EXHIBIT 10.7
SALES AGREEMENT
This Sales Agreement (this "Agreement"), effective as of December 9,
2003 (the "Effective Date"), is made by and between The Singing Machine Inc., a
Delaware corporation ("SMC"), and CPP Belwin, Inc., a Delaware Corporation and
its Affiliates (collectively, "WPB").
WHEREAS, SMC has produced karaoke software, in compact disk ("CDG")
format (such CDG's are collectively referred to as the "Catalogue" and
individually as a "Title"); and
WHEREAS, SMC has requested WBP to market the Titles; and
WHEREAS, WBP is willing to market the Titles subject to the terms of
this Agreement.
NOW, THEREFORE, in consideration of the above premises SMC and WBP
agree as follows:
ARTICLE I -
DEFINITIONS
1.1 In addition to those terms set forth above, the terms listed below
shall have the following meanings for the purpose of this Agreement:
"Advertising Allowance" means sums agreed upon by the parties to be
used to promote the sale of Licensed Products including, but not limited to
cooperative advertising costs and market development funds.
"Affiliate" means a corporation, partnership (limited or general),
limited liability company, joint venture, association, trust, or any other
unincorporated organization or entity owned in whole or in part by or under
common control with a party to this Agreement.
"Change of Control" shall include any change of control directly or
indirectly of WBP whether such change of control is by merger, consolidation,
sale or transfer of assets or equity, assignment, transfer, combination, joint
venture, management contract, assimilation, attribution or amalgamation of any
kind whatsoever.
"Claim" means any claim, action, suit, litigation, investigation,
inquiry, review or proceeding.
"Confidential Information" means all information furnished by a party
(the "Providing Party") to the other party (the "Receiving Party") that is
designated as confidential, whether or not a trade secret, including but not
limited to any business plans, any information regarding the Providing Party's
marketing, structural or strategic plans, or any other analyses, compilations,
studies or other documents whether prepared for or given to the Receiving Party
or prepared by or for directors, officers, employees, agents or representatives
of the Providing Party or any affiliate thereof (including without limitation
accountants, attorneys and financial advisors) (Representatives").
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"Copyright Office" means the Copyright Office of the Library of
Congress of the United Stated of America.
"CDG" means a compact disk with graphics containing the contents of a
Title.
"Distribution Fee" means that percentage of Net Sales Receipts set
forth on Exhibit C.
"Effective Date" means December 9, 2004.
"Intellectual Property" means all patents, trademarks, trade names,
logos, service marks, service names, copyrights, and applications therefore, and
license or other rights in respect thereof used in connection with the Catalogue
and any of the Titles and whether or not SMC's or any other Person's.
"Judgment" means any judgment, decree, writ, injunction, ruling or
order.
"Legal Expenses" means any and all fees, costs and expenses of any kind
reasonably incurred by a Person and its counsel in investigating, preparing for,
defending against or providing evidence, producing documents or taking other
action with respect to, any threatened or asserted Claim including but not
limited to fees, costs and expenses of counsel at pre-trail, trail and appellate
levels.
"Licensed Products" means CDG's and Other Formats containing the
contents of any of the Titles set forth on Exhibit A.
"Licensed Property" means the Xxxx, the Logo and all Intellectual
Property and Technology.
"Logo" means those certain logos set forth on Exhibit B attached hereto
and hereby made a part hereof and all other logos of SMC registered with the
Copyright Office or non-U.S. registration authorities or used by SMC as common
law marks or their equivalent.
"Xxxx" means those certain trademarks and service marks set forth on
Exhibit C attached hereto and hereby made a part hereof and all other marks of
any type or nature of SMC registered with the Copyright Office or non-U.S.
registration authorities or used by SMC as common law marks or their equivalent.
"Net Proceeds" means Net Sales Receipts actually received by WBP, less
the Distribution Fee, the Reserve Amount, the Advertising Allowance, is any, and
less any other payments due to WBP hereunder.
"Net Reserves" means the Reserve Amount retained by WBP for a
particular month less the amount of money required to repay any Licensed
Products returned by WBP Account and Non-WBP Account customers during that month
and less any sums anticipated to be due WBP by reason of any indemnity
obligations of SMC.
"Net Reserve Month" means the third month prior to the month before the
month in which the payment of Net Reserves are to be made. For example, on March
15, 2004, WBP will
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be required to pay the amount of Net Reserves due to SMC for the month of
December, 2003 (December being the third month before February, the month before
the payment is being made).
"Net Sales Receipts" means gross revenue from the sale of Licensed
Products less sales tax, VAT (or its equivalent) and other taxes in the nature
of sales taxes and freight costs, if any.
"Non-WBP Accounts" means those accounts to which Licensed Products are
sold directly by SMC. A true and complete list of Non-WBP Accounts is set forth
on Exhibit D.
"Other Formats" means any format other than CDG, whether now known or
hereafter invented or discovered.
"Person" means and includes an individual, corporation, partnership
(limited or general), joint venture, association, trust, any other
unincorporated organization or entity and a governmental entity or any
department or agency thereto.
"Remaining Inventory" means those Licensed Products that make up the
inventory of WBP at the date of termination of this Agreement.
