LICENSE AGREEMENT
This Agreement, dated effective as of January 1, 2001 (the "Effective
Date"), is by and between EMERSON RADIO CORP. (hereinafter "Licensor"), a
Delaware corporation, having a place of business at Nine Entin Road, Parsippany,
New Jersey 07054, and FUNAI CORPORATION, INC., a New Jersey corporation, having
a place of business at 100 North Street, Teterboro, New Jersey 07608 and its
Affiliates, as defined herein (hereinafter "Licensee").
Licensor, directly and through affiliates, distributes a variety of
consumer electronics products and microwave ovens in numerous countries
throughout the world. Licensor is the owner of a certain valuable and well-known
trademark as specifically set forth on Exhibit A (I) ("Trademark"), and the
goodwill associated therewith;
Licensee desires to obtain a license of Licensor's Trademark in connection
with the manufacturing, marketing, sale and distribution of certain consumer
electronics and other products as specifically set forth on Exhibit A (II),
together with replacement parts which may bear the Trademark (collectively
referred to herein as the "Goods"); Licensee desires to sell the Goods bearing
the Trademark in the fifty United States, Washington, D.C. and Canada as they
presently exist ("Territory") and use Licensor's Trademark in conjunction
therewith;
Licensor is agreeable to license the use of its Trademark with respect to
the manufacturing, marketing, distribution and sale of the Goods by Licensee in
the Territory, subject to the terms and conditions of this Agreement.
In consideration of the foregoing premises and the mutual agreements
contained herein, the following is agreed to:
1. DEFINITIONS
1.1 "Affiliate" means a person or entity who directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control, by ownership or ability to influence management, with a
specified person or entity.
1.2 "Confidential Information" means any and all information, data,
specifications, customer lists, products and services information, sales and
marketing information, vendor data, and information regarding either Licensor,
Licensee or their respective Affiliates (collectively, the "Information")
except: (a) Information which at the time of disclosure is in the public domain;
(b) Information which, after disclosure, through no fault of the party receiving
same, is published or otherwise becomes part of the public domain; (c)
Information which the receiving party can document as having been in its
possession prior to the time of disclosure to it by the other party; or d)
Information which the receiving party can document as having been received by it
on a non-confidential basis from a third party.
1.3 "Contract Year" means, (i) as to the first Contract Year, the period
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commencing on the Effective Date of this Agreement and ending on December 31,
2001; and (ii) each immediately subsequent full year during the term of this
Agreement commencing January 1.
1.4 "Contract Quarter" means each calendar quarter or part thereof within
each Contract Year.
1.5 "Sale" means sale, lease, rental, transfer, exchange or other
disposition of the Goods by Licensee. A Sale will be deemed to have occurred
when the Goods are shipped or are invoiced whichever occurs first.
2. GRANT
Subject to the terms and conditions of this Agreement, Licensor hereby
grants to Licensee an exclusive (to the extent contemplated by Section 8)
non-transferable license to utilize the Trademark solely upon and in connection
with the manufacturing, sale, marketing and distribution of the Goods in the
Territory. Licensee shall not use the Trademark, or purport to give consent to
the use of the Trademark, in any manner or on any product, items or services,
except as specifically set forth in this Agreement. The Goods bearing the
Trademark shall not, directly or indirectly, be distributed, sold, or otherwise
transferred or disposed of outside of the Territory by the Licensee. Licensee
shall inform its customers and distributors in writing that the Goods cannot be
distributed, sold or otherwise disposed of outside of the Territory. Licensee
shall not sell the Goods to any customer or distributor that may distribute,
sell or otherwise dispose of the Goods outside of the Territory. However,
Licensor acknowledges that it is aware that Wal-Mart Stores, Inc. maintains
facilities in Puerto Rico to which Goods sold by Licensee to Wal-Mart Stores,
Inc. in the United States may be transferred from time to time by Wal-Mart
Stores, Inc. and agrees that sales of any such Goods by Wal-Mart stores in
Puerto Rico shall not be considered a breach of this Agreement. Notwithstanding
the above and any termination of this Agreement as set forth in Section 9, if
Goods are sold or otherwise disposed outside of the Territory, Royalties (as
hereafter defined) shall be due on any and all such sales of Goods. Under no
circumstances shall Licensee sell the Goods on line over the Internet directly
or indirectly without Licensor's prior written consent.
3. TERM
Subject to the earlier expiration or termination of this Agreement as
provided in Section 9 or otherwise herein, this Agreement shall be effective as
of the Effective Date and expire as of the close of business on December 31,
2003 (the "Term"), subject to renewal for successive three-year periods provided
(i) Licensee has paid to Licensor all Royalties and Minimum Royalties (as
hereinafter defined) payable for each Contract Year as set forth herein, (ii)
Licensee has satisfied and/or complied with all of its obligations hereunder,
and (iii) the parties mutually agree in writing as to the minimum royalties and
gross sales projections. Each successive renewal period shall hereinafter be
referred to as a "Renewal Term." "Initial Term" and "Renewal Term" shall
collectively be referred to as the "Term."
