EXHIBIT 10.4
As of January 1, 2002
Ms. Terry Marco, Director of Marketing
The Singing Machine Company, Inc.
6601 Lyons Road, Bldg. A-7.
Coconut Creek, FL 33073
Re: Amendment to MTVN Domestic Merchandise License Agreement.
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Dear Terry:
Reference is made to the agreement dated the 1st day of November, 2000, by and
between MTV Networks, a division of Viacom International Inc., ("MTVN") and The
Singing Machine Company, Inc. ("Licensee") with respect to the "MTV: Music
Television" name, trademark and logo (the "Licensed Property") (the
"Agreement"). Capitalized terms used without definition herein shall have the
respective definitions set forth in the Agreement.
Effective as of the date hereof, MTVN and Licensee hereby agree that the
Agreement shall be amended as follows:
1. Section 1 of the definition of Licensed Products contained in the Basic
Provisions shall be amended by (a) deleting in its entirety the phrase "but no
more than twelve" in the first sentence and (b) adding the following after the
first sentence: "The number of Music Products to be released by Licensee is and
shall remain subject to MTVN's prior approval in its sole discretion."
2. The phrase "Advance Karaoke Machine (as hereafter defined) and the Karaoke
Machine (as hereafter defined)" contained in Section l and Section 2 of the
definition of Licensed Products contained in the Basic Provisions shall be
deleted in its entirety and replaced with the "MTV Karaoke Machines (as
hereafter defined)".
3. The phrase "((1)-(4) each a "Licensed Product," collectively the "Licensed
Products".)" at the end of the definition of Licensed Products contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:
"(5) 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, (c) must be used with a separate television set or
viewing monitor in order to be functional and (d) includes (i) dual cassette
decks for recording and playing back Karaoke performances, (ii) 2 microphone
inputs, (iii) AC power operation, (iv) a Microphone (as hereafter defined), (v)
a patch cord and (vi) 12 watt RMS Power Output (Model No. SMG-328).
(6) 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, (c) must be used with a separate television set or
viewing monitor in order to be functional and (d) includes (i) a handle (ii) 2
microphone inputs,
* 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
(iii) AC/DC power operation, (iv) a Microphone, (v) a patch cord and (vi)
built-in speaker system (Model No. SMG-128).
(7) One version of a Karaoke hardware machine branded with the Licensed
Property which (a) will be sold exclusively at Toys R Us retail stores, (b)
enables the end-user to play the Music Products and the Sampler Music Products
and participate in Karaoke activities, (c) does not include a viewing monitor,
(d) must be used with a separate television set or viewing monitor in order to
be functional and (e) includes (i) a single cassette deck, (ii) 2 microphone
inputs, (iii) AC power operation, (iv) a Microphone and (v) a patch cord (Model
No. SMG-138).
(8) 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) allows the end
user to plug the Karaoke machine into a separate television set and video
cassette recorder which allows the end user to view and record their Karaoke
performance, (c) includes a viewing monitor, (d) includes a video camera feature
that (i) is permanently attached to the top of the Karaoke machine and
manufactured as part of the Karaoke machine hardware as a whole, (ii) needs to
be manually adjusted by the end user to record their Karaoke performance, (iii)
is not an individual piece of hardware separate and apart from the Karaoke
machine and is not able to be detached from the Karaoke Machine for use
independent of the Karaoke machine, (iv) does not contain the technical
functionality to allow it to operate as a stand alone video camera and (e)
includes (i) 2 microphone inputs, (ii) AC power operation, (iii) a Microphone
and (iv) a patch cord (Model No. SMVG-600). For the avoidance of doubt, in no
event shall the video camera be Internet compatible or contain any technology
that would allow it to broadcast or otherwise distribute any content. MTVN shall
have approval rights regarding all technical components of the video camera
feature.
((3)-(8) each a "MTV Karaoke Machine" and collectively, the "MTV
Karaoke Machines")
(9) One version of a uni-directional, handheld microphone which (a)
weighs approximately 10 ounces, with a frequency response of 100-12,000 Hz,
Sensitivity of-76B+/-3dB at 1 KHz and Impedance of 600 ohm+/-15%, (b) is
approximately 2-1/6" X 10-1/2" in size, (c) is branded with the Licensed
Property, (d) must use a wire that plugs into the MTV Karaoke Machines to be
operational and (e) may be sold individually (the "Duet Microphones") or
packaged together with the MTV Karaoke Machines (the "Microphone Sold With MTV
Karaoke Machines") (the Duet Microphone and the Microphone Sold With MTV Karaoke
Machines, collectively, the "Microphone(s)") (Model No. 222). For the avoidance
of doubt, a Microphone shall be used by plugging it into an MTV Karaoke Machine
and singing into it for an amplified voice effect.
((1)-(9) each a "Licensed Product" and collectively, the "Licensed
Products").
