Exhibit 10.34
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Confidential portions omitted and filed separately with the Commission. Deleted
text (represented by "XXXX" in the text and an asterisk in the margin) indicates
such omissions.
VERITAS MUSIC ENTERTAINMENT
Suite 500, Cummins Station
000 00xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Date: as of December 31, 1995
Ms. Xxxxxxxx Xxxxxx
0000 Xxxxx Xxxx
Xxxxxxxxxxxxxx, Xxxxxxxxx 00000
Dear Xx. Xxxxxx:
The following, when fully executed by both parties where indicated below,
shall constitute the agreement between Veritas Music Entertainment ("Company,"
"we," "us," etc.) and you with regard to your exclusive services as a recording
artist and musician:
1. Term.
A. The "Term" hereof shall consist of an "Initial Period" and so many
of the "Option Periods" below as may be exercised pursuant hereto.
B. The "Initial Period" shall commence on the date hereof and shall
end on the date eight (8) months after the commercial release of the LP
satisfying your recording commitment for the Initial Period or, at Company's
election, on the date during the Initial Period specified in Company's notice of
option exercise.
C. Subject to paragraph 5D below and conditioned upon the release of
the applicable LP in the Initial Period or prior Option Period as the case may
be, you grant us five (5) irrevocable options to extend the Initial Period for
additional contract periods (the "Option Periods") upon the same terms and
conditions applicable to the Initial Period, except as otherwise provided
herein. Notwithstanding the foregoing, Company's option at the end of the second
Option Period may only be exercised by Company if total sales units for the
third LP hereunder equal or exceed 250,000 USNRC units (excluding reserves of
twenty percent (20%) for purposes of this calculation only) unless you otherwise
waive such sales requirement. Each such Option Period shall run consecutively
beginning on the expiration of the Initial Period or the previous Option Period,
as the case may be. Each such Option Period shall end on the date eight (8)
months after the commercial release of the LP satisfying your recording
commitment for the Option Period in question or, at Company's election, on the
date during the Option Period specified in Company's notice of option
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exercise. The Initial Period and the Option Periods are sometimes referred to as
"Contract Period(s)."
Company shall exercise each such option by notice to you at any time prior to
the expiration of the then-current Contract Period.
2. Recording Services; Recording Commitment.
A. During the Term you will render your exclusive services to Company
as a recording artist and musician throughout the World.
B. During each Contract Period you shall perform for the recording of
and deliver a sufficient number of master recordings embodying your performances
(the "Masters") to comprise one LP (the "Recording Commitment"). On our
reasonable request and at our expense, which shall be recoupable under paragraph
8 below, you shall repeat your performances until, in our opinion, satisfactory
Masters have been produced. The Masters shall be deemed accepted if not rejected
by written notice from Company within fifteen (15) days after full delivery
hereunder.
C. Notwithstanding the provisions of paragraph 2A above, you may
perform as a background vocalist or instrumentalist accompanying a featured
artist for the purposes of making phonograph records for others, provided:
(1) You have fulfilled all of your obligations under this
agreement and such activity does not in any way interfere with the continuing
prompt performance of your obligations hereunder;
(2) You do not render a solo or "step-out" performance.
(3) The musical style of the recording shall not be substantially
similar to the characteristic musical style of recordings made by you hereunder;
(4) The compositions so recorded shall not have been recorded and
are not anticipated to be recorded by you hereunder.
(5) Your name may be used in connection with such records in the
form of a courtesy credit to Company on the Album liners used for such records,
in the same positions as the credits accorded to other sidemen and in type of
the same size and prominence; and,
(6) Except as expressly provided herein, neither your name nor
any name associated with you nor any picture, portrait or likeness of you shall
be used in connection with such recordings, including, without limitation, on
the front covers of Album containers, on sleeves or labels used for single
records, or
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in advertising, publicity or other form of promotion or exploitation
without Company's express written consent, which Company may withhold in its
unrestricted discretion.
3. Recording Guidelines.
A. You shall only schedule and conduct recording sessions after
requesting and receiving Company's written approval of the material to be
recorded, the studios for recording and mastering sessions, the musicians and
additional vocalists performing on the Masters, the individual producers and the
Authorized Budget. Such request shall be submitted to Company not less than
thirty (30) days prior to the proposed first date of recording. Xxxxx Xxxxxx is
deemed approved as the producer of the first LP hereunder.
B. Neither "live" performances, Multiple Albums, instrumental Masters
nor spoken-word Masters shall be recorded without your and Company's prior
written consent.
C. You shall deliver the LP due within each Contract Period within one
hundred fifty (150) days of the commencement of the period in question.
4. Recording Costs. Company shall be responsible for those recording costs
incurred in connection with the Masters which you and Company have mutually
approved in writing (the "Approved Budget"). Any recording budget not in excess
of $125,000.00 is deemed approved. Company shall not be deemed unreasonable for
refusing to approve any costs which are not submitted to Company in writing at
least thirty (30) days prior to commencement of the recording session in
question. Any costs in excess of the Approved Budget which were incurred for
reasons within your control shall constitute advances to you and shall be
recoupable from any and all royalties otherwise payable to you hereunder
(including, without limitation, mechanical royalties) or require you to repay
such costs immediately.
