EXHIBIT 10.3
MTVN DOMESTIC
MERCHANDISE LICENSE AGREEMENT
Agreement made as of November 1, 2000, by and between MTV NETWORKS, a
division of Viacom International Inc., a Delaware corporation, with offices at
1515 Broadway, New York, New York 10036 ("MTVN"), and TIE SINGING MACHINE
COMPANY, INC., a Delaware corporation, with offices at 6601 Lyons Road, Bldg.
A-7, Coconut Creek, FL 33073 ("Licensee") (this "Agreement").
BASIC PROVISIONS
The "LICENSED The "MTV: MUSIC TELEVISION" name, trademark and logo.
PROPERTY"
"KARAOKE" A leisure activity whereby individuals sing the words to a
song as such words appear on a television screen or viewing
monitor and are displayed in sync with the audio track of such
song.
The "LICENSED (1) At least two but no more than twelve compilation of song
titles of compact discs or cassettes which are branded with
the Licensed Property and comprised of a compilation of music
tracks and the technology necessary for the end-user to
participate in Karaoke activities (the "Music Product(s)"). In
addition to the provisions set forth in Article 4, MTVN shall
have final approval rights regarding the identity of the music
tracks and any performances contained on the Music Products.
The content contained in the Music Products may only be
provided to the end-user via the Music Products as packaged
goods and may not be provided on any other technical platform
now known or hereafter devised. The Music Products shall be
sold separately from the Advanced Karaoke Machine (as
hereafter defined) and the Karaoke Machine (as hereafter
defined).
* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission
(2) No more than one title per year of the Term (as hereafter
defined) for a total maximum of three titles of a compact disc
which are branded with the Licensed Property and comprised of
a compilation of no more than three music tracks and the `
technology necessary for the end-user to participate in
Karaoke activities which shall be packaged with the Advanced
Karaoke Machine (as hereafter defined) and the Karaoke Machine
as hereafter defined) (the" Sampler Music Products"). In
addition to the provisions set forth in Article 4, MTVN shall
have final approval rights regarding the identity of the music
tracks and any performances contained on the Sampler Music
Products. For the avoidance of doubt, the content contained in
the Sampler Music Products may only be provided to the
end-user via the Sampler Music Products as packaged goods and
may not be provided on any other technical platform now known
or hereafter devised. No royalties shall be paid for Sampler
Music Products.
(3) One version of a Karaoke hardware machine branded with the
Licensed Property which (a) enables the end-user to play the
Music Products and the Sampler Music Products and participate
in Karaoke activities, (b) does not include a viewing monitor
and (c) must be used with a separate television set in order
to be functional (the "Karaoke Machine").
(4) One version of a Karaoke hardware machine branded with the
Licensed Property which (a) enables the end-user to play the
Music Products and the Sampler Music Products and participate
in Karaoke activities and (b) includes (i) a television set,
(ii) a single cassette deck for recording Karaoke performances
and (iii) an AM/FM terrestrial radio receiver (the "Advanced
Karaoke Machine").
((1) through (4) each a "Licensed Pro of collectively the
"Licensed Products".)
The "LICENSED The United States of America, its territories and possessions.
TERRITORY"
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The "LICENSED (1) Mid tier stores (e.g., JC Penny and Sears), department
CHANNELS OF stores (e.g., May Company and Macy's), book stores whether
DISTRIBUTION" independent or chain (e.g., Barnes & Noble), college
bookstores whether independent or chain, specialty/trend
stores (e.g., Spencer's and Gadzooks), music stores whether
independent or chain (e.g., Musicland), video stores whether
independent or chain, computer/ electronics stores (e.g.,
Software Etc. and Electronic Boutique), discount retailers and
warehouse store chains (e.g., Best Buy, Costco, Sam's Club),
and upon MTVN's approval in each instance, catalog retailers
and direct mail. MTVN acknowledges and agrees that retailers
in the Licensed Channels of Distribution may advertise and
sell the Licensed Products via their catalogs and direct mail
which are branded with their retail store names (e.g., JC
Penny catalog).
(2) Upon MTVN's prior approval, Licensee shall have the
non-exclusive right to distribute the Licensed Products
through Licensee's wholly owned and operated website; and
through (a) online only retailers (e.g,, amazon.com and
etoys.com) and (b) the wholly owned and operated websites of
retailers in the Licensed Channels of Distribution (the (a)
and (b) collectively, the "LCD Retailers") provide _d,
however, that the websites owned by Licensee and the LCD
Retailers shall be in compliance with MTVN's website operating
guidelines and the an-line Privacy Alliance Guidelines. In
addition, Licensee acknowledges and agrees on behalf of
itself, and the LCD Retailers, that (i) MTVN shall have
approval over all content used on the websites used by
Licensee and the LCD Retailers incorporating the Licensed
Products and the Licensed Property, (ii) in no event shall
Licensee or the LCD Retailer develop a MTVN branded online
boutique or website, (iii) in no event shall Licensee or the
LCD Retailer use any MTVN content (i.e., video clips, sound
bytes and copies of book pages, etc.) on their respective
websites, (iv) there shall be a one-way link from the websites
used by Licensee and the LCD Retailer incorporating the
Licensed Products and the Licensed Property to the appropriate
MTVN website, (v) on-line orders for the Licensed Products
shall only be fulfilled for orders placed within the Licensed
Territory and 3
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(vi) MTVN may at any time during the Term of this Agreement
revoke Licensee's right to distribute the Licensed Products
on-line upon 15 days prior notice. Licensee covenants and
agrees that it will use best efforts to ensure that the LCD
Retailers are in compliance with the terms and conditions set
forth above.
