Document:

Exhibit
10.1

TRADEMARK
LICENSE

This Agreement is made
and entered into effective as of the 10th October, 2005 (“Effective Date”) by and
between Dominion Entertainment, Inc., a Minnesota corporation, having its
principal place of business at 2655 Cheshire Lane North, Suite 100, Plymouth,
MN 55447 (“Licensor”) on one hand; and BCI Eclipse Company, LLC, a Minnesota
limited liability company, 810 Lawrence Drive, #100, Newbury Park, CA 91320 (“Licensee”)
on the other hand.

WHEREAS,
Licensor owns and/or controls the US Trademark Registration Nos. 1,864,592 and
1,929,509 (herein collectively the “Registrations”), for the marks “K-TEL, and
the “K” logo, (herein respectively the “Marks”), of which specimens are
attached hereto, made a part hereof, and incorporated by reference on Exhibit “A”;
and

WHEREAS,
Licensor and Licensee have entered into an agreement attached hereto, made a
part hereof, and incorporated by reference as Exhibit “B” (“License Agreement”),
whereby Licensor grants to Licensee the right to manufacture, advertise and
sell compact discs and digital video discs (“DVD”) for sale through the
channels described in the License Agreement embodying master recordings or
musical performances in audio and video formats only which are owned or
controlled by Licensor and which are limited to and specifically set forth in
the License Agreement.  Licensee also
intends to license and release compact discs and DVD’s embodying master
recordings or musical performances owned by third parties and released by
Licensee, which master recordings or DVD’s must be specifically approved by
Licensor (if licensed from a non-major record label) (collectively referred to
herein as “Products”).  As used herein, “major
record label” shall mean EMI, Sony BMG, Warner Music, Universal Music and their
respective owned, controlled and affiliated labels.

WHEREAS, the
parties are desirous of entering into this Agreement whereby Licensee will
obtain the right to use the Marks on the Products during Term (as herein
defined).

NOW THEREFORE,
the parties hereto agree as follows:

1.             Territory.  United States (“Territory”).

2.             Term.

(a)                                  The
“Initial Term” shall commence on the Effective Date of this Agreement and shall
terminate at the end of the calendar month occurring fourteen (14) months
thereafter unless extended or sooner terminated as provided for herein.

(b)                                 Licensee
is granted an option to extend the Initial Term for a second one (1) year
period (“First Extension”) conditioned upon the following:

(i)             Licensor must have
earned Royalties based on Products shipped (which shall include the Advance as
hereinafter set forth) in the amount of three hundred fifty thousand dollars
($350,000.00) (“First Extension Amount”) by the end of the Initial Term.  It is understood and agreed that Royalties
based on shipments of Product will not actually be paid to Licensor until the
accounting period during which Licensee actually receives payment for such
Product; or

(ii)          Licensee shall have the
option to pay any shortfall in the First Extension Amount on or before the date
which is sixty (60) days following the expiration of the Initial Term in order
to qualify for the First Extension, provided however

 

 

written notice of its intention to pay such amount
shall be given to the Licensor on or before the expiration of the Initial Term
and provided further that any such shortfall payment shall not applied as a
credit against the Second Extension Amount or any payment otherwise due or
becoming due under this Agreement or the License Agreement.  Any shortfall amounts paid by Licensee
hereunder shall be referred to as a “Shortfall Payment.”

(c)                                  Licensee
is granted an option to extend the Term for a third one (1) year period (“Second
Extension”) conditioned upon the following:

(i)             Licensor must have
earned additional Royalties based on Product shipped equal to or exceeding the
sum of four hundred fifty thousand dollars ($450,000.00) during the First
Extension period (and not earned during the Initial Term) (“Second Extension
Amount”) by the end of the First Extension period.  It is understood and agreed that Royalties
based on shipments of Product will not actually be paid to Licensor until the
accounting period during which Licensee actually receives payment for such
Product; or

(ii)          Licensee shall have the
option to pay any shortfall in the Second Extension Amount on or before the
date which is sixty (60) days following expiration of the First Extension
period in order to qualify for the Second Extension, provided however written
notice of its intention to pay such amount shall be given to the Licensor on or
before the expiration of the First Extension period and provided further that
any such shortfall payment shall not be applied or credited toward any payment
otherwise due or becoming due under this Agreement or the License
Agreement.  Any such shortfall amounts
paid by Licensee shall be referred to as a “Shortfall Payment.”

(d)                                 To
the extent that Licensee is required to issue any credits for return of any of
Products which were sold or distributed by Licensor, or any of its distributors
other than Licensee (“Licensor Products”), and such credits are based on
returns of units of Product in excess of twenty-five percent (25%) of the units
of such Products set forth on Exhibit C attached hereto and by this reference
incorporated herein, Licensee shall have the right to deduct the amount of all
such credits in excess of the twenty-five percent (25%) (as well as any
third-party return processing charges actually incurred by Licensee on such
excess) from any royalties or Extension Amounts otherwise due to Licensor
hereunder.  For purposes of clarity,
Licensee shall not have the right to deduct the amount of credits for returns
until such returns exceed the twenty-five percent (25%) threshold set forth
above.  Licensee shall then own any
inventory of Licensor Products for which it has accepted such returns and
issued credits (up to the twenty-five percent (25%) limitation set forth above)
and Licensor shall continue to own any inventory of Licensor Products in excess
of the twenty-five percent (25%) limitation set forth above and Licensee shall
return such inventory to Licensor at Licensee’s expense.  If Licensee is then selling the same
Products, Licensee shall furnish at its own expense the current sleeves for
such Products and shall furnish jewel cases at Licensee’s expense, and Licensor
shall rework the Products and sell such inventory to Licensor at a purchase
price equal to Licensee’s normal manufacturing costs for such Products for
Licensee to resell under the terms of this Agreement.  If Licensee is not then selling the same
Product then notwithstanding the grant of an exclusive license herein Licensor 

 

 

shall be entitled to sell such inventory through any
means whatsoever including traditional retail channels.

(e)                                  Only
upon expiration of the Term due to the effluxion of time, Licensee shall have
the non exclusive right for a period of six (6) months immediately following
such expiration to sell off inventory of the Products then existing, PROVIDED
that Licensee continues to account for and pay the royalties herein provided
and PROVIDED FURTHER THAT Licensee shall not manufacture in the six (6) months
prior to such expiration any more Product than the Licensee reasonably expects
to sell during that period and that on expiration of the sell-off period
Licensee shall supply Licensor with a full detailed and accurate written
inventory confirming the quantity of the Product then in Licensee’s inventory
(including inventory held in any location under the possession, custody or
control of Licensee).

3.             Grant of
Rights.

(a)                                  Subject
to the terms and conditions of this Agreement, Licensor hereby grants to
Licensee the exclusive license to use the Marks in the Territory and during the
Term only in association with the Products and only in a field of use (the “Field
of Use”) being limited to the sale and distribution of the Products and
associated promotional and packaging materials through retail store, online
retail store (such as amazon.com) and record and video club sales channels
only.  The Field of Use shall
specifically exclude, without limitation, TV and/or radio advertised and mail
order packages and internet downloads). 
Notwithstanding the foregoing, Licensor shall have the right to use the
Marks in association with Products sold to fill orders received from customers
until the later of such time as Licensor has entirely depleted his inventory of
Products and the Licensee is in a position to ship Products.

(b)                                 Licensee
shall use the Marks only in the form and manner and with appropriate legends as
prescribed from time to time by Licensor, and shall not use any other trademark
or service mark in combination with the Marks (other than Licensee’s own
trademark) without prior written approval of Licensor, not to be unreasonably
withheld.

(c)                                  At
the expiration or termination of the Term, Licensee shall execute and deliver
to Licensor a document, in form and substance satisfactory to Licensor,
assigning to Licensor all of Licensee’s right, title and interest, if any, in
and to the aforesaid Marks.  In the event
Licensee fails to execute and deliver said document, Licensor shall have the
right to execute the same as Licensee’s attorney-in-fact, and Licensee does
hereby irrevocably constitute and appoint Licensor its true and lawful
attorney-in-fact only for the purpose of executing such document.

