U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT No.2
TO
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended April 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ________ to ________
Commission file number 0-26120
IMPRINT RECORDS, INC. (FORMERLY VERITAS MUSIC ENTERTAINMENT, INC.)
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Tennessee 62-1587889
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Cummins Station, 209 10th Avenue South, Suite 500, Nashville, TN 37203
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(615) 244-9585
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
-----
As of June 12, 1996, the Company had outstanding 4,738,000 shares of
common stock, no par value.
Traditional Small Business Disclosure Format (check one):
Yes X No
-----
Page 1 of 81 sequentially
numbered pages.
Exhibit Index begins on page 3.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMPRINT RECORDS, INC.
(FORMERLY VERITAS MUSIC ENTERTAINMENT, INC.)
DATE: November 26, 1996 By: /s/Roy W. Wunsch
------------------
Roy W. Wunsch, Chairman
and Chief Executive Officer
DATE: November 26, 1996 By: /s/Wayne Halper
-----------------
Wayne Halper, Chief Financial
Officer/Vice President -
Business Development
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
- ----------- --------
10.1 Distribution Agreement between the Company and
Distribution North America dated as of April 1, 1996* 4
10.2 Agreement between the Company and Timtojay Music, 19
Inc. dated as of April 30, 1996*
* - The Company has requested confidential treatment from the Securities
and Exchange Commission for portions of this Exhibit, which
confidential portions have been filed separately.
EXHIBIT 10.1
Confidential portions omitted and filed separately with the Commission.
Deleted text (represented by "XXX" in the text and an asterisk in the
margin) indicate such ommissions.
DISTRIBUTION AGREEMENT
This Agreement is made as of the 1st day of April, 1996 (the
"Effective Date") by and between Veritas Music Entertainment, Inc., d/b/a
Imprint Records, a corporation duly organized and existing under the laws of
Tennessee, having its principal place of business at 209 10th Avenue South,
Suite 500, Nashville, Tennessee ("Label"), and Distribution North America, a
Delaware partnership having a place of business at One Camp Street, Cambridge,
Massachusetts ("Distributor").
WHEREAS, Label is engaged in the business of manufacturing and
marketing phonorecords; and
WHEREAS, Distributor is engaged in the business of distributing
goods manufactured by others in the Territory (as hereinafter defined),
including products similar or related to the Products (as hereinafter defined);
and
WHEREAS, Label desires to license Distributor to act as exclusive
distributor of the Products in the Territory, and Distributor is willing to
accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, Label and Distributor do hereby agree as follows:
1. DEFINITIONS
1.1 Products. As used herein, the term "Products" means all
phonorecords in any medium now known or as may be hereafter developed intended
primarily for home use, school use, juke box use, or use in means of
transportation and derived from sound recordings which are owned or controlled,
in whole or in part, directly or indirectly by Label and/or released at any time
during the Term (as defined herein) in the Territory on the Imprint label and/or
any affiliate or related entity owned or controlled (directly or indirectly
through one or more intermediaries) by or among or controlling Label (excluding
any record label acquired and/or controlled by Label subsequent to the Effective
Date with a pre-existing third party distribution agreement for the term of such
distribution agreement).
<PAGE>
1.2 Territory. As used herein, the term "Territory" means the United
States of America, its territories, and possessions.
2. EXCLUSIVE DISTRIBUTORSHIP
Grant of Distributorship. Label hereby grants to Distributor the sole and
exclusive right to distribute and sell the Products during the Term to retail
stores, record dealers, rack jobbers, one stops, so-called "on-line" retail
stores, and catalogs within the Territory all in accordance with the terms and
conditions set forth herein. Label reserves the right to sell the Products
through record clubs and/or its mail order operation. Label agrees to provide
Distributor with at least one hundred and twenty (120) days written notice prior
to changing or discontinuing any or all of the Products during the Term.
3. ORDERS AND PERFORMANCE
Orders and Shipment. Distributor shall place orders for the Products with
Label on Distributor's standard purchase order form setting forth the quantity
of the Products ordered (as mutually determined by Label and Distributor), the
specifications therefor, the method and manner of delivery and the desired
delivery date.
The Products sold to Distributor by Label shall be shipped F.O.B. from
Label's plant to the destination in the Territory designated by Distributor.
Label shall pay all freight, insurance, duty, and customs, and any other
charges associated with shipment of the Products to Distributor's designated
warehouse facilities.
Label will ship the Products to Distributor in final wrapped packaged
containers with all necessary bar coding and in such manner as Distributor
reasonably determines is appropriate consistent with industry standards.
4. PRICES, PAYMENT TERMS, RETURNS AND SECURITY INTEREST
4.1 Prices. Attached hereto as Exhibit A is Label's price schedule
for the Products (which the parties hereto agree to review in good faith ten
(10) months after the Effective Date). All prices are inclusive of all
governmental excise, sales, use, occupational or similar taxes. Said prices
shall be subject to change by mutual agreement of the parties from time to time,
provided, however, that no such price change shall affect purchase orders
received by Label prior to such price change. The prices at which the Products
are resold in the Territory shall be at the sole discretion of Distributor.
2
<PAGE>
4.2 Terms of Payment. Distributor shall pay to Label by check an
amount, net of returns and reserves against returns, offsets, overpayments, or
debits, equal to invoices payment to Label for Products which are delivered
for sales to Distributor within sixty (60) days from the end of the bimonthly
period within which the sale of the Product by Distributor is completed. Label
will not be charged for returns solely resulting from Distributor error.
4.3 Consignment Sale. Label shall retain title to the Products
until sold by Distributor to its customers. Distributor assumes the risk of
loss of Products in its possession (until the sale of such Products) in excess
* of XXXXXXXXXXXXXXXXXXX percent of the average number of units of Label's
Product in Distributor's possession during Distributor's fiscal year, and will
reimburse Label for any such loss at Label's actually incurred manufacturing
cost price. Title to consigned Products shall be and remain in the Label until
sold. Label retains and is hereby granted a security interest in the excess of
the value of the consigned Products over any amounts Label owes Distributor
(until the consigned Products are sold or returned to Label). At Label's
request, Distributor will assist Label with the execution of appropriate
documents for filings (in each jurisdiction in which Distributor maintains
warehousing facilities or otherwise stores the consigned Products) under the
Uniform Commercial Code to protect this interest.
4.4 Returns. Notwithstanding anything contained herein to the
contrary, all sales of Product by Label to Distributor shall be returnable at
an amount equal to the purchase price paid by Distributor, and Distributor
shall have the absolute right to return Product to Label, whether as the
result of excess orders or excess returns, either during the Term or within
one hundred fifty (150) days following the termination or expiration of this
Agreement. Distributor shall process customer returns in accordance with its
standard policies. In the event Label requests that Product be scrapped by
Distributor, then all costs of such scrapping shall be chargeable to Label.
5. MARKETING AND ADVERTISING
5.1 Distributor's Undertaking.
(a) Distributor shall use best reasonable efforts to
distribute Products in the Territory in the ordinary course of business by
soliciting and fulfilling orders for such Product on behalf of Label together
with invoicing and collecting payment from customers. The method, manner and
extent of distribution of Products hereunder and the collection of payment
therefor shall be within the sole discretion of Distributor (consistent with
its standard policies).
* - Confidential portions omitted and filed separately with the Commission.
3
<PAGE>
(b) Distributor shall use best reasonable efforts to promote
the sale of the Products in the Territory. Unless the Distributor and Label
mutually agree to incur expenses with respect to so-called "co-op advertising"
(which expenses incurred by Distributor will be charged back to Label), Label
shall be solely responsible for advertising the Products throughout the
Territory in the appropriate trade advertising media and in a manner insuring
proper and adequate publicity for the Products. The method, manner and extent of
release and advertising of the Products hereunder shall be mutually determined
by the parties hereto.
(c) Distributor shall maintain a sales staff in such number
and in such location(s) as Distributor reasonably deems appropriate.
5.2 Right to Appoint Sub-Dealers. Distributor shall have the right,
at its own discretion, to appoint Valley Record Distributors, of Woodland,
California, as a sub-dealer or other sub-dealers to market the Products in the
Territory in accordance with the grant of the distributorship pursuant to
Section 2.
5.3 Label's Undertaking.
(a) Label agrees that it shall be solely responsible for and
shall pay all costs of production and manufacture of the Product hereunder,
including without limitation: the costs and expenses of producing, recording and
manufacturing such Product; the costs and expenses of artwork preparation and
reproduction; costs of preparing and/or compiling packaging, inserts and
containers; costs and expenses of advertising, marketing and promoting Product;
the payment of any and all royalties (including mechanical copyright royalties),
fees, or other sums to artists, producers, record labels, songwriters,
publishers, musicians, unions and guilds (including Special Payments, Transfer
Funds, and reuse fees), studios and engineers; all personal property taxes
levied on any amounts hereunder or on the sale of Products; and any other costs,
expenses or fees arising out of, connected with or incidental to the production,
recording, manufacture and sale of Product which Distributor is not otherwise
responsible for as specifically provided in this Agreement.
(b) Label agrees to provide Distributor, at no cost to
Distributor, such sales materials (e.g., posters, flyers, point-of-purchase
materials), if any, with respect to Products as Label generally makes available
to its distributors, and Distributor may reproduce such sales materials as
reasonably required, provided that Label shall reimburse Distributor for any
costs incurred on Label's behalf in reproducing and distributing such sales
materials; and provided further that Distributor will
4
<PAGE>
not materially alter any materials so provided by Label without Label's prior
consent, which will not be unreasonably withheld.
6. CONFIDENTIALITY OF INFORMATION AND MATERIALS
Confidentiality. Each of the parties hereto shall hold in strict
confidence and shall not disclose to any third party or use, either before or
after the termination or expiration of this Agreement, any of the terms and
conditions of this Agreement relating to payment provisions, or any confidential
information marked as such which is conveyed, in writing, to or by Label or
Distributor. The foregoing shall not apply to information currently in the
possession of any party before the time of disclosure, or which was common or
public knowledge, or was necessary or reasonably required in connection with
Distributor's distribution activities in the Territory.
7. WARRANTIES AND REPRESENTATIONS
Label's Warranty.
Label warrants and represents that:
(a) It has and, during the term of this Agreement, shall have,
good, clear and marketable title to the Products being sold to the Distributor
under this Agreement, free and clear of any and all liens and encumbrances which
may otherwise affect Label's title.
(b) (i) It is duly organized and existing and in good standing
under the laws of the State of Tennessee; (ii) it is not a foreign person within
the meaning of Section 1445 of the Internal Revenue Code and any regulations
promulgated thereunder; and (iii) the execution, delivery and performance of
this Agreement are within Label's corporate powers, have been duly authorized by
all necessary and appropriate corporate and shareholder actions or approval, if
applicable, and are not in contravention of law or the terms of Label's Articles
of Incorporation, By-Laws, or any amendments thereto, or any agreement,
undertaking or obligation to which Label is a party.
(c) The exercise of Distributor's rights hereunder shall not
obligate Distributor to make any payments other than as specifically set forth
herein or obtain consents from any third party.
(d) The Products and their distribution shall not violate the
copyright, trademark, unfair competition, libel, privacy, publicity, or other
right of any third party including any rights dealing with the import or export
of Products.
5
<PAGE>
(e) Label has not sold, assigned, transferred, leased,
conveyed or granted a security interest in, or otherwise disposed of, and will
not sell, assign, transfer, lease, convey or grant a security interest in and to
the Products covered by this Agreement, or any of them, adverse to or derogatory
of the material rights granted to Distributor herein and Label has not
authorized and will not authorize any other person or entity to distribute and
sell Products in the Territory in contravention of Distributor's exclusive
rights hereunder.
(f) There are no advances or other outstanding obligations to
independent distributors or others with respect to the distribution of Products.
Distributor's Warranty.
Distributor warrants and represents that:
(a) Distributor will not remove or alter any of Label's
trademarks or trade names ("Marks") appearing on Label's Products, the packaging
thereof and/or any advertising or other promotion materials supplied by Label in
connection therewith. Distributor will at all times use best reasonable efforts
to properly identify Label's Marks whether in association with Label and/or
Label's Products.
(b) Subject to Section 11.3 herein, Distributor will promptly
notify Label of any claim of which Distributor becomes aware involving any of
Label's warranties, representations, indemnifications or rights hereunder.
(c) Distributor will maintain suitable offices, warehousing
facilities and staff for its performance of its duties hereunder. Distributor
will conduct business in its own name and will pay all of its own costs and
expenses.
(d) Distributor acknowledges and agrees that all right, title
and interest, including without limitation, all copyrights and trademarks, in
and to the Product (and the packaging thereof and all associated Marks) and all
advertising, promotion and publicity materials supplied by Label in connection
therewith shall remain the exclusive property of Label. Distributor agrees to
promptly notify Label if Distributor becomes aware of unauthorized distribution
or sale of the Product.
(e) Distributor will promptly pay Label according to the
payment provisions of this Agreement.
(f) Distributor will use best reasonable efforts to keep the
consigned Product safely stored in its warehousing facilities, or that of its
subdistributors, and will
6
<PAGE>
not remove same without Label's written consent, except upon their sale or
return, as provided in this Agreement.
8. INSURANCE
8.1 Distributor's Insurance. With respect to the Product,
Distributor shall secure and maintain during the Term an insurance policy or
policies protecting the Distributor against loss for fire, theft or property
damage, and Label shall be named as an additional insured with respect to same.
Upon Label's request, Label will be provided with a fully paid certificate
evidencing the foregoing.
8.2 Label's Insurance. Label will maintain in effect during the term
of this Agreement a broad form of vendor's liability insurance (including
coverage against copyright, trademark or other intellectual property
infringement) with limits for not less than [PLEASE PROVIDE]. Label will furnish
Distributor with certificates evidencing such insurance. Label will also at all
times maintain sufficient insurance to cover the risk of loss of all shipments
of Products to Distributor.
9. REPORTS AND RECORDS
9.1 Reports. Within thirty (30) days of the expiration of each
fiscal month of Distributor during the Term, Distributor agrees to furnish Label
with a detailed sales statement with respect to such month. At Label's request,
Distributor agrees to work with Label so that Label will have regular access to
sales, inventory, and returns information.
9.2 Records. Distributor agrees to maintain copies of all
documentation relating to its purchase, distribution and sale of Products under
this Agreement. Distributor shall permit Label to have access to such
documentation at Distributor's place of business where Distributor keeps the
books and records to be examined, and during ordinary business hours, provided
Label gives Distributor reasonable prior written notice specifying the
documentation to be examined. Label may make such an examination of the
requested documentation only twice and only within one year following the close
of each taxable year of Distributor for each year of the Term of this Agreement.
Each statement shall be deemed conclusive and binding two years following the
date it is rendered. Such examination shall be conducted by a certified public
accountant or attorney on behalf of Label and shall be at Label's sole cost and
expense.
7
<PAGE>
10. ARTWORK, PACKAGING, AND OTHER INTELLECTUAL PROPERTY RIGHTS
10.1 Acknowledgment of Rights. Label represents and warrants that it
is the owner of all right, title and interest in and to the names, designs,
artwork, packaging, and advertising associated with its Products, including all
performances and artistic, musical material embodied in the Products, and the
trademarks and logos used in connection therewith, together with any new or
revised names, designs, artwork, packaging, and advertising which Label may
adopt to identify it or any Product during the Term (collectively "Materials").
10.2 License to Use Materials. Label hereby grants to Distributor a
license during the Term to reproduce, publicly perform, distribute, and, subject
to any reasonable restrictions set forth by Label, to use the Materials and the
names, likenesses, and biographical material contained thereon throughout the
Territory in connection with the distribution and sale of Products hereunder.
10.3 Intellectual Property Claims. In the event that any claim or
suit is brought against Distributor (or its customers) alleging infringement of
any intellectual property right, and Distributor is prohibited from exercising
its rights granted by Label under this Agreement either pursuant to an
injunction, or if in Distributor's good faith and reasonable opinion the
Products are likely to become the subject of a claim of infringement, Label
will, in addition to defending any claim brought against and indemnifying
Distributor (or its customers) pursuant to Section 11, at the request of
Distributor, either procure for Distributor the right to continue using the
Products or modify them so they become non-infringing or grant Distributor a
credit for such Products and accept their return, at Label's sole cost and
expense, without prejudice to any other rights which Distributor may have
against Label.
11. RIGHTS AND OBLIGATIONS OF THE PARTIES
11.1 Indemnification. Each party hereto (the "Indemnifying Party")
shall indemnify and hold the other and its respective owners, subsidiaries and
affiliates, licensees, customers and persons serving as officers, directors,
shareholders, partners or employees thereof (individually and collectively the
"Indemnified Party") harmless from and against any damages, liabilities, losses,
taxes, fines, penalties, costs and expenses (including, without limitation,
reasonable counsel fees and expenses) of any kind or nature whatsoever (whether
or not arising out of third party claims and including all amounts paid in
investigation, defense or settlement of the foregoing pursuant to this
Agreement) which may be sustained or suffered by any of them
8
<PAGE>
arising out of or connected with or resulting from any actual or alleged breach
of any of the representations, warranties, or covenants of the Indemnifying
Party under this Agreement, intentional or otherwise, or in any certificate or
exhibit delivered pursuant hereto, or from any claim which is inconsistent with
such representations, warranties or covenants.
Satisfaction of Indemnification Obligations. In order to
satisfy the indemnification obligations pursuant to Section 11.1 above, the
Indemnified Party shall have the right (in addition to collecting directly from
the Indemnifying Party) to set off its indemnification claims against the same's
obligation to make payment under this Agreement. Notwithstanding the foregoing,
the Indemnifying Party shall have the right (in lieu of any set-off) to deliver
to the Indemnified Party an indemnity or surety bond, in form reasonably
satisfactory to the Indemnified Party, which shall cover the amount of the
indemnification obligation and estimated legal costs.
11.3 Notice; Defense of Claims. Promptly after receipt by the
Indemnified Party of notice of any claim, liability or expense to which the
indemnification obligations hereunder would apply, the Indemnified Party shall
give notice thereof in writing to the Indemnifying Party, but the omission to so
notify the Indemnifying Party promptly will not relieve the Indemnifying Party
from any liability. If, within twenty (20) days after receiving such notice, the
Indemnifying Party gives written notice to the Indemnified Party stating that it
disputes and intends to defend against such claim, liability or expense at its
own cost and expense, then counsel for the defense shall be selected by the
Indemnifying Party (subject to the consent of the Indemnified Party, which
consent shall not be unreasonably withheld), but the Indemnified Party shall
have the right to compromise, settle or make payment on such claim, liability or
expense in the exercise of reasonable business judgment. Notwithstanding
anything herein stated, the Indemnified Party shall at all times have the right
to fully participate in such defense at its own expense, directly or through
counsel, provided, however, that if the named parties to the action or
proceeding include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the expense of separate counsel
for the Indemnified Party shall be paid by the Indemnifying Party. If no such
notice of intent to dispute and defend is given by the Indemnifying Party, or if
such diligent good faith defense is not being or ceases to be conducted, the
Indemnified Party may, at the expense of the Indemnifying Party, undertake the
defense of such claim, liability or expense (with counsel selected by the
Indemnified Party). If such claim, liability or expense is one that by its
nature cannot be defended solely by the Indemnifying Party, then the Indemnified
Party shall make available all information and assistance that the Indemnifying
Party may
9
<PAGE>
reasonably request at the Indemnifying Party's expense and shall cooperate with
the Indemnifying Party in such defense.
