each of its successors, assigns, directors,
officers, employees, agents, attorneys, attorneys-in-fact, consultants and
advisors of or to any of the foregoing (collectively, the "Assignee Releasors")
hereby acquits, waives, releases, and discharges Foothill Capital Corporation in
its capacity as the lender under the Loan Documents and the Assignor hereunder,
and its successors, assigns, directors, officers, employees, agents, attorneys,
consultants and advisors of any of the foregoing (collectively,

                                        3

<PAGE>

the "Releasees"), of and from any and all claims (including, without limitation,
any liabilities, damages and causes of action to the extent arising therefrom)
whatsoever, in law or in equity, whether known or unknown, which the Assignee
Releasors ever had, now have, or hereinafter can, shall or may have against the
Releasees by reason of any matter arising out of or related to the Loan
Documents, the Loans, the Forbearance Agreement, the Intercreditor Agreement, or
this Agreement, or any other actions or omissions relating in any way thereto;
PROVIDED, HOWEVER, that nothing in this Section 7 shall acquit, waive, release
or discharge Assignor of any representation, warranty or covenant explicitly
made by Assignor in this Assignment. The Assignee Releasors specifically waive
as against the Releasees any rights they, or any of them, may have under Section
1542 of the California Civil Code, which provides:

     A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.

     8. CONSENT, RELEASE BY BORROWERS, GUARANTORS.

     Borrowers and Guarantors consent to this Assignment. As an inducement to
Assignor to enter into this Assignment, each Borrower and each Guarantor, for
itself and each of its successors, assigns, directors, officers, employees,
agents, attorneys, attorneys-in-fact, consultants and advisors of or to any of
the foregoing (collectively, the "Borrower Releasors") hereby acquits, waives,
releases, and discharges the Releasees, of and from any and all claims
(including, without limitation, any liabilities, damages and causes of action to
the extent arising therefrom) whatsoever, in law or in equity, whether known or
unknown, which the Borrower Releasors ever had, now have, or hereinafter can,
shall or may have against the Releasees by reason of any matter arising out of
or related to the Loan Documents, the Loans, the Forbearance Agreement, or this
Agreement, or any other actions or omissions relating in any way thereto. The
Borrower Releasors specifically waive as against the Releasees any rights they,
or any of them, may have under Section 1542 of the California Civil Code, which
provides:

     A general release does not extend to claims which the creditor does not
     know or suspect to exist in his favor at the time of executing the release,
     which if known by him must have materially affected his settlement with the
     debtor.

     9. CONTINUING INDEMNIFICATION.

     Notwithstanding the assignment of the Assignor's rights pursuant to this
Assignment or any other agreement, document or instrument executed in connection
herewith, each Borrower agrees to (a) reimburse Assignor for any costs and
expenses (including, without limitation, attorneys fees and costs) incurred by
Assignor in connection with this Assignment, and (b) pay, indemnify, defend, and
hold Releasees harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Assignment and of the Loan Agreement, the Forbearance
Agreement, and any other Loan Documents or the transactions contemplated
therein, and with respect to any investigation, litigation, or proceeding
related to this Assignment, the Loan Agreement, any other Loan Document, or the
use of the proceeds of the credit provided thereunder (irrespective of whether
any Releasee is a party thereto), or any act, omission, event or circumstance in
any manner related thereto.

                                        4

<PAGE>

     10. DISHONORED ITEMS.

     The Payoff Amount has been calculated on the premise that all checks and
other instruments delivered by the Borrowers to the Assignor, or to any other
financial institution that has in turn provided the amount thereof to the
Assignor for application to the Borrowers' loan balance, have been or will be
honored and paid in full. The Assignee agrees to pay the Assignor, on demand at
any time during the 90 days following the Effective Date, the amount of any such
check or other instrument that may be returned for nonpayment, for any reason.

     11. MISCELLANEOUS.

          (a) Any amendment or waiver of any provision of this Assignment shall
be in writing and signed by the parties hereto. No failure or delay by either
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof and any waiver of any breach of the provisions of this
Assignment shall be without prejudice to any rights with respect to any other or
further breach thereof.