(d)                                 Any
rights in and to the Marks owned and/or controlled by Licensor which are not
specifically granted to Licensee herein are expressly reserved by
Licensor.  Licensee agrees and
acknowledges that it shall not acquire any rights of any nature in the Marks as
a result of Licensee’s use thereof, and that all uses thereof by Licensee shall
inure to Licensor.  Licensee acknowledges
the validity of the Marks and Licensor’s ownership of the Marks and of the
goodwill pertaining thereto, and agrees that the benefit of and goodwill
associated with use of the Marks by Licensee will inure entirely for the
benefit of Licensor.  During the term of
this Agreement and thereafter, Licensee will not:

 

 

(i)             do anything or omit
to do anything that might impair, jeopardize, violate, or infringe the Marks or
Licensor’s rights thereto; or

(ii)          attack or challenge the
validity of the Marks or Licensor’s rights thereto, or assist any other party
to do so; or

(iii)       do anything through
Licensee’s use of the Marks or otherwise to prejudice or diminish the
reputation or goodwill of Licensor; or

(iv)      claim, use or apply to
register, record, or file any trade-mark, trade name, copyright, or design that
is identical or confusingly similar to the Marks, or any portion thereof, or
assist any other party to do so.

(v)         use or authorize the use
of any Marks or other designation identical with or confusingly similar to any
trademark or “logos” owned and/or controlled by Licensor.

(e)                                  The
Products shall specifically exclude, without limitation, non-physical master
recordings (such as digital downloads) digitally distributed over the Internet
or via any on-line service, provided however that Licensee shall have the right
to sell finished goods of Product licensed hereunder via Licensee’s website and
other on-line retail channels (i.e. 
Amazon, Barnes & Noble).

(f)                                    Licensor
warrants that it has the authority to grant the rights set forth in this
Section 3 to specifically include those rights granted with respect to the use
of the Marks.

(g)                                 Licensee
may distribute the Product to retailers, reviewers and media outlets as a
promotional giveaway for the sole purpose of promoting sales of the Products to
retailers, provided however the Licensee’s entitlement to do so shall be
limited to commercially reasonable quantities.

4.             Advances
and Royalties.

(a)                                  Licensee
shall pay to Licensor a non-returnable advance against Royalties, as that term
is defined herein (“Advance”) of one hundred thousand dollars ($100,000.00)
upon execution of this Agreement.

(b)                                 The
Advance payment shall be recoupable by Licensee out of fifty percent (50%) of
the Royalties which would otherwise be payable to Licensor until such time as
Licensee has recouped the Advance, at which time one hundred percent (100%) of
Royalties shall be paid to Licensor. 
Except as provided in this Section 4(b), the Advance shall not applied
or credited toward any payment otherwise due or becoming due under this Agreement
or the License Agreement or the Canadian Trademark License Agreement.

(c)                                  Royalties
shall be paid every quarter with the first reporting period to cover October
through December 2005 within sixty (60) days from the last day of such calendar
quarter, which Royalties shall be accompanied by a statement of sales from all
sources.

(d)                                 In
addition to the Royalty payments and statements, Licensee shall submit monthly
sales statements to show gross shipments itemized by Products to Licensor for
sales from all sources by the end of each month subsequent to the

 

 

prior reporting month with the first sales statement
due November 30, 2005 for sales during the period of October 2005.  Time shall be of the essence in respect of
all Licensee’s obligations to pay any and all sums due to Licensor under this
Agreement.

(e)                                  In
the event Licensee fails to timely make payments due under this Agreement or
the License Agreement or the Trademark License Agreement entered into between
K-tel International, Ltd. and the Licensee dated the date hereof (the “Canadian
Trademark License Agreement”) then, this Agreement, License Agreement and the
Canadian Trademark License Agreement shall concurrently terminate subject to
the notice and cure provision of Section 11 herein.

(f)                                    Licensee
agrees to pay to Licensor royalties (“Royalties”) of:

(i)             thirty cents (30¢)
per unit on one hundred percent (100%) of all compact disc audio Products and
all karaoke audio Products sold and paid for, without deductions, with a
wholesale price floor of $3.00 per unit (“Minimum Base Price”) subject to
Section 4(g) below;

(ii)          ten percent (10%) of the
wholesale selling price per unit on one hundred percent (100%) of all DVD audio
Products sold and paid for, without deductions, with a wholesale price floor
equal to the Minimum Base Price;

(g)                                 Notwithstanding
the foregoing, Licensee may from time to time offer special discounted programs
whereby the wholesale price falls below the Minimum Base Price.  In that event, Licensee shall pay Royalties
of ten percent (10%) based on such lower wholesale price; provided, that in no
event shall the Royalty be less than twenty-seven and one-half cents (271⁄2 ¢)
per unit of Product sold and paid for; and, provided further, that Licensee may
not pay such lowered royalty on more than twenty percent (20%) of all units of
Product sold and paid for regardless of the wholesale price at which such
Products were sold.

(h)                                 Interest
at the rate of three per cent (3%) above the then current prime being charged
by Wells Fargo Bank from time to time published shall be charged to and payable
by Licensee for the period commencing upon the date such payment was due until
the date such payment is made.

5.             Audits.  During the Term and thereafter as long as
Licensee continues to sell the Products in accordance with this Agreement and
for a period of one (1) year thereafter, Licensee shall keep and maintain full
detailed and accurate written records and books of account relating to the sale
of Products.  Licensor, and its
appointees, shall have the right to audit and inspect Licensee’s books and
records as relates to the subject matter of this Agreement.  Such inspection shall be allowed once during
each contract year at Licensee’s principal place of business in the United
States where books and records are maintained. 
Such inspections shall be allowed during the Term and for one (1) year
thereafter.  Such inspection shall be at
Licensor’s expense provided, however, that if an underpayment to Licensor is
equal to or in excess of five (5%) percent of the Royalties due and payable in
any payment period is discovered, Licensee shall reimburse Licensor for the
reasonable and direct expenses of such inspection in addition to remitting the
amount determined to be due.

6.             Quality
Control.

(a)                                  Licensee
agrees that all Products bearing the Marks which are manufactured, advertised
and sold by Licensee under this Agreement and all covers, tray cards,

 

 

sleeves and other packaging, and all advertising and
promotional material relating thereto, shall be of the same nature and quality
as the goods of Licensor and shall strictly comply with Licensor’s reasonable
instructions with respect to the use thereof. 
Licensee shall further strictly comply with all reasonable label copy
instructions received from Licensor. 
Licensee shall cooperate with Licensor to facilitate Licensor’s control
of such nature and quality, to permit reasonable inspection of Licensee’s
operation, and to supply Licensor with specimens of all uses of the Mark upon
request.

(b)                                 If
any materials or actions are reasonably disapproved by Licensor, Licensor will
notify Licensee and Licensee shall immediately correct the problem to Licensor’s
satisfaction.  In the event Licensor
requests such a change, the parties shall cooperate with each other and
Licensee will promptly comply with such reasonable request to ensure that the
goodwill associated with the Marks is maintained.

(c)                                  The
parties acknowledge that Licensor’s quality control rights in this Section 6
are necessary to preserve the excellent reputation and goodwill associated with
the Marks.

(d)                                 Licensee
shall use the Marks in a professional, first-class manner in order to preserve
and enhance the goodwill associated with the Marks.  Licensee will use the Marks only while this
Agreement is in effect, only in respect of the Products, only within the Field
of Use and only in accordance with the policies, practices, specifications,
directions, and standards reasonably stipulated by Licensor to Licensee from
time to time.  Licensee warrants that it
possesses the expertise, facilities and ability to professionally and
successfully operate its business and to promote the goodwill associated with
the Marks.  Licensee will not use the
Marks in any manner that is not expressly permitted by this Agreement unless
Licensor agrees to same in writing.

(e)                                  Whenever
Licensee uses the Marks, it shall give or print a notice to the effect that the
mark is owned by Licensor or its licensors and used under license by Licensee.

(f)                                    Licensor
shall exclusively own all world-wide right, title and interest in and to all
United States and foreign trademarks, copyrights, service marks, trade secrets
and all other intellectual property or industrial property rights in any way
regarding the Marks, and to all derivative works and/or modifications thereto.  The copyright in and to all material
containing or referring to the Marks or any words or designs that are
substantially similar to the Marks and that are prepared by or on behalf of
Licensee shall be or become the sole property of Licensor.  Licensee will promptly do such acts and
execute and deliver to Licensor all instruments that Licensor, acting
reasonably determines is necessary to effect, perfect, register, or record such
ownership.  In the event Licensee or its
agents develop or create logos, designs, or other artwork that Licensor
approves (in advance and in writing) to be used in conjunction with the Marks,
including without limitation all covers, tray cards, sleeves and other
packaging, and all advertising and promotional material relating thereto, all
such written and graphic materials, designs, logos, and other items
(collectively “Designs”) shall be a “work-for-hire” under the copyright laws of
the United States, and Licensor shall be the sole author and owner of all such
work.  As additional consideration for this
Agreement, Licensee irrevocably assigns and transfers to Licensor all right,
title and interest worldwide in and to all such Designs, and to all
modifications

 

 

and derivative works thereof, and to all worldwide
intellectual property rights related thereto. 
Upon Licensor’s request, Licensee shall execute any and all assignments,
applications and other documents, and perform such acts as Licensor requests to
obtain trademark, copyright or other proprietary protection in any country in
order to protect Licensor’s interest in all such Designs.  Licensee shall have the right to use the
Designs only with the Marks as approved by Licensor.