12. RELATIONSHIP OF PARTIES
Independent Contractor Status. Nothing contained in this Agreement shall
be construed to constitute either party as a partner, employee or agent of the
other, nor shall either party hold itself out as such. Neither party has the
right or authority to incur, assume or create, in writing or otherwise, any
warranty, liability or other obligation of any kind, express or implied, in the
name of or on behalf of the other, it being intended by both Distributor and
Label that each shall remain an independent contractor responsible for its own
actions.
13. ASSIGNMENT
Assignment. Except to Distribution North America, Inc. and/or Valley
Record Distributors or by way of merger or reorganization or as part of the sale
or acquisition of all or substantially all of its assets, Distributor may not
assign, transfer, or license its rights hereunder without the prior written
consent of Label. Label may not assign, transfer, or license its rights
hereunder without the prior written consent of Distributor, unless it is to a
party obtaining all, or substantially all of Label's assets, or as part of a
merger or reorganization.
14. TERM OF AGREEMENT
Term. This Agreement shall remain in effect for a period of two (2) years
after the Effective Date (the "Term"), and shall be automatically renewed for
consecutive additional one (1) year terms provided that neither party gives
written notice to the other at least ninety (90) days prior to the expiration
date of the applicable term of its intention to discontinue the arrangement.
15. TERMINATION
15.1 Events of Termination. Either party may terminate this
Agreement as follows:
(a) Bankruptcy, Etc. Immediately upon written notice to the
other party in the event that proceedings in bankruptcy or insolvency are
instituted by or against the other party, or a receiver is appointed, or if any
substantial part of the assets of the other party is the subject of attachment,
sequestration or other type of comparable proceedings, and such proceeding is
not vacated or terminated within thirty (30) days after its commencement or
institution.
(b) Default. If one party commits a material breach of any of
the terms or provisions of this Agreement and does
10
<PAGE>
not cure such breach within thirty (30) days after receipt of written notice
given by the other party (except that repeated material breaches of the same
nature will not be considered curable hereunder).
15.2 Rights upon Termination. Upon termination of this Agreement, by
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any monies due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under this Agreement which specifically survive or are to be performed after the
date of termination. Sections 4.4, 6, 7, 8, 9, 10, 11, 12, 15.3, and 16 shall
survive termination or expiration of this Agreement for any reason. Upon
termination of this Agreement, Distributor shall have the right to have
delivered Products then on order on an irrevocable letter of credit, C.O.D. or
cash-in-advance basis as selected by Label in its sole discretion.
15.3 Returns. On or after the date of termination or expiration of
this Agreement for a period of one hundred fifty (150) days, Label will accept
returns of Product in the hands of customers of Distributor at prices equal to
the prices paid by such customers, or contractually obligate the successor
distributor of Distributor to accept returns of such Product in the hands of
customers of Distributor at the prices paid by such customers, and will
indemnify and hold Distributor harmless from any claims by customers of
Distributor based upon such customer's return privilege.
16. MISCELLANEOUS
16.1 Force Majeure. If the performance of any obligation under this
Agreement is prevented, restricted or interfered with by reason of war,
revolution, civil commotion, acts of public enemies, blockade, embargo, strikes,
any law, order, proclamation, regulation, ordinance, demand, or requirement
having a legal effect of any government or any judicial authority or
representative of any such government, or any other act whatsoever, whether
similar or dissimilar to those referred to in this Section 16.1, which is beyond
the reasonable control of the party affected, then the party so affected shall,
upon giving prior written notice to the other party, be excused from such
performance to the extent of such prevention, restriction, or interference,
provided that the party so affected shall use reasonable commercial efforts to
avoid or remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed.
16.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all previous negotiations,
agreements and commitments with respect
11
<PAGE>
thereto, and shall not be released, discharged, changed or modified in any
manner except by instruments signed by duly authorized officers or
representatives of each of the parties hereto.
16.3 Applicable Law. This Agreement has been entered into in the
Commonwealth of Massachusetts, and the validity, interpretation and legal effect
of this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts applicable to contracts entered into and performed entirely within
the Commonwealth of Massachusetts. Any disputes regarding this Agreement shall
be submitted to the American Arbitration Association in Boston, Massachusetts
for arbitration under the rules of the American Arbitration Association and any
such arbitration decision shall be a binding and final determination of the
dispute(s) and shall be fully enforceable as an arbitration award in any court
having jurisdiction and venue over the parties.
16.4 Partial Illegality. If any provision of this Agreement or the
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event, the
parties shall use their best efforts to replace the invalid or unenforceable
provision by a provision that, to the extent permitted by the applicable law,
achieves the purpose intended under the invalid or unenforceable provision. Any
deviation by either party from the terms and provisions of this Agreement in
order to comply with applicable laws, rules or regulations shall not be
considered a breach of this Agreement.
16.5 Waiver of Compliance. Any failure by any party hereto to
enforce at any time any term or condition under this Agreement shall not be
considered a waiver of that party's right thereafter to enforce each and every
term and condition of this Agreement.
16.6 Obligations. The rights and obligations of each party shall
inure to its respective successors, heirs, administrators, and assigns (subject
to Section 13 above).
16.7 Notices. All notices and other communications in connection
with this Agreement shall be in writing and shall be sent to the respective
parties at the following addresses, or to such other addresses as may be
designated by the parties in writing from time to time in accordance with this
Section 16.7, by registered or certified mail, postage prepaid, or by express
courier service, service fee prepaid, or by telefax with a hard copy to follow
via certified mail or express courier service in accordance with this Section
16.7.
12
<PAGE>
To Distributor at: Distribution North America
One Camp Street
Cambridge, Massachusetts 02140
Attention: Duncan Browne
With copy to: Distribution North America
One Camp Street
Cambridge, Massachusetts 02140
Attention: John A. Virant, Esq.
To Label at: Veritas Music Entertainment, Inc.
209 10th Avenue South, Suite 500
Nashville, Tennessee 37203
Attention: Roy Wunsch &
Wayne Halper
With copy to: John T. Frankenheimer, Esq.
Loeb and Loeb, LLP
10100 Santa Monica Boulevard
Los Angeles, California 90067
All notices shall be deemed received (i) if given by hand, immediately,
(ii) if given by certified mail, three (3) business days after posting, (iii) if
given by express courier service, the next business day in the jurisdiction of
the recipient, or (iv) if given by telefax, upon acknowledgment of receipt by
the recipient via return telefax.
16.8 Headings. The headings and captions hereunder are for
convenience only and shall not affect the interpretation or construction of this
Agreement.
16.9 Counterparts. This Agreement together with the exhibits
attached hereto may be executed in counterparts, each of which shall be deemed
to be an original and all of which together shall be deemed to be one and the
same instrument.
16.10 Preparation of Agreement. This Agreement has been negotiated
by Label and Distributor and, therefore, is to be construed simply and fairly
and not strictly for or against any of the parties.
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives as of the Effective
Date.
VERITAS MUSIC ENTERTAINMENT, INC.
By: /s/ Roy W. Wunsch
-----------------
Title: Chairman and CEO
-------------------
DISTRIBUTION NORTH AMERICA
By: /s/ Duncan Browne
-----------------
Title: President
------------------
14
<PAGE>
EXHIBIT A
PRICE SCHEDULE
* XXXXXXXXXXXXXXXX per single full-length analog tape cassette
* XXXXXXXXXXXXXXXX per single full-length compact disc
* - Confidential portions omitted and filed separately with the Commission.
15
EXHIBIT 10.2
Confidential portions omitted and filed separately with the Commission. Deleted
text (represented by "XXX" in the text and an asterisk in the margins) indicate
such omissions.
AGREEMENT made as of this 30th day of April, 1996, by and between Imprint
Records, Inc., 209 10th Avenue South, Suite 500, Nashville, Tennessee 37203
("Company"), and TIMTOJAY MUSIC, INC. "You").
1. SERVICES.
During the term of this Agreement (the "Term") and for the Territory (as
that term is described hereinbelow), You will cause Charlie Major ("Artist") to
render exclusive services as a recording artist for Company, cause Masters to be
produced and Deliver same to Company and cause camera-ready artwork to be
produced and Deliver same to Company to be used in connection with the
manufacturing and promotion of Records embodying those Masters to be produced
and Deliver same to Company, among other things as specifically described in
this Agreement. Your obligations will include, among others, furnishing and
paying for the services of the producers of those Masters and all other third
parties rendering services in connection with those Masters as well as paying
for all of the Recording Costs in connection with those Masters. Attached hereto
as Exhibit "A" is a so-called "inducement letter" signed by Artist.
Notwithstanding anything to the contrary contained herein, Company hereby
acknowledges that certain agreement previously entered into by and between
Artist and BMG Music Canada, Inc. ("BMG") on or about the 11th day of January,
1993, as amended, (the "BMG Agreement") pursuant to which Artist is required to
render his exclusive services as a recording artist to BMG for the Universe
excluding the Territory.
2. TERM.
2.01 The Term shall hereof shall commence on the date of the full
execution of this Agreement and shall consist of the Initial Period, and each
Option Period, if any. The Initial Period and each Option Period are each
hereafter sometimes referred to as a "Contract Period". The Initial Period shall
commence on the above date and continue until the earlier of (i) thirty (30)
days after the exercise by BMG of its option to extend the term of the BMG
Agreement into the Second Option Period as provided for in the BMG Agreement, if
at all, or (ii) thirty (30) days after the last date by which BMG is required to
exercise its option to extend the term of the BMG Agreement into the Second
Option Period as provided for in the BMG Agreement, if at all; but in no event
earlier than the last day of the seventh (7th) full calendar month following the
initial release by
<PAGE>
Company in the Territory of the First Licensed Album (as that term is described
hereinbelow). You hereby grant Company five (5) options to extend the Term for
additional Contract Periods ("Option Periods") on the same terms and conditions
as the Initial Period, unless otherwise provided herein. Company may exercise
each option by written notice to You sent before the end of the Contract Period
then in effect ("Current Contract Period"). Each Option Period shall commence
upon the expiration of the immediately preceding Contract Period. Unless
terminated as otherwise provided herein, the First Option Period hereunder, if
any, shall continue until the earlier of (i) thirty (30) days after the exercise
by BMG of its option to extend the term of the BMG Agreement into the Third
Option Period as provided for in the BMG Agreement, if at all, or (ii) thirty
(30) days after the last date by which BMG is required to exercise its option to
extend the term of the BMG Agreement into the Third Option Period as provided
for in the BMG Agreement, if at all; but in no event earlier than the last day
of the seventh (7th) full calendar month following the initial release by
Company in the Territory of the first Album of newly recorded material (as
distinguished from the First Licensed Album, the Second Licensed Album or any
and all Greatest Hits Albums (as those terms are defined hereinbelow)) solely
embodying the performances of Artist. Additionally, unless terminated as
otherwise provided herein, the Second Option Period hereunder, if any, shall
continue until the earlier of (i) thirty (30) days after the exercise by BMG of
its option to extend the term of the BMG Agreement into the Fourth Option Period
as provided for in the BMG Agreement, if at all, or (ii) thirty (30) days after
the last date by which BMG is required to exercise its option to extend the term
of the BMG Agreement into the Fourth Option Period as provided for in the BMG
Agreement, if at all; but in no event earlier than the last day of the seventh
(7th) full calendar month following the initial release by Company in the
Territory of the second Album of newly recorded material (as distinguished from
the First Licensed Album, the Second Licensed Album or any and all Greatest Hits
Albums (as those terms are defined hereinbelow)) solely embodying the
performances of Artist. Furthermore, unless terminated as otherwise provided
herein, the Third Option Period hereunder, if any, shall continue until the
earlier of (i) thirty (30) days after the exercise by BMG of its option to
extend the term of the BMG Agreement into the Fifth Option Period as provided
for in the BMG Agreement, if at all, or (ii) thirty (30) days after the last
date by which BMG is required to exercise its option to extend the term of the
BMG Agreement into the Fifth Option Period as provided for in the BMG Agreement,
if at all; but in no event earlier than the last day of the seventh (7th) full
calendar month following the initial release by Company in the Territory of the
third Album of newly recorded material (as distinguished from the First Licensed
Album, the Second Licensed Album or any and all Greatest Hits Albums (as those
terms are
2
<PAGE>
defined hereinbelow)) solely embodying the performances of Artist. Additionally,
unless terminated as otherwise provided herein, the Fourth Option Period
hereunder, if any, shall continue until the earlier of (i) thirty (30) days
after the exercise by BMG of its option to extend the term of the BMG Agreement
into the Sixth Option Period as provided for in the BMG Agreement, if at all, or
(ii) thirty (30) days after the last date by which BMG is required to exercise
its option to extend the term of the BMG Agreement into the Sixth Option Period
as provided for in the BMG Agreement, if at all; but in no event earlier than
the last day of the seventh (7th) full calendar month following the initial
release by Company in the Territory of the fourth Album of newly recorded
material (as distinguished from the First Licensed Album, the Second Licensed
Album or any and all Greatest Hits Albums (as those terms are defined
hereinbelow)) solely embodying the performances of Artist. The Fifth Option
Period hereunder, if any, shall continue until the last day of the seventh (7th)
full calendar month following the initial release by Company in the Territory of
the fifth Album of newly recorded material (as distinguished from the First
Licensed Album the Second Licensed Album or any and all Greatest Hits Albums (as
those terms are defined hereinbelow)) solely embodying the performances of
Artist. For the purposes of calculating the periods specified above, the month
of December (including any and all of the days of said months) shall be excluded
from the calculation of such periods. If Company fails to give notice of its
exercise of any option as specified above, the Term shall automatically expire
at the end of the current Contract Period.
2.03 Notwithstanding anything to the contrary contained herein, in the
event that BMG fails or otherwise chooses not to exercise any of its options, as
above-described, or the BMG Agreement is terminated for any reason whatsoever
prior to the delivery by Artist to BMG of the Seventh LP (as described in the
BMG Agreement), then Company shall continue to have the right to exercise its
options for additional Contract Periods, as above-described, on the further
terms and conditions as described in Paragraph 25 hereinbelow. Furthermore, in
the event that the BMG Agreement is extended, amended or the like, pursuant to
which extension or amendment Artist agrees to deliver more Albums to BMG than
heretofore provided for in the existing BMG Agreement, then this Agreement shall
be deemed automatically extended and amended to grant Company such additional
Option Periods so that Company has the right to release, if at all, such
additional Albums on such terms and conditions as may be agreed upon by Company
and You after and as the result of good faith negotiations. Notwithstanding
anything to the contrary contained herein, You agree to consult with Company
prior to entering into any extension or amendment of the existing BMG Agreement.
3
<PAGE>
3. RECORDING COMMITMENT ("COMMITTED ALBUMS").
3.01 During the Initial Period, Company will release the First Licensed
Album. During each Option Period, you shall cause Artist to record and you shall
deliver to Company one (1) Album. You shall deliver to Company the Committed
Album for a Contract Period within ninety (90) days after such period's
commencement; provided, however, that Artist will not be required to deliver an
Album prior to the later of the date (i) twelve (12) months after the Delivery
of the immediately preceding Album or (ii) seven (7) months after the initial
release in the Territory of the immediately preceding Album.
3.02 Notwithstanding anything to the contrary contained herein and,
furthermore, provided that BMG exercises its option to extend the term of the
BMG Agreement into the Second Option Period as provided for in the BMG
Agreement, in the event that the First Licensed Album attains net
Soundscan-measured sales in the Territory equal to or greater than sixty two
thousand five hundred (62,500) units in all configurations combined (with a
twelve and one half percent (12.5%) provision for reserves for this calculation
only) no later than the actual date by which Company would otherwise be required
to exercise its option to extend the Term of this Agreement into the First
Option Period (the "First Option Date"), then Company's option to extend the
term of this Agreement into the First Option Period is deemed automatically
exercised as of the First Option Date. In the event that the Term of this
Agreement does not extend into the First Option Period hereof, if Company has
not released the Second Licensed Album as of such early termination date, then
Company will no longer have the right to so-release said Second Licensed Album.
4. RECORDING PROCEDURES.
4.01 Notwithstanding anything to the contrary contained herein or in the
BMG Agreement, Company and you shall mutually approve all recording personnel
(including producers), the Musical Compositions or other Selections (including
medleys), the studios, the recording dates and a detailed recording budget
(collectively, the Recording Elements") subject to the terms and conditions set
forth in the BMG Agreement.
4.02 (a) As and when required by Company, you shall allow Company's
representatives to attend any or all recording sessions hereunder.
(b) You shall timely supply Company with all of the information
Company needs in order to prepare to release Phonograph Records derived from
such Masters.
4
<PAGE>
(c) (i) All Masters shall be recorded under BMG's current Phonograph
Record Labor Contract with the AFM; all musicians who render services in
connection with the recording of such Masters (including instrumentalists, if
any) will be paid by You, the scale set forth in the said Labor Contract; and
You shall pay the required contributions to the Pension Welfare Fund.
(ii) All AFTRA members whose performances are embodied in the
Masters will be paid by You the rates applicable under the current AFTRA Code of
Fair Practices for Phonograph Recordings. You shall also pay to the AFTRA
Pension and Welfare Fund any contribution required to be made under the AFTRA
Code based on compensation to other performers whose performances are embodied
on the applicable Masters recorded hereunder.
(iii) The foregoing representations and warranties are
included for the benefit, respectively, of the AFM, AFTRA, and the AFM and AFTRA
members whose performances are embodied in the applicable Masters and may be
enforced by AFM and/or AFTRA or their respective designees, as the case may be,
and by Company.
(iv) You shall furnish or shall cause the applicable Producer
to furnish Company with copies of all union contracts and/or union session
reports.
4.03 (a) You shall deliver to Company the Masters promptly after their
completion. All original session tapes and any derivatives or reproductions
thereof shall be delivered to Company concurrently, or, at Company's election,
maintained at a recording studio or other location designated by Company, in
Company's name and subject to Company's control. Each Master shall be subject to
Company's approval as satisfactory for the manufacture and sale of Phonograph
Records, and, upon Company's request and at Your sole expense, you shall
re-record any Musical Composition or other Selection until a Master satisfactory
to Company has been obtained; provided, however, that all of the Recording
Elements associated with such additional Selections or re-recordings shall be
subject to the mutual approval of Company and You. Any Masters which are not
accepted by Company or not deemed satisfactory or otherwise not deemed Delivered
hereunder shall be considered "outtakes".
(b) In addition to Your Delivering to Company those elements, parts
and the like as described in Paragraph 8.b. of the BMG Agreement, You shall
Deliver to Company fully mixed, edited, and unequalized and equalized Masters
(including but not limited to a final two-track equalized tape copy),
satisfactory to Company for its manufacture and sale of Phonograph Records, and
all original and duplicate Masters of the material recorded, together with (i)
the multi-track tape and one (1) safety copy
5
<PAGE>
thereof; (ii) all necessary licenses and permissions; (iii) all materials
required to be furnished by you to Company for use in the packaging and
marketing of the Records, including without limitation, complete "label copy"
information with respect to such Masters; such "label copy" shall include,
without limitation (A) the title, recording dates, timing, publisher(s)
songwriter(s), performer(s) and composer(s) of each musical composition embodied
on the Masters; (B) the producer(s) thereof; and (C) any other credit and
information that is to appear on the labels, liners and packaging of Records
embodying such Masters; (iv) all "sideman" and any third party clearances and
consents, including, without limitation, all written consents in connection with
Embodied Copyrighted Materials (as defined in paragraph 13.04(a) below); (v) all
mechanical and first-use licenses for each musical composition embodied in the
Masters at the rate specified herein; and (vii) all liner notes, approved
artwork, and credits for all configurations of records. Notwithstanding anything
to the contrary contained herein, any remixing or remastering or tape
duplication(s) that may occur solely at the request of Company after the
Delivery of the Masters shall be nonrecoupable hereunder, unless You or Artist
agree otherwise.
