License Agreement [Amendment No. 5] - Koss Corp. and Jiangsu Electronics Industries Ltd.
FIFTH AMENDMENT TO LICENSE AGREEMENT
THIS FIFTH AMENDMENT TO LICENSE AGREEMENT ("Fifth Amendment") is made
and entered into this 30th day of March, 2001, effective as of
December 31, 2000, by and between KOSS CORPORATION, a Delaware corporation
("LICENSOR"), and JIANGSU ELECTRONICS INDUSTRIES LIMITED, a British Virgin
Islands company ("LICENSEE").
RECITALS
WHEREAS, LICENSOR and LICENSEE (by way of assignment) are parties to a
certain License Agreement between LICENSOR and Trabelco N.V. dated November 15,
1991 ("Original License Agreement"), as amended by an Amendment to License
Agreement dated November 15, 1991 ("First Amendment"), a Second Amendment to
License Agreement dated September 29, 1995 ("Second Amendment"), a Third
Amendment and Assignment of License Agreement dated as of March 31, 1997 ("Third
Amendment"), and a Fourth Amendment to License Agreement dated May 29, 1998
("Fourth Amendment") (the Original License Agreement, the First Amendment, the
Second Amendment, the Third Amendment, and the Fourth Amendment are hereinafter
collectively referred to as the "License Agreement"); and
WHEREAS, the parties now desire to further amend certain terms and
provisions of the License Agreement as hereinafter provided; and
WHEREAS, as an inducement to LICENSOR to amend the License Agreement
and enter into this Fifth Amendment, Orient Power Holdings Limited, a Bermuda
company ("Orient Power"), desires to reaffirm its guarantee of the obligations
of LICENSEE under the License Agreement and this Fifth Amendment by executing
the Consent of Guarantor in the form of EXHIBIT F attached hereto.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 1.2 of the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the following inserted in its
place:
1.2 "Products" mean the consumer electronic products of LICENSEE
set forth in EXHIBIT B hereto, subject to any limitations
referenced in the License Agreement or this Fifth Amendment
(including but not limited to Section 18.6 and EXHIBIT B) and
the additional limitation that those Products not sold by
LICENSEE in every country in the Territory, bearing any of
the Licensed Trademarks, by December 31, 2001, shall be
deleted from EXHIBIT B as of January 1, 2002, with respect to
those countries in the Territory where such Products were not
sold by December 31, 2001, and as of that date such Products
shall not be considered to be part of the License Agreement
or this Fifth Amendment with respect to those countries in
the Territory where such
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Products were not so sold. A sale for the purpose of this
Section 1.2 shall be a sale in the normal course of business,
and not merely to preserve any rights under the License
Agreement or this Fifth Amendment. Minimum Royalties shall
not be affected by the deletion of any Products from the
License Agreement or this Fifth Amendment.
"Core Products" shall mean the following Products set forth
on Exhibit B hereto:
Non-mobile clock radios;
Non-mobile AM/FM radios (excluding clock radios and
audio systems incorporating clock radios) without a
cassette or compact disc player;
Non-mobile audio systems of any nature (excluding clock
radios and audio systems incorporating clock radios)
with a cassette player but without a compact disc
player; and
Non-mobile audio systems of any nature (excluding clock
radios and audio systems incorporating clock radios)
with a compact disc player.
"Non-Core Products" shall mean all Products set forth on
Exhibit B hereto that are not Core Products.
Any reference to non-mobile Products in this Section 1.2 or
on any Exhibit hereto shall mean those products which are not
designed for use in automobiles.
2. Section 1.3 of the License Agreement is hereby deleted in its
entirety and the following inserted in its place:
1.3 "Licensed Products" mean all Products of LICENSEE which have
any of the Licensed Trademarks affixed or attached thereto in
any manner or which are advertised, promoted, distributed or
sold in connection with the Licensed Trademarks.
3. Section 1.4 of the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the following inserted in its
place:
1.4 "Territory" shall mean the United States, Canada, and Mexico.
