AGREEMENT made and entered into as of this day of this 18th day of June, 1998
and between PUSH RECORDS, INC. ("Company"), located at 00 Xxxx 00xx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, and LEGEND ENTERTAINMENT CORPORATION
("you" or "your"), located at 0000 Xxx Xxxxxx Xxxx, Xxxxxxxx, Xxxx 00000, f/s/o
Xxxx Xxxxx and Xxxxx Xxxxx p/k/a BLESSID UNION OF SOULS ("Artist"), whose
address is: c/o Xxxxx Xxxxxxx, Esq. 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx
Xxxx 00000.
1. EXCLUSIVE SERVICES
Company hereby engages you to furnish the exclusive personal services of
Artist (the "Artist") as a recording artist in connection with the production of
Records and you hereby accept such engagement and agree to exclusively furnish
such services for Company in the Territory during the initial period of this
agreement and all extensions and renewals (the "Term").
2. TERM
The Term shall commence on the date hereof and shall continue for an
initial period (the "Initial-Period") ending on the date ten (10) months
following Delivery of all Recordings constituting the Recording Commitment for
such Initial Period. Provided that worldwide sales for Album 1 for the first
eighteen (18) months following the initial commercial release thereof equal or
exceed three hundred thousand (300,000) units, Company shall have two (2)
consecutive separate options to extend the Term for further periods (the "Option
Periods"), each upon the same terms and conditions applicable to the Initial
Period, except as otherwise set forth herein. Each Option Period for which
Company has exercised its option shall commence upon the expiration of the
immediately preceding Contract Period and shall continue until the date ten (10)
months following Delivery of all Recordings constituting the Recording
Commitment for the applicable Option Period. You shall be required to serve
notice of expiration of the term upon Company no more than forty five (45) days
and no less than thirty (30) days prior to the end of each respective period,
including the initial period and each option period, if any, and Company shall
thereafter have thirty (30) days within which to exercise, if at all, the
option(s), if any, provided for herein. Company may, at its sole discretion,
exercise each respective option, if at all, by notice to you at any time prior
to the date the Term would otherwise expire. As used herein, the term "Contract
Period" shall mean the Initial Period or any Option Period of the Term, as such
may be suspended or extended as provided herein.
3. RECORDING COMMITMENT: DELIVERY
(a)(i) During each Contract Period you will cause Artist to perform and
record for Company a sufficient number of Masters to constitute the required
number of Albums specified in the following schedule (the "Recording
Commitment"):
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Contract Period Recording Commitment
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Initial Period One (1) Album (the "First Album")
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First Option Period One (1) Album (the "Second Album")
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Second Option Period Two (2) Albums (the "Third and Fourth Albums")
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(b)(i) You shall Deliver the First Album of the Recording Commitment to
Company within five (5) months following commencement of the Initial Contract
Period.
(ii) You shall Deliver the Second through Fourth Albums of the
Recording Commitment, if any, no earlier than ten (10) months and no later than
eighteen (18) months after Delivery of the immediately preceding Album of the
Recording Commitment, unless you and Company mutually agree in writing to an
earlier or later Delivery date.
(c) You shall not commence recording any Album earlier than seven (7)
months following the date of Delivery of the immediately preceding Album.
(d)(i) Upon your written request and as a courtesy, Company will notify
you of the date of Delivery with respect to any Album of the Recording
Commitment, provided, however, that Company's inadvertent failure to provide
such information shall not constitute a breach of this agreement and Company's
providing you with such information shall not constitute a waiver by Company of
your obligations with respect to Delivery of Masters hereunder. If you dispute
the date of Delivery with respect to any Album of the Recording Commitment as
provided in the notice from Company, you shall give notice of such objection in
writing to Company within thirty (30) days of Company's notice to you. Your
failure to so notify Company shall be deemed your acceptance of the date
contained in Company's notice to you.
(ii) If you have not received any notice from Company pursuant to
paragraph 3(d)(i) above within thirty (30) days after the date you deem to be
such applicable delivery date, then you shall notify Company within ten (10)
days after such thirty (30) day period of the date you deem the applicable
delivery date. Company shall have the right to object to such date within thirty
(30) days after receipt of your notice.
(iii) If either party objects to the date contained in the notice
given by the other party, Company and you shall mutually and in good faith agree
in writing on the date to be deemed the delivery date. If the parties do not
reach such agreement or if neither party gives notice of the delivery date of
any Album of the Recording commitment earlier than thirty (30) days prior to the
date of initial release in the United States of such Album, then the delivery
date of such Album shall be deemed to be sixty (60) days prior to such date of
initial release.
4. RECORDING PROCEDURE
(a)(i) Prior to the commencement of recording each Album, you and Company
shall mutually agree on each of the following before you proceed further: (A)
selection of producer and the financial terms of the agreement between you and
such producer; (B) selection of material, it being
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understood that some songs are written while recording, which songs shall be
subject to acceptance by Company, including the number of Compositions to be
recorded; and (C) the dates of recording and mixing and the studios where
recording and mixing are to take place. Subject to Company's approval of budget
and financial terms, EMOSIA is deemed approved and accepted as the Producer of
Album 1. With regard to Albums 1 through 4, Company shall be deemed to have
approved any first-class recording studio including as to the First Album,
Ligosa Sound Studio (Cincinnati, OH) for both recording and mixing, subject to
and consistent with an approved budget. In addition, at least fourteen (14) days
prior to the date of the first recording session for the Album concerned, you
shall submit to Company in writing a proposed recording budget setting forth, in
itemized detail, all anticipated Recording Costs for the album concerned. Upon
receipt of Company's written approval of such recording budget, which shall not
be unreasonably withheld, you shall commence such sessions. A proposed Recording
Budget will be deemed approved which is not more than ninety percent (90%) of
the applicable Recording Advance.
(ii) Nothing in this agreement shall obligate Company to continue or
permit the continuation of any recording sessions, even if previously approved
hereunder, if Company reasonably anticipates that the Recording Costs for the
applicable Masters will exceed the applicable Recording Advance or that Masters
constituting the applicable Recording Commitment will not be Commercially
Satisfactory.
(iii) It is of the essence of this agreement that you obtain prior
to each applicable recording session and deliver to Company within seventy-two
(72) hours following each such recording session, a duly completed and executed
Form 1-9 or such similar or other forms as may be prescribed by the United
States Immigration and Naturalization Service or other government agency
regarding citizenship, permanent residency or so-called "documented worker"
status which Company notifies you of in respect of each individual employed to
render recording services hereunder. You shall simultaneously obtain and deliver
to Company true and complete copies of all evidentiary documents relating to the
contents or subject matter of said forms. In the event you fail to comply with
any of the foregoing requirements, Company may deduct any resulting penalty
payments from all monies payable to you under this agreement.
(b) No Recordings shall be made by or include unauthorized Sampling.
("Sampling," as used herein, refers to the use and reproduction of pre-existing
musical material, hereinafter "Sampled Material," which is owned or controlled
by any Person other than you, in a Recording hereunder, but is not intended to
refer to Artist's newly recorded performance hereunder of a musical composition
previously recorded by other recording artist(s) and heretofore released.)
Concurrently with your delivery to Company of a Recording, you shall notify
Company in writing of the names and addresses of all recording artists, record
companies, songwriters and publishers and/or any other Persons who have any
right, title or interest of any kind in any Sampled Material embodied in that
Recording. You shall be solely responsible for obtaining all consents and
licenses necessary or desirable in connection with the use, reproduction and
licensing by Company, of any Sampled Material in any Recording hereunder for
Records and Audiovisual Records and reproductions thereof, so that Company shall
enjoy the full and perpetual rights granted to Company pursuant to paragraph 5
with respect to Recordings hereunder; at Company's request, you shall supply
Company with fully executed copies of any such consents, licenses and other
related documentation. You shall be solely responsible for and shall account for
and pay to any and all Persons who own or control Sampled Material any monies or
other compensation to which such Persons are entitled as a result of any use
hereunder by Company of any Recording embodying such Sampled Material.
Notwithstanding anything to the contrary expressed or implied
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herein, no royalties, Advances or other monies shall be earned by or payable to
you hereunder or under any other agreement in connection with any Record
embodying any Sampled Material, and no Recording embodying Sampled Material
shall be deemed Delivered hereunder unless and until you have obtained, on
Company's behalf, all rights required hereunder with respect to such Sampled
Material, and, if Company requests, until Company receives documentation
satisfactory to Company with respect thereto.
(c) Each Album Delivered by you as part of the Recording Commitment shall
only contain newly-recorded studio Masters of previously unrecorded Compositions
(other than demonstration recordings) made specifically for the applicable
Album, unless an authorized signatory on behalf of Company consents otherwise in
writing, which consent Company may withhold in its unrestricted discretion.
5. GRANT OF RIGHTS
(a) All Recordings made or furnished to Company by you or Artist embodying
Artist's performances under this agreement or during the Term from the inception
of the recording thereof, and all reproductions derived therefrom, together with
the performances embodied thereon, shall be the property of Company in
perpetuity for the Territory free from any claims whatsoever by you or Artist or
any other Person. Company shall have the exclusive right throughout the
Territory to copyright those Recordings in Company's name as the author and
owner of them and to secure any and all renewals and extensions of copyright
throughout the Territory. Each such Recording shall be considered a "work made
for hire" for Company; if any such Recording is determined not to be a "work
made for hire," it will be deemed transferred to Company by this agreement,
together with all rights in it. You and Artist hereby irrevocably and
unconditionally waive any and all moral and like rights, that Artist has in the
Recordings and in the performances embodied therein and hereby agree not to make
any claim against Company or any Person authorized by Company to exploit the
Recordings based on such moral or like rights, but Company shall not have the
right to modify the masters in any way once same are accepted by Company,
without limiting the generality of the foregoing, Company and any Person
authorized by Company shall have the exclusive and unlimited right to all the
results and proceeds of Artist's recording services rendered during the Term,
including, but not limited to, the exclusive, unlimited and perpetual rights
throughout the Territory:
(i) to manufacture, advertise, sell, lease, license, distribute or
otherwise use, exploit or dispose of, in any or all fields of use by any method
now or hereafter known, Records embodying Masters;
(ii) to release Records derived from Masters under any name,
trademark or label which Company or its subsidiaries, affiliates or licensees
may from time to time elect, provided that such label is company's top label
imprint, currently Push Records.
(iii) to perform such Masters publicly and to permit public
performances thereof by means of radio broadcast, television or any other method
now or hereafter known, provided that fifty percent (50%) of public performance
income paid directly to and received by Company therefrom will promptly be paid,
(without regard to recoupment), to you without regard to the recouped status of
your account.
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(iv) to reproduce, adapt, transmit, communicate or otherwise use
Masters, all upon such terms and conditions as Company may elect, or at its
discretion, to refrain therefrom.
(b) In accordance with subparagraph 6(a) of this agreement, Company and
any Person authorized by Company, including Company's licensees and
institutional advertisers, shall have the exclusive right during the term and
the non exclusive and perpetual right after the term hereof, without any
liability to any Person, to use and to authorize other Persons to use the names
(including any professional names heretofore or hereafter adopted), and any
likenesses, whether or not current (including photographs, portraits,
caricatures and stills from any Videos made hereunder), autographs (including
facsimile signatures) and biographical material of or relating to Artist, to any
producer and to any other Person performing services in connection with Masters
hereunder, on and in the packaging of Records hereunder, and for purposes of
advertising, promotion and trade and in connection with the marketing and
exploitation of Records hereunder and general goodwill advertising (i.e.,
advertising designed to create goodwill and prestige and not for the purpose of
selling any specific product or service), without payment of additional
compensation to you or Artist or any other Person. Notwithstanding the
foregoing, Company shall comply with any contractual limitations on the use of
the name and likeness of any such producer or other Person that exist prior to
the execution of your or Artist's agreement with such producer or other Person,
provided you have given Company prior written notice of any such limitation: you
agree to use your reasonable efforts to obtain the fullest rights to use the
name and likeness of any such producer or other Person consistent with the
custom and practice in the United States record industry. No such names,
likenesses, or biographical material shall be used in connection with product
(other than Records hereunder) or service endorsements or merchandising
provided, however, that Company may use such names, likenesses, and biographical
material in connection with the promotion of Records hereunder, with your prior
written consent which may be reasonably withheld, including, without limitation,
the distribution of promotional merchandise solely on a gratis basis. You
represent and warrant that you own the exclusive right to so use such names,
likenesses, autographs (including facsimile signatures) and biographical
materials and that the use of same will not infringe upon the rights of any
third party. If any Person challenges Artist's right to use a professional name,
Company may, at its election and without limiting Company's rights, require
Artist to adopt another professional name approved by Company. Company shall
have the right to do, but shall not be required to do, a Trademark and or
Service Xxxx search of each and every professional name and or xxxx which Artist
uses or by which Artist is known. During the Term, Artist will not change the
name by which Artist is professionally known without Company's prior written
approval which shall not be unreasonably withheld.
(c) In addition to our other rights hereunder, we shall have the right, at
our election and for any reason, with or without cause, to terminate the Term at
any time by written notice to you. Additionally, we shall have the right, at our
election, with or without cause, to refuse to permit you to fulfill your
then-current Recording Commitment for any Contract Period including, without
limitation, by discontinuing recording sessions for any Masters and ceasing the
payment of Recording Costs for any Masters. If we refuse to permit you to
fulfill your minimum Recording Commitment for any Contract Period, other than as
a result of an event or contingency referred to in subparagraph 13(b), we shall
have no obligations or liabilities to you in connection therewith unless within
forty five (45) days after our refusal you shall notify us of your desire to
fulfill your minimum Recording Commitment for that Contract Period and within
thirty (30) days after our receipt of that notice we shall fail to advise you in
writing that we shall permit you to fulfill your minimum Recording Commitment
for that Contract Period. If we shall fail to so advise you in writing that we
shall permit you to fulfill your minimum Recording Commitment for that Contract
Period, the Term shall expire as of the end of that thirty (30)
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day period and we shall have no obligations or liabilities to you whatsoever in
connection with our failure to permit you to fulfill your Recording Commitment
for that Contract Period. We shall, however, pay to you promptly after the
expiration of that thirty (30) day period, as an advance recoupable from
royalties hereunder, an amount equal to:
(A) If the term expires pursuant to subparagraph 5(c) during the Initial
Period (the "First Album"): one-third (1/3) of the applicable
Recording Advance; one half (1/2) if recording has actually
commenced, or
(B) If the term expires pursuant to subparagraph, 5(c) during the First
Option Period (the "Second Album"): one-third (1/3) of the
applicable Recording Advance; one half (1/2) if recording has
actually commenced, or
(C) If the term expires pursuant to subparagraph 5(c) during the Second
Option Period (the "Third Album" and "Fourth Album"):
(i) prior to commencement of recording the Third Album, one-third
(1/3) of the Recording Advance for the Third Album or;
(ii) if recording of the Third Album has actually commenced, one
half (1/2) of the Recording Advance for the Third Album or;
(iii) if the Third Album has been recorded and delivered but prior
to commencement of recording of the Fourth Album, one third
(1/3) of the Recording Advance for the Fourth Album or;
(iv) if recording of the Fourth Album has actually commenced, one
half (1/2) of the Recording Advance for the Fourth Album.
Any such payment shall be less any advances including amounts previously paid or
incurred by Company which may or were intended to reduce, be applied against or
be charged against the applicable Recording Advance and shall be inclusive of
the minimum union scale payments which would have been required to have been
paid to Artist for each Required Album for that Contract Period that we did not
permit you to record, which such payment shall be deemed to be in full
satisfaction of any and all of Company's obligations hereunder in connection
with such Master Recordings (other than those which survive the expiration of
the Term, such as warranties, recording re-restrictions, and royalty
accountings), and the Term shall automatically terminate as of the date of any
such notice and payment pursuant to this subparagraph 5(e). Company shall have
the right to charge any payment to you or Artist pursuant to this subparagraph
5(e) against and/or deduct same from any and all monies (excluding mechanical
royalties) accruing or becoming payable hereunder.
6. CREATIVE AND MARKETING MATTERS
(a)(i) During the Term, all photographs, likenesses and biographical
material concerning you or Artist which Company uses for the purposes herein
stated shall be subject to your approval, which shall not be unreasonably
withheld and which approval (or disapproval) shall be given to Company within
five (5) days after such photographs or biographical material are submitted to
you by Company. Your failure to give such notice to Company shall be deemed to
be approval as to the material for which said approval is sought. Promptly
following the execution of this agreement, you shall furnish Company with a
reasonable number of photographs of Artist and biographical material concerning
Artist. All photographs and biographical material concerning Artist furnished by
you to Company, or approved by you, shall be deemed approved by you for the
purposes hereof unless you notify Company in writing to the contrary thereafter.
Anything to the contrary notwithstanding, approved photographs of Artist which
Company uses, for purposes other than for record packaging,
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shall be subject to your re-approval, which shall not be unreasonably withheld
and which approval (or disapproval) shall be given to Company within five (5)
days after such photographs or biographical material are submitted to you by
Company if such use first occurs or is to occur more than two (2) years after
initially approved. Your failure to give such notice to Company shall be deemed
to be approved as to the material for which said approval is sought. An
inadvertent failure by Company to obtain your approval pursuant to this
subparagraph 6 (a) shall not constitute a breach of this agreement by Company.
