//10QSB_10854.cec
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 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 July 31, 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.
(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)
VERITAS MUSIC ENTERTAINMENT, INC.
(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 September 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 60 sequentially
numbered pages.
Exhibit Index begins on page 14.
<PAGE>
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
July 31, January 31,
1996 1996
---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $2,636,993 $4,405,672
Investments, commercial paper -- 999,733
Inventory 165,126 --
Other current assets 26,211 94,008
---------- ----------
2,828,330 5,499,413
---------- ----------
Fixed assets, net 406,412 348,631
---------- ----------
Other assets:
Organization and other costs, net 20,091 23,103
Other assets 4,817 45,108
---------- ----------
24,908 68,211
---------- ----------
$3,259,650 $5,916,255
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,329 $ 78,163
---------- ----------
Commitments
Shareholders' equity:
Common stock, no par value;
authorized, 9,000,000 shares;
issued and outstanding, 4,738,000 shares 6,301,792 6,301,792
Additional paid-in capital 577,425 577,425
Deficit accumulated during the
development stage ( 3,620,896) ( 1,041,125)
---------- ----------
3,258,321 5,838,092
---------- ----------
$3,259,650 $5,916,255
========== ==========
</TABLE>
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
December 8, 1994
(inception) to
Three months ended Three months ended Six months ended Six months ended July 31, 1996
July 31, 1996 July 31, 1995 July 31, 1996 July 31, 1995 (Cumulative)
----------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ - $ - $ - $ -
----------- ------------ ---------- ----------- ----------
Expenses:
Artist develop-
ment and
promotion 848,465 - 1,612,313 - 2,114,392
General and
administrative
expenses 500,072 30,410 1,070,778 37,384 1,684,473
----------- ------------ ---------- ----------- ----------
1,348,537 30,410 2,683,091 37,384 3,798,865
----------- ------------ ---------- ----------- ----------
Loss from
operations (1,348,537) (30,410) (2,683,091) (37,384) (3,798,865)
----------- ------------- ---------- ----------- ----------
Interest expense - (83,782) - (98,071) (98,071)
Interest income 41,603 5,189 103,320 5,189 276,040
----------- ------------ ---------- ---------- -----------
41,603 (78,593) 103,320 (92,882) 177,969
----------- ------------- ---------- ---------- -----------
Net loss ($1,306,934) ($ 109,003) ($2,579,771) ($ 130,266) ($3,620,896)
=========== ============= ========== =========== ===========
Net loss per common stock
share ($ .28) ($ .03) ($ .54) ($ .04) ($ .86)
=========== ============= ========== ========== ===========
Weighted average
shares outstanding 4,738,000 3,680,000 4,738,000 3,450,000 4,199,800
=========== ============= ========== ========== ==========
</TABLE>
See notes to financial statements.
3
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<TABLE>
<CAPTION>
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
December 8, 1994
Six months Six months (inception) to
ended ended July 31, 1996
July 31, 1996 July 31, 1995 (cumulative)
--------------- --------------- ---------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss ($2,579,771) ($ 130,266) ($3,620,896)
Adjustments to
reconcile net loss
to net cash used in
operating activities:
Amortization 47,067 93,324 151,481
Changes in assets and
liabilities:
Inventory ( 165,126) - ( 165,126)
Other current assets 67,797 ( 44,328) ( 26,211)
Organization costs - ( 30,131) ( 30,131)
Other assets 40,291 ( 45,450) ( 4,817)
Accounts payable and
accrued expenses ( 76,834) 95,161 1,327
---------- ------------ ----------
Net cash used in
operating activities ( 2,666,576) ( 61,690) ( 3,694,373)
---------- ------------ ----------
Cash flows from investing activities:
Leasehold improvements ( 639) ( 4,177) ( 220,835)
Furniture and equipment ( 101,197) - ( 236,704)
Investments purchased,
commercial paper - - ( 999,733)
Investments sold,
commercial paper 999,733 - 999,733
---------- ----------- ----------
Cash provided (used) in
investing activities 897,897 ( 4,177) ( 457,539)
---------- ----------- ----------
Cash flows from financing activities:
Deferred loan cost - ( 15,312) ( 15,312)
Deferred stock offering costs - ( 252,390) ( 252,390)
Shareholder loan - proceeds - 1,400 1,400
Shareholder loan - payment - ( 1,400) ( 1,400)
Notes payable - proceeds - 225,000 225,000
Notes payable - payment - ( 300,000) ( 300,000)
Issuance of common stock -
and warrants, net of stock
offering costs - 6,534,836 7,131,607
---------- ------------ ----------
Net cash provided by
financing activities - 6,192,134 6,788,905
---------- ------------ ----------
(Decrease) increase in cash ( 1,768,679) 6,126,267 2,636,993
Cash and cash equivalents,
beginning 4,405,672 235 0
---------- ------------ ---------
Cash and cash equivalents,
ending $2,636,993 $ 6,126,502 $2,636,993
========== ============ ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
IMPRINT RECORDS, INC.
Formerly, Veritas Music Entertainment, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. The condensed financial statements at July 31, 1996 and for the three and
six month periods then ended are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The condensed financial
statements should be read in conjunction with the financial statements and
notes thereto, together with management's discussion and analysis of
financial condition and results of operations, contained in the Company's
Form 10-KSB for the fiscal year ended January 31, 1996. The results of
operations for the three and six months ended July 31, 1996 are not
necessarily indicative of the results for the entire fiscal year ending
January 31, 1997.
2. In August, 1995, the U.S. Patent and Trademark Office rejected the
Company's application to register "Veritas" as the tradename of the
Company. In January, 1996, a third party objected in writing to the
Company's use of the name "Veritas" and demanded that the Company cease
doing so. Since February, 1996, the Company has been doing business under
the name "Imprint Records" and in April 1996, the Board of Directors of the
Company voted to change the Company's corporate name to "Imprint Records,
Inc.". The shareholders of the Company approved the name change in June
1996 and on July 23, 1996 the Company filed Articles of Amendment to its
Charter to change its name with the Secretary of State of Tennessee.
5
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Item 2. PLAN OF OPERATIONS
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this report.
The Company was incorporated in December 1994 under the laws of Tennessee,
and began operations after its initial public offering in late July 1995. The
Company has had no revenues from operations through the fiscal quarter ended
July 31, 1996. Consequently, there are no comparable prior periods for purposes
of the following discussion.
Results Of Operations
The Company is in the development stage and has had no revenues from
operations through the fiscal quarter ended July 31, 1996.
Plan Of Operations - Recent Developments
Recording Contracts With Artists
The Company plans to release a third single from Gretchen Peters's "The
Secret of Life" album to radio stations featuring an "Adult Contemporary"
(mainstream "pop" music) format in the fall of 1996. "The Secret of Life" was
released and shipped for retail distribution starting June 4, 1996. The
Company's distributor has shipped a total of approximately 67,000 units of the
album in cassette and CD format to the major national music store chains in the
U.S.
"Tell Me Something I Don't Know," the second single to be released from
Charlie Major's "Here and Now" album, was released to Country music radio on
August 19, 1996. Major's first single from that album, "I Do It For The Money,"
was released on June 10, 1996, and has received modest airplay on Country music
radio stations. For the past 16 weeks, the video version of this single has
appeared regularly on Country music television, and it continues to air
regularly.
Major, a Canadian singer-songwriter, is under contract to another record
company on a worldwide basis, excluding the United States. The Company has
acquired the U.S. rights to distribute Major's releases from that record
company. Major's first album on the Company's label, "Here and Now," is complete
and is scheduled for retail release in the U.S. in October 1996.
Al Anderson, a Country music singer-songwriter and musician, and former
member of the band NRBQ, is scheduled to release his first album on the
Company's label, "Pay Before You Pump," in September of 1996. The Company has
received 10,000 advance orders from retailers for "Pay Before You Pump."
Jeff Wood, a new artist and songwriter with whom the Company has an
exclusive recording contract, has completed recording for his first album on the
Company's label, "Between The Earth And The Stars." Wood is currently doing
promotional performances in preparation for the release in October 1996 of
the first single from that album, "You Just Get One." "Between The Earth And The
Stars" is set for retail release in January 1997.
Bob Woodruff, a singer-songwriter who has previously released one album on
another label and with whom the Company now has an exclusive recording contract,
has been writing and recording material for his first album on the Company's
label for the past several months. That as yet untitled album is scheduled for
release in January 1997.
6
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The Company has reached an understanding with Bob Woodruff's prior record
label to acquire the exclusive rights to distribute worldwide Woodruff's first
(and only) album recorded on that label, "Dreams & Saturday Nights," for a
period of five years. The Company expects a definitive agreement with respect
to the acquisition of the rights to be executed in the next few months, which
agreement the Company expects will provide for a royalty payment to Woodruff's
prior label for each copy of "Dreams & Saturday Nights" sold by the Company,
with the remainder of the net proceeds from such sales to be retained by the
Company.
Distribution
The Company has signed an agreement with Distribution North America ("DNA")
to distribute the Company's CDs and cassettes in the U.S. retail market;
Distribution North America is currently distributing Gretchen Peters's "The
Secret of Life" album. The Company has been informed that DNA has reached a
tentative agreement to sell its operations to New York-based Alliance
Entertainment Corporation ("AEC"). The Company has been told the purchase will
be finalized by late September 1996. The Company expects that AEC, as successor
in interest to DNA under the Distribution Agreement between the Company and DNA,
will continue to distribute the Company's products without any material changes
in the relationship between the parties.
Licensing Agreements For Company Products
In mid-August 1996, the Company signed an agreement with Paradoxx Music for
release and distribution of the Company's recordings in Brazil. Although not
currently a major market for Country music, the Company believes Brazil may be
an emerging market for the Company's products. The agreement calls for the
Company to receive a royalty payment from Paradoxx for each Company recording
sold. Paradoxx plans to release both Gretchen Peters's "The Secret of Life"
album and Al Anderson's "Pay Before you Pump" album in the next 60 days.
In mid-August 1996, the Company signed an agreement with BMG Music Canada
Inc. for release of the Company's recordings in Canada. As with the Paradoxx
license, the agreement calls for the Company to receive a royalty payment from
BMG for each Company recording sold. BMG is expected to release "The Secret of
Life" in Canada within the next three months.
The Company is currently negotiating licensing agreements for distribution
of its product in Australia and the U.K.
Senior Management
On August 8, 1996, effective July 29, 1996, Anne Weaver was elected Vice
President of Promotion for the Company, replacing Brad Chambers, who departed
June 19, 1996. Prior to joining the Company, Weaver headed her own company, Anne
Weaver Promotions, formed in January 1996. For two years before that, Weaver was
Vice President of Promotion for Mercury/Nashville. Before joining Mercury,
Weaver served as Southwest Promotion Manager for Arista/Nashville, and as
Promotion Coordinator for RCA Records/BMG Distribution in Dallas, Texas. Weaver
and the Company have entered into a two year employment agreement (with a
Company option to extend the agreement for one year) that calls for a base
salary of $150,000, with a percentage increase on the first anniversary date
thereof of not less than the percentage change in the Consumer Price Index
during the previous year. In addition, Weaver is entitled to participate in the
Company's Executive Incentive Plan that could entitle her, based on the
Company's performance, to a maximum bonus of 30% of her annual base salary.
Weaver was also awarded incentive stock options for 25,000 shares of Company
common stock, exercisable at $1.38 per share. Options awarded vest and are
exercisable for one-third of the 25,000 shares on each of July 28, 1997, July
28, 1998 and July 28, 1999.
7
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In connection with Brad Chambers's severance from employment with the
Company, the Company and Chambers entered into an Assignment and Release in June
1996. The agreement requires the Company to forgive a $25,000 loan made to
Chambers upon commencement of his employment with the Company and also requires
the payment of $50,000 to Chambers to settle claims by Chambers relating to the
remaining term of his employment contract with the Company.
Plan of Operations - Since Inception
In addition to the recent developments outlined above, since its inception
in late 1994 and the commencement of operations after its initial public
offering in late July 1995, the Company has leased space in the vicinity of
Nashville's Music Row for use as the Company's headquarters; completed the
hiring of its senior management team; signed five Country music artists;
released two singles on the Company's label by Gretchen Peters, "When You Are
Old" and "I Ain't Ever Satisfied;" released one other single on the Company's
label by Charlie Major, "I Do It For The Money," and identified a manufacturer
to meet the Company's requirements for the manufacture of CD and cassette
recordings for retail sale in the U.S. market.
The Company currently has a recording contract with Gretchen Peters. In
addition to the initial advance to Peters, the Company has incurred $150,000 in
recording costs (recoupable from the artist's royalties) in connection with "The
Secret of Life," which was shipped for retail distribution starting June 4,
1996.
The Company currently has a recording contract with Country music artist
Bob Woodruff. To date, the Company has incurred $90,000 in recording costs in
connection with Woodruff's album (recoupable from the artist's royalties). The
album is currently in production, and the Company estimates that an additional
$35,000 in recording costs will be incurred over the next three months to
finalize it for retail release in the U.S., currently scheduled for January
1997.
The Company currently has recording contracts with Al Anderson and Jeff
Wood. In addition to the initial advances paid to these artists by the Company,
to date, the Company has incurred recording costs of $46,000 in connection with
Anderson's album, and $150,000 in recording costs in connection with Wood's
album (in each case recoupable from royalties). The Company estimates that an
additional $2,000 in costs will be incurred in connection with Anderson's album,
and another $20,000 in costs will be incurred in connection with Wood's album
over the next three months.
The Company has acquired the licensing rights in the U.S. to distribute
Charlie Major's releases. The Company has released Major's first single on the
Company's label, "I Do It For the Money," to Country music radio on June 10,
1996, and expects to distribute his first album for the Company in the U.S.,
"Here and Now," in October 1996. In connection with the foregoing, the Company
has incurred approximately $20,000 to modify Major's album for release in North
America, most of which amount is recoupable against artist royalties, and has
spent approximately $90,000 in radio advertising to promote airplay of Major's
release.