4.04 Each Master shall embody the Artist's performance as the sole
featured artist of a single Musical Composition previously unrecorded by the
Artist and shall be recorded in its entirety in a recording studio or in such a
recording facility and with such recording equipment as may be reasonably
approved by Company. No Masters shall be recorded in whole or in part at live
concerts or other live performances unless an authorized officer of Company
agrees to the contrary in writing. Each Committed Album shall embody no fewer
than thirty five (35) minutes in playing time and containing no fewer than ten
(10) Musical Compositions unless Company otherwise agrees to the contrary in
writing. You shall not record or deliver hereunder, nor shall Company be
obligated to accept, Masters constituting a Multiple Album. However, if You
shall do so and Company shall accept those Masters hereunder, then, at Company's
election, for the purpose of calculating the number of Masters recorded and
delivered hereunder, those Masters shall be deemed to be only one (1) Album.
4.05 Any Masters which are not recorded or delivered in all respects in
accordance with the terms hereof shall not, unless Company otherwise consents in
writing, apply towards the fulfillment of your Recording Commitment.
Furthermore, if Company shall make any payments on Your behalf with Your prior
approval or which are a part of the approved Recording Elements or approved
Recording Budget with respect to any Master, you shall, within sixty (60) days
of Company's demand, pay to Company the amount thereof and Company may, without
limiting Company's
6
<PAGE>
other rights and remedies, deduct that amount from any monies payable by Company
hereunder.
4.06 If you or the Artist shall for any reason whatsoever except for a
verified medical reason (excluding any illness related to drugs, alcohol or any
self-induced or personally exacerbated cause, and otherwise subject to the terms
hereof, including without limitation paragraph 17) delay the commencement of or
be unavailable for any recording sessions for the Masters, you shall, within
sixty (60) days following Company's demand, pay Company an amount equal to the
expenses or charges paid or incurred by Company by reason thereof. Company may,
without limiting Company's other rights and remedies, deduct that amount from
any monies payable by Company hereunder.
4.07 Company may, at its election, discontinue any recording sessions for
the Masters if in Company's judgment the Masters being produced will not be
satisfactory; provided, however, that prior to discontinuing any such recording
sessions, Company agrees to consult with You and Artist with the goal of
agreeing to viable alternatives (including, but not limited to the recording of
additional or other selections, etc.).
5. RECORDING COSTS.
5.01 You shall pay the Recording Costs of the Masters recorded at
recording sessions conducted in accordance with the terms hereof. If the
Recording Costs of any Masters shall exceed the Recording Budget approved by
Company, You shall be solely responsible for and shall promptly pay the excess.
You shall be solely responsible for and shall make any payments to any
individuals rendering services in connection with the recording of the Masters.
You shall also be solely responsible for and shall pay any penalties incurred
for late payments caused by any delay in submitting union contracts forms,
report forms, or invoices or other documents. If, however, Company, on Your
behalf and at Your request, pays any of the Recording Costs (including, but not
limited to the excess or such other costs as described above), you shall, within
sixty (60) days following Company's demand, pay to Company the amount thereof
and Company may, without limiting Company's other rights and remedies, deduct
that amount from any monies payable by Company hereunder.
5.02 Recording Costs shall mean and include all union scale payments
(including "excess" scale payments) made to the Artist, all payments required to
be made to any other individuals rendering services in connection with the
recording of the Masters (including, but not limited to, the Producer), all
other payments which are required to made by You or Company pursuant to any
applicable law or regulation or the provisions of any collective bargaining
agreement between You or Company and any
7
<PAGE>
union or guild, all amounts paid or incurred for studio or hall rentals, tape,
engineering, editing, instrument rentals and cartage, mastering, mixing,
re-mixing, "sweetening", transportation and accommodations, immigration
clearances, trademark and service mark searches and clearances, "sample"
clearances any so-called "per diems" for any individuals (including the Artist)
rendering services in connection with recording of the Masters, together with
all other amounts paid or incurred by Company in connection with the recording
of the Masters; provided, however, that any Recording Costs incurred after
Delivery shall be subject to Paragraph 4.03 hereinabove. Notwithstanding the
foregoing, you agree that the Advances hereunder include the prepayment of
session union scale as provided in the applicable union codes, and you and
Artist agree to complete any documentation required by the applicable union to
implement this sentence. Notwithstanding anything to the contrary contained
herein, the term Recording Costs shall also mean and include all other amounts
paid or incurred for the preparation of camera-ready artwork to be used in
connection with the manufacturing and sale of Masters hereunder (including, but
not limited to, photo session costs, photographer costs, artwork preparation,
lay-out design, duplication costs, shipping costs, and the like).
5.03 If packaging for Phonograph Records hereunder contains special
elements or requires additional fabrication costs (e.g., for embossing,
die-cutting, special ink or paper, additional color separations requested by
you, etc.) such that Company would incur manufacturing or fabrication costs in
excess of Company's normal per-unit costs without such special elements or costs
("Standard Manufacturing Costs"), and provided you have requested or consented
to such special elements or additional fabrication costs, the excess above
Company's Standard Manufacturing Costs shall be paid by you or reimbursed to
Company on demand. All such excess costs incurred by Company shall be invoiced
to you, and may be deducted from any sums (other than mechanical royalties)
required to be paid by Company pursuant to this Agreement. (Nothing contained
herein shall be deemed to require Company to utilize any artwork elements which
would cause Company to incur any Special Packaging Costs.)
6. RIGHTS.
6.01 (a) Subject to the terms and provisions herein, Company shall have
the exclusive right to for itself and to authorize others to manufacture, sell,
distribute and advertise Phonograph Records embodying those Masters under any
trademarks, trade names or labels, and to lease, license, convey or otherwise
use or dispose of those Masters by any method now or hereafter known in any
field of use and to perform publicly Phonograph Records and other reproductions
embodying those Masters, all upon
8
<PAGE>
such terms as Company may approve, or Company may refrain from doing any or all
of the foregoing.
(b) Notwithstanding anything to the contrary contained herein,
Company shall not have the right to manufacture, sell, promote or otherwise
distribute Masters (including the First Licensed Album, the Second Licensed
Album and any and all Greatest Hits Albums) after the seven (7) year period
commencing on the date of the retail street date in the Territory of the last
Phonograph Record embodying any of the Masters described herein (the
"Distribution Period"). Furthermore, and notwithstanding anything to the
contrary contained herein, in the event that as of the last day of the
Distribution Period the sum of all of your royalty accounts (including, but not
limited to, your royalty account in connection with Audiovisual Recordings and
in connection with audio royalties) on the books of Company has a debit balance,
the Distribution Period shall automatically be extended for an additional period
of time until no later than the next accounting period semester first falling
after that accounting statement that Company was required to deliver to You
which would have showed (if applicable) that Your royalty account on the books
of Company has a credit balance. Subject to the terms and provisions set forth
in this Agreement, nothing contained herein shall prevent Company from entering
into licenses the term of which extend for ten (10) years from the date of the
initial release of the Record embodying such licensed master. For the avoidance
of doubt, Company shall be required to obtain Your prior approval in connection
with any such licenses that extend beyond ten (10) years (as described in the
immediately preceding sentence), which approval will not be unreasonably
withheld. Upon the expiration of the Distribution Period (as same may be
extended), Company shall offer to sell to you its inventory of Records
manufactured from, or embodying all or any portion of any of the Masters at its
then current box-lot/wholesale price to distributors with respect to such
particular Records. You shall have thirty (30) days from the receipt of
Company's notice to accept such offer. Notwithstanding anything to the contrary
contained herein, for six (6) months following expiration of the Distribution
Period (hereinafter the "Sell-Off Period"), Company may continue to advertise
and sell any Records previously manufactured from, or embodying all or any
portion of any of the Masters and on hand on a non-exclusive basis; provided,
however, that Company shall have furnished you with a written inventory upon the
expiration of the Distribution Period. Following the expiration of the
Distribution Period and the Sell-Off Period referred to in this Subparagraph,
Company shall notify you as to the number and type of Records manufactured from,
or embodying all of any portion of the Masters then remaining on hand, and you
may, at your option, exercisable within ten (10) days after such notice,
repurchase any or all such Records at Company's manufacturing cost thereof
9
<PAGE>
or instruct Company to destroy such Records. If Records are destroyed, Company
will furnish to you an affidavit to that effect upon your request.
Additionally, at such time, Company will execute all paperwork and documents
necessary to transfer any and all copyrights (or the like) as above-described
in Paragraph 6.01 (a) to You and Company will not have any further rights in
and to the Masters. Additionally, following the expiration of the Distribution
Period and the Sell-Off Period referred to herein, Company agrees to execute
such documents as necessary so as to revert to You or your designees any and
all rights or the like that it may have in and to the any of the Masters,
including, but not limited to any rights that Company may have to income from
Masters licensed hereunder to third parties which licenses extend beyond the
expiration of the Distribution Period and Sell-Off Period. Company
acknowledges that after the Distribution Period and the Sell-Off Period, it
has no rights in and to any of the Masters. For the avoidance of doubt,
nothing contained herein shall authorize or otherwise permit Company to
manufacture any Records during the Sell-Off Period.
c. Notwithstanding anything to the contrary contained herein and
so long as the sum of all of your royalty accounts on the books of Company has
a debit (i.e. unrecouped) balance, during the four (4) year period commencing
on the date three (3) full calendar years after the retail street date in the
Territory of the last Record embodying any of the Masters described herein,
You shall have the right to pay to Company the sums described in Subparagraph
(d) hereinbelow ("Repurchase Price") and upon the receipt of such payment by
Company, the Term of this Agreement shall expire and otherwise terminate;
provided, however, that Company shall still retain its right to the Sell-Off
rights as described in the immediately preceding Subparagraph (b) (the
"Repurchase Right"). Furthermore, Your exercising the Repurchase Right will
not affect any licenses that Company might have entered into in connection
with the Masters.
d. The Repurchase Price in connection with the Repurchase Right,
* if any, shall be the amount equal to XXXXXXXXXXXXXXXXXXXX percent of sum of
all of your and Artist's royalty accounts on the books of Company which
contain a debit balance (including, but not limited to the audio account and
the Audiovisual Account) as of the end of the immediately preceding royalty
accounting period.
6A.01(a) Provided you have fulfilled all your material obligations under
this Agreement, Company will commercially release each Album recorded in
fulfillment of your Recording Commitment in the Territory within one hundred
eighty (180) days after the date of completion of the lacquer, copper or
equivalent masters concerned; provided, however, that Company will
* - Confidential portions omitted and filed separately with the Commission.
10
<PAGE>
commercially release the First Licensed Master in the Territory no later than
September 30, 1996 and nothing contained herein shall grant Company any
so-called "cure" rights with respect to its release commitment for such First
Licensed Master. If Company fails to do so you may notify Company at any time
after the end of the one hundred eighty (180) day period concerned, that you
intend to terminate the Term of this Agreement unless Company releases the Album
within sixty (60) days after Company's receipt of your notice (the "cure
period"). If Company fails to commercially release the Album in the Territory
before the end of the cure period you may terminate the Term of this Agreement
by giving Company notice at any time after the end of the cure period. On
receipt by Company of your termination notice the Term of this Agreement will
end and all parties will be deemed to have fulfilled all of their obligations
under it except those obligations which survive the end of the Term (e.g.,
warranties, re-recording restrictions and obligation to pay royalties) and
Company will have no rights in and to such Album that it failed to release
(which failure to release resulted in the termination of this Agreement as
provided for herein). Your only remedy for failure by Company to release an
Album will be termination in accordance with this paragraph.
(b) The running of the one hundred eighty (180) day and the sixty
(60) day period referred to in paragraph 6A.02(a) will be suspended (and the
expiration date of each of those periods will be postponed) for the period of
any suspension of the running of the Term of this Agreement under paragraph
17.01. If any such one hundred eighty (180) day or sixty (60) day period would
otherwise expire on a date between October 31st and the next February 1st its
running will be suspended for the duration of the period and between October
31st and February 1st and its expiration date will be postponed by the same
amount of time (i.e., one hundred twenty-four (124) days).
6A.02 Company shall not re-mix or re-edit any Master Recording delivered
in fulfillment of your Recording Commitment without your mutual approval. The
preceding sentence shall not apply with respect to editing necessary for the
release of Singles, Long-Play Singles or non-disc configurations, or to
eliminate material which in the reasonable opinion of Company's legal counsel is
likely to constitute a defamation, libel or violate or infringe upon any right,
including, without limitation, the right of privacy, of any person.
6A.03 Company shall consult with you in connection with Company's
selection of the so-called "A" sides and "B" sides of Singles released in the
Territory; provided that Company's inadvertent failure to do so shall not be
deemed a breach hereof. During the Term hereof, you shall select the "B" side of
each Single released in the Territory; provided that you have first
11
<PAGE>
consulted in good faith with Company with respect to such "B" Side selection and
provided you make such selection in a timely manner. Notwithstanding the
foregoing, Company shall have the absolute right to reject such "B" Side for any
Master that Company reasonably believes may subsequently be released as the "A"
Side of a Single.
6A.04 During the Term, Company will not, without Your consent, sell
Records derived from Masters delivered in fulfillment of Your Recording
Commitment as "cut-outs" in the Territory prior to the earlier of (i) twelve
(12) months from the date of initial Territory release of such Records or (ii)
two (2) months after such Record is no longer in any then-published Billboard
Chart; however, if Company sells any Records in contravention of the foregoing
restriction, Your sole remedy shall be that You shall be entitled to the
otherwise applicable royalty rate hereunder on all such sales during the period
of such restriction.
6A.05 (a) In the event Company elects to sell Records hereunder as
cut-outs as authorized by Paragraph 6A.04 hereinabove, Company shall so notify
You, and shall offer You the opportunity to purchase all of such inventory
(provided that no failure by Company to give such notice and/or offer said
opportunity to You shall constitute a breach hereof) at a price equal to the
price at which Company elected to sell all of such Records to third parties. You
may notify Company of Your desire to purchase Company's inventory in the
Territory of such Records, provided that You tender payment-in-full therefor
within thirty (30) business days following your receipt of such cut-out Records.
You shall be deemed to have rejected such opportunity if You do not respond in
writing within five (5) business days following Company's offer to You of the
opportunity to purchase such Records.
(b) Solely with respect to any Records which are "cutout" by
Company, Company and You shall both have the right, subject to the approval of
the other party, such approval not to be unreasonably withheld, to enter into
third-party licenses for the sale and distribution of such "cut-out" Records;
provided, however, that fifty percent (50%) of the net income from such
"cut-out" licenses shall be payable directly to Company for its own account and
fifty percent (50%) of the net income from such "cut-out" license shall be
payable directly to You for your own account.
6A.06 During the Term, Company will not, without Your consent, sell any
Committed Album as a Budget Record in the Territory until the earlier of (i)
fifteen (15) months after the initial release of the Album concerned as a
"top-line" Record in the Territory or (ii) three (3) months after the Committed
Album
12
<PAGE>
no longer appears in any Billboard Album Chart; however, if Company sells any
Records in contravention of the foregoing restriction, Your sole remedy shall be
that You shall be entitled to the otherwise applicable royalty rate hereunder on
all such sales during the period of such restriction.
6A.07 During the Term, Company will not, without Your consent, sell any
Committed Album as a Mid-Priced Record in the Territory until the earlier of (i)
nine (9) months after the initial release of the Album concerned as a "top-line"
Record in the Territory or (ii) three (3) months after the Committed Album no
longer appears in any Billboard Album Chart; however, if Company sells any
Records in contravention of the foregoing restriction, Your sole remedy shall be
that You shall be entitled to the otherwise applicable royalty rate hereunder on
all such sales during the period of such restriction.
6A.08 Company will not, without your consent, initially release any
Committed Album in the Territory under any record label other than a "top-line"
label then used by the Imprint Records, Inc. for recordings of performances by
the best-selling pop artists then under exclusive term contract to Imprint
Records, Inc.; provided, however, that this restriction shall not apply to the
Second Licensed Master.
6A.09 With respect to audio Records manufactured for sale in the
Territory, Company will not, without obtaining Your consent, use or license
others to use Masters on "Premium Records". (A "Premium Record" is a Record
produced for use in promotion of the sale of merchandise other than Phonograph
Records which bears the name of the sponsor for whom the Record is produced.).
6A.10 Company will not, without your consent, commercially release
"outtakes" on Phonograph Records or otherwise exploit such outtakes. "Outtakes"
shall mean preliminary, unfinished Master Recordings made under this Agreement
or such other Masters that are specifically called 'outtakes' hereunder. For the
purpose of this Agreement, the term "outtakes" will include any Masters that are
"in the can" and have not been released as a part of an Album project.
6A.11 Company shall not, without your consent, license the Masters for use
in the Territory in television or radio commercials advertising non-phonograph
record products or for motion pictures or television (pay, free broadcast or
otherwise) programming which motion pictures or television programming at the
time of the license is intended to have an "X" or "NC-17" rating by the Motion
Picture Association of America; provided, however, that in the event that Your
account is in a "recouped position" on the books of Company (as that term is
generally
13
<PAGE>
understood in the music industry), then Company will not, without your
consent, license the Masters for use in any motion picture or television
programming. Notwithstanding anything to the contrary contained herein, after
the Term of this Agreement, Company shall be entitled to retain for its own
account fifty percent (50%) of the net income payable from any licenses
entered into pursuant to this Paragraph 6A.16 which licenses were entered into
during the Term. Furthermore and notwithstanding anything to the contrary
contained herein, Company shall be entitled to retain for its own account
twenty five percent (25%) of the net income payable from any licenses entered
into pursuant to this Paragraph 6A.16 which licenses were entered into during
the period of time beginning as of the expiration of the Term of this
Agreement and ending on the date three (3) years thereafter (the "End Date");
provided, however, that in the event that You are in negotiations for any such
licenses as of the End Date, then such twenty five percent (25%) amount shall
be payable to Company so long as the license is actually entered into no later
than the date one (1) year after the End Date.
6A.12 (a) (i) If Company releases in the Territory a "Greatest Hits" or
"Best Of" type Album consisting of Master Recordings recorded hereunder,
Company and You shall mutually agree upon the selections, tracking, title and
artwork to be included on such "Greatest Hits" or "Best Of" type Album;
provided, however, that Your approval shall be deemed granted in connection
with any Record that was or is planned to be released as a Single hereunder.
(ii) With respect to any "Greatest Hits" or "Best Of"
type Album to be released in the Territory during the Term, if Company shall
so request, You shall Deliver to Company within ninety (90) days following
such request up to two (2) sides (the "New Side(s)"), consisting of newly
recorded material, for (without limitation) inclusion in said "Greatest Hits"
or "Best Of" type Album.
(b) Provided You are in compliance with Your material obligations
hereunder, if Company releases any such "Greatest Hits" or "Best Of" type
Album in the Territory in accordance with subparagraph 6A.12 (a) above, then
Company shall pay to You an Advance (the "Greatest Hits Advance") equal to the
* amount by which XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX dollars exceeds the unrecouped
balance of Your royalty account hereunder, provided, however, in no event
shall the Greatest Hits Advance be less than the actual Recording Costs
approved by Company in connection with the New Sides, if any plus
* XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX dollars. Any Greatest Hits Advance payable to
You pursuant to this paragraph 6A.12 (b) shall be made as follows:
* XXXXXXXXXXXXXXXXXXXXXXXXXX dollars upon the delivery of the New Sides, if any,
and the balance promptly after the initial
* - Confidential portions omitted and filed separately with the Commission.