"Reserve Amount" means a sum equal to twenty five (25%) percent of Net
Sales Receipts reserved as set forth in Section 5.2 of this Agreement to cover
the returns of Licensed Products and indemnity sums due or payable to WBP.
"Security Interest" means any security interest, pledge, lien, charge,
claim, option, equity, right, restriction on transfer or encumbrance of any
nature whatsoever.
"SMC Agreement" means any agreement between SMC and any Person
including but not limited to all security agreements, pledges, other security
instruments, agreements, contracts, leases, licenses, franchises, obligations,
instruments or other commitments, arrangements or understandings of any kind,
whether written or oral, binding or nonbonding, to which SMC is a party and
which include in any part the Catalogue or by which SMC or any of the Catalogue
may be bound or affected.
"Tax" and "Taxes" means all taxes, fees, levies or other assessments,
including but not limited to income, excise, property, sales, franchise,
withholding, value added, social security and unemployment taxes imposed by the
United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments.
"Technology" means trade secrets, proprietary information, inventions,
know-how, processes and procedures owned by SMC, licensed to WBP and used in
connection with the Catalogue and any of the Titles.
"Termination Date" means the date upon which this Agreement is
scheduled to terminate, whether it is scheduled to terminate at the end of the
initial term of this Agreement or at the end of any subsequent renewal term.
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"Territory" means the United States of America and Canada and their
respective territories and possessions as well as U.S. Military Exchanges
throughout the entire world.
"WBP Accounts" means those accounts to which Licensed Products are
sold other than Non-WBP Accounts.
"WBP Indemnified Parties" means WBP, its directors, officers,
shareholders, employees and Affiliates and their respective directors, officers,
shareholders and employees.
ARTICLE II -
LICENSE
2.1 Grant. SMC grants to WBP an exclusive right and license to: (i)
promote, market and sell the Licensed Products within the Territory; and (ii)
use the Licensed Property in or on any product container, product literature,
product advertisement or other method that may be used to distribute, promote,
advertise and sell the Licensed Products within the Territory. SMC will
cooperate with WBP and use its best efforts to assist and facilitate the
promotion, sale, distribution and marketing of Licensed Products, including
without limitation, referring sales "leads" to WBP within the Territory.
2.2 Internet Rights Included. The rights licensed to WBP hereunder
shall include and not be limited to anything that pertains to the Internet,
INTERNIC, the World Wide Web, any web site, Domain name, Domain registration, or
any other computer related or Internet related or derived source or system. To
the extent that SMC maintains a web site, SMC shall maintain a link to a
designated web site of WMP upon which the Licensed Products shall be available
for sale. Such link shall be exclusive for products of similar character.
2.3 Sublicense Rights. WBP shall have the right to sublicense the
rights licensed to it hereunder and to subcontract the sale, promotion,
marketing and distribution of all or any portion of any of the Licensed
Products.
2.4 Code Programs. Additional discount programs are offered on behalf
of WBP to retail and wholesale customers otherwise known as "Code Programs".
Code Programs may include additional discounts or dating for a specific period
of time. SMC may elect, upon notice to WBP, to participate in WEA's Code
Programs or any of them. WBP shall not offer Licensed Products under any Code
Program without the prior consent of SMC.
ARTICLE III -
DUTIES OF THE PARTIES
3.1 SMC Obligations. SMC shall deliver, at its sole cost, risk and
expense, Licensed Products in such quantities as EBP shall request and in all
cases sufficient to meet market demand to WBP's warehouse, F.O.B. such
warehouses. Each warehouse shall be delivered a complete range of all Licensed
Products. SMC shall also provide SBP with a suggested retail price list for the
Licensed Products as agreed upon by the parties. SMC shall provide promotional
copies as requested by WBP but shall not be obligated to provide more than 200
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copies of each Title. Each promotional copy shall be marked as such and shall
not be sold by WBP. SMC shall consult with WBP and approve all advertising
sufficiently in advance to permit WBP to carry out a marketing campaign in form
and substance similar to other WBP and Affiliate marketing campaigns. SMC shall
pay the cost of all advertising. With the prior written consent of WBP which may
be withheld in the sold discretion of WBP, the cost of advertising may be paid
from the Net Sales Receipts. To the extent that Advertising Allowances are paid
from Net Sales Receipts, such Advertising Allowances shall be deducted from Net
Sales Proceeds after the payment to WBP of Distribution Fees and SMC Serviced
Account Distribution Fees.
3.2 Duties of WBP. WBP shall use reasonable commercial efforts to
promote, market and sell the Licensed Products to WBP Accounts at a price agreed
upon between WBP and SMC. WBP's marketing efforts shall include attendance at
those trade shows and conventions it elects to attend, meetings with WBP
Accounts, direct mail such as mailings to Licensed Product dealers, preparation
and mailing of catalogues, and placement and promotion of the Licensed Products
on xxx.xxxxxxxxxxx.xxx and any business to business intranet site that it may
maintain. WBP shall provide locations for the warehousing of Licensed Products
in sufficient quantities to meet market demand. The present warehouse locations
are 00000 X.X. 00xx Xxxxxx, Xxxxx, Xxxxxxx, and 000 Xxxxxxxx Xxxx Xx., Xxxx X,
Xxxxxx, Xxxxxxxx. WBP may change the locations for warehousing the Licensed
Products on twenty-one (21) days notice to SMC. WBP shall provide order
fulfillment services from its warehouses. In addition, WBP shall provide (i)
record keeping of all sales and returns and (ii) inventory control in accordance
with industry standard practice. WBP shall also use reasonable commercial
efforts to collect all sums due from sales of the Licensed Products. In the
event that WBP engages outside collection agents, it shall advance such fees and
any costs associated therewith and shall thereafter recover such costs and fees
from Net Receipts prior to the payment of sums due to SMC.