5. Rights in Masters.
A. All Masters, all duplicates and derivatives thereof, all records
made from the Masters (including the copyright in such Masters for the full term
of copyright and any renewal and/or extension of such copyright), together with
the performances embodied therein, shall, from the inception of recording, be
exclusively and perpetually Company's property, free of any claim whatsoever by
you and/or any person deriving any rights from you. Editing, modification,
resequencing and/or remixing of any Masters or portions thereof shall be subject
to your approval, not to be unreasonably withheld, with the exception of
resequencing necessary to conform to manufacturing requirements (including the
restrictions of manufacturing new mediums). All Masters, from the inception of
recording, shall be deemed works made for hire within
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the meaning of the United States Copyright Act. If any Masters do not so qualify
or are determined not to be works made for hire, you hereby assign and agree to
assign to Company, its successors and assigns, absolutely and forever, all
right, title and interest in such Masters, and the copyright in each of them,
for the full term of copyright (including all extensions and renewals of such
copyright) in each country of the world and, wherever applicable, elsewhere in
the universe. Without limiting the generality of the foregoing, Company and its
subsidiaries, affiliates, licensees and assigns shall have the sole, exclusive
and unlimited right throughout the universe to manufacture records by any
method(s) now or hereafter known embodying any portion(s) or all of the
performances embodied in the Masters recorded hereunder (including, without
limitation, "Best of" and "Greatest Hits" records); to perform publicly and to
permit public performance of such records; to repackage, sell, transfer, deal
in, exploit or otherwise dispose of such Masters and records (as well as
duplicates and derivatives of such Masters) at such times and places, in any and
all media and manner, and under any trademarks, trade names or labels which are
identified as Company's top "country" label; or, subject to the provisions
hereof, Company and its subsidiaries, affiliates, licensees and assigns may, at
their election, delay or refrain from doing any one or more of the foregoing.
Without limiting the generality of the foregoing, Company may use or license the
use of the Masters for synchronization in motion picture, television and other
audiovisual soundtracks, background music and any other purposes, including,
without limitation, use on transportation facilities.
B. Promptly upon Company's request, you shall execute and deliver to
Company any documents necessary for Company to secure copyright protection in
the Masters as Company may reasonably request, and you hereby appoint Company as
your attorney-in-fact to sign in your name any such documents which you have not
signed and delivered to Company within ten (10) days following Company's request
therefor, provided they are consistent with the terms of this agreement.
C. Nothing herein contained shall require Company to record the number
of Masters constituting your Recording Commitment hereunder for any given Option
Period. Company may, at its sole election exercisable at any time by notice to
you, fulfill its entire obligation to you with respect to such unrecorded sides
by paying to you with respect thereto a sum equal to one hundred percent (100%)
of the Minimum Advance otherwise payable to you in connection with that
particular album. Notwithstanding the above, in the event Company elects not to
record the number of Masters constituting your Recording Commitment in any given
Contract Period, you shall be entitled to retain any monies paid to you as
Advances under paragraph 6B(1) prior to Company's election. All such union
payments or other monies paid to you shall constitute advances recoupable from
any and all royalties (other than mechanical royalties) accruing to your credit
hereunder. The Term
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of this agreement shall terminate automatically in the event Company exercises
its rights pursuant to this subparagraph.
D. (1) Provided you have fulfilled all your material obligations under
this agreement, Company will release in the United States and Canada each LP
recorded in fulfillment of your Recording Commitment in the Initial Period and
each Option Period within seven (7) months after delivery of the Masters
concerned ("Release Period"). If Company fails to do so, you may notify Company
(the "First Notice") within ninety (90) days after the end of the Release Period
concerned that you intend to terminate the term of this agreement unless Company
releases the LP within thirty (30) days after Company's receipt of your notice
(the "cure period"). If Company fails to release the Single or LP before the end
of the cure period, you may terminate the term of this agreement by giving
Company notice (the "Termination Notice") within ninety (90) days after the end
of the cure period. On receipt by Company of your Termination Notice, the term
of this agreement will end and all parties will be deemed to have fulfilled
their obligations under it except those obligations which survive the end of the
term (e.g., warranties, re-recording restrictions and obligations to pay
royalties). Your only remedy for failure by Company to release a Record will be
in accordance with this paragraph. If you fail to give Company the notices
within the periods specified, your right to terminate as to that LP will lapse.
(2) The running of each of the Release Periods and notice periods
referred to in subparagraph 5D(1) will be suspended (and the expiration date of
each of those periods will be postponed) for the period of any suspension of the
running of the term of this agreement. If any such Release Periods or notice
periods would otherwise expire on a date between November 1 and the next January
16, its running will be suspended for the duration of the period between
November 1 and January 16, and its expiration date will be postponed by the same
amount of time (i.e., 77 days).
6. Artist Royalties and Advances. Conditioned upon your full and faithful
performance of all of the terms and provisions hereof:
A. Royalties: Company shall pay to you, in respect of Company's net
sales of phonograph records embodying, or other exploitation of, the Masters,
royalties upon the terms set forth in Exhibit A attached hereto and incorporated
herein by this reference. Such royalties shall be inclusive of all royalties and
other sums payable to any individual producer, remix producer or any other
royalty participant, except as otherwise specifically set forth herein.