The "TERM" The term of this Agreement shall commence on November 1, 2000
and continue through December 31, 2003.
The "ROYALTY *% of Net Sales (as defined in the annexed Additional Terms
RATE" and Conditions) for the Music Products. *% of Net Sales (as
defined in the annexed Additional Terms and Conditions) for
the Karaoke Machine and the Advanced Karaoke Machine.
The "GUARANTEED The Guaranteed Minimum Royalty for the Term is $686,250.00 and
MINIMUM ROYALTY" shall be payable as follows:
$50,000.00 on January 5, 2001;
$40,000.00 on or before September 30, 2001;
$40,000.00 on or before November 30, 2001;
$64,375.00 on or before January 31, 2002;
$64,375.00 on or before April 30, 2002;
$64,375.00 on or before July 31, 2002;
$64,375.00 on or before October 31, 2002;
$75,000.00 on or before January 31, 2003;
$75,000.00 on or before April 30, 2003;
$75,000.00 on or before July 31, 2003; and
$73,750.00 on or before October 31, 2003.
"PRESENTATION (1) The Presentation Date to Licensee's Retailer's shall be
DATE TO January 6, 2001 for (a) the Karaoke Machine, (b) the Advanced
LICENSEE'S Karaohe Machine and (c) at least two Music Products, the
RETAILERS" titles of such Music Products to be mutually agreed upon by
MTVN and Licensee.
(2) The Presentation Date to Licensee's Retailer's for the
remaining Compact Disks shall be determined in accordance with
a mutually acceptable presentation schedule to be agreed upon
by MTVN and Licensee.
* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission
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"INITIAL SHIP (1) The Initial Ship to Licensee's Retailers shall be June 30,
DATE TO 2001 for (a) the Karaoke Machine, (b) the Advanced Karaoke
LICENSEE'S Machine and (c) at least two Music Products, the titles of
RETAILERS" such Music Products to be mutually agreed upon b MTVN and
Licensee.
(2) The Initial Ship to Licensee's Retailers for the remaining
Compact Disks shall be determined in accordance with a
mutually acceptable initial schedule to be agreed upon by MTVN
and Licensee.
"COPYRIGHT NOTICE""(C)____ Licensee to fill in year of publication] MTV
Networks, a division of Viacom International Inc. All Rights
Reserved."
"TRADEMARK "MTV: MUSIC TELEVISION(TM)". Licensee shall also include the
NOTICE" following notice on all materials set forth in Section 5(b) of
The Additional Terms And Conditions in proximity to the
Licensed Property. "MTV: MUSIC TELEVISION" and all related
titles and logos are trademarks of MTV Networks, a division of
Viacom International Inc.
"ADDITIONAL Licensee shall be solely responsible for all costs and
INFORMATION" expenses related to the Licensed Products including, but not
limited to, third party clearances, in connection with the
development, manufacture, packaging, duplication, advertising,
marketing, promotion, distribution and sale of the Licensed
Products. Licensee shall be solely responsible for obtaining
all licenses, clearances and permissions (including, without
limitation, all master use mechanical license agreements) for
all content to be included on or in connection with the
Licensed Products that may be necessary for the manufacture,
advertising, marketing, promotion, distribution and
exploitation of the Licensed Products. All applicable fees,
payments and royalties for talent and music relating to the
Licensed Products and the advertising, marketing and promotion
thereof (including, any guild, union and residual obligations,
music synchronization fees and other audio and art costs
including materials requested by Licensee that MTVN must
create) shall be paid by Licensee.
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This Agreement includes the Additional Terms and Conditions and the
Exhibits annexed hereto and made a part hereof. All capitalized terms in the
Additional Terms and Conditions shall have the respective definitions as set
forth in the Basic Provisions herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE SINGING MACHINE COMPANY, INC. MTV NETWORKS, a division of
Viacom International Inc.
By: /s/ John Klecha By: /s/ Heidi Eskenazi
- -------------------------------- ----------------------------------
Name: John Klecha Name: Heidi Eskenazi
Title: Chief Operating Officer Title: Vice president, Licensing
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ADDITIONAL TERMS AND CONDITIONS
-------------------------------
ARTICLE 1. LICENSE. MTVN hereby grants to Licensee, and Licensee hereby accepts,
the nonexclusive right to incorporate the Licensed Property on the Licensed
Products solely for the purpose of the manufacture, distribution, sale and
advertisement of the Licensed Products through the Licensed Channels of
Distribution in the Licensed Territory during the Term (the "License") as
specified in the Basic Provisions. Licensee shall not have the right to
sublicense the rights granted hereunder.