ARTICLE IV -
TERM AND TERMINATION
4.1 Term. The term of this Agreement (the "Term") shall commence on the
Effective Date and shall terminate two years from the Effective Date unless it
is earlier terminated as provided in Sections 4.2 or 4.3 below. Any party may
terminate this Agreement as of a Termination Date by notice to the other party
received by the other party no later than 180 days prior to the Termination Date
(the "Expiration Notice"). Upon notice from WBP no earlier than 180 days prior
to the Termination Date and provided that SMC has not timely delivered to WBP an
Expiration Notice, the term of this Agreement shall be extended for an
additional period of two years upon the same terms and conditions as set forth
herein.
4.2 Termination by SMC. This Agreement may be terminated prior to the
Termination Date in the event of a default by EBP as more specifically set forth
in Article IX below.
4.3 Termination by WBP. This Agreement may be terminated at any time
prior to the Termination Date upon thirty (30) days prior written notice from
WBP to SMC or in the event of a default by SMC as more specifically set forth in
Article IX below.
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4.4 Sales Post-Termination. Upon termination of this Agreement, WBP
shall have the right to deliver Licensed Products to the WBP Accounts and the
Non-WBP Accounts that have placed orders prior to such termination.
4.5 Post Termination Obligations. Termination of this Agreement shall
not relieve any party of any obligation or liability accrued hereunder prior to
such termination, not affect or impair the rights of any party arising under
this Agreement prior to such termination, except as expressly provided herein.
After the termination of this Agreement, subject to WBP's rights to deliver
Licensed Products to WBP Accounts and Non-WBP Accounts, WBP shall deliver the
Remaining Inventory to SMC, at the cost and expense of SMC. WBP shall also cease
to use the Licensed Property and shall turn over to SMC all promotional
materials that contain the Licensed Property.
ARTILE V -
PAYMENTS
5.1 Net Proceeds. WBP shall pay the Net Proceeds to SMC monthly
beginning on January 15, 2004 and continuing each month thereafter on the 15th
day following the end of each month, in arrears. With such payment, SBP shall
provide a monthly repost detailing the sales, Reserve Amounts and Net Proceeds
payable for the previous month (the "Monthly Report"). In the event that for any
reason a payment is not due for any month, WBP shall nevertheless provide a
Monthly Report for such month.
5.2 Reserve Amount. WBP shall retain the amount of twenty five (25%)
percent of all Net Sales Receipts as the Reserve Amount. Beginning on March 15,
2004 and the fifteenth of each month thereafter, WBP shall pay to SMC, along
with the Net Proceeds, the amount of Net Reserves due to SMC for the Net Reserve
Month. On the 15th day of the third month following the month during which this
Agreement terminates, WBP shall pay the final amount of Net Reserves to SMC.
5.3 Set Off. All sums payable to SMC shall be subject to set off by
SBO for sums due to WBP as set forth in Articles X and XI below.
5.4 WBP Books of Account. WBP shall maintain and keep (at its principal
place of business or such other place as shall be disclosed to SMC and its sole
expense) accurate books of account and record covering all matters and
transactions relating to this Agreement. SMC and its duly authorized
representative(s) shall have the right at its sole expense, upon reasonable
notice during WBP's regular business hours and in a manner reasonably calculated
to avoid disruption of the business of WBP being carried on at such location, no
more than twice in any calendar year, to examine and copy and otherwise audit
said books of accounts, records with respect to this Agreement. WBP shall
maintain and keep all such books of account and records available for at least
two (2) years after expiration or earlier termination of this Agreement.
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ARTICLE VI -
REPRESENTATIONS OF SMC
6.1 SMC represents and warrants to WBP as follows:
a. Organization and Good Standing. SMC is a corporation duly
organized, validly existing an din good standing under the laws of the
State of Florida and has the corporate power and authority to own the
Licensed Property, the Catalogue and each Title contained within it,
and to carry on its business as now being conducted.
b. Authority, Approvals and Consents. SMC has the corporate power
and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized and approved by the Board of Directors of
SMC and no other corporate proceedings on the part of SMC are
necessary to authorize and approve this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, SMC,
enforceable against SMC in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies). The execution, delivery and performance of this Agreement
by SMC and the consummation of the transactions contemplated hereby do
not and will not:
(i) contravene any provisions of the Certificate of
Incorporation of By-Laws of SMC;
(ii) conflict with, result in a breach of any provision of,
constitute a default under, result in the modification or
cancellation of, or give rise to any right of termination or
acceleration in respect of, any SMC Agreement or require any
consent or waiver of, or release of Security Interest by, any
Person;
(iii) result in the creation of any Security Interest upon,
or any Person obtaining any right to acquire, any properties,
assets or rights or SMC.
c. Absence of Liabilities. SMC has no liabilities of any nature
whatsoever (whether known or unknown, due or to become due, accrued,
absolute, contingent or otherwise) that would result in a Security
Interest on all or any portion of the Catalogue including, without
limitation, any liabilities for Taxes or liabilities for unpaid fees
or royalties to any Person providing goods or services in connection
with any of the Titles.
d. Legal Matters. On the date of this Agreement, (i) there are
no Claims pending against, or, to the best knowledge of SMC threatened
against of affecting, SMC, or any of its properties or rights before or
by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity and (ii) SMC is not subject to any
Judgment.