B. Album Advances: Company shall pay you the following sums which
shall be deemed nonreturnable advances to you, recoupable from any royalties
(other than mechanical royalties)
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otherwise payable to you hereunder, and which shall be deemed a prepayment of
any minimum union scale payments required to be paid to you pursuant to the
terms of any collective bargaining agreement to which Company may be party:
* LP 1 XXXXX
Minimum Maximum
------- -------
* LP 2 XXXXX XXXXX
* LP 3 XXXXX XXXXX
* LP 4 XXXXX XXXXX
* LP 5 XXXXX XXXXX
* LP 6 XXXXX XXXXX
The actual amount of each advance for LPs 2 through 6 shall be calculated
based on a sales formula equal to 66-2/3% of your net royalties (less reserves
which for purposes of this calculation only shall not exceed 20%) with respect
to net sales through normal retail channels in the United States of the
immediately preceding album as of the date twelve (12) months from the date of
the initial U.S. release (determined by reference to Company's monthly trial
balance), less the amount of the approved recording costs for the LP in
question, as described in paragraph 4 above. One-half of the Minimum Advance
shall be paid upon Company's exercise of its option in each period and the
balance (as it is calculated pursuant to the above formula) shall be paid upon
the satisfactory delivery of the Masters for the LP in each period and payment
of all outstanding recording costs; with the exception that Company shall pay
one-half of the advance for LP 1 upon execution of this agreement. 1
C. At your request and authorization, Company will make payments for
services of one or more producers on your behalf, as follows:
(1) A royalty (the "Producer Royalty") on the net sales of
phonograph records (in all configurations) derived from the Masters and
embodying those Masters produced by such producer, computed and paid upon the
same royalty base and in the same manner as the royalty payable to you
hereunder, at the same times and subject to the same conditions, not to exceed
three percent (3%) of the Suggested Retail List Price of such records without
Company's consent with proportionate reductions on all sales for which reduced
royalties are payable to you under this agreement and proportionate reductions
with respect to records embodying both Masters and other masters. With respect
to sales or exploitation of the Masters on which your royalty is determined on
a basis other than the Suggested Retail List Price, the Producer's Royalty
shall be proportionately allocated. The amount of the Producer Royalty will be
deducted dollar-for-dollar from all royalties (other than mechanical
royalties) payable or becoming payable to you under this Agreement.
* - Confidential portions omitted and filed separately with the Commission.
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(2) The Producer Royalty will not be payable until Company has
recouped all Recording Costs attributable to the Masters under the Agreement.
Such recoupment will be computed at your net royalty rate as reduced to reflect
the deduction of all royalties payable to the subject producer(s) of Masters
under this agreement. After such recoupment, the Producer Royalty will be
computed retroactively and paid on all such records from the first record sold.
7. Accountings.
A. Royalties payable to you hereunder will be accrued and calculated
semiannually and paid, less all advances and any other charges incurred during
the accounting period in question by September 30 for the semiannual period
ending June 30 and by March 31 for the semiannual period ending December 31.
Company shall have the right, however, to establish reasonable reserves for
returns and exchanges (said reserves not to exceed 35% of units shipped,
exclusive of free goods). Such reserves shall be fully and equally liquidated
over the four (4) accounting periods subsequent to that in which the reserve is
taken.
B. Royalty payments hereunder shall be accompanied by a statement in
accordance with Company's regular accounting practices. Each statement shall
become conclusively binding on you, unless you shall advise Company in writing
of the specific basis of your objection within three (3) years after the date
Company mails such statements. No action, suit or proceeding shall be against
Company unless commenced against Company in a court of competent jurisdiction
within one (1) year after Company disallows in writing your specific written
objection. Company shall have no obligation to furnish statements after the
expiration of Term except in connection with royalties payable hereunder or at
your specific requests. Royalties accruing to your credit hereunder shall be
less whatever taxes the laws of any applicable jurisdiction require be withheld
in connection with such royalties.
C. You may, not more than once during any calendar year, but only once
with respect to any statement rendered hereunder, audit Company's books and
records for the purpose of determining the accuracy of statements rendered to
you. You shall not be entitled to examine any manufacturing records or any other
records which do not specifically report sales or other distribution of records
or calculation of net receipts on which royalties are accruable to your credit
hereunder. All audits shall be made during regular business hours upon thirty
(30) days' prior notice and shall be conducted on your behalf by an independent
Certified Public Accountant or attorney. Each examination shall be made at your
own expense at Company's regular place of business in the United States where
the books and records are maintained. In the event that, at the time of your
notice to Company of your intention to examine Company's books and records, the
certified public accountant designated by you is engaged in an outstanding
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examination of Company's books and records on behalf of another person, only the
period of time for commencement of an examination of Company's books and records
with respect to the statement as specified in this paragraph shall be extended
by the number of days such certified public accountant is unavailable to you due
to such engagement, but in no event longer than six (6) months.