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4. GOODS
4.1 Licensee shall maintain and comply with the quality standards for the
Goods as set forth in Exhibit B. Licensee shall, promptly after its initial
commercial production of the Goods (or earlier, if available, but in no event
later than thirty (30) days prior to Licensee's first sale of any of the Goods)
deliver to Licensor (without cost to Licensor) at its facilities in Parsippany,
New Jersey, U.S.A., or such other location designated by Licensor, two (2)
representative samples of each model of the Goods bearing the Trademark as well
as the related packaging, advertising, labels, promotional or any other printed
material used in conjunction with the sale of the Goods. Licensor, at its sole
discretion, may disapprove of the use of any of the Goods or associated
material, the quality of which is not consistent with the quality standards set
forth in this Section 4 or Goods or materials which fail to comply with proper
usage of the Trademark as defined in this Agreement. Licensor's approval shall
be deemed given if Licensor does not notify Licensee of Licensor's disapproval
of any Goods or associated material within 15 days after receipt of same.
4.2 If the quality standards are not being maintained at any time during
the Term or the Termination Period (as hereinafter defined), then upon written
notice from Licensor, Licensee shall immediately discontinue the sale and
distribution of the Goods or any associated material that do not meet said
quality standards. Any Goods that are defective, dangerous or fall below the
quality standards shall immediately be removed from sale and if already sold,
recalled. Goods, in inventory or elsewhere, not meeting quality standards shall
not be distributed or sold. Licensee shall take the above actions at its own
expense.
4.3 Licensee shall ensure that the manner of sale, distribution and/or
exploitation by Licensee shall in no manner reflect adversely upon the good name
or value of Licensor or of the Trademark.
4.4 Licensee shall comply at its sole cost with all applicable laws, rules
and regulations relating to the manufacture, use, sale, import, export and
distribution of the Goods throughout the Territory (and, if applicable, where
the Goods are manufactured), whether foreign, federal, state or local, including
but not limited to those of the FCC, Underwriters Laboratory and CSA, and any
patent and other licenses and pay any such fees applicable to the Goods, as
required. Licensee shall provide Licensor with copies of any approvals,
registrations, permits or licenses. In any license, registration or request for
government or regulatory approval, Licensor shall be identified as the owner of
the Trademark.
4.5 All of the Goods, and all advertising, promotion, packaging or any
written material distributed by or through Licensee will, unless otherwise
specifically agreed to in writing by Licensor, bear the following legend:
"EMERSON AND THE G-CLEF LOGO ARE REGISTERED TRADEMARKS OF EMERSON RADIO
CORP., PARSIPPANY, NEW JERSEY, U.S.A."
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4.6 In all cases where Licensee desires artwork involving Goods to be
prepared, the cost of such artwork and the time for the production thereof shall
be borne by Licensee. All artwork and designs involving the Trademark, or any
reproduction thereof, shall be and remain the property of Licensor.
5. ROYALTIES
5.1(a) Licensee shall pay to Licensor as royalties ("Royalties") a sum
equal to the royalty rate for the Goods as set forth on Exhibit A (III) hereto
multiplied by the "net sales price" of the Goods directly or indirectly sold by
Licensee for each particular category of Goods. The term "net sales price" shall
mean the invoice price of the applicable Goods [as translated into U.S. Dollars
using an average monthly exchange rate for the applicable Contract Quarter based
upon the exchange rate as listed in the New York Edition of The Wall Street
Journal], less any actual, documented per-unit adjustments for 1.) returns of
Goods from Licensee's customers ("Returns") and 2.) prepaid domestic freight
charges (if separately billed or separately itemized on such
invoices)(hereinafter, collectively referred to as "per-unit adjustments"). The
parties acknowledge that Licensee does sometimes sell a Good to a customer at a
price which thereafter is lowered due to mutual agreement between Licensee and
the customer as a result of declining industry prices for any such Good. In such
case, the parties hereto agree that, notwithstanding the invoice price for any
such Good, the determination of the "net sales price" (as such term is defined
in this Agreement") for any such Good shall be based on the actual, documented
price paid for such Good to Licensee by Licensee's customer after such
retroactive price reduction has taken place ("invoice price adjustment")
(hereinafter, included in the references to "per unit adjustments"). The "net
sales price" for actual, documented demonstration models of Goods requested by
and provided to customers without charge ("Demonstration Models") shall be zero
and no earned royalty shall be payable thereon, provided, however, that in any
month the aggregate current fair market sales price of all Demonstration Models
shall not exceed one-half percent (.5%) of the total net sales of Goods for that
month.