Company will use reasonable efforts to cure such failure in any future
production runs following notice from you or Artist.
(ii) You shall cause Artist, subject to Artist's prior professional
commitments, and at Company's sole non-recoupable expense, to cooperate with
Company's efforts to promote any Albums released hereunder, including, but not
limited to, Artists appearing for interviews with trade press, in-store
promotional events, and other promotional appearances, which appearances shall
be mutually selected by you and Company.
(iii) With respect to the initial release in the United States of
each Album of the Recording Commitment, Company shall consult with you in good
faith in a meaningful manner regarding marketing plans Company intends to
implement for the Album concerned, however, the inadvertent failure by Company
to consult with you shall not constitute a breach hereof.
(iv) Company may remix Albums delivered hereunder however, remixing
costs incurred by Company in excess of $30,000 per Album shall not be
recoupable. Additionally, Company may remix masters to be released as Singles,
however, remixing costs in excess of $20,000 per Single shall not be recoupable.
All such remixing costs shall not be deductible from or otherwise reduce the
applicable Recording Fund.
(b) During the Term, you shall not record or Deliver a Multiple Record Set
without Company's prior approval, which approval may be withheld in Company's
sole discretion nor shall Company require Artist to record and you to Deliver a
Multiple Record Set without your consent.
(c)(i) Company shall not, without your approval, which approval may be
withheld in your sole discretion:
(A) sell Records hereunder as Premium Records.
(B) license any Master hereunder in connection with any
political or commercial advertisements.
(C) license any Master hereunder for synchronization in any
theatrical motion picture, television motion picture, television soundtrack or
any home video devices which have received a rating of "X" or "NC-17" or its
equivalent from the Motion Picture Association of America (or it's counterpart
for television), where Company has a reasonable belief that such rating would be
given at the time of Company's licensing of the applicable Master.
(D) release any demonstration recordings or "outtakes".
(ii) During the Term in respect of Records manufactured for sale in
the Territory, Company shall not, without your approval, not to be unreasonably
withheld:
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(A) license any Master for synchronization with theatrical
motion pictures, or television motion pictures, television programs, or any
other audiovisual productions;
(B) license any Master for use in radio programs or radio
commercials (other than radio commercials advertising Records made hereunder).
(C) license any Master for synchronization with television
commercials (other than television commercials advertising Records made
hereunder).
(iii) During the Term in respect of Records manufactured for sale in
the United States, Company shall not, without your approval:
(A) couple, or, license to a third party for coupling, more
than two (2) Masters on any particular Record offered for sale to the public,
which Record embodies Recordings that do not embody the performances of Artist,
except with respect to samplers, uses on transportation carriers, and Consumer
Compilations. The term "Consumer Compilation" means a Record embodying
Recordings (including one (1) or more Masters) that are sequenced and/or
selected by the consumer (e.g., the Personics system);
(B) release any Mid-Price Record comprised solely of Masters
Delivered hereunder prior to eighteen (18) months following Company's initial
United States release of a full-priced Record embodying such Masters. If Company
releases any such Mid-Price Record prior to the expiration of said eighteen (18)
month period without your approval, your sole remedy shall be that the royalty
to which you are otherwise entitled for any royalty-bearing units of such
Mid-Price Record sold prior to the expiration of said eighteen (18) month period
shall not be reduced pursuant to subparagraph 9(c)(i);
(C) release any Budget Record comprised solely of Masters
Delivered hereunder prior to twenty four (24) months following Company's initial
United States release of a full-priced Record embodying such Masters. If Company
releases any such Budget Record prior to the expiration of said twenty four (24)
month period without your approval, your sole remedy shall be that the royalty
to which you are otherwise entitled for any royalty-bearing units of such Budget
Record sold prior to the expiration of said twenty four (24) month period shall
not be reduced pursuant to subparagraph 9(c)(i);
(D) commercially release any Single derived from Masters
delivered hereunder without engaging in a meaningful, good-faith consultation
with you regarding the selections to be embodied on the "A" side of any such
Single. With respect to the "B" side of any such Single, Company shall obtain
your prior consent as to the selection to be embodied thereon;
(E) release more than one (1) Album in the form of a "Greatest
Hits" compilation consisting entirely of Masters recorded hereunder until you
have Delivered the first three (3) Albums of the Recording Commitment. During
the Term in respect of Records manufactured for sale in the United States,
Company shall not, without your approval, release a Greatest Hits Album without
your prior approval of the Masters to be included thereon; provided, however,
that such approval right shall not delay the scheduled release date of any such
Greatest Hits Album. All Masters embodied on any Singles listed at any time
among the top fifty (50) Singles in the weekly chart of best-selling popular
Singles published in Billboard magazine, i.e., the chart titled "Hot 100
Singles", or the
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chart corresponding most closely to that chart if it is retitled or
discontinued, shall be deemed approved by you and Company for inclusion on
Greatest Hits Albums. In the event of a dispute, with respect to Masters not
subject to the preceding sentence, fifty percent (50%) of such Masters shall be
selected by you, and fifty percent (50%) of such Masters shall be selected by
Company; and
(iv) The failure of Company's licensees to obtain your approval for
such use(s) shall not constitute a breach by Company. You shall provide Company
specific notice and Company shall request or direct the licensee to seek your
approval for said use.
(d)(i) Notwithstanding anything to the contrary herein, provided you have
fulfilled all of your material obligations under this agreement, Company agrees
to commercially release each Album constituting the Recording Commitment in the
United States within one hundred twenty (120) days following Delivery of the
Album concerned (the "U.S. Release Deadline Period"). If Company shall have
failed to so release any such Album in the United States, you shall have the
right, within sixty (60) days following the expiration of the U.S. Release
Deadline Period to notify Company in writing of Company's failure and of your
desire that the Term be terminated if Company does not, within forty-five (45)
days after Company receives such notice from you ("U.S. Release Cure Period"),
to commercially release the Album concerned in the United States. If Company
then fails to release the Album concerned in the United States during the U.S.
Release Cure Period, Company shall have no liability other than payment of
royalties and any other monies due or becoming due to you whatsoever and your
only remedy shall be to terminate the Term by written notice to Company within
thirty (30) days following the expiration of the U.S. Release Cure Period. If
you terminate the Term of this Agreement pursuant to, and in accordance with,
the immediately preceding sentence of this subparagraph 6(d)(i), you shall have
the option to purchase all of the Masters ,but no less than all constituting
such recorded and unreleased Album from Company (the "Unreleased Masters")
provided you notify Company of your election in the written notice specified in
the immediately preceding sentence.
(ii) If you exercise your right to purchase the Unreleased Masters,
Company will transfer to you the Unreleased Masters no later than fifteen (15)
days after the date of your notice of exercise of your option to acquire
Company's rights in the Unreleased Masters and Company will deliver them to you
at Company's offices. You shall reimburse Company for the Recording Costs and
all Advances paid to you in connection with the Unreleased Masters
simultaneously with your acquisition of the unreleased Masters, by certified or
bank check. The unreleased Masters will be delivered to you and accepted "as is"
at the time of delivery and no warranty or representation, express or implied,
is or will be made by Company in connection therewith; provided, however, that
Company shall not further impair or encumber the rights in or to the Unreleased
Masters prior to your purchase of them. Any use by you or any other Person of
the Unreleased Masters will be in accordance with subparagraph 13(d)(ii) of this
agreement.
(e)(i) Provided you have fulfilled all of your material obligations under
this agreement and not withstanding subparagraph 5 (a)(iv), Company agrees to
commercially release each Album constituting the Recording Commitment in the
following periods after Company commercially releases such Album in the United
States: in Canada within sixty (60) days; the United Kingdom within ninety (90)
days, Germany, France, Italy, Belgium, the Netherlands and Luxembourg within one
hundred twenty (120) days; Japan, Australia, and New Zealand within one hundred
fifty (150) days.
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(ii) If Company fails to comply with paragraph 6(e)(i) in any
Foreign Release Territory, you may notify Company, within forty-five (45) days
following the end of the respective release deadline concerned, that you intend
to invoke this section 6(e)(ii) if Company does not release that Album in that
Foreign Release Territory within seventy-five (75) days following Company's
receipt of your notice (the "Foreign Release Cure Period"). If Company then
fails to release the Album concerned in the Foreign Release Territory concerned
during the Foreign Release Cure Period, you shall have the right ("Outside
License Option") to require Company to enter into an agreement with a licensee
designated by you, who is actually engaged in the business of manufacturing and
distributing Records in the Foreign Release Territory, authorizing the licensee
to manufacture and distribute Records derived from that Album in that Foreign
Release Territory. You may exercise your Outside License Option by giving
Company notice within ninety (90) days after the end of the Foreign Release Cure
Period. Your only remedy for any failure by company to release a particular
Album in a particular Foreign Release Territory shall be to exercise your
Outside License Option in accordance with this subparagraph (6)(e)(ii). If you
fail to give Company any of the notices described in the foregoing provisions of
this subparagraph (6)(e)(ii) within the appropriate time period specified
herein, your rights under this subparagraph (6)(e)(ii) shall lapse. Fifty (50%)
of Company's Net Receipts from licenses entered into pursuant to this
subparagraph (6)(e)(ii) shall be credited to your royalty account under this
agreement and paid to you (if such account is fully recouped) for Records sold
under those licenses, in lieu of any other royalties set forth in paragraph 9.
Each license agreement shall provide for such compensation for Company as you
negotiate with the licensee, and shall contain other provisions as Company shall
reasonably require, including, but not limited to, the following:
(A) the licensee shall be required to obtain and deliver to
Company, in advance: (1) all consents by Artist or third parties which Company
may reasonably require (including but not limited to consents by recording
artists); and (2) all agreements arising in connection with the manufacture or
distribution of Records under the license (including such agreements, if any, by
unions and funds established under union agreements). The licensee shall if
applicable to sales in the respective territory(ies), also become a first party
to the Record Manufacturers' Special Payments Fund Agreement dated October 1993
(or any successor agreement then in effect) with the American Federation of
Musicians of the United States and Canada. The license shall not become
effective until the licensee has complied with all the provisions of this
subparagraph 6(e)(ii)(A);
(B) the licensee shall make all payments (other than to you,
Artist producers and other royalty participants), required in connection with
the manufacture, sale and distribution in that Foreign Release Territory of
Records made from Masters after the effective date of the license, including,
without limitation, any royalties and other payments to other performing
artists, producers, owners of copyrights in Compositions, the Music Performance
Trust Fund and Special Payments Fund, if applicable and any other unions and
union funds. The licensee, if necessary, shall comply with the applicable rules
and regulations of the American Federation of Musicians and any other union
having jurisdiction and any other applicable laws, rules and regulations
covering any rights from the licensee, in the manufacture and sale of Records or
otherwise;
(C) Company shall make no warranty of merchantability or
fitness for a particular purpose or any other warranty or representation,
express or implied, in connection with the Masters, the license, or otherwise.
Company will deliver to the licensee a so-called "1630" (or other format in
Company's sole but reasonable discretion) embodying the Masters of a quality
sufficient for the manufacture of Records. You and licensee shall indemnify and
hold harmless Company and Company's licensees against all claims, damages,
liabilities, costs, and expenses, including, without
10
limitation, reasonable counsel fees and legal expenses, arising out of any use
of the Masters in the Foreign Release Territory or exercise of such rights by
the licensee or any third party deriving rights from the licensee in the Foreign
Release Territory;
(D) Company shall instruct its licensees in the Foreign
Release Territory concerned in writing not to manufacture Records derived from
those Recordings for sale in that Release Territory, except as permitted under
subparagraph 6(e)(ii)(H) below. If you or the licensee notifies Company of any
such manufacture, Company shall instruct the Company's licensee concerned in
writing to discontinue it and Company shall use other reasonable efforts to
discontinue such manufacture, but neither Company nor the Company licensee shall
have any liability by reason of any manufacture occurring before Company's
receipt of such notice, and Company shall have no liability by reason of any
such manufacture at any time;
(E) each record released under the license shall bear a sound
recording copyright notice identical to the notice used by Company for Company's
initial United States release of the Master concerned and such other notice as
Company shall reasonably require, and any other notice as may be required by the
law of such country. Otherwise, those Records shall not be identified directly
or indirectly with Company;
(F) Upon reasonable notice, Company shall have the right to
examine the books and records of the licensee and all others authorized by the
licensee to manufacture or distribute Records under the license, for the purpose
of verifying the accuracy of the accountings rendered to Company by the
licensee:
(G) the licensee shall not have the right to authorize any
other person or entity to exercise any rights pursuant to the license without
Company's prior written consent, not to be unreasonably withheld; and
(H) Company and Company's licensees shall, as provided herein,
have the continuing right at all times to manufacture and sell Greatest Hits
Albums and Compilation Albums, which may embody those Masters subject to the
license, in that Foreign Release Territory. (A "Compilation Album" means an
Album containing Recordings hereunder coupled with other Recordings (e.g., "Best
of the 90's").
(f) The U.S. Release Deadline Period and the U.S. Release Cure Period
shall be suspended and the expiration date postponed for the period of any
suspension of the running of the Term under subparagraph 13 (b).
7. ADVANCES AND RECORDING COSTS
Company shall pay to you the following sums which shall be Advances:
(a)(i) For any Album of the Recording Commitment which Company is paying,
at your written request, Recording Costs, Company shall, upon receipt of
invoices therefor, pay directly all such Recording Costs actually incurred in
the production of Masters comprising each such Album constituting the Recording
Commitment, provided such costs have been approved by Company in writing
pursuant to subparagraph 4(a)(i). Such Recording Costs shall be deducted from,
and shall not exceed, the applicable Advances for Recording Costs (the
"Recording Advances") set forth below.
11
(ii) With respect to the First Album, a Recording Advance shall be
payable to you in the amount of Three Hundred Seventy Five Thousand Dollars
($375,000), which amount shall be administered by you and payable as follows:
(A) Twenty five percent (25%) of the recording advance for Album
One upon complete execution of this agreement and the Artist
Inducement letter attached hereto as Exhibit A, from which you
irrevocably authorize and direct that Fifteen Thousand Dollars
($15,000) be paid to "Xxxxx Xxxxxxx, As Attorney" and be sent
to him at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000.
(B) Twenty five percent (25%) of the applicable Recording Advance
for Album One shall be payable promptly following receipt by
company of your written notice to Company that recording of
Masters to comprise Album One has commenced.
(C) Twenty five percent (25%) of the applicable Recording Advance
for Album One (1) Shall be payable promptly, following receipt
by company of your written notice to company that basic
tracking of all Masters to comprise Album One has been
completed.
(D) The balance, if any, of the applicable Recording Advance shall
be paid promptly to you after deducting all Recording Costs
and other Advances from the First Album Recording Advance,
paid or incurred by Company in connection with the First
Album, following Delivery to Company and acceptance thereby of
the First Album and Receipt by Company of all invoices for all
Recording Costs incurred in connection therewith.
(iii) The Recording Advances for the Second and each subsequent
Album of the Recording Commitment, if any, for which Company administers the
funds, shall be payable by Company following your written notice to Company that
recording of Masters to comprise the applicable Album constituting the Recording
Commitment has commenced, and is scheduled to proceed, without interruption, to
completion. The balance, if any, of the applicable Recording Advance shall be
paid to you after deducting all Recording Costs excluding mastering and other
Advances paid or incurred by Company in connection with the applicable Album,
following Delivery to Company of the applicable Album and receipt by Company of
all invoices for all Recording Costs incurred in connection therewith. Company
shall have the right to withhold a reasonable portion of such payment to provide
for anticipated Recording Costs (e.g., union payments in respect of recording
sessions and sampling costs) in an amount not to exceed Ten Thousand Dollars
($10,000), which Recording Costs have not yet been paid by Company or billed to
Company and which are otherwise deductible from payments to be made to you.
Provided that Company shall have received all invoices relating to all such
costs, Company shall not withhold such sums for a period of more than thirty
(30) days following Delivery.
(b)(i) You shall have the right to administer the Fund for any Album.
With respect to any Album subsequent to the first album of the Recording
Commitment, if any, for which you pay Recording Costs, Company shall pay you a
Recording Advance as set forth below, from which you shall promptly pay, when
due and owing, all Recording Costs and all other costs of meeting your
obligation to Deliver Masters hereunder. Without limiting the generality of the
foregoing, you shall be solely responsible for the payment of (A) any union
scale payments (including, without limitation, fees or royalties) or any other
payments, (other than per record royalties) required to be made to "Artist",
producer and all Persons (excluding Company personnel) whose services are
rendered in connection
12
with the Masters Delivered hereunder; (B) all expenses relating to cartage
instrument rental, concert hall rental, technical equipment, and except as
otherwise provided herein personnel, including engineers for the purpose of
recording, editing, remixing, mastering, remastering and re-recording the
Masters hereunder prior to Company's acceptance of such Masters as Technically
Satisfactory; and (C) all amounts payable pursuant to the requirements of any
collective bargaining agreements based upon or calculated by reference to union
scale payments. If however, Company pays any such costs for which you are
responsible, any such payment shall be deducted from your Recording Advance
pursuant to subparagraphs 7(a)(ii)(D) 7(d)(ii)(D) and 7(d)(iii).