8. Mechanical Royalties.
A. As used herein:
(1) "Controlled Composition" means that portion of a work which
is written by you and/or a producer of Masters hereunder ("Producer") or a work
which is owned or controlled by you and/or Producer or a work in which you
and/or Producer have (has) a direct or indirect interest in the income to be
derived therefrom or from the copyright thereof, whichever is greatest.
(2) "Statutory Rate" means, with respect to each musical work
recorded and embodied in a Master hereunder, the minimum fixed (without regard
to playing time) mechanical royalty rate in effect pursuant to the United States
Copyright Act or the Canadian Copyright Act or the generally accepted rate
negotiated by record companies and music publishers in Canada (as the context so
requires) at the date of first release of the Master in question and with
respect to Masters embodied in Greatest Hits LPs ("Greatest Hits Master"), the
date of release of the Greatest Hits LP embodying the Greatest Hits Master in
question.
B. (1) Company shall be responsible for the payment of mechanical
royalties directly to the copyright proprietors of the musical works embodied on
the Master Recordings hereunder. You agree to assist Company in entering into
mechanical licenses with such copyright proprietors, which licenses shall be
consistent with the terms and conditions hereof but which shall otherwise be in
the general form utilized by the Xxxxx Xxx Agency, Inc., or in the form
otherwise acceptable to Company.
(2) You warrant, represent and agree that Company shall receive,
with respect to all works embodied in all Masters hereunder, "first use"
mechanical licenses, as such term is understood in the record industry, on terms
no less favorable than those contained in the then-current standard mechanical
license form issued by The Xxxxx Xxx Agency.
C. With respect to Controlled Compositions licensed hereunder for the
United States, Company shall render quarterly statements and payments therefor
of all mechanical copyright royalties payable as set forth herein, within sixty
(60) days after the end of the applicable calendar quarters ending in March,
June, September and December (in accordance with Company's regular accounting
practices), for each quarter for which such
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royalties accrue pursuant to the terms hereof. Company shall have the right to
withhold a portion of such royalties as a reasonable reserve for returns and
exchanges, not to exceed thirty-five percent (35%) of such royalties. Such
reserves shall be fully and equally liquidated over the four (4) accounting
periods subsequent to that in which the reserve is taken. The provisions of
subparagraphs 7B and C above shall be applicable to accountings rendered
pursuant to this subparagraph 8C.
D. You agree to cause each Controlled Composition recorded hereunder
to be licensed to Company, for the United States and Canada, at the following
rates:
(1) With respect to Records sold in the United States or Canada
* through normal retail channels on Company's "top price line": XXXXXX of the
Statutory Rate, increasing prospectively on an album-by-album basis if and
when the LP in question attains top-line net sales through normal retail
channels in excess of the following:
Sales Rate
----- ----
* XXXXX XXXXX
* XXXXX XXXXX
(2) With respect to all other Records: one- half (1/2) of the
Statutory Rate.
E. Without limiting the foregoing, it is agreed that the maximum
copyright royalty which Company shall be required to pay in respect of a
Record embodying Master Recordings recorded hereunder shall be the aggregate
of (1) the number of Controlled Compositions on such Record times the
applicable rate described in subparagraph 8D above, and (2) the number of
works on such Record which are not Controlled Compositions times the minimum
statutory rate as determined in accordance with then-current variance applied
by The Xxxxx Xxx Agency; provided, however, that unless Company solely of its
own accord and without your consent embodies more than ten (10) Masters on an
LP, two (2) Masters on a single, or five (5) Masters on an EP, in no event
shall the aforesaid maximum copyright royalty exceed an overall limit of (i)
ten (10) times the statutory rate as determined in accordance with the
then-current variance applied by The Xxxxx Xxx Agency for an LP, (ii) two (2)
times the statutory rate as determined in accordance with the then-current
variance applied by The Xxxxx Xxx Agency for a Singles Record, or (iii) five
(5) times the statutory rate as determined in accordance with the then-current
variance applied by The Xxxxx Xxx Agency for an EP. Notwithstanding the
foregoing, if any LP attains top-line net sales through normal retail channels
in excess of 250,000 units or 500,000 units, the following maximum copyright
royalty limits shall apply:
Sales Maximum
----- -------
* - Confidential portions omitted and filed separately with the Commission.
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250,000 units 11 times statutory rate
500,000 units 12 times statutory rate
F. No mechanical royalty whatsoever shall be payable with respect to
Controlled Compositions for (1) Records cut out of the Company catalog and sold
as discontinued merchandise or Records sold as "scrap," "overstock" or
"surplus"; (2) any work which is non-musical; (3) Records distributed by Company
which are not "records sold" as defined in paragraph 21 below; provided,
however, that Company shall pay mechanical royalties on fifty percent (50%) of
records distributed by Company pursuant to paragraph 1D(3) of Exhibit A
hereunder; (4) any work which consists of an arrangement of a work in the public
domain; or (5) any more than one use of any work on a particular Record, except
that if any such Controlled Composition referred to in this subparagraph has a
new title, substantially different lyrics or a substantial addition of melodic
material, then the mechanical royalty rate for such Controlled Composition shall
be determined by multiplying the applicable mechanical royalty with respect to
such Controlled Composition by that percentage which is used by the applicable
performing rights society (ASCAP or BMI) in determining the credits to be given
the publisher of such Controlled Composition for public performances thereof and
further provided that you shall furnish Company with a copy of a letter or other
satisfactory evidence from the appropriate performing rights society setting
forth the said percentage. In the event you shall fail to provide Company with
such letter or satisfactory evidence of the percentage as aforesaid, then
Company shall not be obligated to pay any mechanical royalty whatsoever with
respect to such arranged material.