(b) Licensee shall be required to pay certain non-refundable minimum
royalties for each Contract Year as set forth on Exhibit C ("Minimum
Royalties"). Such payments shall be creditable towards any Royalties that become
due in accordance with this Section for such Contract Year. No such credits may
be carried over to any subsequent Contract Year.
(c) All costs and expenses incurred in the manufacture, sale, distribution
or exploitation of the Goods, or otherwise incurred by Licensee, and all taxes,
duties, levies and assessments, including sales, value added and use taxes,
pertaining to the manufacture, sale, distribution or exploitation of the Goods,
except for taxes on the net income realized by Licensor under this Agreement,
shall be paid by Licensee. No such costs, expenses or taxes shall be deducted
from, or diminish in any way, or result in the reduction of, any Royalties
payable to Licensor.
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5.2 If any Goods are sold at a special reduced price to any of Licensee's
Affiliates, officers, directors, employees, representatives, agents or major
stockholders, the Royalty paid on such sales shall be based upon the average net
sales price charged third party customers during the Contract Quarter in which
such sale is made.
5.3 Royalties shall accrue for all sales made during each Contract Quarter,
and shall be due on the 30th day of the month following the end of such Contract
Quarter with the final quarterly payment due within thirty (30) days of the
expiration or termination date of this Agreement. Payment of Royalties shall
accompany the quarterly statements required by Section 5.4 below. The acceptance
by Licensor of any of the statements furnished pursuant to this Agreement or of
any Royalties paid hereunder shall not preclude Licensor from questioning the
accuracy thereof at any time during the Term or within three (3) years after the
termination or expiration of this Agreement.
5.4 Within thirty (30) days after each Contract Quarter, Licensee shall
furnish to Licensor complete and accurate statements in the form attached as
Exhibit D, certified to be accurate by Licensee, describing for that Contract
Quarter a.) the Goods, including product category/model number/invoice price,
distributed and/or sold by Licensee, b.) the per-unit adjustments as set forth
in this Section 5 for such Goods, c.) the Net Sales Price of such Goods and d.)
the Royalty payable by Licensee. Statements shall be furnished to Licensor
whether or not any Goods have been sold during the Contract Quarter in question.
On an annual basis, within 60 days after the close of Licensee's fiscal year,
Licensee will provide Licensor with Licensee's financial statements, audited by
the regularly retained independent chartered or certified public accountants of
Licensee, and prepared in accordance with generally accepted accounting
principles, consistently applied. Within 60 days after the end of each Contract
Year, Licensee shall furnish to Licensor an Annual Royalty Statement in the form
annexed as Exhibit D, certified to be accurate by an independent chartered or
certified public accounting firm.
5.5 Licensee shall keep, maintain and preserve all books of account and
records relating to the license hereby granted, and Licensor and its duly
authorized representatives shall have the unqualified right during each Contract
Year, upon reasonable notice, to conduct two (2) examinations of such books and
records. The examination shall take place at reasonable hours without unduly
disturbing Licensee's business operations, to examine, copy and extract said
books of account and records and of all other documents and materials in the
possession or under the control of Licensee with respect to the subject matter
and terms of this Agreement. The books of account and records shall be made
available for inspection by Licensor for three (3) years after the expiration or
termination of this Agreement. If Licensor's duly authorized representatives
shall discover an underpayment of 5% or more, in addition to payment of the
underpayment as set forth in this Section, Licensee shall pay to Licensor the
cost of such examination.
5.6 Royalties found to be due as a result of Licensor's examination of (a)
any statement provided pursuant to Paragraph 5.4 above or (b) Licensee's books
of accounts and records, shall be paid immediately in good funds.
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5.7 Any and all late payments of Royalties and Minimum Royalties shall bear
interest, commencing on the date originally due and payable, at an annual
interest rate equal to the prime rate as listed in the New York Edition of The
Wall Street Journal, plus five percent (5%).
6. LICENSOR'S TRADEMARK RIGHTS; LIMITATION OF USE AND AUTHORITY
6.1 Licensor warrants, and Licensee acknowledges and agrees, that Licensor
holds all right, title and ownership in and to the Trademark to be used on the
Goods in the Territory and the goodwill appurtenant thereto. Licensee recognizes
the great value to Licensor of the goodwill associated with the Trademark and
that the Trademark has a secondary meaning in the mind of the public. This
Agreement does not grant Licensee any right of ownership, title or interest in
the Trademark, nor authorize Licensee to use the Trademark except for the
purposes set forth in this Agreement. Licensee acknowledges that it does not
have and has not acquired any rights in or to the Trademark, product names,
likenesses or any derivations of the foregoing. The Trademark, all rights
therein and use thereof, and the goodwill pertaining thereto, whether developed
by the Licensor or the Licensee, shall inure to the benefit of and be the
exclusive property of Licensor. If applicable, Licensee shall assign to Licensor
the Trademark and any incidental rights created by its use, together with any
goodwill and shall execute and deliver to Licensor such documents as Licensor
requires to register Licensee as a registered or permitted user thereof, in
accordance with any applicable laws, rules, requirements or regulations of the
Territory. The Trademark shall be displayed by Licensee, without alteration, on
all Goods sold by Licensee. Any copyright which may be created in any article,
design, label or the like, bearing the Trademark shall be subject to the prior
approval before use, and be the property of Licensor. Upon request, Licensee
shall provide Licensor with all necessary documents or information for the
purpose of perfecting Licensor's title to any Trademark registrations, including
the date of the first use in commerce of the Trademark on the Goods in the
Territory.