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e. Ownership. SMC has good and marketable title to the Catalogue
free and clear of all rights of other Persons.
f. Intellectual Property; Technology. SMC owns or has valid,
binding and enforceable rights to use all Intellectual Property and
Technology, without any conflict with the rights of others and will at
all times during the Term own or have valid, binding and enforceable
rights to use all Intellectual Property and Technology, without any
conflict with the rights of others. SMC is the sole and exclusive
owner of or has the right to use the Licensed Property subject to no
interference or other contest proceeding. SMC has not received any
notice from any other person pertaining to or challenging the right of
SMC to won or use, as applicable, any part of the Licensed Property.
SMC has not granted any outstanding licenses or other rights, and has
no obligations to grant licenses or other rights in or to, any of the
Licensed Property. No Claims have been made by SMC of any violation or
infringement by others of the rights of SMC with respect to any
Licensed Property, and SMC knows of no basis for the making of any
such claim. SMC has not violated or infringed any intellectual
property or technology rights (including but not limited to trade
secrets) of any other Person related to the Catalogue or any Title.
g. Brokers. Neither SMC, nor any director, officer or employee
thereof, has employed any broker or finder of has incurred or will
incur any broker's, finder's or similar fees, commissions or expense,
in each case in connection with the transactions contemplated by this
Agreement.
h. Disclosure. SMC has not made any material misrepresentation to
WBP relating to this Agreement or the Catalogue nor has SMC omitted to
state to WBP any material fact relating to this Agreement or the
Catalogue which is necessary in order to make the information given by
or on behalf of SMC to WBP not misleading or which, if disclosed,
would reasonably affect the decision of a Person who is considering
licensing the Catalogue or any Title.
ARTICLE VII -
REPRESENTATIONS OF WBP
7.1 WBP represents and warrants to SMC as follows:
a. Organization and Good Standing. WBP is a limited liability
company duly organized, validly existing and in good standing under
the laws of the State of Florida and has the corporate power and
authority to license the Licensed Property and to carry on its
business as not being conducted.
b. Authority, Approvals and Consents. WBP has the corporate power
and authority to enter into this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorizes and approved by all necessary corporate
action. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, WBP, enforceable
against WBO in accordance with its terms (except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by
the principles governing the availability of equitable remedies).
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c. Brokers. Neither the WBP, not any manager, officer or employee
thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses,
in each case in connection with the transactions contemplated by this
Agreement.
ARTICLE VIII -
CONFIDENTIALITY
8.1 Confidentiality. WBP and SMC agree that any Confidential
Information disclosed by a Providing Party to the Receiving Party pursuant to
this Agreement shall be maintained in strict confidence and each will use all
reasonable diligence to prevent disclosure except to necessary personnel and to
Affiliated and consultants who agree to be bound by this confidentiality
provision. SMC further agrees that the Technology shall be maintained in strict
confidence and that it will use all reasonable diligence to prevent disclosure
except to necessary personnel, Affiliated and consultants, who agree to be bound
by this confidentiality provision. WBP's and SMC's obligations under this
confidentiality provision shall remain in effect for the Term and a period of
one (1) year thereafter. WBP and SMC shall not have any obligation of
confidentiality with respect to information that:
a. is in the public domain by use and/or publication at the time
of its receipt from the disclosing party; or
b. is developed independently of information received from the
disclosing party; or
c. was already in the recipient's possession prior to receipt
from disclosing party; or
d. is properly obtained by recipient from a third party with a
valid legal right to disclose such information and such third party is
not under a confidentiality obligation to the disclosing party.
Upon termination of this Agreement, all confidential information
provided by each party (each, a "Disclosing Party") to the other (each, a
"Receiving Party") shall be promptly returned by the Receiving Party to the
Disclosing Party.
ARTICLE IX -
DEFAULT
9.1 WBP events of Default. Each of the following will constitute a "WBP
Event of Default" under this License provided that SMC first gives written
notice thereof to WBP:
a. Failure to timely pay sums due to SMC within ten (10) business
days following written notice of such failure;
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b. Failure to perform any material term, covenant, provision,
warranty, or undertaking in this Agreement unless WBP has promptly
commenced and continues diligent efforts to remedy the default within
thirty (30) days following written notice thereof. If the remedy
requires additional time in excess of the 30 day cure period, WBP
shall have such additional time as is reasonably necessary to cure
same.
c. If any representation of WBP under this Agreement is false
when made or becomes false at any time during the Term.