During the next twelve months, the Company intends to (a) release Charlie
Major's first album on the Company's label, entitled "Here and Now," in October
1996, (b) continue production on and release the first albums by Al Anderson
(currently scheduled for September 1996), Jeff Wood and Bob Woodruff (each
currently scheduled for January 1997), (c) sign an agreement with Bob Woodruff's
prior record label to acquire, for a period of five years, the worldwide
distribution rights to Woodruff's first album, "Dreams & Saturday Nights,"
recorded on that label, (d) release a third single from Gretchen Peters's "The
Secret of Life" album in the fall of 1996, (e) release to Country music radio
the first single from Jeff Wood's upcoming album, "Between The Earth And The
Stars," entitled "You Just Get One," and (f) seek a distributor or distributors
to sell the Company's albums in Australia, the U.K. and certain other foreign
markets.
8
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Based on the Company's current business plan, the Company believes that it
can continue to satisfy its cash requirements for operations for at least
another twelve months without raising additional funds.
Other Country Music Artists
The Company continues to explore the opportunities available in the
marketplace for the signing of new Country music artists and is currently in
negotiations exploring the signing of a sixth artist.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Stockholders took place on June 28, 1996 at
the Company's offices in Nashville, Tennessee.
(b) The stockholders of the Company elected the following five individuals as
Directors of the Company, which five individuals constitute the entire
Board of Directors of the Company:
Roy W. Wunsch
Stanley O. Schaetzle, Jr.
Frank M. Bumstead
Charles M. Flood, Jr.
Donald A. Schlitz
(c) The stockholders of the Company took action on three proposals at the
Annual Meeting, including the election of Directors. The vote tabulation
for each was as follows:
1. Election of Directors
For Withheld
--- --------
Roy W. Wunsch 3,969,851 15,105
Stanley O. Schaetzle, Jr. 3,970,051 14,905
Frank M. Bumstead 3,970,051 14,905
Charles M. Flood, Jr. 3,969,551 15,405
Donald A. Schlitz 3,969,751 15,205
2. Change of the Company's Corporate Name From Veritas Music
Entertainment, Inc. to Imprint Records, Inc.
For: 3,965,712
Against: 14,244
Abstain: 5,000
3. Selection of Drucker, Math & Whitman, P.C., as Company's Auditors for
Fiscal Year Ending January 31, 1997
For: 3,972,052
Against: 8,304
Abstain: 9,600
10
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ITEM 5 - OTHER INFORMATION
On August 22, 1995, the U.S. Patent and Trademark Office rejected the
Company's application to register "Veritas" (part of the Company's former name),
as the tradename of the Company. On January 17, 1996, a third party objected in
writing to the Company's use of the name "Veritas" and demanded that the Company
cease doing so. The Company acquiesced in this request and starting February 9,
1996, the Company began doing business under the name "Imprint Records" in
accordance with Section 48-14-101(d) of the Tennessee Business Corporation Act.
Based on the foregoing developments, on April 23, 1996, the Board of
Directors of the Company approved for submission to the Company's stockholders
an amendment to the Company's Charter to change the Company's corporate name to
"Imprint Records, Inc." This amendment to the Company's Charter to change its
corporate name was approved by the Company's stockholders at the Company's
Annual Meeting of Stockholders on June 28, 1996. The Company filed an Amendment
to its Charter with the Tennessee Secretary of State to change its name to
Imprint Records, Inc. on July 23, 1996. The Company filed an application for
registration of the tradename "Imprint Records" with the U.S. Patent and
Trademark Office on February 9, 1996, and is awaiting the outcome of that
application, which is expected in September or October of 1996.
11
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
3.1 (i) Articles of Amendment of Charter of Veritas Music
Entertainment, Inc., dated June 28, 1996.
10.1 Employment Agreement between the Company and Ms. Anne Weaver,
dated as of August 8, 1996.
10.2 Licensing Agreement between the Company and BMG Music Canada
Inc., dated as of August 7, 1996.*
10.3 Licensing Agreement between the Company and Paradoxx Music
dated as of August 13, 1996.*
10.4 Assignment and Release between the Company and Mr. Brad
Chambers.
(b) The Company has not filed any reports on Form 8-K.
* The Company has requested confidential treatment from the Securities
and Exchange Commission for portions fo this exhibit, which
confidential portions have been filed separately.
12
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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.
DATE: November 7, 1996 By: /s/Roy W. Wunsch
------------------
Roy W. Wunsch, Chairman
and Chief Executive Officer
DATE: November 7, 1996 By: /s/Wayne Halper
-----------------
Wayne Halper, Chief Financial
Officer/Vice President -
Business Development
13
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EXHIBIT INDEX
Exhibit Page No.
3.1(i) Articles of Amendment of Charter of Veritas Music
Entertainment, Inc., dated June 28, 1996. 15
10.1 Employment Agreement between the Company and Ms. Anne Weaver,
dated as of August 8, 1996. 16
10.2 Licensing Agreement between the Company and BMG Music Canada
Inc., dated as of August 7, 1996.* 24
10.3 Licensing Agreement between the Company and Paradoxx Music,
dated as of August 13, 1996.* 48
10.4 Assignment and Release between the Company and Mr. Brad
Chambers. 53
27 Financial Data Schedule
* The Company has requested confiential treatment from the Securities
and Exchange Commission for portions of this exhibit, which
confidential portions have been filed separately.
14
//EX3-1(i)_10854.CEC
<PAGE>
EXHIBIT 3.1(i)
Corporate Control No. 0287284
ARTICLES OF AMENDMENT
OF
CHARTER OF
VERITAS MUSIC ENTERTAINMENT, INC.
(Pursuant to the provisions of Section 48-20-106
of the Tennessee Business Corporation Act)
The undersigned, duly authorized to act on behalf of the above-referenced
corporation, hereby certifies the following:
1. The name of the corporation is:
Veritas Music Entertainment, Inc.
2. The Board of Directors and stockholders of the corporation have approved
and ratified the following amendment to the corporation's charter:
Section 1 of the corporation's Charter is hereby deleted in its
entirety, and is hereby replaced with the following:
"1. The name of the corporation is: Imprint Records, Inc."
3. The above amendment to the corporation's Charter was duly adopted by the
corporation's Board of Directors on April 23, 1996, and duly adopted by the
corporation's stockholders at the 1996 annual meeting, held June 28, 1996.
Dated: June 28, 1996
Veritas Music Entertainment, Inc.
By: /s/ Roy W. Wunsch
-----------------------------
Roy W. Wunsch
Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT 10.1
IMPRINT RECORDS, INC.
SUITE 500, CUMMINS STATION
209 10TH AVENUE SOUTH
NASHVILLE, TENNESSEE 37203
Dated as of August 8, 1996
Ms. Anne Weaver
2640 Somerset Drive
Nashville, Tennessee 37217
Re: Ms. Anne Weaver -w- Imprint
Executive Employment Agreement
Dear Anne:
This letter sets forth the agreement between Imprint Records, Inc.
("Imprint") and Ms. Anne Weaver ("Anne" or "you") with respect to your
employment on the following terms and conditions:
1. Employment:
A. Effective as of July 29, 1996, ("Commencement Date"), you shall be
employed by Imprint on the terms and conditions set forth herein as Vice
President of Promotion. In such capacity, you shall be assigned such duties
and responsibilities relating to Imprint's promotion activities, and you
will otherwise undertake such duties and responsibilities as Imprint may,
from time to time, reasonably determine.
B. During your employment, you will devote your full business time,
attention, knowledge and skills to the best of your ability in furtherance
of the business of Imprint. You shall report to and be subject, at all
times, to the direction and control of Imprint's Chief Executive Officer
and President or such other executive officers of Imprint as Imprint may
deem appropriate. You shall at all times be subject to, observe and carry
out such rules, policies, directions and restrictions as
<PAGE>
Imprint may from time to time reasonably establish. You shall be
headquartered in Nashville, Tennessee, but shall do such traveling as
may be required of you in the performance of your duties.
C. The term of this agreement shall commence as of the Commencement
Date and shall terminate on the date two (2) years from the date hereof
(the "Term") unless terminated earlier as expressly provided herein.
Notwithstanding the foregoing, Imprint shall have the irrevocable option
to extend the Term hereof (on the same terms and conditions set forth in
this agreement, with the exception of this paragraph) for an additional
successive period of one (1) year, exercisable by written notice to Weaver
given not less than sixty (60) days prior to the expiration of the initial
two (2)-year contract period of the agreement.
2. Compensation:
A. Base Salary: As compensation for your services to Imprint
hereunder, you shall be paid an annual base salary at the rate of One
Hundred Fifty Thousand Dollars ($150,000.00) per year. Such rate of salary
shall be reviewed by Imprint as of each applicable anniversary date of your
employment hereunder, and any increase shall be wholly discretionary and
based upon, among other things, Imprint's evaluation of your performance;
provided, however, that, notwithstanding anything to the contrary herein,
you shall receive an increase in such base salary effective as of the
second anniversary hereof of not less than an amount equal to any increase
in the Consumer Price Index in effect upon the Commencement Date versus
that in effect upon the anniversary date hereof. Your salary shall be
payable in equal installments in accordance with Imprint's normal payroll
policy.
B. Contingent Compensation: You shall also be entitled to participate
in the Imprint Executive Incentive Plan (the "EIP") as the same may be in
effect for each fiscal year of Imprint in accordance with the terms and
conditions of the EIP and shall be entitled to received pursuant thereto a
maximum achievable bonus of up to twenty percent (20%) of your annual base
salary paid in any fiscal year. Such figure may be increased to up to a
maximum of thirty percent (30%) of your annual base salary paid in any
fiscal year if Imprint achieves its optimum goals,
<PAGE>
tentatively calculated at two hundred percent (200%) of Imprint's sales
achievements. Your participation in the EIP in accordance with this
agreement shall commence as of the Commencement Date and your bonus, if
any, shall be based on the annual base salary paid to you during such
fiscal year in which the bonus is payable. Weaver acknowledges that her
participation in the EIP shall be in accordance with the provisions of this
agreement and that, except as otherwise provided herein, no bonus shall be
payable to Weaver in the event that her employment with Imprint shall be
terminated under paragraph 5A below prior to the expiration of the contract
year in respect of which such bonus might otherwise be payable. All salary
and other compensation payable to you under this agreement shall be subject
to normal payroll taxes and withholding requirements.
3. Employee Benefits:
A. Insurance and Benefit Plans: You shall be entitled to participate
in any present or future hospitalization or medical insurance plan or such
other employee benefit plans which are generally available on a group basis
to employees of Imprint of comparable level and status and which may be in
effect from time to time during the Term of this agreement. Imprint shall
be under no obligation to institute or continue the existence of any
employee benefit plan described herein and may from time to time amend,
modify or terminate any such employee benefit plan. Until such time as (i)
Imprint has a group hospitalization or medical insurance plan in effect for
its employees or (ii) time expires for your participation in the group
insurance benefits provided by your previous employer under the federal act
commonly referred to as "COBRA," whichever shall occur first, Imprint will
reimburse you for each payment made by you for premiums due to maintain
those insurance benefits available to you under COBRA upon receipt by
Imprint of each receipt provided to you by such previous employer or the
insurance carrier for each payment made by you or your written notification
that such premium has been paid by you.
B. Vacation: You shall be entitled to not more than two (2) weeks paid
vacation (in addition to Imprint's established holidays) during the first
and second years of your employment by Imprint and not more than three (3)
weeks paid vacation during the third year of such employment (if any).
<PAGE>
C. Travel and Expense Budget: Imprint shall reimburse you for expenses
reasonably and actually incurred or paid by you during the Term of this
agreement in connection with the performance of your bona fide duties
hereunder (including cellular phone charges) upon submission of appropriate
vouchers and receipts, provided that such are within the applicable limit
of your established travel and expense budget. Your level of travel in
connection with Imprint's business will, in all cases, be consistent with
that of other Imprint executives of comparable levels and status.
4. Employment Relationship:
A. Confidential Information: You understand that the services to be
performed by you hereunder are special, unique and extraordinary, and that
by reason of those services, you may acquire confidential information and
trade secrets. It is agreed that all information relative to the activities
of Imprint, including, but not limited to, Imprint's contractual
third-party relationships, contracts, financial information, plans,
developments, administrative procedures, operations, or dealings with other
third parties, is the property of Imprint and shall not be disclosed by you
during or after the Term of this agreement other than to Imprint, its
designees or employees or except as may otherwise be required in connection
with Imprint's business and affairs.
B. Conflict of Interest: During your employment by Imprint, you agree
that you will not, without Imprint's prior written consent: engage or
become interested, directly or indirectly, as owner, employee, partner,
consultant, through stock ownership (except ownership of less than 5% of
the number of shares outstanding of any securities which are listed for
trading on any securities exchange), investment of capital lending of money
or property, rendering of services or otherwise, either alone or in
association with others in the operation of any type of business engaged in
music publishing, record production, artist management, or any other
business in which Imprint or any of its affiliates are currently or may
hereafter be engaged at any time during the Term hereof.
<PAGE>
C. Solicitation of Employees: You shall not, during the Term hereof
and for a period of one (1) year thereafter, for yourself or on behalf of
any other person, partnership, corporation or entity, directly or
indirectly, or by action in concert with others: (i) solicit, induce, or
encourage any person known to you to be an employee of Imprint or any
affiliate of Imprint to terminate his or her employment or other
contractual relationship with Imprint or any of its affiliates or (ii)
solicit, induce or encourage any artist or any other person known by you to
have a contractual relationship with Imprint to discontinue, terminate,
cancel or refrain from entering into any contractual relationship with
Imprint or any of its affiliates.
D. Injunctive Relief: You acknowledge that the provisions of this
paragraph 5 are reasonable and necessary for the protection of Imprint and,
without the restrictions imposed by the provision, that Imprint would
suffer irreparable and immeasurable damage. You, therefore, expressly agree
that Imprint shall be entitled to seek injunctive or other equitable relief
to prevent the breach or threatened breach by you of the provisions of
these paragraphs and secure their enforcement.
5. Termination:
A. With Cause: Imprint shall have the right to terminate this
agreement for cause at any time during the Term hereof upon written notice.
For purposes of this agreement, the term "for cause" shall mean: (i)
conviction or entering into any plea other than "not guilty" with respect
to any felony indictment; (ii) refusal or failure to perform any duties or
responsibilities assigned to you pursuant to this agreement (other than due
to illness or disability); (iii) engaging in any conduct detrimental to the
business, goodwill or good name of Imprint or any of its affiliates; and,
(iv) your death or disability. You shall be deemed disabled if you shall
be unable, by reason of mental or physical incapacity from performing his
duties hereunder for a period of sixty (60) consecutive days or an
aggregate of ninety (90) days in any consecutive 6-month period. Any
written notice of termination for cause under this paragraph shall set
forth in detail the act or conduct giving rise to such notice. If your
employment by Imprint shall be terminated pursuant to this paragraph, you
shall be entitled to receive only the base salary
<PAGE>
actually earned and payable to you pursuant to paragraph 3 above through
the date of your termination, together with any approved unreimbursed
expenses through the date of termination, and you shall not thereafter be
entitled to any further salary, bonus, expenses, benefits or other
compensation of any kind hereunder.