ARTICLE 2. RESERVATION OF RIGHTS. MTVN retains all rights not expressly granted
hereunder including, but not limited to, the right to distribute and sell the
Licensed Products through premium offers, combination and give-away Sales,
direct response, direct mail, home shopping type of networks, the on-line medium
or any other non-traditional medium now known or hereafter invented, sales
clubs, incentive programs, theme parks/ recreational attractions and activities,
any MTVN or its affiliated companies' retail outlets and the rights to the
Licensed Property, and all names, trademarks and likenesses of characters which
are used in connection with a motion picture or other theatrical or live stage
presentation for all products, including the Licensed Products.
ARTICLE 3. ROYALTIES, ACCOUNTING AND AUDIT.
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(a) COMPUTATION:
------------
(i) Royalties shall be payable by Licensee at the Royalty Rate
set forth in the Basic Provisions on Net Sales of all Licensed Products. "Net
Sales" shall mean gross sales less customary trade quantity discounts and
allowances, actual returns and returns for damaged goods only, the aggregate of
which shall not exceed eight percent of gross sales. Except for those expressly
provided for in this Section 3(a)(i), there shall be no deductions of any sort
or kind including, but not limited to, deductions for returns, cash discounts,
costs or expenses incurred in the manufacture, distribution, sale or
advertisement of the Licensed Products, or for uncollected bills.
(ii) Licensee shall not have the right to sell one or more of
the Licensed Products packaged together with a non-"MTV: Music Television"
branded product (the "Bundle" or "Bundling").
(iii) Royalty obligations shall accrue upon the sale of the
Licensed Products. A Licensed Product is considered "sold" when it is invoiced,
shipped, or paid for, whichever event occurs first. Subject to the provisions o
f Section (3)(a)(i), Licensee shall be entitled to credit MTVN's royalty account
for any payment of royalties made to MTVN for Licensed Products sold and
subsequently returned for credit.
(iv) In the event that Licensed Products are sold to any party
affiliated, controlled, or in any way related to Licensee at a special price
lower than the average price charged to other parties, the royalty payable to
MTVN shall be based upon said average price.
(b) PAYMENTS:
---------
(i) Royalties shall be payable on a quarterly basis throughout
the Term, within 45 days after the close of each respective quarter. Quarters
shall be based on a standard calendar year.
(ii) Licensee shall pay to MTVN a non-refundable Guaranteed
Minimum Royalty as set forth in the Basic Provisions.
(iii) All payments and Quarterly Reports to MTVN hereunder
shall be sent to the following address: MTV Networks, Ancillary Sales, P.O. Box
13801, Newark, NJ 07188.0801 with a copy of such Quarterly Report to the Vice
President, Licensing, MTV: Music Television at the address specified in Article
16.
(iv) All payments past due shall be subject to a late charge
of one percent per month (or the highest rate allowed by law if lower), from the
date such payments were due.
(v) The Guaranteed Minimum Royalty shall be non-refundable but
recoupable against the royalties due hereunder. Royalty payments made for any
period of the Term shall be credited against the Guaranteed Minimum Royalty for
such period of the Term.
(c) ACCOUNTING:
-----------
Within 45 days after the close of each quarter, Licensee shall
furnish to MTVN complete and accurate statements of its sales of Licensed
Products and royalties due MT VN, in the form annexed hereto as Exhibit A and
Exhibit B (the "Quarterly Reports"). Quarterly Reports shall be furnished
whether or not Licensee has actual royalties to report for any quarter. All
Quarterly Reports shall be signed and certified as correct by an officer of
Licensee. Acceptance by MTVN of royalty payments and Quarterly Reports shall not
preclude MTVN from questioning the accuracy thereof.
(d) AUDIT:
------
(i) Licensee shall keep accurate books of account and records
at its principal place of business of all transactions relating to, or
affecting, this Agreement, during the Term and fox a period of three years
thereafter. MTVN, or its representative, shall have the right during reasonable
business hours to examine and verify Licensee's physical inventory of the
Licensed Products as well as Licensee's books of accounts and records, and to
make copies and extracts thereof; provided, however, that all such audits shall
be kept confidential between the parties and relates solely to the performance
of the parties under this Agreement. No accounts or records not rationally
relating to Licensee's performance under this Agreement shall be available to
MTVN.
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(ii) In the event that an audit by MTVN discloses an
underpayment in royalties due MTVN, Licensee shall promptly pay MTV'N such
discrepancy plus a late charge of one percent per month (or the highest rate
allowed by law if lower), from the day such payments were due. If such audit
discloses a discrepancy of seven percent or more in favor of Licensee for any
quarter, Licensee shall also reimburse MTVN for all costs, fees and expenses,
incurred by MTVN in connection with the audit. If such audit discloses a
discrepancy in favor of MTVN, such overpayments shall be deducted from future
payments due MTVN under-this Agreement.