d. If WBP files a voluntary petition under any bankruptcy,
reorganization, or insolvency law of any jurisdiction;
e. If WBP consents to or applies for the appointment of a
trustee, receiver, custodian, or similar official for itself or for
all or substantially all its assets or a trustee, receiver, custodian,
or similar official is appointed to take possession of all or
substantially all of WBP's assets and the order of appointment is not
dismissed or stayed within 60 days after appointment;
f. If WBP makes any assignment for the benefit of creditors, or
other arrangement or composition under any laws for the benefit of
insolvent persons; an order for relief is entered against WBP under
any bankruptcy, reorganization, or insolvency law of any jurisdiction
and such order is not dismissed or stayed within 60 days after its
entry; or any case, proceeding, or other action seeking such order
remains undismissed for 60 days after its filing; or any writ of
attachment, garnishment, or execution is levied against all of
substantially all of WBP's asset; or all or substantially all of WBP's
assets become subject to any attachment, garnishment, execution, or
other judicial seizure, and the same is not satisfied, removed,
released, or bonded within 60 days after the date the writ was levied
or the date of the attachment, garnishment, execution, or other
judicial seizure.
9.2 Remedies for WBP Event of Default. Upon a WBP Event of Default, SMC
shall be entitled to the following remedies:
a. If WBP is in default on any payment due under this Agreement,
the amount in arrears will bear interest from the date of the default
until the amount is paid in full, at a rate equal to the maximum rate
allowed by Florida law.
b. SMC may terminate this Agreement, and such termination will be
without prejudice to any other rights or claims SMC may have against
WBP.
c. SMC may seek specific performance and injunctive relief,
including, without limitations, temporary or preliminary injunctive
relief.
9.3 SMC Events of Default. Each of the following will constitute a "SMC
Event of Default" under this License provided that WBP first gives written
notice thereof to SMC:
a. Failure to perform any material term, covenant, provision,
warranty, or undertaking in this Agreement unless SMC has promptly
commenced and continues diligent efforts to remedy the default within
thirty (30) days following written notice
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thereof. If the remedy requires additional time in excess of the 30
day cure period, SMC shall have such additional time as is reasonably
necessary to cure same.
b. If any representation of SMC under this Agreement is false
when made or becomes false at any time during the Term.
c. If SMC files a voluntary petition under any bankruptcy,
reorganization, or insolvency law of any jurisdiction;
d. If SMC consents to or applies for appointment of a trustee,
receiver, custodian, or similar official for itself or for all or
substantially all its assets or a trustee, receiver, custodian, or
similar official is appointed to take possession of all or
substantially all of SMC's assets and the order of appointment is not
dismisses or stayed within 60 days after appointment;
e. If SMC makes any assignment for the benefit of creditors,
or other arrangement or composition under any laws for the benefit of
insolvent persons; an order for relief is entered against SMC under any
bankruptcy, reorganization, or insolvency law of any jurisdiction and
such order is not dismisses or stayed within 60 days after its entry;
or any case, proceeding, or other action seeking such order remains
undismissed for 60 days after its filing; or any writ of attachment,
garnishment, or execution is levied against all or substantially all of
SMC's assets; or all or substantially all of SMC's assets become
subject to any attachment, garnishment, execution, or other judicial
seizure, and the same is not satisfied, removed, released, or bonded
within 60 days after the date the writ was levied or the date of the
attachment, garnishment, execution, or other judicial seizure.
9.4 Remedies for SMC Event of Default. Upon a SMC Event to Default, WBP
shall be entitled to the following remedies:
a. If SMC is in default on any payment due under this Agreement,
the amount in arrears will bear interest from the date of the default
until the amount is paid in full, at a rate equal to the maximum rate
allowed by Florida law.
b. WBP may terminate this Agreement, and such termination will be
without prejudice to any other rights or claims WBP may have against
SMC.
c. WBP may seek specific performance and injunctive relief,
including, without limitation, temporary or preliminary injunctive
relief.
9.5 Rights of WBP. In the event that a SMC Event of Default results
from SMC's cessation of or failure to actively conduct its primary business
operations, the liquidation or seizure of its assets, any bankruptcy or
insolvency, an assignment for the benefit of creditors, or its failure to own or
control the Licensed Property, then WBP shall have the right, in addition to all
other remedies, to the ownership of the Licensed Property for no additional
consideration. In such event, SMC shall execute such documents as shall be
required to transfer to and fully vest the Licensed Property and the Catalogue
in WBP.
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ARTICLE X -
INFRINGEMENT ACTIONS
10.1 Infringement Actions. If either party hereto learns of a possible
infringement of the Licensed Property or asserted against either party as a
result of the Licensed Property, such party shall inform the other party hereto
promptly in writing of such possible infringement and provide the other party
with any available evidence thereof, to the extent in such party's possession or
control.
10.2 SMC Obligation to Protect the Licensed Property and the WBP
Indemnified Parties. During the Term, SMC shall (i) prosecute any lawsuits,
legal actions or other proceedings which, in the opinion of WBP, are necessary
or advisable to protect the Licensed Property from infringements, and (ii)
protect, indemnify and defend the WBP Indemnified Parties in the event that any
claim, lawsuit, legal action or other proceeding is made or instituted against
WBP as a result of its sales of Licensed Products. Notwithstanding the
foregoing, SMC shall not be required to indemnify and defend the WBP Indemnified
Parties in connection with the illegal or grossly negligent actions of the WBP
Indemnified Parties. The cost and expense of defending and indemnifying the WBP
Indemnified Parties and of prosecuting lawsuits, legal actions or other
proceedings in connection with alleged infringements shall be paid by SMC. In
furtherance of such right, WBP hereby agrees that SMC may include WBP as a party
plaintiff in any such suit, without expense to WBP, and WBP undertakes to
furnish any documentary evidence or evidentiary materials which SMC may
reasonably require for the purpose of terminating such infringements.