B. Without Cause: If Imprint terminates this agreement other than "for
cause" as provided in paragraph 5A above, you shall have the right to
receive, for the remaining Term of the Agreement, your base salary to which
you would have otherwise been entitled under this agreement throughout the
remaining portion of the Term. You shall also be entitled to receive any
approved unreimbursed business expenses and your pro rata bonus, if any,
actually earned and payable to you pursuant to paragraph 3 above through
the date of termination of your employment. Amounts payable by Imprint
under this paragraph shall be payable when and as the same would otherwise
have been payable under the terms hereof and shall be subject to your duty
to mitigate your damages by using reasonable efforts to seek other
comparable employment within the Nashville, Tennessee, area; provided,
however, that in the event that any payment is not made within three (3)
business days from when same would otherwise be payable, Imprint shall be
liable for a penalty payment to you in the amount of five hundred dollars
($500.00) for each such occurance. Compensation (in whatever form) earned
by you on account of such other employment during the unexpired portion of
this agreement (without regard to when such compensation is paid) shall be
applied in reduction of Imprint's obligations hereunder.
6. Notices: Notices required or sent under this agreement shall be deemed
to have been given or served in delivered in person or sent by certified mail,
return receipt requested, postage and fees prepaid, or by overnight delivery
prepaid service to the parties at their addresses set forth above. Copies of
notices to Imprint shall be sent to Wayne Robert Halper, Esquire, Imprint
Records, Inc., 209 10th Avenue South, Suite 500, Nashville, Tennessee 37203.
Copies of notices to you shall be sent to______________________________________
___________________________________________________________. Either of the
parties hereto may, at any time hereafter, change the address to which notices
shall be sent by giving written notice to the other party under this paragraph
7. The date of giving of any notice sent by mail shall be the date of posting,
<PAGE>
except that notices of change of address shall be deemed given when received.
7. Assignment: Neither this agreement nor the right to receive any payments
hereunder may be assigned by you. Imprint shall have the right to assign this
agreement to any successor in interest, whether by merger, consolidation,
acquisition of all or substantially all of Imprint's business or assets, or
otherwise.
8. Representations and Warranties: You represent and warrant to Imprint
that you have the unfettered right to enter into this agreement on the terms and
subject to the conditions hereof, and that you have not done nor permitted to be
done anything which may curtail or impair any of the rights granted to Imprint
herein. Neither the execution and delivery of this agreement by you nor the
performance by you of any of your obligations hereunder constitute or will
constitute a violation, breach of or default under any agreement, arrangement or
understanding, or any other restriction of any kind, to which you are a party or
by which you are bound. You agree to hold Imprint harmless and indemnify Imprint
to the extent permitted by law against any and all damages or losses which it
may suffer as a result of a breach of your representations and warranties
hereunder. This indemnify shall survive the termination of this agreement.
9. Miscellaneous:
A. Waiver: No course of dealing or any delay on the part of either
party in exercising any of its rights hereunder will operate as a waiver of
any rights of such party. No waiver of any default or breach of this
agreement shall be deemed a continuing waiver or waiver of any other breach
or default.
B. Entire Agreement: This agreement sets forth the entire agreement
between us and supersedes all prior agreements and understandings, written
or oral, relating to the terms of your employment, and may not be changed
except in writing, duly executed by both you and Imprint. Any continued
employment of you by Imprint following the expiration of the Term
<PAGE>
hereof shall not be deemed to extend the Term and shall be deemed to be
at will.
C. Governing Law: This agreement shall be governed, interpreted and
construed in accordance with the laws of the state of Tennessee applicable
to agreements entered into and to be performed entirely therein. Any suit,
action or proceeding with respect to this agreement shall be brought
exclusively in the courts of the State of Tennessee, County of Davidson.
D. Binding Effect: This document is not intended to constitute an
agreement, commitment or offer of employment binding upon Imprint until and
unless executed on behalf of Imprint, as provided below, and no
representative of Imprint has authority to make any commitment or give any
assurance to the contrary.
If the foregoing correctly sets forth our understanding and agreement,
please sign where indicated below.
Very truly yours,
IMPRINT RECORDS, INC.
By: /s/ ROY W. WUNSCH
----------------------------
Office: CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
-----------------------
ACCEPTED AND AGREED TO:
/s/ ANNE WEAVER
- -----------------------
Ms. Anne Weaver
//EX10-2_10854.CEC
<PAGE>
1
EXHIBIT 10.2
Confidential portions omitted and filed separately with the Commission.
Deleted text (represented by XXXX in the text and an asterisk (*) in the
margin) indicates such omissions.
August 7, 1996
Imprint Records
209 10th Ave. S.
Suite 500
Nashville, Tennessee
37203-4101
Gentlepersons:
When signed by Imprint Records ("you", "your", etc.), and by BMG Music
Canada Inc. ("BMG"), 150 John Street, 6th Floor, Toronto, Ontario, M5V 3C3, the
following shall constitute an agreement between you and BMG.
1. Grant of Rights
(a) During the Term (as hereinafter defined), you shall, in accordance with
the terms and conditions hereof, deliver to BMG the Licensed Masters contained
on the Licensed LPs, as both terms are hereinafter defined, embodying the
performances of the each Artist as hereinafter defined.
(b) (i) You hereby grant to BMG, its subsidiaries, affiliates, licensees
and assigns the sole, exclusive and unlimited right throughout Canada (the
"Territory") and for the Term as hereinafter defined (which may be suspended or
extended as provided for herein) to:
(A) manufacture Records during the Term by any methods now or
hereafter known, embodying any portions or all of the performances embodied
in the Licensed Masters and publicly perform and permit public performance
of such records subject to any rights granted by the writers to public
performing rights societies; and
(B) advertise, sell, transfer, deal in, exploit or otherwise dispose
of such Records during the Term and during the Sell-Off Period (as
hereinafter defined) at such times and places and in any and all media and
manner as shall be determined by BMG, in its sole and exclusive discretion
under any trademarks, trade names or labels designated by BMG, provided all
releases will be on one of your then current top-line labels, or,
notwithstanding any provisions hereof, BMG and/or its subsidiaries,
affiliates, licensees and assigns may, at their election, reasonably delay
from doing any one (1) or more of the foregoing.
(ii) Subject to your prior approval, not to be unreasonably withheld,
you hereby grant to BMG the non-exclusive right to exploit the Licensed
Masters for synchronization in motion picture, television and other
audiovisual soundtracks, background music and other similar purposes (other
than commercials) for exploitation in Canada only. If you receive income
from any third party for synchronization, as described above, of Licensed
*Masters in the territory, you agree to pay BMG XXXXXXXXXXXXXXX of the net
amount (as defined in paragraph 9(b)(vi)) of such income so received by
you.
(iii) Subject to your prior approval, not to be unreasonably withheld,
BMG may compile and exploit a "Greatest Hits" album for any Artist during
the Term.
(c) Subject to paragraph 2(d) below, BMG shall be the sole and exclusive
owner of all tangible duplicates and derivatives made by BMG from the Licensed
Masters and of all
*Confidential portions omitted and filed separately with the Commission
<PAGE>
2
Records made by BMG from such Licensed Masters, duplicates and derivatives. You
shall be the sole and exclusive owner of the Licensed Masters and the underlying
sound recordings contained thereon.
(d) Promptly following BMG's request, you shall execute and deliver to BMG
(at BMG's expense) any documents requested which are necessary for BMG to secure
copyright protection in the Licensed Masters and the sound recordings made from
the Masters and you hereby appoint BMG as your agent and attorney-in-fact to
sign any such documents in your name and to make appropriate disposition of them
provided they are consistent with this agreement. BMG agrees to promptly provide
you with copies of any such documents signed on your behalf. BMG shall have the
right to bring, prosecute, defend, and appear in suits, actions and proceedings
involving any of said copyrights insofar as the same pertain to Records
embodying the Licensed Masters, at its own expense, in its own name, and, in the
event that you shall elect not to appear in such proceedings, in your name as
your attorney-in-fact for these purposes.
(e) If you are in the final stages of negotiation with a major U.S. label
and one of the outstanding issues in that negotiation is that you must provide
worldwide distribution rights to that major U.S. label, BMG agrees to enter into
good faith negotiations with you regarding your buying back the rights you have
granted to BMG hereunder. BMG further agrees that, subject to the circumstances
described in this subparagraph and upon receipt of timely written notice from
you, BMG shall refrain from exercising any option to extend this agreement for
an additional contract period.
2. Term; Sell-Off Period
(a) The term of this agreement ("Term") shall commence on the date hereof
and shall consist of the Initial Period and Option Periods.
(b) The "Initial Period" of the Term shall mean:
(i) for all types of exploitation of the Licensed Masters other than
those referred to in subparagraph 2 (b)(ii) below, the period commencing on
the date hereof and, unless terminated or otherwise provided herein, ending
three (3) years from the date first written above.
(ii) in perpetuity in the case of any Licensed Masters embodied on
Records sold or distributed as contemplated in subparagraphs 9(b)(iv) or
(v).
(c) The Initial Period and the Option Periods of the Term are each
sometimes herein referred to as a "Contract Period" or "Period."
(d) (i) You hereby grant to BMG two (2) separate and consecutive options to
extend the Term for additional two (2) year periods on the same terms and
conditions applicable to the Initial Period except as otherwise set forth herein
(the "First Option Period" and the "Second Option Period" respectively). BMG may
exercise its options by sending you notice no later than six (6) months prior to
the expiration of the current Contract Period. If BMG fails to give such notice,
the Term shall automatically expire at the end of the current Contract Period.
(ii) Notwithstanding anything contained herein to the contrary and
*assuming timely delivery to BMG of a minimum of XXXXXXXXXXX Licensed LPs
during the current Contract Period, as a condition precedent to BMG having
the right to exercise its option to extend the Term for an additional
Contract Period, BMG must have attained in the current Contract Period
cumulative gross sales of all Licensed LPs delivered equal to or greater
*than XXXXXXXXXXXXXXXX units inclusive of all configurations, subject to a
*XXXXXXXXXX percent reserve. If BMG fails to attain this sales plateau, BMG
may exercise its option for an
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
3
additional Contract Period only upon receipt of your approval. Should you
*deliver fewer than XXXXXXXXXX Licensed LPs to BMG during the current
Contract Period, the sales plateau to be attained shall be pro-rated
accordingly for the purposes of this calculation.
(iii) Notwithstanding anything contained herein to the contrary, if
BMG attains in the current Contract Period cumulative sales of all Licensed
*LPs delivered in excess of XXXXXXXXXXX units inclusive of all
configurations, BMG shall be deemed to have exercised its option for the
next Contract Period.
(e) The exploitation period for each Licensed LP delivered hereunder shall
be the longer of the Term or three (3) years from the date of first commercial
release of the applicable Licensed LP in the Territory (the "Exploitation
Period") and all of the rights granted to BMG by you herein regarding the
exploitation of Licensed Masters shall survive until the expiration of the
Exploitation Period on an album by album basis.
(f) Upon expiration of the Exploitation Period, BMG shall have the rights
described in subparagraph 1(b)(i)(B) above for a period of six (6) months
thereafter ("Sell-Off Period"), with respect to the inventory of any Record in
its possession which contains the Licensed Masters manufactured by BMG prior to
the expiration or termination of the Term. BMG shall not increase manufacturing
in anticipation of the Sell-Off Period during the period three (3) months prior
to expiration or termination of the Term, other than as required to fill actual
order received by BMG. BMG shall provide you with an accounting of all
outstanding inventory one (1) month prior to commencement of the Sell-Off
Period; you agree to instruct BMG by the date of commencement of the Sell-Off
Period as to whether you wish to purchase the inventory, if any, remaining upon
expiration of the Sell-Off Period. Upon the expiration of the Sell-Off Period,
BMG shall either sell to you at the cost of manufacture or promptly destroy all
inventory, if any, then remaining. BMG shall submit to you an affidavit of
destruction signed by an authorized signatory of BMG upon your written request.
Upon the expiration of the Sell-Off Period, all parts, masters, film, etc.
shall, at your written direction, be either returned to you or destroyed as
evidenced by an affidavit.
3. Advances
*(a) (i) BMG agrees to pay you an initial recoupable advance of XXXXXXXX
U.S. Dollars upon execution of this agreement (the "Contract Advance").
(ii) BMG agrees to pay you an additional recoupable Contract Advance
*of XXXXXXXX U.S. Dollars upon exercise of each option to extend the Term.
(iii) Recoupment of the Contract Advance(s) shall be
cross-collateralized against sales of all Licensed LPs.
*(b) (i) BMG further agrees to pay you a recoupable advance of XXXXXXXXX
U.S. Dollars for each Licensed LP delivered pursuant to paragraph 4 herein (the
"Album Advance"). Each Album Advance shall be paid within fifteen days from
delivery of the applicable Licensed LP.
(ii) In the event a particular Licensed LP attains a net sales level
*of XXXXX units prior to release of the next consecutive album by the same
Artist, then BMG agrees to pay you an additional recoupable Album Advance
*of XXXXXXXXX U.S. Dollars.
(iii) In the event a particular Licensed LP attains a net sales level
*of XXXXX units prior to release of the next consecutive album by the same
Artist, then BMG agrees to pay you an additional recoupable Album Advance
*of XXXXXX U.S. Dollars.
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
4
(vi) BMG shall recoup the Album Advance(s) against sales by the
applicable Artist.
(c) (i) In the event a particular Licensed LP attains a net sales level
*of XXXXXXX units prior to release of the next consecutive album by the same
*Artist, then BMG shall pay you a recoupable Album Advance of XXXXXXXX U.S.
Dollars (the "Subsequent Album Advance") within fifteen days after release
of the next subsequent Licensed LP by the same artist.