6.2 Neither Licensee nor any of its Affiliates will, directly or
indirectly:
- sell, manufacture or distribute any goods whatsoever under a mark similar
to the Trademark.
- register or attempt to register the Trademark in its own name or the name
of any third party.
- register or attempt to register in its name or that of any other person
or entity affiliated with it any name or mark, corporate name, internet domain
name or domicile, web site or any other designation of any kind, in any
language, which is the same as, similar to or a derivative of, or otherwise
utilizing any portion of the Trademark or trade names of Licensor or any of its
Affiliates.
- incorporate or form any corporation or use any name which is the same as,
or which is likely to cause confusion or mistake with, any corporate name of
Licensor or of any of its Affiliates or subsidiaries.
- re-label any of the Goods.
- use any trademark, brand or trade dress which is the same as, or which is
likely to cause confusion or mistake with any trademark, brand or trade dress of
Licensor.
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7. TRADEMARK INFRINGEMENT; INDEPENDENT CONTRACTOR
7.1 Licensee will notify Licensor promptly of any of the following that may
come to Licensee's knowledge:
(a) Any alleged infringement by Licensor or Licensee of the rights of any
third parties arising out of the activities undertaken in connection with this
Agreement;
(b) Any alleged infringement of the Trademark of Licensor; or
(c) Any other factors or events which reasonably may be expected to have a
material adverse effect on the promotion of the Goods under the Trademark or on
Licensor's rights and interests in the Trademark.
7.2 Pursuant to its warranty in Paragraph 6.1 herein that Licensor holds
all right, title, and ownership, in and to the Trademarks to be used on the
Goods in the Territory, Licensor warrants and represents to Licensee that
Licensee's use of said Trademarks on the Goods in the Territory and the sales of
such Goods in the Territory with said Trademarks affixed, in the manner set
forth in this Agreement, shall not violate the trademark rights of any third
party. Licensor agrees to defend, in its sole discretion, and indemnify Licensee
for all costs and damages reasonably incurred by Licensee (including but not
limited to its reasonable attorneys' fees) should any third party claim that
such use by Licensee violates the trademark rights of such third party. In the
event Licensor fails to take any action to defend Licensee from any such claim
within fifteen (15) days of receipt of written notice from Licensee, Licensee
shall have the right to use its own attorneys to contest or settle such claim
but no settlement shall be made without Licensor's prior written approval, with
all fees, costs and expenses reasonably incurred by Licensee in contesting or
settling such claim (including, but not limited to, reasonable attorneys' fees
and the settlement amount) being paid by Licensor.
7.3 Licensee shall utilize its best efforts to furnish all reasonable
assistance, at Licensor's request, to enable Licensor to assert and prosecute
any claims or defend against any action arising in connection with or related to
the Trademark and the matters described in Sections 7.1 and 7.2 above. Such
assistance shall include, but not be limited to: monitoring and reporting to
Licensor any improper or unauthorized use of the Trademark, signing documents,
giving testimony, joining such action and asserting claims with respect to the
licensed Trademark against third parties. All expenses reasonably incurred by
Licensee in furnishing such assistance (such as, for example, travel and other
expenses incurred in giving testimony) shall be promptly repaid by Licensor upon
presentation of reasonable proof thereof. However, no single expense in excess
of $1000.00 shall be incurred without Licensor's prior written consent.
7.4 Licensee shall not use the name or credit of Licensor in any manner
whatsoever, nor incur any obligation in Licensor's name. Nothing herein
contained shall be construed to constitute the parties joint venturers, nor
shall any similar relationship be deemed to exist between them. Nothing herein
contained shall be construed as constituting Licensee as Licensor's agent or as
authorizing Licensee to incur financial or other obligations in Licensor's name
without Licensor's specific prior authorization in writing. Under no
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circumstances shall any power be granted, or be deemed to be granted to
Licensee, be deemed to be a power coupled with an interest. The rights and
powers retained by Licensor to supervise or otherwise intervene in Licensee's
activities, all as hereinabove provided, are retained because of the necessity
of protecting Licensor's copyrights, Trademark, properties and property rights
generally, and specifically to conserve the goodwill and good name of Licensor
and of the Trademark.