G. Without limiting Company's rights, if for any reason Company is
required to pay any mechanical royalties in excess of the limits specified in
this paragraph 8, you shall promptly reimburse Company for the excess or Company
shall have the right, in addition to any other remedies available to it, to
deduct such excess from any sums otherwise payable to you hereunder (including,
without limitation, mechanical royalties).
H. Company is hereby granted the right to reprint the lyrics of
Controlled Compositions on the jackets, sleeves or other packaging of Records
derived from Masters hereunder. Company shall provide appropriate copyright
notices and writer and publisher credits with respect to such reprinted lyrics.
I. Any assignment or other disposition of the rights in any Controlled
Composition shall be specifically made subject to Company's rights hereunder.
9. Name, Voice, Likeness and Biography.
You hereby grant to Company the exclusive right during the Term, and the
nonexclusive right thereafter, to use and to
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authorize other persons to use your name (including any professional name),
facsimile signature, voice, approved likeness, and approved biographical
material for purposes of advertising, promotion and trade in connection with the
making and exploitation of the Masters and records hereunder and in connection
with Company's institutional advertising. You acknowledge that in connection
with the approval of likenesses and biographical materials, time is of the
essence and you will reply within ten (10) business days from your receipt of
each such request for approval. If you fail to reply within that time period,
Company shall have the right to select and use such likenesses and biographical
materials as it determines in its sole discretion. You acknowledge that any and
all album or packaging artwork, logos, designs, trademarks and photographs
created by Company shall be exclusively and perpetually Company's property, free
of any claim whatsoever by you and/or any person deriving any rights from you.
Company will secure your approval (which shall not be unreasonably withheld)
regarding the proposed artwork and cover layout for each LP released hereunder
and pay all costs of preparing such artwork up to a maximum of $9,000.00 per
album, provided that all artwork costs in excess thereof resulting from special
artwork requested by you shall be recoupable from monies (other than
mechanicals) otherwise payable to you under this agreement unless specifically
agreed to by Company.
10. Re-recording Restrictions.
For a period of five (5) years following the delivery of any musical
composition embodied in a Master hereunder or two (2) years following the
expiration of the Term (one [1] year following the expiration of the Term with
respect to musical compositions which are as yet unreleased), whichever shall
expire later (the "Restriction Period"), you shall not, for the purpose of
making and/or exploiting master recordings or records, perform for any person
other than Company such musical composition recorded hereunder.
11. Marketing Restrictions.
During the term of this agreement, with respect to audio records
manufactured for sale in the United States, Company will not, without your
consent:
A. couple during any 1-year period more than two (2) Masters made
hereunder on any disc record with recordings not embodying your performances,
except promotional records, consumer compilation records (e.g., personics),
sampler-type records, and programs for use on public transportation carriers and
facilities;
B. allow any album to be sold as "mid-line" product less than the
earlier of nine (9) months after its release or three (3) months after the album
is no longer in the Top 50 of any Billboard chart, provided if the album does
not appear in the
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Billboard chart for the first six (6) months after release, then thereafter it
may be sold at mid-line prices; allow any album to be sold as "budget" product
less than the earlier of twelve (12) months after its release or three (3)
months after said album no longer appears in the Top 50 of any Billboard chart,
provided if the album does not appear in the Billboard chart for the first nine
(9) months after release, then thereafter it may be sold at budget prices; allow
any album to be sold as "cutout" product less than the earlier of twelve (12)
months after its release or three (3) months after said album no longer appears
in the Top 50 of any Billboard chart, provided if the album does not appear in
the Billboard chart for the first nine (9) months after release, then it may be
sold at cutout prices;
C. during or after the term use Masters made under this agreement on
premium records to promote the sale of any product or service other than
records;
D. during and after the term, release out-takes, i.e., Masters
recorded in connection with an LP project but not included on the record or
other records derived therefrom;
E. during or after the term shall not license Masters for use in any
NC-17 or X-rated films, commercial advertisements or advertisements related to
any political or religious causes.
12. Your Relationship to Company.
A. In performing your services and obligations hereunder you shall be
deemed to be an independent contractor, and nothing herein contained shall in
any way constitute you Company's agent or employee.
B. You shall cooperate fully with Company in connection with any
controversy or litigation which involves Company's rights under this agreement
and with Company's promotional and publicity efforts involving you and your
recordings hereunder, including appearances for press interviews and
photographs. Subject to your prior approval, not to be unreasonably withheld,
Company shall also have the right to record your personal appearances visually
on film, tape or other devices, subject to the provisions of any applicable
collective bargaining agreement to which Company is a party, for use in
promoting records embodying your performances, but not in connection with any
commercial use thereof.