4. The following Section 3.5 is hereby added to the License
Agreement:
3.5 Upon written instructions from LICENSOR to LICENSEE to cease
using any or all of the Licensed Trademarks in connection
with any or all of the Products as a result of any actual or
potential claim, suit, demand, or action relating to said
use, LICENSEE shall immediately cease said use as so
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instructed. LICENSOR shall have the right to so instruct
LICENSEE to so cease use of the Licensed Trademarks only if
LICENSOR believes in good faith that LICENSEE'S continued use
of the Licensed Trademarks could give rise to a claim, suit,
demand, or action resulting in liability to LICENSOR.
5. Section 7.1 of the License Agreement (as amended by the Second
Amendment) is hereby deleted in its entirety and the following inserted in its
place:
7.1 During the term of the License Agreement (including this
Fifth Amendment), LICENSEE will pay to LICENSOR as royalties
("Royalties") an amount equal to the sum of the respective
percentage (as set forth on EXHIBIT B) of net sales of each
category of the Licensed Products, less 2% of the itemized
discounts, rebates and shipping costs as stated on LICENSEE's
invoices regarding such sales of the Licensed Products (2%
representing an average of such amounts), and as further
exemplified on EXHIBIT D attached hereto. The term "net
sales" with respect to each category of the Licensed Products
shall be defined as the total amount invoiced by LICENSEE for
sales of the Licensed Products in such category less the
total amount of returns of the Licensed Products in such
category, and shall include sales of the Licensed Products to
LICENSOR as provided in Section 14.2 hereof. In calculating
Royalties, no deduction shall be made for advertising
allowances, uncollectible accounts or any other form of
discount (other than volume rebates) which does not appear on
the customer's invoice. Volume rebates allowed a customer
will be credited on a separate invoice to the customer, and
an annual adjustment of 2% of such rebates shall be made to
the Royalties regarding all volume rebates allowed during the
respective Contract Year.
6. Section 7.3 of the License Agreement (as amended by the Third
Amendment and the Fourth Amendment) is hereby deleted in its entirety and the
following inserted in its place:
7.3 LICENSEE shall pay to LICENSOR the following Minimum
Royalties for the Contract Years set forth below:
Year Minimum Royalties
---- -----------------
2000 $850,000
2001 $500,000
If the sum of the total Royalties paid with respect to a
Contract Year does not equal or exceed the Minimum Royalties
for such Contract Year, the difference between the Minimum
Royalties and the Royalties for such Contract Year shall be
due and payable on each January 20 following such Contract
Year.
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7. Section 7.6 of the License Agreement is hereby deleted in its
entirety and the following inserted in its place:
7.6 LICENSEE shall not have the automatic right and option of
renewing the License Agreement (including this Fifth
Amendment). The License Agreement and this Fifth Amendment,
however, shall be renewed at the end of the Contract Year
ending on December 31, 2000 for a period of one (1) year
only, at which time, as of January 1, 2002, the License
Agreement and this Fifth Amendment shall automatically expire
and terminate (unless sooner terminated in accordance with
the provisions of the License Agreement and this Fifth
Amendment) unless LICENSOR and LICENSEE agree, by June 30,
2001, on the amount of Minimum Royalties to be paid by
LICENSEE for the calendar year beginning January 1, 2002, in
which case the License Agreement and this Fifth Amendment
shall be renewed for the 2002 calendar year. Similarly, if
LICENSOR and LICENSEE agree on the amount of Minimum
Royalties to be paid by LICENSEE for any subsequent calendar
year by June 30 of the immediately preceding calendar year,
and the License Agreement and this Fifth Amendment have not
previously expired or terminated, the License Agreement and
this Fifth Amendment shall be renewed for that subsequent
calendar year only.
8. Section 10.1 of the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the following inserted in its
place:
10.1 LICENSOR shall be required to file trademark applications and
to seek trademark registrations for the Licensed Trademarks
in the Territory in order to encompass the Non-Core Products,
but only if specifically so requested in writing by LICENSEE.