(g)                                 Licensee
shall comply with the applicable laws and regulations and obtain all
appropriate government approvals pertaining to the sale, distribution and
advertising of Products, goods and services covered by this License.

(h)                                 In
the event Licensee fails to abide, in any respect, by the provisions set forth
above in Sections 3a) to f) above, Licensor shall have the right to terminate
this Agreement subject to the Notice and Cure as provided in Section 11.

(i)                                     Licensee
shall notify Licensor of any adverse use of a trademark or other designation
similar to any trademarks or “logos” owned and/or controlled by Licensor, of
which Licensee is or becomes aware and Licensee shall not communicate with any
person other than Licensor and its counsel in connection with any such adverse
use.  Licensor shall have the sole
discretion to take such action as it deems appropriate and the right to
exclusively control any litigation or other administrative claim or otherwise
relating to any of the Marks.  Any money,
damages or other benefits arising out of any such infringement, challenge or
claim shall accrue to Licensor.  Licensee
shall cooperate fully in the enforcements of rights contained in this section,
including, without limitation, releasing information and documents relevant
thereto, participation in any litigation brought hereunder, and/or appearance
as witnesses therein.  Licensee shall not
at any time apply for any registration (in any name other than Licensor’s) of
any copyright, trademark or “logo” or other designation which includes any
trademarks or “logos” owned and’/or controlled by Licensor in whole or in part,
and shall not file any document with any governmental authority or take any
other action which would affect the status of the Marks.

(j)                                     If
there is a claim by any party, person or entity that its rights under federal,
state or foreign law or under common law are superior (because of prior use,
prior registration or for any other reason) to any of the Marks or future trade
marks at any time registered by Licensor, or any logos, designs, copyrights,
business or commercial symbols, or business features (in this section collectively
referred to as the “Marks and Identifications”), and if Licensor determines
that said claims are legally meritorious, by Court proceedings and/or in
reliance upon an opinion of legal counsel, then upon receiving written notice
from Licensor, Licensee at its expense, will, as soon as practicable
thereafter, use such substitution, variances, combinations, alternatives,
alternates, modifications, changes and amendments of and to the Marks and
Identifications.  Licensee will not make
or adopt any changes, substitutions, alternatives, amendments, modifications or
alternates whatever in or to the use of the Licensed and Identifications unless
directed by Licensor in writing.

7.             Approvals
of Products.  Licensor
shall have the right to approve in writing the content and packaging of any
Products released hereunder which have been licensed from any non-major label
third party on which the Marks are used, which approval shall not be
unreasonably withheld.

 

 

8.             Injunctive
Relief.  Each party
expressly agrees that in the event Licensee breaches any provision of this
Agreement, and in addition to any other rights or remedies available, the other
party shall be entitled to seek injunctive relief and/or damages, resulting
from any such breach, which may be reduced to a final, adverse judgment.

9.             Indemnification.  Licensee and Licensor shall indemnify, defend
and hold each other harmless from any and all loss and damage, including
reasonable attorney’s fees, arising out of or connected with any claim by any
third party or from any act by either party which is inconsistent with any of
the warranties, representations, and/or agreements made by either party herein,
and shall reimburse the other party on demand for any payment made by it at any
time with respect to any liability or claim to which the foregoing indemnity
applies.  Licensor shall have the right
at all times, in its sole discretion, to control the defense of any claim.  If Licensor fails to pay an indemnity due
hereunder to the Licensee, Licensee may withhold such amounts from any monies
due to the Licensor under this Agreement or the License Agreement or the
Canadian Trademark License Agreement.

10.           Assignment.  Licensor may assign this Agreement to any
third party or to any subsidiary, affiliated or controlling corporation or to
any party owning or acquiring a substantial portion of the assets or stock of
Licensor.  Licensor may also sublicense
its rights hereunder to any of its Licensee’s to the extent necessary or advisable
in Licensor’s sole discretion to implement the license granted.  Licensee may assign this Agreement to any
subsidiary, affiliated or controlling corporation.  Any other assignment by either party requires
the other party’s prior written approval, which shall not be unreasonably
withheld or delayed.  Licensee may not
sublicense its rights hereunder.

11.           Notice and Cure.  In the event that Licensee fails or refuses
to perform any other of Licensee’s obligations to be performed hereunder in
default under this Agreement, Licensor shall give Licensee written notice of
breach to include the reasons for default (“Notice”).  Upon receipt of Notice, Licensee shall have
thirty (30) days to correct the default described in the Notice (“Cure”).  If such default is not fully Cured to
Licensor’s satisfaction, Licensor shall have the right to immediately terminate
the rights granted in this Agreement. 
Licensee shall be obligated to make payments and otherwise abide by the
surviving obligations under this Agreement.

12.           Termination.  Licensor shall have the right to terminate
this Agreement upon fifteen (15) days written notice to Licensee in the event
of any affirmative act of insolvency by Licensee, or upon the appointment of
any receiver or trustee to take possession of the properties of Licensee or upon
the winding-up, sale, consolidation, merger or any sequestration of
governmental authority of Licensee; or upon termination of the License
Agreement or the Canadian Trademark License Agreement pursuant to the terms
thereof.  Licensee acknowledges and agrees
that its strict observance and performance of all of the covenants, terms and
provisions of this Agreement are necessary for the protection of Licensor and
the Marks.  Licensor acknowledges and
agrees that such observance and performance by Licensee are conditions
precedent to each and all of the rights granted to Licensee under this
Agreement.  Upon termination of this
Agreement, nothing herein shall be construed to release any party from any
liability for any obligation incurred to the effective date of termination or
for any breach of this Agreement prior to the date of such termination and all
accrued obligations or liabilities of the parties and the provisions of this
Agreement which by their nature are intended to endure beyond such termination
shall remain in full force and effect. 
Upon expiration or termination of this Agreement, the License to use the
Marks shall automatically revert to Licensor, and Licensee shall immediately
cease using any of the Marks, or any marks confusingly similar to the Marks,
and shall destroy all materials bearing the Marks.  Upon any termination or expiration of this
Agreement, Licensee shall have no right to indicate in any manner that Licensee
was formerly a licensee of the Marks or any similar reference thereto.

 

 

13.           Miscellaneous Provisions.

(a)                                  This
Agreement represents the entire agreement between the parties concerned and the
subject matter hereof and supersedes all prior agreements with respect thereto
between the parties hereto and any of them.

(b)                                 This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.

(c)                                  This
Agreement shall be subject to and governed by the laws of the State of
Minnesota and all questions concerning the meaning and intention of the terms
of this Agreement and concerning the validity hereof and questions relating to
the performance hereunder shall be adjudged and resolved in accordance with the
laws of said state.  Any controversies
arising out of this Agreement shall be brought by the parties to Hennepin
County District Court, Fourth Division, State of Minnesota, or to the United
States District Court for the District of Minnesota, and they hereby grant
jurisdiction of such court(s) and to any appellate courts having jurisdiction
over appeals from such court(s).

(d)                                 Whenever
possible, each provision of this Agreement and each related document shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or any related document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement or such related documents.

(e)                                  This
Agreement may not be and shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived in whole or in part except by written
instrument signed by the parties hereto. 
No waiver of any provision of this Agreement shall constitute a waiver
of any other provision, nor shall any waiver constitute a continuing waiver
unless otherwise provided.

(f)                                    All
representations, warranties, covenants and undertakings made hereunder shall
survive the term and termination of this Agreement.

(g)                                 This
Agreement may be executed by the parties in separate counterparts, each of
which, when executed and delivered, shall be an original, but of which together
shall constitute one and the same instrument.

(h)                                 Nothing
contained herein shall be construed to create a partnership or joint venture
between Licensor and Licensee.  No
signatory of this document shall be deemed to be an agent of the other party
nor can either party in any way bind the other party or incur any obligation or
liability on behalf of the other.

(i)                                     In
the event a court of competent jurisdiction makes an adjudication to enforce
the terms and conditions hereof, the prevailing party shall be entitled to its
costs, including reasonable attorneys’ fees, in an amount determined by the
court.

 

 

(j)                                     Time
shall be of the essence of this Agreement.

(k)                                  All
amounts expressed herein are in US dollars.

(l)                                     No
warranties or representations shall be deemed to have been made by either party
except as expressly hereinabove set forth.