(ii) In the event a particular Licensed LP fails to attain a net sales
*level of XXXXX units prior to release of the next consecutive album by the
same Artist, then BMG shall pay the recoupable Artist Advance(s) set out in
subparagraph 3(b) based on attainment of sales levels by the subsequent
Licensed LP.
(d) You acknowledge that records sold to or through a Record club shall not
be included in the calculation of net sales levels attained herein.
4. Delivery Schedule
You shall deliver the Licensed Masters contained on the Licensed LPs set
out in Schedule A, attached hereto, on or before ____________, 1996.
Furthermore, you agree to deliver to BMG a copy of each album recorded by any of
your artists during the Term within one (1) month from such album's delivery to
you. BMG shall have thirty (30) days to elect to commercially release such
delivered album in the Territory, then such album shall be a Licensed LP
hereunder and such artist shall be deemed to be an Artist hereunder. Should you
provide BMG in a timely manner with advance samples of master recordings prior
to delivery of a particular album, BMG agrees to make its election as to whether
to commercially release such delivered album in the Territory within ten (10)
business days of delivery of the applicable album. If BMG elects not to release
an album by a particular artist, then BMG shall have no further rights hereunder
to recordings by that particular artist during the Term, except at your sole
discretion. BMG agrees to commercially release in the Territory, all Licensed
LPs by each Artist within one hundred and twenty (120) days from delivery to BMG
of the applicable Licensed LP(s) and to make best efforts to co-ordinate its
release schedule with your U.S. release schedule. Notwithstanding anything
contained in this paragraph 4 to the contrary, unless BMG approves delivery of
a greater number of albums, you agree to provide BMG with no more than eight (8)
albums each year of the Term from which BMG may elect to exercise its option as
set out above.
5. Delivery Guidelines
(a) Contemporaneously with the delivery of the Licensed Masters hereunder,
you shall furnish BMG in writing with the following:
(i) the label copy (including song titles and any subtitles), names of
composers, any show or movie credits, affiliate (SOCAN, BMI, ASCAP et al.),
timings, indication whether recording is track, sweetening or vocal
overdub, notation whether for LP or single, producer and/or production
company credits;
(ii) the liner credits;
(iii) a technically satisfactory Sony PCM 1610/30 U-matic tape master,
the equivalent or a digital audio tape ("DAT") accompanied by the
appropriate tracking information. BMG shall have the right to require, at
BMG's sole cost, that Licensed Masters be re-mixed to BMG's specifications;
provided your consent shall be required for any remixes, re-editing, re-
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
5
mastering, re-sequencing or re-compiling of songs. Following such approval,
you shall prepare and deliver to BMG the master tape and two (2) equalized
copies thereof and, with respect to CDs (as hereinafter defined), two
technically satisfactory Sony PCM 1610/30 U-matic tape masters, or the
equivalent thereof, accompanied by the appropriate digital tracking
information.
(iv) the final timings in connection with the Sony PCM 1610/30 U-matic
tape master and/or digital audio tapes and master tapes furnished in
accordance with subparagraph 5(a)(iii) above.
(b) All items submitted under subparagraph 5(a) above shall be subject to
the approval of BMG's President or his designee as technically satisfactory for
the manufacture and sale of records and in respect of the advocacy of illegal
activity, patent, offensiveness, rights of privacy and publicity and defamation
or other violation of law or infringement of any rights of other persons or
entities.
(c) No Licensed Masters delivered hereunder shall be in contravention of
public morals or taste, contain libelous or obscene matters, violate rights of
privacy or any other rights of third persons.
(d) Unless indicated to the contrary herein, all deliveries shall be
made f.o.b. to BMG's office at 150 John Street, 6th Floor, Toronto, Ontario, M5V
3C3 or at such other location as BMG shall designate from time to time.
(e) Notwithstanding anything to the contrary contained herein, upon
delivery of the Artwork, should the cost per unit of the Artwork at such
delivery date, as calculated by BMG or any of its affiliates or licensees,
exceed BMG's (or such affiliates' or licensees') standard unit packaging cost
limitation, BMG shall so notify you. You shall then have the option of (i)
notifying BMG, within three (3) business days, that you shall revise and
re-submit the Artwork to BMG within thirty (30) days so that the cost per unit
does not exceed the applicable standard unit packaging cost limitation (and in
the event you give such notice and fail to so revise and resubmit the Artwork
with such thirty (30) day period, BMG shall have the right to prepare the
packaging for the Licensed LP concerned, which packaging shall be subject to
your approval, not to be unreasonably withheld, at your sole cost) or (ii)
notifying BMG, within three (3) business days, that BMG has the Offset Right
with respect to all such costs in excess of the applicable standard unit
packaging cost limitation. In the event you fail to so notify BMG, BMG shall
have the option of preparing the packaging for the record concerned at your sole
cost or having the Offset Right with respect to all such costs in excess of the
applicable standard unit packaging cost limitation. The current applicable
standard unit packaging cost for CDs is the cost of a 4-panel, 4-colour insert
and 4-colour tray card; for cassettes, it is the cost of a 4-colour U-card.
6. Costs
You hereby warrant and represent that you shall be responsible for, and
have paid and shall pay when due and owing, all costs and expenses whatsoever in
connection with the Licensed Masters, including, without limitation, all
transportation, hotel and living expenses incurred by you, each Artist and each
producer in connection with the Licensed Masters and for all costs of furnishing
BMG with such fully-edited Master recordings and other items which you are
required to so deliver hereunder. Without limiting the generality of the
foregoing, you shall be solely responsible for the payment of (i) all costs for
arrangements, orchestrations and copying; (ii) all union scale payments, fees,
royalties and other payments due to each Artist, each producer, any other third
party (including without limitation advances or fees payable to third parties
for "sample" clearances but excluding union special payments) and all other
persons who render performances or services in connection with recording
sessions, as well as payroll taxes and any other taxes required to be paid
thereon; (iii) all cartage, instrument rental, studio and
<PAGE>
6
engineering fees; (iv) all mixing, re-mixing, editing, re-editing, mastering and
re-mastering costs (which mastering and re-mastering costs shall not include the
costs of "cutting the master lacquers" or manufacturing metal parts); and
(v) all amounts payable pursuant to any applicable collective bargaining
agreements based upon or calculated by reference to union scale payments. You
warrant, represent and agree that all costs, charges and expenses referred to
in this Paragraph 6 will be paid for by you when they are due. If, however, BMG
is required to pay any such costs for which you are responsible, then, without
limiting BMG's rights, BMG shall have the Offset Right (as hereinafter defined).
Should BMG choose to re-mix or re-edit or engage in any of the activities
described in subparagraph 6(iv), then BMG shall be responsible for any costs so
incurred and same shall not be recoupable. BMG shall be the owner of the
re-mixed, re-edited, re-mastered, etc. Master recording.
7. Artwork
(a) (i) You shall prepare and deliver the album artwork ("Artwork") for use
in connection with the Licensed LPs.
(ii) BMG shall order, at BMG's sole expense, all film negatives
required for manufacture of printed inserts.
(b) All Artwork and all rights therein (including the copyright and any
renewal and/or extension of such copyright and the right to secure such
copyright therein), will be exclusively your property free of any claim
whatsoever by BMG.
(c) All matters relating to BMG's trademarks, legal obligations or other
requirements shall be determined in BMG's sole discretion.
(d) All costs of Artwork for use in connection with the Licensed LPs paid
for by BMG shall be recoupable by BMG against royalties payable hereunder.
8. Masters/Artwork -- Warranties
(a) You hereby warrant and represent:
(i) that you are and will be the sole owner in the Territory of the
Licensed Masters and Artwork as well as the sole owner and holder in the
Territory of all right, title and interest, tangible and intangible,
therein, together with the copyright in the Licensed Masters and Artwork
(including any renewal and/or extension of such copyright);
(ii) that there are no (nor will there be any) liens or other
encumbrances against the Licensed Masters, Artwork, or any part thereof and
that you shall at all times keep and hold the Licensed Masters and Artwork
free and clear therefrom;
(iii) that you have the right, on your behalf and on behalf of all
other persons who participated in or in connection with the Licensed
Masters and Artwork, to grant to BMG the rights to use same for Records and
other purposes described in this agreement;
(iv) that no Records derived from any particular Licensed Masters have
been manufactured, distributed or sold in the Territory prior to the
delivery to BMG of such respective Licensed Masters other than as set forth
in subparagraph 21(a)(iv) hereof;
(v) that you are not currently a party to any agreement pursuant to
which you have granted to any third party any right in and to any of the
Licensed Masters for Record
<PAGE>
7
purposes in the Territory in derogation of the rights granted to BMG
pursuant to this agreement; and
(b) If you are in breach or alleged breach of any warranty and/or
representation made by you under subparagraph 8(a) above, then, without
limitation of BMG's rights, Paragraph 21 shall apply and to the extent
applicable, BMG shall have the Offset Right.
9. Royalties
(a) (i) Provided you have performed in accordance with the terms hereof,
with respect to Records sold which embody one or more Licensed Masters, BMG
shall accrue hereunder a royalty at the rate (sometimes hereinafter referred
*to as the "Basic Rate") of XXXXXXXX percent computed on a royalty base of
the "published price to dealers" (PPD) of Records (less Container deductions
and any taxes, if any) in the Territory.
(ii) If BMG's Top Line net sales hereunder through Normal Trade
*Channels in the Territory of any Licensed LP exceed XXXXXXXX units (as
determined in accordance with BMG's standard accounting procedures and as
reflected on statements rendered hereunder), then, in lieu of anything to
the contrary contained in subparagraph 9(a)(i) above, the royalty which
shall accrue hereunder on any such excess sales of such respective Licensed
*LPs shall be at the Basic Rate plus XXXXXXX; and if BMG's net sales
hereunder through Normal Trade Channels on its Top Line of any Licensed LPs
*exceed XXXXXXXX units (determined as aforesaid), then, in lieu of anything
to the contrary contained in subparagraph 9(a)(i) above, the royalty which
shall accrue hereunder on any such excess sales of such respective Licensed
*LPs shall be at the Basic Rate plus XXXXXX; and if BMG's net sales
hereunder through Normal Trade Channels on its Top Line of any Licensed LPs
*exceed XXXXXXX units (determined as aforesaid), then, in lieu of anything
to the contrary contained in subparagraph 9(a)(i) above, the royalty which
shall accrue hereunder on any such excess sales of such respective Licensed
*LPs shall be at the Basic Rate plus XXXXXX percent.
(b) The following, however, shall apply with respect to the computation
of royalties:
(i) (A) With respect to Records sold to or through a Record club
(including without limitation a Record club affiliated with BMG) or any
other direct-to-consumer mail- fulfillment sales operation or through a
sales operation of the type commonly known as "TV/key outlet merchandising"
wherein BMG is a licensor and with respect to Masters licensed by BMG to
others for their distribution of Records (other than as described in
subparagraph 9(b)(i)(B) below) or if such Records are released by a third
party, the royalty shall be an amount equal to Your Fraction (as
*hereinafter defined) of XXXXXXXX of all net receipts received by BMG in
Canada from its licensees arising out of the foregoing sales or other
distribution of Records embodying the Licensed Masters, after deduction of
all applicable copyright payments, union payments, or other mutually agreed
upon third party payments; provided you shall have prior approval, not to
be unreasonably withheld, over any of the above-described sales methods.
(B) With respect to Records sold to or through a direct-to-consumer
mail-fulfillment sales operation other than a Record Club and with respect
to Records sold through TV/key outlet merchandising wherein BMG is not a
*licensor, royalties shall be at XXXXXXX the rate otherwise applicable and
the royalty base shall be the actual selling price less Container
deductions and any taxes; provided you shall have prior approval, not to be
unreasonably withheld, over any of the above-described sales methods.
(C) For the purposes of this Agreement, "Your Fraction" means a
fraction the numerator of which is your Basic Rate and the denominator of
which is the aggregate of your Basic Rate and the basic rates accrued to
any other royalty participants.
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
8
(ii) (A) Intentionally Deleted.
(iii) (A) With respect to Records sold on a Mid-price line, royalties shall
*be at XXXXXXX of the rate otherwise applicable; provided you shall have prior
approval, not to be unreasonably withheld, over any Mid-price line sales
program(s).
(B) With respect to Records sold on a Budget-price line, royalties shall be
*at XXXXXX of the rate otherwise applicable; provided you shall have prior
approval, not to be unreasonably withheld, over any Budget-price line sales
program(s).
(C) With respect to Records sold on a Super-Budget-price line, royalties
*shall be at XXXXXXX of the rate otherwise applicable; provided you shall have
prior approval, not to be unreasonably withheld, over any Super-Budget-price
line sales program(s).
(D) You are deemed to grant approval to BMG to sell Records on a reduced-
price line, should you authorize sales on that same reduced-price line in the
territory of the United States.
(iv) With respect to Records sold to a commercial purchaser for use as a
premium, promotional item, sales incentive or for a similar purpose ("premium
*record(s)"), royalties shall be XXXXXXXX of the rate otherwise applicable and
the royalty base shall be BMG's actual selling price of such premium Record
(less Container deductions and any taxes); provided you shall have prior
approval, not to be unreasonably withheld, over any premium sales program(s).
(v) With respect to Records ("coupled records(s)") sold embodying Licensed
Masters coupled with Master recordings not delivered hereunder, royalties shall
be at that proportion of the rate otherwise applicable which the number of
Licensed Masters included on such coupled Record bears to the total number of
sides comprising such coupled record; provided no Licensed Master shall be
coupled with other Master recordings not delivered hereunder without your prior
approval, not to be unreasonably withheld. Notwithstanding the foregoing, you
hereby grant to BMG the right to couple one Licensed Master from each unrecouped
Licensed LP with other Master recordings without seeking your prior approval.
(vi) If BMG receives income from the Licensed Masters in synchronization
with motion picture or television soundtracks or in Videograms (as
hereinafter defined) thereof, BMG shall accrue an additional royalty
*hereunder of Your Fraction of XXXXXXX of the net amount of such income so
received by BMG. For purposes of this subparagraph, "net amount" shall mean
the gross amounts received by BMG or you, as applicable, in connection with
the subject matter hereof, less duplication costs and less BMG's
out-of-pocket costs and any amounts which BMG or you are obligated to pay to
third parties (such as, without limitation, mechanical copyright payments,
AFM and other union fund payments). Notwithstanding anything to the
contrary, no synchronization license shall be granted with respect to any
motion picture or television soundtrack or videogram without the express
written consent of you.