All costs and expenses (including reasonable attorneys' fees)
associated with the preparation, filing, prosecution,
registration and maintenance of such applications and
registrations shall be paid by LICENSOR. LICENSEE shall
cooperate with LICENSOR by providing necessary samples,
invoices or other documents necessary to support all
applicable applications and registrations for the Licensed
Trademarks in connection with the Licensed Products.
If LICENSOR is unable to register or maintain its
registrations for one or more of the Licensed Trademarks in
connection with any Products in any jurisdictions in the
Territory, then the parties agree to negotiate in good faith
a mutually acceptable resolution with respect to such
jurisdictions, with the understanding that neither LICENSOR
nor LICENSEE shall have any liability to the other for such
inability to register or to maintain such registrations for
any such trademarks; provided, however, that if any trademark
application or registration for Core Products is successfully
opposed in the United States or Canada, and as a result of
such successful opposition LICENSEE is prohibited, pursuant
to a final, non-appealable order from a court of
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competent jurisdiction, from selling Core Products in either
the United States or Canada, then LICENSOR shall reimburse
LICENSEE for the amount of Royalties theretofore paid by
LICENSEE relating to the sale of the prohibited Core Products
only, in the prohibited jurisdiction of the United States
and/or Canada only, during the three (3) year period
immediately preceding such prohibition, subject to the
following limitations on such reimbursements: (i) all such
reimbursements shall not exceed a total of Three Million
Dollars ($3,000,000) for all prohibited sales of Core
Products in both jurisdictions, (ii) LICENSOR shall not be
required to make any such reimbursement to LICENSEE if any
such successful opposition and subsequent prohibition in
either jurisdiction would not have occurred if LICENSOR had
not lost any trademark rights due to LICENSEE's non-use or
misuse of any of the Licensed Trademarks, and (iii) LICENSOR
shall not be required to make any such reimbursement to
LICENSEE in the event LICENSEE is prohibited from selling any
Non-Core Products in either jurisdiction. LICENSEE shall be
permitted to terminate the License Agreement and this Fifth
Amendment if LICENSEE's total net sales of Core Products in
the Territory decrease by ten percent (10%) or more and such
decrease is the direct result of a successful opposition,
cancellation or infringement action prohibiting the use of
the Licensed Trademarks in connection with the Core Products
in the Territory; provided, however, that LICENSEE shall not
be able to so terminate the License Agreement and this Fifth
Amendment if any opposition, cancellation or infringement
action resulting in any such prohibition as to use would not
have occurred if LICENSOR had not lost any trademark rights
due to LICENSEE's non-use or misuse of the Licensed
Trademarks.
9. Section 11 of the License Agreement is hereby amended as follows:
The heading for Section 11 of the License Agreement is hereby
deleted in its entirety and the following inserted in its place:
11. REPRESENTATIONS AND INDEMNITIES; LIMITATIONS OF LIABILITY.
Section 11.1 of the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the following inserted in its
place:
11.1 LICENSOR represents that, as of the date of this Fifth
Amendment, LICENSOR owns at least one application or
registration for at least one of the Licensed Trademarks in
each jurisdiction in the Territory. Listed in EXHIBIT E to
the License Agreement are, as of the date of this Fifth
Amendment, LICENSOR's trademark registrations relating to the
License Agreement for the Licensed Trademarks in the
Territory. If LICENSEE complies with the notice, cooperation
and assistance requirements of this
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Section 11.1, LICENSOR agrees to indemnify LICENSEE, its
parent, subsidiaries and affiliates, and all officers,
directors, agents and employees thereof, and any of them,
from any and all expenses, damages, claims, suits, actions,
judgments and costs whatsoever (including reasonable
attorneys' fees) (collectively, "Damages") which LICENSEE may
hereinafter incur, suffer or be required to pay in connection
with any third-party claim, suit or action resulting from the
use by LICENSEE of the Licensed Trademarks on the Core
Products in the Territory in accordance with the License
Agreement and this Fifth Amendment (collectively,
"Third-Party Claim"); provided, however, that LICENSOR's
obligation to so indemnify LICENSEE (i) shall not apply to
any Damages incurred by LICENSEE as a result of LICENSEE's
non-use or misuse of any of the Licensed Trademarks, (ii)
shall not include any Damages attributable to LICENSEE's
failure to cease using the Licensed Trademarks, pursuant to
LICENSOR's written instructions, as a result of any actual or
potential Third-Party Claim, (iii) shall not result in any
liability to LICENSOR in excess of the amount of Royalties
paid by LICENSEE during the three (3) year period immediately
preceding initiation of the Third-Party Claim for sales of
only Core Products in those countries in which a final
settlement or a final, non-appealable order has been entered
against LICENSEE relating to LICENSEE'S use of the Core
Products in the Territory, and (iv) shall not include any
Damages which are attributable to any Non-Core Products.