          (b) All payments made hereunder shall be made without any set-off or
counterclaim.

          (c) The Assignor and the Assignee shall each pay its own costs and
expenses (including attorneys fees and costs) incurred in connection with the
negotiation, preparation, execution and (subject to Section 6 above) performance
of this Assignment. Nothing contained in this Section 11(c) shall prevent either
the Assignor or the Assignee from charging the Borrower's loan account for any
such fees, costs, or expenses pursuant to the terms of the Loan Agreement.

          (d) This Assignment may be executed in any number of counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.

          (e) THIS ASSIGNMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF
CALIFORNIA AND SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF SUCH STATE, EXCEPT THAT NO DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY
THE LAWS OF ANY OTHER STATE OR JURISDICTION. Each of the Assignor, Assignee,
Borrowers, and Guarantors agrees that, in addition to any other courts that may
have jurisdiction under applicable laws or rules, any action or proceeding to
enforce or arising out of this Assignment may be commenced in the Superior Court
of the State of California for Los Angeles County, or in the United States
District Court for the Central District of California, and each of the Assignor,
Assignee, Borrowers, and Guarantors consents and submits in advance to such
jurisdiction and agrees that venue will be proper in such courts on any such
matter. Each party to this Assignment hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

          (f) THE ASSIGNOR, THE ASSIGNEE, BORROWERS, AND GUARANTORS EACH OF
WAIVES TRIAL BY JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN
ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT
OF THIS ASSIGNMENT, THE LOAN AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR
WRITTEN) DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE ASSIGNOR, ON THE ONE HAND, AND ANY OF THE
ASSIGNEE, THE BORROWERS OR THE GUARANTORS, ON THE OTHER HAND. EACH OF THE
PARTIES TO THIS AGREEMENT CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND
FREELY MADE.

                                        5

<PAGE>

          (g) Assignee, Borrowers, and Guarantors agree that after this
Assignment and Acceptance have been completed, all references to "Foothill
Capital Corporation" are changed to "K-5 Leisure Products, Inc.," that all
references to the state of incorporation of K-5 Leisure Products, Inc. shall be
to Nevada law; and that Section 13 of the Loan Agreement shall be amended to
read as follows:

     12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

     THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT,) THE CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUCTED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA
OR, AT THE SOLE OPTION OF K-5 LEISURE PRODUCTS, INC.. IN ANY OTHER COURT IN
WHICH K-5 LEISURE PRODUCTS, INC. SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
BORROWER AND K-5 LEISURE PRODUCTS, INC. WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 12. EACH BORROWER AND K-5 LEISURE PRODUCTS, INC.
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND K-5 LEISURE PRODUCTS, INC. REPRESENTS THAT THEY HAVE REVIEWED THIS
WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION,  A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     IN WITNESS WHEREOF, the Assignor, the Assignee, the Borrowers, and the
Guarantors have caused this Assignment to be executed and delivered by their
duly authorized officers as of the date first above written.

                                          FOOTHILL CAPITAL CORPORATION,
                                          as Assignor

                                          By:  /s/ C. MacDonald
                                             --------------------------------
                                          Title:  Vice President

                                                -----------------------------

                                        6

<PAGE>

                                          K-5 LEISURE PRODUCTS, INC.,
                                          as Assignee

                                          By: /s/ P. Kives
                                             --------------------------------
                                          Title: President

                                                -----------------------------

                                          Address for Notices:

                                          220 Saulteaux Crescent

                                          -----------------------------------
                                          Winnipeg, MB R3J 3W3
                                          -----------------------------------
                                          Canada

                                          -----------------------------------

                                          BORROWERS:

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

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                          DOMINION ENTERTAINMENT, INC.,
                                          a Minnesota corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

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

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                          K-TEL TV, INC., a Minnesota
                                          corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                          K-TEL VIDEO, INC., a Minnesota
                                          corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                          GUARANTORS:

                                          K-TEL INTERNATIONAL, INC.,
                                          a Minnesota corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                        7