14
<PAGE>
Territory release of the "Greatest Hits" or "Best Of" type Album concerned.
Notwithstanding the foregoing, if Company requests the New Sides and You fail or
refuse to deliver the New Sides, then no Greatest Hits Advance shall be payable
to You in connection with Company's release of any such "Greatest Hits" or "Best
Of" type Album.
(c) Company shall pay any and all costs (the "New Side(s) Costs")
incurred in connection with such "Greatest Hits" or "Best Of" type Album. The
applicable Greatest Hits Advance payable and the New Side(s) Costs shall be
charged against and recoupable at any time from any and all royalties (other
than mechanical royalties) accruing to Your credit hereunder. Neither any
"Greatest Hits" or "Best Of" type Album(s) nor any New Side(s) shall be deemed
part of Your Recording Commitment hereunder.
(d) The royalty rate applicable to a given Master Recording embodied
on a "Greatest Hits" or "Best Of" type Album shall be the highest royalty rate
actually attained hereunder for the Contract Period in which such Master
Recording was recorded. The royalty rate applicable to the New Sides shall be
equal to the highest royalty rate attributable to any of the other Master
Recordings embodied on such "Greatest Hits" or "Best of" type Album.
6A.13 Company may not license any Masters hereunder for distribution
through so-called "record clubs" without your prior approval.
6A.14 Company shall not during any one (1) year without Your consent, such
consent not to be unreasonably withheld, initially couple more than three (3)
different Masters made hereunder with recordings not embodying Artist's
performances; provided, however, that no more than two (2) of such Masters will
appear on the same Album at the same time. The immediately preceding sentence
shall only apply provided that Your royalty account hereunder is in a "recouped
position" (as such term is commonly understood in the recording industry) as of
the semi-annual accounting period immediately prior to the semi-annual
accounting period when Company initially couples a Master made hereunder with
recordings not embodying Artist's performances. Notwithstanding the first
sentence of this paragraph 6A.13, no such consent shall be required for
"sampler" Records. Furthermore, notwithstanding anything to the contrary
contained herein, Company agrees to use its best efforts to consult with You
prior to engaging in such coupling activities as specifically described in this
subparagraph; provided, however, that the failure of Company to so consult with
You shall not be deemed a breach of this Agreement.
15
<PAGE>
7. NAME AND LIKENESS.
7.01 (a) Company and any person, firm or corporation designated by Company
shall have the right during the Distribution Period and the Sell-Off Period
throughout the Territory to use and to permit others to use the Artist's name
(both legal and professional, and whether presently or hereafter used by the
Artist), likeness, other identification and biographical material concerning the
Artist, and the name and likeness of any producer or other person rendering
services in connection with Masters recorded by the Artist during the Term
solely for the purposes of trade and advertising; provided, however, that no
such use will be or imply a merchandising tie-in with any goods, wares, services
or institutions other than as such may be specifically authorized hereunder
without Your prior written consent. Company shall have the further right to
refer to the Artist during the Term and for the Territory as Company's exclusive
recording artist and you and the Artist shall in all your and the Artist's
activities in the entertainment field use reasonable efforts to cause the Artist
to be billed and advertised during the Term as Company's exclusive recording
artist. The rights granted to Company pursuant to this paragraph with respect to
the Artist's name, likeness, other identification and biographical material
concerning the Artist shall be exclusive during the Term and nonexclusive
thereafter. Accordingly, but without limiting the generality of the foregoing,
neither you nor the Artist shall authorize or permit any person, firm, or
corporation other than Company to use during the Term the Artist's legal or
professional name or the Artist's likeness in connection with the advertising or
sale of Phonograph Records.
(b) For and in the Territory, neither you or the Artist shall render
any services or authorize or permit your or the Artist's name or likeness or any
biographical material concerning you or the Artist to be used in any manner by
any person, firm or corporation in the advertising, promoting or marketing of
blank magnetic recording tape or any other product or device primarily intended
for home use, whether now known or hereafter developed, which may be used for
the fixation of sound alone or sound together with visual images.
7.02 (a) It is hereby expressly agreed that, as between you, Artist and
Company and with respect to such materials that Company pays for, Company shall
exclusively own and control all materials comprising the artwork (including,
without limitation, art, photographs, graphic designs, etc.) and other items
created or used in connection with the exploitation of Phonograph Records
hereunder (the "Art Materials"), including, without limitation, all copyrights
and the right to secure copyright throughout the world and in perpetuity.
16
<PAGE>
(b) For ten (10) business days prior to Your conducting any
negotiation with any third party with respect to the right to use Your name,
portrait, picture or likeness or other identification of or any used by You in
connection with the manufacture, advertising, sale and/or distribution of
non-Record products ("Merchandising Rights"), You shall enter into good faith
negotiations with Company with respect to a license of such Merchandising
Rights to Company.
8. ADVANCES.
8.01 All monies paid to you or the Artist or on Your or the Artist's
behalf or with Your or the Artist's permission, authorization or request or
that are specifically deemed Advances hereunder or to or on behalf of any
person, firm or corporation representing you or the Artist, other than
royalties payable pursuant to this Agreement, shall constitute Advances
hereunder.
8.02 Within ten (10) business days following the full execution of this
* Agreement, Company shall pay to You XXXXXXXXXXXXXXXXXXXXX dollars, which
payment shall be deemed an Advance against, and shall be fully recoupable
from, all royalties (other than mechanical royalties) otherwise payable
hereunder and, furthermore, which payment shall specifically be deemed to be
an Advance against and a prepayment of any and all applicable union session
payments due and owing to Artist in connection with the recording of the Album
required to be recorded and delivered and otherwise licensed to Company during
the Initial Period, if any.
8.03 Within the earlier of (i) ninety (90) business days following the
full execution of this Agreement and (ii) the date by which Company is
required to make the payment to You specifically referred to in Paragraph 8.04
* hereinbelow), Company shall pay to You XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
dollars, which payment shall be deemed an Advance against, and shall be fully
recoupable from, all royalties (other than mechanical royalties) otherwise
payable hereunder and, furthermore, which payment shall specifically be deemed
to be an Advance against and a prepayment of any and all applicable union
session payments due and owing to Artist in connection with the recording of
the Album required to be recorded and delivered and otherwise licensed to
Company during the Initial Period, if any.
8.04 Within twelve (12) business days following the initial release in
the Territory of the First Licensed Master, Company shall pay to You
* XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX dollars, which payment shall be deemed an
Advance against, and shall be fully recoupable from, all royalties (other than
mechanical royalties) otherwise payable hereunder and,
* - Confidential portions omitted and filed separately with the Commission.
17
<PAGE>
furthermore, which payment shall specifically be deemed to be an Advance
against and a prepayment of any and all applicable union session payments due
and owing to You in connection with the recording of the Album required to be
recorded and delivered and otherwise licensed to Company during the Initial
Period, if any.
8.05. Within eleven (11) business days following the commencement of
* each Option Period, if any, Company shall pay to You XXXXXXXXXXXXXXXXXXXXXX
dollars, which payment shall be deemed an Advance against, and shall be fully
recoupable from, all royalties (other than mechanical royalties) otherwise
payable hereunder and, furthermore, which payment shall specifically be deemed
to be an Advance against and a prepayment of any and all applicable union
session payments due and owing to Artist in connection with the recording of
the Album required to be recorded and delivered and otherwise licensed to
Company during such Option Period, if any.
8.06. Within ten (10) business days following the commencement of
recording of each Album required to be recorded and delivered by Artist (or
otherwise licensed by You) to Company during each Option Period, if any,
* Company shall pay to You XXXXXXXXXXXXXXXXXXXXXXXXX dollars, which payment
shall be deemed an Advance against, and shall be fully recoupable from, all
royalties (other than mechanical royalties) otherwise payable hereunder and,
furthermore, which payment shall specifically be deemed to be an Advance
against and a prepayment of any and all applicable union session payments due
and owing to Artist in connection with the recording of the Album required to
be recorded and delivered and otherwise licensed to Company during such Option
Period, if any.
8.07. Within thirty (30) business days following the delivery of each
Album required to be recorded and delivered by Artist (or otherwise licensed
by You) to Company during each Option Period, if any, Company shall pay to the
* You an amount equal to difference between XXXXXX dollars and XXX percent of
* XXX percent of the actual Recording Costs for the Album recorded and delivered
and otherwise licensed to Company during the immediately preceding Contract
Period, which payment shall be deemed an Advance against, and shall be fully
recoupable from, all royalties (other than mechanical royalties) otherwise
payable hereunder and, furthermore, which payment shall specifically be deemed
to be an Advance against and a prepayment of any and all applicable union
session payments due and owing to Artist in connection with the recording of
the Album required to be recorded and delivered and otherwise licensed to
Company during such Option Period, if any. Notwithstanding anything to the
contrary contained herein, Company shall not be required to pay to You an
amount in excess of the amounts listed below for the
* - Confidential portions omitted and filed separately with the Commission.
18
<PAGE>
Albums delivered and otherwise licensed to Company during the Option Periods
listed below:
OPTION PERIOD MAXIMUM PAYMENT TO YOU
* FIRST OPTION PERIOD $XXXXXXXXX
* SECOND OPTION PERIOD $XXXXXXXXX
* THIRD OPTION PERIOD $XXXXXXXXX
* FOURTH OPTION PERIOD $XXXXXXXXX
* FIFTH OPTION PERIOD $XXXXXXXXX
* 8.08 XXXXXXXXXXXXXX percent of all sums paid or incurred by Company in
connection with the independent radio promotion of Phonograph Records
hereunder or in connection with independent publicity relating to Artist, if
any, shall be deemed to constitute Advances hereunder; provided, however, that
such recoupable amounts in connection with the independent radio promotion
* commitments shall not exceed XXXXXXXXXXXXXXXXXX dollars in connection with any
* Single nor XXXXXXXXXXXXXXXXX dollars in connection with any Album.
9. ROYALTIES.
9.01 Company will pay you an "all-in" royalty, during the term of
copyright in the country concerned of Masters embodied in Phonograph Records
delivered hereunder computed at the applicable percentage indicated in the
Royalty Schedule below, of the applicable Royalty Base Price in respect of Net
Sales of such Phonograph Records (other than Audiovisual Records) consisting
entirely of Masters licensed under this Agreement during the respective
Contract Periods specified below and sold by Company or Company's permitted
licensees through Normal Retail Channels ("USNRC"):
ROYALTY SCHEDULE
------------------------------------------------------------------------------
TERRITORY
---------
Masters made during Long-Play
the: Albums Singles Singles
----------------------------------------------------------------
* First Option Period XXX XXX XXX
* Second Option Period XXX XXX XXX
* - Confidential portions omitted and filed separately with the Commission.
19
<PAGE>
* Third Option Period XXX XXX XXX
* Fourth Option Period XXX XXX XXX
* Fifth Option Period XXX XXX XXX
The royalty rates set forth in this paragraph 9.01 are sometimes
referred to herein as your "basic royalty rate(s)".
9.02 Notwithstanding anything to the contrary contained in the Royalty
Schedule hereinabove, and with respect to each Album Delivered in fulfillment
of your Recording Commitment hereunder, the royalty rate applicable to USNRC
Net Sales of top-line Albums pursuant to the terms hereof shall be the royalty
rate specified in the Royalty Escalation Schedule below.
ROYALTY ESCALATION SCHEDULE
Album recorded in Net Sales in the Territory of top-
fulfillment of the line Albums (determined in
Recording Commitment accordance with Company's standard
for the: accounting procedures).
* XXX XXX XXX XXX XXX
* First Option Period XXX XXX XXX XXX XXX
* Second Option Period XXX XXX XXX XXX XXX
* Third Option Period XXX XXX XXX XXX XXX
* Fourth Option Period XXX XXX XXX XXX XXX
* Fifth Option Period XXX XXX XXX XXX XXX
9.03 (a) Subject to the terms and provisions set forth in Paragraph
6A.13 hereinabove, the royalty rate on Phonograph Records sold through
* so-called "record clubs" shall be XXXXXXXX of the otherwise applicable royalty
* rate if manufactured and sold by Company, and an amount equal to XXXXXXXX of
the Net Royalty from the sale of those Phonograph Records if manufactured and
sold by Company's licensees.
(b) If, pursuant to Company's agreement with any record club
licensee distributing Records hereunder through a direct mail or mail order
operation ("Club Agreement") (1) the aggregate number of our Records
(including Records hereunder) distributed thereunder during any particular
period of time as "free" or "bonus" records
* - Confidential portions omitted and filed separately with the Commission.
20
<PAGE>
shall exceed the aggregate number of our Records (including Records hereunder)
sold thereunder during that period (hereinafter such excess Records are
referred to as "Excess Club Records"); and (2) the number of Records hereunder
distributed thereunder during that time period by such licensee as "free" or
"bonus" Records shall exceed the number of records hereunder sold during that
time period by such licensee (hereinafter such excess Records are referred to
as "Excess Club Artist Records") then Company shall credit Your royalty
account hereunder with a portion of the adjusting royalty payment, if any,
made by such licensee to Company in respect of the Excess Club Records
distributed by that licensee during that time period, which portion shall be
* determined by multiplying XXXXXXX percent by a fraction the numerator of which
shall be the aggregate number of Excess Club Artist Records distributed by
that licensee during that time period and the denominator of which shall be
the Aggregate Qualifying Excess Club Records (as defined in the following
sentence), including Excess Club Artist Records, distributed by that licensee
during that time period. As used in the preceding sentence, "Aggregate
Qualifying Excess Club Records" shall mean the aggregate number of "free" or
"bonus" records in the excess of records sold with respect to each artist
signed to Company (or other royalty participant) whose "free" or "bonus"
records distributed pursuant to a Club Agreement exceed the number of their
records which are sold thereunder during the applicable time period.
9.04 Except as specifically provided for herein, in respect of any Master
Recording licensed by Company to others for their distribution of Phonograph
* Records in the Territory, Company will pay You XXXXXXXX percent of Company's
net receipts from Company's licensee. ("Net receipts", in the preceding
sentence, means receipts as computed after deduction of all copyright, AFM and
other applicable third party payments required by law.) If another artist, a
producer, or any other Person is entitled to royalties on sales of such
Records, that payment will be divided among You in the same ratio as that
among Your respective basic royalty percentage rates.
9.05 (a) The royalty rate on any Mid-Price Record will be
* XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX of the applicable basic royalty rate
prescribed in paragraph 9.01. The royalty rate on any Budget Record, any
Multiple Record Set, any Premium Record, any Record sold for distribution
through military exchange channels, or any "picture disc" (i.e., a disc Record
with artwork reproduced on the surface of the Record itself) will be
* XXXXXXXXXXXXXXXXXXXXXX of the applicable basic royalty rate prescribed in
paragraph 9.01. The royalty rate on any Record which is not an Album, Single
* or a Long-Play Single will be XXXXXXXXXXXXXXXXXXX of the applicable basic
Album royalty rate prescribed in paragraph 9.01. The royalty rate on any
digital compact cassette ("DCC") or any Mini-disc Record will be
* XXXXXXXXXXXXXXXXXXXXX percent of the rate which would otherwise be applicable
under this Agreement. The royalty rate for
* - Confidential portions omitted and filed separately with the Commission.
21
<PAGE>
* any Record in a New Configuration will be XXXXXXXX the rate which would
otherwise be applicable hereunder. The provisions set forth in the immediately
preceding sentence shall apply until twelve (12) months following the initial
release of any Master delivered hereunder as embodied on such New
Configuration. Thereafter, the royalty for Records sold in the form of New
Configuration shall be negotiated in good faith by the parties, taking into
account, among other things, the then-prevailing industry standards.
Notwithstanding anything to the contrary contained herein, Company shall have
the right to release, distribute and sell such Records prior to the completion
of such negotiations, and to accrue royalties to Your account hereunder at the
royalty rate set forth herein. Notwithstanding anything to the contrary in the
immediately two (2) preceding sentences, in the event Company adopts a general
policy applicable to the majority of new artists signed exclusively to Company
which provides for a royalty rate reduction with respect to records in compact
disc or DCC or Mini-disc configuration more favorable to such new artist than
the royalty rate reduction provided herein, You shall receive the benefit of
such general policy, on a prospective basis only.
(b) The royalty rate applicable to USNRC Net Sales of top-line
compact disc Records will be the below-listed percentage of the rate which
would otherwise be applicable under this Agreement The royalty rate applicable
to USNRC Net Sales of top-line compact disc Albums pursuant to the terms
hereof shall be the percentage of the rate which would otherwise be applicable
under this Agreement as specified in the Compact Disc Royalty Escalation
Schedule below.
COMPACT DISC ROYALTY ESCALATION SCHEDULE
------------------------------------------------------------------------------
Album recorded in Net Sales in the Territory of top-
fulfillment of the line compact disc Albums
Recording Commitment (determined in accordance with
for the: Company's standard accounting
procedures).
* XXXX XXXX XXXX XXXX XXXX
All
Contract
* Periods XXX XXX XXX XXX XXX
9.06 (a) Except as otherwise specifically set forth herein, on Masters
licensed by Company on a flat-fee or a royalty basis for the sale of
Phonograph Records or for any other uses, the royalty rate shall be an amount
* equal to XXXXXXXX percent of the
* - Confidential portions omitted and filed separately with the Commission.
22
<PAGE>
Net Flat Fee or Net Royalty, as applicable, from such exploitation of the
Masters.
(b) To the extent permissible at law, you hereby assign to Company
all right, title and interest in and to any and all royalties or other
payments to which you are or may become entitled to receive (herein "Your
Share") under the Audio Home Recording Act of 1992, as it may be amended (the
"Act"), or any implementing or similar legislation requiring the payment of
copyright royalties in connection with the sale of recording devices or blank
tapes or any other recordable device (e.g., digital audio tape, DCC). Upon
receipt by Company of such royalties or payments, Company shall credit your
royalty account with one hundred (100%) percent of Your Share of such
royalties or payments received. In order to effectuate the foregoing, you
shall execute and deliver to Company a letter of direction address to the
Register of Copyrights of the U.S. Copyright Office and you agree to execute
and deliver to Company any other document or documents as may be reasonably
necessary to cause the payment to Company of Your Share of such royalties or
payments. It is expressly understood and agreed that except as provided above
in this paragraph 9.06(b), Company shall be entitled to retain for its own use
and benefit any royalties or payments received by Company pursuant to the Act.
9.07 Audiovisual Royalties shall be computed on the Audiovisual Records
Royalty Base Price; otherwise, in accordance with the provisions of this
Agreement applicable to Conventional Albums and: If manufactured and sold by
* Company, XXXXXXXXXXXXXXXXXX percent on U.S. sales, XXXXXXXXXXXXXXXXXXXX
percent ex-U.S. If manufactured and sold by Licensees (in the U.S. or
elsewhere), and on Audiovisual Recordings licensed or otherwise furnished by
* Company for exploitation other than on Audiovisual Records, XXXXXXXXXXXXXXX
percent of Net Receipts. Audiovisual royalties (and receipts payments) are
"all-in" (inclusive of, without limitation, payments to publishers).
9.08 Notwithstanding anything to the contrary contained in this Article
9:
(a) In respect of Joint Recordings, the royalty rate to be used in
determining the royalties payable to you shall be computed by multiplying the
royalty rate otherwise applicable by a fraction, the numerator of which shall
be one (1) and the denominator of which shall be the total number of royalty
artists whose performances are embodied on a Joint Recording. The term "Joint
Recording" shall mean any Master Recording embodying the Artist's performances
and any performances by another artist with respect to which Company is
obligated to pay royalties. Artist shall not be required to record any such
Joint Recordings without Artist's prior approval.
