EXHIBIT 10.5
As of November 13, 2002
Mr. Eddie Steele, CEO
The Singing Machine Company, Inc.
6601 Lyons Road, Bldg. A-7
Coconut Creek, FL 33073
Re: Second Amendment to MTVN Domestic Merchandise License Agreement
Dear Eddie:
Reference is made to the agreement dated the 1st day of November, 2000, as
amended January 1, 2002, 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. The definition of "Term" contained in the Basic Provisions of the Agreement
shall be deleted in its entirety and replaced with the following:
"The Term of this Agreement shall commence on November 1. 2000 and
continue through December 31, 2003."
2. In addition to (and not in lieu of) the Guaranteed Minimum Royalty of
$686,250 payable pursuant to the Agreement, Licensee shall pay MTVN an
additional Guaranteed Minimum Royalty of $1,500,000, payable as follows:
$500,000 on or before December 27, 2002; $333,334 on or before June 1,
2003; $333,333 on or before September 1, 2003; and $333,333 on or
before December 1, 2003.
3. Notwithstanding anything to the contrary contained in the Agreement, the
additional Guaranteed Minimum Royalty due pursuant to Paragraph 2 hereinabove
shall (a) not be recoupable against any royalties due for sales of Licensed
Products sold through December 31, 2002 and (b) be recoupable solely against
royalties due for sales of Licensed Products sold on or after January 1, 2003.
4. The following shall be added to the definition of Royalty Rate contained in
the Basic Provisions of the Agreement:
- -------
* 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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"The Royalty Rate on sales of all Licensed Products sold on or after January 1,
2003 shall be * of Net Sales (as defined in the Additional Terms and Conditions
of the Agreement)."
5. The definition of Licensed Products contained in the Basic Provisions of the
Agreement shall be deleted in its entirety and replaced with the following:
The "LICENSED (1) Each year of the Term, Licensee shall release at least
PRODUCTS" eight compact discs or cassettes in at least four
different musical genres consisting of a compilation of
music tracks, which shall be branded with the Licensed
Property and contain the technology necessary for the
end-user to participate in Karaoke activities (the
"Music Product(s)"). The number of Music Products to be
released by Licensee shall be subject to MTVN's prior
approval in its sole discretion. In addition to the
provisions set forth in Article 4, MTVN shall have
prior and 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 MTV Karaoke Machines (as hereafter
defined).
(2) Each year of the Term, Licensee shall release no more
than three compact discs of a compilation of no more
than eight music tracks which shall be branded with the
Licensed Property and contain the technology necessary
for the end- user to participate in Karaoke activities
which shall be packaged with the MTV Karaoke Machines
(the "Sampler Music Products"). In addition to the
provisions set forth in Article 4, MTVN shall have
prior and 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 by Licensee to MTVN
for Sampler Music Products.
(3) (a) One version of a uni-directional, handheld
microphone which (i) weighs approximately 10 ounces,
with
- -------
* 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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a frequency response of 100-12,000 Hz, Sensitivity
of-76B+/- 3dB at 1 1000Hz and Impedance of 600
ohm+/-15%, (ii) is approximately 2-1/6" X 10-1/2"
in size, (iii) is branded with the Licensed
Property, (iv) must use a wire that plugs into the
MTV Karaoke Machines to be operational and (v) may
be sold individually (a "Duet Microphone") or
packaged together with the MTV Karaoke Machines (a
"Microphone Sold With MTV Karaoke Machines")
(Model No. SMM 300).
(b) One version of a uni-directional, handheld
microphone which (i) weighs approximately 10
ounces, with a frequency response of 100-10,000
Hz, Sensitivity of-72dB +1- 3dB at 1000Hz and
Impedance of 600 ohm +1-30% (ii) is approximately
1.8" by 11.1" in size, (iii) is branded with the
Licensed Property, (iv) may be sold as a Duet
Microphone or a Microphone Sold With MTV Karaoke
Machines, (v) includes a cord to plug the
microphone into an MTV Karaoke Machine and two AA
batteries for use without the cord as a wireless
microphone (Model No. SMM 106).
(Section 3(a) and Section 3(b), individually and
collectively, the "Microphone(s)").
For the avoidance of doubt, a Microphone shall be
used by either plugging it into an MTV Karaoke
Machine or using "AA" batteries and singing into
it for an amplified voice effect accomplished by
the end-user singing into such Microphone.
(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 (Model No. STVG-700).
(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
view the lyrics of the songs
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and (d) includes (i) a handle (ii) two microphone
inputs, (iii) AC/DC power operation, (iv) a
Microphone, (v) a patch cord and (vi) built-in
speaker system (Model No. SMG-128).