The parties acknowledge and agree that, any device or item that does not meet
all of the specifications and include all of the capabilities set forth in the
definitions above shall not constitute a "Licensed Product" hereunder. In no
event shall any of the Licensed Products include any other components or
technical functionality nor' known or hereafter devised or developed which is
not specified herein including, but not limited to, wireless, cellular,
satellite or any mobile telephone functionality. If Licensee intends to create,
develop, sell, distribute or manufacture a product that varies from the Licensed
Products to the extent that it modifies, enhances or otherwise alters one or
more of the stated features or adds an unstated feature, then Licensee shall
give MTVN prior notice describing such requested alteration, and MTVN then may
elect in its sole discretion to include such altered product as
2
Part of the definition of "Licensed Products" by giving notice to Licensee and
amending this Agreement to such effect."
4. Subject to Paragraph 8 below, the phrase "Specialty toy stores (e.g., FAO
Schwarz) and Toys R Us and KayBee Toys and upon MTVN's approval other Mass
market toy stores ("Toy Store Retailers")" shall be added to the definition of
Licensed Channels of Distribution contained in the Basic Provisions of the
Agreement.
5. The definition of Royalty Rate contained in the Basic Provisions of the
Agreement shall be deleted in its entirety and replaced with the following:
"(1) *% of Net Sales (as defined in the annexed Additional Terms and
Conditions) for the Music Products and the Duet Microphones.
(2) Except for the Licensed Products defined in Section 8 of the
definition of Licensed Products (SMVG-600), *% of Net Sales (as defined in the
annexed Additional Terms and Conditions) for the MTV Karaoke Machines."
(3) *% of Net Sales (as defined in the annexed Additional Terms and
Conditions) for the Licensed Products defined in Section 8 of the definition of
Licensed Products (SMVG-600).
6. The definition of Presentation Date To Licensee's Retailers contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:
"(1) The Presentation Date to Licensee's Retailer's shall be:
(a) January 6, 2001 for (i) the Karaoke Machine, (ii) the Advanced
Karaoke Machine and (iii) at least two Music Products, the
titles of such Music Products to be mutually agreed upon by
MTVN and Licensee;
(b) January 6, 2002 for the four remaining MTV Karaoke Machines;
and
(c) Mutually agreed upon for the Duet Microphones.
(2) The Presentation Date to Licensee's Retailer's for any other Music
Products approved by MTVN shall be determined in accordance with a mutually
acceptable presentation schedule to be agreed upon by MTVN and Licensee."
7. The definition of Initial Ship Date To Licensee's Retailers contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:
"(1) The Initial Ship to Licensee's Retailers shall be:
(a) June, 2001 for (i) the Karaoke Machine, (ii) the Advanced
Karaoke Machine and (iii) at least two Music Products, the
titles of such Music Products to be mutually agreed upon by
MTVN and Licensee;
(b) No later than June 30, 2002 for the MTV Karaoke Machines in
parts (5) through (7) of the definition of Licensed Products;
(c) No later than September 30, 2002 for the MTV Karaoke in part
(8) of the definition of Licensed Products; and
3
* 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
(c) No later than September 30, 2002 for the MTV Karaoke in part
(8) of the definition of Licensed Products; and
(d) Mutually agreed upon by MTVN and Licensee for the Duet
Microphones.
(2) The Initial Ship to Licensee's Retailers for any other Music
Products approved by MTVN shall be determined in accordance with a mutually
acceptable initial schedule to be agreed upon by MTVN and Licensee."
8. (a) Licensee acknowledges that the placement of the Licensed Products in
retail toy stores, is of the utmost importance to MTVN and, therefore, Licensee
shall use best efforts to ensure that (i) all Toy Store Retailers display,
place, market and makes available for sale the Licensed Products solely in the
music/karaoke/electronics section of each store during the Term and (ii) the
Duet Microphones are only sold with the other Licensed Products and not with any
microphones or music related products marketed to or intended for children
and/or pre-teens (e.g., Barbie branded microphones).
(b) If at any time during the Term (i) any Licensed Products are sold
in any sections, aisles or areas other than the music/karaoke/electronics
section of a Toy Store Retailer or (ii) the Duet Microphones are sold in an area
or section apart from the Licensed Products ((i) and (ii), the "Prohibited
Areas"), then (y) the party hereto with knowledge of such marketing, placement,
display or sales activities in the Prohibited Areas shall promptly notify the
other and (z) Licensee shall have fourteen days from the time it is made aware
of such activities to have the Toy Store Retailers terminate such activities. If
the Toy Store Retailers do not remove the Licensed Products and any marketing
and sales materials related thereto from the Prohibited Areas and display,
market, place and sell the Licensed Products solely as described in Section 8(a)
above, then MTVN shall have the right, in its sole discretion, upon notice to
Licensee, to automatically revoke Toy Stores Retailers from the Licensed
Channels of Distribution.
Except as otherwise herein amended, the Agreement is hereby ratified and
confirmed in all respects.
Please indicate your acceptance of the foregoing by signing in the space
provided below.
Very truly yours,
MTV Networks, a division of
Viacom International Inc.
By: /s/ Heidi Eskenazi
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Name: Heidi Esken
Title: V.P. Licensing, Merchandising
& Interactive; MTV
ACCEPTED AND AGREED TO:
THE SINGING MACHINE COMPANY, INC.
By: /s/ John Klecha
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Name: John Klecha
Title: Chief Operating Officer