* - Confidential portions omitted and filed separately with the Commission.
23
<PAGE>
(b) The royalty rate on a Phonograph Record embodying Masters made
hereunder together with other Masters will be computed by multiplying the
royalty rate otherwise applicable by a fraction, the numerator of which is the
number of Selections embodying Masters made hereunder and contained on the
particular record concerned and the denominator of which is the total number
of Selections contained on such Record. The royalty rate on an Audiovisual
Record containing a Audiovisual Recordings made hereunder and other
audiovisual works will be determined by apportionment based upon actual
playing time on the Record concerned.
(c) No royalties shall be payable to you in respect of Phonograph
Records sold or distributed by Company or Company's licensees for promotional
purposes, as cut-outs, at close-out prices, for scrap, at less than inventory
cost or at fifty (50%) percent or less of the Record's highest posted
wholesale price (whether or not intended for resale), as "free", "no charge"
or "bonus" Records (whether or not intended for resale), to Company's
employees or those of Company's licensees and their relatives, or to radio
stations; provided, however, that Company's activities in connection with same
are reasonable.
(d) (i) If records derived from the Masters are sold to
distributors or others for less than Company's highest posted wholesale price,
or at a discount therefrom or are distributed to others for resale as "free",
* "no charge" or "bonus" Records, but for more than XXXXXXXX percent of such
wholesale price, then, for purposes of this paragraph, a percentage of such
records shall be deemed non-royalty bearing records, which percentage shall be
an amount equal to the percentage of such lesser amount or the applicable
discount. Notwithstanding anything to the contrary contained herein, Company
will not engage or distribute records as "free" or "no charge" or "bonus"
Records (other than in connection with Record Club) without the prior written
consent of You or Artist.
(ii) Company agrees that such special and discount programs
for Albums shall not exceed in the aggregate on a royalty-free basis
* XXXXXXXXXXXX percent of the aggregate gross units of the particular Album
concerned shipped through USNRC unless Company obtains your consent. If
Company exceeds the foregoing limitation for any particular Album without
obtaining your consent, your sole remedy shall be that you shall be entitled
to be paid or credited with royalties at the applicable royalty rate for all
such excess units.
(e) Company may elect from time to time to compute and pay you
royalties hereunder on a royalty base different than the Royalty Base Price
provided herein, as long as such computation
* - Confidential portions omitted and filed separately with the Commission.
24
<PAGE>
does not materially affect the net amount of royalties otherwise payable to you
at that time hereunder.
10. ROYALTY PAYMENTS AND ACCOUNTINGS.
10.01 Company shall send to You statements for royalties payable hereunder
on or before October 1st for the semi-annual period ending the preceding June
30th and on or before April 1st for the semi-annual period ending the preceding
December 31st, together with payment of royalties, if any, earned by You
hereunder during the semi-annual period for which the statement is rendered,
less all the right to retain, as a reserve against charges, credits, or returns,
such portion of payable royalties as shall be reasonable in Company's best
business judgment. With respect to Albums sold hereunder, Company's reserve
shall not exceed thirty five percent (35%) of the number of such records
shipped. Company shall have shipped. With respect to Singles sold hereunder,
Company's reserve shall not exceed fifty percent (50%) of the number of such
records shipped, unless Company reasonably believes a particular release
justifies a higher reserve. Reserves shall be ratably and fully liquidated no
later than the end of the fourth full accounting period following the period in
which such reserve was initially established. Records returned will be
apportioned between royalty-free records and records on which royalties are
payable in the same proportion as such records were shipped to customers. You
shall reimburse Company within sixty (60) days following receipt of Company's
demand for any overpayments, and Company may also deduct the amount thereof from
any monies payable to You hereunder (other than mechanical royalties). Royalties
paid by Company on Phonograph Records subsequently returned shall be deemed
overpayments.
10.02 No royalties shall be payable to You on sales of Phonograph Records
by any of Company's licensees or distributors until payment on those sales has
been received by Company in the Territory or Company has received accredit
against a prior advance. Sales by a authorized licensee or authorized
distributor shall be deemed to have occurred in the semi-annual accounting
period during which that authorized licensee or authorized distributor shall
have rendered to Company accounting statements and payments for those sales.
10.03 Intentionally deleted.
10.04 (a) Company will maintain books and records which report the sales
of Phonograph Records, on which royalties are payable to You. You may, but not
more than once a year, at Your own expense, examine and audit those books and
records, as provided in this paragraph 10.04 only. You may make those
examinations only for the purpose of verifying the accuracy of the statements
sent to You under paragraph 10.01. All such examinations shall be in
25
<PAGE>
accordance with GAAP procedures and regulations. You may make such an
examination for a particular statement only once, and only within three (3)
years after the date when Company is required to send You that statement under
paragraph 10.01. You may make such an examination only during Company's usual
business hours, and at the place where Company keeps the books and records to be
examined. If You wish to make an examination You will be required to notify
Company at least thirty (30) days before the date when You plan to begin it.
Company may once postpone the commencement of Your examination for no more than
thirty (30) days by notice given to You not later than five (5) days before the
commencement date specified in Your notice; if Company does so, the running of
the time within which the examination may be made will be suspended during the
postponement. If Your examination has not been completed within two (2) months
from the time You begin it, Company may require You to terminate it on seven (7)
days' notice to You at any time; Company will not be required to permit You to
continue the examination after the end of that seven (7) day period. You will
not be entitled to examine any manufacturing records or any other records that
do not specifically report sales or other distributions or other commercial
exploitations of the Masters and of Phonograph Records on which royalties are
payable to You. You may appoint a certified public accountant to make such an
examination for You, but not if (s)he or his/her firm has begun an examination
of Company's books and records for any Person except You unless the examination
has been concluded and any applicable audit issues have been resolved. Such
certified public accountant will act only under a Letter of Confidentiality
which provides that any information derived from such audit or examination will
not be knowingly released, divulged or published to any person, firm or
corporation, other than to You or to a judicial or administrative body in
connection with any proceeding relating to this Agreement.
(b) Notwithstanding the penultimate sentence of paragraph 10.04(a),
if Company notifies You that the representative designated by You to conduct an
examination of Company's books and records under paragraph 10.04(a) is engaged
in an examination on behalf of another Person ("Other Examination"), You may
nevertheless have Your examination conducted by Your designee, and the running
of the time within which such examination may be made shall be suspended until
Your designee has completed the Other Examination, subject to the following
conditions:
(i) You shall notify Company of Your election to that effect
within fifteen (15) days after the date of Company's said notice to You;
(ii) Your designee shall proceed in a reasonably continuous
and expeditious manner to complete the Other Examination and render the final
report thereon to the client and Company; and
26
<PAGE>
(iii) Your examination shall not be commenced by Your designee
before the delivery to Company of the final report on the Other Examination,
shall be commenced within thirty (30) days thereafter, and shall be conducted in
a reasonably continuous manner.
(The preceding provisions of this paragraph 10.04(b) will not apply if Company
elects to waive the provisions of the penultimate sentence of paragraph 10.04(a)
which require that Your representative shall not be engaged in any Other
Examination.)
10.05 If You have any objections to a royalty statement, You will give
Company specific notice of that objection and Your reasons for it within three
(3) years year after the date when Company is required to send You that
statement under paragraph 10.01. Each royalty statement will become conclusively
binding on You at the end of that three (3) year period, and You will no longer
have any right to make any other objections to it. You will not have the right
to sue Company in connection with any royalty accounting, or to sue Company for
royalties on Records sold during the period a royalty accounting covers, unless
You commence the suit within that three (3) year period. If You commence suit on
any controversy or claim concerning royalty accountings rendered to You under
this agreement in a court of competent jurisdiction (as provided in paragraph
23.09 below), the scope of the proceeding will be limited to determination of
the amount of the royalties due for the accounting periods concerned, and the
court will have no authority to consider any other issues or award any relief
except recovery of any royalties found owing. Your recovery of any such
royalties will be the sole remedy available to You by reason of any claim
related to Company's royalty accountings. Without limiting the generality of the
preceding sentence, You will not have any right to seek termination of this
Agreement or avoid the performance of Your obligations under it by reason of any
such claim. The preceding three (3) sentences will not apply to any item in a
royalty accounting if a court of competent jurisdiction determines that the item
was fraudulently misstated and such determination is not overruled or reversed.
10.06 Company shall have the right to deduct from any amounts payable to
You hereunder that portion thereof as may be required to be deducted under any
statute, regulation, treaty or other law, or under any union or guild agreement,
and You shall promptly execute and deliver to Company any forms or other
documents as may be required in connection therewith.
10.07 Each payment made by Company to You under this Agreement, other than
union scale payments under Article 5 hereof, shall, at Company's election, be
made by a single check payable to TIMTOJAY MUSIC, INC. All payments herein are
contingent upon
27
<PAGE>
Company receiving properly completed W-9 and/or 1001 IRS tax forms, as
applicable.
11. MUSICAL COMPOSITION LICENSES.
11.01 You hereby grant to Company and Company's designees an irrevocable
non-exclusive license, under copyright, to reproduce each Controlled
Composition on Phonograph Records and to distribute those Phonograph Records
in the Territory.
11.02 Mechanical royalties shall be payable for each Controlled
Composition on Net Sales of Phonograph Records and at the following rates:
(a) On Phonograph Records sold in the United States, the rate (the
"United States Mechanical Rate") for each Controlled Composition embodied
* thereon shall be equal to XXXXXXXXXXXXXXXXX percent of the minimum statutory
royalty rate provided for in the United States Copyright Act which is
applicable to the reproduction of Musical Compositions as of the date of the
delivery of the first Master hereunder embodying the Controlled Composition in
question, or, if earlier, as of the date that is sixty (60) days prior to the
date upon which that first Master was required to be delivered hereunder. The
term "United States Full Mechanical Rate" for each Controlled Composition
* shall be equal to XXXXXXXXXXXXXXX percent of the minimum statutory royalty
rate (with respect to a five (5) minute composition) provided for in the
United States Copyright Act which is applicable to the reproduction of Musical
Compositions as of the date of the delivery of the first Master hereunder
embodying the Controlled Composition in question, or, if earlier, as of the
date that is sixty (60) days prior to the date upon which that first Master
was required to be delivered hereunder.
(b) Notwithstanding anything to the contrary contained in the
immediately preceding Subparagraph, the United States Mechanical Rate for each
Controlled Composition on Net Sales of Phonograph Records sold in the United
States will be the below-listed percentage of the minimum statutory rate
provided for in the United States Copyright Act which is applicable to the
reproduction of Musical Compositions as of the date of the delivery of the
first Master hereunder embodying the Controlled Composition in question, or,
if earlier, as of the date that is sixty (60) days prior to the date upon
which that first Master was required to be delivered hereunder:
UNITED STATES MECHANICAL RATE ESCALATION SCHEDULE
------------------------------------------------------------------------------
* - Confidential portions omitted and filed separately with the Commission.
<PAGE>
Album recorded in Net Sales in the United States of
fulfillment of the top-line Albums (determined in
Recording Commitment accordance with Company's standard
for the: accounting procedures).
* XXXXXXX XXXXXX XXXXX
* All Contract Periods XXX XXX XXX
provided, however, that once Net Sales in the United States of top-line Albums
* for all of the Committed Albums hereunder exceeds XXXXXXXX Soundscan-measured
units, all Controlled Compositions embodied on Committed Albums that are
* recorded and released after that date will be paid at the rate of XXXX from
the first record sold, subject to the other limitations and restrictions set
forth herein.
(c) Notwithstanding anything to the contrary contained herein, if
you or Artist or any publishing affiliate of yours or Artists enters into an
exclusive worldwide co-publishing agreement with Company ("Imprint Music
Publishing") pursuant to which Imprint Music Publishing is entitled to retain
* for its own account at least XXXXXXXX percent of net mechanical licensing
income ("Imprint Publishing Agreement"), then if any Record recorded under
* this Agreement contains a Controlled Composition which is XXXXXXXXXXXXXXXXXXXX
percent subject to the Imprint Music Publishing Agreement ("Subject Controlled
Composition") paragraphs 11.02(a) will be deemed modified by deleting
* XXXXXXXXXXXXXXXXXXX, paragraph 11.02(b) will be deemed deleted and the
corresponding limitation set forth in paragraph 11.03(b) shall be
commensurably increased in respect of such Subject Controlled Composition
during the term of the Imprint Music Publishing Agreement, only.
11.03 Notwithstanding the foregoing:
(a) The mechanical royalty rate for a Controlled Composition
* contained on a Mid-Priced Record or a Budget Record shall be XXXXXXX of the
United States Mechanical Rate. No mechanical royalties shall be payable on any
Phonograph Records for which no royalties are payable pursuant to Article 9
above; provided, however, and subject to all other reductions specifically
provided for herein, You shall be paid mechanical royalties in connection with
* XXXXXXX percent of those Records referred to in Paragraph 9.08 (d). No
mechanical royalties shall be payable on any Controlled Composition having a
playing time of less than ninety (90) seconds. No mechanical royalty shall be
payable on any work which consists of an arrangement of a work in the public
domain or any more than one use of any work on a particular Record.
* - Confidential portions omitted and filed separately with the Commission.
29
<PAGE>
(b) The maximum aggregate mechanical royalty rate for all
Selections, including Controlled Compositions, contained on a Phonograph Record
for sales in the United States shall be the product of (1): the United States
Full Mechanical Rate for the first Master recorded in connection with the
particular Album or EP project concerned and (2): ten (10) for Albums
(containing one (1) or more discs or the tape equivalent), four (4) for EPs, and
two (2) for Singles and Long-Play Singles, regardless of the number of
Selections contained thereon. If the aggregate mechanical royalty rate
applicable to all of the Selections embodied on any Phonograph Record hereunder
shall exceed the applicable maximum aggregate royalty rate set forth above for
that Phonograph Record, then the aggregate mechanical royalty rate for the
Controlled Compositions, if any, contained thereon shall be reduced by an amount
equal to such excess. If the aggregate mechanical royalty rate applicable to all
of the Selections embodied on that Phonograph Record shall, even as reduced in
accordance with the immediately preceding sentence, still exceed the applicable
maximum aggregate mechanical royalty rate for that Phonograph Record solely on
account of Your or Artist's request or demand, then you shall, within sixty (60)
days following your receipt of Company's demand, pay Company an amount equal to
the additional mechanical royalties payable as a result of that excess and
Company may, in addition to all of Company's other rights or remedies, deduct
that amount from any monies payable by Company hereunder.
11.04 Company will compute Mechanical Royalties on Controlled Compositions
as of the end of each calendar quarter-annual period in which there are sales or
returns of Records on which mechanical royalties are payable to you. On the next
May 15th, August 15th, November 15th, or February 15th, Company will send a
statement covering those royalties and will pay any net royalties which are due.
Mechanical Royalty reserves maintained against anticipated returns and credits
will not exceed the same reserves withheld in connection with the sale of
Records hereunder and will be ratably liquidated within fourteen (14) quarterly
accounting periods as above-described. If any overpayment of mechanical
royalties is made to any Person you will reimburse Company for it; Company may
also recoup it from any payments due or becoming due to you. If Company pays any
mechanical royalties on Records which are returned later, those royalties will
be considered overpayments. If the total amount of the mechanical royalties
which Company pays on any Record consisting of Masters made under this agreement
(including mechanical royalties for Compositions which are not Controlled
Compositions) is higher than the limit fixed for that Record under subparagraph
11.03(b), that excess amount will be considered an overpayment also. Paragraphs
10.04 and 10.05 will apply to mechanical royalty accountings.
30
<PAGE>
11.05 You shall, upon Company's request, use Your best efforts cause the
issuance to Company and Company's designees of mechanical licenses to reproduce
on Phonograph Records Selections which are not Controlled Compositions and to
distribute those Phonograph Records in the United States. Those mechanical
licenses shall be at rates and on terms no less favorable to Company and
Company's designees than those contained in the standard mechanical license
issued by the Harry Fox Agency, Inc. or any successor with respect to Phonograph
Records distributed in the United States; provided, however, in no event shall
those rates exceed one hundred (100%) percent of the applicable minimum
statutory rates set forth in paragraph 11.02 above.
11.06 If the copyright in any Controlled Composition is owned or
controlled by a person, firm or corporation other than you, you shall cause that
person, firm or corporation to grant to Company and Company's designees the same
rights as you are required to grant to Company and Company's designees pursuant
to this paragraph.
11.07 You hereby grant to Company and Company's designees at no fee,
royalty, or other cost to Company or Company's designees, the irrevocable,
non-exclusive, worldwide right to reproduce and publicly perform each Controlled
Composition on Audiovisual Recordings, to distribute Audiovisual Records
embodying those Audiovisual Recordings, and to otherwise exploit in any manner
and through any media those Audiovisual Recordings. You shall, upon Company's
request, use Your best efforts to cause the issuance to Company and Company's
designees, at no fee, royalty, or other cost to Company or Company's designees,
the irrevocable, non-exclusive, worldwide right to reproduce and publicly
perform each Selection which is not a Controlled Composition on Audiovisual
Recordings and to distribute Audiovisual Records embodying those Audiovisual
Recordings, and to otherwise exploit in any manner or media those Audiovisual
Recordings. If Company or Company's designees shall pay any such fee, royalty,
or other cost, you shall, upon Company's demand, pay Company the amount thereof,
and Company may, in addition to all of Company's other rights and remedies,
deduct that amount from any monies payable by Company hereunder. Without
limiting the generality of the foregoing, it is understood and agreed that
Company's rights under this paragraph 11.07 include the right to reproduce and
publicly perform, at no fee, royalty or other cost to Company or Company's
designees, Controlled Compositions and Non-Controlled Compositions in television
and/or radio commercials advertising Phonograph Records made hereunder.
11.08 Any assignment, license or other agreement made with respect to
Controlled Compositions shall be subject to the terms hereof.
31
<PAGE>
12. AUDIOVISUAL RECORDINGS.
12.01 Upon Company's request and subject to Artist's prior commitments,
you shall cause the Artist to appear for the making of Audiovisual Recordings
embodying the Artist's performances on the following terms:
(a) Company and you shall mutually designate the Musical
Compositions which shall be embodied in the Audiovisual Recordings. Company and
you shall mutually approve the producer and director of the Audiovisual
Recordings, all other individuals rendering services in connection with the
production of the Audiovisual Recordings, the storyboard and script for the
production of the Audiovisual Recordings, and the locations at and the dates on
which the Audiovisual Recordings shall be produced (the "Audiovisual Production
Elements").
(b) Company shall pay the Audiovisual Production Costs in an amount
not in excess of a written budget approved by Company in writing. The
Audiovisual Production Costs shall mean and include all minimum union scale
payments made by Company to the Artist in connection with the production of the
Audiovisual Recordings, all payments which are made by Company to any other
individuals rendering services in connection with the production of the
Audiovisual Recordings, all other payments which are made by Company pursuant to
any applicable law or regulation or the provisions of any collective bargaining
agreement between Company and any union or guild (including, without limitation,
payroll taxes and payments to union pension and welfare funds), all amounts paid
or incurred by Company for studio, hall, location or set rentals, tape, film,
other stock, engineering, editing, instrument rentals and cartage,
transportation and accommodations, immigration clearances, any so-called "per
diems" for any individuals (including the Artist) rendering services in
connection with the production of the Audiovisual Recordings, together with all
other amounts paid or incurred by Company in connection with the production of
the Audiovisual Recordings. To the extent permissible under applicable union
agreements, you and Artist hereby waive any right to be paid union scale
payments in connection with the production of Audiovisual Recordings. The
Audiovisual Production Costs shall constitute Advances hereunder.