(m)                               Any
notice or other communication given or made under this Agreement shall be in
writing and, without prejudice to the validity of any other method of service,
may be delivered personally or by courier or sent by facsimile transmission or
by first class prepaid recorded delivery letter and shall be addressed if to
Licensor to Licensor at the address on the cover page of this Agreement and if
to Licensee to Licensee’s address at the address on the cover page of this
Agreement (with a copy to Howard M. Zelener, ESQ 548 Carnes Circle, Redlands,
CA 92374) or to such other address or facsimile transmission number as the
relevant addressee may hereafter by notice hereunder substitute.

(n)                                 Any
such notice or other communication shall be deemed to have been duly served
given or made (i) in the case of mailing three (3) days after the envelope
containing such notice was mailed and proof that any such envelope was properly
addressed prepaid registered or certified and mailed shall be sufficient
evidence that such notice or other communication has been duly served, given or
made; or (ii) in the case of delivery when left at the relevant address; or
(iii) in the case of a facsimile transmission upon receipt by the addressee of
the complete text in legible form.

This Agreement
shall not become effective until executed by both parties hereto.

	
  DOMINION ENTERTAINMENT, INC.

  	
   

  	
  BCI ECLIPSE COMPANY, LLC.

  
	
  By: /s/ P. Kives

  	
   

  	
  By:

  	
     /s/
  Edward Goetz

  
	
   An authorized signatory

  	
   

  	
  An authorized signatory

  
	
  Fed Tax ID # 41-1545922

  	
   

  	
  Fed Tax ID # 20-1482637

  

 

 

Agreement
14324

Exhibit
A

	
  Word Mark

  	
   

  	
  K

  
	
  Goodsand Services

  	
   

  	
  IC 009. US 021 026. G & S: pre-recorded audio
  tapes, compact discs and video tapes featuring music. FIRST USE: 19921101.
  FIRST USE IN COMMERCE: 19921101

  
	
  MarkDrawing Code

  	
   

  	
  (3) DESIGN PLUS WORDS, LETTERS, AND/OR NUMBERS

  
	
  DesignSearch Code

  	
   

  	
  26.01.21 - Circles that are totally or partially
  shaded.

  
	
  Serial Number

  	
   

  	
  74559386

  
	
  Filing Date

  	
   

  	
  August 10, 1994

  
	
  CurrentFiling Basis

  	
   

  	
  1A

  
	
  OriginalFiling Basis

  	
   

  	
  1A

  
	
  Publishedfor Opposition

  	
   

  	
  August 1, 1995

  
	
  Registration Number

  	
   

  	
  1929509

  
	
  Registration Date

  	
   

  	
  October 24, 1995

  
	
  Owner

  	
   

  	
  (REGISTRANT) K-TEL INTERNATIONAL, INC. CORPORATION
  MINNESOTA 2655 CHESHIRE LANE NORTH, STE 100 PLYMOUTH MINNESOTA 55447

  
	
  Assignment Recorded

  	
   

  	
  ASSIGNMENT RECORDED

  
	
  Attorney of Record

  	
   

  	
  John J. Held

  
	
  Prior Registrations

  	
   

  	
  0991990;1090236

  
	
  Type of Mark

  	
   

  	
  TRADEMARK

  
	
  Register

  	
   

  	
  PRINCIPAL

  
	
  Affidavit Text

  	
   

  	
  SECT 15. SECT 8 (6-YR). SECTION 8(10-YR) 20050307.

  
	
  Renewal

  	
   

  	
  1ST RENEWAL 20050307

  
	
  Live/Dead Indicator

  	
   

  	
  LIVE

  

 

 1
 

 

 

	
  Word Mark

  	
   

  	
  K-TEL

  
	
  Goodsand Services

  	
   

  	
  IC 009. US 021 026 036. G & S: pre-recorded
  audio tapes, compact discs and videotapes, all featuring music. FIRST USE:
  19721101. FIRST USE IN COMMERCE: 19721101

  
	
  MarkDrawing Code

  	
   

  	
  (1) TYPED DRAWING

  
	
  DesignSearch Code

  	
   

  	
   

  
	
  Serial Number

  	
   

  	
  74466358

  
	
  Filing Date

  	
   

  	
  December 3, 1993

  
	
  CurrentFiling Basis

  	
   

  	
  1A

  
	
  OriginalFiling Basis

  	
   

  	
  1A

  
	
  Publishedfor Opposition

  	
   

  	
  September 6, 1994

  
	
  Registration Number

  	
   

  	
  1864592

  
	
  Registration Date

  	
   

  	
  November 29, 1994

  
	
  Owner

  	
   

  	
  (REGISTRANT) K-tel International, Inc. CORPORATION
  MINNESOTA 2655 Cheshire Lane North Suite 100 Plymouth MINNESOTA 55447

  
	
  Assignment Recorded

  	
   

  	
  ASSIGNMENT RECORDED

  
	
  Attorneyof Record

  	
   

  	
  John J. Held

  
	
  Prior Registrations

  	
   

  	
  0973984;1077308

  
	
  Type of Mark

  	
   

  	
  TRADEMARK

  
	
  Register

  	
   

  	
  PRINCIPAL

  
	
  Affidavit Text

  	
   

  	
  SECT 15. SECT 8 (6-YR). SECTION 8(10-YR) 20050222.

  
	
  Renewal

  	
   

  	
  1ST RENEWAL 20050222

  
	
  Live/Dead Indicator

  	
   

  	
  LIVE

  

 

 2Exhibit
10.2

PHONOGRAPH
RECORD LICENSE AGREEMENT

This Agreement confirms
the arrangement between Licensor and Licensee whereby Licensor shall grant to
Licensee a non-exclusive license during the Term and within the Territory to
use Licensor’s Master Recordings in accordance with the terms and conditions
set out in this Agreement.

	
  Licensor:

  	
   

  	
  Dominion Entertainment, Inc.

  
	
   

  	
   

  	
  2655 Cheshire Lane North

  
	
   

  	
   

  	
  Suite 100

  
	
   

  	
   

  	
  Plymouth, MN 55447

  
	
   

  	
   

  	
   

  
	
  Licensee:

  	
   

  	
  BCI ECLIPSE COMPANY, LLC

  
	
   

  	
   

  	
  810 Lawrence Drive, #100,

  
	
   

  	
   

  	
  Newbury Park, CA 91320

  
	
   

  	
   

  	
   

  
	
  Licensed Master(s):

  	
   

  	
  each Master Recording from Licensor’s Master
  Recording Catalog dated 2/1/2005 consisting of 117 pages, a true copy of
  which has been delivered to the Licensee, plus such additions thereto as the
  parties may mutually agree upon (the “Catalog”) licensed to Licensee in
  accordance with the attached Terms and Conditions and as listed on the
  attached Schedule A.

  
	
   

  	
   

  	
   

  
	
  Master Recording(s):

  	
   

  	
  any recording whether on magnetic recording tape
  lacquer or wax disc or other substance or material now known embodying sound
  alone which is used in the manufacture of records for sale to the public.

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  The “Term” of this Agreement shall commence on
  October 10, 2005, and shall run concurrent with and shall be conditioned upon
  the same Term and termination provisions of the Trademark License dated
  effective September 1, 2005.

  
	
   

  	
   

  	
   

  
	
  Exploitation Term:

  	
   

  	
  the period of two (2) calendar years commencing on
  the initial release date of each Titled Album as specified on the attached
  Schedule A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Following expiration of the Exploitation Term there
  shall be a “sell off” period in accordance with Section 17.6 of the attached
  Terms and Conditions.

  
	
   

  	
   

  	
   

  
	
  Record(s), Phonograph

  	
   

  	
   

  
	
  Record(s) and Recording:

  	
   

  	
  audio only reproductions of Master Recordings in
  audio-only compact disc format and digital video disc format

  
	
   

  	
   

  	
   

  
	
  Advance:

  	
   

  	
  a non-returnable advance in the sum of one hundred
  fifty dollars (US$150.00) per Licensed Master recoupable against Royalties
  payable hereunder.

  
	
   

  	
   

  	
   

  
	
  Royalties:

  	
   

  	
  royalties payable hereunder by Licensee to Licensor
  in accordance with the attached Terms and Conditions

  

 

 

	
  Royalty Rate:

  	
   

  	
  US $.03 per re-recorded Licensed Master and US $.04
  per original Licensed Master embodied on the Titled Album

  
	
   

  	
   

  	
   

  
	
  Titled Album:

  	
   

  	
  the Album having the title specified on Schedule A
  annexed hereto

  
	
   

  	
   

  	
   

  
	
  Territory:

  	
   

  	
  United States and Canada

  
	
   

  	
   

  	
   

  
	
  Label Credit:

  	
   

  	
  “Under license from Dominion Entertainment, Inc.”