(vii) No royalties whatsoever shall accrue hereunder with respect to:
(A) Records distributed to any person primarily for purposes of promotion or
critique; (B) Records sold as "scrap", "overstock" or "surplus," which terms
shall mean excess inventory of a particular Record which is listed in the
*BMG catalog and sold at less than XXXXXXX of BMG's then current PPD; and (C)
Records cut out of the BMG catalog and sold as discontinued merchandise
("CutOuts"); provided you shall have prior approval, not to be unreasonably
withheld, over any of the sales methods contempleted in (B) and (C) herein.
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
9
(viii) With respect to Multiple LP Albums, and with respect to Records sold
to any government or its subdivisions, departments or agencies, or to military
exchanges, or to educational institutions or libraries, royalties shall be at
*XXXXXXX the rate otherwise applicable; provided you shall have prior approval,
not to be unreasonably withheld, over any of the above-described sales methods.
(ix) To the extent possible, BMG shall honour any restrictions regarding
methods of exploitation contemplated herein which are contained in agreements
between you and your artists and of which you make BMG aware.
(c) If legislation requiring the payment of royalties for the public
performance of Records is enacted in Canada and BMG receives such royalties
solely attributable to Master recordings licensed hereunder and Artist is not
entitled to receive similar royalties in Canada from a collective society or
entity other than BMG, then, with respect to performances in Canada, BMG shall
accrue to the relevant Artist's royalty account that portion of such royalties
as is required by law. If no such agreement and/or law applies, BMG shall pay an
amount equal to fifty (50%) percent of the net amount directly allocable to
Master recordings licensed hereunder and so received by BMG less all payments to
third parties (and you shall be responsible in any event for all required
payments to producers or other parties engaged by you in connection with
recording of the Master recordings hereunder).
(d) (i) As used in this Paragraph 9, the words "any taxes" shall mean any
taxes which are stated as part of, rather than separately from, the applicable
price upon which royalties are computed.
(ii) As used in subparagraph 9(b) above, the words "the rate otherwise
applicable", when applied to each particular type of Record (e.g., Singles
record, EP, LP, etc.) sold in the Territory, shall mean the rate under
subparagraph 9(a) or (b) above (as applicable) corresponding to the first unit
of each such particular type of Record sold in the Territory.
10. Royalty Payments
(a) Royalties earned hereunder will be accrued quarterly and paid, less all
advances and any other charges, during February for the quarterly period ending
in December, during May for the quarterly period ending in March, during August
for the quarterly period ending in June and during November for the quarterly
period ending in September, in accordance with BMG's regular accounting
practices. BMG shall, however, have the right to establish reasonable reserves
for returns and exchanges. The reserve so established respecting each particular
Licensed LP hereunder shall not exceed the following percentages of the total
number of units of such Licensed LP shipped:
*(i) XXXXXX percent for the first, second and third quarters after
release of the Licensed LP
*(ii) XXXXXX percent for the fourth and fifth quarters after release of
the Licensed LP
(iii) full liquidation of reserve during the sixth quarter after
release of the Licensed LP
BMG shall have the right to establish reasonable reserves in excess of the
percentage limitations set out herein if actual returns exceed the
above-referenced reserve limitations. If BMG makes any overpayment of royalties
(e.g., by reason of an accounting error or by paying royalties on Records
returned later), BMG shall have the Offset Right in connection therewith.
(b) (i) Each royalty payment hereunder shall be accompanied by a detailed
statement in accordance with BMG's regular accounting practices. Each statement
shall become binding on
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
10
you and you shall neither have nor make any claim against BMG with respect to
such statement, unless you shall advise BMG, in writing, of the specific basis
of such claim within eighteen months after the date that you receive such
statement. BMG shall have no obligation to furnish statements after the
expiration of the Term except: (A) in connection with royalties payable
hereunder; or (B) upon your written request received by BMG during a
particular quarterly accounting period for the applicable statement which
would otherwise have been rendered to you respecting the quarterly period
preceding such particular quarterly period.
(ii) You will not have the right to sue BMG in connection with any
royalty accounting, or to sue BMG for royalties accrued by BMG during the
period a royalty accounting covers, unless you commence the suit within two
(2) years after the date when the statement in question is rendered to you.
If you commence suit on any controversy or claim concerning royalty
accountings rendered to you under this agreement, the scope of the
proceeding will be limited to determination of the amount of the royalties
or monies 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 royalties found owing. Your recovery of any such royalties will
be the sole remedy available to you or any Artist by reason of any claim
related to BMG's royalty accountings. Without limiting the generality of
the preceding sentence, neither you nor an Artist will have any right to
seek termination of this agreement or avoid the performance of your
obligations under it by reason of any controversy or claim concerning
royalty accountings rendered to you under this agreement; provided that
nothing contained in this sentence shall prevent you from seeking
termination of this agreement where fraud has been demonstrated to have
occurred.
(c) Royalties accruing hereunder shall be less whatever taxes the laws of
any applicable jurisdiction require be withheld in connection with such
royalties.
(d) If, on any date, the performances borne on any Master recording
hereunder become property of the public domain in any territory of the world so
that persons may reproduce and/or exploit in such territory Records of such
performances without license from and payment to BMG, then, notwithstanding
anything herein to the contrary, no monies whatsoever shall accrue hereunder in
connection with Records sold hereunder in such territory on and after said date
insofar as such performances are concerned.
(e) BMG agrees that you may, not more than once during any calendar year,
but only once with respect to any statement rendered hereunder, audit its books
and Records for the purpose of determining the accuracy of BMG's statements to
you. If you wish to perform any such audit, you will be required to notify BMG
at least thirty (30) days before the date when you plan to begin it. BMG may
postpone the commencement of your audit by notice given to you not later than
ten (10) business days before the commencement date specified in your notice; if
BMG does so, the running of the time within which the audit may be made will be
suspended during the postponement. If your audit has not been completed within
one (1) month from the time you begin it, BMG may require you to terminate it on
seven (7) days' notice to you at any time; BMG will not be required to permit
you to continue the examination after the end of that seven (7) day period. You
shall not be entitled to examine any manufacturing records or any other Records
which do not specifically report sales of Records or calculation of net receipts
on which royalties are accruable hereunder. All audits shall be made during
regular business hours upon reasonable notice, and shall be conducted on your
behalf by an independent Chartered Accountant or Certified Public Accountant,
but not if he or his firm has begun an examination of BMG's books and Records
for any person (except you), unless the examination has been concluded and any
applicable audit issues have been resolved. Each examination shall be made at
your own expense at BMG's regular place of business in Canada where the books
and Records are maintained.
<PAGE>
11
11. Mechanical Royalties
(a) As used herein:
(i) "Controlled Composition" means a work which is written in whole or
in part by an Artist and/or producer(s) or which is owned or controlled by
you and/or an Artist and/or producer(s) or in which you and/or an Artist
and/or producer(s) have (has) a direct or indirect interest in the
publishing income to be derived therefrom or from the copyright thereof.
(ii) "Statutory Rate" means, with respect to each musical work
recorded and embodied in a Master Recording hereunder, the minimum fixed
(without regard to playing time) mechanical royalty rate in effect pursuant
to the Canadian Copyright Act or the rate agreed upon by the Canadian music
publishing industry or its mechanical collection representative pursuant to
industry-wide agreement (as the context so requires) in effect at the time
of the execution of this Agreement or the rate determined by law, as the
case may be.
(b) If any contracts with the Artist or producer or any composer or author
of Controlled Compositions provide or shall at any time during the Term provide
that a royalty in an amount less than the Statutory Rate shall apply with
respect to Records sold in Canada and containing Controlled Compositions or that
reduced mechanical royalties shall apply with respect to "free" Records or that
reduced royalties shall apply with respect to Cut-Outs, then you agree to
provide BMG with copies of the relevant contracts and afford to BMG the benefit
thereof. BMG shall have the right to charge any and all mechanical royalties
which shall so become payable to any third party against and/or deduct same from
any and all sums accruing to your credit or becoming payable hereunder.
(c) You agree that each Controlled Composition recorded hereunder is hereby
licensed to BMG, for Canada, at the rates set forth in this paragraph 11(d)
below. With respect to Controlled Compositions so licensed hereunder, BMG shall
render quarterly statements and payments therefor of all mechanical copyright
royalties payable as set forth herein, within sixty (60) days after the end of
the applicable quarters ending in March, June, September and December (in
accordance with BMG's regular accounting practices), for each quarter for which
such royalties accrue pursuant to the terms hereof. BMG shall have the right to
withhold a portion of such royalties as a reasonable reserve in accordance with
normal company policies. The provisions of paragraph 10(b), (c) and (e) shall be
applicable to accountings rendered pursuant to this paragraph 11.
(d) (i) With respect to Records sold in Canada through normal trade
channels on BMG's Top Line or Mid-Price Line, the rates referred to in
subparagraph 11(c) above shall be the Statutory Rate, except as set forth in
subparagraph 11(b) above.
(ii) With respect to records sold in Canada on a Budget-Price or
Super-Budget- Price Line or as premium Records or pursuant to subparagraph
9(b)(i) above, the rates referred to in subparagraph 11(c) above shall be
one-half (1/2) of the Statutory Rate.
(e) Without limiting subparagraph 11(d) above, it is agreed that the
maximum copyright royalty which BMG shall be required to pay in respect of a
Record embodying Master recordings recorded hereunder shall be the aggregate of
(i) the number of Controlled Compositions on such Record times the applicable
rate described in subparagraph 11(d) above, and (ii) the number of works on such
Record which are not Controlled Compositions times the Statutory Rate; provided,
however, that in no event shall the aforesaid maximum copyright royalty exceed
an overall limit of (iii) twelve (12) times the Statutory Rate for an LP, (iv)
two (2) times the Statutory Rate for a seven (7") inch Singles record, (v) three
(3) times the Statutory Rate for a twelve (12") inch Singles record or (vi) six
(6) times the Statutory Rate for an EP.
<PAGE>
12
Notwithstanding the foregoing, in the event BMG is required to make aggregate
mechanical payments hereunder in excess of the above-mentioned limits, then BMG
agrees not to reduce any sums, monies or royalties otherwise payable to you
hereunder by the amount of such excess mechanical payments.
(f) No mechanical royalty whatsoever shall be payable for (i) Records cut
out of the BMG catalog and sold as discontinued merchandise; (ii) any work which
is non-musical; (iii) Records distributed by BMG which are not "Records sold" as
defined in paragraph 24 below; or (iv) any work which consists of an arrangement
of a work in the public domain.
(g) Notwithstanding the foregoing, if on any date any work becomes property
of the public domain in any territory, no mechanical royalties whatsoever shall
become payable in connection with Records hereunder manufactured, distributed,
sold or otherwise exploited in such territory on and after said date insofar as
such work is concerned.
(h) Intentionally deleted.
(i) Any assignment or other disposition of the rights in any Controlled
Composition shall be specifically made subject to BMG's rights hereunder.
(j) BMG is hereby granted the right to reprint the lyrics of Controlled
Compositions on the jackets, sleeves or other packaging of Records derived from
the Licensed Masters. BMG shall provide appropriate copyright notices and writer
and publisher credits with respect to such reprinted lyrics.
(k) BMG shall be responsible for the payment of mechanical royalties
directly to the copyright proprietors of the musical works embodied on the
Master Recordings hereunder. You, Artist and producer(s) agree to assist BMG in
entering into mechanical licenses with such copyright proprietors, which
licenses shall be consistent with the terms and conditions hereof but which
shall otherwise be in the general form utilized by the CMRRA or the Harry Fox
Agency, Inc. or in a form otherwise acceptable to BMG.
(l) You hereby warrant and represent that the "Schedule of Publishers"
appended to this agreement is a complete list of the music publishers in which
you and/or Artist and/or procuder(s) have a direct or indirect interest, and/or
with which you and/or Artist and/or producer(s) have an agreement entitling such
music publisher to administer Controlled Compositions. You agree to promptly
notify BMG, in writing, of each additional music publisher in which you and/or
Artist and/or producer(s) acquire any such interest and of each other change
required to keep the list currently accurate.
(m) Any assignment or other disposition of the rights in any Controlled
Composition shall be specifically made subject to BMG's rights hereunder.
12. Audiovisual Works
(a) As used herein:
(i) "Audiovisual work" means a work consisting of a series of related
images which are intrinsically intended to be shown by the use of a machine
and/or device (including, without limitation, projectors, viewers and electronic
equipment) together with accompanying sounds, if any, regardless of the nature
of the material object, such as film, disc or tape, in which a work is embodied.
<PAGE>
13
(ii) "Video Clip" means an audiovisual work produced during the Term
embodying a Master Recording of one (1) or more musical works in synchronization
with a visual rendition of Artist's performances and/or other performances
and/or images.
(iii) "Program" means a compilation, collective work or derivative work
which embodies a Video Clip(s) and/or other audiovisual works.
(iv) "Video Clip(s) and Program(s)" shall hereinafter sometimes be
referred to collectively as "Video(s)".
(v) "Videogram" means a material object, including, without limitation,
tape, disc or film, embodying a Video or a compilation, collective work or
derivative work which embodies a Video together with other Video(s) and/or other
work(s) intended for home use, including, without limitation, videocassettes and
videodiscs.
(vi) "Exhibition Copy" means a copy of a Video in any material form,
including, without limitation, tape, disc or film, intended for non-home use,
including, without limitation, all video, jukebox, television, theatrical and
non-theatrical distribution.
(vii) "Production Costs" means all costs incurred or expended in
connection with the production and delivery of the final master tape or film of
Videos, including, without limitation, flat fee payments to the publishers of
musical works; unreimbursed costs and expenses incurred in the duplication and
delivery of copies of Videos (including, without limitation, Exhibition Copies)
for licensees; and all other costs and expenses incurred with respect to Videos.
(b) You shall deliver to BMG promptly after the execution hereof, any Video
Clip heretofore or hereinafter produced containing a Licensed Master or Licensed
Masters.
(c) (i) You agree that with respect to any musical composition embodied in
Videos you will secure and deliver to BMG a license, effective as of the date of
this Agreement for synchronization and other uses on a non-exclusive perpetual
basis for the Territory free of charge or royalty, for the purpose of
reproducing such musical composition embodied in Videos and Exhibition Copies
and exhibiting, duplicating, manufacturing and distributing copies of such
Videos and Exhibition Copies for promotional purposes.