(ii) With respect to the Second and each subsequent Album
constituting the Recording Commitment, if any, a Recording Advance shall be
payable to you in an amount equal to sixty-six and two-thirds percent (66-2/3%)
of the amount of royalties credited to your royalty account hereunder in respect
of USNRC Net Sales of the immediately preceding Album constituting the
Recording Commitment, subject to subparagraphs 7(c) and 7(d) of this agreement.
(c) For the purposes of making the computations pursuant to subparagraph 7
(b), Company shall refer to accounting statements rendered to you and Company's
good faith estimate of royalties that have accrued, but have not yet been
credited to your record royalty account through the end of the accounting period
following the date twelve (12) months following Company's initial release in the
United States of the immediately preceding Album constituting the Recording
Commitment (the "Computation Date") and, solely for the purposes of making such
computation, reserves shall be limited to fifteen percent (15%) of shipments,
prior to the Computation Date, of the prior Album whose Net Sales form the basis
for such computation.
(d)(i) Notwithstanding the foregoing, the Recording Advance for each
Album, other than the First Album, constituting the Recording Commitment shall
be no less than the applicable minimum amount and no more than the applicable
maximum amount set forth below:
--------------------------------------------------------------------------------
Album Minimum Maximum
--------------------------------------------------------------------------------
Second Album $425,000 $ 850,000
--------------------------------------------------------------------------------
Third Album $500,000 $1,000,000
--------------------------------------------------------------------------------
Fourth Album $600,000 $1,200,000
--------------------------------------------------------------------------------
(ii) The Recording advances for each subsequent Album of the Recording
Commitment, if any, for which you administer the funds, shall be payable as
follows:
(A) Twenty five percent (25%) of the Recording Advance for the
applicable album of the Recording Commitment shall be payable, if at all, upon
exercise of the applicable option. For the purpose of clarity, twenty five
percent (25%) of the Recording Advance for album three shall be payable upon
exercise of the second option and no payment shall be required at that time with
regard to the Recording Fund for album four.
(B) Twenty five percent (25%) of the applicable Recording
Advance for the applicable album shall be payable promptly following receipt by
company of your written notice to Company that recording of Masters to comprise
the applicable Album has commenced, except that as to
13
album number four, fifty percent (50%) of the applicable Recording Advance shall
be payable upon receipt of such written notice.
(C) Twenty five percent (25%) of the applicable Recording
Advance for each Album Shall be payable promptly, following receipt by company
of your written notice to company that basic tracking of all Masters to comprise
the applicable Album constituting the Recording commitment has been completed.
(D) The balance, if any, of the applicable Recording Advance
shall be promptly paid to you after deducting all Recording Costs and other
Advances from the applicable Album Recording Advance paid or incurred by Company
in connection with the applicable Album, following Delivery to Company and
acceptance thereby of the applicable Album and Receipt by Company of all
invoices for all Recording Costs incurred in connection therewith.
(iii) With respect to payments to be made pursuant to subparagraph
7(a)(ii)(D) or 7(d)(ii)(D), Company shall have the right to withhold a
reasonable portion of such payments to provide for anticipated Recording Costs,
(e.g., union payments in respect of recording sessions and sampling costs) of
Fifteen Thousand Dollars ($15,000), which Recording Costs have not yet been paid
by Company or billed to Company and which are otherwise deductible from payments
to be made to you. Provided that you have provided Company with such
documentation, Company shall not withhold such sums for a period of more than
thirty (30) days following Delivery.
(e) All monies paid to you or Artist or on behalf of you or Artist with
your or Artists approval or consent or if required by law or to or on behalf of
any Person representing you or Artist, other than royalties payable pursuant to
paragraphs 9, 12 and 18, shall constitute Advances, unless otherwise provided
herein or unless Company shall otherwise consent in writing.
(f) All Recording Advances paid by Company pursuant to the terms of
paragraph 7, and Advances paid by Company pursuant to subparagraph 18 (a)(iv),
as applicable, shall specifically include the prepayment of session union scale,
as provided in the applicable union codes, and you agree to complete any
documentation required by the applicable union to effectuate the terms of this
sentence. All Recording Costs excluding the actual cost of mastering, incurred
in excess of the applicable approved Recording Advance, shall be your sole
responsibility. All mastering costs shall be paid by Company and although
recoupable, shall not reduce the Recording Advances. You hereby agree to
forthwith pay and discharge all such excess Recording Costs. In the event that
Company elects to pay, on your behalf, any such Excess Recording Costs which
exceed the applicable Recording Advance, Company shall have the right to deduct
such excess Recording Costs from any monies otherwise due you other than
mechanical royalties under this agreement; if such monies are insufficient, you
shall reimburse Company, upon notice, to the extent of such insufficiency.
(g) Fifty percent (50%) of all expenses paid or incurred by Company in
connection with the independent promotion of Masters (i.e., promotion by Persons
other than regular employees of Company) which expenses shall not exceed One
Hundred Thousand Dollars ($100,000) per single unless approved in writing by
you, shall constitute Advances. You and Company agree that Video Production
shall not constitute independent promotion under this subparagraph 7(g).
(h) Any cost, not to exceed Six Hundred Dollars ($600.00) incurred by
Company in connection with a trademark and/or service xxxx search to confirm
Artist's right to use any professional name shall constitute an Advance.
14
(i) Promptly following the initial release in the United States of
each Greatest Hits Album as provided in paragraph 6(c)(iii)(F) above, if
any, during the term, Company will pay to Artist an advance in an amount
equal to the difference between One Hundred and Fifty Thousand Dollars
($150,000.00) and the unearned balance in Artist's royalty account
hereunder, if any, determined as of the last day of the month preceding
the month of the initial United States release of such Greatest Hits
Album. Each such Advance shall be inclusive of all Recording Costs for the
applicable Greatest Hits Masters, but in no event shall the Advance paid
pursuant to this subparagraph 7(i) be less than Seventy Five Thousand
Dollars ($75,000.00) with respect to any Greatest Hits Album released on
or before the scheduled release date established by Company or after the
scheduled release date established by Company if the delay in the release
of the Greatest Hits Album is not caused by Artist.
8. PRODUCER SERVICES
(a) Each Recording recorded hereunder shall be produced, subject to
paragraph 4, by a producer mutually approved by you and Company. You shall be
solely responsible for the engagement of such producer and for the payment of
all monies becoming payable to such producer, unless such producer is a Staff
Producer as defined in subparagraph 8 (b). In the event Company elects to pay
any such producer directly, Company may deduct or recoup such payment from all
record royalties payable to you under this agreement. Company agrees to comply
with your reasonable request to pay any producer directly, however, failure of
Company to comply with your request shall not be deemed to be a breach hereof.
Provided that you provide Company with a copy of the payment provisions of your
agreement with such mutually approved producer, Company shall not refuse to
comply with your request to pay such producer solely on the basis that such
request is for the Producer royalty to be paid to such producer retroactive to
record one after recoupment of Recording Costs, other than the Producers
advance, at the royalty rate payable to you hereunder net of any such royalty
requested to be paid to such producer, (i.e. Artist Royalty less the Producer
Royalty).
(b) With respect to Recordings produced by a mutually approved producer
rendering services pursuant to an agreement with Company (other than an
agreement relating solely and specifically to those particular Recordings)
("Staff Producer"), Company shall deduct from the applicable Recording Advance
for such Recordings a sum equal to Four Thousand Dollars ($4,000.00) times the
number of such Recordings, which sum shall constitute Recording Costs.
Additionally, you hereby direct Company to deduct from all monies payable to you
under this agreement or any other agreement a royalty computed at a Basic U.S.
Rate of four percent (4%) for Net Sales of Singles, Maxi-Singles, EPs and Albums
with royalties for all other uses (e.g., foreign sales, clubs, licensing, etc.)
calculated, reduced and paid in the same manner as your royalties are
calculated, reduced and paid for similar Net Sales under this agreement.
9. ROYALTIES
Company shall credit to your royalty account royalties as described below.
Royalties shall be computed by applying the applicable royalty rate specified
below to the applicable Royalty Base Price in respect of Net Sales of the Record
concerned:
15
(a)(i) The royalty rate (the "Basic U.S. Rate") on USNRC Net Sales of
Records consisting entirely of Masters recorded hereunder during the applicable
Contract Periods specified below shall be as follows:
--------------------------------------------------------------------------------
TYPE OF RECORD CONTRACT PERIOD BASIC U.S. RATES
--------------------------------------------------------------------------------
Singles, Maxi-Singles All 13%
--------------------------------------------------------------------------------
EPs All 14%
--------------------------------------------------------------------------------
First Album Initial 15%
--------------------------------------------------------------------------------
Second Album First Option 15.5%
--------------------------------------------------------------------------------
Third and Fourth First and Second Albums of 16% (3rd)
Albums Second Option 16.5% (4th)
--------------------------------------------------------------------------------
(ii) The royalty rate (the "Escalated U.S. Album Rate") solely on
USNRC Net Sales of each Album constituting the Recording Commitment in excess of
the following number of units shall be the applicable rate set forth below
rather than the otherwise applicable Basic U.S. Rate or any prior and otherwise
applicable Escalated U.S. Album Rate: The royalty rates for each album
subsequent to the First Album shall be no lower than highest royalty rate of the
immediately previous album.
--------------------------------------------------------------------------------
RECORDING COMMITMENT USNRC NET SALES ESCALATED U.S.
ALBUM RATES
--------------------------------------------------------------------------------
First Album 250,000 units 15.5%
--------------------------------------------------------------------------------
500,000 units 16%
--------------------------------------------------------------------------------
Second Album 250,000 units 16%
--------------------------------------------------------------------------------
500,000 units 16.5%
--------------------------------------------------------------------------------
Third Album 250,000 units 16.5%
--------------------------------------------------------------------------------
500,000 units 17%
--------------------------------------------------------------------------------
Fourth Album 250,000 units 17%
--------------------------------------------------------------------------------
500,000 17.5%
--------------------------------------------------------------------------------
(b) The royalty rate (the "Foreign Rate") on Net Sales of Top-Line
Records (other than Audiovisual Records) sold for distribution through normal
retail channels in the following territories outside the United States by
Company or its Principal Licensee shall be computed at the applicable percentage
of the Basic U.S. Rate (without regard to any applicable Escalated U.S. Album
Rate) that would otherwise apply to USNRC Net Sales of the Record concerned, as
follows:
16
--------------------------------------------------------------------------------
TERRITORIES PERCENTAGE OF APPLICABLE BASIC
U.S. RATE
--------------------------------------------------------------------------------
Canada 85%
--------------------------------------------------------------------------------
United Kingdom 85%
--------------------------------------------------------------------------------
Japan, Australia, New Zealand and the 75%
European Union (as constituted on the
date hereof) other than the United Kingdom.
--------------------------------------------------------------------------------
Rest of the World 66 2/3%
--------------------------------------------------------------------------------
(c)(i) The royalty rate on Net Sales of the following categories of sales
of Records by Company or its Principal Licensee shall be computed at the
applicable percentage of the Basic U.S. Rate (without regard to any applicable
Escalated U.S. Album Rate) or Foreign Rate that would otherwise apply to such
Net Sales:
--------------------------------------------------------------------------------
CATEGORY OF SALES PERCENTAGE OF APPLICABLE BASIC U.S.
RATE OR FOREIGN RATE
--------------------------------------------------------------------------------
Government and Educational Institutions 50%
--------------------------------------------------------------------------------
Premium Records 50%
--------------------------------------------------------------------------------
Mid-Price Record 75%
--------------------------------------------------------------------------------
Budget Record 66 2/3%
--------------------------------------------------------------------------------
PX 90%
--------------------------------------------------------------------------------
(ii) The royalty rate on Net Sales of: (A) any Record sold by
Company or a Principal Licensee through any direct mail or mail order
distribution method other than a Club Operation; and (B) any Record sold outside
the United States in conjunction with a major television advertising campaign,
during the calendar quarter-annual period in which that campaign begins and the
next two (2) calendar quarter-annual such periods, shall be fifty percent (50%)
of the otherwise applicable Basic U.S. Rate or Foreign Rate. Notwithstanding
anything to the contrary contained herein, the aggregate amount not accrued to
your account as a result of the royalty reduction permitted in this paragraph
9(c)(ii)(B) shall not exceed one-half (1/2) of the cost of any such major
television advertising campaign.
(iii) The royalty rate on Net Sales of any Multiple Record Set shall
be fifty percent (50%) of the otherwise applicable Basic U.S. Rate or Foreign
Rate set forth above if the Royalty Base Price of that particular Multiple
Record Set is the same as the Royalty Base Price applicable to Company's or a
Principal Licensees's single Top-Line Record in the same configuration in the
applicable country of the Territory where the particular Multiple Record Set is
sold. If a different Royalty Base Price applies to such Multiple Record Set, the
royalty rate shall be calculated by multiplying the
17
applicable Basic U.S. Rate or applicable Foreign Rate by a fraction, the
numerator of which shall be the Royalty Base Price for such Multiple Record Set
and the denominator of which shall be the Royalty Base Price applicable to
Company's or its Principal Licensee's single Top-Line Record in the same
configuration multiplied by the number of Records in the Multiple Record Set.
(d) (i) The royalty rate on Net Sales of Records derived from Masters,
which Records are licensed by Company or a Principal Licensee for sale through
any Club Operation shall be fifty percent (50%) of Net Receipts solely
attributable to such Masters. No royalties shall be payable with respect to
Records received by members of any Club Operation in an introductory offer in
connection with joining it or purchasing a required number of Records including,
without limitation, Records distributed as "bonus" or "free" Records, or Records
for which the Club Operation is not paid.
(ii) (A) The royalty rate for Masters licensed by Company or a
Principal Licensee to a Person for use in the distribution of Records shall be
fifty percent (50%) of Net Receipts solely attributable to such Masters;
provided that such credit to your royalty account shall be the same royalty
amount that would otherwise be credited to your account hereunder for such use
if Company distributed the Records concerned.
(B) The royalty rate for Masters licensed by Company or a
Principal Licensee to a Person for use in synchronization with theatrical motion
pictures, television programs, or radio or television commercials, or on any
other "flat fee" basis, shall be fifty percent (50%) of Net Receipts solely
attributable to such Masters.
(e) Notwithstanding anything to the contrary contained herein and for
sales by Company or a Principal Licensee of Records in the following
configurations:
(i) With respect to audio-only Records in compact disc form, the
royalty rate ("the CD Rate") shall be ninety percent (90%) of the otherwise
applicable Basic U.S. Rate, Escalated U.S. Album Rate or Foreign Rate, however,
if during the term hereof, any Album released hereunder is certified Gold (sales
of 500,000 units) by the RIAA then the CD Rate shall be increased prospectively
to one hundred percent (100%) for such Album and all subsequent Albums in the
compact disc form.
(ii) With respect to Records in any form, configuration, format or
technology not herein described, which is now known but not widely distributed
or which hereafter becomes known, including Enhanced CD, CD Extra, CD-ROM and
DVD ("New Technology Configurations"), the royalty rate shall be ninety percent
(90%) of the otherwise applicable Basic U.S. Rate, Escalated U.S. Album Rate or
Foreign Rate. At any time but no sooner than the later of (A) two (2) years
following the date of this agreement or (B) one (1) year following the first
release of a Record hereunder in the New Technology Configuration concerned,
upon your request, Company shall negotiate with you in good faith with respect
to the computation of royalties payable in respect of the New Technology
Configuration(s) concerned, which negotiations shall take into consideration
then current industry practices and Company's then current policies with respect
to recording artists of comparable sales stature for that particular form of
configuration or exploitation, however, the failure of the parties hereto to
agree to, or of Company to set, a different rate as to New Technology
Configurations, shall not be a breach and shall not prevent Company from
exploiting or continuing to exploit Records in New Technology Configurations.
18
(f) With respect to Records and other exploitations sold directly to
consumers (i) by Company in the United States, (ii) or by a Principal Licensee
outside the United States, or by their respective licensees throughout the
Territory (e.g., licensed web sites), other than by distribution of physical
Records to consumers, (e.g., without limitation, the downloading or other
conveyance of Artist's performances in Master(s) or Video(s) concerned via
telephone, satellite, cable, direct transmission over wire or through the air,
and on-line computer sales) (collectively, "Cybersales"), the royalty rate shall
be eighty percent (80%) of the otherwise applicable Basic U.S. Rate or Foreign
Rate. Such royalties shall be computed on the basis of ninety percent (90%) of
Net Sales of such Records in the United States, and one hundred percent (100%)
of Net Sales of such Records outside the United States. At any time during the
Term but no sooner than two (2) years after the date of this agreement, you may
request in writing that Company negotiate with you in good faith with respect to
the computation of royalties payable in respect of Cybersales, and, provided
such request is made, Company agrees to engage with you in such negotiations.
Those negotiations shall take into consideration then current industry practices
and Company's then current policies with respect to artists of comparable sales
stature to Artist for that particular form of configuration or exploitation,
however, the failure of the parties hereto to agree to, or of Company to set, a
different rate as to Cybersales, shall not be a breach and shall not prevent
Company from exploiting or continuing to exploit Records in Cybersales.