  

 

This Agreement is subject
to the attached Terms and Conditions which are expressly incorporated into this
Agreement.

	
  Signed by

  	
  Signed by

  
	
   

  	
   

  
	
  /s/ P. Kives

  	
   

  	
  /s/ Edward Goetz

  
	
   

  	
   

  
	
  An authorized signatory

  	
  An authorized signatory

  
	
   

  	
   

  
	
  For and on behalf of

  	
  For and on behalf of

  
	
   

  	
   

  
	
  DOMINION ENTERTAINMENT, INC.

  	
  BCI ECLIPSE COMPANY, LLC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  October 14, 2005

  	
   

  	
  Date:

  	
  October 15, 2005

  
						

 

 2

 

 

SCHEDULE A

PART 1

Date:

In accordance with the
provisions of the agreement between the parties dated as of September 1, 2005
(the “Agreement”) Licensor hereby approves and agrees to license to Licensee
the following Master Recordings from Licensor’s Catalog (“the Licensed Masters”)
in connection with the manufacture, distribution and sale of Records having the
Album title as follows:

Titled Album:

Product #:

UPC #:

Release Date:

Advance:

SRLP:

* = Re-Recording

	
  Licensed Master(s):

  	
  Artist

  

 

Licensor hereby
acknowledges and agrees that Licensee may use and exploit the above Licensed
Masters in accordance with the provisions of the Agreement.

	
  Very truly yours,

  	
  Accepted and Agreed

  

 

	
  Dominion Entertainment, Inc.

  	
  BCI Eclipse Company, LLC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
				

 

 

TERMS AND
CONDITIONS

ARTICLE 1
- DEFINITIONS

1.1                                 In
these Terms and Conditions the following words and expressions have the
following meanings:

“Accounting Statement”:
as specified in Section 10.1 below;

“Album”: unless otherwise
agreed by Licensor one or more Records in compact disc format only constituting
at least three (3) tracks and twenty two (22) minutes playing time sold in a
single package;

“Artist”: any individual
or group of individuals whose performances are embodied on the Licensed
Masters;

“person” and “party”: any
individual corporation, partnership, association or other organized group of
persons or legal successors or representatives of the foregoing.

1.2                                 References
in these Terms and Conditions to Sections, sub-sections and Schedule(s) are
references to those contained in these Terms and Conditions.

1.3                                 The
Agreement and the Schedules to these Terms and Conditions are an integral part
of these Terms and Conditions and reference to these Terms and Conditions
includes reference thereto.

1.4                                 Capitalized
terms not defined in these Terms and Conditions shall have the meanings
ascribed to them in the Agreement to which these Terms and Conditions are
attached. In the event of any inconsistency between the Agreement and these
Terms and Conditions, the Agreement shall prevail.

ARTICLE 2
- GRANT OF RIGHTS

2.1                                 Subject
to the provisions of these Terms and Conditions, Licensor hereby grants to
Licensee a non-exclusive license during the Term and within the Territory to:

(a)                                  compile
the Master Recordings within the Titled Album (the “Licensed Masters”) derived
wholly from Licensor’s Catalog or licensed from EMI, Sony, BMG, Warner Music,
Universal Music and their respective owned, controlled and affiliated labels
(each a “Major Record Label”) and which have been approved by Licensor as
specified on Schedule A; and

(b)                                 to
manufacture, distribute and sell the Titled Album in compact disc format only
embodying the Licensed Masters only through retail store, online retail store
(such as amazon.com) and record and video club sales channels which are located
in the Territory under Licensor’s name and logo.

2.2                                 Licensor
agrees that during the Term and in the Territory it shall not license to a
third party more than 75% of the same Licensed Masters that have previously
been approved hereunder as a Titled Album for inclusion on a single “multiple
artist compilation” Album.

2.3                                 Titled
Albums may include both Master Recordings of the Licensor and/or master
recordings or musical performances licensed from a Major Record Label and
released by Licensee and/or master recordings licensed from a third party which
is not a Major Record Label

 

 

in which case the master
recording must be specifically approved by Licensor in advance and in writing.

ARTICLE 3
- LIMITATION ON GRANT OF RIGHTS

3.1                                 Notwithstanding
anything to the contrary in these Terms and Conditions, Licensee hereby
acknowledges and/or agrees to observe the following restrictions and/or
limitations on any rights granted to Licensee hereunder:

(a)                                  the
rights granted to Licensee hereunder shall be limited to the extent that
Licensor owns or controls such rights. Licensor shall notify Licensee of any
limitations or restrictions;

(b)                                 Licensee
shall not use the Licensed Masters or dispose of or use in any way the Titled
Album manufactured therefrom except for commercial manufacture and sale of the
Titled Album through retail store, online retail store (such as amazon.com or
the Licensee’s website) and record and video club sales channels in the
Territory and, in particular but without limitation, Licensee shall not release
any Licensed Master as a single Record containing two (2) or less tracks and/or
via direct transmission on the Internet or directly or indirectly offer a
Titled Album for sale through TV and/or radio advertised and mail order
packages;;

(c)                                  Licensee
shall not release market, distribute, exploit or sell the Titled Album or
Records embodying Licensed Masters utilizing premium schemes;

(d)                                 any
Licensed Master released hereunder shall be released in its entirety and
without editing or alteration (including without limitation without undergoing
any so called “cedaring” cleaning or any other sound improvement processes)
unless carried out with the prior written approval of Licensor, provided that
any new copyrights and all other like rights of whatever nature or description
whether now known or hereafter invented arising in the Licensed Masters after
such editing or alteration shall from the creation thereof be assigned to
Licensor throughout the world to hold absolutely for the full term of copyright
including any and all periods of extension, renewal or reversion and to the
extent permissible thereafter in perpetuity;

(e)                                  Licensee
shall not sub-license any rights granted to it under these Terms and Conditions
provided that record and video club sales shall not be deemed to be a
sublicense;

(f)                                    Licensee
shall not sell the Titled Album as a delete, liquidation or close out sale
without Licensor’s prior written consent and in any event the royalty
provisions of Section 6.1 below shall continue to apply to any Titled Album
sold as a delete, liquidation or close out sale;

(g)                                 any
Licensed Master designated with an (*) on Schedule A as a re-recorded version
of the original recording in Licensor’s Catalog is not the original recording
and Licensee shall use the following designation on all sleeves, inlay cards
(front and back) in 8 point type “All selections are new stereo recordings
performed by the original artist or one or more members of the original group”;

 2
 

 

 

(h)                                 Licensee
shall make available to Licensor all artwork, packaging and relevant label copy
information on Titled Albums licensed hereunder for digital download
distribution by Licensor; and

(i)                                     Licensee
may distribute the Titled Album to reviewers, media outlets and retailers as a
promotional giveaway for the sole purpose of promoting sales of such Records to
retailers, provided that the quantity shall be limited to a commercially
reasonable amount.

ARTICLE 4
- RESERVATION OF RIGHTS

4.1                                 Any
and all rights in the Licensed Masters not expressly licensed to Licensee
hereunder are hereby expressly reserved to Licensor.

4.2                                 Without
limitation to the generality of Section 4.1 above, Licensee hereby acknowledges
that the following shall be and shall remain the property of Licensor and/or
shall be and shall remain reserved to Licensor and the Licensee hereby and
hereinafter assigns all of its right title and interest in and to all of the
following:

(a)                                  any
and all physical materials and any other device, contrivance or conception in
material or non-material form or method (whether now known or hereafter
invented) supplied by Licensor to Licensee hereunder including any and all
mothers, stampers, matrices, tapes and/or other copies derived from such
materials excluding only the Titled Album manufactured in accordance with these
Terms and Conditions for sale to consumers in the Territory;

(b)                                 the
copyright and all other property rights under statute and/or common law in the
Licensed Masters and in any and all mothers stampers, matrices and tapes and of
other copies derived from such materials embodying the Licensed Masters (or any
of them);

(c)                                  any
and all copyrights, trademarks or other similar rights or other property rights
which may accrue to Licensee or to any of its distributors, agents or
representatives by reason of the exercise of the rights granted pursuant to
these Terms and Conditions;

(d)                                 the
exclusive right to use or license the Licensed Masters and/or any performances
embodied thereon for use in connection with the synchronization of the same
with any other media whatsoever including but not limited to any computer
software, film, music videos, television productions and/or Internet
productions and/or motion pictures and/or advertisements and/or any soundtrack
albums derived therefrom; and

(e)                                  any
and all copyrights or other intellectual property rights in an to the
compilation of the Licensed Masters to form the Titled Album.