(ii) Without limiting BMG's rights, if, for any reason, BMG is
required to pay with respect to such musical composition any sums, then BMG
shall have the Offset Right.
(d) Each Video, including, but not limited to, all copyrights of any nature
whatsoever in and to each Video and each element or component part thereof,
excepting only the copyrights in the underlying musical works, shall be your
sole, exclusive and perpetual property. However, BMG, its affiliates,
subsidiaries, licensees and assigns shall have the sole, exclusive and right in
the Territory during the Term and the Sell-Off Period for promotional purposes
to: (i) exhibit, duplicate, manufacture, distribute and exploit by sale, lease,
license, rental or any other manner each Video (or any portion(s) thereof) and
copies thereof for such purposes, at such times and places, and in any and all
media and manner, including, but not limited to, "free", "pay", "public",
"cable" and "subscription" television, theatrical and non-theatrical
distribution, as shall be determined by BMG and (iii) allow others to exercise
any or all of the aforesaid rights. BMG shall
<PAGE>
14
have the right to cut and edit each Video (if necessary) for the exploitation of
such Video in different media.
(e) You and Artist agree that, during the Term, Artist shall not render and
shall not have the right to render any performance (excluding solely non-musical
dramatic performances) for any person other than BMG in connection with the
creation and/or exploitation of Videos in the Territory. You and Artist shall
not have the right (and you and Artist shall not have the right to authorize,
permit or grant to any person other than BMG the right) to manufacture and/or
distribute Videograms embodying such performances in the Territory.
13. Names, Voices, Likenesses and Biographies
You warrant and represent that BMG shall have the non-exclusive right,
during the Term and the Sell-off Period and in the Territory, without any
liability to any person, to use and to authorize other persons to use the names
(including any professional names), facsimile signatures, voices, any likenesses
and biographical material of each Artist collectively and individually, and
producer(s) for purposes of exploitation of the Licensed Masters and Records
hereunder; provided you shall have prior approval, not to be unreasonably
withheld, over any such likenesses and biographical material. Material provided
to BMG by you is deemed approved by you. You warrant and represent that you,
the Artist(s), and/or the producer(s) own the exclusive respective rights to
use Artist(s)'s and producer(s)'s names, respectively, in connection with the
manufacture and exploitation of Master recordings and Records; provided that
no such use will be or imply an endorsement of or merchandising tie-in with
any goods, wares, services or institutions.
14. Negative Covenants
(a) During the Term, with respect to the Licensed Masters, you shall not
use, or authorize or permit any person other than BMG to use in the Territory,
Artist's name(s) (including any professional names), facsimile signatures,
voices, likenesses or biographies in connection with the manufacture and/or
exploitation of Master recordings or Records.
(b) Neither you nor Artist nor producer(s) nor any person deriving any
rights from you and/or Artist and/or producer(s) shall at any time do, or
authorize any person to do, anything inconsistent with, or which might diminish
or impair, any of BMG's rights hereunder.
15. Your Relationship to BMG
(a) You are an independent contractor hereunder, and nothing herein
contained shall in any way constitute you as the agent or employee of BMG. You
do not intend Artist or any other person to be a third party beneficiary of this
agreement.
(b) You shall cooperate fully with BMG in connection with:
(i) any controversy or litigation which involves BMG's rights under
this agreement. Without limiting BMG's rights and your obligations
hereunder, BMG may, to protect its rights hereunder, act (including taking
legal action) in the name(s) of you and BMG.
(ii) BMG's promotional and publicity efforts involving Artist and
Artist's recordings hereunder, including personal appearances by Artist for
press interviews and photographs. Any costs incurred in connection
therewith by Artist and approved by BMG prior to their incurrence shall be
reimbursed to Artist and shall not be recoupable hereunder. BMG
<PAGE>
15
shall also have the right at its reasonable request to record Artist's
personal appearances visually on film, tape or other devices, subject to
the provisions of any applicable collective bargaining agreement to which
BMG is a party, for use in promoting Records embodying Artist's
performances.
16. Your Contract with Artists and Producer
You warrant and represent that you have a binding contract with each
Artist and producer(s) of the Licensed Masters (collectively the "Contracts")
which shall grant to you all rights necessary for you to fulfill all of your
obligations hereunder which relate directly or indirectly to each Artist and
producer(s). If you do not enforce any of your rights under the Contracts, BMG
may, without limitation of BMG's rights, enforce such rights in your name and/or
the name of BMG. No breach by you of Artist's Contract shall be sufficient cause
for Artist's failure to perform fully for BMG pursuant to said Contract and this
agreement. If you should breach either of the Contracts, then BMG may, without
limitation of BMG's rights, cure such breach on your behalf and at your expense.
No modification of or amendment to the Contracts will be made which would
directly or indirectly diminish any of BMG's rights hereunder. You shall be
responsible for prompt payment to Artist and/or producer(s) as a result of the
services performed by Artist and producer(s) in connection with this agreement.
17. BMG's Rights and Remedies
(a) In the event that you shall file a petition of bankruptcy or
insolvency, or shall be adjudicated as or become bankrupt or insolvent, or shall
file any petition or answer seeking reorganization, readjustment, composition,
moratorium or arrangement of your business under any law relating to bankruptcy
or insolvency, or if there shall be appointed a receiver of all or substantially
all of your property or if you shall make any assignment or attempted assignment
for the benefit of creditors, or if any proceedings shall be instituted for the
bankruptcy, liquidation or winding up of your business or for the termination of
its corporate charter then, BMG shall have the right, by giving written notice
to you, to terminate the Term effective as of the date such notice of
termination is given.
(b) If, for any reason other than BMG's hindrance without cause or force
majeure (as hereinafter defined), you materially breach this agreement or any of
the Licensed Masters are not timely delivered in accordance with paragraph 4
above, then, without limiting BMG's rights, BMG may, at its election, by written
notice to you, suspend its obligations to you hereunder for a period of time
equal to the duration of such failure provided BMG shall give you written notice
of any such breach and you shall have a period of thirty (30) days to cure such
breach. During any such suspension, BMG shall have the right to terminate the
Term by written notice to you, in which case all of BMG's obligations to you
under this agreement shall be extinguished, other than BMG's continuing
obligation to render statements and payments, if any, without affecting BMG's
rights which would have survived the Term and any rights BMG may have had by
reason of your failure to perform.
(c) Except as otherwise may specifically be indicated herein to the
contrary, the rights and remedies of BMG and you as specified herein are not to
the exclusion of each other or of any other rights or remedies of BMG or you,
BMG and you may exercise or decline to exercise any one (1) or more of BMG's or
your rights and remedies, as applicable, as BMG or you may deem fit, without
jeopardizing any other rights and remedies of BMG or you; and all of BMG's and
your rights and remedies in connection with this agreement shall survive the
expiration of the Term.
<PAGE>
16
18. Force Majeure
If by reason of act of God or force majeure, such as war, fire, earthquake,
labour controversy, civil commotion, acts of any government, or the
unavailability of or delays in the delivery of materials and supplies, or
similar or dissimilar matters beyond BMG's control, BMG is prevented from or
materially hampered in the recording, manufacture, distribution or sale of
Records, BMG shall have the right, by written notice to you and without
liability, to suspend BMG's obligations hereunder and, if such occurs during the
Term, to extend the Term, by written notice to you, for a period of time equal
to the period of such suspension. However, if any of the foregoing contingencies
shall affect BMG only (rather than the Record industry generally), and if BMG
suspends its obligations for a period in excess of six (6) months, then, at any
time after such six (6) month period, you may request BMG in writing to
terminate such suspension. If BMG shall not within thirty (30) days following
its receipt of such request notify you in writing of its termination of such
suspension, you may at any time during the continuance of such suspension
terminate the Term. If you so terminate the Term, only those obligations of the
parties which would have continued after the Term shall survive such
termination. However, during any such suspension, BMG shall be obligated to
continue to pay royalties to you pursuant to this agreement unless the cause of
such suspension shall affect BMG's ability to make such payments.
19. Union Agreements
(a) You hereby warrant and represent that, if Artist's and/or producer(s)'s
services come within the scope of any agreement between any union and BMG, you
shall cause Artist and/or producer(s) (if Artist and/or producer(s) are not
already members of any such union) to join such union within thirty (30) days
after Artist and/or producer(s) first renders services hereunder that are
subject to such agreement(s). You further warrant and represent that Artist
and/or producer(s) shall remain a member in good standing of such union so long
as Artist's and/or producer(s)'s services hereunder are within the scope of such
agreement.
(b) BMG shall be solely responsible for and shall make full and timely
payment of any and all sums which may become due and payable, on account of the
manufacture and sale of Records by BMG hereunder, to the Music Performance Trust
Fund, the Special Payments Fund and any other union or union trust fund having
rights in the premises. Such sums paid by BMG shall not be chargeable against or
recoupable by BMG from royalties accruing hereunder.
20. Promotion of Records
(a) Any promotional efforts or expenditures made by you or on your behalf
in connection with any Records hereunder shall be in accordance with applicable
legal standards. In the event you are in breach of the preceding sentence, BMG
may, without limiting its rights, terminate the Term forthwith by sending you
written notice of such termination.
(b) You agree to provide BMG with copies of all marketing, promotional and
advertising materials (including, but not limited to, photographs and marketing
plans) developed for or by you at no cost to BMG. BMG agrees to pay for the cost
of duplicating and shipping these materials.
(c) BMG agrees to consult with you regarding the creation of and to provide
you with copies of all marketing, promotional and advertising materials
(including, but not limited to, photographs and marketing plans) developed for
or by BMG at no cost to you. You agree to pay for the cost of duplicating and
shipping these materials.
<PAGE>
17
21. Warranties and Representations; Indemnity
(a) You hereby warrant and represent that:
(i) You are possessed of the full right to enter into this agreement,
that you are and shall at all times remain possessed of all rights
necessary for you to completely fulfill all of your
obligations hereunder, and that your entering into this agreement and
fulfilling such obligations does not and shall not infringe upon the rights
of any person whatsoever.
(ii) None of the Masters recordings hereunder nor the performances
embodied therein, nor any other Materials (as hereinafter defined) nor any
authorized use thereof by BMG or its affiliates or licensees will violate
or infringe upon the rights of any third party. As used herein, "Materials"
mean any musical, dramatic, artistic and literary materials, ideas and
other intellectual properties furnished or selected by you, Artist or
producer(s) and contained in or used in connection with Masters recordings
hereunder or the packaging, sale, distribution, advertising, publicity or
other exploitation thereof.
(iii) The royalties and other payments specified herein shall be
comprehensive. Except as expressly provided herein to the contrary, BMG
shall have no monetary obligation whatsoever to you, Artist, producer(s) or
any other party for or in connection with this agreement or services
performed hereunder by you, Artist or producer(s), or BMG's exercise of its
rights hereunder.
(iv) The Licensed Masters have never been previously released in the
Territory save as follows (collectively the "Previously Released Masters"):
Title Release Date Catalogue Number Label
----- ------------ ---------------- -----
(b) You hereby indemnify BMG and hold BMG harmless against any and all
losses and damages (including reasonable attorneys' fees) arising out of any
claim by any one (1) or more third parties or any act or conduct by you which is
inconsistent with any warranty, representation, promise or covenant herein made
by you. You shall pay BMG on demand any sums for which you are liable hereunder
and if you fail to do so, BMG shall have the Offset Right. Without limiting the
generality of the foregoing, if any claim, action or proceeding is made or
brought against BMG which is inconsistent with any warranty or representation
herein made by you or which alleges matters which if proven would constitute a
breach by you of this agreement or any warranty, representation, promise or
covenant herein made by you, then: (i) BMG shall give you prompt written notice
thereof and you shall have the right to participate in the defense thereof at
your expense; and (ii) BMG shall have the right: (A) to suspend its obligations
hereunder (and, if such occurs during the Term, to extend the Term, by written
notice to you) for a period of time equal to the time which elapses from the
making or bringing of such claim, action or proceeding until the resolution
thereof; and/or (B) to withhold and reserve, from any sums otherwise payable to
you hereunder, sums reasonably sufficient to secure BMG for your liabilities
hereunder; provided, however, that if you shall deliver to BMG an indemnity or
surety bond, in a form and with a company acceptable to BMG, which in respect of
such claim, action or proceeding shall cover the amount of such claim, action or
proceeding and BMG's estimated legal fees and legal costs in connection
therewith, then BMG shall not withhold payment of monies otherwise payable to
you hereunder in respect of such claim, action or proceeding; and provided
further that BMG shall liquidate any such withheld amounts if, within
<PAGE>
18
twelve (12) months, no lawsuit has been commenced and active settlement
discussions are not then taking place.
(c) BMG hereby warrants and represents that:
(i) BMG is able to execute this agreement.
(ii) BMG shall not make any use of the Master recordings other than as
set forth in this agreement.
22. Miscellaneous
(a) This agreement sets forth the entire understanding between you and BMG
with respect to the subject matter hereof, and no amendment to or modification,
waiver, termination or discharge of this agreement or any provision hereof shall
be binding upon you or BMG unless confirmed by a written instrument signed by
your authorized signatory and BMG's authorized signatory. Any process in any
action, suit or proceeding arising out of or relating to this agreement may,
among other methods, be served upon you by delivering it or mailing it in
accordance with paragraph 23 below. Any such process may, among other methods,
be served upon Artist by delivering the process or mailing it to Artist in the
manner prescribed in paragraph 23 below. No waiver of any provision of or
default under this agreement shall affect your or BMG's right, as the case may
be, thereafter to enforce such provision or to exercise any right or remedy in
the event of any other default, whether or not similar. This agreement shall be
construed under the internal laws of the Province of Ontario applicable to
agreements to be performed wholly therein, and both parties agree that only the
Ontario courts shall have jurisdiction over this agreement and any controversies
arising out of this agreement shall be brought by the parties to the Ontario
Court (General Division) of the Province of Ontario and the venue shall be
Toronto, and they hereby grant jurisdiction to such court(s) and to any
appellate courts having jurisdiction over appeals from such court(s).
(b) If any part of this agreement shall be determined to be invalid or
unenforceable by a court of competent jurisdiction or by any other legally
constituted body having the jurisdiction to make such determination, the
remainder of this agreement shall remain in full force and effect provided that
the part of this agreement thus invalidated or declared unenforceable is not
essential to the intended operation of this agreement.