NOTWITHSTANDING ANY PROVISIONS IN THE LICENSE AGREEMENT OR
THIS FIFTH AMENDMENT TO THE CONTRARY, THE INDEMNIFICATION
OBLIGATIONS OF LICENSOR SHALL ONLY COVER ACTUAL,
OUT-OF-POCKET DAMAGES INCURRED BY LICENSEE IN CONNECTION WITH
A FINAL SETTLEMENT INVOLVING LICENSEE, OR A FINAL,
NON-APPEALABLE ORDER AGAINST LICENSEE, ARISING OUT OF A
THIRD-PARTY CLAIM, BUT SHALL NOT INCLUDE ANY INCIDENTAL,
CONSEQUENTIAL (INCLUDING, BUT NOT LIMITED TO, LOSS OF ACTUAL
OR ANTICIPATED PROFITS OR REVENUES), INDIRECT, SPECIAL,
EXEMPLARY OR PUNITIVE DAMAGES INCURRED BY LICENSEE. LICENSEE
SHALL GIVE LICENSOR PROMPT WRITTEN NOTICE, COOPERATION AND
ASSISTANCE IN CONNECTION WITH ANY THIRD-PARTY CLAIM, AND
LICENSOR SHALL HAVE COMPLETE CONTROL OVER THE DEFENSE AND
SETTLEMENT THEREOF.
The following Section 11.4 is hereby added to the License
Agreement:
11.4 Notwithstanding any other provisions of, and without
diminishing any liabilities or obligations of LICENSEE under,
the License Agreement or this Fifth Amendment, LICENSOR shall
have no liability or obligation to LICENSEE whatsoever
arising out of the License Agreement or this Fifth Amendment
(i) relating to LICENSEE'S sale or use of any Non-Core
Products (including, without limitation, the royalty
reimbursement obligations under Section 10.4 and the
indemnification obligations under Section 11.1), or (ii)
relating to any other liabilities or obligations incurred by
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LICENSEE as a result of LICENSEE's use of the Licensed
Trademarks, other than those liabilities or obligations of
LICENSOR set forth in the License Agreement or this Fifth
Amendment.
The following Section 11.5 is hereby added to the License
Agreement:
11.5 In the event LICENSEE requests LICENSOR to file trademark
applications and seek trademark registrations in the
Territory for the Non-Core Products, LICENSOR shall take the
actions necessary to comply with such request. If LICENSOR is
successful in obtaining trademark registrations for all
Non-Core Products in all jurisdictions in the Territory, this
Fifth Amendment shall be amended to delete the distinction
between Core Products and Non-Core Products so that Non-Core
Products are treated the same as Core Products under this
Fifth Amendment. If LICENSOR is successful in obtaining
trademark registrations for some (but not all) of the
Non-Core Products in some (but not all) of the jurisdictions
in the Territory, then the distinction between Core Products
and Non-Core Products shall be deleted only for those
Non-Core Products and for those jurisdictions in the
Territory for which LICENSOR is successful in obtaining
trademark registrations. LICENSEE shall cease all sale or use
of the Licensed Trademarks on those Non-Core Products in
those jurisdictions in which LICENSOR is not able to obtain
trademark registrations.