(g) The royalty rate on any Record embodying Masters hereunder coupled
with other Recordings shall be computed by multiplying the otherwise applicable
royalty rate by a fraction, the numerator of which is the number of Masters
hereunder embodied on such Record and the denominator of which is the total
number of Recordings embodied on such Record.
(h) As to any Master embodying the performances of Artist together with
the performances of any other artist(s), the royalty rate otherwise payable
hereunder with respect to sales of any Record derived from such Master shall be
computed by multiplying such royalty rate by a fraction, the numerator of which
shall be one (1) and the denominator of which shall be the total number of
artists whose performances are embodied on such Master, including Artist;
provided, however, that members of the same group shall constitute one royalty
earning artist for purposes of such apportionment. The Recording Costs for any
such Master shall be pro-rated in accordance with the formula specified in the
preceding sentence. Company shall not require Artist to record with any other
artist(s), without Artist's consent.
(i) No royalties shall be payable to you in respect of: (A) Records given
away or furnished on a "no-charge" basis to "one-stops", rack jobbers,
distributors or dealers, whether or not affiliated with Company, which Records
do not exceed Three Hundred (300) "no-charge" Singles out of every One Thousand
(1,000) Singles distributed and Two Hundred (200) "no-charge" Albums out of
every One Thousand (1,000) Albums distributed provided that such "no charge"
Records shall, where distributed by a third party distributor/licensee, not
exceed the number of "no charge" Records shipped thereby; (B) such additional
"no-charge" Records distributed during short term special promotions or
marketing campaigns, which such Records do not exceed the limits set forth in
subparagraph 9(i)(A) plus an additional ten percent (10%) of the total number of
Records distributed; (C) Records given away or sold at below fifty percent (50%)
of the stated wholesale prices for promotional purposes to disc jockeys, Record
reviewers, radio and television stations and networks, motion picture companies,
music publishers, Company's employees, Artist, or other customary recipients of
promotional Records or for use on transportation facilities; (D) Records sold as
scrap, salvage, overstock or "cut-outs"; (E) Records sold below cost; and (F)
"sampler" Records intended for free distribution to automobile purchasers and
containing not more than two (2) Masters hereunder. Company shall have the right
to include or to
19
license others to include any one or more Masters hereunder in promotional
Records on which such Masters and other Recordings are included, which
promotional Records are sold at a more than fifty percent (50%) below the
regular price of Company's Albums. No royalties shall be payable on sales of
such promotional Records.
(j) As to Records sold at a discount to "one-stop", rack jobbers,
distributors or dealers, whether or not affiliated with Company, in lieu of the
Records given away or furnished on a "no-charge" basis as provided in sections
9(i)(A) and (E), the applicable royalty rate otherwise payable hereunder with
respect to such Records shall be reduced in the proportion that said discount
Wholesale Price bears to the usual stated Wholesale Price, provided that said
reduction in the applicable royalty rate does not exceed the percentage
limitations set forth in subparagraphs 9(i)(A) and (B).
(k) Notwithstanding anything to the contrary expressed or implied in this
paragraph 9, this paragraph 9 shall not be deemed to apply to (i) any payments
received by Company pursuant to any statute or other legislation (including,
without limitation, payments for the public performance of Recordings, or
royalties payable for the sale of blank cassettes or for the sale of recording
equipment) or (ii) any so-called "blanket licenses" (including, without
limitation, performance licenses) between Company and a licensee under which the
licensee is granted access to all or a significant portion of Company's
catalogue of master recordings unless it is possible to accurately calculate a
portion of such payment which is specifically and directly attributable to
royalty bearing master recordings of Artist.
10. ACCOUNTING.
(a) Statements as to royalties payable hereunder shall be sent by Company
to you within ninety (90) days after the expiration of each semi annual period
for the preceding semi annual period ending the last fiscal day of June or
December. Notwithstanding the foregoing, Company may, if Company elects, change
the aforesaid time and dates, provided, however, in the event of such change,
statements shall be rendered to you no less frequently than semi-annually.
Concurrently with the rendition of each statement, Company shall pay you all
royalties shown to be due by such statement, after deducting all Recording Costs
paid by Company, all payments made therefore to you and Artist, and all Advances
made to you and Artist prior to the closing date of such statement. Advances and
any payments which Company is permitted to deduct from royalties made by Company
subsequent to the last date of a particular accounting period shall not reduce
the accrued royalties, if any, payable to you hereunder in respect of such
accounting period. The preceding sentence shall not apply to any Advances
Company is not obligated to pay hereunder or any Advances where the reason for
payment of such Advance after the end of the applicable accounting period is
pursuant to your request, your late Delivery of an Album, (i) where such
lateness exceeds seventy five (75) days and is not approved or requested by
Company, or your delay in the timely fulfillment of any of your other material
obligations hereunder. No statements need be rendered by Company for any such
period after the expiration of the Term for which there are no sales of Records
derived from Masters hereunder or liquidation of reserves hereunder or other
exploitation of Masters hereunder, however, following your written request,
Company shall render a statement for any other such period, if Company is
reasonably able to do so. All payments shall be made to the order of: Legend
Entertainment Corporation and sent to: 0000 Xxx Xxxxxx Xxxx, Xxxxxxxx, Xxxx,
00000. Company shall be entitled to maintain a single account with respect to
all Recordings subject to this agreement. Company may maintain reasonable
reserves; each such royalty reserve shall be liquidated evenly and not later
than the end of the third semi-annual accounting period following the accounting
period in which it is established. Company shall not establish any royalty
reserve during any particular accounting period: (i) with respect to Albums in
excess of thirty percent (30%), or (ii) with
20
respect to Singles, Maxi-Singles, and EPs in excess of forty percent (40%), of
the aggregate number of Albums or Singles, or Maxi-Singles, or EPs, as the case
may be, shipped to Company's customers, unless Company anticipates in its good
faith judgment returns and credits which justify the establishment of a larger
reserve, (ii) provided that reserves held shall not exceed or duplicate reserves
held by Company's distributor where such distribution is by a third party
distributor. You shall be deemed to have consented to all accountings rendered
by Company hereunder and said accountings shall be binding upon you and not
subject to any objection by you for any reason unless specific objection, in
writing, stating the basis thereof is given to Company within two (2) years
after the date Company has rendered the applicable statement, and after such
written objection, unless suit is instituted within three (3) years after the
date Company has rendered the applicable statement.
(b) (i) You shall have the right at your sole cost and expense to appoint
a Certified Public Accountant who is not then currently engaged in an
outstanding audit of Company to examine Books and Records as same pertain to
sales of Records subject hereto as to which royalties are payable hereunder,
provided that any such examination shall be for a reasonable duration, shall
take place at Company's offices during normal business hours on reasonable prior
written notice and shall not occur more than once in any calendar year. You may
examine Books and Records with respect to a particular statement only once.
(ii) Notwithstanding anything to the contrary contained in
subparagraph l0(b)(i), if Company notifies you that the Certified Public
Accountant designated by you to conduct an audit under subparagraph l0(b)(i) is
engaged in an outstanding audit of Company on behalf of another person ("Other
Audit"), you may nevertheless have your audit conducted by such accountant, and
the running of the time within which such audit may be made and the time within
which to commence legal action shall be suspended until such accountant has
completed the Other Audit, subject to the following conditions:
(A) You shall notify Company of its election to that effect
within fifteen (15) days after the date of Company's said notice to you;
(B) You shall use your reasonable efforts to cause your
accountant to proceed in a reasonably continuous and expeditious manner to
complete the Other Audit and render the final report thereon to the client and
Company; and
(C) Your audit shall not be commenced by your accountant
before the delivery to Company of the final report on the Other Audit, shall be
commenced within thirty (30) days thereafter, and shall be conducted in a
reasonably continuous manner. It shall not be a material breach if Company shall
inadvertently under account to Artist.
(iii) The provisions of subparagraph l0(b)(ii) will not apply if
Company elects to waive the provisions of subparagraph l0(b)(i) which require
that your accountant shall not be engaged in any Other Audit.
(c) Company shall compute your royalties in the same national currency in
which Company's licensee pays Company for that sale, and Company shall credit
those royalties to your account at the same rate of exchange at which the
licensee pays Company. For purposes of accounting to you, Company shall treat
any sale outside of the United States as a sale made during the semi annual
period in which Company receives Company's licensee's accounting and payment for
that sale. If any
21
licensee deducts any taxes from its payments to Company, Company may deduct a
proportionate amount of those taxes from your royalties. If any law, any
government ruling, or any other restriction affects the amount of the payments
which a Company licensee can remit to Company, Company may deduct from your
royalties an amount proportionate to the reduction in the licensees's
remittances to Company. If Company cannot collect payment in the United States
in U.S. Dollars, Company shall not be required to account to you for that sale,
except as provided in the next sentence. Company shall, at your request and at
your expense, deduct from the monies so blocked, and deposit in a foreign
depository, the equivalent in local currency of the royalties which would be
payable to you on the foreign sales concerned, to the extent such monies are
available for that purpose, and only to the extent to which your royalty account
is then in a fully recouped position. All such deposits shall constitute royalty
payments to you for accounting purposes. To the extent possible, Company will
allow you to select the foreign depository referred to in this subparagraph 10
(c).
11. NOTICES.
Except as otherwise specifically provided herein, all notices under this
agreement shall be in writing and shall be given by courier or other personal
delivery requiring the signature of the recipient, by overnight delivery by an
established overnight delivery service (e.g., Federal Express or United Parcel
Service), or by registered or certified mail return receipt requested at the
appropriate address below, or at a substitute address designated in a written
notice sent by the party concerned to the other party hereto.
TO YOU: LEGEND ENTERTAINMENT CORPORATION
0000 Xxx Xxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
CC: Xxxxx Xxxxxxx
TO COMPANY: PUSH RECORDS, INC.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Each notice to Company shall be addressed to the attention of Company's Vice
President of Business & Legal Affairs, and a copy of each notice to Company
shall be sent simultaneously to the attention of Company's Executive Vice
President/General Counsel. Notices shall be deemed given when mailed or
deposited into the custody of an overnight delivery service for overnight
delivery, or, if personally delivered, when so delivered, except that a notice
of change of address shall be effective only from the date of its receipt.
12. LICENSES FOR MUSICAL COMPOSITIONS
(a) For the purposes of this paragraph 12, the following definitions shall
apply:
(i) "Controlled Compositions": Any Composition, or material recorded
pursuant to this agreement, which, in whole or in part, is written or composed,
and/or owned or controlled, directly or indirectly, by you and/or any individual
member of Artist and/or any producer of a Master.
22
(ii) "Effective Date": The date on which the applicable record is
released which embodies a Controlled Composition provided that such delivery is
no later than provided for in paragraph 3(b)(i) and 3(b)(ii) and if Company has
not requested or approved such late delivery and if such delivery is later than
as provided therein the date on which Artist commences recording the Recording
which embodies a Controlled Composition.
(iii) "U.S. 100% Rate": A royalty per Controlled Composition equal
to one hundred percent (100%) of the United States minimum compulsory license
rate applicable to the use of Compositions on phonorecords under the United
States Copyright Law (without regard to playing time) in effect on the Effective
Date, or, if there is no statutory rate in the United States on the Effective
Date, one hundred percent (100%) of the per Composition rate (without regard to
playing time) generally utilized by major record companies, where such companies
are deemed to be paying the equivalent of a full "statutory rate".
(b) (i) Controlled Compositions shall be and are hereby licensed to
Company and its licensees.
(A) For the United States, at a royalty per Controlled
Composition equal to the U.S. 100% Rate;
(B) For Canada, at a royalty per Controlled Composition equal
to the Canadian 100% Rate.
(ii) Notwithstanding the foregoing, the maximum aggregate mechanical
royalty rate which Company shall be required to pay with respect to:
(A) any Single hereunder, regardless of the total number of
Compositions embodied thereon, shall not exceed two (2) times the U.S. 100% Rate
or Canadian 100% Rate, as the case may be;
(B) any Maxi-Single hereunder, regardless of the total number
of Compositions embodied thereon, shall not exceed three (3) times the U.S. 100%
Rate or the Canadian 100% Rate, as the case may be;
(C) any EP hereunder, regardless of the total number of
Compositions embodied thereon, shall not exceed five (5) times the U.S. 100%
Rate or the Canadian 100% Rate, as the case may be;
(D) any Album other than a multiple LP set in any form other
than compact disc, regardless of the total number of Compositions embodied
thereon, shall not exceed eleven (11) times the U.S. 100% Rate or the Canadian
100% Rate, as the case may be;
(E) any Album in compact disc form, regardless of the total
number of Compositions embodied thereon, shall not exceed eleven (11) times the
U.S. 100% Rate or the Canadian 100% Rate, as the case may be. Notwithstanding
the foregoing, in the event that any Album of the Recording Commitment contains
non-Controlled Compositions, then the maximums set forth in subparagraphs
12(b)(ii)(D) and (E) shall be increased by the difference, if any, between (a)
the mechanical royalty required to be paid with respect to up to two (2) such
non-Controlled Compositions (but in no event more than the U.S. 100% Rate or the
Canadian statutory per Composition rate (without
23
regard to playing time) in effect on the Effective Date, as the case may be, for
two (2) Compositions, and (b) the mechanical royalty that would be payable if
such non-Controlled Compositions were Controlled Compositions.
(F) A Multiple Record Set shall be the same amount prescribed
in section 12(b)(ii)(D) or (E) as applicable, if the Royalty Base Price of that
Multiple Record Set is the same as the Royalty Base Price applicable to the Top
Line single-unit Albums marketed by Company or Company's principal Licensee in
the territory concerned at the beginning of the royalty accounting period
concerned. If a different Royalty Base Price applies to a Multiple Record Set,
the maximum Mechanical Royalty shall be adjusted in proportion to the variance
in the Royalty Base Price, provided that in no event shall it be more than twice
the maximum royalty prescribed in section 12(b)(ii)(D). That adjustment of the
maximum Mechanical Royalty shall be made by using the following formula:
(X divided by Y) multiplied by Z = adjusted Mechanical Royalty
("X" represents the Royalty Base Price for the Multiple Record Set concerned;
"Y" represents the Royalty Base Price for a Top Line single-unit Album described
in the first sentence of this section 12(b)(ii)(F); and "Z" equals the maximum
Mechanical Royalty otherwise applicable under section 12(b)(ii)(D).)
(c) (i) In the event that any Single, Maxi-Single, EP or Album contains
other Compositions in addition to Controlled Compositions and the aggregate
mechanical royalty rate for said Single, Maxi-Single, EP or Album exceeds the
applicable maximum aggregate mechanical royalty rate provided in subparagraph
12(b)(ii), the aggregate mechanical royalty rate for the Controlled Compositions
contained thereon shall be reduced by the aforesaid excess over said applicable
rate. Additionally, Company shall have the right with respect to any Single,
Maxi-Single, EP or Album, the aggregate mechanical royalty rate for which
exceeds the applicable maximum aggregate mechanical royalty rate provided in
subparagraph 12(b)(ii), to deduct the excess payable thereon from all monies
payable to you pursuant to this agreement.
(ii) All mechanical royalties payable hereunder shall be paid on the
basis of Net Sales of Records for which royalties are payable to you pursuant to
this agreement, except that mechanical royalties shall be payable, for
Controlled Compositions embodied on any Album single or other record of the
Recording Commitment with respect to fifty percent (50%) of such Albums singles
or other records which are for all other purposes non-royalty bearing pursuant
to the terms of subparagraph 9(i)(A)(B) and subparagraph 9(j) herein. Company
may maintain reasonable reserves with respect to the payment of mechanical
royalties which reserves shall be liquidated after the third accounting period
following the accounting period in which such reserve(s) are established. If
Company makes an overpayment to you of mechanical royalties in respect of
Compositions recorded under this agreement, you will reimburse Company for same,
failing which Company may recoup any such overpayment from all monies becoming
payable to you pursuant to this agreement. Mechanical royalty payments on
Records subsequently returned are considered overpayments.
(iii) Notwithstanding anything to the contrary contained herein,
mechanical royalties payable in respect of Controlled Compositions for Net Sales
of Records for any use other than as described in subparagraphs 9(a), (b),
(c)(iii), (e), (f), (g), (h), (i) and (j) shall be seventy-five (75%) percent of
the otherwise applicable U.S. 100% Rate or Canadian 100% Rate, as the case may
be. Mechanical royalties for Controlled Compositions which are arranged versions
of any Compositions in
24
the public domain shall be paid in the same proportion as the appropriate
performing rights society grants performing credits to the publisher of such
Controlled Composition, provided you have furnished Company with a copy of the
letter from such performing rights society setting forth the percentage of the
otherwise applicable credit which the publisher will receive.
(iv) Any assignment of the ownership or administration of copyright
in any Controlled Composition shall be made subject to the provisions hereof and
any inconsistencies between the terms of this agreement and mechanical licenses
issued to and accepted by Company shall be determined by the terms of this
agreement.
(v) If any Single, Maxi-Single, EP or Album contains other
Compositions in addition to the Controlled Compositions, you will use
your reasonable efforts to obtain for Company's benefit mechanical licenses
covering such Compositions on the same terms and conditions applicable to
Controlled Compositions pursuant to this paragraph 12.