8. EXCLUSIVITY
Subject to the provisions set forth in Section 17.2, nothing in this
Agreement shall be construed to prevent Licensor from using or granting any
other licenses for the use of the Trademark or from utilizing the Trademark in
any manner whatsoever, except that, as long as Licensee complies with the terms
and conditions of this Agreement, Licensor shall not use nor grant any other
license of the Trademark effective during the Term of this Agreement within the
Territory in connection with the sale of the Goods listed in Exhibit A. It is
agreed that, as long as Licensee is in compliance with the terms and conditions
of this Agreement, Licensor agrees to defend, in its sole discretion, and
indemnify Licensee for all costs and damages reasonably incurred by Licensee
(including but not limited to reasonable attorneys' fees) should any third party
claim that during such period of compliance by Licensee, such third party has
been granted a license by Licensor of the Trademark in the Territory during the
Term hereof in connection with the sale of such Goods. Such indemnity shall be
in addition to any other remedy that Licensee may have for such breach of this
Agreement. In the event Licensor fails to take any action to defend Licensee
from any such claim within fifteen (15) days of receipt of written notice of any
such claim from Licensee, Licensee shall have the right to use its own attorneys
to contest or settle such claim but no settlement shall be made without
Licensor's prior written approval, with all fees, costs and expenses reasonably
incurred by Licensee in contesting or settling such claim (including, but not
limited to, reasonable attorneys' fees and the settlement amount) being paid by
Licensor.
9. TERMINATION
9.1 This Agreement shall immediately terminate by its own force without
notice from Licensor upon the occurrence of any one or more of the following
events: (i) an assignment by Licensee for the benefit of creditors; (ii) a
public admission by Licensee of its insolvency; (iii) dissolution of Licensee or
loss of its charter by forfeiture or otherwise; (iv) adjudication of Licensee as
bankrupt or insolvent; (v) appointment of a trustee, liquidator or receiver for
the Licensee or a material or substantial portion of its assets, subsidiaries or
property; (vi) exercise by any court or governmental agency of jurisdiction over
the property or business of the Licensee or any substantial part thereof; (vii)
the commencement of any proceedings for the reorganization, dissolution,
liquidation or winding up of the Licensee; (viii) the filing by Licensee of a
voluntary petition in bankruptcy under any bankruptcy or insolvency law or any
law providing for Licensee's reorganization, dissolution, liquidation or winding
up, or (ix) consent by Licensee to the appointment of a receiver or trustee of
itself or of its property or any substantial part thereof.
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9.2 If Licensee: (i) without prior written consent of Licensor sells, or
permits or has reason to believe a party to whom it sells Goods shall sell, any
Goods outside the Territory bearing the Trademark, except in cases involving
sales of the Goods by Wal-Mart stores in Puerto Rico as provided for herein in
Paragraph 2; (ii) has intentionally or negligently rendered or renders an
incorrect, material representation or report in connection with the rights
granted to Licensee hereunder; (iii) commits intentional or negligent material
damage or omits or fails to take steps within its power to prevent such damage
to Licensor's business, reputation, vendor relationships, customers or client
base, distribution channels or assets or the value of any of Licensor's
tradenames, the Trademark, service marks, symbols, signs, or other distinctive
marks, or the goodwill associated therewith; (iv) fails to provide insurance
substantially in accordance with the terms of Exhibit E; (v) fails to pay any
Royalties, Minimum Royalties or provide any Royalty Statement as set forth in
Section 5 when due; (vi) registers or attempts to register in its own name or
the name of a third party a Trademark or any other trademark owned by the
Licensor or similar to such a trademark, or any name or mark, corporate name or
any designation of any kind which is the same as, similar to or a derivative of,
or otherwise utilizing any portion of the Trademark or trade names of Licensor
or any of its Affiliates; (vii) assigns or transfers this Agreement, including
by operation of law, without the prior written consent of Licensor; or (viii)
breaches any of its obligations hereunder, then, in addition to the rights
available under law or in equity, Licensor may notify Licensee in writing that
Licensee is in default under the terms of the Agreement. If such default is not
remedied within thirty (30) days after the delivery of such notice, Licensor
shall have the right to terminate this Agreement effective upon delivery to
Licensee of notice that the Agreement is terminated.
9.3 Licensee may terminate this Agreement at any time after December 31,
2001 upon one (1) year's prior written notice (the "Notice Period") to Licensor
and upon the immediate payment of any Royalties, including the Minimum
Royalties, as set forth in this Agreement, which would otherwise be due
including those which would be due during the Notice Period.