<PAGE>

                                          K-TEL ONLINE, INC., a Minnesota
                                          corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                          K-TEL DVD, INC., a Minnesota
                                          corporation

                                          By: /s/ Dennis Ward

                                             --------------------------------
                                          Its: Chief Financial Officer

                                              -------------------------------

                                        8

<PAGE>

<TABLE>
<CAPTION>
                                   SCHEDULE A

                                   ----------

                                      K-TEL

                                  PAYOFF AMOUNT

                                                           AMOUNT
                                                    --------------
<S>                                                  <C>
            Revolving Principal                     $   490,338.08
            Term Loan Principal                       2,904,874.00
            Accrued Audit Expenses                        7,500.00
            Accrued Legal Fees - Buchalter               20,000.00
            Accrued Legal Fees - Faegre                   5,000.00
            Accrued Interest Expense - Revolver           8,345.56
            Accrued Interest Expense - Term Loan         27,233.28
            Accrued Fees (Service Fee,
                 Unused & Wire Fee)                       3,753.93
            Deposit for Foothill Expenses Not Yet
                 Invoiced                                12,500.00
                                                    --------------
                 Total Expected Payoff Amount        $3,479,544.85
</TABLE>EXHIBIT 10.3

                          VOLUNTARY SURRENDER AGREEMENT

     This is an Agreement for voluntary surrender of collateral ("Agreement")
made and entered into this 12th day of March, 2001, by and between K-Tel
International (USA), Inc. ("K-Tel USA") and K-5 Leisure Products, Inc. ("K-5").

                                    RECITALS

                                    --------

A.        On September 27, 1999, K-5 and K-Tel International, Inc. ("K-Tel")
          entered into that certain Credit Agreement (the "K-5 Agreement"). As
          of the date hereof, K-Tel is indebted to K-5 under the terms and
          conditions of the K-5 Agreement (and all documents delivered pursuant
          thereto) in the principal amount of $3,155,824,69, together with
          interest on such principal sum in the amount of $10,894.10, for an
          aggregate Indebtedness to K-5 of $3,166,723.79 plus costs and expenses
          of collection including reasonable attorneys' fees (the "K-5
          Indebtedness").

B.        K-Tel is unable to meet the demand of K-5 for full satisfaction of its
          obligations to K-5 under the K-5 Agreement.

C.        The obligations of K-Tel to K-5 under the K-5 Agreement were
          guaranteed by K-Tel USA dated September 27, 1999 which guaranty was
          secured by a Security Agreement from K-Tel USA to K-5, under which K-5
          holds, INTER ALIA, a security interest in essentially all of K-Tel
          USA's inventory, receivables, equipment, and general intangibles (the
          "Collateral").

D.        On November 19, 1997, K-Tel USA and Foothill Capital Corporation
          ("Foothill") entered into that certain Loan and Security Agreement
          (the "Foothill Agreement"). On February 28, 2001, Foothill assigned
          all of its right, title and interest in the Foothill Agreement to K-5.
          As of the date hereof, K-Tel USA is indebted to K-5 under the terms
          and conditions of the Foothill Agreement (and all documents delivered
          pursuant thereto) in the principal amount of $3,479,544.85 together
          with interest on such principal sum in the amount of $12,011.58, for
          an aggregate Indebtedness under the Foothill Agreement to K-5 of
          $3,491,556.43 plus costs and expenses of collection including
          reasonable attorneys' fees (the "Foothill Indebtedness"). On February
          28, 2001, K-5 made additional advances under the Foothill Agreement of
          $445,000.00 bringing the total indebtedness under the Foothill
          Agreement to $3,924,544.85 (the K-5 Indebtedness and the Foothill
          Indebtedness are together, the "Indebtedness"). The total of the
          Indebtedness as of this date is $7,091,268.64.

E.        To secure repayment of all obligations of K-Tel USA to Foothill, K-Tel
          USA gave Foothill a security interest in the Collateral owned by K-Tel
          to USA, which security interest has been assigned to K-5.

F.        K-Tel USA is unable to meet the demand of K-5 for full satisfaction of
          its obligations to K-5 under the Foothill Agreement.