10.3 WBP Right to Protect the Licensed Property and the WBP Indemnified
Parties. If within six (6) months after having been notified of any alleged
infringement of the Licensed Property, SMC shall have been unsuccessful in
persuading the alleged infringer to desist and shall not have brought and shall
not be diligently prosecuting an infringement action, or if SMC shall notify WBP
at any time prior thereto of its intention not to bring suit against any alleged
infringer, then, and in those events only, WBP shall have the right, but shall
not be obligated, to prosecute at its own expense such infringement of the
Licensed Property and WBP may, for such purposes, use the name of SMC as party
plaintiff. SMC shall bear all costs and expenses of any such suit. If within ten
(10) days of being notified of any claim or demand against any WBP Indemnified
Party, SMC shall not have formally and actually undertaken the defense of such
WBP Indemnified Party or if SMC shall at any time thereafter discontinue its
defense of such WBP Indemnified Party, WBP shall have the right to defend the
WBP Indemnified Party at the expense of SMC.
10.4 Cooperation. In any infringement suit to protect the Licensed
Property or to indemnify any Person pursuant to this Agreement, WBP shall, at
the request and expense of SMC, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, specimens, and the like.
10.5 Escrow of Funds. In the event that any suit is brought by any
third party alleging that any of the Licensed Property infringes any
Intellectual Property of any other Person, or if a
12
claim or demand is brought against any WBP Indemnified Party (collectively, an
"Indemnifiable Matter"), at the option of WBP, the sums payable to SMC with
respect to the sale of the Licensed Products (the "Escrowed Funds") may be held
in escrow by WBP to the extent of the costs and expenses reasonably anticipated
by WBP to be incurred including but not limited to Legal Expenses and potential
damages for such Indemnifiable Matter. The expenses incurred by WBP in
connection with the Indemnifiable Matter shall be paid to WBP on a monthly basis
upon the submission of invoices for such expenses and the balance of the
Escrowed Funds shall remain in escrow pending the outcome of the Indemnifiable
Matter. Upon the conclusion of the Indemnifiable Matter, the applicable amount
of Escrowed Funds shall be remitted first, to WBP to the extent of its remaining
costs and expenses including but not limited to the Legal Expenses and then to
the claimant if the claimant is awarded damages or if a settlement is agreed
upon by SMC with the claimant that requires the payment of sums to the claimant.
The balance of Escrowed Funds shall then be paid to SMC. The Escrowed Funds
shall not bear interest and WBP shall have no obligation to invest the Escrowed
Funds. In the event of a dispute over all or any portion of the Escrowed Funds,
WBP may initiate an action in the nature of interpleader and deposit the portion
of the Escrowed Funds that is in dispute with the court having jurisdiction over
such interpleader action. In any action in which the Escrowed Funds are
interpled, WBP, upon depositing the Escrowed Funds with a court, shall be
released from further liability, but shall be entitled to assert all claims to
which it may be entitled. WBP shall not be liable, except for its own gross
negligence or willful misconduct in connection with the Escrowed Funds. WBP
shall be entitle to rely upon any order, judgment, certification, demand,
notice, instrument or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity or the service thereof. WBP may act in
reliance upon any instrument or signature believed by it to be genuine and may
assume that any person purporting to give receipt or advice or make any
statement or execute any document in connection with the provisions hereof has
been duly authorized to do so.
10.6 Additional Provisions. The provisions of Section 11.2 c. (i)-(iv)
shall govern the defense and settlement of any Indemnifiable Matter.
ARTICLE XI -
SURVIVAL AN DINDEMNIFICATION
11.1 Survival. All representations and warranties of the parties shall
survive the termination of this Agreement for a period of five years; provided,
however, that (i) to the extent any breach of a representation or warranty
involved any Tax matters, such representation and warranty and any related
indemnity obligation shall survive until the expiration of the applicable
statute of limitations relating to any such Tax matter.
11.2 Indemnification. The parties shall indemnify each other as set
forth below:
a. In addition to its indemnification obligations set forth in
Article X, SMC shall (i) indemnify and hold harmless WBP from any and
all losses, damages, liabilities and Claims arising out of, based upon
or resulting from any inaccuracy as of the date hereof of any
representation or warranty of SMC which is contained in or made
13
pursuant to this Agreement or any breach by SMC of any of its
obligation contained in or made pursuant to this Agreement and (ii)
reimburse WBP for any and all fees, costs and expenses of any kind
related thereto (including, without limitation, any and all Legal
Expenses).
b. WBP shall (i) indemnify and hold harmless SMC from any and all
losses, damages, liabilities and Claims arising out of, based upon or
resulting from any inaccuracy as of the date hereof of any
representation or warranty of WBP which is contained in or made
pursuant to this Agreement or any breach by WBP of any of its
obligations contained in or made pursuant to this Agreement and (ii)
reimburse SMC for any and all fees, costs and expenses of any kind
related thereto (including, without limitation, any and all Legal
Expenses).