(d) You hereby agree that all Controlled Compositions shall be available
for licensing by Company and Company's licensees, for reproduction and
distribution in each country of the Territory outside of the United States and
Canada through the author's society or other licensing and collecting body
generally responsible for such activities in the country concerned. You shall
use your best efforts to cause the issuance of effective licenses, under
copyright and otherwise, to reproduce each Controlled Composition on Records and
distribute those Records outside the United States and Canada, on terms not less
favorable to Company or Company's licensees than the terms prevailing on a
general basis in the country concerned with respect to the use of Compositions
on comparable Records.
(e) (i) In respect of all Controlled Compositions, Company and its
licensees are hereby granted: the irrevocable perpetual worldwide right to
reprint the lyrics on the jackets, sleeves and other packaging of Records
derived from Masters hereunder, and to reproduce such lyrics on, or cause the
reproduction of lyrics by, any New Technology Configurations. Company shall
provide appropriate copyright notices and writer and publisher credits with
respect to such reprinted lyrics; provided that Company's inadvertent and
isolated failure to do so in any instance shall not constitute a breach of this
agreement.
(ii) You also grant to Company and Company's licensees an
irrevocable license under copyright to reproduce each Controlled Composition in
Videos, to reproduce, distribute and perform those Videos in any manner
(including, without limitation, publicly and for profit), to manufacture and
distribute Audiovisual Records and other copies of those Videos, and to exploit
them otherwise, by any method and in any form known now or in the future,
throughout the Territory, and to authorize others to do so. Company and
Company's licensees shall not be required to make any payment in connection with
those uses, and that license shall apply whether or not Company receives any
payment in connection with any use of any Video. If any exhibition of a Video is
also authorized under another license (such as a public performance license
granted by ASCAP or BMI), that exhibition shall be deemed authorized by that
license instead of this agreement. (In all events, Company and Company's
licensees shall have no liability by reason of any such exhibition.)
Notwithstanding the foregoing, with respect to Net Sales of Audiovisual Records
hereunder which are sold, paid for and not returned, Company shall pay a
synchronization fee for Controlled Compositions equal to four percent (4%) of
the Royalty Base Price for Audiovisual Records (defined in subparagraph
24(z)(iii)) below therefor, prorated on the basis that the playing time of
Controlled Compositions bears to the total playing time of such Audiovisual
Record.
25
(f) Notwithstanding anything to the foregoing provisions of this paragraph
12 to the contrary, if a particular Controlled Composition recorded hereunder is
embodied more than once on a particular Record, Company shall pay mechanical
royalties in connection therewith at the applicable rate for such Controlled
Composition as if the Controlled Composition concerned were embodied thereon
only once.
13. EVENTS OF DEFAULT
(a) If you do not fulfill timely any portion of the Recording Commitment
hereunder or any of your other material obligations hereunder in accordance with
all of the terms and conditions of this agreement, then, in addition to any
other rights or remedies which Company may have, Company shall have the right,
upon written notice to you at any time prior to the expiration of the
then-current Contract Period, (i) to terminate the Term; and (ii) to require you
to repay to Company the unrecouped amount of any Advance previously paid to you
and not attributable under paragraph 7 to an Album which has actually been
Delivered, except as expressly provided in the next sentence, unless your
default is due solely to your death or disability. You shall not be required to
repay any such Advance to the extent to which you furnish Company with
documentation satisfactory to Company establishing that you have actually used
the Advance to make payments to Persons not affiliated with you and in which you
do not have an interest, for Recording Costs incurred in connection with the
Album concerned prior to Company's demand for repayment. Company may exercise
any or all of its rights pursuant to subparagraph 13(a), by sending you the
appropriate notice. Notwithstanding anything to the contrary in this agreement,
if you Deliver Masters for any Album hereunder at any time within sixty (60)
days from the later of the date such Delivery was required pursuant to
subparagraph 3(b)(i) or a date approved by Company, Company shall not exercise
its rights under this subparagraph 13(a) on the basis of such delayed Delivery.
No exercise by Company of its rights under this paragraph shall limit Company's
rights to recover damages by reason of your default or to exercise any of its
other rights and remedies.
(b) Company reserves the right, at its election, to suspend the operation
of this agreement for the duration of any of the following contingencies, if by
reason of any such contingency, it is materially hampered in the performance of
its obligations under this agreement or its normal business operations are
delayed or become impossible or commercially impracticable: Act of God, fire,
catastrophe, labor disagreement, acts of government, its agencies or officers,
any order, regulation, ruling or action of any labor union or association of
artists, musicians, composers or employees affecting Company or the industry in
which it is engaged, delays in the delivery of materials and supplies, or any
other cause beyond Company's control. Any such suspension due to a labor
controversy which involves only Company shall be limited to a period of three
(3) months. Notwithstanding such suspension, Company shall continue to account
and pay royalties to you as and when due unless the contingency resulting in
such suspension materially hampers Company in carrying out such obligation. No
suspension shall continue past three (3) months, unless industry wide where it
shall last up to nine (9) months.
(c) If Artist's voice or Artist's ability to perform as an instrumentalist
should be materially or permanently impaired for a period in excess of seven (7)
consecutive months, then, in addition to any other rights or remedies which
Company may have, Company shall have the right, upon written notice to you, to
terminate the Term.
(d) (i) If Company exercises any of its termination rights pursuant to
this paragraph 13, you shall have the option to purchase any recorded but
undelivered or unreleased Masters from
26
Company. Company will transfer to you such Masters as you wish to purchase (the
"Subject Masters") no later than fifteen (15) days after the date of your notice
of exercise of your option to acquire Company's rights in the Subject Masters
and upon receipt by Company of certified funds fully reimbursing Company for the
Recording Costs of the Subject Masters, Company will deliver the Subject Masters
to you at Company's offices. You shall reimburse Company for the Recording Costs
of the Subject Masters simultaneously with your acquisition of the Subject
Masters, by certified or bank check. The Subject Masters will be delivered to
you and accepted "as is" at the time of delivery and no warranty or
representation, express or implied, is or will be made by Company in connection
therewith; provided, however, that Company shall not further impair or encumber
the rights in or to the Subject Masters prior to your purchase of them.
(ii) You shall be solely responsible for paying for, discharging and
performing, as and when due, all obligations and liabilities relating to the
Subject Masters and the Unreleased Masters. Without limiting the foregoing, you
shall make all payments required in connection with manufacture, sale or
distribution of Records derived from the Subject Masters and/or the Unreleased
Masters and all other payments required by reason of your use of the Subject
Masters and/or the Unreleased Masters, including, without limitation, all
royalties and other payments to performing artists, producers, owners of
copyrights in musical compositions, the Music Performance Trust Fund and Special
Payments Fund, and any other unions and union funds. You shall comply with the
applicable rules and regulations of the American Federation of Musicians and any
other union having jurisdiction and any other applicable laws, rules and
regulations covering any use of the Subject Masters and/or the Unreleased
Masters by you, or any Person deriving rights from you, in the manufacture and
sale of Records or otherwise. You warrant and represent that you have obtained
or will obtain all necessary rights, licenses, permissions, clearances, consents
and approvals which you are required to obtain from other Persons relating to
the exploitation of the Subject Masters and/or the Unreleased Masters. You will
indemnify and hold harmless Company and its licensees from and against any and
all claims, damages, liabilities, costs and expenses, including legal expenses
and reasonable counsel fees, arising out of any use of the Subject Masters
and/or the Unreleased Masters by you or your successors, assigns or licensees.
(e) It is understood and agreed that the active participation of Xxxxx
Xxxxx in the management and operation of Company is a vital part of this
Agreement. Upon the death or incapacity of Xxxxx Xxxxx and/or if he shall cease,
for whatever reason, to be actively engaged in the management and operation of
Company as a senior executive thereof you shall have the right, by giving the
Company written notice, to terminate the Term of the Agreement, within forty
five (45) days after the active participation of Xxxxx Xxxxx ceases, provided,
however, that the term of the Agreement shall not terminate unless Company shall
fail to cause the active participation of Xxxxx Xxxxx to continue within forty
five (45) days after receipt by Company of such notice.
14. INJUNCTIVE RELIEF
You expressly acknowledge that Artist's services hereunder are of a special,
unique intellectual and extraordinary character which gives them peculiar value,
and that in the event of a breach or threatened breach of any term, condition,
representation, warranty, agreement or covenant hereof Company Will be caused
immediate irreparable injury, including loss of goodwill and harm to reputation,
which cannot be adequately compensated in monetary damages. Accordingly, in the
event of any such breach, actual or threatened, Company shall have, in addition
to any other legal remedies, the right to seek injunctive or other equitable
relief. The preceding sentence shall not be construed to preclude you from
opposing
27
Company's application for injunctive relief based upon a challenge of the
factual or legal basis alleged by Company in support of its application.
15. WARRANTIES AND REPRESENTATIONS; INDEMNITIES
(a) You warrant and represent that:
(i) Artist is over the age of eighteen (18) and have the right and
that you and Artist have legal capacity to enter into this agreement, and you
are not subject to any prior obligations or agreements, whether as a party or
otherwise, which would restrict or interfere in any way with the full and prompt
performance of your obligations hereunder, and you shall fully and promptly
perform your obligations to Artist.
(ii) There exist no prior unreleased Recordings embodying Artist's
performances collectively as Blessid Union of Souls, except as set forth on
Schedule A attached to this agreement.
(iii) Company shall not be required to make any payments of any
nature for or in connection with the acquisition, exercise or exploitation of
any of Company's rights hereunder, except as specifically provided in this
agreement. You shall be solely responsible for: (A) all royalties (except
mechanical royalties) payable to producers, mixers, remixers and others
contributing to the recording of Masters engaged by you or with your consent
(subject to subparagraph 8(a) and (b) above); (B) all Recording Costs in excess
of the Recording Advances set forth in paragraph 7, unless such excess is caused
or requested by or approved by Company; (C) all mechanical royalties in excess
of the applicable rates and/or the applicable maximum aggregate mechanical
royalty rates set forth in subparagraph 12(b)(ii); (D) video shoot cancellation
costs pursuant to the terms of subparagraph 18(b)(iii); (E) all Special
Packaging Costs which you have requested or submitted; (F) all other costs, if
any, which are in excess of the fixed amounts provided herein which Company has
agreed to pay which have not been incurred solely as a result of Company's acts
or omissions or upon Company's request or approval; and (G) all other amounts
which you agree in writing to pay herein. You shall promptly pay all of the
amounts set forth in this subparagraph 15(a)(iii), or reimburse Company if
Company pays them. Such amounts may also be deducted from all monies, other than
mechanical royalties, becoming payable to you by Company under this agreement to
the extent to which they have not been paid by you or you have not reimbursed
Company.
(iv) The Materials or any use thereof, shall not violate any law and
shall not infringe upon or violate the rights of any Person (including, without
limitation, contractual rights, copyrights, rights of publicity and rights or
privacy); and that each track-by-track list identifying the performers on each
Master and describing their performances which you furnish to Company is and
shall be true, accurate and complete. "Materials," as used in this subparagraph
15(a)(iv), means: Masters hereunder (including any Sampled Material embodied
therein); all Controlled Compositions; each name used by Artist, individually or
as a group, in connection with Masters hereunder; all photographs and likenesses
of Artist; and all other musical, dramatic, artistic and literary materials,
ideas, and other intellectual properties furnished by you or artist, contained
in or used in connection with any Masters hereunder or their packaging, sale,
distribution, advertising, publicizing or other exploitation supplied by or
approved by you or Artist. Company's acceptance and/or utilization of Masters,
Materials, or track-by-track lists hereunder shall not constitute a waiver of
your representations, warranties or agreements in respect thereof, or a waiver
of any of Company's rights or remedies.
28
(v) You will make no changes in the personnel comprising Artist
without Company's prior written consent which shall not be unreasonably
withheld. You shall not, during the Term, assign Artist's professional name set
forth on Page 1 hereof, or any other names utilized by Artist in connection with
Masters, or permit the use of said names by any other individual or group of
individuals in respect of the Masters without Company's prior written consent,
and any attempt to do so shall be null and void and shall convey no right or
title. You hereby warrant and represent that you or Artist are and shall be the
sole owner of all such professional names, and that no other Person has the
right to use said names or to permit said names to be used in connection with
Records (except previously released records set forth in Schedule A), and that
you have the authority to grant Company the exclusive right to use said names in
the Territory in accordance with all of the terms and conditions of this
agreement and Company shall have the exclusive right to use said professional
name as set forth herein.
(vi) Artist shall not perform, and neither you nor Artist shall
authorize or knowingly permit Artist's performances to be recorded for any
purpose, without an express written agreement with the Person for whom the
Recording is to be made for Company's benefit, prohibiting the use of such
Recording for making, promoting, or marketing Recordings or Records, or for
digital broadcasts or other transmissions, distributions or other communications
now or hereafter known, in violation of the applicable restrictions set forth in
subparagraphs 15(a)(i)(vii) and (viii). You shall furnish Company with a fully
executed copy of each such agreement promptly after the execution thereof.
Without limiting the generality of this subparagraph 15(a)(vi), Artist shall
have the right to (A) perform as an actor or singer/musician in motion picture
or other visual or audio-visual media, and (B) appear on musical shows on
television provided that neither you nor Artist permit the replication of such
television show(s) to be released as Audiovisual Records.
(vii) Artist shall not perform or render any services and Artist
shall not authorize the use of Artist's name, likeness, or other identification
for the purpose of distributing, selling, advertising or exploiting Records for
any Person other than Company during the Term in the Territory. Notwithstanding
the preceding sentence,
(A) Artist shall have the right to perform as a so-called
non-featured "back-up musician, background vocalist" or "sideman" with featured
artists for the purpose of making Records for any Person other than Company only
upon the following conditions:
(1) Artist's activities in this regard shall not
materially interfere with the prompt and timely performance of your Delivery
obligations hereunder;
(2) You shall undertake to provide Company with advance
written notice thereof and the Compositions to be performed and recorded shall
not be Compositions recorded pursuant to this agreement; provided, however, your
isolated failure to do so shall not constitute a breach of this agreement;
(3) If any such Recording is released in a Record,
Artist's name may only be used on the liner of such Record in a size, prominence
and type style as is customary in the recording industry for the names of such
non-featured "back-up musicians", "background vocalists" and "sidemen" whose
performances are embodied, and who are given credit on such Record, and in the
same place on the liner where all other such non-featured performers are listed,
and, Company shall be given appropriate courtesy credit in conjunction with any
use of Artist's name on the liner of such Record;
29
provided, however, Artist's failure to procure such credit for Company shall not
be deemed a breach of this agreement; and
(4) Artist shall not perform any step-outs, solos or
duets in excess of fifteen (15) seconds in connection with such Recordings; and
(5) Except as otherwise provided above, Artist's name,
likeness, or photograph shall not be used in any manner by any third party in
connection with the performances of any member of Artist or in any advertising
thereof. No visual reproduction of Artist's performance shall appear in any
Video, New Technology Configurations, Cybersales or Audiovisual Record without
Company's prior written consent.
(B) The individual members of Artist shall have the right to
produce, mix, remix and engineer Recordings by other recording artists, but only
upon the following conditions:
(1) Such individual's activities as a producer shall not
materially interfere with the prompt and timely performance of you or Artist's
Delivery obligations or material obligations pursuant to subparagraph 6(a)(ii)
herein;
(2) You shall undertake to provide Company with advance
notice of any such activity; provided, however, your isolated failure to do so
shall not constitute a breach of this agreement;
(3) If any such Recordings are released in a Record, the
name of the individual member of Artist who produced, mixed, remixed, or
engineered such Recording may only be used on the liner notes, packaging and
advertising of such Record in a size, prominence and type style as is customary
in the recording industry for the names of producers, mixers, remixers, or
engineers who have produced or provided other applicable services in connection
with Recordings embodied, and who are given credit, on such Record, and in the
same place on the liner where all other producers, mixers, remixers and
engineers are listed, and Company shall be given appropriate courtesy credit in
connection with any use of the name of any individual member of Artist on the
liner of such Record; provided, however, Artist's failure to procure such credit
for Company shall not be deemed a breach of this agreement; and
(4) Artist's professional name, likeness, or photograph
shall not be used in any manner by any third party in connection with Artist's
production, mixing, remixing and engineering of Recordings or in any advertising
for such Record; provided, however, that the name of the individual member of
Artist concerned may be used as set forth above.
(viii) Artist shall not perform for the purpose of recording any
Composition, or any adaptation of a Composition, recorded hereunder for any
Person other than Company for use in the Territory on Records, or in radio or
television commercials except as provided in subparagraph 15(a)(vi) of this
agreement, or otherwise for synchronization with visual images, for a period
of (A) five (5) years after the date of Delivery to Company of all Recordings
made in the course of the same Album (or other recording project) as the
Recording of the restricted Composition concerned, or (B) two (2) years after
the expiration or other termination of the Term, whichever is later (the
"Re-recording Restriction"). In the event that a Composition recorded hereunder
is not embodied on any Record which is released
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hereunder prior to one (1) year after the expiration or other termination of
this agreement, there shall be no Re-recording restriction with respect to such
Composition.