9.4(a) Upon termination of this Agreement, Licensor shall have the right to
retain all moneys paid hereunder to date, to receive all moneys to which it is
entitled and to avail itself of any legal or other remedy or relief available to
it including, but not limited to, equitable relief to enjoin the use of the
Trademark and the manufacture, sale and distribution of Goods utilizing the
Trademark. Licensee shall be responsible for all costs of such enforcement. All
remedies available to Licensor hereunder are cumulative, and Licensor may
exercise any one or more remedies or rights available to it cumulatively. The
termination of this Agreement shall be without prejudice to Licensor's rights
and remedies with respect to any obligation incurred or breach committed prior
to such termination, including the right to recover for damages caused by
Licensee's breach. Licensee acknowledges that its failure to cease (or cause to
cease) the marketing, manufacture, assembly and packaging, sale or distribution
of Goods, parts, packaging, written materials or components using the Trademark
at the termination of this Agreement, other than as set forth in Section 9.6,
will result in immediate and irreparable damage to Licensor and to the rights of
any subsequent licensee.
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9.4(b) Upon termination of this Agreement, Licensee shall promptly deliver
to Licensor any and all property of the Licensor in the possession, custody or
control of Licensee, including all promotional material, original artwork,
product manuals and any other material bearing the Trademark in the possession
of Licensee, subject to the provisions of Section 9.6.
9.5 Within ten (10) days of the termination or expiration of this
Agreement, Licensee shall deliver to Licensor a statement showing the number and
description of Goods on hand or in process. Licensor shall have the right to
take a physical inventory to ascertain or verify such statement, and refusal by
Licensee to submit to such physical inventory shall forfeit Licensee's right to
dispose of such inventory as provided in Section 9.6 hereof.
9.6 In the event of termination or expiration, Licensee, its receivers,
representatives, trustees, agents, administrators and successors shall have no
further right to sell, exploit or in any way deal in or with the Goods, parts or
components (except as otherwise set forth in this Agreement), or any advertising
matter, written materials, packing material, boxes, cartons or other
documentation relating thereto bearing the Trademark, without the express
written consent of Licensor; provided, however, Licensee shall be entitled
(subject to the obligation to timely pay all Royalties) to dispose of Goods on
hand or on order at the date of termination bearing the Trademark for a period
of six (6) months from the date of termination, at prevailing market prices.
This six-month period shall be referred to herein as the "Termination Period".
Nothing contained herein shall be deemed to permit the manufacture of any Goods
for Licensee during the Termination Period, or the sale of any such improperly
manufactured Goods during the Termination Period.
10. DISTRIBUTION OF GOODS
Licensee shall use commercially reasonable efforts to diligently and
continuously market, manufacture (or cause to be manufactured), distribute and
sell the Goods, including, without limitation, achieving the total minimum sales
projections set forth on Exhibit C, and shall make and maintain adequate
arrangements for their distribution throughout the Territory.
11. SUPPLIERS
The Licensee shall obtain satisfactory written evidence from any supplier
that is retained by Licensee that such supplier will not use the Trademark in
any manner not permitted under this Agreement, in the form set forth on Exhibit
F, in those instances where the supplier furnishes Goods, parts, components,
written materials or packaging for the Goods bearing the Trademark.
12. SERVICE AND SPARE PARTS
Licensee shall establish and monitor such service agents and centers in the
Territory as may be necessary to the service of Goods. Licensee shall maintain a
sufficient inventory of spare parts for the Goods taking into account any order
lead, requiring same, during the Term and the Termination Period. During the
Term and subsequent to the expiration or termination of this Agreement, Licensee
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shall provide for after sales warranty service and maintain a sufficient
inventory of spare parts for the Goods for the respective periods required by
any and all applicable laws or Licensee's warranty, whichever is longer.
13. REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other that:
(a) It is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.
(b) It has the full power and authority to execute and deliver this
Agreement and to perform all of its obligations hereunder and entry into this
Agreement and the performance of its obligations hereunder do not and shall not
contravene any laws, or contravene, conflict with or result in a breach of its
certificate of incorporation, by-laws, or any other empowering document or
agreement to which it is a party.
(c) The execution and delivery of this Agreement has been duly authorized
by all necessary corporate action of the party and constitutes the valid and
legally binding obligation of each party enforceable against the party in
accordance with it terms.
(d) This Agreement shall be binding on the successors, assigns and legal
representatives of both parties.
14. DISCLAIMER AND INDEMNIFICATION
14.1 Licensee shall not and does not grant any warranty or guaranty binding
Licensor or creating any liability for Licensor. Licensee will make no
statements or representations whatsoever to any third parties which, expressly
or impliedly, states or suggests that Licensor is making any warranties with
respect to the Goods. Licensor expressly disclaims any implied warranties,
including the implied warranties of merchantability and fitness for a particular
purpose.