10. Sections 3.1, 5.3 and 11.2 of the License Agreement are hereby
amended by adding the following sentence to the end of each of said Sections:
LICENSEE's obligations under this Section shall not be
released or limited in any way as a result of LICENSOR's
approval of Licensed Products, any packaging therefor, or any
advertising relating thereto.
11. The License Agreement is hereby amended by adding the following
Section 18.6:
18.6 LICENSEE shall not manufacture, distribute or sell (i) any
speakers, except as a prepackaged component of an audio
system that is commonly expected by the consuming public to
include such speakers with such audio system, or (ii) any
speaker accessories (including, but not limited to, AC or DC
adaptors, mounting brackets, or assemblies, etc.), whether or
not as part of a prepackaged component of an audio system
that is commonly expected by the consuming public to include
such speaker accessories with such audio system.
12. The License Agreement is hereby amended by adding the following
Section 18.7 to the License Agreement:
18.7 The parties hereto agree that the License Agreement and this
Fifth Amendment have been jointly drafted by the parties,
that the language used in the License Agreement and this
Fifth Amendment reflect their mutual intent, and that no term
or provision shall be construed more
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or less favorably to either party hereto on the grounds that
it was drafted or authorized by such party.
13. EXHIBIT B to the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the EXHIBIT B attached hereto
shall be inserted in its place.
14. EXHIBIT D to the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the EXHIBIT D attached hereto
shall be inserted in its place.
15. EXHIBIT E to the License Agreement (as amended by the Fourth
Amendment) is hereby deleted in its entirety and the EXHIBIT E attached hereto
shall be inserted in its place.
16. Except as hereby amended, the License Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Fifth
Amendment on the day and year first above written.
KOSS CORPORATION
By: Michael J. Koss
------------------------------------------
Print Name:
------------------------------------------
Title: CEO/President
------------------------------------------
JIANGSU ELECTRONICS INDUSTRIES LIMITED
By: /s/ Poon Ka Hung
------------------------------------------
Print Name:
------------------------------------------
Title: Chief Executive Officer
------------------------------------------
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EXHIBIT B
MOBILE PRODUCTS* Royalty
--------------- -------
Audio systems of any nature (excluding clock radios and audio systems 2.0%
incorporating clock radios) with a cassette player but without a
compact disc player
Audio systems of any nature (excluding clock radios and audio systems
incorporating clock radios) with a compact disc player and/or a CD 1.5%
changer
Power amplifiers 1.5%
Power inverters 1.5%
Receivers 2.0%
HOME AND PORTABLE PRODUCTS** Royalty
---------------------------- -------
Clock radios 2.0%
AM/FM radios (excluding clock radios and audio systems incorporating
clock radios) without a cassette or compact disc player 3.0%
Audio systems of any nature (excluding clock radios and audio systems
incorporating clock radios) with a cassette player but without a 2.0%
compact disc player
Audio systems of any nature (excluding clock radios and audio systems
incorporating clock radios) with a compact disc player and/or a CD 1.5%
changer
Power amplifiers 1.5%
Receivers 2.0%
* All products listed under Mobile Products in this EXHIBIT B shall mean
only those products which are designed for use in automobiles only.
** Home and portable products listed in this EXHIBIT B shall not include
products designed for use in automobiles.
LICENSEE shall not manufacture, distribute or sell (i) any speakers,
except as a prepackaged component of an audio system that is commonly
expected by the consuming public to include such speakers with such
audio system, or (ii) any speaker accessories (including, but not
limited to, AC or DC adaptors, mounting brackets, or assemblies, etc.),
whether or not as part of a prepackaged component of an audio system
that is commonly expected by the consuming public to include such
speaker accessories with such audio system.