ARTICLE 5
- DELIVERY OF LICENSED MASTERS

5.1                                 Licensor
shall deliver to Licensee:

(a)                                  a
copy master tape and ISRC code of the applicable Licensed Masters; and

(b)                                 written
confirmation of the following:

 3
 

 

 

(i)                                     the
correct title of the musical composition embodied in the Licensed Master;

(ii)                                  the
names of the author and composer of such musical composition; and

(iii)                               such
other additional copyright information as Licensor may reasonably desire to
have displayed on the label of the Titled Album.

5.2                                 The
copy master tapes delivered by Licensor under Section 5.1 above shall be of
acceptable quality for use in the commercial production of Records for general
sale.

ARTICLE 6
- CONSIDERATION

6.1                                 In
consideration of Licensor entering into these Terms and Conditions, Licensee
hereby agrees to pay Licensor:

(a)                                  the
Advance on the later of the signature of the applicable Part to Schedule A or
the actual delivery of masters and artwork (Time shall be of the essence with
regard to such payment and the ten (10) day cure period specified in Section
17.2 below shall not apply thereto); and

(b)                                 a
royalty on one hundred per cent (100%) of all Titled Albums manufactured, sold
and paid for which royalty shall be calculated at the Royalty Rate.

In computing the number
of the Titled Album manufactured and sold hereunder Licensee shall have the
right to deduct returns and credits on account of (i) defective merchandise and
(ii) errors in billing and errors in shipment.

6.2                                 In
addition to the sums payable under this Article 6, Licensee shall pay for
and/or reimburse Licensor for Licensor’s cost of duplication ($75.00 per 12
track master ($6.25 per each master recording) and $50.00 for each layered art
file in .jpeg format, if any) plus delivery and shipping expenses for the
Licensed Master(s) negatives, advertising, promotional and display and any
other materials supplied or caused to be supplied by Licensor to Licensee
hereunder. Payment shall be made within thirty (30) days of Licensor’s invoice.

6.3                                 All
amounts due hereunder by the Licensee to the Licensor shall be paid when due
hereunder, without prior demand therefor and, except as provided in Section
15.2(c) and except as set forth in Section 15.2 without any set-off,
compensation or deduction whatsoever, at the office of the Licensor or such
other place as the Licensor may designate from time to time in writing.

ARTICLE 7
- THIRD PARTY PAYMENTS

7.1                                 With
respect only to mechanical royalties payable to copyright proprietors of all
copyright musical compositions embodied in the Licensed Masters 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. Licensee shall indemnify and
hold Licensor harmless from any claims or liabilities whatsoever resulting from
Licensee’s failure to make such payments.

7.2                                 Subject
to Section 7.1 above Licensor shall pay all other royalties and payments if any
which may become due to artists producers and any third parties entitled to
payment with respect to the Titled Album manufactured and sold hereunder and
Licensor shall indemnify and hold Licensee free and harmless from all claims
with respect thereto.

 4
 

 

 

7.3                                 Except
for the payments expressed to be payable by Licensee under these Terms and
Conditions, Licensee shall have no further financial obligation in respect of
the exercise by Licensee of the rights licensed to it by virtue of these Terms
and Conditions.

ARTICLE 8
- LABEL CREDIT

8.1                                 Licensee
agrees that the labels and inlay cards of the Titled Album manufactured and
sold hereunder shall bear the Label Credit in respect of the Licensed Masters
embodied thereon.

ARTICLE 9
- SAMPLES

9.1                                 Licensee
shall provide Licensor prior to the distribution of the Titled Album with two
(2) sample Records.

ARTICLE
10 - ACCOUNTING

10.1                           During
the Term and thereafter as long as Licensee continues to sell the Titled Album
in accordance with these Terms and Conditions, Licensee shall keep and maintain
full detailed and accurate written records and books of account relating to the
manufacture and sale of the Titled Album hereunder and shall deliver to
Licensor within sixty (60) days following the last day in March, June,
September and December of each year detailed written accounting statements (“Accounting
Statements”), showing sales of the Titled Album hereunder during the three (3)
month period prior to the last day of March, June, September or December (as
the case may be). Each Accounting Statement shall show:

(a)                                  the
period for which the Accounting Statement is furnished (“the Accounting Period”);

(b)                                 the
number of Records of the Titled Album shipped, sold, paid for and not returned
during the Accounting Period;

(c)                                  Licensee’s
title and catalog number of the Titled Album and in respect of such Titled
Album Licensor’s title and catalog number of each Licensed Master embodied
thereon;

(d)                                 the
format(s) in which the Titled Album has been released;

(e)                                  the
applicable Royalty Rate; and

(f)                                    each
Accounting Statement shall be accompanied by remittance for all amounts shown
to be due thereunder to Licensor.

Time shall be of the
essence in respect of all Licensee’s obligations to pay any and all sums due to
Licensor under these Terms and Conditions.

10.2                           Licensee
shall not be permitted to cross-collateralize or offset any advance paid or
payable under each Part to Schedule A attached to this Agreement or royalties
paid or payable under each Part to Schedule A attached to this Agreement
against any and all royalties payable pursuant to the terms of any other Part
to Schedule A attached to this Agreement.

10.3                           All
payments to Licensee shall be made in US Dollars.

10.4                           In
the event Licensee does not pay to Licensor the amount shown to be due by any
Accounting Statement on the date payment is required to be made pursuant to
these Terms and

 5
 

 

 

Conditions,
notwithstanding that time shall be of the essence in respect of all sums
payable to Licensor hereunder and without prejudice to any other rights or
remedies available to Licensor including without limitation, Licensor’s rights
of termination under Article 17 below Licensor may elect to accept late payment
from Licensor but only on the basis that: interest at the rate of three per
cent (3%) above the then current prime being charged by Wells Fargo Bank from
time to time published shall be charged to and payable by Licensee for the
period commencing upon the date such payment was due until the date such
payment is made.

ARTICLE
11 - WITHHOLDING TAX PROVISIONS

11.1                           In
the event Licensee shall be obliged by the laws of the Territory to deduct and
withhold income or other similar tax from royalties payable to Licensor
hereunder and Licensee shall be unable to secure a credit against such
withholding (or part thereof) from the relevant withholding authorities then
remittance hereunder to Licensor may be reduced accordingly SUBJECT TO Licensee
supplying Licensor with a certificate of deduction addressed to Licensor from
the relevant authority and PROVIDED ALWAYS THAT in each instance Licensee shall
notify Licensor as soon as possible of the name and address of the withholding
authority requiring withholding to be made the amount to be withheld and the
basis of withholding and Licensee shall provide Licensor with such documents
and such other assistance to enable Licensor to secure any available tax
credits.

ARTICLE
12 - AUDIT PROVISIONS

12.1                           On
reasonable prior written notice to Licensee, no more than once per annum,
Licensor shall have the right to audit, examine, inspect and take extracts from
the books and records of Licensee including without limitation:

(a)                                  all
manufacturing records relating to the Titled Album;

(b)                                 the
release date of the Titled Album in each country of the Territory;

(c)                                  the
number of Titled Albums manufactured during the Accounting Period;

(d)                                 the
address of each processing plant where such Titled Album were manufactured;

(e)                                  the
address(es) of the location(s) where such Titled Album were stored prior to
their leaving the possession custody or control of Licensee and where the
remainder of such Titled Album manufactured but not yet “shipped” are being
held;

(f)                                    full
details of all returns and credits errors in billing and in shipment, Titled
Album distributed as promotional giveaways and/or as free goods to retailers
for promoting sales of such Records, together with supporting documentation;
and

(g)                                 all
such other information in the possession custody or control of Licensee
relating to such Licensed Masters;

for the purposes of
verifying the accuracy of the Accounting Statements and conducting an audit
trail of the Titled Album manufactured for and on behalf of Licensee.

12.2                           Further
for such purposes access shall be granted and/or procured by Licensee to and/or
for Licensor to the processing plants and warehouses where the Titled Album are
manufactured and/or stored by or for Licensee. Such audit examination
inspection and extraction shall be held during normal business hours and with
regard to the books and records

 6
 

 

 

of Licensee at the
regular place of business of Licensee where such books and records shall be
maintained. Such audit shall be carried out by qualified independent
accountants and shall be at Licensor’s expense PROVIDED HOWEVER that if an
underpayment for any payment period is found in excess of five per cent (5%) of
the royalties payable in respect of the period for which the audit has been
conducted then Licensee shall reimburse Licensor on demand for the reasonable
expense of such inspection in addition to remitting the amount shown properly
to be due plus accrued interest calculated in accordance with Section 10.4
above.