G.        K-5 wishes to provide for disposition of the Collateral, in a manner
          which complies with the provisions of the Uniform Commercial Code now
          in effect in the State of Minnesota and wishes to ensure that it is
          proceeding in a commercially reasonable manner in disposing of the
          Collateral.

H.        K-Tel USA and K-5 intend this Agreement to assist in obtaining the
          maximum return on the liquidation of the Collateral.

<PAGE>

     NOW, THEREFORE, in consideration of the above recitals, as well as the
covenants and representations contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, K-5
and K-Tel USA:

     (1) The above recitals are acknowledged by the parties to be true and
correct and are incorporated herein by reference.

     (2) AGREEMENT OF K-TEL USA. K-Tel USA agrees to the following:

          (a)  On the date hereof and in connection with K-5's foreclosure of
               its security interest in the Collateral, K-Tel USA hereby
               voluntarily surrenders to K-5 the Collateral together with all of
               its right, title and interest therein. The Collateral will remain
               subject to K-5's security interests. K-Tel USA acknowledges that
               K-5 will provide all notices of default or disposition of the
               Collateral required by Minnesota Statutes Section 336.9-504.

          (b)  On the date hereof, K-Tel USA shall deliver to K-5 all of the
               Collateral and shall deliver to K-5 all documents necessary to
               effectuate and facilitate (i) K-Tel USA's voluntary surrender of
               all of the Collateral to K-5 hereunder and (ii) any disposition
               of the Collateral by K-5 to third parties hereafter, (all such
               documents to be in form acceptable to K-5). Notwithstanding such
               delivery, K-Tel USA shall maintain existing insurance on the
               Collateral until such time as K-5 disposes of the Collateral,
               equal to the value thereof as set forth herein, all such
               insurance to name K-5 as loss payee.

          (c)  Except for the rights of K-Tel USA to reduction of the
               Indebtedness as contained in Section 3 of this Agreement, K-Tel
               USA hereby waives and renounces any rights in or to the
               Collateral, including without limitation any right to further
               notice of the disposition thereof, whether under Minnesota
               Statutes ss. 336.9-504 or otherwise, except for any right to
               redeem the Collateral under Minnesota Statutes Section 336.9-506.

     (3) REDUCTION OF INDEBTEDNESS. Subsequent to the voluntary surrender of the
Collateral by K-Tel USA herein, upon its full performance under Section 2 hereof
and based upon the representations, warranties and covenants of K-Tel USA
herein, K-5 will apply funds in accordance with the Uniform Commercial Code and
will reduce the amount of the Indebtedness by the amount actually received by
K-5 upon K-5's disposition to third parties of the Collateral conveyed to K-5
hereunder; provided, however, that the Indebtedness shall not be so reduced
until funds paid or to be paid upon such disposition are collected funds
(subject to no rights of setoff, charges or other claims or reductions). Upon
the collection by K-5 of the total amount of the Indebtedness, K-5 will
terminate any financing statements, wherever filed, which name K-Tel USA as
Debtor and K-5 as secured party.

     (4) REPRESENTATIONS AND WARRANTIES OF K-TEL USA. To induce K-5 to enter
into this Agreement and to accept K-Tel USA Inc.'s voluntary surrender of all of
K-Tel USA, Inc.'s right, title and interest in and to the Collateral, K-Tel USA,
Inc. represents and warrants to K-5 and agrees that:

          (a)  TITLE AND CONDITION OF CONVEYED COLLATERAL. K-Tel USA has good
               and marketable title to and owns the Collateral, free and clear
               of all security interests, liens or encumbrances other than those
               in favor of K-5 being foreclosed hereby and those set forth on
               EXHIBIT A attached hereto. K-5 has a valid, perfected, first
               priority security interest in all of the Collateral. The parties,
               after due consideration, have concluded and estimated that the
               value of the Collateral being surrendered will have a fair market
               value substantially less than the Indebtedness.

          (b)  FAIR MARKET VALUE. K-Tel USA admits and agrees that K-5 by
               reducing the Indebtedness as provided herein pursuant to a
               commercially reasonable sale as

                                        2

<PAGE>

               required by Minnesota Statutes Section 336.9-504, will have
               provided a full, fair, equivalent and adequate consideration to
               K-Tel USA for the Collateral.