c. Promptly after receipt by any person entitle to
indemnification under this Section 11.2 (an "Indemnified Party") of
notice of the commencement of any action in respect of which the
Indemnified Party will seek indemnification hereunder, the Indemnified
Party shall notify each person that is obligated to provide usch
indemnification (an "Indemnified Party") thereof in writing, but any
failure to so notify the Indemnifying Party shall not relieve it from
any liability that it may have to the Indemnified Party other than
under this Article XI. The Indemnifying Party shall be entitle to
participate in the defense of such action and, provided that within 15
days after receipt of such written notice the Indemnifying Party
confirms in writing its responsibility therefore and reasonably
demonstrates that it will be able to pay the full amount of potential
liability in connection with any such claim, to assume control of such
defense with counsel reasonably satisfactory to such Indemnified
Party; provided, however, that:
(i) the Indemnified Party shall be entitle to participate in
the defense of such claim and to employ counsel at its own
expense to assist in the handling of such claim;
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any
settlement of such claim or ceasing to defend against such claim,
if pursuant to or as a result of such settlement or cessation,
injunctive or other equitable relief would be imposed against the
Indemnified Party;
(iii) no Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all
liability in respect of such claim; and
(iv) the Indemnifying Party shall not be entitled to control
(but shall be entitle to participate at its own expense in the
defense of), and the Indemnified Party shall be entitle to have
sole control over, the defense or settlement of (A) any claim to
the extent the claim seeks an order, injunction or other
equitable relief against the Indemnified Party which, if
successful, could materially interfere with the business,
operations, assets, condition (financial or otherwise) or
14
otherwise, or prospects of the Indemnified Party or (B) any claim
relating to Taxes.
After written notice by the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of any
such action, the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any Legal Expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation and of
liaison counsel for the Indemnified Party. If the Indemnifying
Party does not assume control of the defense of such claim as
provided in this Section 11.2 (c), the Indemnified Party shall
have the right to defend such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party,
and the Indemnifying Party will promptly reimburse the
Indemnified Party therefore in accordance with this Section 11.2.
The reimbursement of fees, costs and expenses required by this
Section 11.2 shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received
or expense incurred.
d. In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Article XI, the
Indemnifying Party shall, upon payment of such indemnity in full, be
subrogated to all rights of the Indemnified Party with respect to the
claims to which such indemnification relates.
e. Any claim by WBP for indemnification may be applied against
any payment thereafter due to SMC under this Agreement, by means of
setoff, reduction or otherwise. The rights of WBP under this
subsection (e) are in addition to such other rights and remedies which
WBP may have under this Agreement or otherwise.
11.3 Survival. SMC's obligations under Article X and this Article XI
shall survive the termination of this Agreement.
ARTICLE XII -
GENERAL TERMS AND CONDITIONS
12.1 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given (i) if
physically delivered, (ii) if transmitted by fax or other similar means, with
subsequent oral confirmation, or (iii) three (3) business days after having been
transmitted to a third party providing delivery services in the ordinary course
of business which guarantees delivery on the next business day after such
transmittal (e.g., via Federal Express) all of which notices or other
communications shall be addressed to the recipient as follows:
15
If to WBP: CPP Belwin, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
ATTN: Xxxx X. Xxxxx, Chief Executive Officer
Telecopy Number: (000) 000-0000
With a courtesy copy to: Xxxxxxx Xxxxxx P.A.
000 XX 0xx Xxxxxx
00xx Xxxxx
Xxxxx, Xxxxxxx 00000
ATTN: Xxxxxx X. Xxxxxx, Esq.
If to SMC: The Singing Machine, Inc.
0000 Xxxxx Xxxx
Xxxxxxxx X-0
Xxxxxxx Xxxxx, Xxxxxxx 00000
ATTN: Xxxx X. Xxxxxxxxx, Corporate Legal Manager
Telecopy Number: (000) 000-0000
or such other addressees and telecopy numbers as either Party shall hereafter
furnish to the other Party.
12.2 Modifications. This Agreement may not be amended, changed,
modified or rescinded except in writing signed by a duly authorized
representative of each party hereto.
12.3 Captions; Gender, Number. Section and other heading shave been
inserted for convenience of reference only an dare not a part of nor intended to
govern, limit or aid in the construction of any term or provision hereof. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
12.4 Dispute Resolution and Arbitration. Any dispute, controversy or
claim arising out of or relating to this Agreement shall be settled by binding
arbitration conducted by the American Arbitration Association ("AAA") in
accordance with AAA Commercial Arbitration Rule and Procedures (the "Rules").