(ix) All Persons rendering services in connection with Masters or
Videos shall fully comply with the provisions of the Immigration Reform Control
Act of 1986.
(x) The Recordings to be recorded will be subject to the AFM and
AFTRA collective bargaining agreements and/or any other applicable collective
bargaining agreements and you or an entity owned or controlled by you will be a
party to all such agreements.
(xi) You and Artist will comply with all union rules, regulations
and agreements applicable to the Recordings.
(xii) Before the Delivery of Recordings to Company hereunder; (1)
you will except as otherwise provided herein, make all payments to all Persons
rendering services for the Recordings concerned; (2) you will deliver or cause
to be delivered to Company all licenses required under copyright for the
recording of the musical compositions and any other copyrighted material
reproduced in the Recordings, and you will make all payments (except mechanical
royalties) required under those licenses; (3) you will pay or furnish Company
with waivers of all other payments (except "per-record" royalties) to which any
Person may become entitled and all other costs in connection with those
Recordings or their use in the manufacture and sale of Records; (4) you will
furnish Company with the name of each vocalist who may be a "covered artist"
under Appendix A to the AFTRA 1993-1996 National Code of Fair Practice for
Phonograph Recordings (or any applicable successor agreement), it being agreed
that your failure to notify Company of such vocalists will constitute your
warranty and representation that no such "covered artist" rendered services in
connection with the Recordings; and (5) you will furnish Company with all
required AETRA and AFM forms, duly completed and executed.
(xiii) If any claim is asserted against Company for payment of any
obligation required to be discharged by you pursuant to subparagraphs l5(a)(x)
through 15(a)(xv), Company will have the right to make any such payment and any
late penalties incurred due to your untimely delivery of or failure to deliver,
necessary paperwork required to make such payments, and shall deduct the amount
of such payment, including late payments, from any and all monies accruing or
becoming payable to you hereunder. No payments shall be made pursuant to
subparagraph 7(a)(iii) until Company receives the documentation required to be
furnished to Company pursuant to subparagraphs 15(a)(xii) and/or 15(a)(xvi).
(xiv) Except as otherwise provided herein, all unions concerned and
the owners of recording studios to be used, if any, have agreed not to look to
Company for payment of any scale compensation or other obligations arising in
connection with Masters recorded hereunder, except for "per-record" royalties.
(xv) Except as otherwise provided herein, all union scale payments
due all Persons who render or perform services in connection with Masters
recorded hereunder, as well as payroll taxes and any other taxes required to be
paid thereon, if any, shall be promptly paid by you when due.
(xvi) You will furnish Company with all information and all
instruments and documents which Company may reasonably require in connection
with Masters to confirm your compliance with the terms of subparagraphs 15(a)(x)
through 15(a)(xv) and 24(k) of this agreement.
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(xvii) You warrant and represent that Company will be granted
licenses for Controlled Compositions in accordance with paragraph 12 of this
Agreement.
(b) You agree to and do hereby indemnify, save and hold Company harmless
from any and all loss and damage (including court costs and outside reasonable
attorneys' fees) arising out of, connected with or as a result of any
inconsistency with, failure of, or breach or threatened breach by you of any
warranty, representation, agreement, undertaking or covenant contained in this
agreement including, without limitation, any claim by any third party in
connection with the foregoing, provided same has resulted in a final judgment
against Company or which has been settled with your written consent, which
consent shall not be unreasonably withheld, it being agreed that such consent
shall only be required for settlements in excess of Five Thousand Dollars
($5,000.00). In addition to any other rights or remedies Company may have by
reason of any such inconsistency, failure, breach, threatened breach or
claim, Company may obtain reimbursement from you, on demand, for any payment
made by Company at any time after the date hereof with respect to any loss,
damage or liability (including actual court costs and outside reasonable
attorneys' fees) resulting therefrom, provided the foregoing indemnity is
applicable to same. Such amounts may also be deducted from all monies becoming
payable to you by Company under this agreement to the extent to which they have
not been reimbursed to Company by you. If the amount of any such claim or loss
has not been determined, Company may withhold sums due you in an amount
consistent with such claim or loss pending such determination unless you post a
bond in a form and from a bonding company acceptable to Company in an amount
equal to Company's estimate of the amount of the claim. Such withheld sums shall
be released if suit is not filed within twelve (12) months after Company is
notified of or receives a communication with respect to such claim; provided,
however, that if such claim is thereafter asserted, Company shall maintain the
right to begin once again to withhold monies. Company shall give you notice of
any third party claim to which the foregoing indemnity applies and you shall
have the right to participate in the defense of any such claim through counsel
of your own choice and at your expense; provided that Company shall have the
right at all times, in Company's sole discretion, to retain or resume control of
the conduct thereof.
16. APPROVALS
(a) Except as otherwise expressly provided in this agreement, as to all
matters treated herein to be determined by mutual agreement, or as to which any
approval or consent is required, such agreement, approval or consent shall not
be unreasonably withheld.
(b) Your agreement, approval or consent, whenever required (including,
without limitation, written agreement, approval or consent), shall be deemed to
have been given unless you notify Company otherwise within ten (10) business
days following the date of Company's written request to: Xxxx Xxxxxxx, who is
hereby deemed an authorized agent to give approval on behalf of you.
17. COLLECTIVE BARGAINING AGREEMENTS
You hereby warrant and represent that, during the Term, Artist shall become and
remain a member in good standing of any labor unions with which Company may at
any time have agreements lawfully requiring such union membership, including,
but not limited to, the American Federation of Musicians and the American
Federation of Television and Radio Artists. All Masters hereunder shall be
produced in accordance with the rules and regulations of all unions having
jurisdiction. Those provisions of any
32
collective bargaining agreement between Company and any labor organization which
are required, by the terms of such agreement, to be included in this agreement
shall be deemed incorporated herein.
18. VIDEOS
(a) Company agrees to cause to be produced at least one (1) promotional
Video in connection with each Album constituting the Recording Commitment.
(b) With respect to any Videos requested by Company:
(i) The Master to be embodied in such Videos, the concept for such
Videos, the creative aspects of the production of such Videos (including,
without limitation, preparation of the script and story board), and the dates
and locations for the shooting of such Videos, shall be mutually selected by
you and Company; provided that, each Master released as the "A" side of a Single
shall be deemed mutually selected by you and Company for inclusion in a Video.
(ii) The director of such Videos shall be mutually selected by you
and Company and Company shall engage the other production personnel for such
Videos. Artist shall fully cooperate with the director and all other production
personnel in the production of such Videos. Company shall determine the budget
for each Video, in consultation with you, subject to the preceding sentence and
the terms of subparagraph 18(a).
(iii) Company shall pay all Video Production Costs incurred in
connection with such Videos consistent with a production budget approved by
Company in good faith consultation with you. All Video Production Costs in
excess of the approved budget that have been incurred due solely as a result of
your acts or omissions shall be your sole responsibility, (unless approved in
writing by Company), and you hereby agree to forthwith pay and discharge all
such excess costs. In the event that Company agrees to pay any such excess costs
on your behalf, you shall, upon demand reimburse Company for such excess costs
or, in lieu of requesting reimbursement, Company may deduct such excess costs
from all monies payable to you other than mechanical royalties under this
agreement. In the event that Artist fails to appear at locations and/or on dates
which have been mutually approved by you and Company, without reasonable excuse,
the costs of cancellation of the shoot shall be fully deductible from all monies
payable to you under this agreement to the extent, if any, that the video
production costs exceed the budget as a result thereof.
(iv) All Video Production Costs paid or incurred by Company shall
constitute Advances, fifty percent (50%) of which shall be recoupable from
royalties credited to your account pursuant to paragraph 9, and one hundred
percent (100%) of which shall be recoupable from royalties derived from the
commercial exploitation of Videos credited to your account pursuant to paragraph
18. Company shall not be entitled to recoup more than one hundred percent (100%)
of the Video Production Costs for any Video. This subparagraph is subject to
subparagraph 18(b)(iii).
(v) Company shall not, without your consent, require Artist to
perform for the making of a so-called "long-form" Video consisting of Videos of
various musical Compositions and Company shall not commercially release such
"long-form" Video in the United States during the Term. The term "long-form"
Video shall mean a full-length audio-visual program, as such term is generally
understood in the recording industry, but specifically excludes any compilation
of so-called "short form" or promotional Video. During the Term hereof Company
shall not commercially release audiovisual
33
material embodying Videos or portions thereof made hereunder together with other
audiovisual materials without your consent.
(c) With respect to Net Sales by Company of Audiovisual Records which
embody Videos, the royalty credited to your account hereunder shall be computed
in accordance with the provisions of paragraph 9, except that: (i) with respect
to Net Sales of Top Line Audiovisual Records in the United States through normal
retail channels, the Basic U.S. Rate shall be eighteen percent (18%); and (ii)
with respect to Net Sales of Top Line Audiovisual Records outside the United
Stated through normal retail channels, the Foreign Rate shall be fourteen
percent (14%). The Escalated U.S. Album Rate shall not apply.
(d) (i) The royalty rate for Videos, licensed by Company or a Principal
Licensee to a Person for use in the manufacture and distribution of Audiovisual
Records shall be fifty percent (50%) of Video Net Receipts solely attributable
to such Videos; provided that such credit to your royalty account shall not
exceed the same royalty amount that would otherwise be credited to your account
hereunder for such use if Company manufactured or distributed the Audiovisual
Record concerned.
(ii) The royalty rate for Videos licensed by Company or a Principal
Licensee to a Person for use in synchronization with theatrical motion pictures,
television programs, or radio or television commercials shall be fifty percent
(50%) of Video Net Receipts solely attributable to such Videos.
(e) Notwithstanding anything to the contrary in subparagraph 9(g), the
royalty rate on a Video which is coupled with videos by other artists on
Audiovisual Records shall in no event exceed the royalty rate that would apply
if such royalty were computed by apportionment based on the actual playing time
of each Recording embodied in the Audiovisual Record concerned.
(f) The terms of the following paragraphs of this agreement as same
specifically refer or logically relate to videos, are specifically incorporated
by reference into this paragraph 18, and shall apply to the exploitation of
Videos as if fully set forth herein: paragraph 5, subparagraph 6(c), paragraph
10, paragraph 15, paragraph 16, and paragraph 24.
(g) Notwithstanding anything to the contrary in this agreement as same
specifically refer or logically relate to videos, Company may reproduce on any
New Technology Configuration any Video without payment of a separate or
additional royalty for such use; the royalty to be credited to your Record
royalty account for Net Sales of such New Technology Configurations pursuant to
paragraph 9 shall cover the use of such Video.
19. BANKRUPTCY AND RELATED PROVISIONS
(a) Without limiting any other rights Company may have, if you file a
petition for relief under Title 11 of the United States Code (the "Bankruptcy
Code") or an order for relief is entered in respect of any petition filed
against you under the Bankruptcy Code and (i) you or a trustee of yours in a
case under the Bankruptcy Code fails to assume both this agreement and the
contract between you and Artist within sixty (60) days after the order for
relief, or (ii) the court having jurisdiction of the case under the Bankruptcy
Code determines that either this agreement or the contract between you and
Artist may not be assumed pursuant to Section 365 of the Bankruptcy Code, then
this agreement shall immediately terminate, and upon such termination, Artist
shall render Artist's personal services directly
34
to Company for the purposes of making Records upon the terms and conditions set
forth in subparagraph 19(c).
(b) Without limiting any other rights Company may have, if (i) you
consent, acquiesce or take any action in support of a petition filed by or
against you looking to reorganization, arrangement, readjustment, liquidation,
dissolution, or similar relief under any other present or future federal or
state statute, law or regulation, or there is appointed, with the consent of
you, any receiver, liquidator, custodian, assignee, trustee, sequestrator or
other similar official of you or of any substantial part of your property, or
you make an assignment for the benefit of creditors, or you admit in writing
your inability to pay your debts generally as they become due; or (ii) a decree
or order is entered by a court having competent jurisdiction in respect of any
petition filed or action taken against you looking to reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any other present or future federal or state statute, law or
regulation, resulting in the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of you or of any
substantial part of your property, or resulting in the winding-up or liquidation
of your affairs, and the continuance of any such decree or order is unstayed and
in effect for a period of thirty (30) consecutive days; or (iii) you shall lose
or fail to secure the exclusive rights to Artist's recording services or shall
otherwise fail to fulfill your material obligations under this agreement; then
at any time after the occurrence of any such event, Company shall have the
option, by notice in writing sent to you and Artist (at the same address as
you), to terminate this agreement and require that Artist render Artist's
personal services directly to Company for the purpose of making Records upon the
terms and conditions set forth in subparagraph 19(c). If Company exercises the
option to terminate in subparagraph 19(b) and/or exercises its option in
subparagraph 19(b) for Artist to render Artist's recording services directly to
Company, Company shall as to Albums delivered to Company after such termination
and/or option exercise: (1) As to record royalties, deposit all such royalties
otherwise due hereunder into an interest bearing escrow account; (2) As to
Recording Advances, Company shall administer all Recording Advances and shall
deposit any balance remaining from the applicable Recording Advance after paying
the Recording Costs of the applicable Album, into such escrow account.
As to any monies so deposited by Company into such escrow account, Company shall
not disburse any of such funds so held in such escrow account until so ordered
by a court order or pursuant to a written agreement entered into by you and
Artist relating to such funds held in escrow; except notwithstanding the
foregoing as to any monies held in escrow by Company for a period in excess of
two (2) years, Company may deposit such monies into an account administered by
the Clerk of the Supreme Court of New York County, New York.
As to any record royalties derived from Albums (and/or the Masters contained
therein) delivered to Company prior to such termination and/or option exercise,
Company shall continue to pay all such royalties to you.
(c) If this agreement terminates in accordance with subparagraph 19(a)
above or Company exercises the option set forth in subparagraph 19(b), Artist
shall render Artist's recording services directly to the Company for the
unexpired balance of the Term (as if the agreement had not been terminated),
including extensions thereof, upon all the same terms and conditions as are
herein contained.
(d) Without limiting any other rights you may have, if Company files a
petition for relief under Title 11 of the United States Code (the "Bankruptcy
Code") or an order for relief is entered in respect of any petition filed
against Company under the Bankruptcy Code and (i) Company or a trustee of
Company in a case under the Bankruptcy Code fails to assume both this agreement
and the Agreement between you and Artist referred to in the Artist Inducement
letter, attached hereto as Exhibit A, within sixty (60) days after the order for
relief, or (ii) the court having jurisdiction of the case under the Bankruptcy
Code determines that either this agreement and the Agreement between you and
Artist referred to in the Artist Inducement letter, attached hereto as Exhibit
A, may not be assumed pursuant to Section 365 of the Bankruptcy Code, then this
agreement shall immediately terminate.
35
20. GROUP PROVISIONS
(a) (i) You warrant, represent and agree that, for the Term, Artist will
perform together as a group (the "Group") for Company. If any individual
comprising Artist refuses, neglects or fails to perform together with the other
individuals comprising Artist in fulfillment of the obligations under this
agreement or leaves the Group, you shall give Company prompt written notice
thereof. Said individual shall remain bound by this agreement, including, but
not limited to, the provisions of subparagraph 20(b) herein or Company may, by
notice in writing, (A) terminate this agreement with respect to such individual
or (B) terminate this agreement in its entirety without any obligation as to
unrecorded or undelivered Masters.
(ii) The individual whose engagement is so terminated or who
refuses, neglects or fails to perform with the Group or who leaves the Group,
may not perform for others for the purpose of recording any Composition as to
which the applicable Re-recording Restriction has not yet expired. Any member of
Artist who refuses, neglects or fails to perform with the Group or who leaves
the Group shall not thereafter use the professional name of the Group in any
commercial or artistic endeavor; said professional name shall remain for all
purposes the property of those members of the Group who continue to perform
their obligations hereunder and whose engagements are not terminated.
(iii) Each person permanently added to Artist, as a replacement or
otherwise, shall become bound by the terms and conditions of this agreement and
shall execute this agreement and any other documents required by Company as a
condition precedent to being so added.
(iv) In the event that an individual engagement is terminated by
notice from Company, or by mutual consent, (A) each party shall be relieved and
discharged from liability for Masters unrecorded at the time of such notice or
mutual consent and (B) you will be solely responsible for and shall pay all
monies required to be paid to such individual whose engagement is so terminated
in connection with any Masters theretofore or thereafter Delivered under this
agreement for which royalties are payable to such individual and you will
indemnify and hold harmless Company against any claims relating thereto,
pursuant to the terms of subparagraph 15(b).
(b) In addition to the rights provided in the preceding subparagraph
20(a), Company shall have, and each individual member of the Group hereby grants
to Company, an irrevocable option for the individual and exclusive services of
each of the individuals comprising Artist for the purpose of making Records.