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EXHIBIT D
Calculation of Quarterly Royalties Payment
Total Sales Returns Net Sales Royalty Rate Subtotal
----------- ------- --------- ------------ --------
MOBILE PRODUCTS*
---------------
Audio systems of any nature ___________ _____________ ___________ 2.0% _________
(excluding clock radios and
audio systems incorporating
clock radios) with a cassette
player but without a compact
disc player
Audio systems of any nature ___________ _____________ ___________ 1.5% _________
(excluding clock radios and audio
systems incorporating clock radios)
with a compact disc player and/or
a CD changer
Power Amplifiers ___________ _____________ ___________ 1.5% _________
Power Inverters ___________ _____________ ___________ 1.5% _________
Receivers ___________ _____________ ___________ 2.0%
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Total Sales Returns Net Sales Royalty Rate Subtotal
----------- ------- --------- ------------ --------
HOME AND PORTABLE PRODUCTS**
--------------------------
Clock Radios ___________ _____________ ___________ 2.0% _________
AM/FM radios (excluding clock ___________ _____________ ___________ 3.0% _________
radios and audio systems incorporating
clock radios) without a cassette or
compact disc player
Audio systems of any nature ___________ _____________ ___________ 2.0% _________
(excluding clock radios and audio
systems incorporating clock radios)
with a cassette player but without
a compact disc player
Audio systems of any nature ___________ _____________ ___________ 1.5% _________
(excluding clock radios and audio
systems incorporating clock radios)
with a compact disc player and/or
a CD changer
Power Amplifiers ___________ _____________ ___________ 1.5% _________
Receivers ___________ _____________ ___________ 2.0% _________
Subtotal $________
Subtotal $___________
Less 2% of itemized discounts, rebates
and shipping costs (___________)
ROYALTIES PAYMENT $___________
* All products listed under Mobile Products in this EXHIBIT D shall mean only
those products which are designed for use in automobiles only.
** Home and portable products listed in this EXHIBIT D shall not include
products designed for use in automobiles.
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EXHIBIT E
UNITED STATES
KOSS (Plain Block Letters) Registered Registration No. 1,821,035
KOSS (Stylized) Registered Registration No. 1,850,556
KOSS & Design Registered Registration No. 2,070,098
CANADA
KOSS (Plain Block Letters) Registered Registration No. 454,503
KOSS (Stylized) Registered Registration No. 454,504
KOSS & Design Registered Registration No. 454,505
MEXICO
KOSS (Plain Block Letters) Registered Registration No. 442439
KOSS (Stylized) Registered Registration No. 514637
KOSS & Design Registered Registration No. 516421
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EXHIBIT F
CONSENT OF GUARANTOR
The undersigned, Orient Power Holdings Limited, a Bermuda company
("Orient Power"), for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby consents to the foregoing
Fifth Amendment to License Agreement ("Fifth Amendment") and reaffirms its
guarantee of the performance by Jiangsu Electronics Industries Limited ("Jiangsu
Electronics") or any sublicensee of Jiangsu Electronics (Jiangsu Electronics and
any sublicensee are hereinafter collectively referred to as "Jiangsu") of all of
Jiangsu's obligations under (a) the Fifth Amendment and (b) that certain License
Agreement between Koss Corporation, as Licensor, and Trabelco N.V., as Licensee,
dated November 15, 1991, as amended by an Amendment to License Agreement dated
November 15, 1991, and a Second Amendment to License Agreement dated September
29, 1995, and a Third Amendment and Assignment of License Agreement dated as of
March 31, 1997 between Trabelco N.V., Jiangsu Electronics, Hagemeyer Electronics
(N.A.), Inc., Hagemeyer Consumer Products, Inc. d/b/a/ Koss Electronics
Products, KCP Limited and Koss Corporation, and a Fourth Amendment to License
Agreement dated May 29, 1998 (collectively, that certain License Agreement and
the amendments thereto are hereinafter collectively referred to as the "License
Agreement"). Orient Power also guarantees the payment to Koss Corporation of any
and all amounts owed to Koss Corporation by Jiangsu under the Fifth Amendment
and the License Agreement, including but not limited to, the royalty obligations
and indemnity obligations of Jiangsu thereunder.
ORIENT POWER HOLDINGS LIMITED
Dated: ___________________ By: ___________________________________________
Name: ___________________________________________
Title: ___________________________________________