ARTICLE 4. QUALITY, SAMPLES, APPROVALS AND MANUFACTURES.
- --------- --------------------------------------------
(a) The quality and style of all Licensed Products, and the manner in
which the License Property may appear on the Licensed Products and on or in any
packaging, promotional materials, labels, advertising, publicity and display
materials of any kind and in any medium which are used in connection with the
Licensed Products are subject to MTVN's prior approval and shall be in full
conformity with all applicable laws and regulations.
(b) At each stage of development or production and prior to
manufacture, Licensee shall promptly provide MTVN with two samples in the form
of proofs and/or prototypes for each Licensed Product and all related materials
for MTVN's approval, which may be withheld in MTVN's sole discretion. MTVN shall
advise Licensee in writing of its approval. or disapproval of such samples
within 10 business days. No samples shall be deemed approved unless and until
MTVN has given its approval. Licensee shall not proceed beyond any development
or production stage where approval is required without first securing such
approval. - In connection with the submission of samples by Licensee for MTVN's
approval, Licensee shall submit to MTVN a completed copy of the Licensed Product
Approval Form provided by MTVN as Exhibit _C. Once a sample has been approved,
Licensee shall not depart therefrom. Approval by MTVN shall not relieve Licensee
of any of its agreements, indemnities and warranties hereunder.
(c) Licensee shall promptly reimburse MTVN for any and all costs of
artwork and other creative materials prepared by MTVN exclusively for the
Licensed Products at Licensee's request.
(d) Concurrently with the initial shipment of each Licensed Product,
Licensee shall furnish to MTVN, at no cost to MTVN, (i) 50 samples of each Music
Product and each subsequent-year of the Term, 25 samples of each Music Product
and (ii) 8 samples of each Karaoke Machine and each Advanced Karaoke Machine and
each subsequent year of the Term, 5 samples of each of the Karaoke Machine and
each Advanced Karaoke Machine. Any Licensed Products requested by MTVN in excess
of the foregoing amounts shall be made available to MTVN at Licensee's cost. No
samples provided to MTVN shall be reproduced by MTVN nor shall MTVN authorize
any entity affiliated with or having a contractual relationship with MTVN to
reproduce such samples. In addition, samples provided to MTVN shall not be made
available I for retail distribution by MTVN nor shall MTVN authorize any entity
affiliated with or having a contractual relationship with MTVN to sell any
samples for retail distribution. No royalties shall be due under this Agreement
to MTVN for any sample provided to MTVN. Licensed Products
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request by MTVN for resale shall be made available to MTVN at Licensee's best
wholesale price.
(e) During the Term, Licensee shall permit representatives selected by
MTVN access to Licensee's floor stock for sampling purposes at any tune during
normal business hours upon reasonable notice.
(f) At any time during the Term, and for a period of one year
thereafter, upon MTVN's request therefor, Licensee shall provide MTVN with a
listing of the names and addresses of Licensee's third party manufacturers on
the Approval of Manufacturer Form attached hereto as Exhibit D, and, if
additionally requested by MTVN, a copy of Licensee's agreement with any such
manufacturer. If such manufacturer utilizes the Licensed Property for any
unauthorized purpose, Licensee shall use best efforts to ensure that such
utilization is immediately halted. MTVN acknowledges and agrees that it shall
not engage Licensee's third party manufacturers, as identified by Licensee, to
manufacture the Licensed Products itself.
(g) From time to time, upon MTVN's request, Licensee shall include
certain materials provided by MTVN relating to MTVN's programs, programming
services, or ancillary businesses, which materials are not in direct competition
with the Licensed Products of Licensee, in the packaging of the Licensed
Products.
ARTICLE 5. MARKINGS.
- --------- ---------
(a) Licensee shall affix the Copyright and Trademark Notices set forth
in the Basic Provisions to all Licensed Products and to all packaging, labels,
promotional, advertising, publicity, and display materials used in connection
therewith, in accordance with instructions from MTVN. No Licensed Products, or
related materials, shall contain any other copyright, trademark or trade name
unless Licensee has obtained MTVN's prior consent. MTVN consents to the use of
"The Singing Machine" on the Licensed Products. The inclusion of any other
trademark or trade name shall be subject to MTVN's approval, such approval to be
at MTVN's sole discretion. MTVN may at any time require an addition to or change
of the Copyright and Trademark Notices, effective not less than 30 days after
receipt by Licensee of notice thereof; provided however, that Licensee shall
have the right to continue to distribute any inventory already manufactured at
the time of such notice, Licensee shall fully cooperate with MTVN in connection
with MTVN's obtaining or maintaining copyright and/or trademark protection for
the Licensed Property in MTVN's name.
(b) Licensee shall affix to the Licensed Products and all packaging,
labels, promotional materials, advertising, publicity, and display materials
used in connection therewith, any other legends, markings and notices required
by any law or regulation in the Licensed Territory or which MTVN reasonably may
request. .