Said option may only be exercised with respect to such individuals who have left
the Group and shall be exercised by Company giving you notice in writing within
sixty (60) days after Company receives the notice provided for in subparagraph
20(a) to the effect that each such individual has refused, neglected or failed
to perform with the other individuals comprising Artist or that each such
individual has left the Group or that the Group has disbanded. Company shall be
deemed to have exercised said option with respect to such individual(s) unless
you serve written notice to Company that the time for exercising said option has
run. In the event that you serve notice that the time to exercise the option(s)
for the individual and exclusive services has run then Company shall have thirty
(30) days within which Company shall provide written notice of the exercise of
the option set forth herein. In the event of Company's exercise of such option,
you and each such individual shall be deemed to have entered into a new and
separate agreement with Company with respect to each such individual's exclusive
recording services upon all the terms and conditions of this agreement except
that:
36
(i) Company shall have the right to extend the term for option
periods so that Company shall have the right under such agreement to the same
number of Albums as Company then has rights or options for under this agreement.
(ii) Company shall pay a Recording Advance in respect of Masters to
be recorded by each such individual up to the amount of seventy-five percent
(75%) of the Recording Advance set forth in paragraph 7 for the immediately
preceding Album Delivered by Artist constituting the Recording Commitment, or if
Artist has not yet Delivered the First Album, of the Recording Advance for the
First Album. Each succeeding Recording Advance shall be at least seventy-five
percent (75%) of the minimum Recording Advance set forth in this agreement which
follows the Recording Advance on which the first Recording Advance to each such
individual concerned is computed;
(iii) Company's royalty obligation to you and Artist in respect of
Recordings by each such individual shall be the payment to you of the same Basic
U.S. Rate, Escalated U.S. Album Rate, and Foreign Rate as set forth in this
agreement, with royalties for all other uses (foreign sales, clubs, licensing,
etc.), calculated and reduced in the same manner as otherwise provided in
paragraph 9;
(iv) If your royalty account is in an unrecouped position at the
date of Company's exercise of its option for the individual concerned pursuant
to subparagraph 20(b)(ii), then the portion of such unrecouped balance
chargeable to your royalty account for such individual shall be determined by
multiplying such unrecouped balance by a fraction, the numerator of which shall
be one (1) and the denominator of which shall be the total number of royalty
artists constituting Artist (including such leaving individual as to whom
Company exercises its option), as of the date of Company's exercise of its
option.
(v) Recordings by such individual shall not be applied in diminution
of the Recording Commitment and Delivery obligations as set forth in paragraph
3.
21. ARTWORK
(a) You and/or Artist may, but are not obligated to, prepare and deliver
to Company, subject to approval by Company, the artwork for the album cover used
in connection with the release, during the Term, of each Album constituting the
Recording Commitment (hereinafter, the "Artwork") and any Greatest Hits Albums
during the Term, provided that:
(i) You deliver all such Artwork prepared by you and/or Artist,
together with all licenses and consents (if any) required in connection
therewith, to Company in New York City not less than sixty (60) days prior to
Company's projected release date for the Album. Time is of the essence of this
delivery obligation. Company shall advise you reasonably in advance of Company's
projected release date for each Album. If any of such material has not been
delivered to Company within the time prescribed herein (or if you have otherwise
advised Company that you and/or Artist do not intend to prepare and deliver
Artwork in respect of any specific Album), Company shall have the right to
prepare and use Company's own Artwork in good faith consultation with you.
Company shall not be obligated to make any such payments to you or any other
Person in connection with any Artwork produced by Company for the Album
concerned.
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(ii) You will deliver to Company, together with all such Artwork
produced by you and/or Artist, an itemized statement of your actual costs in
connection therewith. Following such delivery to Company and its acceptance of
such Artwork in accordance with this paragraph 21, Company shall reimburse you
in the amount of said costs, up to but not in excess of Ten Thousand Dollars
($10,000) with respect to each Album constituting the Recording Commitment,
excluding the cost of separations, which costs Company shall bear as a
non-recoupable expense. Unless Company specifically agrees in writing otherwise,
any costs incurred by you in excess of such said Ten Thousand Dollars ($10,000)
per Album and reimbursed by Company shall be recoupable against all royalties,
except mechanical royalties, payable hereunder.
(iii) The Artwork and all other related material delivered to
Company will be subject to mutual approval by Company and you. If Company
rejects any Artwork, Company shall notify you of the reason for such rejection,
and, if possible, recommend changes to the Artwork which might make it
acceptable, and you shall have the right to revise and resubmit it for Company's
approval, subject to all of the conditions above (including, without limitation,
the delivery deadline fixed in subparagraph 21(a)(i)), except that Company shall
have no obligation to make any payments in connection with the revising of the
Artwork in excess of the amount set forth in subparagraph 21(a)(ii) hereof.
(iv) All Artwork and related material delivered hereunder and all
rights therein shall be Company's property throughout the Territory in
perpetuity. All matters relating to Company's trademarks or any elements of the
album cover other than the Artwork shall be determined in Company's sole
discretion. Company shall have the right to affix to each record or container
hereunder an anti-counterfeiting or similar device which shall be determined in
Company's sole discretion. Company shall have the right to include or affix on
each record or container hereunder UPC bar coding. Artwork shall not be used in
connection with product, other than Records, provided however that Company may
use such Artwork in connection with the sale and promotion of Records including,
without limitation the distribution of promotional merchandise solely on a
gratis basis.
(v) No Artwork will be deemed delivered until accepted by Company
and all requirements hereof have been fulfilled; provided, however, the Artwork
should be deemed delivered and accepted by Company if the Artwork has been
utilized by Company on the applicable Album.
(b) You and/or Artist will not use or authorize the use of the Album cover
artwork or any other materials created by or furnished by Company or the
expenses of which are reimbursed to you by Company in connection with
merchandise of any sort, including, without limitation, in connection with
printed sheet music, unless you receive Company's prior written approval.
(c) In the event that:
(i) Company manufactures Album jackets (including any inserts or
other special elements or materials) for which the production costs (e.g.,
artwork production or origination costs, excluding costs of separations) exceed
Twelve Thousand Five Hundred Dollars ($12,500) solely as a result of materials
supplied by you, you shall pay Company, upon Company's request, an amount equal
to the amount of any such excess production costs;
(ii) If at your written request the tape inlay card for any Album
hereunder shall consist of more than five (5) panels, printed in four colors on
one side with the other side printed in one color ("Four Over One"), you shall
pay Company, upon Company's request, an amount equal to the
38
difference between the standard manufacturing costs for a tape inlay card of
five (5) panels printed Four Over One and the manufacturing costs for such tape
inlay card, times the number of such tape inlay cards manufactured; and/or
(iii) If at your written request the compact-disc liner notes
booklet shall consist of more than eight (8) pages, printed in four colors on
the outside cover of the booklet with the remaining pages printed in one color
("Four Over One"), you shall pay Company, upon Company's request, an amount
equal to the difference between the standard manufacturing costs `for a
compact-disc liner note booklet of eight (8) pages printed Four Over One and the
manufacturing costs for such compact-disc liner note booklet, times the number
of such compact-disc liner note booklets manufactured.
(iv) All sums for Album jackets, tape inlay cards and compact disc
liner notes booklets, which you are required to pay Company pursuant to
subparagraphs (i), (ii) and (iii) above are herein referred to as "Special
Packaging Costs".
(b) If you shall not promptly pay all Special Packaging Costs to Company,
Company shall the right to deduct from all monies other than mechanical
royalties payable to you under this agreement an amount equal to such Special
Packaging Costs.
22. INSURANCE
Company shall have the right to secure insurance with respect to Artist for
Company's own benefit. In this connection, Artist agrees to be available for one
(1) physical examination by a physician of your choice (who is acceptable to the
insurance carrier concerned) as and when reasonably requested to do so and to
complete such questionnaires and other documents which Company or any insurance
carrier may from time to time require in connection with securing and
maintaining such insurance. Company shall keep such information confidential,
except that Company may disclose such information solely to the applicable
insurance carrier(s). The failure by or inability of Artist to be insurable
shall not constitute a breach of this agreement. If Artist shall so request, in
writing, within sixty (60) days after the expiration of the Term of this
agreement, Company shall cancel any then existing insurance policy with respect
to Artist secured pursuant to this paragraph for Company's benefit.
23. ASSIGNMENT
Company shall have the right without your consent to assign this agreement in
whole or in part to BMG, any subsidiary, parent company, affiliate, or to any
third party acquiring a substantial portion of Company's assets or stock;
provided, however, that Company shall remain liable for all payments required to
be made to you hereunder. Neither you nor Artist shall have the right to assign
this agreement or any of your rights or obligations hereunder, except that you
may assign your right to receive royalties hereunder to an entity owned or
controlled by you and/or by all members of Artist.
24. DEFINITIONS
For the purposes of this agreement, the following definitions shall apply:
(a) "Advance": A prepayment of royalties. Company may recoup Advances from
record royalties to be paid or accrued to or on behalf of you or Artist pursuant
to this agreement. Advances
39
paid under paragraph 7 shall not be returnable to Company except as specifically
provided in this agreement. Mechanical royalties shall not be chargeable in
recoupment of any Advances. Notwithstanding anything to the contrary expressed
or implied elsewhere herein, nothing may be recouped, deducted, from or set-off
against mechanical royalties.
(b) "Album": A Record or a Multiple Record Set having no less than thirty
five (35) minutes of playing time, and which embodies at least, ten (10) Masters
of different Compositions sold in a single package.
(c) "Any other agreement": Any other agreement with Company relating to
Artist's Recordings or relating to Artist as a recording Artist or as a producer
of Recordings of Artist's own performances.
(d) "Audiovisual Record": A Record which embodies, reproduces, transmits
or communicates visual images, including, without limitation, any Video, but
excluding New Technology Configurations and Cybersales.
(e) "Books and Records": That portion of Company's books and records which
specifically reports: (i) sales and other distributions of Records embodying
Masters recorded hereunder; (ii) net royalty receipts or the net amount received
from any other exploitation of Masters hereunder; and (iii) Recording Costs
incurred in connection with Masters hereunder and any sums specifically charged
against royalties hereunder; provided that such defined term shall not be deemed
to include any manufacturing records (e.g., inventory and/or production records)
or any other of Company's records.
(f) "Budget Record": A Record which is sold by Company or its Principal
Licensee(s) at a price which is at least forty percent (40%) less than below
Company's or the applicable Principal Licensee's then-prevailing suggested
retail list price for Top Line Records, which price is consistently applied by
Company to such Records and which Records are sold by Company or its Principal
Licensee(s) as budget Records.
(g) "Club Operation": A business which is primarily engaged in the direct
marketing to consumers on a membership basis of audio and video products (for
example, Columbia House in the United States or Bertelsmann in Europe).
(h) "Commercially Satisfactory": Any Recording(s) required to be Delivered
hereunder shall not be considered satisfactory unless in Company's reasonably
applied business judgment: (i) it is technically satisfactory for Company's
requirements for the manufacture and sale of records; (ii) it embodies
performances by Artist that are "first class" (as the term is generally
understood in the record industry); and (iii) it is at least of the same
quality, and of a reasonably similar style of music, as Artist's recorded
performances of the immediately preceding Album previously released pursuant to
the terms of this agreement; provided, however, for the purpose of this
subparagraph (iii) only, in the case of the First Album, such Recording(s) shall
be of at least reasonably similar quality, and of the "same style" of music, as
Artist's LP entitled "Blessid Union Of Souls" submitted to, and reviewed by,
Company.
(i) "Composition": A musical composition or medley consisting of words
and/or music, or any dramatic material and bridging passages, whether in the
form of instrumental and/or vocal music, prose or otherwise, irrespective of
length.
40
(j) "Container Charge": The applicable percentage, specified below, of the
Gross Royalty Base (net of all taxes included in such Gross Royalty Base Price)
applicable to the Records concerned:
(i) Analog cassette tape - twenty percent (20%) of the Gross Royalty
Base.
(ii) Vinyl LP configuration-ten percent (10%) of the Gross Royalty
Base.
(iii) Records in the following configurations: compact disc,
Audiovisual Record, New Technology Configurations, Cybersales, and Records, (not
including vinyl singles)- twenty percent (20%) of the Gross Royalty Base. There
shall be no Container Charge for Records packaged in Company's stock paper
sleeves without inserts or special elements.
(k) "Delivery," "Deliver," and "Delivered": The actual receipt by Company
of a completed, fully-edited, mixed, DAT master or 1/2" analog tape, as
requested by Company of each Master comprising the applicable Recording
Commitment, approved by Company as Commercially Satisfactory, which tapes shall
in all respects be in the proper form for the production of the parts necessary
for the manufacture or creation of Records, together with Company's receipt of
all materials, consents, approvals, licenses and permissions in respect of each
such Master. Your Delivery obligation shall include all union session reports
and the delivery of a track-by-track list identifying the performers on each
Master and describing their performances and a fully completed "AFFILIATION
EXHIBIT" in the form annexed hereto. Each Master shall be subject to Company's
approval as Commercially Satisfactory, and shall not be deemed Delivered unless
and until such approval is given. Upon the request of Company, Artist shall
re-record any Composition until a Commercially Satisfactory Master shall have
been obtained. Only Masters Delivered in full compliance with the material
provisions of this agreement shall be applied in fulfillment of the Recording
Commitment and no payments shall be made to you in connection with any Masters
which are not in full compliance. Each Master shall be delivered to Company at
PUSH Records located at 00 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, New York,
10010, or such other place as Company may notify you in writing. For the
purposes of calculating the Term and any other time periods computed on the
basis of the date of Delivery of the applicable Album Recording Commitment
(other than for purposes of any payments under subparagraphs 7(a)(ii)(D),
7(a)(iii)(B), 7(a)(iii), 7(d)(ii)(D), Delivery shall be deemed to have occurred
upon the last day in which Company has accepted and approved as Commercially
Satisfactory hereunder all of the Masters constituting such Album of the
Recording Commitment. All Recordings of Artist's performances made during the
Term, including, without limitation, multi-tracks, session tapes, and outtakes,
but excluding Masters Delivered hereunder, shall be maintained in good condition
at a location selected or approved by Company and Company shall own such
Recordings as provided in paragraph 5 whether or not such Recordings are
Delivered to Company. Any payments made by Company following the physical
delivery of Masters herein but prior to Delivery shall not constitute a waiver
of your Delivery obligations hereunder or of Company's right to approve Masters
as Commercially Satisfactory. If you administer Recording Advances pursuant to
subparagraph 7(b)(i) and thus you are responsible for paying Recording Costs,
then Delivery shall not be deemed complete until: (1) you make all of the
payments referred to in subparagraph 7(b)(i); (2) you pay or furnish Company
with waivers of all other payments (except "per-record royalties") to which any
third party may become entitled and all other costs in connection with those
Recordings or their use in the manufacture and sale of Records; and (3) you
furnish Company with the name of each vocalist who may be a "covered artist"
under Appendix A to the American Federation of Television and Radio Artists
1993-1996 National Code of Fair Practice for Phonograph Recordings (or any
applicable successor agreement) and all required American Federation of
Television and Radio Artists forms, duly completed and executed. Your failure to
notify
41
Company of those vocalists shall constitute your warranty and representation
that no such "covered artist" rendered services in connection with the
Recordings.
(l) "EP": A Record embodying thereon four (4) to six (6) Masters.
(m) "Gross Receipts": All monies (including Advances other than
returnable Advances) actually received by Company in the United States, directly
from the applicable exploitation of Masters and/or Videos concerned. (For the
purposes of determining Gross Receipts, any royalties credited to Company's
account but charged in recoupment of a prior Advance made to Company and
retained by the payor by reason of that charge shall be deemed paid to Company
and received by Company when Company receives the accounting reflecting the
credit and charge concerned.) If any monies included in Gross Receipts is
attributable to a Master and/or Video hereunder and to other Recordings, the
amount of that item to be included in Gross Receipts hereunder shall be
reasonably apportioned. If a use of a Master and/or a Video on which a Net
Receipts royalty or a Video Net Receipts royalty is payable hereunder is made
by an affiliate of Company or by a joint venture as to which Company is a party,
Company's discretion in negotiating the amount of the compensation (if any) to
be paid or credited to Company for that use and included in Gross Receipts shall
be conclusive, provided that amount is fair and reasonable under the
circumstances. (The preceding sentence shall apply whether or not the user
derives revenues from the use, and the user's revenues shall not be deemed Gross
Receipts.) Any such amount shall be deemed fair and reasonable if it is
comparable to compensation then being negotiated by Company with unaffiliated
users for comparable uses, or if Company notifies you that it proposes to agree
to the amount concerned and you do not notify Company of your objection within
ten (10) business days. If you make any such objection you shall also notify
Company of your reasons therefor and shall negotiate with Company in good faith
to resolve the difference underlying such objection if Company so requests.
Notwithstanding the foregoing or anything to the contrary expressed or implied
elsewhere herein, with respect to receipts payable for sales through a Club
Operation, Gross Receipts shall specifically not include any profits received by
Company or any Principal Licensee as a joint venturer in such Club Operation
(e.g., The Columbia House Company).
(n) "Master": A Recording embodying a performance by Artist of a single
Composition, or a medley of Compositions, which consists of sound only and is
used or useful in the recording, production, manufacture, and/or exploitation of
Records.
(o) "Maxi-Single": A Record embodying thereon three (3) Masters.