(6) One version of a Karaoke hardware machine branded with
the Licensed Property which (a) will be sold
exclusively at Toys R Us retail stores from the
beginning of the Term through December 31, 2002, and in
any of the Licensed Channels of Distribution
thereafter, (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 view the lyrics of
the songs and (e) includes (i) a single cassette deck,
(ii) two microphone inputs, (iii) AC power operation,
(iv) a Microphone and (v) a patch cord (Model No.
SMG-138).
(7) 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-users 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 the end-user's 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) two Microphone inputs, (ii) AC power operation,
(iii) a Microphone and (iv) a patch cord (Model No.
SMVG 600).
(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) does not
include a viewing monitor, (c) must be used with a
separate television set or viewing monitor in order to
view the lyrics of the songs, (d) has a tray load,
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three CD&G changer, (e) has a top load, single cassette
deck for recording and playing back Karaoke
performances and (f) includes a (i) remote control
which is solely operational with the SMG-282, (ii)
Microphone and (iii) built-in speaker system (Model No.
SMG-282).
(9) 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
view the lyrics of the songs, (d) has a tray load,
three CD&G changer, (e) has a front load, single
cassette deck for recording and playing back Karaoke
performances and (f) includes a (i) remote control
which is solely operational with the SMG-270, (ii)
Microphone and (iii) built-in speaker system (Model No.
SMG-270).
(10) 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
view the lyrics of the songs, (d) has a tray load,
three CD&G changer, (e) has a top (load, single
cassette deck for recording and playing back Karaoke
performances and (f) includes a (i) remote control
solely operational with the SMG-280, (ii) Microphone
and (iii) built-in speaker system (Model No. SMG-280).
(11) 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) includes a
built-in 5.5 inch black and white viewing monitor, (c)
has a top load, single CD&G player and (d) includes a
(i) Microphone and (ii) built-in speaker system (Model
No. STVG-50l).
(12) 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) includes a
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built-in 5.5 inch black and white viewing monitor, (c)
has a front load, single cassette deck for recording
and playing back Karaoke performances, (d) has a top
load, single CD&G player and (e) includes a (i)
Microphone and (ii) built-in speaker system (Model No.
STVG-505).
(13) 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
view the lyrics of the songs, (d) has a top load,
single CD&G player, (e) includes a video camera feature
that (i) is permanently attached to the top of the
Karaoke machine and manufactured as part of the machine
hardware as a whole, (ii) needs to be manually adjusted
by the end-user to record the end-user's 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 (f) includes
(i) headphone plug in capability, (ii) a device that
allows the Karaoke machine to be mounted to the top of
a television set and (iii) a Microphone (Model No.
SMVG-608).
(14) 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) includes a
built-in 13- inch color television set (i) manufactured
as part of the Karaoke machine hardware as a whole,
(ii) which receives television reception and is used as
a viewing monitor for Karaoke activities and (iii)
contains a "cable-tuner module" responsible for signal
decoding (i.e., does not need an external/separate
device to receive the television signal from the
available cable), (c) has a tray load, single CD&G
player that is (1) capable of playing regular CD-ROM
discs as well as discs in DVD format containing audio
visual performances stored on DVD disks in a digital
form using a MPEG-2 compression standard, (ii) not
designed or capable of modifying any content of DVD or
compact disks in any form and (iii) is not designed or
capable of recording or copying
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any content ("DVD Player"), (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 the end-user's 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 and (iv) does
not contain the technical functionality to allow
it to operate as a stand alone video camera, (e)
includes a video cassette recorder device capable
of playing and recording audio visual Karaoke
performances solely in an analog form from and
onto film based tapes/cartridges ("VCR"), which
VCR is (i) manufactured as part of the Karaoke
machine as a whole and (ii) is not an individual
piece of hardware separate and apart from the
Karaoke machine and (f) includes a (i) remote
control which is solely operational with the
STVG-630 and (ii) Microphone (Model No. STVG-630).
(15) 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) includes a
built-in 7 inch black and white television set (i)
manufactured as part of the Karaoke machine hardware as
a whole, (ii) that receives television reception and is
used as a viewing monitor for Karaoke activities and
(iii) does not contain a "cable-tuner module" (i.e.,
needs an external/separate device to receive the
television signal from the available cable), (c) has a
front load, single cassette deck for recording and
playing back Karaoke performances, (d) has a tray load,
single CD&G player, (e) has an AM/FM terrestrial radio
receiver (i.e., a device that enables an end-user to
listen to audio content solely via such receiver) and
(f) includes a (i) Microphone and (ii) built-in speaker
system (Model No. STVG-707).