(c) Licensee acknowledges and agrees that it shall provide a credit to
any third party creators of any Licensed Properties, as directed by MTVN, on the
Licensed Products or packaging or other materials related thereto.
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ARTICLE 6. OWNERSHIP.
- --------- ----------
(a) As between MTVN and Licensee, all right, title and interest in and
to the Licensed Property shall be and remain the sole and complete property of
MTVN. Licensee recognizes the value of the goodwill associated with the Licensed
Property, that the Licensed Property may have secondary meaning in the mind of
the public, and that the trademarks and copyrights in the Licensed Property, and
any registrations therefor, are good and valid. All use by Licensee of the
Licensed Property shall inure to the benefit of MTVN. Licensee shall not, during
the Term or thereafter, contest or assist others to contest, MTVN's rights or
interests in the Licensed Property or the validity of this License. Licensee
shall not seek any copyright or trademark registration for the Licensed
Property.
(b) With respect to the intellectual property owned or controlled by
Licensee not by virtue of this Agreement ("Licensee's Intellectual Property"),
any copyright, trademark, or other proprietary rights owned by Licensee and
heretofore used by it which are used in connection with the Licensed Products as
approved by MTVN pursuant to Section S(a) above, shall continue to be owned by
Licensee and shall not become the property of MTVN.
(c) Except for Licensee's Intellectual Property, all right, title, or
interest in or to any copyright, trademark, or other proprietary rights that
come into existence during the Term as a result of the exercise by Licensee of
any right granted to it hereunder, shall immediately and automatically vest in
MTVN.
(d) Except as otherwise provided, all materials that come into
existence during the Term, including, but not limited to, art work and designs,
packaging, labels, and promotional, advertising, publicity, and display
materials used in connection with the Licensed Products shall be deemed "works
made for hire" fox MTVN within the meaning of the U.S. Copyright Law. To the
extent that any such work does not so qualify, for the consideration set forth
herein, Licensee hereby irrevocably and absolutely assigns to MTVN all rights
throughout the universe in perpetuity in all media now known or hereafter
developed including, but not limited to, the copyright and any extensions and
renewals thereof and the trademarks and the goodwill associated therewith.
(e) Licensee agrees to execute and deliver to MTVN any documents which
MTVN may reasonably request to confirm MTVN's ownership of its rights hereunder,
Licensee hereby irrevocably appoints MTVN as its attorney-in-fact coupled with
an interest to sign any such documents in Licensee's name.
(f) Licensee shall be obligated to obtain written assignments of
copyright in favor of MTVN in respect of any artwork or other copyrightable
subject matter developed in connection with the Licensed Property on the
Licensed Products, in the form attached hereto as Exhibit E.
ARTICLE 7. INFRINGEMENTS. Licensee shall promptly notify MTVN of any apparently
unauthorized use or infringement by third parties of any rights granted to
Licensee herein, and shall cooperate fully in any action at law or in equity
undertaken by MTW with respect to such
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unauthorized use or infringement. Licensee shall not institute any suit in
connection with any apparently unauthorized use or infringement without first
obtaining the consent of MTVN to do so, and MTVN shall have the sole right to
determine whether or not any action shall be taken on account of any such
unauthorized uses or infringements.
ARTICLE 8. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.
- --------- ---------------------------------------------
(a) Licensee represents, warrants, and undertakes as follows:
(i) It is free to enter into and fully perform this Agreement;
(ii) All ideas, creations, designs, materials and intellectual
property furnished by Licensee in connection with the Licensed Products shall be
Licensee's own and original creation and shall not infringe upon the rights of
any person or entity or shall be fully licensed by Licensee;
(iii) The Licensed Products and all materials used in,
connection therewith shall be of the highest standard reasonably suitable for
goods of the type of the Licensed Products. The Licensed Products will be safe
for use by consumers and will comply with all applicable governmental rules,
guidelines, codes, regulations, and warranties (express or implied) including,
without limitation, those contained in the Child Safety Protection Act and/or
adopted by the Consumer Product Safety Commission;
(iv) The Licensed Products shall be manufactured, distributed,
sold and advertised in accordance with all applicable federal, state and local
laws including but not limite to all applicable labor laws and regulations and
in a manner that will not reflect adversely upon MTVN, and shall not infringe
upon or violate any rights of any third parties;
(v) Licensee shall use its best efforts to obtain maximum
sales of the Licensed Products in the Licensed Territory during the Term;
(vi) Licensee has obtained or shall obtain all required
authorizations, approvals, licenses, or permits from all government authorities
in order for it to enter into and perform its obligations pursuant to this
Agreement;
(vii) Licensee shall not pledge this Agreement, or the rights
provided hereunder, as security or collateral to any third party; and
(viii) Licensee shall not initially sell, distribute, market
or permit any third party to sell, distribute or market any Licensed Products
which are damaged, defective, "seconds" or otherwise fail to meet the
specifications quality or notice approval requirements contained hereunder.