(p) "Mid-Price Record": A Record which is sold by Company or its Principal
Licensee(s) at a price which is at least thirty percent (30%) less than
Company's or the applicable Principal Licensee's then-prevailing suggested
retail list price for Top Line Records and, which price is consistently applied
by Company to such Records and which Records are sold by Company or its
Principal Licensee(s) as mid-priced Records.
(q) "Multiple Record Set": Two or more Records packaged and/or marketed as
a single unit.
(r) "Net Receipts": Gross Receipts from the exploitation of Masters after
deduction by Company of all direct out-of-pocket expenses, taxes, included
therein, and adjustments incurred in the applicable exploitation of Masters
concerned, and/or in connection with the collection and receipt of those Gross
Receipts in the United States (including, without limitation, all copyright
payments, all re-use payments, all Trust Fund payments, and any other third
party payments and any legal fees incurred
42
in collecting such monies). If any item deducted from Gross Receipts in
determining Net Receipts is attributable to a Master hereunder and to other
Recordings, the amount of that item to be deducted in determining Net Receipts
hereunder shall be determined by reasonable apportionment.
(s) "Net Sales": One hundred percent (100%) of gross sales, less returns,
credits, and reserves against anticipated returns and credits.
(t) "Person": Any natural person, legal entity or other organized group of
persons or entities. (All pronouns, whether personal or impersonal, which refer
to Persons include natural persons and other Persons.)
(u) "Premium Record": A Record produced for use in promoting the sale of
merchandise other than Records, and which bears the name of the sponsor for whom
the Record is produced.
(v) "Principal Licensee": Company's licensee for the majority of Records
sold on behalf of Company in the territory concerned.
(w) "Record": any form of reproduction, distribution, transmission or
communication of Recordings now or hereafter known (including reproductions of
sound alone, or together with visual images) which is manufactured, distributed,
transmitted or communicated primarily for home use, institutional (e.g., library
or school) use, jukebox use, or use in means of transportation, including,
without limitation, any computer-assisted media (e.g., CD-ROM, DVD, CD Extra,
Enhanced CD) and Cybersales.
(x) "Recording": Any recording of sound, whether or not coupled with a
visual image, by any method and on any substance or material, whether now or
hereafter known, which is used or useful in the recording, production, and/or
manufacture of Records or for any other commercial exploitation of sound.
(y) "Recording Costs": Wages, fees, advances and payments of any nature
(other than royalties) to or in respect of all musicians, vocalists, conductors,
arrangers, orchestrators, engineers, producers, copyists, etc.; payments to a
trustee or fund based on wages to the extent required by any agreement between
Company and any labor organization or trustee; union session scale payable to
Artist; all studio, tape, editing, mixing, re-mixing, mastering and engineering
costs; authoring costs; all costs of travel by persons other than Company
employees, per diems, rehearsal halls, non-studio facilities and equipment,
dubdown, rental and transportation of instruments; all costs occasioned by the
cancellation of any scheduled recording session; and all other costs and
expenses incurred in the production, but not the manufacture, of Masters and
Records hereunder, and any Demos hereunder, which are then customarily
recognized as recording costs in the recording industry. Notwithstanding
anything to the contrary contained herein, any Recording Costs for all remixes
from any particular Album or single which are paid, incurred or reimbursed by
Company after Delivery of the Masters constituting the Album concerned shall be,
to the extent they are recoupable at all, be recoupable solely from royalties
(other than mechanical copyright royalties) payable to you hereunder and shall
not be recoupable from Advances. If Company furnishes any of its own facilities,
materials, services or equipment for which Company has a standard rate, the
amount of such standard rate or if there is no standard rate, the market value
for the services or thing furnished shall be deemed Recording Costs. Payments to
the AFM Special Payments Fund and the Music Performance Trust Fund based upon
record
43
sales (so-called "per-record royalties") shall not be recoupable from your
royalties or reimbursable by you.
(z) "Royalty Base Price": The amount specified below ("Gross Royalty
Base") applicable to the Record concerned, less the applicable Container Charge,
excise taxes, duties and other applicable taxes included within the Gross
Royalty Base:
(i) With respect to Records sold for distribution in United States,
the manufacturer's suggested retail price in the United States. Company may
elect, in Company's sole discretion, as of the date of commencement of any
accounting period hereunder (the "New Base Effective Date") to compute royalties
for Net Sales of Records (other than Audiovisual Records) in the United States
occurring on or after the New Base Effective Date (the "New Base Net-Sales")
utilizing a Royalty Base Price derived from the Wholesale Price of such Records
rather than the manufacturer's suggested retail price of such Records. Should
Company elect to do so, the following shall apply in computing royalties for New
Base Net Sales:
(A) The Gross Royalty Base shall be the Wholesale Price (as
defined in subparagraph 24 (hh)) rather than the manufacturer's suggested retail
price in the United States.
(B) New Basic U.S. Rates shall be determined for Singles,
Maxi-Singles. EPs and Albums in each form of Record other than New Technology
Configurations not previously released by Company and methods of Cybersales not
previously exploited by Company. The new Basic U.S. Rate for Singles,
Maxi-Singles, EPs and Albums in a particular form shall be determined by
multiplying the existing Basic U.S. Rate for such Records in such form by a
fraction, the numerator of which is the manufacturer's suggested retail price in
the United States for the majority of such Top Line Records in such form as of
the New Base Effective Date, and the denominator of which is the Wholesale Price
for the majority of such Top Line Records in such form as of the New Base
Effective Date. The New Basic U.S. Rates shall be utilized in lieu of the Basic
U.S. Rates to compute royalties for the New Base Net Sales and for no other
purpose. Notwithstanding the foregoing, on the date of the New Base Effective
Date only, the New Basic U.S. Rates when applied to the New Royalty Base Price
shall yield the same dollars-and-cents royalty amounts payable with respect to
Records immediately prior to the New Base Effective Date.
(C) In computing royalties for New Base Net Sales of New
Technology Configurations released prior to the New Base Effective Date, the
applicable New Basic U.S. Rate shall be reduced as set forth in subparagraph 9
(e) (ii).
(D) In computing royalties for New Base Net Sales through Cybersales, released
prior to the New Base Effective Date, the applicable New Basic U.S. Rate shall
be reduced as set forth in subparagraph 9 (f).
(ii) With respect to Records sold for distribution outside the
United States, the manufacturer's suggested retail price (or its equivalent
constructed price) in the country of manufacture or sale, as Company is paid,
provided that if a retail related base cannot be established in a particular
country, then the base shall be that amount equal to the lowest wholesale price
payable by the largest category of Company's customers in the normal course of
business with respect to such Records sold for distribution during the
applicable semi-annual accounting period, multiplied by one hundred twenty-six
44
percent (126%), provided, however, if a published price to dealers ("ppd")
exists in the applicable country of sale then Company may apply the ppd in lieu
of the lowest wholesale price.
(iii) With respect to Audiovisual Records, the amount which Company
receives for each Audiovisual Record from Company's distributor, whether or not
affiliated with Company.
(iv) Notwithstanding anything to the contrary expressed or implied
elsewhere herein, the Gross Royalty Base for any Record sold by Cybersales shall
be the price paid by the consumer to Company or its Principal Licensee(s), as
applicable, for the Record concerned.
(aa) "Single": A Record embodying thereon one (1) or two (2) Masters.
(bb) "Top Line Record": A Record bearing the same Gross Royalty Base as
the majority (or plurality) of the new Record releases in the same configuration
of Company's best selling artists.
(cc) "Territory": The world.
(dd) "USNRC Net Sales" - Net Sales of Top Line Records (other than
Audiovisual Records), on which royalties are payable, consisting entirely of
Masters recorded hereunder and sold by Company through normal retail channels in
the United States.
(ee) "Video": An audiovisual work featuring, primarily, the audio
soundtrack of one (1) or more Masters hereunder.
(ff) "Video Net Receipts": Gross Receipts from the exploitation of Videos,
after deduction by Company of all direct expenses, taxes included therein, and
adjustments incurred in connection with the Video Production Costs, the
acquisition of rights in the Video concerned, the applicable exploitation of the
Video concerned, and/or in connection with the collection and receipt of those
Gross Receipts in the United States (including, without limitation, all
copyright payments, all re-use payments under Company's agreements with the
American Federation of Musicians and any other third party payments and any
legal fees incurred in collecting such monies). If any item deducted from Gross
Receipts in determining Video Net Receipts is attributable to a Video hereunder
and to other Recordings or Videos, the amount of that item to be deducted in
determining Video Net Receipts hereunder shall be determined by reasonable
apportionment. Video Net Receipts shall be determined after deducting the
foregoing as well as after deducting a marketing and distribution fee equal to
ten percent (10%) of the applicable Gross Receipts in respect of any broadcast,
telecast, cablecast or other exploitation (excluding the sale of Audiovisual
Records).
(gg) "Video Production Costs": All amounts paid or incurred in connection
with the production, conversion and delivery of Videos. Video Production Costs
include, 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 to licensees, and all direct out-of-pocket costs (such as
for rights, artists (including Artist), producers and other personnel, travel
costs for persons other than Company employees, per-diems, facilities,
materials, services and use of equipment). If Company furnishes any of its own
facilities, materials, services or equipment for which Company has a standard
rate, the amount of such standard rate or if there is no standard rate, the
market value for the services or thing furnished shall be deemed Video
Production Costs. Notwithstanding the foregoing, mechanical royalties paid by
Company in respect of Videos shall not be included in Video Production Costs.
45
(hh) "Wholesale Price" - The amount which Company or Distributor charges
Customers for each Record in the United States, whether or not affiliated with
Company.
The following terms are defined elsewhere in this agreement as follows:
(A) [INTENTIONALLY OMITTED]
(B) "Basic U.S. Rate"- subparagraph 9(a).
(D) "Consumer Compilation" - subparagraph 6(c)(iii)(A).
(B) "Contract Period" - paragraph 2.
(F) "Controlled Composition" - subparagraph 12(a)(i).
(G) "Cybersales"- subparagraph 9(f).
(H) [INTENTIONALLY OMITTED]
(I) "Escalated U.S. Album Rate" - subparagraph 9(a)(ii).
(J) "Foreign Rate"- subparagraph 9(b).
(K) "Four Over One"- subparagraph 21(c).
(L) "Group" - subparagraph 20(a)(i).
(M) "Materials"- subparagraph 15 (a)(iv).
(N) "New Technology Configurations"- subparagraph 9(e)(ii).
(0) "Option Period"- paragraph 2.
(P) "Recording Advances" - subparagraph 7(b).
(Q) "Recording Commitment" - paragraph 3.
(R) "Re-recording Restriction" - subparagraph 1 5(a)(viii).
(S) "Sampled Material" - subparagraph 4(b).
(T) "Sampling" - subparagraph 4(b).
(U) "Special Packaging Costs" - subparagraph 21(c)(iv).
(V) "Staff Producer" - subparagraph 8(b).
46
(W) "Subject Masters" - subparagraph 13(d)(i).
(X) "Term" paragraph 2.
(Z) "U.S. Release Cure Period" - subparagraph 6(d).
(AA) "U. S. Release Deadline Period" - subparagraph 6(d).
25. MISCELLANEOUS
(a) This agreement sets forth the entire agreement between the parties
with respect to the subject matter hereof. No modification, amendment, waiver,
termination or discharge of this agreement shall be binding upon Company unless
confirmed by a written instrument signed by an authorized officer of Company, or
binding upon you unless confirmed by a written instrument signed by an
authorized officer of you. A waiver by either you or Company of any term or
condition of this agreement in any instance shall not be deemed or construed as
a waiver of such term or condition for the future, or of any subsequent breach
thereof. All rights, options and remedies in this agreement shall be cumulative
and none of them shall be in limitation of any other remedy, option or right
available to Company or to you. Should any provision of this agreement be
adjudicated by a court of competent jurisdiction as void, invalid or
inoperative, such decision shall not affect any other provision hereof, and the
remainder of this agreement shall be effective as though such void, invalid or
inoperative provision had not been contained herein. The headings of the
paragraphs hereof are for convenience only and shall not be deemed to limit or
in any way affect the scope, meaning or intent of this agreement or any portion
thereof. All accountings and royalties required herein, and all grants made
herein, shall survive and continue beyond the expiration or earlier termination
of this agreement. Neither party shall be entitled to recover damages or to
terminate the Term by reason of any breach by the other party of its material
obligations, unless the latter party has failed to remedy the breach within a
reasonable time following receipt of notice thereof. (The preceding sentence
shall not apply to any recovery to which Company may be entitled by reason of
your failure to fulfill the Recording Commitment hereunder.) If you claim that
additional monies are payable to you hereunder, Company shall not be deemed in
material breach of this agreement unless such claim is reduced to a final
judgment by a court of competent jurisdiction or is settled and Company fails to
pay you the amount thereof within thirty (30) days after Company receives notice
of the entry of such judgment or within thirty (30) days after such settlement,
as applicable. In entering into this agreement, and in providing services
pursuant hereto, you and Artist have and shall have the status of independent
contractors. Nothing herein contained shall contemplate or constitute you or the
Artist as Company's agents or employees, and nothing herein shall constitute a
partnership, joint venture or fiduciary relationship between you and Company.
(b) THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW
YORK AND ITS VALIDITY, CONSTRUCTION, PERFORMANCE AND BREACH SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE WHOLLY
PERFORMED THEREIN. YOU AGREE TO SUBMIT YOURSELF TO THE JURISDICTION OF THE
FEDERAL OR STATE COURTS LOCATED IN NEW YORK CITY IN ANY ACTION WHICH MAY ARISE
OUT OF THIS AGREEMENT AND SAID COURTS SHALL HAVE EXCLUSIVE JURISDICTION OVER ALL
47
DISPUTES BETWEEN COMPANY AND YOU OR BLESSED UNION OF SOULS PERTAINING TO THIS
AGREEMENT AND ALL MATTERS RELATED THERETO. IN THIS REGARD, ANY PROCESS IN ANY
ACTION OR PROCEEDING COMMENCED IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX ARISING
OUT OF ANY CLAIM, DISPUTE OR DISAGREEMENT UNDER THIS AGREEMENT MAY, AMONG OTHER
METHODS, BE SERVED UPON YOU BY DELIVERING OR MAILING THE SAME, VIA REGISTERED OR
CERTIFIED MAIL, ADDRESSED TO YOU AT THE ADDRESS PROVIDED HEREIN FOR NOTICES TO
YOU; ANY SUCH DELIVERY OR MAIL SERVICE SHALL BE DEEMED TO HAVE THE SAME FORCE
AND EFFECT AS PERSONAL SERVICE WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED
IN THIS SUBPARAGRAPH 25(b) SHALL PRECLUDE COMPANY FROM JOINING YOU OR BLESSED
UNION OF SOULS IN AN ACTION BROUGHT BY A THIRD PARTY AGAINST COMPANY IN ANY
JURISDICTION, ALTHOUGH COMPANY'S FAILURE TO JOIN YOU OR BLESSID UNION OF SOULS
IN ANY SUCH ACTION IN ONE INSTANCE SHALL NOT CONSTITUTE A WAIVER OF ANY OF
COMPANY'S RIGHTS WITH RESPECT THERETO, OR WITH RESPECT TO ANY SUBSEQUENT ACTION
BROUGHT BY A THIRD PARTY AGAINST COMPANY. NOTHING CONTAINED HEREIN SHALL
CONSTITUTE A WAIVER OF ANY OTHER REMEDIES AVAILABLE TO COMPANY.
(c) This agreement shall not become effective until executed by all
parties.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on the day
and year first above written.
PUSH RECORDS, INC.
By: /s/ [ILLEGIBLE]
-------------------------------------
------------------------------------- Legend Entertainment Corporation
Social Security Number:
By: /s/ [ILLEGIBLE]
-------------------------------------
-------------------------------------
Social Security Number: Tax id #: 00-0000000
-------------------------------
--------------------------------------
Social Security Number:
--------------------------------------
Social Security Number:
p/k/a "_______________________"
48
[ILLEGIBLE]
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GROUP INSTRUMENTS AFofM VOCALIST LEAD PUBLISHING PERFORMANCE
MEMBER PLAYED MEMBER AFTRA MEMBER SINGER COMPANY RIGHTS SOCIETY
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yes yes yes ASCAP
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no no no BMI
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GROUP INSTRUMENTS AFofM VOCALIST LEAD PUBLISHING PERFORMANCE
MEMBER PLAYED MEMBER AFTRA MEMBER SINGER COMPANY RIGHTS SOCIETY
--------------------------------------------------------------------------------------------------------------
yes yes yes ASCAP
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no no no BMI
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GROUP INSTRUMENTS AFofM VOCALIST LEAD PUBLISHING PERFORMANCE
MEMBER PLAYED MEMBER AFTRA MEMBER SINGER COMPANY RIGHTS SOCIETY
--------------------------------------------------------------------------------------------------------------
yes yes yes ASCAP
--------------------------------------------------------------------------------------------------------------
no no no BMI
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
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GROUP INSTRUMENTS AFofM VOCALIST LEAD PUBLISHING PERFORMANCE
MEMBER PLAYED MEMBER AFTRA MEMBER SINGER COMPANY RIGHTS SOCIETY
--------------------------------------------------------------------------------------------------------------
yes yes yes ASCAP
--------------------------------------------------------------------------------------------------------------
no no no BMI
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