(c) (i) BMG may assign this agreement or any of its rights or obligations
hereunder to a parent, subsidiary or affiliated company or any person acquiring
all or substantially all of its assets, or with whom BMG may merge. The
foregoing shall in no way limit BMG's right to assign or license (e.g.
synchronization licensing) in the ordinary course of business.
(ii) You may assign this agreement or any of its rights or obligations
hereunder to a parent, subsidiary or affiliated company or any person
acquiring all or substantially all of your assets, or with whom you may
merge. You have the unfettered right to assign your rights to income,
advances or royalties to third parties.
(d) The captions preceding the text of the various provisions of this
agreement are inserted solely for reference and shall not constitute a part of
this agreement nor affect its meaning, construction or effect. Every word or
phrase defined herein shall, unless herein specified to the contrary, have the
same meaning throughout. As used herein, wherever applicable, the singular
shall include the plural and the plural shall include the singular, the
masculine shall include the feminine and the feminine shall include the
masculine.
<PAGE>
19
(e) BMG shall have no obligation whatsoever to make any investigation of
the facts relevant to any warranty or representation herein made by you.
23. Notices
All notices and other items from one party to the other hereunder will,
unless herein indicated to the contrary, be addressed as follows:
To you: At your address as set forth on the first page hereof
To BMG: At BMG's address as set forth on the first page hereof, directed to
the attention of the Manager, Business Affairs & Business Development;
or to such other address as the addressee may designate in writing. Any notice
shall be sent either by certified or registered mail, return receipt requested
(and in the case of notices sent to or from a location outside Canada, by air
mail), or by personal delivery or air express, and shall be deemed complete when
same (containing whatever information may be required hereunder) is deposited in
any mail box addressed as aforesaid, except that (a) all materials personally
delivered shall be deemed served when received by the party to whom addressed,
(b) air express materials shall be deemed served one (1) day after delivery to
the air express company, (c) notices of change of address shall be effective
only from the date of its receipt, (d) royalty statements shall be sent by
regular mail and shall be deemed rendered when deposited in any mail box.
24. Definitions.
(a) "Master recording" and "Master Recording" means the original material
object in which sounds, with or without visual images, are fixed by any method
now known or later developed and from which sounds, with or without visual
images, can be perceived, reproduced or otherwise communicated, either directly
or with the aid of a machine, device or process.
(b) "Record" and "record" means any reproduction of a Master recording in
any form now known or later developed in which sounds, with or without visual
images, are fixed by any method now known or later developed, manufactured or
exploited primarily for home, school or jukebox use or use in means of
transportation.
(c) "Material" means any work or series of sounds capable of fixation on a
Record.
(d) "Side" means one (1) continuous performance of material, not exceeding
five (5) minutes of playing time.
(e) "Delivery" and "deliver", as used with respect to Master recordings
delivered hereunder mean the thorough and complete performance by you with
respect to such Master recordings of all of the requirements of paragraph 5, and
the approval by BMG of such Master recordings as technically satisfactory as set
out in paragraph 5. Delivery of such Master recordings and all related elements
shall be made f.o.b. BMG's offices at 150 John St., 6th Floor, Toronto, Ontario,
M5V 3C3 (or such other office as BMG shall specify in writing).
(f) "Singles record" means a Record with a playing time of less than
twenty-two (22) minutes.
(g) "EP" means a Record containing not fewer than three (3) nor more than
seven (7) sides thereon and totaling not less than twenty-two (22) minutes of
playing time (unless BMG, in
<PAGE>
20
its discretion, agrees in writing that fewer than twenty-two (22) minutes of
playing time for a particular EP is acceptable).
(h) "LP" means a Record containing not fewer than eight (8) sides thereon
and totaling not less than thirty-five (35) minutes of playing time (unless BMG,
in its discretion, agrees in writing that fewer than thirty-five (35) minutes of
playing time for a particular LP is acceptable).
(i) Intentionally Deleted.
(j) "Album" means one (1) or more LPs packaged together by BMG for
marketing as a single unit.
*(k) "Container deduction" means XXXXXXX percent of either the "published
price to dealers", "constructed price" or "actual selling price" of such
Record, whichever is the applicable price in computing the royalty on such
*Record, except for analogue cassettes the percentage shall be XXXXXXXX
percent.
*(l) "Records sold", "record sales" and "sales" mean XXXXXXX percent of
those Records shipped by BMG hereunder for which BMG is paid and which are
neither returned to nor exchanged by BMG. For the purpose of this subparagraph
24(l):
(i) If Records are shipped subject to a discount or merchandise plan,
the number of such Records deemed to have been shipped shall be determined
by reducing the number of Records shipped by the percentage of discount
granted.
(ii) If a discount is granted in the form of "free" or "bonus"
Records, such "free" or "bonus" Records shall not be deemed included in the
number of Records sold.
(iii) If Records which are shipped subject to a discount or
merchandising plan, or respecting which a discount was granted in the form
of "free" or "bonus" Records, are returned to BMG, the number of such
Records deemed to have been returned shall be determined by reducing the
number of Records returned by the percentage of discount in effect under
the BMG discount or merchandising plan applicable to returns at the time of
such returns.
(iv) In no event shall the aggregate number of LP Records on BMG's Top
Line deemed not shipped and not sold under sub-paragraphs 24(l)(i) and (ii)
*above XXXXXXX percent of the aggregate of gross Records shipped in all
configurations of the applicable Record or BMG shall accrue royalties
hereunder with respect to any such excess.
(m) "Person" and "party" mean any individual, corporation, partnership,
association or other organized group or combination of any or all of the
foregoing, and their legal successors or representatives.
(n) "Offset Right" means BMG's right, with respect to certain monies to
which the Offset Right applies hereunder, to demand reimbursement from you of
such monies (and you shall immediately make such reimbursement) and/or the right
to charge such monies against and/or deduct same from any sums accruing or
becoming payable hereunder.
(o) "Sales through normal trade channels" and "sold through normal trade
channels" mean all sales or uses hereunder, but excluding all other sales or
uses set forth in subparagraph 9(b) above.
*-Confidential portions omitted and filed separately with the Commission.
<PAGE>
21
(p) "Top Line" means BMG's top "price line" of Records of a particular
type. By way of example only as prices are subject to change, the current
average PPD for a regular CD is approximately $12.87 and for a regular Cassette
is approximately $7.54. "Mid-price line" means (with respect to Records of a
particular type for which BMG has established a PPD) a "price line" which is
equal to or greater than sixty-five (65%) percent and less than eighty-six (86%)
percent of BMG's Top Line for Records of such particular type and (with respect
to Records of a particular type for which BMG has not established a PPD) a
"price line" which is BMG's secondary "price line" for Records of such
particular type. "Budget line" means (with respect to Records of a particular
type for which BMG has established a PPD) a "price line" which is equal to or
greater than fifty-one (51%) percent and less than sixty-five (65%) percent of
BMG's Top Line for Records of such particular type and (with respect to Records
of a particular type for which BMG has not established a PPD) a "price line"
which is BMG's tertiary "price line" for Records of such particular type.
"Super-Budget line" means (with respect to Records of a particular type for
which BMG has established a PPD) a "price line" which is less than fifty-one
(51%) percent of BMG's Top Line for Records of such particular type and (with
respect to Records of a particular type for which BMG has not established a PPD)
a "price line" which is BMG's lower "price line" for Records of such particular
type.
(q) "Licensed LPs" means the albums set out in Schedule "A" and any other
albums delivered pursuant to paragraph 4 for which BMG has exercised its option
therein.
(r) "Licensed Masters" means the Master recordings contained on the
Licensed LPs.
(s) "Artists" means those recording artists, individually and collectively,
whose performances are contained on Licensed LPs.
25. Trademark
(a) You grant to BMG the sole and exclusive right during the Term and any
extensions thereof to use your Trademark "Imprint Records" or any other
trademarks hereafter used by you in the United States (hereinafter collectively
referred to as "Trademarks" and individually as a "Trademark") or any of them,
only within the Territory, only on or in relation to the Licensed LPs
manufactured or marketed by BMG as provided herein and only for so long as the
Licensed LPs continue to be manufactured or sold by BMG in accordance with each
and all of the terms and conditions hereof. BMG shall use the Trademark only so
long as the Licensed LPs hereunder are made in accordance with specifications,
standards and quality approved by you, acting reasonably and in conformity with
the quality standards embodied in samples approved by you, acting reasonably.
BMG shall provide you, promptly after your request therefor, samples of any and
all Licensed LPs and other reproductions manufactured or sold in the Territory
and shall permit you or its representatives to observe the manufacture thereof.
(b) If any adverse claim is asserted by any third party with respect to the
Trademarks, BMG shall have the right to manufacture, sell and advertise the
Licensed LPs hereunder under any other trademark selected by you with BMG's
approval (or if no such trademark is selected by you, under a trademark selected
by BMG) until such claim shall have been defeated or withdrawn, or until you
shall have granted to BMG the right to use under this agreement another
trademark upon the same terms and conditions as set forth in this Paragraph 25.
(c) In the event of any adverse or unauthorized use of the Trademarks or
any of them and of any use of any kind whatsoever of any marks similar to the
Trademarks, BMG shall give you prompt notice thereof and shall cooperate with
you, at your expense, in the appropriate claims or protests and in any
litigation such use.
<PAGE>
22
(d) Subject to the foregoing, the Licensed LPs manufactured by BMG under
this agreement shall be released under the Trademarks, and all records
manufactured hereunder and all album covers, labels, sleeves and other packaging
and all advertising and promotional materials relating thereto shall bear the
Trademarks (and no other trademarks save those owned or controlled by BMG) as
same appear on the Licensed LPs, Album covers, sleeves and other packaging and
advertising and promotional materials released or distributed by you outside the
Territory (except in the event you prepare the packaging in accordance with
subparagraph 5(e) above). BMG shall comply with all label copy instructions
received from you and all label copy shall bear appropriate notice under the
Rome Convention.
(e) BMG shall have the right to identify itself as the manufacturer and
distributor of the Licensed LPs hereunder in the Territory on Records embodying
Master recordings hereunder and on the packaging thereof in a type size not
larger than the industry standard.
(f) BMG's use of the Trademarks shall not vest in BMG any right, title or
interest in the Trademarks. Upon termination of the Term, BMG shall assign to
you all rights that BMG may have acquired in the Trademarks.
IN WITNESS WHEREOF the parties hereto have executed this agreement.
BMG MUSIC CANADA INC.
Per: /s/ PAUL ALOF
-----------------------------------
An Authorized Signatory
Agreement with the foregoing is hereby acknowledged this 7th day of
---
August, 1996.
- ------
IMPRINT RECORDS INC.
Per ROY W. WUNSCH
- ---------------------------
An Authorized Signatory
<PAGE>
23
SCHEDULE OF PUBLISHERS
<PAGE>
24
SCHEDULE "A"
//EX10-3_10854.CEC
<PAGE>
EXHIBIT 10.3
Confidential portions omitted and filed separately with the Commission.
Deleted text (represented by XXXX in the text and an asterisk (*) in the
margin) indicates such omissions.
LICENSING AGREEMENT
Entered into as of the 13th day of August, 1996
By and between: IMPRINT RECORDS
209 10th Ave. S., Suite 500
Nashville, Tennessee 37203-4101
(hereinafter referred to as "Licensor")
and PARADOXX MUSIC
Rua Pinto Ferraz, 58
Vila Mariana
Sao Paulo - SP
Brasil
(hereinafter referred to as "Licensee")
The following will confirm the essential terms and conditions respecting the
Licensee's rights and obligations to perform as the Licensor's exclusive
distributor in the territory of Brasil ("the Territory") (subject to the terms
and conditions set forth below) for compact disc and cassette formats.
1. Term: The term of this agreement ("Term") shall commence on the date
hereof and shall end three (3) years thereafter. Paradoxx shall have the
exclusive distribution rights with respect to any master licensed hereunder for
a period of no less than twelve (12) months from the initial release in the
territory; provided, however, that if any particular master achieves gold status
prior to the twelve (12) date, then Paradoxx shall have an additional six (6)
months to exclusively distribute that master and if any particular master
achieves Platinum status prior to the twelve (12) month date, then Paradoxx
shall have an additional twelve (12) months to exclusive distribute that master.
Upon the expiration of the term with respect to any particular master
all parts, masters, film, etc. shall be either returned to Imprint or destroyed
as evidenced by an affidavit and Paradoxx shall provide Imprint with an
accounting of all outstanding inventory and Paradoxx shall either sell same to
Imprint at its cost of manufacturing or promptly destroy such inventory.
2. Ownership: The Licensor hereby warrants and represents that it is the
owner of all rights in respect to the albums offered for release (hereinafter
referred to as "The Masters") and that the Licensor possesses the full rights,
power and authority to enter into this agreement with the Licensee.
<PAGE>
3. Distribution Rights:
(a) Licensee shall be the Licensor's sole and exclusive distributor for the
Territory (Brasil). Licensor shall deliver to Licensee a copy of each album
recorded by any of its artists during the term within one (1) month from such
album's delivery to Licensor. The Licensee shall have thirty (30) days to elect
to commercially release such delivered album in the Territory and such album
shall then become a licensed album hereunder and such artist shall be deemed to
be an artist hereunder. If Licensee elects not to release an album by a
particular artist during the term, then Licensee shall have no further rights
hereunder to recordings by that particular artist during the term except at
Licensor's sole discretion. In the event that Licensee sells product outside of
the Territory or sells product to an individual or company that it knows is
engaged in selling products outside of the Territory, Licensor shall have the
right to terminate this agreement immediately and all of the exclusive rights
granted to Licensee hereunder shall terminate immediately.
(b) Notwithstanding the foregoing, the Licensor shall retain the right to
sell product directly to any retail account in the Territory to whom the
Licensee cannot or will not sell.
4. Product Pricing: Product pricing for sale in the Territory shall be
determined by Licensee in consultation with the Licensor.
5. Mechanical Royalties: All mechanical royalties and/or any other
royalties or payments that are based on the sale of records by Licensee (other
than those payments or royalties that Licensor is required to make to the
Artist) shall be paid by Licensee and shall not be recoupable hereunder or
charged back in any manner to Licensor.