12.3                           Without
prejudice to the generality of this Article 12 and only in conjunction with any
audit exercised thereunder Licensee shall grant or procure the grant to
Licensor of access to all source manufacturing records relating to the Titled
Album in each of the countries where production of the Titled Album occurs and
to all subsequent paperwork documents computer printouts relevant to all stock
movements and royalty calculations in all countries of the Territory.

ARTICLE
13 - LICENSEE’S WARRANTIES

13.1                           Licensee
hereby warrants represents and agrees to and with Licensor that:

(a)                                  Licensee
is now and shall continue to be engaged during the Term in the manufacture,
sale, distribution and exploitation of Records in the Territory;

(b)                                 Licensee
shall use its best efforts in accordance with these Terms and Conditions to
promote the manufacture, sale, distribution and exploitation in the Territory
of the Titled Album;

(c)                                  Licensee
shall release a minimum of seventy five (75) Titled Albums hereunder within
twelve (12) months from the date hereof;

(d)                                 Licensee
possesses the full right power and authority to enter into and to perform these
Terms and Conditions;

(e)                                  subject
to Section 5.2 all Records manufactured by Licensee hereunder shall be of the
highest quality and shall be consistent with the standards of the record
industry;

(f)                                    all
Records manufactured by Licensee hereunder shall be manufactured, advertised,
distributed and sold by Licensee in strict compliance with all of these Terms
and Conditions and the trademark license agreement made between the parties
dated the date hereof and the Canadian trademark license agreement made between
the Licensee and K-tel International,
Ltd. dated the date hereof and Licensee hereby expressly acknowledges
that no such Records may be exported for advertisement and/or sale (directly or
indirectly) outside the Territory and Licensee shall not knowingly sell any
Records manufactured hereunder to any third party intending to advertise and
resell such Records outside the Territory and Licensee acknowledges that it
shall be deemed to be knowingly selling or otherwise permitting the sale of
Records manufactured hereunder to a third party intending to advertise and
re-sell such Records outside the Territory if such third party shall have to
the knowledge of Licensee previously purchased Records embodying the Licensed
Masters and advertised and/or sold them outside the Territory;

(g)                                 all
copy master tapes and other materials supplied to Licensee by Licensor
hereunder and all mothers, stampers, matrices, tapes and other copies derived
therefrom shall be retained under conditions of strict security to minimize the
risk

 7
 

 

 

of theft and/or unauthorized duplication and Licensee
shall not allow or permit any unauthorized duplication, use, disclosure or
publication thereof. In the event of a breach or threatened breach of the
foregoing provision in this Section 13.1(g), the parties acknowledge that the
harm suffered by Licensor may not be compensable by monetary damages alone, and
accordingly Licensee agrees that Licensor shall, in addition to any other legal
or equitable remedies, be entitled to an injunction against such breach or
threatened breach;

13.2                           Licensee
shall promptly notify Licensor of any circumstances coming to its attention
which may prejudice Licensor’s rights in Licensed Masters and shall give all
possible assistance to Licensor in the enforcement and/or protection of
Licensor’s rights in Licensed Masters.

ARTICLE
14 - LICENSOR’S WARRANTIES

14.1                           Licensor
warrants represents and agrees to and with Licensee that:

(a)                                  Licensor
possesses the full right power and authority to enter into and to perform these
Terms and Conditions;

(b)                                 at
the date of signature of these Terms and Conditions, Licensor is the exclusive
owner of or otherwise controls the rights to be granted to Licensee in Licensed
Master(s) and to the best of Licensor’s knowledge and belief there exists no
claims against it which would cause it to lose rights in any of the Licensed
Masters;

(c)                                  if
at any time during the Term of these Terms and Conditions a claim shall be made
against Licensor which if successful would cause Licensor to lose rights in any
of the Licensed Masters, Licensor shall promptly notify Licensee of the same in
writing specifying whether Licensee must cease or may continue with the manufacture
and/or sale of the Titled Album. If such notice shall require Licensee to cease
manufacture and/or sale of the Titled Album as specified in the notice,
Licensee shall with effect from the date of receipt of such notice cease the
manufacture and sale of such Records and Licensor shall indemnify Licensee
against all demands claims, liabilities, losses, damages, costs and expenses
arising from and against all actions suits and proceedings which are commenced
taken or made against Licensee in connection with the manufacture and sale of
the Titled Album by Licensee in accordance with these Terms and Conditions as
specified in the notice prior to the date of Licensee’s receipt of such notice
and which are reduced to a judgment or order of a Court of competent
jurisdiction. If no notice shall be given or if such notice given shall specify
that Licensee should continue with the manufacture and/or sale of the Titled
Album, Licensee shall be entitled to continue the manufacture and sale of the
Titled Album and Licensor shall indemnify Licensee in the same terms as
specified in the previous sentence in relation to or in connection with the
manufacture and sale by Licensee of the Titled Album in accordance with these
Terms and Conditions until the date of receipt by Licensee of a written notice
from Licensor under this Section requiring Licensee to cease manufacture and/or
sale of the Titled Album;

(d)                                 the
exercise by Licensee of rights granted in Licensed Masters in accordance with
these Terms and Conditions shall not infringe the rights of any third party
and/or in any way contravene any applicable statute, law, rule or regulation.

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ARTICLE
15 - INDEMNITIES

15.1                           Licensee’s
Indemnities.

(a)                                  Licensee
hereby irrevocably and unconditionally agrees to indemnify and keep indemnified
Licensor from and against all actions suits and proceedings which may be
commenced, taken or made against Licensor arising in relation to or in
connection with any failure or alleged failure by Licensee duly and punctually
to observe and perform these Terms and Conditions and which are either:

(i)                                     fully
adjudicated by a court, arbitrator or other forum of competent jurisdiction; or

(ii)                                  settled
with Licensee’s prior written consent, which consent shall not be unreasonably
withheld or delayed; or

(iii)                               withdrawn
or not proceeded with by the claimant.

(b)                                 Prompt
notice shall be given to Licensee of any claim to which this indemnity relates
and Licensee shall have the right at its own expense to control the defense
thereof PROVIDED THAT:

(i)                                     Licensor
shall have the right to co-operate and assist in such defense at its own
expense;

(ii)                                  if
Licensee shall not exercise its right to control the defense then Licensor
shall in addition to any other indemnity under these Terms and Conditions be
reimbursed for its reasonable expenses (including reasonable legal fees)
incurred in such defense.

(c)                                  All
sums payable pursuant to Section 15.1 by Licensee shall be paid immediately on
Licensor’s demand in full without any deduction, withholding, counter claim or
set off.

(d)                                 Any
release settlement discharge or withdrawn claim between Licensor and Licensee
shall be conditional upon no security or payment made or given to Licensor
being avoided, reduced, set aside or rendered unenforceable by virtue of any
provision or enactment now or hereafter in force relating to bankruptcy,
insolvency or liquidation and if any such security or payment shall be avoided
reduced set aside or rendered unenforceable Licensor shall be entitled to
recover the full amount or value of any such security or payment from Licensee
and otherwise to enforce this Article 15 as if such release settlement
discharge or withdrawn claim had not taken place.

(e)                                  Licensee
shall have the right to participate in the defense of any claim to which this
indemnity relates at Licensee’s own cost and expense provided that Licensee
agrees that any such claim may be compromised or settled by Licensor without
the consent of Licensee.

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15.2                           Licensor’s
Indemnities.

(a)                                  Licensor
hereby irrevocably and unconditionally agrees to indemnify and keep indemnified
Licensee from and against all actions, suits and proceedings which may be
commenced, taken or made against Licensee arising in relation to or in
connection with any failure or alleged failure by Licensor duly and punctually
to observe and perform these Terms and Conditions and which are either:

(i)                                     fully
adjudicated by a court, arbitrator or other forum of competent jurisdiction; or

(ii)                                  settled
with Licensor’s prior written consent, which consent shall not be unreasonably
withheld or delayed; or

(iii)                               withdrawn
or not proceeded with by the claimant.

(b)                                 Prompt
notice shall be given to Licensor of any claim to which this indemnity relates
and Licensor shall have the right at its own expense to control the defense
thereof PROVIDED THAT:

(i)                                     Licensee
shall have the right to co-operate and assist in such defense at its own
expense;

(ii)                                  if
Licensor shall not exercise its right to control the defense then Licensee
shall in addition to any other indemnity under these Terms and Conditions be
reimbursed for its reasonable expenses (including reasonable legal fees)
incurred in such defense.