Notwithstanding anything to the contrary contained above, Licensee may resell
any "B goods" Licensed Products which are returned for credit due to minor
cosmetic damage only (e.g., small dents or minor scratches); pro vided, however,
that (y) MTVN shall have approval in
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its sole discretion over any such sales, including without limitation, the
proposed retailers and (z) such Licensed Products are clearly identified to the
consumer as "B" goods".
(b) MTVN represents, warrants, and undertakes as follows:
(i) It is free to enter into and fully perform this Agreement;
and
(ii) The Licensed Property is original to and the sole
property of MTVN, and does not infringe upon or violate any copyright, trademark
or proprietary right of any third party.
ARTICLE 9. INDEMNITIES
- --------- ------------
(a) Licensee shall at all times indemnify and hold MTVN, its officers,
directors and employees harmless from and against any and all claims, damages,
liabilities, costs and expenses, including reasonable counsel fees, arising out
of or relating to any breach or alleged breach by Licensee of any
representation, warranty or undertaking made herein, or out of any defect
(latent or patent) in the Licensed Products; provided, however, that MTVN shall
give prompt notice, cooperation and assistance to Licensee relative to any such
claim or suit, and provided further that no settlement of any such claim or suit
shall be made without the prior consent of MTVN.
(b) *
ARTICLE 10. INSURANCE. Licensee shall obtain and maintain at its own costs and
expense from a qualified insurance company licensed to do business in New York,
separate polices for (a) standard Product Liability Insurance and (b) standard
Errors and Omissions Insurance, both naming MTVN as an additional named insured,
with respect to all Licensed Products manufactured hereunder, whether sold
during the License Term or thereafter. The Product Liability Insurance shall
provide protection against any and all claims, demands and causes of action
arising out of any defects or failure to perform, alleged or otherwise, of the
Licensed Products or any material used in connection therewith or any use
thereof during the License Term and thereafter. The amount of coverage for each
policy shall be $5,000,000 per occurrence. The policies shall provide for 10
days notice to MTVN from the insurer pursuant to Article 16, in the event of
any modification, cancellation or termination thereof. Licensee agrees to
furnish MTVN a Certificate of Insurance evidencing same prior to the final
execution of the Agreement which shall be attached hereto as Exhibit F. In no
event shall Licensee manufacture, distribute or sell the Licensed Products prior
to receipt by MTVN of such evidence of insurance.
* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission
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ARTICLE 11. DEFAULT.
- ---------- -------
(a) Upon the occurrence of any of the following events (each of which
is a "Default"), then in addition and without prejudice to any rights which it
may have at law, in equity or otherwise, MTVN shall have the right to terminate
this Agreement, to delete from this Agreement any elements of the Licensed
Property or any Licensed Products and/or to require the immediate payment of any
Guaranteed Minimum Royalty and royalties due or to become due hereunder:
(i) Licensee fails to meet the Presentation Date To Licensee's
Retailers or the initial Ship Date To Licensee's Retailers of the Licensed
Products;
(ii) Licensee fails to actively manufacture, advertise,
distribute or sell the Licensed Products;
(iii) Licensee fails to make a payment or famish a Quarterly
Report in accordance herewith and does not cure such failure within 45 days
after notice thereof;
(iv) Licensee fails to comply with. the approval, quality, and
safety requirements hereunder and/or the Licensed Products do not comply with
such requirement and/or the Licensed Products are the subject matter of adverse
or negative publicity due to such failure and does not cure such failure within
45 days after notice thereof;
(v) Licensee fails to comply with any other of Licensee's
material obligations hereunder or breaches any warranty or representation made
by it hereunder and does not cure such failure or breach within 45 days after
notice thereof;
(vi) Licensee sells or otherwise disposes of all or
substantially all of its business or assets to a third party, or control or
ownership of Licensee is changed or transferred;
(vii) Licensee sells or causes others to sell the Licensed
Products outside the Licensed Channels of Distribution or outside the Licensed
Territory and does not cure such failure or breach within 45 days after notice
thereof;
(viii) Licensee fails to obtain or maintain insurance in the
amount of the type provided for herein and does not cure such failure or breach
within 45 days after notice thereof;
(ix) Licensee contests or assists others to contest MTVN's
rights or interests in the Licensed Property or the validity of this License; or
(x) Licensee fails to comply with any provision of any other
agreement between Licensee and MTVN and does not cure such failure or breach
within 45 days after notice thereof.
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(b) In the event that the Licensed Products pose a safety threat to the
consumer, or are the subject of a claim or inquiry by the Consumer Product
Safety Commission or the Child Safety Protection Act or any other person, agency
or commission because of quality and/or safety concerns, and/or labeling or are
the subject of negative publicity due to poor quality and/or safety of the
Licensed Products, Licensee shall, upon MTVWs reasonable request, immediately
recall such Licensed Products from the market place, and take any other measures
MTVN may reasonably demand.
