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That would be my concern, if they control the DNS, that would scare me as well. I still think your best bet would be playing by their rules while spending your time building up a new website. I would also recommend getting legal advice. I remember long ago I came across Nissan's website which now is functional, but for a while it was just a landing page that stated neither Nissan Computers nor Nissan Motors was allowed to use the website. If you did a 301 redirect, and this company went hard enough and ended up demanding you to pull the domain, I would hate to see you loose all the 301 potential anyway, simply because they pulled the rug out from under you. Good luck!!! If I were them I would try and just buy you out!

Thanks for your advice and tips!