6. Packaging: The Licensor shall provide Licensee with fully packaged
copies of Licensor's products. With respect to records manufactured by Licensee,
it shall use identical artwork and packaging as utilized by the Licensor in
connection with the applicable record, with sole addition of a legal line
indicating Licensee's exclusive right to manufacture and distribute Licensor
product in the Territory. Licensee shall be responsible for all product costs
including artwork, film, manufacturing parts, video copies and shipping, and
such costs shall not be recoupable hereunder or charged back in any manner to
Licensor.
7. No Revision: Licensee shall not in any manner add to, edit or revise the
Licensor's product packaging thereof without the Licensor's consent.
2
<PAGE>
8. Royalties/Advances:
(a) In connection with each album title ("Title") to be supplied by
the Licensor to the Licensee for manufacture, Licensee shall pay the
*Licensor a royalty of XXXXXXX percent (XXXX%) of full price PPD (US$XXXXX).
*(b) Licensee shall pay the Licensor an advance of XXXXXXXXX Dollars
*(US$XXXXXX) for the first option on each title owned by Licensor released
within first year of agreement, payable upon option to release. Value of
advances for second and third years of agreement will be determined by
Licensor in agreement with Licensee. Said advance shall be recoupable, on
an artist-by-artist basis and therefore not cross-collateralized, from
monies payable in connection with the particular artist for whom the
advance is paid.
9. Force Majeure/Labor Relations: Should Licensee be unable to distribute
Licensor's records for any reason, including without limitation, work
stoppage, in excess of thirty (30) consecutive days during the term
hereof, then Licensor will have the right to terminate this agreement at
any time thereafter.
10. Accounting/Audit Rights:
(a) Licensee shall account to Licensor for all sales hereunder within
forty-five (45) days after the end of each calendar semester. Said
accounting shall provide a detailed and specific list of all sales during
the applicable period for any reason.
(b) Licensor shall have the right to audit all manufacturing and sales
records with regard to this agreement, not more than once per year. In the
event of a discrepancy in excess of five percent (5%), you shall pay all
costs of such audit.
11. Returns: No royalties shall be paid upon returns.
*-Confidential portions omitted and filed separately with the Commission.
3
<PAGE>
12. No Sub-Licensing/Compilations: No recordings manufactured and/or
distributed by Licensee hereunder shall be embodied in any configuration other
than the long-playing album from which the recording is derived, without
Licensor's prior written consent in each instance.
13. Marketing/Promotion: All marketing and promotion activities utilizing
the Licensor's or those of its artists shall be subject to its prior approval.
14. Copyright and Trademark Protection: Licensee shall take all reasonable
measures to protect all copyrights and trademarks in connection with each title
and the artwork, recordings, compositions and recording artist names embodied
thereon with respect to the entire Territory.
15. Claim of Breach: Except as specifically provided for herein, in the
event of a claim of breach by either party of any of the terms and conditions
hereof, the party claiming shall provide notice to the other party of such claim
and the party receiving such notice shall have thirty (30) days within which to
cure such alleged breach.
16. Notices: All notices to Licensor hereunder shall be sent via air
express to IMPRINT RECORDS at the following address:
IMPRINT RECORDS
209 10th Ave. S., Suite 500
Nashville, Tennessee 37203-4101
USA
All payments hereunder shall be transmitted by wire to IMPRINT RECORDS
designated account, the appropriate identity of which will be provided to
Licensee shortly after the execution hereof.
All notices to Licensee shall be sent to:
PARADOXX MUSIC
Rua Dr. Pinto Ferraz, 58
Vila Mariana
Sao Paulo
04117-040 Brazil
4
<PAGE>
17. Venue and Jurisdiction: This contract is entered into the City of
Nashville in the State of Tennessee. Any and all controversies pertaining to
this agreement shall be governed by the laws of the said state. Any and all
actions concerning this agreement shall be maintained in the courts of the
County of Nashville, State of Tennessee.
18. Attorney's Fees: In the event Licensor has to institute any legal
action against Licensee to enforce any of its rights under this agreement,
Licensor shall be entitled to all attorneys' fees and court costs, the contrary
Licensee against Licensor being equally true.
19. Effectiveness of this Agreement: This agreement shall not be deemed
effective until fully executed by both parties hereto.
20. Withholding Tax: Licensee is hereby authorized to deduct from any money
payable to Licensor portion of it as required to withhold by way of local law,
statute or decree by way of so-called "withholding tax" and where double
taxation treaty forms are available, Licensee shall provide such forms at lease
once a month in advance of the due date for payment so that Licensor shall not,
wherever possible, suffer the "withholding tax". Licensee will notify Licensor
of the details of any money so withheld or payment made to the relevant
authority by Licensee and will deliver to Licensor the appropriate certificate
of deduction.
AGREED TO AND ACCEPTED:
IMPRINT RECORDS
By /s/ Wayne Halper
- ----------------------------------------
Wayne Halper
AGREED TO AND ACCEPTED:
PARADOXX MUSIC
By /s/ Fernando Perrell
- ----------------------------------------
Fernando Perrell
5
//EX10-4_10854.CEC
<PAGE>
EXHIBIT 10.4
AGREEMENT AND RELEASE
This Agreement and Release is made by and between Imprint Records
(formerly known as Veritas Music Entertainment) (hereinafter "Employer"), its
subsidiaries, its affiliates and related entities and Brad Chambers (hereinafter
"Employee").
W I T N E S E T H :
WHEREAS, Employee has previously been employed by
Employer; and
WHEREAS, the parties have elected to end their Employment
Relationship; and
WHEREAS, Employee acknowledges that he has had adequate time to
consider this Agreement and has voluntarily agreed to its terms; and
WHEREAS, the parties wish to clarify and memorialize certain
agreements made between them in regard to Employee's employment and the
termination of his employment;
NOW, THEREFORE, in consideration of the foregoing premises and
the terms stated herein, it is mutually agreed between the parties as follows:
1. Employee resigned his employment with Employer effective 5:00 p.m.,
June 19, 1996 (the "Separation Date").
2. Employee agrees to return to Employer all personal property, items,
documents, or business records of any kind which belong to Employer within five
business days of the date of execution of this Agreement.
<PAGE>
3. Employee and Employer agree that upon the execution of this Agreement,
Employer shall give the Employee the following: - the sum of $25,000 which
constitutes a compromise and settlement of Employee's disputed claim for wages
due under the parties' employment contract;
- the sum of $25,000 which constitutes a compromise and settlement of
various disputed personal injury claims, including emotional distress,
that Plaintiff has raised or threatened to raise;
- payment for all outstanding expense reports submitted by
Employee as of the date of the execution of this Agreement;
- forgiveness of the loan it made to Employee in the amount
of $25,000
The payment of the above sums, the forgiveness of the loan, and the payment
of Employee's expenses shall constitute full and final settlement of the
parties' employment relationship and shall terminate all obligations that
Employer may have had under the parties' Employment Agreement or otherwise under
Tennessee or federal law.
4. Employer shall withhold from any payments made pursuant to this
Agreement any taxes required by law to be withheld with respect to such
payments.
5. As specific consideration for the release and waiver contained in
Paragraph 6 of this Agreement and Release, Employer shall provide the following
benefits to which Employee is not otherwise entitled: Employer agrees to
continue Employee's medical coverage through the company for the months of
August, September, and October of 1996. Employer agrees to pay only the
Employer's portion of Employee's medical insurance. After the expiration of
three months, Employee has only those rights to medical benefits which are
otherwise available to him under state or federal law.
2 of 8
<PAGE>
6. Employee, for himself and his heirs, personal representatives,
successors and assigns, does hereby release and forever discharge Employer, its
successors, assigns, agents, representatives, employees, officers, directors,
trustees, and shareholders, from any and all causes of action, claims, demands,
suits, damages, sums of money and/or judgments (hereinafter "damages") arising
at any time prior to and through the date of the execution of this Agreement and
Release which might have been asserted against Employer, its successors, agents,
representatives, employees, officers, directors, trustees, or shareholders by
Employee, or on his behalf, including, but not limited to, any which may have
been asserted against Employer by or on behalf of Employee relating to his
employment by Employer or the termination of his employment, including accrued
vacation pay, profit sharing plans, retirement plans or any benefit plans of any
type or nature, and any claims for discrimination of any type under any federal,
state or local law or regulation, including, but not limited to, claims under
the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights
Act 1964 and the Civil Rights Act of 1991, except for any claims arising under
this Agreement and Release.
7. Likewise, Employer, its personal representatives, successors and
assigns, does hereby release and forever discharge Employee from any and all
causes of action, claims, demands, suits, damages, sums of money and/or
judgments (hereinafter "damages") arising at any time prior to and through the
date of the execution of this Agreement and Release which might have been
asserted
3 of 8
<PAGE>
against Employee relating to his employment by Employer, except for any claims
arising under this Agreement and Release.
8. Should any state or federal tax authority determine that additional
taxes beyond those which will be withheld under this Agreement are due on the
payments provided for in this Agreement, then Employee agrees to be solely
responsible for the Employee's portion of any and all additional taxes assessed
and interest or penalties charged. Employee also agrees to indemnify and hold
harmless Employer from any and all liability of whatever kind incurred by it
with respect to any payments made under this Agreement including but not limited
to taxes, levies, assessments, fines, interests and penalties.
9. The parties declare that each has carefully read this Agreement. Both
parties agree to the terms of this Agreement and enter into it freely and
voluntarily in order to make a full and final adjustment and resolution of the
matters contained herein.
10. Employee specifically represents that he was represented by counsel,
that the terms of this Agreement were jointly negotiated over a period of more
than thirty days, and that he had adequate time to consider the issues resolved
herein.
11. The parties further acknowledge that this Agreement and Release may be
revoked by Employee within seven (7) days from the execution hereof and that the
Agreement and Release shall not become effective or enforceable until after the
revocation period has expired. Employee agrees that any revocation shall be
submitted to Employer in writing and accompanied by any portion of
4 of 8
<PAGE>
the consideration that she may have already received under the terms of this
Agreement and Release.
12. The parties agree that they will keep the terms, conditions and
existence of this Agreement and Release confidential. Each agrees that they may
discuss such matters only with their attorney and their accountant or tax
preparer. To the extent that either party is permitted to disclose and does
disclose such information, that party agrees to require, and warrants, that the
person receiving such information shall maintain its confidentiality.
13. In addition, Employee agrees that the services he performed for
Employer were special, unique and extraordinary, and that by reason of those
services he acquired confidential information and trade secrets. It is agreed
that all confidential information relative to the activities of Employer,
including, but not limited to, Employer's contractual third-party relationships,
contracts, financial information, plans, developments, administrative
procedures, operations, or dealings with other third parties, is the property of
Employer and shall not be disclosed by Employee for any reason.
14. Employee agrees that he will not himself or through third parties or
agents disparage Employer in any respect relating to any matter pertaining to
his employment with Employer or his retirement from employment with Employer.
Likewise, Employer agrees that it will not disparage Employee in any respect
relating to any matter
5 of 8
<PAGE>
pertaining to his employment with Employer or his retirement from employment
with his Employer.
A. The parties agree that any violation of these confidentiality and
non-disparagement provisions shall cause damage to the other which cannot be
readily calculated. They further agree that any such violation shall be
specifically enforceable by a court of law or equity or by binding arbitration,
and they further agree to pay the other the amount of Two Thousand Five Hundred
Dollars ($2,500.00) as liquidated damages, and not as a penalty, for each breach
of the foregoing confidentiality and non- disparagement provisions of this
Agreement and Release.
15. It is understood and agreed that this Agreement and Release does not
and shall not constitute an admission by Employer or Employee of any violation
of any law or right of the other.
16. This Agreement and Release constitutes the entire understanding and
agreement between the parties as to the subject matter hereof and the terms of
this Agreement and Release may not be waived, modified or supplemented except in
writing by all parties hereto.
17. Should this Agreement and Release be held invalid or unenforceable (in
whole or in part) with respect to any particular claims or circumstances, it
shall remain fully valid and enforceable as to all other claims and
circumstances.
18. Any claims concerning the meaning, application and/or interpretation of
this Agreement and Release, any matter which relates to Employee's employment
and arises after the date of this
6 of 8
<PAGE>
Agreement and Release, or any claim of breach of or failure to perform this
Agreement and Release, shall be settled solely by binding arbitration in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. Any arbitration decision shall be fully binding on both
parties and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. Each party shall pay the fees and costs
of presenting its case in arbitration, except that the Arbitrator may award
attorney's fees to the prevailing party. All other costs of arbitration,
including the cost of any transcript of the proceedings, administrative fees,
and the arbitrator's fees shall be borne equally by the parties. Any arbitration
hearing shall take place in Davidson County, Tennessee and Tennessee law shall
govern. The parties, and each of them, agree that the remedy, if any, awarded by
such arbitrator shall be the sole and exclusive remedy for each and every claim
which is subject to arbitration pursuant to this paragraph, but that the
arbitrator shall not have the authority or power to order reinstatement as a
remedy. Any award by the arbitrator shall, unless both parties agree in writing
otherwise, be in writing and shall set forth the factual and legal basis for
such award and shall state which party is deemed to be the prevailing party for
the purpose of awarding attorney's fees hereunder.
7 of 8
<PAGE>
19. This Agreement and Release shall be construed in accordance with the
laws of Tennessee.
OUR SIGNATURE BELOW INDICATES THAT WE HAVE
READ THE FOREGOING DOCUMENT, UNDERSTAND ITS TERMS,
AND AGREE TO BE BOUND BY IT.
Employer
/s/ BRAD CHAMBERS By ROY W. WUNSCH
- -------------------------------- --------------------------
Employee
Its: CHAIRMAN & CEO
- -------------------------------- ------------------------
Date: 6/19/96 Date: 6/19/96
- -------------------------------- -----------------------
8 of 8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF IMPRINT RECORDS, INC. FORMERLY, VERITAS MUSIC ENTERTAINMENT,
INC. (A DEVELOPMENT STAGE COMPANY) AS OF JULY 31, 1996 AND FOR THE QUARTER
ENDED JULY 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 2,637
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 165
<CURRENT-ASSETS> 26
<PP&E> 459
<DEPRECIATION> (53)
<TOTAL-ASSETS> 3,260
<CURRENT-LIABILITIES> 1
<BONDS> 0
0
0
<COMMON> 6,302
<OTHER-SE> (3,043)
<TOTAL-LIABILITY-AND-EQUITY> 3,260
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,349
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,307)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,307)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