          (c)  RESIDENCE OF K-TEL USA AND LOCATION OF COLLATERAL. K-Tel USA
               represents and warrants to K-5 that the addresses specified in
               Section 10(a) hereof constitute the "residences" of K-Tel USA for
               purposes of all state or federal laws, statutes or regulations
               relating to the payments of or assessment for taxes of all types
               (and the reporting of income or filing of returns relating
               thereto) and that all of the Collateral is located, stored or
               maintained by K-Tel USA at that location or locations in the same
               county.

          (d)  NO TRANSFER OF COLLATERAL. K-Tel USA represents and warrants to
               K-5 that during the time period commencing on March 13, 2000 and
               continuing to and including the date hereof, K-Tel USA has not
               transferred, conveyed, assigned or otherwise disposed of any
               material portion of (or any of K-Tel USA's then existing right,
               title or interest in) the Collateral other than in the ordinary
               course of their business.

     (5) ADDITIONAL COVENANTS OF K-TEL USA. K-Tel USA additionally covenants
to K-5 as follows:

          (a)  FURTHER INSTRUMENTS. On the date hereof, or thereafter if
               necessary, K-Tel USA shall, without cost or expense to K-5,
               execute and deliver to or cause to be executed and delivered to
               K-5 such further instruments and take such other action as K-5
               may reasonably require to carry out more effectively the transfer
               of the Collateral contemplated by this Agreement.

          (b)  FURTHER DISPOSITION. The Collateral may be disposed of by K-5 by
               public sale, private sale or other disposition, and any auction,
               private sale or other disposition of the Collateral, pursuant to
               the provisions of Minnesota Statutes Section 336.9-504, may be
               held by K-5 on any real property owned, occupied, leased or
               controlled by K-Tel USA without charge to K-5 for use of such
               real property.

          (c)  BOOKS AND RECORDS.  K-5 shall be entitled to reasonable access to
               the books and records of K-Tel USA.

          (d)  RELEASE AND SETTLEMENT OF CLAIMS. K-Tel USA hereby stipulates and
               agrees that the amount of the Indebtedness prior to any reduction
               hereunder is as set forth in the Recitals.

          (e)  COMMISSION. K-Tel USA hereby stipulates and agrees that it is not
               entitled to any commission or other remuneration from K-5 upon
               K-5's disposition of the Collateral hereafter to any third party
               and that no action undertaken by K-5 pursuant hereto will in any
               way limit or discharge K-5's security interest in any of the
               Collateral, or any other interests of K-5 in any other real or
               personal property of K-Tel USA or any affiliates.

     (6) MUTUAL COVENANTS.

          (a)  EFFECT OF SURRENDER. The voluntary surrender of the Collateral by
               K-Tel USA hereunder is intended to be, and shall constitute, a
               voluntary surrender of the same in connection with K-5's
               foreclosure of its security interests in the Collateral only. It
               is not a transfer for security nor is such voluntary surrender an
               election or proposal by K-5 to retain the Collateral in
               satisfaction of the obligations of K-Tel USA to K-5. K-5 retains
               the right to seek a deficiency against K-Tel USA.

                                        3

<PAGE>

          (b)  AMENDMENTS, WAIVERS, ETC. No amendment, modification or waiver or
               any of the provisions of this Agreement shall be effective unless
               the same shall be in writing and signed by K-5 and K-Tel USA, and
               then such waiver shall be effective only in the specific instance
               and for the specific purpose for which given.

     (7) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty made by K-Tel USA in this Agreement shall survive
the date hereof.

     (8) ADDITIONAL ADVANCES. Although K-5 may determine to advance such other
sums as K-5 may in its sole discretion determine to be advances permitted under
Minnesota Statutes Section 336.9-504(1)(a), K-Tel USA acknowledges that K-5 has
no obligation to make any such further advances.

     (9) GOVERNING LAW. This Agreement shall be governed by and construed under
and in accordance with the laws of the State of Minnesota.