14.2 Licensee shall obtain all necessary licenses and pay all royalties
applicable to the Goods or any parts or components thereof. In the event
Licensee utilizes any parts or components which are subject to a license
agreement, either directly or indirectly through a parts supplier, or are
required to be licensed, Licensee represents that such licenses shall be valid
and that it shall be and remain in full compliance with the terms thereof,
including the payment of any royalty fees. Licensee represents that the Goods
shall be and remain free from all claims of intellectual property infringement
(including but not limited to any patents, trademarks, copyrights, trade dress,
etc.) and that it shall not obtain or use any parts or components with the Goods
which are unlicensed copies of components for which a third party owns the
intellectual property rights. Licensee shall defend, indemnify and hold harmless
Licensor, its affiliates and subsidiaries and their respective employees,
officers, directors, stockholders, agents, licensees, representatives,
successors and assigns from and against any and all claims, demands, judgments,
liabilities, damages, losses, costs and expenses of any nature (including
attorneys' fees and expenses), including without limitation, death, personal
<PAGE>
injury, bodily injury, sickness, disease, property damage, loss of use of
property or product liability arising from or related to any (i) claim, action
or omission of Licensee, its agents, employees or their families, affiliates,
distributors, suppliers or subcontractors arising under this Agreement, (ii)
Licensee's failure to comply with its obligations set forth herein, (iii)
Licensee's misrepresentation of any warranties or representations, (iv) action
or omission arising out of the operation of Licensee's business or performance
under this Agreement, or (v) claim or action arising from Licensee's sale of the
Goods, including any claim of infringement of a third party's proprietary
intellectual property, including any patent, copyright, trademark or trade
dress, except as may otherwise be set forth in paragraphs 7 or 8 herein.
15. INSURANCE
Prior to the distribution or sale of any Goods, Licensee shall purchase and
maintain or cause to be maintained, at its own cost, insurance reasonably
satisfactory to Licensor of the kinds and in the amounts specified in Exhibit E
or in amounts required by law, whichever is greater.
16. CONFIDENTIALITY
Each party will use any Confidential Information received by the other
party solely for the purpose of carrying out this Agreement. Neither party will
disclose any Confidential Information to third parties without the express
written consent of an officer of the other party, unless compelled by law,
required by applicable securities rules or regulations or, in the written
opinion of counsel such disclosure is required by law. In such event, each party
shall inform the other party as far in advance as possible prior to making any
such disclosure. Notwithstanding the foregoing, Licensor shall not be required
to inform or obtain the consent of Licensee for the issuance of any press
release which utilizes, refers to or discloses sales or royalty information
relating to this Agreement, or for the reporting or filing of this Agreement in
accordance with applicable securities regulations. Each party shall cause each
of their respective officers, directors, agents or employees to whom a
disclosure of Confidential Information is made or any subcontractor, or
supplier, including the manufacturer(s) of the Goods or any parts or components
therefor, to adhere to the terms and conditions of this section as if, and to
the same extent as if, he or she were a party to this Agreement. Upon expiration
or termination of this Agreement, each party shall return to the other party all
copies of the Confidential Information of the other party in its possession or
control, except that Licensor shall not be required to return Confidential
Information provided by Licensee which has become a part of Licensor's books and
records and which pertains to historical sales and royalty information.
17. LICENSOR'S LINE OF BUSINESS; NEW GOODS
17.1 Licensee acknowledges that Licensor is presently in the business of
selling consumer electronic products, microwave ovens and other consumer
products and is seeking alliances, joint venture partners and/or licensees with
the goal of distributing other consumer products throughout the world. Licensee
acknowledges that marketing and distribution of the foregoing (as well as any
other products which Licensor may distribute) with the Trademark shall not
constitute a breach of this Agreement. As Licensor currently sells such products
to Wal-Mart in the Territory, Licensee agrees to give Licensor reasonable
<PAGE>
advance written notice at least once each calendar quarter of a meeting during
such quarter regarding the sale of Goods to Wal-Mart in the Territory, and the
opportunity for a representative designated by Licensor in writing to attend
each such meeting.
17.2 In the event Licensor or Licensee is desirous of introducing into the
Territory video products not previously offered by Licensor to Licensee under
the terms of this Agreement ("New Goods"), Licensor hereby grants to Licensee a
right of first refusal with respect to the manufacture, sale, marketing and
distribution of such New Goods in the Territory. In such event and in each
instance, Licensor or Licensee, as the case may be, shall furnish the other with
a description of the New Goods and related specifications. Licensee shall have
30 days after receipt of or giving such notice, as the case may be, to advise
Licensor in writing whether it is interested in acquiring the rights to such New
Goods for the Territory, which shall be in accordance with the terms of this
Agreement, pursuant to such notice. If Licensee is interested in acquiring the
rights to such New Goods, within 60 days after notifying Licensor of such
interest, Licensee shall provide Licensor with (a) reasonable and realistic
monthly sales projections for the 12-month period beginning with product
availability; (b) a market study; and (c) detailed assumptions supporting the
projections, all of which must be in a form acceptable to Licensor. In the event
Licensor accepts the market study, related sales projections and the assumptions
underlying same, Licensor shall provide Licensee with written confirmation that
the New Goods are added to the list of Goods set forth on Exhibit A and subject
to the terms of this Agreement. Should Licensee (i) refuse such offer or (ii)
fail to exercise its rights hereunder by providing Licensor with written notice
and an acceptable market study, sales projection or underlying assumptions
within the prescribed time period, then, in any such event, Licensee's rights
hereunder with respect to such New Goods shall be waived and Licensor, in its
sole discretion, shall be free to sell or grant distribution or trademark
license rights with respect to such New Goods within the Territory,
notwithstanding anything to the contrary in this Agreement.