13. Company's Rights and Remedies.
A. Your services are of special, unique, unusual and extraordinary
character which gives them a peculiar value, the loss of which cannot be
reasonably or adequately compensated for by damages in an action at law.
Inasmuch as any breach of this agree-
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ment with respect to such services would cause Company irreparable damage,
Company shall be entitled to seek injunctive and other equitable relief, in
addition to whatever legal remedies are available to Company, to prevent or cure
any such breach or threatened breach.
B. If, for any reason other than Company's hindrance without cause,
you materially breach this agreement, including, without limitation, your
failure to perform any of your material obligations hereunder, then, without
limiting Company's rights, Company may, at its election, by written notice to
you, suspend its obligations to you during the duration of such failure if such
breach is not cured within thirty (30) days of its written notice.
Notwithstanding the foregoing, no cure period shall apply to breach of the
exclusivity and timely delivery terms and provisions of this agreement. During
any such suspension (or within thirty [30] days after the end thereof), Company
shall have the right to terminate the Term by written notice to you. In the
event Company exercises such right of termination, all of Company's obligations
to you under this agreement (with the exception of Company's obligation to pay
royalties with respect to Masters exploited hereunder) shall be extinguished
without affecting Company's rights which would have survived the Term and any
rights Company may have had by reason of your failure to perform. For the
purposes of this subparagraph, your failure to perform will include, but will
not be limited to, any incapacity preventing you from fully performing in
accordance with the terms of this agreement by reason of illness, accident,
disfigurement, impairment of voice or mental or physical disability or a
material change in your facial or physical appearance or voice from that which
existed on the date of execution of this agreement. Without limiting the
generality of the foregoing, if, through no fault of Company, and for a reason
other than force majeure, Company is prevented from or materially hampered in
its ability to release or exploit records hereunder, Company shall have the
right by written notice to you to extend the expiration of the then applicable
Contract Period for a period of time equal to the period during which Company is
so prevented or hampered, not to exceed six (6) months.
C. Except as otherwise specifically provided herein, the rights and
remedies of each party to this agreement are not to the exclusion of each other
or of any other rights or remedies of each respective party; each party may
exercise or decline to exercise any one or more of its rights and remedies as it
may deem fit, without jeopardizing any of its other rights and remedies; and all
of each party's rights and remedies in connection with this agreement shall
survive the expiration of the Term.
D. During the term hereof, Company shall have the right, at its sole
expense, to purchase one or more insurance policies covering your life and/or
any disability suffered by you due to accident or sickness. Company shall be the
named owner and beneficiary of such policy or policies. You agree to make
yourself
13
reasonably available for any medical examinations required in connection with
the purchase of any such policies, and you will perform any other acts
reasonably necessary in order for Company to obtain such policies. You may, at
your discretion and expense, have your personal physician present at any such
medical examinations. If Company is unable to place such life and/or disability
insurance with an insurance company, then lack of insurability shall not
constitute a breach of this agreement hereunder.
14 Force Majeure. If by reason of act of God or force majeure, such as war,
fire, earthquake, strike, lockout, labor controversy, civil commotion, acts of
any government, its agencies or officers or any order, regulation or ruling
thereof, or action by any labor union or association of artists, musicians,
composers, employees or employers affecting Company or the record industry, or
the unavailability of or delays in the delivery of materials and supplies, or
similar or dissimilar matters beyond Company's control, Company is prevented
from or materially hampered in the recording, manufacture, distribution or sale
of records, Company shall have the right, by written notice to you and without
liability, to suspend Company's obligations hereunder and expiration of the
applicable Contract Period for the greater of six (6) months or such period of
time equal to the period of such suspension if such force majeure affects the
majority of the record industry. However, during any such suspension, Company
shall be obligated to continue to pay royalties to you pursuant to this
agreement unless the cause of such suspension shall affect Company's ability to
make such payments.
15. Audiovisual Works.
A. As used herein:
(1) "Video" means an audiovisual work embodying a recording of
one (1) or more musical works in synchronization with a visual rendition of your
performances and/or other performances and/or images.
(2) "Videogram" means a material object, including, without
limitation, tape, disc or film, embodying a Video or a compilation, collective
work or derivative work which embodies a Video together with other Video(s)
and/or other work(s) intended for home use, including, without limitation,
videocassettes and videodiscs.
(3) "Exhibition Copy" means a copy of a Video in any material
form including, without limitation, tape, disc or film, intended for non-home
use, including, without limitation, all video jukebox, television, theatrical
and non-theatrical distribution.
(4) "Production Costs" means all costs
14
incurred or expended in connection with the production and delivery of the final
master tape or film of Videos, including, without limitation, flat fee payments
to the publishers of musical works; unreimbursed costs and expenses incurred in
the duplication and delivery of copies of Videos (including, without limitation,
Exhibition Copies) for licensees; and all other costs and expenses (excluding
Company's overhead costs and services of Company employees) incurred with
respect to Videos.
B. From time to time during the Term, if Company shall so request and
subject to your reasonable prior professional commitments, you shall perform at
sessions for the purpose of embodying your performances on Videos. Your
performances under this subparagraph shall not fulfill any part of the Recording
Commitment for any Contract Period. Company will produce a minimum of one (1)
Video in connection with the release of each LP in fulfillment of your Recording
Commitment, provided that Videos continue to be a primary marketing tool in the
recording industry for the selling of country LPs.