(c) The Audiovisual Recordings shall be produced in accordance with
the rules and regulations of all labor unions and guilds having jurisdiction
over the production thereof.
(d) You shall cause the Artist to fully cooperate with Company and
Company's designees and to perform to the best of the Artist's ability in
connection with the production of the Audiovisual Recordings.
32
<PAGE>
(e) If the Audiovisual Production Costs exceed the budget approved
by Company in writing as a result of any cause which is within your or the
Artist's control, or if you or the Artist shall for any reason whatsoever delay
the commencement of or not be available for any scheduled appearance by you or
the Artist relating to the production of the Audiovisual Recordings, you shall,
within sixty (60) days following receipt of Company's demand, pay to Company an
amount equal to the expenses or charges paid or incurred by Company by reason
thereof. Company may, without limiting its other rights and remedies, deduct
that amount from any monies payable by Company hereunder.
(f) Notwithstanding anything to the contrary contained herein, one
Hundred (100%) percent of the aggregate amount of Audiovisual Production Costs
shall be recoupable from any and all monies payable to you from the exploitation
of Audiovisual Recordings hereunder. Furthermore, and notwithstanding anything
to the contrary contained herein, fifty (50%) percent of the Audiovisual
Production Costs for each Audiovisual Recording may be recouped from your
royalties on sales of Records which do not reproduce visual images or other
exploitations of audio Masters ("audio royalties").
12.02 Company shall be the sole owner of all worldwide rights in and to
each Audiovisual Recording (including the worldwide copyrights therein and
thereto). Without limiting the generality of the foregoing, it is understood and
agreed that Company's rights to use your name and the name, likeness, and other
identification of the Artist and biographical material concerning the Artist in
the Audiovisual Recordings are set forth in Articles 6 and 7 hereof, wherein the
terms "Masters" and "Phonograph Records" shall include Audiovisual Recordings
and Audiovisual Records, respectively.
12.03 Notwithstanding anything to the contrary contained herein and so
long as the BMG Agreement has not been terminated, lapsed or otherwise expired,
Company agrees to license each Audiovisual Recording produced hereunder to You
solely for promotional use in the Universe outside of the Territory only to BMG;
provided, however, that You will pay to Company no less than fifteen percent
(15%) of the total Audiovisual Production Cost for each Audiovisual Recording
that You wish to so-license as a fee for such license. In the event that You
wish to commercially exploit each such Audiovisual Recording in the Universe
outisde of the Territory only, Company agrees to negotiate the terms of such
commercial license with You in good faith, provided, however, that the initial
fifteen percent (15%) payment above-described will not be deemed a prepayment of
or otherwise applied towards any fee or royalty that You might otherwise pay to
Company in connection with such commercial license rights. Notwithstanding
anything to the contrary contained herein and solely in connection with each
Master
33
<PAGE>
Recording released by Company for which BMG, at any time prior to such release
by Company, produced (at its own and sole expense and cost) an Audiovisual
Recording embodying such Master Recording, Company agrees to license each such
Audiovisual Recording that Company produces hereunder to BMG at 'no charge'.
Furthermore, You agree to cause BMG to register in the name of Company the
copyright in and such Audiovisual Recordings that Company produces and which are
licensed to BMG in each territory of the universe where BMG plans to release,
distribute, manufacture or otherwise exhibit same.
13. WARRANTIES, REPRESENTATIONS AND COVENANTS.
You hereby warrant, represent and covenant that:
13.01 You have the right and power and capacity to enter into this
Agreement, to grant the rights granted by you to Company hereunder, and to
perform all of the terms hereof, and you have not done and shall not do anything
that will impair Company's rights hereunder. Without limiting the generality of
the foregoing, no Musical Composition or any other material recorded by the
Artist shall be subject to any re-recording or other restrictions.
13.02 During the Term you and Artist shall become and remain members in
good standing of any labor union or guilds with which Company may at any time
have an agreement lawfully requiring your or the Artist's membership.
13.03 (a) All recording sessions for the Masters shall be or have been
conducted in all respects in accordance with the terms of the AF of M Phonograph
Record Labor Agreement, of the AFTRA Code for the Phonograph Industry, and of
the agreements with all other labor unions and guilds having jurisdiction over
the recording of the Masters.
(b) The information supplied by you pursuant to paragraph 4.03(b)
above constitutes an accurate and complete listing of all individuals,
vocalists, musicians and other performers whose performances are in fact
embodied in such Masters and a corresponding description of the specified vocal,
musical and/or other performances actually performed by each such person and
embodied on such Masters.
13.04 (a) Your and Artist's names, masters, Selections embodied on masters
and/or materials supplied to Company by you hereunder will not violate or
infringe upon any common law or statutory right of any person, including,
without limitation, any contractual rights, copyrights, rights of privacy,
rights of publicity, trademark rights and rights to trade names. Neither you nor
Artist shall "interpolate", "quote from," "sample", "borrow" or otherwise adapt
any copyrighted music, copyrighted spoken words,
34
<PAGE>
copyrighted sounds, copyrighted words, copyrighted selections and/or copyrighted
sound recordings (including, without limitation, any sounds accompanying
copyrighted audiovisual works) owned or controlled by third parties in Masters
("Embodied Copyrighted Materials") without having first obtained the written
consent of the applicable copyright proprietors of such Embodied Copyrighted
Materials, and your failure to obtain such written consents shall be deemed a
material breach of this Agreement; provided, always, that if Company, in the
exercise of its reasonable business judgment, believes that Embodied Copyrighted
Materials exist without such written consent from the applicable copyright
proprietors, Company may withhold monies and/or royalties otherwise payable to
you hereunder in amounts reasonably related to potential third party liability
as a result thereof.
(b) Artist is the sole owner of the professional name "Charlie
Major" and no other Person has or will have the right to use such name in
connection with Records during the Term other than Company. You shall not use a
different name in connection with Records unless you and Company mutually agree
in writing.
13.05 There are no recordings embodying the Artist's performances which
have not heretofore been commercially released in the Territory on Phonograph
Records which You, Artist, BMG or any third party has the right to release
during the Term of this Agreement.
13.06 Neither you nor the Artist shall at any time, directly or
indirectly, give or offer to give any consideration of any kind to any radio or
television station or network, to any employee thereof, or to any person, firm,
or corporation controlling or influencing that station or network's programming
for the purpose of securing the broadcast or promotion of any Phonograph Records
hereunder.
13.07 Except as otherwise specifically provided herein, Company shall have
no obligation hereunder or otherwise to pay any person, firm, or corporation any
amounts in connection with the exercise of any of Company's rights hereunder,
including, without limitation, Company's rights with respect to the recording or
exploitation of Masters.
13.08 Artist has reached the age of majority prior to the date hereof.
13.09 Intentionally deleted.
13.10 The Masters shall be free of any and all liens or and encumbrances.
35
<PAGE>
13.11 Company's knowledge of facts which if true would constitute a breach
of any warranty, representation or covenant made by you hereunder shall not
impair or otherwise affect Company's entitlement to indemnification pursuant to
paragraph 20 below or its other remedies hereunder.
14. RECORDING RESTRICTIONS.
14.01 During the Term and for the Territory, neither you nor the Artist
shall enter into any agreement or make any commitment which would interfere with
your or the Artist's performance of any of the terms hereof nor shall the Artist
perform for or render services in connection with the recording of any Masters
for any person, firm, or corporation other than Company. After the expiration or
termination of the Term, the Artist shall not, prior to the later of the
following dates, perform for any person, firm or corporation other than us, for
the purpose of making Phonograph Records or Masters, any Selection which shall
have been delivered hereunder: (a) the date five (5) years subsequent to the
date on which that Selection shall have been last delivered to Company in a
Master Recording recorded hereunder, or (b) the date thirty (30) months
subsequent to the expiration or termination of the Term (the later date in
respect of any Selection being hereinafter sometimes referred to as the
"Restriction Date").
14.02 For the Territory, neither you nor the Artist shall at any time
manufacture, distribute, sell or authorize the manufacture, distribution, or
sale by any person, firm, or corporation other than Company of Phonograph
Records embodying (a) any performance rendered by the Artist during the Term or
(b) any performance rendered by the Artist after the expiration or termination
of the Term of a Selection recorded hereunder if that performance shall have
been rendered prior to the Restriction Date applicable to that Selection.
Furthermore, neither you nor the Artist shall record or authorize or knowingly
permit to be recorded for any purpose any such performance without in each case
taking reasonable measures to prevent the manufacture, distribution, or sale at
any time by any person, firm, or corporation other than Company of Phonograph
Records embodying that performance. Specifically, but without limiting the
generality of the foregoing, if during the Term the Artist performs any
Selection or if after the Term the Artist performs any Selection prior to the
Restriction Date applicable thereto, neither you nor the Artist will authorize
or knowingly permit that Selection to be recorded unless pursuant to a written
contract containing an express provision that neither that performance nor the
recording thereof will be used directly or indirectly for the purpose of making
Phonograph Records. Upon Company's request, you shall promptly deliver to
Company a copy of the pertinent provisions of each such contract and you shall
cooperate fully with Company in any controversy which may arise or
36
<PAGE>
litigation which may be instituted relating to Company's rights pursuant to this
paragraph.
14.03 (a) During the Term, the Artist will not render any musical
performances (audiovisual or otherwise) for the purposes of making any motion
picture or other audiovisual work ("Picture", below) for any person, firm or
corporation other than us, and no other person, firm or corporation other than
Company will be authorized to produce, distribute, exhibit, or otherwise exploit
any Picture which contains any musical performance (audiovisual or otherwise) by
the Artist, without an express written agreement providing that:
(i) the Picture concerned will not contain performances by the
Artist of more than two (2) Musical Compositions, in whole or in part; and
(ii) not more than one-half (1/2) of any version of the
Picture may consist of featured musical performances (defined below) by the
Artist or anyone else.
(b) "Featured musical performance", in this paragraph, means:
(i) any visual performance of a Musical Composition; and
(ii) any background performance of a Musical Composition which
is intended as a focus of audience attention, whether or not the visual matter
is related dramatically to the lyrics or concept of the Musical Composition.
14.04 Artist may perform as a background musician ("sideman")
accompanying a featured artist for the purpose of making Phonograph Records for
others, provided:
(a) You have then fulfilled all of your material obligations under
this Agreement, and the engagement does not interfere with the continuing prompt
performance of your obligations to Company.
(b) (1) Artist will not render a solo or "step- out" performance,
and
(2) The musical style of the recording will not be
substantially similar to the characteristic musical style of Recordings made by
Artist for Company.
(c) Artist will not record any material which Artist has then
recorded for Company, and will not agree to be restricted from recording the
same material for Company.
37
<PAGE>
(d) Artist will not accept the sideman engagement unless the Person
for whom the recordings are being made agrees in writing, for Company's benefit,
that:
(1) Artist's name may be used in a courtesy credit to Imprint
Records on the Album liners used for such Records, in the same position as the
credits accorded to other sidemen and in type identical in size, prominence and
all other respects; and
(2) Except as expressly provided in section 14.04(d)(1) above,
neither Artist's name (or any similar name), nor any picture, portrait or
likeness of Artist will be used in connection with such Recordings, including,
without limitation, on the front covers of Album containers, on sleeves or
labels used for Singles, or in videos, advertising, publicity or any other form
of promotion or exploitation, without Company's express written consent, which
Company may withhold in its unrestricted discretion.
(e) Before Artist accepts the sideman engagement you will notify
Company of the name of the Person for whom the recordings are being made and the
record company which will have the right to distribute the Records. Your notice
will be addressed to Company's Chief Financial Officer, Vice President Business
Development.
15. CERTAIN OBLIGATIONS WITH RESPECT TO THE ARTIST.
15.01 You have and shall continue to have during the Term the exclusive
right to the Artist's services under an enforceable recording contract (the
"Recording Contract"), a copy of which you shall deliver to Company upon
Company's request. The Recording Contract grants to you all rights necessary to
enable you to perform your obligations hereunder. You shall not impair any of
those rights (by your failure to fully perform your obligations under the
Recording Contract, by your modification or amendment of any terms of the
Recording Contract, by your failure to exercise any options under the Recording
Contract, or otherwise) in derogation of any of Company's rights under this
Agreement. Company may, in your name and on your behalf, exercise or enforce any
of your rights under the Recording Contract.
15.02 You shall be solely responsible for and shall pay to the Artist all
royalties and other compensation which may be payable to the Artist by reason of
the recording, manufacture, distribution and sale throughout the world of
Phonograph Records hereunder or by reason of any other exploitation of the
recordings embodied therein.
15.03 If there shall be a dissolution or liquidation of your assets, or if
a proceeding under any bankruptcy or insolvency
38
<PAGE>
law is commenced by, for or against you, or if there is an appointment of a
receiver, liquidator, custodian, assignee, trustee, sequestrator or any other
similar official for you or any of your assets, or if you attempt to assign,
mortgage or pledge any of your assets for the benefit of your creditors, or if
there is a levy, attachment or seizure of the Masters pursuant to an attachment,
garnishment, execution or other process of law, or if you commit any act of
bankruptcy or become insolvent, or if you shall, for any reason, fail to fulfill
any of your obligations under this Agreement, then, Company may, without
limiting its other rights and remedies, upon written notice to you or the
Artist, require that the Artist render Artist's services to Company for the
remaining balance of the Term upon the terms herein contained and the Artist
shall thereby be deemed substituted for you as a party to this Agreement as of
the date of Company's notice to you or the Artist. As of the date of that
notice, Company shall have no further obligations or liability to you under this
Agreement, except for such obligation, if any, that Company may have to pay you
royalties with respect to Masters recorded prior to that notice. With respect to
Masters recorded subsequent to the date of that notice, (i) the royalty rate
pursuant to paragraph 9.01(a) above with respect to such Masters shall be the
applicable royalty rate pursuant to such paragraph less six (6%) percent, with
appropriate reductions and apportionments for singles, club and other ancillary
sales, etc., and without regard to paragraph 9.02 above. Company may recoup all
Advances or other charges against royalties hereunder, regardless of when paid
or incurred, from any royalties payable by Company to you or to the Artist, or
to your or the Artist's designees.
16. UNIQUE SERVICES.
16.01 You expressly acknowledge that your and the Artist's services
hereunder are of a special, unique, intellectual, and extraordinary character
which gives them peculiar value, and that in the event of a breach by you or the
Artist of any term hereof, Company will be caused irreparable injury which
cannot adequately be compensated by money damages. Accordingly, Company shall be
entitled to seek injunctive relief, in addition to any other rights or remedies
which Company may have, to enforce the terms of this Agreement.
17. CERTAIN REMEDIES.
17.01 If you do not fulfill any portion of your Recording Commitment
within the time prescribed in paragraph 3.02, Company will have the following
options:
(a) to suspend Company's obligations to make payments to you under
this Agreement until you have cured the default;
39
<PAGE>
(b) to terminate the term of this Agreement at any time, whether or
not you have commenced curing the default before such termination occurs; and
(c) to require you to repay to Company the amount, not then
recouped, of any Advance previously paid to you by Company and not specifically
attributable under Article 8 to an Album which has actually been fully
Delivered.
Company may exercise each of those options by sending you the appropriate
notice. If Company terminates the term under clause 17.01(b) all parties will be
deemed to have fulfilled all of their obligations under this agreement except
those obligations which survive the end of the term (such as indemnification
obligations, re-recording restrictions, and your obligations under clause
17.01(c)). No exercise of an option under this paragraph will limit Company's
rights to recover damages by reason of your default, its rights to exercise any
other option under this paragraph, or any of its other rights.
17.02 If because of: act of God; inevitable accident; fire; lockout,
strike or other labor dispute; riot or civil commotion; act of public enemy;
enactment, rule, order or act of any government or governmental instrumentality
(whether federal, state, local or foreign); failure of technical facilities;
illness or incapacity of any performer or producer; or other cause of a similar
or different nature not reasonably within Company's control; Company is
materially hampered in the recording, manufacture, distribution or sale of
records, then, without limiting Company's rights, Company shall have the option
by giving you notice to suspend the running of the then-current Contract Period
for the duration of any such contingency plus such additional time as is
necessary so that Company shall have no less than thirty (30) days after the
cessation of such contingency in which to exercise its option, if any, to extend
the term of this agreement for the next following Option Period. If any
suspension imposed under this paragraph by reason of an event affecting no
Record manufacturer or distributor except Company continues for more than six
(6) months, you may, by notice, request Company to terminate the suspension by
notice given to you within sixty (60) days after its receipt of your notice. If
Company does not do so, the term of this Agreement will terminate at the end of
that sixty (60) day period (or at such earlier time which Company may designate
by notice to you), and all parties will be deemed to have fulfilled all of their
obligations under this Agreement except those obligations which survive the end
of the term (such as warranties, re-recording restrictions and Company's
obligation to pay royalties).
17.03 If Company refuses, without cause, to permit you to fulfill your
minimum Recording Commitment for any Contract Period,
40
<PAGE>
(irrespective of whether or not you have commenced recording the particular
Album for such Recording Commitment), other than as a result of an event or
contingency referred to in paragraph 17.01 above, Company shall have no
obligations or liabilities to you in connection therewith unless you shall
notify Company of your desire to fulfill your minimum Recording Commitment for
that Contract Period and within thirty (30) days after Company's receipt of that
notice Company shall fail to advise you in writing that Company shall permit you
to fulfill your minimum Recording Commitment for that Contract Period. If
Company shall fail to so advise you in writing that Company shall permit you to
fulfill your minimum Recording Commitment for that Contract Period, the Term
shall expire as of the end of that thirty (30) day period and Company shall have
no obligations or liabilities to you whatsoever in connection with Company's
failure to permit you to fulfill your Recording Commitment for that Contract
Period or fails to release the First Licensed Master hereunder. Company shall,
however, pay you promptly after the expiration of that thirty (30) day period,
as a non-recoupable, non-returnable payment hereunder fifty thousand dollars
($50,000.00).
18. PRODUCER AND OTHER ROYALTIES.
18.01 You shall be solely responsible for and shall pay all royalties and
other Compensation which may be payable to any producers of the Masters or to
any others rendering services in connection with the recording of the Masters.
18.02 Notwithstanding the foregoing, Company will accept a Letter of
Direction (as that term is currently understood in the industry) from You that
provides for the direct payment of royalties (on substantially the same terms as
royalties are payable to You hereunder and taking into account the industry-wide
practice of paying producer's their royalty retroactively to the first record
sold after the recoupment of Recording Costs) on Your behalf to any producers of
the Masters or to any others rendering services in connection with the recording
of the Masters. In that event, Company may deduct any amounts payable by Company
to that producer or director from any royalties or other sums payable by Company
hereunder. Furthermore, for the purposes of the recoupment of any Advances or
charges under this Agreement, the royalty rates contained in Article 9 with
respect to those Masters shall be deemed reduced by the amount of the applicable
royalty rates with respect to Masters which are contained in Your Letter of
Direction to Company in connection with such Producer payments. Any Advances
payable by Company to a producer (or such party) which are not recouped by
Company from royalties payable to that producer may be recouped by Company from
any royalties or other sums payable by Company hereunder.
41
<PAGE>
19. DEFINITIONS.
19.01 The term "Advance" shall mean prepayment of royalties. Company may
recoup Advances from royalties (other than mechanical royalties) to be paid to
you or on your behalf pursuant to this Agreement. Except as otherwise set
forth herein, Advances shall be non-refundable.
19.02 The term "Album" shall mean an audio only long-playing Phonograph
Record which is not an EP, Single, or Long-Play Single, and where the context
requires, Masters sufficient to constitute a long-playing audio only
Phonograph Record.