(c) If a petition in bankruptcy is filed by or against Licensee, or
Licensee is adjudicated bankrupt, which is not dismissed within 30 days, or
Licensee makes any assignment for the benefit of creditors or becomes insolvent,
is placed in the hands of a trustee or receiver, fails to satisfy any judgment
against it or is unable to pay its debts as they become due, whichever is
sooner, this License shall automatically terminate forthwith without any notice
whatsoever. Upon such termination for any reason under this Section 11 (c)
Licensee, its receiver, representatives, trustees, agents, administrators,
successors and assigns shall have no further rights hereunder, and neither this
License nor any right or interest herein shall be deemed an asset in any
insolvency, receivership or bankruptcy.
(d) Licensee may terminate this Agreement if MTVN fails to comply with
any of its material obligations hereunder or breaches any warranty or
representation made by it hereunder and does not cure such failure or breach 45
days after notice thereof.
ARTICLE 12. FORCE MAJEURE. In the event that Licensee is prevented from
manufacturing, distributing or selling the Licensed Products because of any act
of God; unavoidable accident; fire; epidemic; strike, lockout, or other labor
dispute; war, riot or civil commotion; act of public enemy; enactment of any
rule, law, order or act of government or governmental instrumentality (whether
federal, state, local or foreign); or other cause of a similar or different
nature beyond Licensee's control, and such condition continues for a period of
45 days or more, either party hereto shall have the right to terminate this
Agreement effective at any time during the continuation of such condition by
giving the other party at least 10 days notice to such effect. In such event,
the Guaranteed Minimum Royalty and royalties on sales theretofore made shall
become immediately due and payable and this Agreement shall be automatically
terminated.
ARTICLE 13. EFFECT OF EXPIRATION OR TERMINATION.
- ---------- ------------------------------------
Upon the expiration or termination of this Agreement for any reason,
all rights granted to Licensee herein shall forthwith revert to MTVN, with the
following consequences:
(a) No portion of any prior payments shall be refundable to
Licensee, and any and all payments due or to become due, including any royalties
and the Guaranteed Minimum Royalty shall be immediately due and payable. If, at
such time, the total amount of royalties paid by Licensee during the Term is
less than the Guaranteed Minimum Royalty, Licensee shall immediately pay such
difference to MTVN.
15
i
(b) After the expiration or termination of this Agreement, Licensee
shall not manufacture, advertise, distribute or sell the Licensed products
containing or including the Licensed Property or any product which may infringe
upon MTVN's proprietary rights, or use any name, logo or design which is
substantially or confusingly similar to the Licensed Property on any product in
any place whatsoever. Except for those Licensed Products distributed to the
Licensed Channels of Distribution prior to the expiration or termination of this
Agreement, Licensee shall promptly deliver to MTVN a statement indicating the
number of Licensed Products then currently on hand or in the process of being
manufactured. MTVN shall have the right to conduct a physical inventory in order
to ascertain or verify such inventory and statement. Except as provided in
Section 13(c), such inventory shall at MTVN's option, be destroyed by Licensee
or purchased by MTVN at Licensee's cost of manufacture. Disposition of any
plates, molds, forms, lithographs and other material relating to the Licensed
Products then remaining on hand shall be subject to notice from MTVN to Licensee
either to destroy the Licensed Products or to deliver the same to MTVN or its
designee. In the event that MTVN requests Licensee to destroy its inventory, the
Licensed Property or materials relating thereto, MTVN may require Licensee to
deliver to MTVN an affidavit by an officer of Licensee, attesting to such
destruction in such form as MTVN may in its sole discretion require.
(c) Upon the expiration of this Agreement, so long as Licensee is not
in default at the time of expiration, Licensee may continue to sell the Licensed
Products, previously manufactured and on hand, on a non-exclusive basis during a
period of 90 days thereafter, subject to all of the terms and conditions
contained in this Agreement; provided, however, that: (i) the Licensed Products
shall be sold in the ordinary course of business at prices not lower than the
prevailing wholesale price or prices charged by Licensee during the 90 day
period immediately preceding the expiration of this Agreement, (ii) no new
Licensed products are manufactured during such sell-off period and (iii) MTVN is
paid its then existing Royalty Rate on all Licensed Products sold during the
sell-off period.
ARTICLE 14. CONFIDENTIALITY. Each of Licensee and MTVN may, from time to time,
be exposed to and will be furnished with certain information, relating to the
other's plans for certain productions and businesses, which are confidential.
Each of Licensee and MTVN shall keep confidential and not reveal or disclose any
of said information, material or data to any third party or the terms of this
Agreement, or any agreement Licensee enters into pursuant to this Agreement
during the Term or thereafter. Neither Licensee nor MTVN shall disclose or make
known to anyone outside of Licensee or MTVN, as applicable, directly or
indirectly, the interest of the other in this Agreement or the terms of this
Agreement. The provisions of this Article 1414 shall not apply to information
which is (a) or becomes publicly available, (b) required to be disclosed
pursuant to a court order or applicable law, rules or regulations or (c)
independently developed by the disclosing party.