C. If Company requests your performances pursuant hereto for the
production of Videos, the following shall be applicable:
(1) The material to be embodied in each Video; the concept for
each Video; the creative aspects of the production of each Video, including, but
not limited to, preparation of the script and "storyboard"; and the date(s) and
locations(s) for the shooting of each Video shall be mutually approved by
Company and you.
(2) The producer and director of each video shall be mutually
approved by you and Company. Company shall engage the producer, director and
other production personnel for each video and shall be responsible for the
production costs of each video in an amount not in excess of a budget to be
established in advance by mutual agreement of Company and you.
(3) You shall fully cooperate with the video producer, the
director and all other production personnel in the production of each Video. If,
for any reason other than Company's refusal without cause to allow you to
perform and other than a force majeure event or other reason beyond your
reasonable control, you shall fail to fulfill any obligations hereunder with
respect to any Video, then, without limitation of Company's rights, you shall be
responsible for the payment of all costs incurred in connection with such
failure. In the event that Company shall pay any costs for which you are
responsible pursuant to the foregoing, you shall promptly reimburse Company
therefore or Company shall have the right, without limiting its other rights, to
deduct same from any other sums otherwise payable to you hereunder (including,
without limitation, mechanical royalties).
15
D. (1) You agree that each Controlled Composition embodied in Videos
will be licensed to Company, effective as of the commencement of production of
the Video embodying each such Controlled Composition, for synchronization and
other uses on a nonexclusive, worldwide and perpetual basis:
(a) free of charge or royalty, for the purpose of reproducing
such Controlled Composition in Videos and Exhibition Copies and exhibiting,
duplicating, manufacturing and distributing copies of such Videos and Exhibition
Copies for all purposes, except as set forth in subparagraph 15D(1)(b) below;
and
(b) with respect to Videograms manufactured by Company and sold
and not returned or leased or rented by Company, for a royalty in an amount
equal to that proportion of four percent (4%) of the published wholesale price
to subdistributors as of the commencement of the accounting period concerned of
each such Videogram sold, leased or rented by Company which the aggregate
playing time of Controlled Compositions embodied in any such Videogram bears to
the total playing time of such Videogram, but in no event more than the
Statutory Rate (as such term is hereinabove defined) with respect to each such
Controlled Composition; and
(c) with respect to Videograms licensed by Company to others
(including without limitation entities affiliated with Company), or the
exploitation of Exhibition Copies, that proportion of fifteen percent (15%) of
Company's net receipts with respect thereto that the aggregate playing time of
Controlled Compositions embodied in such Videogram or Exhibition Copy bears to
the playing time of such Videogram or Exhibition Copy. As used in the foregoing
sentence, "net receipts" shall mean Company's gross receipts less actual
shipping charges and sales or similar taxes and, in the case of Exhibition
Copies, less twelve and one-half percent (12-1/2%) of those monies as a
distribution fee.
(2) Without limiting Company's rights, if, for any reason,
Company is required to pay to the publishers of Controlled Compositions any sums
in excess of the limits set forth in subparagraph 15D above, you shall promptly
reimburse Company for the excess and Company shall have the right, without
limiting its other rights, to deduct such excess from any other royalties,
excluding mechanicals, otherwise payable to you hereunder.
E. Each Video, including, but not limited to, all copyrights of any
nature whatsoever in and to each Video and each element or component part
thereof, excepting only the copyrights in the underlying musical works, shall be
the sole, exclusive and perpetual property of Company, free of any claim by you,
or by any Person deriving any rights from you. Company, its affiliates,
subsidiaries, licensees and assigns shall have the sole, exclusive and perpetual
right to: (1) exhibit, duplicate, manufacture, distribute and exploit by sale,
lease, license rental or any other
16
manner each Video (or any portion(s) thereof) and copies thereof for such
purposes, at such times and places, and in any and all media and manner,
including, but not limited to, "free," "pay," "public," "cable" and
"subscription" television, theatrical and non-theatrical distribution, as shall
be determined by Company, (2) manufacture and distribute Videograms and
Exhibition Copies, and (3) allow others to exercise any or all of the aforesaid
rights. Company shall have the right to cut and edit each Video (if necessary)
for the exploitation of such Video in different media.
F. You agree that during the Term, and (with respect to material
recorded hereunder) during the Restriction Period, you shall not render and
shall not have the right to render any performance (excluding solely non-musical
dramatic performances) for any Person other than Company in connection with the
creation and/or exploitation of Videos. You shall not have the right (and you
shall not have the right to authorize, permit or grant to any Person other than
Company the right) to manufacture and/or distribute Videograms embodying such
performances. During the term of this agreement, you may perform compositions
for televised broadcasts, provided that neither such performance nor any
recording thereof shall be used directly or indirectly for the purpose of making
phonorecords or any other device intended for home use, including, but not
limited to, audiovisual recordings.
16. Union Agreement. You warrant and represent that you are (or shall
become) and shall remain a member in good standing of any union with which
Company is party to a collective bargaining agreement so long as your services
hereunder are within the scope of such agreement.