(16) 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
view the lyrics of the songs, (d) has a top load,
single CD&G player which also
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operates as a DVD Player, (e) has a front load,
single cassette deck for recording and playing
back Karaoke performances and (f) includes a (i)
remote control solely operational with the
SMG-800, (ii) Microphone and (iii) built-in
speaker system (Model No. SMG-800).
(17) 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
view the lyrics of the songs, (d) has a tray load,
single CD&G player which also operates as DVD Player,
(e) has a front load, dual cassette deck for recording
and playing back Karaoke performances, (f) stereo
functionality includes (i) a subwoofer and (ii) two
speakers that may be (y) detached from the main body of
the Karaoke machine and (z) connected to the Karaoke
machine using wires or short range wireless
communications solely using the radio spectrum
necessary for one-way wireless microphones and in no
way facilitates any other means of communication
including, but not limited to, a commercial mobile
radio service pursuant to **47 C.F.R. Part 20 and (g)
includes a (i) remote control solely operational with
the SMG-8 10, (ii) Microphone and (iii) built-in
speaker system (Model No. SMD-810).
(18) 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
view the lyrics of the songs, (d) has a tray load,
three CD&G changer, (e) has a front load, dual cassette
deck for recording and playing back Karaoke
performances, (f) stereo functionality includes (i) 40
watts stereo power, which also operates as an amplifier
(i.e., for a guitar or keyboard with volume control),
(ii) adjustable reverb and (iii) key control
functionality which allows the end-user to adjust the
music to the musical key of their choice and (g)
includes a (i) Microphone and (ii) built-in speaker
system (Model No. SMG-900).
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((9)-(18) only, each, a "2003 MTV Karaoke Machine"
and collectively, the "2003 MTV Karaoke
Machines").
((4)-(18) each, a "MTV Karaoke Machine" and
collectively, the "MTV Karaoke Machines").
((l)-(18) each, a "Licensed Product" and
collectively, the "Licensed Products").
The parties acknowledge and agree that, (1) in no
event shall the Licensed Products, or any features
contained therein, be Internet compatible or
contain any other components or technical
functionality now known or hereafter devised or
developed that would allow the Licensed Products
to broadcast, stream, deliver or distribute any
content. MTVN shall have prior approval rights
regarding all technical components of the Licensed
Products and (2) any device or item that does not
(a) meet all of the specifications and include all
of the capabilities set forth in the definitions
of the Licensed Products and (b) without limiting
the specifications, restrictions and descriptions
of functionality and capability set forth on the
definitions of the Licensed Products, contain all
the features included on the technical spec sheets
for the Licensed Products (excluding the Sampler
Music Products and the Music Products), attached
hereto at Attachment A, shall not constitute a
"Licensed Product" hereunder. In no event shall
any of the Licensed Products include any other
components or technical functionality now 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 part of the
definition of "Licensed Products" by giving notice
to Licensee and amending this Agreement to such
effect.
6. The Presentation Date To Licensee's Retailers for the 2003 MTV Karaoke
Machines shall be January 9, 2003 at the Consumer Electronics Show.
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7. The Initial Ship Date To Licensee's Retailers for the 2003 MTV Karaoke
Machines shall be June 1, 2003.
8. Licensee shall release a minimum of six of the eleven 2003 MTV Karaoke
Machines in accordance with Section 6 and Section 7 above and the terms and
conditions of the Agreement. Notwithstanding anything to the contrary, Licensee
shall have the right, but not the obligation, to release any of the no more than
five remaining unreleased 2003 MTV Karaoke Machines; provided, however, that
such release is in accordance with the terms and conditions of the Agreement.
The identity of all 2003 MTV Karaoke Machines to be released shall be mutually
agreed upon by MTVN and Licensee.
9. Licensee acknowledges and agrees that it shall not, or authorize others, to
design, manufacture, market, distribute or sell Karaoke machines that have the
same color schemes and designs as any MTV Karaoke machines that are being
released for the Term of the Agreement.
10. Licensee acknowledges and agrees that the MTV Karaoke Machines shall always
be primarily marketed and sold as Karaoke machines as opposed to other functions
or features which may be contained in the Licensed Products.
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/ Donald Silvey
-------------------------------------
Name: Donald Silvey
Title: SVP Program Enterprises
ACCEPTED AND AGREED TO:
THE SINGING MACHINE COMPANY, INC.
By: /s/ Edward Steele
------------------------------
Name: Edward Steele
Title: CEO
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