(c)                                  All
sums payable pursuant to Section 15.2 by Licensor shall be paid immediately on
demand by Licensee in full without any deduction, withholding, counterclaim or
set off except that if at the date that any such sum shall be payable by
Licensor the advance paid to Licensor under Section 6.1 shall have been
recouped by Licensee, Licensee shall have the right to set off such sums
against such future sums as may be payable by Licensee to Licensor under this
or any other Agreement.

ARTICLE
16 - ASSIGNABILITY

16.1                           Licensor
may assign this Agreement to any third party or to any subsidiary, affiliated
or controlling corporation or to any party owning or acquiring a substantial
portion of the assets or stock of Licensor. Licensor may also sublicense its
rights hereunder to any of its Licensee’s to the extent necessary or advisable
in Licensor’s sole discretion to implement the license granted. Licensee may
assign this Agreement to any subsidiary, affiliated or controlling corporation.
Any other assignment requires the other party’s prior written approval which
shall not be unreasonably withheld or delayed. Licensee may not sublicense its
rights under this Agreement.

ARTICLE
17 - TERMINATION OR EXPIRATION

17.1                           Automatic Termination: Licensor
shall have the absolute right, with immediate effect, to automatically
terminate these Terms and Conditions and Licensee’s rights hereunder following
the occurrence of any of the following events:

(a)                                  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

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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 thereupon become due and payable.
Further, all Licensed Master(s) 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; or

(b)                                 Licensee
ceasing or threatening to cease to carry on business; or

(c)                                  any
event analogous to any of the foregoing occurring in any jurisdiction to
Licensee; or

(d)                                 upon
termination of the trademark license agreement made between the parties on the
date hereof or upon termination of the Canadian trademark license agreement
made between the Licensee and K-tel International, Ltd. on the date hereof, as
provided for therein.

17.2                           Right to Terminate: In the event
that Licensee shall fail or refuse to deliver any of the statements or payments
provided hereunder, fail to perform in accordance with these Terms and
Conditions or fail or refuse to perform any other obligation on Licensee’s part
to be performed hereunder and such default if capable of cure is not fully
cured within ten (10) days after Licensor has issued notice thereof, the
default shall be deemed an essential breach of these Terms and Conditions and inter alia Licensor shall have the absolute right to
terminate Licensee’s rights hereunder with immediate effect at any time after
the expiration of said ten (10) day period without affecting any of Licensor’s
rights hereunder. If the default is incurable, Licensor shall have the absolute
right to terminate Licensor’s rights hereunder with immediate effect by written
notice.

17.3                           Upon
the early termination of the Term (other than by expiration of the Term by
effluxion of time), Licensee shall within thirty (30) days remit to Licensor
all monies then due and unpaid by virtue of Licensee’s exploitation of Records
hereunder and shall within fifteen (15) days render to Licensor an Accounting
Statement for the period from the end of the Accounting Period of the last
Accounting Statement to the date of termination of these Terms and Conditions.

17.4                           Upon
early termination of the Term or expiration of the Term by effluxion of time
Licensee shall remain responsible for accountings and payments as set forth in
these Terms and Conditions.

17.5                           Licensee
shall within ten (10) days of early termination of the Term or within fifteen
(15) days of expiration of Term by effluxion of time provide Licensor with a
full detailed and accurate written inventory confirming the following in
respect of each Licensed Master:

(a)                                  all
master tapes and other materials in respect thereof provided by Licensor to
Licensee;

(b)                                 all
mothers, stampers, matrices, tapes and other copies (excluding Records) derived
from the master tapes and materials provided by Licensor hereunder;

 11
 

 

 

(c)                                  the
quantity of the Titled Album then in Licensee’s inventory which shall include
inventory held in any location under the possession custody or control of
Licensee.

Following receipt of a
full detailed and accurate written inventory as aforesaid Licensor shall have
the right to elect for the return and/or delivery to Licensor and/or
destruction (at Licensee’s sole cost and expense) of such materials (or part
thereof) listed therein (excluding Records in the case of expiration of the
Term by the effluxion of time). If Licensor shall elect for the return and/or
delivery of materials to Licensor, Licensee shall within thirty (30) days
following notification of such election arrange for such return and delivery at
its own cost and expense to such address in the United States as Licensor may
specify. If Licensor shall elect for the destruction of materials, Licensee
shall promptly arrange for such destruction (at which Licensor shall be
entitled to have a representative attend) and supply to Licensor an affidavit
of such destruction sworn by an officer of Licensee (or if Licensee is not a
corporate entity by an authorized representative of Licensee).

17.6                           Upon
expiration only of the Term by the effluxion of time, Licensee shall have the
non exclusive right for a period of six (6) months immediately following such
expiration to sell off inventory of the Titled Album then existing PROVIDED
that Licensee continues to account for and pay the royalties herein provided
and PROVIDED FURTHER THAT Licensee shall not manufacture in the six (6) months
prior to such expiration any more Titled Album than Licensee reasonably expects
to sell during that period and that on expiration of the sell-off period
Licensee shall supply Licensor with a full detailed and accurate written
inventory confirming the quantity of the Titled Album then in Licensee’s
inventory (including inventory held in any location under the possession
custody or control of Licensee) and all of the provisions set out in Section
17.5 shall apply.

ARTICLE
18 - NOTICES

18.1                           Any
notice or other communication given or made under these Terms and Conditions
shall be in writing and, without prejudice to the validity of any other method
of service, may be delivered personally or by courier or sent by facsimile
transmission or by first class prepaid recorded delivery letter and shall be
addressed if to Licensor to Licensor at the address on the cover page of these
Terms and Conditions and if to Licensee to Licensee’s address at the address on
the cover page of these Terms and Conditions (with a copy to Howard M. Zelener,
ESQ 548 Carnes Circle, Redlands, CA 92374) or to such other address or
facsimile transmission number as the relevant addressee may hereafter by notice
hereunder substitute.

18.2                           Any
such notice or other communication shall be deemed to have been duly served
given or made (i) in the case of mailing three (3) days after the envelope
containing such notice was mailed and proof that any such envelope was properly
addressed prepaid registered or certified and mailed shall be sufficient
evidence that such notice or other communication has been duly served, given or
made; or (ii) in the case of delivery when left at the relevant address; or
(iii) in the case of a facsimile transmission upon receipt by the addressee of
the complete text in legible form.

ARTICLE
19 - CONFIDENTIALITY AND ANNOUNCEMENTS

19.1                           Except
as otherwise agreed by Licensor in writing, Licensee hereby agrees that it
shall not and shall procure that each director, officer, agent and employee of
Licensee shall not at any time hereafter divulge or communicate to any person
other than to directors, officers, employees or professional advisers whose
province it is to know the same any secret or confidential information
concerning the business, financial or contractual arrangements or other
dealings or affairs of Licensor or of any customer or client thereof except to
the extent to which

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such information shall
(other than through any unauthorized disclosure by such party or any director
officer or employee thereof) come within the public domain and except where
required by law.

ARTICLE
20 - CONSTRUCTION

20.1                           These
Terms and Conditions constitute the entire understanding between the parties
relative to this transaction and no modification hereof shall be binding unless
in writing signed by the party to be charged.

20.2                           These
Terms and Conditions shall be construed under the internal laws of the State of
Minnesota applicable to agreements to be performed wholly therein, and both
parties agree that only the Minnesota Courts shall have jurisdiction over this
Agreement. Any controversies arising out of this agreement shall be brought by
the parties to Hennepin County District Court, Fourth Division, State of
Minnesota, or to the United States District Court for the District of
Minnesota, and they hereby grant jurisdiction of such court(s) and to any
appellate courts having jurisdiction over appeals from such court(s).

20.3                           All
rights and remedies granted to Licensor in any provision of these Terms and
Conditions shall not be deemed to be a waiver of any part or future breach of
the same, or any other provision of these Terms and Conditions, nor shall any
act or failure to act be construed as a waiver, unless a memorandum thereof,
expressing the intention to waive, signed by the party to be charged, is made
and delivered to the other party.

20.4                           No
warranties or representations shall be deemed to have been made by Licensor
except as expressly hereinabove set forth.

20.5                           If
any part of these Terms and Conditions 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 these Terms and Conditions shall remain in full force and effect.

20.6                           The
captions herein are for convenience only, do not constitute a part of these
Terms and Conditions, and are not to be used in the construction thereof.

20.7                           Nothing
in this Agreement shall be deemed or construed as creating a joint venture or
partnership among the parties. Each party’s status is, and at all times shall
continue to be , that of independent contractor with respect to each other. No
party shall hold itself out as having authority or relationship in
contravention of this section.

20.8                           Time
shall be of the essence of these Terms and Conditions.

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