19.03 The term "Audiovisual Record" shall mean a Record embodying an
Audiovisual Recording.
19.04 The term "Audiovisual Recording" shall mean every form of Master
Recording embodying visual images.
19.05 The term "Container Charge" shall mean the applicable percentage,
specified as follows, of the Gross Royalty Base applicable to the particular
* Record concerned: XXXXXXXX percent for Singles packaged in color or other
special printed sleeves, and for Albums, EPs, and Long-Playing Singles in disc
form packaged in Company's standard singlefold jackets without any special
elements (such as, but not limited to, plastic, cardboard, or printed inner
* sleeves, inserts, or attachments); XXXXXXXX percent thereof for all other
Albums, EPs or Long-Playing Singles in disc form, and for all other sound-only
* Phonograph Records in disc form; and XXXXXXXX percent thereof for Audiovisual
Records, all Phonograph Records in tape form, such as reel-to-reel tapes,
cartridges, cassettes (whether audio or video) and for all other recorded
* devices, but XXXXXXXX percent for compact disc Records, digital audio tape,
DCC, Mini-disc and all Records in New Configurations.
19.06 The term "Contract Period" shall mean the Initial Period or any
Option Period of the Term (as they may be suspended or extended).
19.07 The term "Controlled Composition" shall mean that portion of a
Musical Composition or other Selection, written or composed by You alone or in
collaboration with others, or which is owned or controlled, in whole or in
part, directly or indirectly, by You or any person firm or corporation in
which You have a direct or indirect interest.
19.08 The terms "Conventional Phonograph Record", "Conventional discs
and tapes" and "Conventional Album" shall refer to discs or tapes of the
quality used for the majority of units of a particular Phonograph Record
released. If, at any particular
* - Confidential portions omitted and filed separately with the Commission.
42
<PAGE>
time, Company has ceased to regularly manufacture plain, black "vinyl" disc
records and only manufactures tapes, compact discs and/or "premium vinyl" (e.g.,
so-called "half-speed mastered") discs, then the terms "Conventional discs" or
"Conventional Album in disc form", and the like, shall refer to conventional
tapes.
19.09 The term "delivery to Company" (or "Delivery to Company") or words
of similar connotation used in connection with Master Recordings or Masters
shall mean delivery to a person designated by Company at such location or
locations designated by Company of fully-mixed, leadered, sequenced, equalized
and unequalized master tapes in proper form for the production of the parts
necessary to manufacture phonograph records therefrom, which Masters have been
approved by Company as satisfactory for the manufacture and sale of Phonograph
Records, and delivery to a person designated by Company at such location or
locations designated by Company of all consents, approvals, copy information,
credits, mechanical licenses and other material and documents (including those
described in paragraph 4.03(b) above) required by Company to release Phonograph
Records embodying those Masters or Masters and to manufacture album covers or
other packaging therefor. Company may (but shall not be obligated to) send you
written notice of the date which Company deems to be the applicable date of
Delivery to Company of any Masters made hereunder. If you dispute the date of
such notice, you shall give notice in writing to Company within ten (10)
business days of Company's notice to you. Your failure to so notify Company
shall be deemed your acceptance of the date contained in Company's notice. The
sending of Company's notice shall be without prejudice to Company's rights and
remedies hereunder if Company later discovers that such delivery has not been
fully and completely made. Company's election to make a payment to you which was
to have been made upon Delivery of Masters or to release a Record derived from
such Master Recording shall not be deemed to be its acknowledgment that such
"Delivery" was properly made and Company shall not be deemed to have waived
either its right to require such complete and proper performance thereafter or
its remedies for your failure to perform in accordance therewith.
19.10 The term "EP" shall mean an audio only Phonograph Record embodying
no fewer than five (5) different Musical Compositions and no more than seven (7)
different Musical Compositions.
19.11 The term "Long-Play Single" shall mean an audio only Phonograph
Record embodying no more than four (4) different Musical Compositions.
19.12 The term "Master Recording" shall mean every form of recording,
whether now known or unknown, embodying sound, or sound
43
<PAGE>
accompanied by visual images, which may be used in the recording, production,
or manufacture of Phonograph Records.
19.13 The term "Masters" shall mean Master Recordings embodying the
performances of the Artist recorded hereunder.
19.14 (a) The term "Mid-Priced Record" shall mean a Phonograph Record
which bears a Gross Royalty Base at least twenty (20%) percent lower, but not
more than thirty-five (35%) percent lower than the Gross Royalty Base
applicable to Company's then-current highest prevailing "top-line" record of
comparable repertoire and in the same configuration (e.g., Album, Multiple
Record Set, Long Play Single, tape cassette, compact disc, etc.) released by
Company or Company's licensees in the territory concerned.
(b) The term "Budget Record" shall mean a Phonograph Record which
bears a Gross Royalty Base greater than thirty-five (35%) percent lower than
the Gross Royalty Base applicable to Company's then-current highest prevailing
"top line" record of comparable repertoire and in the same configuration
(e.g., Album, Multiple Record Set, Long Play Single, tape cassette, compact
disc, etc.) released by Company or Company's licensees in the territory
concerned.
19.15 The term "Multiple Album" shall mean an Album which contains two
(2) or more units of a particular configuration of Record, which is sold as a
single unit.
19.16 The terms "Musical Composition" and "Composition" shall mean a
single musical composition and, for the purposes of computing mechanical
royalties hereunder, shall include medleys and spoken word pieces. Different
versions of a Composition embodied on the same Phonograph Record will be
considered one (1) Composition (and one(1) Selection) for all purposes
hereunder.
19.17 The term "Net Receipts" shall mean an amount equal to the gross
monies received by Company in the Territory from a person, firm or corporation
from the exploitation by that person, firm or corporation of rights in
Audiovisual Recordings (including any monies received by Company for the use
* of Audiovisual Recordings in Audiovisual Records) less XXXXXXXX percent of
those gross monies as a distribution fee, and less all costs paid or incurred
by Company in connection with the exploitation of those rights and the
collection of those monies.
19.18 The term "Net Royalty" or "Net Flat Fee" shall mean the gross
royalty or gross flat fee received by Company in the Territory from a person,
firm or corporation from the exploitation by that person, firm or corporation
of rights in Masters (other than Audiovisual Recordings), less all costs paid
or incurred by
* - Confidential portions omitted and filed separately with the Commission.
44
<PAGE>
Company in connection with the exploitation of those rights and the collection
of those monies, and less all royalties or other sums payable by Company to
any person, firm or corporation in connection with the exploitation of those
rights, except for royalties or other sums payable to producers of those
Masters, which shall be borne solely by you.
* 19.19 The term "Net Sales" shall mean XXXXXXXX percent of gross sales to
wholesale and retail customers, less returns, credits and reserves against
anticipated returns and credits.
19.20 The term "Net Sales through Normal Retail Channels" shall refer to
Net Sales of Phonograph Records hereunder through Company's principal
distributor in the country in question for resale through record or other
retail stores for which a royalty is paid hereunder (and, without limiting the
generality of the foregoing, shall exclude sales or distributions referred to
in paragraph 9.03, 9.04 and 9.05 above);
19.21 The terms "Phonograph Record" and "Record" shall mean every form
of reproduction, whether now known or unknown, embodying sound alone, or sound
accompanied by visual images, distributed primarily for home use, school use,
jukebox use, and use in means of transportation, including, without
limitation, discs of any speed or size, reel-to-reel tapes, cartridges,
cassettes, or other pre-recorded tapes.
19.22 The term "New Configuration" shall mean any configuration of
record not specifically referred to herein.
19.23 The term "Royalty Base Price" shall mean the amount specified
below ("Gross Royalty Base") applicable to the Phonograph Records concerned,
less all excise, purchase, value added, or similar taxes (included in the
Royalty Base Price) and less the applicable Container Charge.
(a) WITH RESPECT TO RECORDS SOLD FOR DISTRIBUTION IN THE
TERRITORY: The Gross Royalty Base for an Audiovisual Record is the amount
computed under section (1) below. The Gross Royalty Base for a Record
reproducing sound only is the amount computed under section (1) or section (2)
* below, whichever is XXXXXXX:
(1) Company's published subdistributor price applicable to
the price series of the unit concerned at the commencement of the accounting
period in which the sale occurs; or
* (2) XXXXXXXX of the prevailing industry suggested retail
list price applicable to Records in the same configuration and the same
wholesale price category as the unit concerned. In this section (2):
* - Confidential portions omitted and filed separately with the Commission.
45
<PAGE>
(i) A "similar U.S. Record company" means one which does
not distribute its own Records directly to wholesalers and retailers on a
nation-wide basis throughout the Territory but does so through a third party
distribution company.
(ii) The "wholesale price" of a Record distributed by
another similar U.S. record company means its published price corresponding most
closely in amount to a subdistributor price for a Record in the same
configuration published by Company.
(iii) The "wholesale price category" of a Record
distributed by Company includes: (A) that Record; and (B) Records in the same
configuration sold by other similar U.S. record companies whose wholesale prices
for those Records correspond most closely in amount to our published
subdistributor price for the Company-distributed Record concerned.
(iv) "Prevailing industry suggested retail list price"
means the average of the suggested retail list prices assigned to Records in the
wholesale price category concerned by the similar U.S. Record company(ies) which
publish suggested retail list prices or, if there are no such suggested retail
list prices, the prevailing retail equivalent prices generally accepted in the
record industry applicable to the Records in the wholesale price category
concerned.
Royalties will be calculated separately with respect to each price series
in which units of a particular Record release are sold during the semiannual
accounting period concerned. References to published prices in this section
refer to those in effect at the commencement of the accounting period concerned.
19.24 The term "Selection" shall mean a Musical Composition, poem,
dramatic work, comedy routine, or other verbal expression.
19.25 The term "Single" shall mean an audio-only seven (7") inch disc
Phonograph Record or its tape or other equivalent, embodying no more than two
(2) Compositions.
19.26 The word "Territory" shall mean the United States of America, its
territories and possessions.
19.27 The words "licensed by Company to others for their distribution of
Phonograph Records" shall mean sales through channels other than through
Company's primary sub-distributor.
19.28 The term "Person" "person" or "Party" shall mean any individual,
corporation, partnership, association or other
46
<PAGE>
organized group of persons or the legal successors or representatives of the
foregoing.
20. INDEMNITY.
20.01 You hereby indemnify, save, and hold Company harmless from any and
all damages, liabilities, costs, losses and expenses (including legal costs and
reasonable attorneys' fees) arising out of or connected with any claim, demand
or action which is inconsistent with any of the warranties, representations,
covenants or agreements made by you in this Agreement, which has resulted in a
final judgment or has been settled with your written consent (it being
understood that your consent shall be deemed given to any settlement not in
excess of Five Thousand ($5,000) Dollars). Notwithstanding the foregoing, if you
withhold consent to any settlement which Company is willing to make, the
foregoing indemnity shall apply and Company may settle such claim in its sole
discretion unless you promptly assume all costs of defending against such claim,
demand or action including, without limitation, court costs, reasonable
attorneys' fees, and direct expenses theretofore incurred by Company in
connection with said claim, demand or action; provided that in the event you
assume said costs, Company shall nonetheless have the right to settle such
claim, demand or action in its sole discretion without your consent, provided
that, in such event, the foregoing indemnification shall not apply with respect
thereto. You shall reimburse Company, on demand, for any payment made by Company
at any time with respect to any damage, liability, cost, loss or expense to
which the foregoing indemnity applies. Pending the determination of any claim,
demand or action, Company may, at its election, withhold payment of any monies
otherwise payable to you hereunder in an amount which does not exceed your
potential liability to Company pursuant to this paragraph; provided, however,
that if you shall deliver to Company an indemnity or surety bond, in a form and
with a company acceptable to Company, which in respect of such claim, demand or
action shall cover the amount of such claim, demand or action and Company's
estimated attorneys' fees and legal costs in connection therewith, then Company
shall not withhold payment of monies otherwise payable to you hereunder in
respect of such claim, demand or action; and provided further that Company shall
liquidate any such withheld amounts if within twelve (12) months no lawsuit has
been commenced and active settlement discussions are not then taking place. You
may participate in the defense of any claim referred to in this paragraph 20
through counsel of your selection at your own expense, but Company will have the
right at all times, in its sole discretion, to retain or resume control of the
conduct of the defense of such claim.
47
<PAGE>
21. ASSIGNMENT.
21.01 (a) Company shall have the right, at its election, to assign any of
Company's rights hereunder, in whole or in part, to any subsidiary, affiliated,
controlling or other related company, and to any Person, firm or corporation
owning or acquiring a majority or controlling portion of Company's stock, and
any rights so assigned may also be assigned by the assignee. Company shall also
have the right to assign any of its rights hereunder to any of its licensees
solely in order to effectuate the purposes hereof.
22. NOTICES.
22.01 All notices to be given to you hereunder and all statements and
payments to be sent to you hereunder shall be addressed to you at the address
set forth on page 1 hereof or at such other address as you shall designate in
writing from time to time. All notices to be given to Company hereunder shall be
addressed to Company to the attention of the Chief Financial Officer/Vice
President Business Development at the address set forth on page 1 hereof or at
such other address as Company shall designate in writing from time to time. All
notices shall be in writing and shall either be served by personal delivery,
mail, or telegraph, all charges prepaid. Except as otherwise provided herein,
notices shall be deemed given when personally delivered, mailed, or delivered to
a telegraph office, all charges prepaid, except that notices of change of
address shall be effective only after actual receipt. A copy of all notices to
you shall be sent to Graham Henderson & Associate, Barristers and Solicitors,
438 University Avenue, Suite 1812, Toronto, Ontario M5G 2K8, provided, however,
the inadvertent failure to send any such copy shall neither impair the
effectiveness of the notice sent nor constitute a breach of this Agreement.
23. MISCELLANEOUS.
23.01 (a) This Agreement sets forth your and Company's entire
understanding relating to its subject matter and all prior and contemporaneous
understandings relating to the same have been merged herein. No modification,
amendment, waiver, termination or discharge of this Agreement or any of its
terms shall be binding upon Company unless confirmed by a document signed by a
duly authorized officer of Company. No waiver by you or Company of any term of
this Agreement or of any default hereunder shall affect your or Company's
respective rights thereafter to enforce that term or to exercise any right or
remedy in the event of any other default, whether or not similar.
(b) If any part of this Agreement is determined to be void, invalid,
inoperative or unenforceable by a court of
48
<PAGE>
competent jurisdiction or by any other legally constituted body having
jurisdiction to make such determination, such decision shall not affect any
other provisions hereof, and the remainder of this Agreement shall be effective
as though such void, invalid, inoperative or unenforceable provision had not
been contained herein. If the payments provided by this Agreement shall exceed
the amount permitted by any present or future law or governmental order or
regulation, such stated payments shall be reduced while such limitation is in
effect to the amount which is so permitted; and the payment of such amount shall
be deemed to constitute full performance by Company of its obligations to you
and Artist hereunder with respect to compensation during the term when such
limitation is in effect.
23.02(a) Company shall not be deemed to be in breach of any of Company's
obligations hereunder unless and until you shall have given Company specific
written notice by certified or registered mail, return receipt requested,
describing in detail the breach and Company shall have failed to cure that
breach within thirty (30) days after Company's receipt of that written notice.
(b) Except with respect to: (i) (intentionally deleted), (ii) your
warranties hereunder, (iii) where a specific cure provision is provided herein,
(iv) breaches incapable of being cured, or (v) an application for injunctive
relief, the failure by you to perform any of your obligations hereunder shall
not be deemed a breach of this Agreement unless Company gives you written notice
of such failure to perform and such failure is not corrected within thirty (30)
days from the date you receive such notice.
23.03 Company's payment obligations under this Agreement are conditioned
upon your full and faithful performance of the terms hereof.
23.04 Wherever your approval or consent is required hereunder, that
approval or consent shall not be unreasonably withheld. Company may require you
to formally give or withhold approval or consent by giving you notice of
Company's request that you do so and by furnishing you with the information or
material in respect of which the approval or consent is sought. You shall give
Company written notice of your approval or disapproval or of your consent or
non-consent within five (5) days after Company's notice is sent and, in the
event of your disapproval or non-consent, your notice shall contain the specific
reasons therefor. Your failure to give Company notice as aforesaid shall be
deemed to be consent or approval, as the case may be, with respect to the matter
submitted.
23.05 Nothing herein contained shall constitute a partnership, joint
venture or other agency relationship between you and Company. Except as
otherwise expressly provided herein, you
49
<PAGE>
and the Artist are performing your obligations hereunder as independent
contractors. Neither party hereto shall hold itself out contrary to the terms of
this paragraph, and neither you nor Company shall become liable for any
representation, act or omission of the other contrary to the provisions hereof.
You do not have the right to execute any agreement or incur any obligation for
which Company may be liable or otherwise bound.
23.06 This Agreement shall not be deemed to give any right or remedy to
any third party whatsoever unless that right or remedy is specifically granted
by Company in writing to that third party.
23.07 The provisions of any applicable collective bargaining agreement
between Company and any labor union or guild which are required by the terms of
that agreement to be included in this Agreement shall be deemed incorporated
herein as if those provisions were expressly set forth in this Agreement.
23.08 Except as otherwise expressly provided herein, all rights and
remedies herein or otherwise shall be cumulative and none of them shall be in
limitation of any other right or remedy.
23.09 This Agreement has been entered into in the State of Tennessee, and
its validity, construction, interpretation and legal effect shall be governed by
the laws of the State of Tennessee applicable to contracts entered into and
performed entirely within the State of Tennessee. All claims, disputes or
disagreements which may arise out of the interpretation, performance or breach
of this Agreement shall be submitted exclusively to the jurisdiction of the
state courts of the state of Tennessee or the Federal District Courts located in
Davidson County; provided, however, if Company is sued or joined in any other
court or forum (including an arbitration proceeding) in respect of any matter
which may give rise to a claim by Company hereunder, you and Artist consent to
the jurisdiction of such court or forum over any such claim which may be
asserted by Company. Any process in any action or proceeding commenced in the
courts of the State of Tennessee arising out of any such claim, dispute or
disagreement, may among other methods, be served upon you by delivering or
mailing the same, via certified mail, addressed to you at the address given in
this Agreement or such other address as you may from time to time designate by
notice in conformity with Article 22 herein.
23.10 This Agreement shall not become effective until signed by you and
countersigned by a duly authorized officer of Company.
23.11 (a) The paragraph headings herein are solely for the purpose of
convenience and shall be disregarded completely in the interpretation of this
Agreement or any of its terms.
50
<PAGE>
(b) No deletion, addition, revision, change or other alteration in
drafts of this Agreement prepared prior to the execution of this Agreement shall
be used for the purpose of construction or interpretation of any term, provision
or language of this Agreement.
23.12 Company may at any time during the Term obtain, at Company's cost,
insurance on the lives of Artist. Company or its designees shall be the sole
beneficiary of that insurance and neither you, nor any member of the Artist, nor
any person, firm or corporation claiming rights through or from you or the
Artist shall have any rights in that insurance. You shall cause Artist to submit
to such physical examinations and to complete and deliver such forms as Company
may reasonably require and otherwise to cooperate with Company fully for the
purpose of enabling Company to secure that insurance.
23.13 From time to time at Company's request, you shall cause Artist to
appear for photography, artwork and similar sessions under the direction of
Company or Company's duly authorized agent, appear for interviews with such
representatives of newspapers, magazines and other publications, and of
publicity and public relations firms as Company may arrange, and confer and
consult with Company regarding Artist's performances hereunder and other matters
which may concern the parties hereto. Artist shall also, if requested by
Company, be available for personal appearances (including performances) on
radio, television, record stores and elsewhere, and to record taped interviews,
spot announcements, trailers and electrical transcriptions, all for the purpose
of advertising, promoting, publicizing and exploiting records released or to be
released hereunder and for other general public relations and promotional
purposes related to the record business of Company or Company's subsidiary and
related companies. Neither you nor Artist shall be entitled to any compensation
from Company for such services, other than minimum union scale to Artist if such
payment is required by applicable agreements.