18. ASSIGNMENT AND SUBLICENSING
The license herein granted is personal to Licensee and may not be assigned,
transferred, sub-licensed, pledged, mortgaged or otherwise encumbered by
Licensee in whole or in part without Licensor's prior written consent. For the
purposes of this section, the term "assigned" shall include without limitation,
transfers of (i) control, whether by merger, consolidation, reorganization or
change of management and (ii) ownership of fifty percent (50%) or more of the
outstanding securities of Licensee. Notwithstanding these restrictions, Licensee
shall notify Licensor in writing prior to any proposed change in control or
transfer of ownership of fifty percent (50%) or more of the outstanding
securities of Licensee. If Licensee is interested in continuing the terms of
this Agreement, Licensor shall determine, following receipt of all financial or
other documents or due diligence materials requested by Licensor concerning the
proposed transfer of control or ownership, whether Licensor will approve, in its
sole discretion, such change of ownership or control.
19. MISCELLANEOUS
19.1 No provision of this Agreement may be changed, amended or waived,
except in a writing signed by both parties. Any waiver on the part of any party
<PAGE>
of any breach, right or interest hereunder shall not imply the waiver of any
subsequent breach or the waiver of any other rights or interests. No waiver by
either party of a breach hereof or a default hereunder shall be deemed a waiver
by such party of a subsequent breach or default of like or similar nature.
19.2 Should any provision of this Agreement prove to be invalid or
unenforceable under existing or future law, the remaining provisions of the
Agreement will remain in force in all other respects.
19.3 All notices will be in writing and in English and will be served
personally or by registered or certified mail, return receipt requested, or by
overnight courier or by facsimile transmission to each other party at its
address or facsimile set forth herein, or at such other address as each party
may provide to the other in writing from time to time. Any such notice will be
effective upon actual receipt.
19.4 This Agreement is the entire and sole agreement and understanding of
both parties and supersedes all other agreements, understandings and
communications, whether oral or written, regarding the subject matter hereof.
This Agreement may be executed in any number of counterparts or by facsimile,
but all counterparts and facsimiles hereof will together constitute but one
agreement. In proving this Agreement, it will not be necessary to produce or
account for more than one counterpart executed by both parties.
19.5 All disputes between the parties concerning this Agreement will be
resolved under the laws of the State of New Jersey, U.S.A., excluding the
conflicts of laws provisions thereof, in the English language, and the courts of
New Jersey will have sole and exclusive jurisdiction over the parties in any
such dispute and venue shall lie exclusively in Morris County, New Jersey.
However, it is expressly understood that this Section shall not preclude
Licensor's right to make application for, and seek enforcement of, injunctive
relief in any court having jurisdiction. Licensee acknowledges that there is no
adequate remedy at law for a breach of this Agreement, or any warranty,
representation or covenant set forth, and monetary damages would not be a
sufficient remedy. Accordingly, Licensor shall be entitled to any equitable
remedies available including, but not limited to, an immediate temporary
restraining order and/or preliminary injunction, without bond or security, and
such other further relief as any court with jurisdiction may deem just and
proper. In any action brought by a party hereto against the other party hereto
as to any claim or right arising out of this Agreement, the prevailing party in
such litigation shall be entitled to recover from the other party hereto its
reasonable attorneys' fees, in addition to any other relief it may be awarded.
19.6 Licensee shall strictly and fully comply with all import/export
controls imposed by the Territory or any country or organization of nations
within whose jurisdiction Licensee operates or does business.
19.7 The respective indemnities, agreements, representations, warranties
and other statements of each of the parties hereto and the undertakings set
<PAGE>
forth in or made pursuant to this Agreement will remain in full force and
effect, and will survive the termination or expiration of this Agreement.
19.8 Licensee shall not disseminate any press release or other announcement
relating to the transaction contemplated by this Agreement without Licensor's
prior written consent as to the contents thereof.
19.9 All payments due pursuant to this Agreement shall be made directly by
Licensee to Licensor, by bank wire transfer as instructed by Licensor, and shall
be in U.S. Dollars.
19.10 The parties have requested that this Agreement be drawn up and
interpreted in the English language.
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
representative of each party effective as of the date set forth above.
EMERSON RADIO CORP.
By: /s/ John J. Raab
Name John J. Raab
Title Executive Vice President Int'l
[Facsimile No. (973) 428-2010]
FUNAI CORPORATION, INC.
By: /s/ Masao Suwa
Name Masao Suwa
Title President
[Facsimile No. 201-288-8019]