ARTICLE 15. PRESS RELEASES/PUBLYC STATEMENTS. Licensee shall make no public
statements or issue any press releases regarding this Agreement, or the Licensed
Products, without the prior consent of MTVN. Notwithstanding anything to the
contrary, MTVN acknowledges that Licensee shall make all legally required United
States Securities and Exchange Commission filings.
16
ARTICLE 16. NOTICES. A11 notices, requests, approvals, consents and other
communications required or permitted under this Agreement, except for payments,
shall be in writing and shall be sent by facsimile to the facsimile number
specified below. A copy of any such notice shall also be personally delivered,
sent by mail or overnight courier delivery service with the capacity to verify
receipt of delivery on the date such notice is transmitted by telecopy to the
addresses specified below.
If to MTVN:
- -----------
MTV Networks, a division of Viacom International Inc.
Attention: Ms. Heidi Eskenazi, Vice President, Licensing
1515 Broadway New York, Never York 10036-5797
Telephone: (212) 846-7145
Telecopy: (212) 846-7908
With a copies:
- ------------
MTV Networks, a division of Viacom International Inc.
Attention: Ms. Elizabeth Matthews, Vice President, Law & Business Affairs
1515 Broadway New York, New York 10036-5797
Telephone: (212) 258-7122
Telecopy: (212) 258-1992
If to Licensee:
- ---------------
The Singing Machine Company, Inc.
Attention; Ms. Terry Marco, Director of Marketing
6601 Lyons Road, Bldg. A-7
Coconut Creek, FL 33073
Telephone: 954-596-1000
Telecopy: 954-596-2000
Receipt of such notice, request, approval, consent or other communication shall
be deemed conclusively made (a) if personally delivered, at the time of delivery
or (b) if mailed or sent by overnight courier service, upon receipt thereof. In
any event, action or proceeding, service of process upon Licensee may be
accomplished by sending such process in the manner specified herein for the
giving of notice to Licensee. Either party may change its address or facsimile
number for notification purposes by giving the other party notice of the new
address or facsimile number and the date upon which it will become effective.
ARTICLE 17. GOVERNING LAW. This Agreement and all questions arising hereunder
shall be governed by, and construed in accordance with, the laws and decisions
of the State of New
17
York without giving effect to the principles thereof relating to conflicts of
law. Each of the parties hereto (a) irrevocably agrees that the federal courts
of the Southern District of New York and the New York State courts shall have
sole and exclusive jurisdiction over any suit or other proceeding arising out of
or based upon this Agreement, (b) submits to the venue and jurisdiction of such
courts and (c) irrevocably consents to personal jurisdiction by such courts.
ARTICLE 18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one single agreement
between the parties.
ARTICLE 19. RELATIONSHIP. Nothing herein contained shall be construed to
constitute a partnership or joint venture between the parties hereto, and
neither Licensee nor MTVN shall be bound by any representation, act or omission
of the other.
ARTICLE 20. SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be contrary to law, then the remaining provisions
of this Agreement shall remain in full force and effect.
ARTICLE 21. WAIVER. No delay or omission by either party to exercise any right
or power it has under this Agreement shall impair or be construed as a waiver of
such right or power. A waiver by either party of any breach or covenant shall
not be construed to be a waiver of any succeeding breach or any other covenant.
All waivers must be in writing and signed by the party waiving its rights.
ARTICLE 22. ENTIRE AGREEMENT. This Agreement, and any Exhibits attached hereto,
is the entire agreement between the parties with respect to its subject matter,
and there are no other representations, understandings, or agreements between
the parties relative to such subject matter.
ARTICLE 23. AMENDMENTS. No amendment to, or change, waiver or discharge of, any
provision of this Agreement shall be valid unless made in writing and signed by
an authorized representative of the party against which such amendment, change,
waiver or discharge is sought to be enforced.
ARTICLE 24. SURVIVAL. The terms of Article 3, Section 4(f), Article 6, Article
8, Article 9, Article 10, Article 13, Article 14, Article 15, Article 17, this
Article 24, Article 25, and Article 27 shall survive the expiration or
termination of this Agreement for any reason.
ASSIGNMENT. Any attempted or purported assignment or other transfer,
sublicense, mortgage or other encumbrance of this Agreement and the rights
granted herein by Licensee without the prior approval of MTVN, which approval
may be granted by MTVN in its sole and absolute discretion, shall be void and of
no effect.
ARTICLE 26. CONSENTS, APPROVALS AND REQUESTS. Except as specifically set forth
in this Agreement, all consents, requests and approvals to be given by either
party under this
18
Agreement shall be (a) in writing and (b) not be unreasonably withheld. Each
party shall make only reasonable requests under this Agreement.
ARTICLE 27. THIRD PARTY BENEFICIARIES. Each party intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person or entity other than MTVN and Licensee.
END OF ADDITIONAL TERMS AND CONDITIONS
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SCHEDULES
Schedule A Actual Quarterly Sales and Royalty Report
Schedule B Projected Quarterly Sales and Royalty Report
Schedule C Music Television Product Approval Form
Schedule D Approval of Manufacturer