23.14 You acknowledge that there exists no formal or informal fiduciary
relationship between you and Company and that there exists no special
relationship of trust and confidence between you and Company independent of the
contractual rights, duties and obligations set forth in this Agreement, and that
the future course of dealing between you and Company shall neither explicitly
nor implicitly indicate such a relationship or the undertaking of any such
extra-contractual duties or obligations by Company.
23.15 If Artist's voice should be or become materially and permanently
impaired or if Artist should otherwise become physically or mentally disabled in
performing, recording and/or personal appearances and/or if Artist should cease
to pursue a
51
<PAGE>
career as an entertainer, Company may elect to terminate this agreement, by
notice to you at any time during the period in which such contingency arose or
continues and thereby be relieved of any liability for the executory provisions
of this agreement.
24. Exclusive License of Existing Masters:
a. For purposes of this Agreement the term "First Licensed Album"
and "Second Licensed Album" shall mean and refer to those certain Masters owned
or controlled by You and listed in Schedule "1" hereto.
b. With respect to the First Licensed Album and the Second Licensed
Album and all "sound recordings", "phonorecords" and "copies" manufactured
therefrom (individually and collectively called the "Licensed Work"), Company
shall have the exclusive right to and to authorize others to manufacture, sell,
distribute and advertise Phonograph Records embodying the Licensed Work under
any trademarks, trade names or labels, and to lease, license, convey or
otherwise use or dispose of the Licensed Work by any method now or hereafter
known in any field of use and to perform publicly Phonograph Records and other
reproductions embodying the Licensed Work, all upon such terms as Company may
approve, or Company may refrain from doing any or all of the foregoing.
c. The following provisions shall apply to the Licensed Masters:
(i) The First Licensed Album and the Second Licensed Album
(and all Delivery Materials with respect thereto) shall be
delivered to Company in accordance with the provisions of this
Agreement hereof no later than thirty (30) days following the
execution of this Agreement.
(ii) The First Licensed Album and the Second Licensed Album
shall be subject to all of the terms and conditions of this
Agreement applicable to masters recorded and delivered under
this Agreement, including without limitation Company's rights
to exploit the Licensed Masters as provided herein, Your right
to receive royalties hereun- der with respect to sales of
records embodying or derived from the First Licensed Album and
the Second Licensed Album, if any and the mechanical
52
<PAGE>
royalty provisions. Notwithstanding anything to the contrary
contained herein, Company agrees to pay You in connection with
records manufactured from the First Licensed Album and the
Second Licensed Album an "all-in" royalty on net sales of
records manufactured from the First Licensed Album and the
Second Licensed Album delivered hereunder at the applicable
rates specified in the Royalty Schedule below. You agree to be
solely responsible for and pay all royalties and/or other sums
due to Artist and Producer and all other artists, musicians,
performers and producer(s) which are or may become due by
reason of Company's exploitation of the masters delivered
hereunder.
ROYALTY ESCALATION SCHEDULE
------------------------------------------------------------------------------
Album: Net Sales in the Territory of top-
line Albums through normal retail
channels (determined in accordance
with Company's standard accounting
procedures).
* XXXX XXXX XXXX XXXX XXXX
* 1st Licensed Album XXX XXX XXX XXX XXX
* 2nd Licensed Album XXX XXX XXX XXX XXX
(iii) With respect to the Licensed Masters, You represent and
warrant to Company as follows:
(A) You are the sole owner of
the Licensed Masters and of
all performances embodied
therein exclusively,
perpetually and throughout the
Territory; and no other
person, firm or corporation
has any rights in or to the
Licensed Masters or any copy
thereof; and You have the
right to license the First
Licensed Album and the Second
Licensed Album exclusively to
Company on
* - Confidential portions omitted and filed separately with the Commission.
53
<PAGE>
all of the terms and conditions
hereof.
(B) There are no liens,
encumbrances and/or
obligations upon or in
connection with the First
Licensed Album or the Second
Licensed Album other than the
rights licensed to Company
herein; and in connection with
the recording of the First
Licensed Album and the Second
Licensed Album (A) all costs
of recording have been paid in
full and (B) all of the
performers whose services were
rendered in connection with
the recording of the First
Licensed Album and the Second
Licensed Album were
contractually free to record
phonograph records of the
selection embodied in the
First Licensed Album and the
Second Licensed Album for You.
At Company's request, You
shall furnish Company with
copies of all instrumentalist,
vocalist, arranger and other
employment contracts and/or
session reports showing that
all payments have been made in
a timely fashion to the proper
parties thereunder. You will
hold Company harmless from any
and all liability, loss,
damage, cost or expenses
(including but not limited to
attorney's fees and court
costs) arising from, connected
with or related to Your
warranties, representations
and agreements with regard to
the First Licensed Album and
the Second Licensed Album.
(C) During the Term and the
Distribution Period, neither
You nor any person acting for
You or with Your authorization
or acquiescence (other than
Company) will manufacture,
distribute or otherwise
exploit
54
<PAGE>
records in the Territory
embodying or derived from the
First Licensed Album and the
Second Licensed Album, except
with the express permission of
Company.
(D) You and Artist were and
are under no disability,
restriction or prohibition
respecting musical works
embodied on the First Licensed
Album and the Second Licensed
Album to be delivered to
Company hereunder.
(E) You have the right to
enter into this entire
agreement with respect to the
First Licensed Album and the
Second Licensed Album and You
have not done or permitted to
be done anything which may
curtail or impair any of the
rights granted to Company
herein.
d. You agree to deliver to Company, concurrently with Your delivery
of the First Licensed Album and the Second Licensed Album to Company and at no
charge to Company, all artwork relating to the First Licensed Album and the
Second Licensed Album. Company shall have the right in its sole discretion and
without payment obligations of any kind, to utilize such artwork in the
manufacture of records from the First Licensed Album and the Second Licensed
Album or to refrain therefrom. You represent and warrant that the aforesaid
artwork and Company's commercial use of the same will not infringe upon the
rights of any third party.
e. Notwithstanding anything to the contrary contained herein, and
for the avoidance of doubt, Company shall have the same rights with respect to
the First Licensed Album and the Second Licensed Album that is has with respect
to all other Committed Albums hereunder.
f. Royalties otherwise payable with respect to First Licensed Album
and the Second Licensed Album shall be applied against royalties or sums due
with respect to the Masters hereunder.
g. With respect to the First Licensed Album and the Second Licensed
Album, You agree to indemnify Company against,
55
<PAGE>
and hold Company harmless from, any and all claims, liabilities, causes of
action, damages, expenses, costs of defense (including reasonable attorney's
fees and court costs) and other costs arising out of or in any way related to
any breach or claimed breach of any representation, warranty or agreement by You
contained in this Agreement. You agree that Company may withhold sums otherwise
due You hereunder in amounts reasonably related to such claim(s) until such time
as such claim(s) are reduced to a final judgment by a court of competent
jurisdiction or are settled. In the alternative, You or Artist may post a bond
in an amount and form reasonably satisfactory to Company, and thereupon Company
shall promptly release all monies withheld in connection with the applicable
claim. Company shall give You prompt notice of all such claims and You shall
have the right to participate in the defense thereof by counsel of its choice at
Your expense. In the event any such claim does not mature into litigation within
one (1) year, all sums previously withheld from You with respect to such claim
shall be promptly paid to You.
25. BMG AGREEMENT
(a) (i) In the event that the BMG Agreement is terminated for any
reason whatsoever, Company shall have the exclusive right, for the period
beginning as of the date of such termination and ending ninety (90) days
thereafter, to sign Artist to an exclusive worldwide recording agreement outside
the Territory on terms no less favorable to Company than those contained in the
BMG Agreement and You and Artist agree to sign such an agreement containing such
terms with Company (the "New Company Deal"). Company shall be granted the right
to no fewer options or Committed Albums than those remaining in the BMG
Agreement.
(ii) In the event that You and Company do not enter into a New
Company Deal, You agree not to enter into any agreement with any third party
with respect to such commercial exploitations as described herein above unless
You first:
(a) notify Company in writing ("Your Notice") of the
proposed agreement with such third party;
(b) furnish Company with complete copies of all the
instruments constituting the proposed agreement (the "Outside Proposal"); and
(c) offer to enter into an agreement with Company on the
same terms and conditions as contained in the Outside Proposal.
(iii) If Company does not accept your offer within five (5)
business days after receipt of Your Notice ("Offer Period") you may then enter
into the agreement set forth in the
56
<PAGE>
Outside Proposal upon substantially the same or better terms and conditions as
set forth in the Outside Proposal.
(iv) No failure by Company to accept an Outside Proposal will
be deemed to waive or otherwise affect any of Company's rights. Without limiting
the generality of the preceding sentence, Company will not be deemed bound by
any proposed waiver, consent, or other agreement required or contemplated to be
made by Company by an Outside Proposal which Company does not preempt.
(b) (i) In the event that this Agreement is terminated for any
reason whatsoever (other than on account of Company's failure to exercise an
option hereunder to extend the term of this Agreement into the next Contract
Period), Company shall have the exclusive right, for the period beginning as of
the date of such termination and ending ninety (90) days thereafter, to sign
Artist to an exclusive license agreement for the Territory for those Masters
released hereunder (the "New License Deal").
(ii) In the event that You and Company do not enter into a New
License Deal, You agree not to enter into any agreement with any third party
with respect to such commercial exploitations as described herein above unless
You first:
(a) notify Company in writing ("Your License Notice") of
the proposed license agreement with such third party;
(b) furnish Company with complete copies of all the
instruments constituting the proposed agreement (the "Outside License
Proposal"); and
(c) offer to enter into an agreement with Company on
substantially the same terms and conditions as contained in the Outside License
Proposal.
(iii) If Company does not accept your offer within five (5)
business days after receipt of Your License Notice ("License Offer Period") you
may then enter into the agreement set forth in the Outside License Proposal
provided that agreement is consummated within thirty (30) days after the end of
the License Offer Period upon the same terms and conditions and in the same form
as set forth in the Outside Proposal. If that agreement is not so consummated
within the thirty (30) day period set forth above, the right of preemption
granted to Company in this paragraph 25 will be revived and no third party other
than Company will be authorized to enter into any agreement concerning
commercial exploitations as above described.
(iv) No failure by Company to accept an Outside License
Proposal will be deemed to waive or otherwise
57
<PAGE>
affect any of Company's rights. Without limiting the generality of the preceding
sentence, Company will not be deemed bound by any proposed waiver, consent, or
other agreement required or contemplated to be made by Company by an Outside
License Proposal which Company does not preempt.
(c) You shall be solely responsible for and shall pay all royalties
and other Compensation which may be payable to BMG in connection with the
recording of the Masters and the grant of rights to Company hereunder.
Notwithstanding the foregoing, Company will accept a Letter of Direction (as
that term is currently understood in the industry) from You that provides for
the direct payment of royalties (on substantially the same terms (including
deductions and reductions but specifically not including escalations) as
royalties are payable to You hereunder except that the royalties will be paid
from the first record sold without regard to any sort of "recoupment") on Your
behalf to BMG in connection with the recording of the Masters and the grant of
rights to Company hereunder; provided, however, that such royalty will not
exceed six percent (6%) of the applicable Royalty Base Price in respect of Net
Sales of such Phonograph Records (other than Audiovisual Records) consisting
entirely of Masters licensed under this Agreement during the respective Contract
Periods specified below and sold by Company or Company's licensees through
Normal Retail Channels. In that event, Company may deduct any amounts payable by
Company to BMG from any royalties or other sums payable by Company hereunder.
Furthermore, for the purposes of the recoupment of any Advances or charges under
this Agreement, the royalty rates contained in Article 9 with respect to those
Masters shall be deemed reduced by the amount of the applicable royalty rates
with respect to Masters which are contained in the Letter of Direction for BMG.
Any Advances payable by Company to BMG which are not recouped by Company from
royalties payable to BMG may be recouped by Company from any royalties (other
than mechanical royalties) or other sums payable by Company hereunder.
58
<PAGE>
IN WITNESS WHEREOF, the parties hereto have this day signed in the
spaces provided below.
TIMTOJAY MUSIC, INC. IMPRINT RECORDS
/s/ Charlie Major /s/ Roy W. Wunsch
- -------------------- ---------------------
By:__________________________ By:_______________________
AN AUTHORIZED SIGNATORY
----------------------
Title
----------------------
Fed. Tax I.D. No.
--------------------
Print Name
59
<PAGE>
EXHIBIT "A"
IMPRINT RECORDS, INC.
209 10th Avenue South, Suite 500
Nashville, Tennessee 37203
Dated as of:__________
Gentlemen:
Pursuant to an exclusive recording contract (the "Recording Contract")
between TIMTOJAY MUSIC, INC. (Company") and me, Company is entitled to my
exclusive services as a recording artist and is the sole owner of the entire
worldwide right, title and interest in and to the results and proceeds of my
services as a recording artist under the Recording Contract, including, without
limitation, master recordings embodying my performances and the phonograph
records derived therefrom. I have been advised that Company is entering into a
written agreement with you (the "Agreement"), pursuant to which Company is
agreeing to furnish my services as a recording artist exclusively to you and
pursuant to which you shall be the sole owner of the right, title and interest
in and to the results and proceeds of my services as a recording artist in the
Territory, its territories and its possessions.
In consideration of your entering into the Agreement, and as a further
inducement for you to do so, it being to my benefit as a recording artist that
you enter into the Agreement, I hereby represent and agree as follows:
1. (a) I have read the Agreement in its entirety and fully understand the
Agreement and all of the terms thereof were explained to me before signing this
document.
(b) Company has the right, insofar as I am concerned, to enter into
the Agreement and to assume all of the obligations, warranties and undertakings
to you on the part of Company contained therein, and Company shall continue to
have those rights during the term of the Agreement and thereafter until all of
those obligations, warranties and undertakings shall have been fully performed
and discharged.
(c) All of the obligations, warranties and undertakings covenants
and agreements on the part of Company contained in the Agreement which concern
Company or me are true and correct.
(d) I shall fully and to the best of my abilities perform and
discharge all of the obligations, warranties and
60
<PAGE>
undertakings contained in the Agreement insofar as the same are required of me
and to the extent Company has undertaken to cause the performance and discharge
by me of those obligations and undertakings.
2. If during the term of the Agreement or any extensions or renewals
thereof, Company shall, for any reason, cease to be entitled to my services as a
recording artist or the results and proceeds thereof in accordance with the
terms thereof or Company shall, for any reason, fail or refuse to furnish my
services as a recording artist or the results and proceeds thereof exclusively
to you as and when required under the Agreement or Company shall commit any
action or omission proscribed in paragraph 15.04 of the Agreement, I shall, at
your written request, for the remaining balance of the term of the Agreement
upon the terms contained therein, be deemed substituted for Company as a party
to the Agreement as of the date of your notice to me. Without limitation of the
foregoing, in the event I am substituted in place of Company as a party to the
Agreement, I shall render all services and perform all acts as shall give to you
the same rights, privileges and benefits to which you are entitled under the
Agreement as if Company had continued to be entitled to my services as a
recording artist and had continued to furnish my services as a recording artist
and the results and proceeds thereof exclusively to you as and when required
under the Agreement, and such rights, privileges and benefits shall be
enforceable in your behalf against me.
3. You and any person, firm or corporation designated by you shall have
the perpetual, worldwide right to use and to permit others to use my name (both
legal and professional, and whether presently or hereafter used by me),
likeness, other identification and biographical material concerning me, for
purposes of trade and advertising solely as specifically authorized in the
Agreement. You shall have the further right to refer to me during the term of
the Agreement as your exclusive recording artist in the Territory, and I shall
in all my activities in the entertainment field use reasonable efforts to be
billed and advertised during the term of the Agreement as your exclusive
recording artist. The rights granted to you pursuant to this paragraph with
respect to my name, likeness, other identification and biographical material
concerning me shall be exclusive during the term of the Agreement and
nonexclusive thereafter. Accordingly, but without limiting the generality of the
foregoing, I shall not authorize or permit any person, firm or corporation other
than you to use during the term of the Agreement my legal or professional name
or my likeness in connection with the advertising or sale of phonograph records
(including, without limitation, audiovisual records).
4. During the term of the Agreement, I shall not enter into any agreement
or make any commitment which would interfere with my performance of my
obligations under the Agreement, and I shall not
61
<PAGE>
perform or render services in connection with the recording of master recordings
for any person, firm or corporation other than you. After the expiration or
termination of the term of the Agreement, I shall not prior to the later of the
following dates perform for any person, firm or corporation other than you, for
the purpose of making recordings of phonograph records, any selection which has
been delivered under the Agreement: (a) the date five (5) years subsequent to
the date on which that selection shall have been last delivered to you in a
master recording recorded under the Agreement; or (b) the date thirty (30)
months subsequent to the expiration or termination of the term of the Agreement.
5. No termination of the Agreement shall diminish my liability or
obligation hereunder without your written consent.
6. You may, in your name, institute any action or proceeding against me
individually or collectively, at your election, to enforce your rights under the
Agreement, under this guarantee or under the Recording Contract.
7. Company expressly acknowledges that Company's and my services hereunder
and under the Agreement are of a special, unique, intellectual and extraordinary
character which gives them peculiar value, and that if Company or I breach any
term hereof or of the Agreement, you will be caused irreparable injury which
cannot adequately be compensated by money damages. Accordingly, you shall be
entitled to seek injunctive relief, in addition to any other rights or remedies
which you may have, to enforce the terms hereof or of the Agreement.
8. I shall look solely to Company for any and all royalties, recording
fees or other monies payable to me in respect of the recording of all recordings
under the Recording Contract and under the Agreement and in respect of your
manufacture, distribution, sale or other use or recordings recorded under the
Agreement and all phonograph records and other reproductions derived therefrom,
all throughout the world.
9. I, on behalf of myself and on behalf of any publisher or other person
or entity which has or may have any interest in or to any Controlled Composition
(as defined in the Agreement) hereby license to you mechanical reproduction
rights with respect to each Controlled Composition upon the terms and at the
mechanical royalty rates applicable to Controlled Compositions licensed to you
by Company as set forth in Article 11 of the Agreement.
10. This agreement has been entered into the State of Tennessee, and its
validity, construction, interpretation and legal effect shall be governed by the
laws of the State of Tennessee applicable to contracts entered into and
performed entirely within the State of Tennessee. All claims, disputes or
disagreements
62
<PAGE>
which may arise out of the interpretation, performance or breach of this
agreement shall be submitted exclusively to the jurisdiction of the state courts
of the state of Tennessee or the Federal District Courts located in Davidson
County; provided, however, if you are sued or joined in any other court or forum
(including an arbitration proceeding) in respect of any matter which may give
rise to a claim by you hereunder, I consent to the jurisdiction of such court or
forum over any such claim which may be asserted by you. Any process in any
action or proceeding commenced in the courts of the State of Tennessee arising
out of any such claim, dispute or disagreement, may among other methods, be
served upon me by delivering or mailing the same, via certified mail.
Very truly yours,
CHARLIE MAJOR
Social Security Number:
Birth Date:
We Consent To The
Foregoing Insofar
As It Concerns Us:
- --------------------------------
By: TIMTOJAY MUSIC, INC.
Its:____________________________
AN AUTHORIZED SIGNATORY
63