     (10) MISCELLANEOUS.

          (a)  NOTICES. Any notices or other communications required or
               permitted hereunder shall be in writing and shall be considered
               delivered in all aspects when it has been delivered by hand or
               mailed by certified mail, return receipt requested, first class
               postage prepaid, addressed as follows:

               To K-5:           K-5 Leisure Products, Inc.
                                 220 Saulteaux Crescent
                                 Winnipeg, Manitoba, Canada
                                 Attention:  Philip Kives

               with a copy to:   LEONARD, STREET & DEINARD, P.A.
                                 150 South Fifth Street, Suite 2300
                                 Minneapolis, MN 55402
                                 Attention:  Steven DeRuyter

               To K-Tel USA:     K-Tel International (USA), Inc.
                                 5555 Pioneer Creek Drive
                                 Maple Plain, MN 55359
                                 Attention:  Dennis Ward

               with a copy to:   BRIGGS AND MORGAN
                                 2400 IDS Center
                              Minneapolis, MN 55402
                              Attention: Av Gordon

or such other addresses as shall be similarly furnished in writing by any
party.

          (b)  ENTIRE AGREEMENT; BINDING EFFECT. This instrument contains the
               entire agreement between the parties hereto with respect to the
               transactions contemplated herein, and shall be binding upon the
               parties hereto and their respective legal representatives,
               successors and assigns. There are no agreements or understandings
               between the parties other than those set forth herein or executed
               simultaneously herewith.

          (c)  COUNTERPARTS. This Agreement may be executed in any number of
               identical counterparts, any or all of which may contain the
               signatures of fewer than all of the parties, and all of which
               shall be construed together as but a single instrument.

                                        4

<PAGE>

          (d)  HEADINGS. Section and paragraph headings in this Agreement are
               included for convenience of reference only and shall not
               constitute a part of this Agreement for any other purpose.

          (e)  NATURE OF AGREEMENT. Notwithstanding the requirement of
               performance by any party subsequent to the date hereof, this
               Agreement shall constitute a binding contract for the surrender
               of the Collateral pursuant to the terms hereof enforceable as
               between the parties hereto upon execution hereof, subject only to
               satisfaction of the terms set forth herein.

          (f)  NO AGENCY OR JOINT VENTURE. Neither the execution of this
               Agreement nor any action taken by parties hereto is intended to
               be, nor shall it be construed to be, the formation of any agency
               relationship, any partnership or joint venture. No party shall
               have the right to obligate or otherwise bind any other party
               hereunder. No third party beneficiary rights are created
               hereunder.

          (g)  LIMITATION. The transactions contemplated in this Agreement are
               not intended by K-5 or K-Tel USA to constitute an accord and
               satisfaction of the Indebtedness, the obligations of K-Tel USA
               under the Loan Agreement and the Foothill Agreement (the
               "Obligations"), or any other obligations of K-Tel USA to K-5. K-5
               does not intend to retain the Collateral in full satisfaction of
               the Obligations or to fully discharge the Obligations as a result
               of the transactions contemplated herein, it being expressly
               understood by the parties hereto that the Indebtedness and the
               Obligations shall be reduced, cancelled and discharged only by
               the amounts and in the manner specifically set forth in this
               Agreement and that K-5's security interest or other liens or
               encumbrances upon the real or personal property of K-Tel USA,
               including without limitation the Collateral, shall remain and
               continue herein, unaffected by the transactions contemplated
               herein except to the extent specifically set forth.

                                       K-TEL INTERNATIONAL (USA), INC.

                                       By: /s/ Dennis Ward

                                          ------------------------------------
                                          Dennis Ward

                                          Its Chief Financial Officer

                                       K-5 LEISURE PRODUCTS, INC.

                                       By: /s/ Philip Kives

                                          ------------------------------------
                                          Philip Kives

                                          Its President

                                        5

<PAGE>

                                  EXHIBIT A TO

                          VOLUNTARY SURRENDER AGREEMENT

Security Interests held by other than K-5:

FILING NUMBER AND DATE      SECURED PARTY            COLLATERAL
----------------------      -------------            ----------

                              None

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