The arbitration shall be heard by three arbitrators to be selected in accordance
with the Rules, in Miami-Dade County, Florida. Judgment upon any award rendered
may be entered in any court having jurisdiction thereof. Within 7 calendar days
after appointment the arbitrators shall set the hearing date, which shall be
within 90 days after the filing date of the demand for arbitration unless a
later date is required for good cause shown and shall order a mutual exchange of
what they determine to be relevant documents and the dates thereafter for the
taking of up to a maximum of 5 depositions by each party to last no more than 2
days in aggregate for each party. Both SMC and WBP waive the right, if any, to
obtain any award for exemplary or punitive damages or any other amount for the
purpose of imposing a penalty from the other in any arbitration or judicial
proceeding or other adjudication arising out of or with respect to this
Agreement, or any breach hereof, including any claim that this
16
Agreement, or any part hereof, is invalid, illegal or otherwise voidable or
void. In addition to all other relief, the arbitrator shall have the power to
award reasonable attorneys' fees to the prevailing party. The arbitrators shall
make their award no later than 7 calendar days after the close of evidence of
the submission of final briefs, whichever occurs later. The obligations herein
to arbitrate shall not prevent any party from seeking temporary restraining
orders, preliminary injunctions or other procedures in a court of competent
jurisdiction to obtain interim relief when deemed necessary by such party and
court to preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute or to seek a remedy specifically
provided for in this Agreement. All parties hereto acknowledge and agree that
the state and federal courts of the State of Florida are courts of competent
jurisdiction for purposes of this paragraph and do hereby submit to the
jurisdiction of the appropriate court in the State of Florida to which the
matter is first submitted by a party for enforcement of any arbitration award or
to obtain any such interim relief as herein provided.
12.5 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Florida
without regard to its choice of law rules or similar principle which would refer
to and apply the substantive laws of another jurisdiction, and applicable
international conventions and treaties.
12.6 Waiver. The failure of either party to exercise any right or
option arising out of a breach of this Agreement shall not be deemed a waiver of
any right or option with respect to any subsequent or different breach, or a
consent to the continuance of any existing breach.
12.7 Specific Performance. In addition to such other remedies as may be
available under applicable law, the parties acknowledge that the remedies of
specific performance and/or injunctive relief shall be available and proper in
the event either party fails or refuses to perform its duties or fulfill its
covenants hereunder.
12.8 Successors and Assignment. The rights and obligations under this
Agreement may not be assigned or otherwise transferred by either party without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed.; provided, however, that WBP may make an
assignment to an Affiliate without the consent of SMC (provided that WBP is not
relieved of its liability hereunder). WBP agrees to provide SMC notice of any
such assignment. Any attempted assignment or transfer in contravention of this
provision will be null and void. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and permitted assigns.
12.9 Change of Control. Notwithstanding Section 13.8 above, a Change of
Control shall not be considered an assignment or transfer of any rights or
obligations of WBP hereunder. In the event of a Change of Control, at the option
of WBP or any successor to WBP, this Agreement may be terminated upon notice to
SMC.
12.10 Entire Agreement. This Agreement (including the Exhibits and
Schedules to this Agreement which are, by this reference, incorporated herein),
constitutes the entire agreement and understanding of the parties with respect
to the subject matter of this Agreement and supersedes all prior agreements and
understandings of the parties with respect to the subject matter of this
Agreement.
17
12.11 Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
each of which will be deemed an original.
12.12 Severability. If any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement will
not be affected thereby, and Sellers and Buyer will use their reasonable efforts
to substitute one or more valid, legal and enforceable provisions which insofar
as practicable implement the purposes and intent hereof. To the extent permitted
by applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal, or unenforceable in any respect.
12.13 Beneficiaries. This Agreement shall not confer upon any other
Person any rights or remedies hereunder.
12.14 Expenses. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, investment bankers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated.
12.15 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and all things as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to this Agreement.
12.16 No Partnership. The parties hereby acknowledge that it is not
their intention under this Agreement to create between themselves a partnership,
joint venture, tenancy-in-common, joint tenancy, co-ownership, franchise, or
agency relationship. Accordingly, notwithstanding any expressions or provisions
contained herein, nothing in this Agreement shall be construed or deemed to
create, or to express an intent to create, a partnership, joint venture,
tenancy-in-common, joint tenancy, co-ownership, franchise, or agency
relationship of any kind or nature whatsoever between the parties hereto.
12.17 No Presumption. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event of any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by both parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
18
IN WITNESS WHEREOF, the parties have caused this Sale Agreement to be
executed in their respective corporate names by their respective officers
thereunto duly authorized.
CPP Belwin, Inc., a Delaware corporation
By: /s/ Xxxx X. Xxxxx
-----------------
Name: XXXX X. XXXXX
---------------
Title: CEO
---------------
The Singing Machine Inc., a Delaware corporation
By: /s/ Yi Xxxx Xxxx
----------------
Name: Yi Xxxx Xxxx
Title: Interim CEO and COO
19
EXHIBIT A
---------
LOGO
----
(To be supplied by SMC)
20
EXHIBIT B
---------
XXXX
----
(To be supplied by SMC)
21
EXHIBIT C
---------
DISTRIBUTION FEE
----------------
The Distribution Fee payable to WBP for all WBP Accounts shall be * (*%)
percent of Net Sales Receipts. The Distribution Fee for Non-WBP Accounts shall
be * (*%) percent of Net Sales Receipts (the "SMC Serviced Account
Distribution Fee"). SMC Services Account Distribution Fee shall be applicable to
all shipments of products of any type or description made on or after the
Effective Date regardless of when the purchase order was entered.
___________
* 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.
22
EXHIBIT D
---------
NON-WBP ACCOUNTS
----------------
The following are Non-WBP Accounts.
*
___________
* 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.
23