17. Promotion of Records. Any promotional efforts or expenditures made by
you or any third party on your behalf in connection with any records hereunder
shall be in accordance with applicable legal standards, including Sections 317
and 507 of the Communications Act of 1934, as amended. In the event you are in
breach of the preceding sentence, Company may, without limiting its rights,
terminate the Term by notice to you.
* XXXXXX percent of all sums expended by Company in connection with
the independent promotion of records hereunder shall be deemed advances to
you, recoupable from any sums (other than mechanical royalties) otherwise
* payable to you hereunder up to a maximum amount of XXXXXX per "single" and
* XXXXXXX per LP.
18. Warranties and Representations; Indemnity.
A. You hereby warrant and represent that:
(1) You are possessed of the full right to enter into this
agreement, that you are and shall at all times remain possessed of all rights
necessary for you to completely fulfill all of your obligations hereunder, and
that your entering
* - Confidential portions omitted and filed separately with the Commission.
17
into this agreement and fulfilling such obligations does not and shall not
infringe upon the rights of any Person whatsoever.
(2) None of the Masters hereunder nor the performances embodied
therein, nor any other Materials (for the purpose of this paragraph only, as
hereinafter defined) nor any authorized use thereof by Company or its affiliates
or licensees will violate or infringe upon the rights of any third party. As
used herein, "Materials" means your name, all Controlled Compositions, and all
other musical, dramatic, artistic and literary materials, ideas and other
intellectual properties furnished or selected by you or Producer and contained
in or used in connection with Masters hereunder or the packaging, sale,
distribution, advertising, publicity or other exploitation thereof, except
noncontrolled compositions.
B. You hereby indemnify Company and hold Company harmless against any and
all losses and damages (including reasonable attorneys' fees) arising out of or
connected with any breach or alleged breach by you of any of your warranties,
representations, or covenants herein which is reduced to final judgments or
settled with your consent, not to be unreasonably withheld. You shall pay
Company on demand any sums for which you are liable hereunder, and if you fail
to do so, Company shall have the right to charge such sums against and/or deduct
such sums from any and all sums accruing to your credit hereunder or becoming
payable hereunder. Without limiting the generality of the foregoing, if any
claim, action or proceeding is made or brought against Company which is
inconsistent with any of your warranties or representations then (1) Company
shall give you prompt notice thereof and you shall have the right to participate
in the defense thereof at your expense, and (2) Company shall have the right to
withhold and reserve, from any sums whatsoever otherwise payable to you
hereunder (including mechanical royalties if any claim, action or proceeding is
made or brought against Company which is inconsistent with any of your
warranties or representations solely with respect to controlled Compositions),
sums reasonably sufficient to secure Company for your liabilities hereunder. If
such amount so withheld by Company exceeds the sum of Five Thousand Dollars
($5,000.00), Company will place such amount in an interest-bearing account.
Notwithstanding the foregoing, Company shall not withhold any monies as
aforesaid if you post a bond which has been reasonably approved by Company in
all respects (i.e., form, amount, duration, surety, etc.). If an action or
proceeding is not commenced and, in the judgment of Company's attorneys, will
not be commenced within twelve (12) months after Company receives written notice
of a claim in respect of which Company has withheld monies in accordance with
the terms hereof, Company will release any such previously withheld monies to
you upon my written request.
18
19. Miscellaneous.
A. This agreement sets forth the entire understanding between you and
Company with respect to its subject matter, and no modification of this
agreement shall be binding upon you or Company unless confirmed by a written
instrument signed by you and Company. No waiver of any provision of or default
under this agreement shall affect either party's right thereafter to enforce
such provision or to exercise any right or remedy in the event of any other
default, whether or not similar. This agreement shall be construed under the
internal laws of the state of Tennessee applicable to agreements to be performed
wholly therein and both parties agree that the state and federal courts located
in Davidson County, Tennessee shall have exclusive jurisdiction over any
controversies arising out of this agreement.
B. If any part of this agreement shall be determined to be invalid or
unenforceable by a court or other legally constituted body of competent
jurisdiction, the remainder of this agreement shall remain in full force and
effect, provided that the part of this agreement thus invalidated or declared
unenforceable is not essential to the intended operation of this agreement.
C. You shall not have the right to assign this agreement or any of
your rights hereunder, except the right to receive royalties or other sums.
Company may, at its election, assign this agreement, the Masters or any of its
rights hereunder to any parent company, subsidiary or affiliate of Company or
any person or entity acquiring all or a substantial portion of the assets of
Company.
D. The captions preceding the text of the various provisions of this
agreement are inserted solely for reference and shall not constitute a part of
this agreement nor affect its meaning, construction or effect.
20. Notices. All notices from one party to the other hereunder will, unless
herein indicated to the contrary, be addressed to the addresses of the parties
set forth on the first page hereof or to such other address as the addressee may
designate in writing. Courtesy copies of notices shall be sent as follows:
If to Company, to: Xxxxx Xxxxxxxx Xxxxx, Esquire
Xxxxx, Tarrant and Xxxxx
00 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
If to you, to: Xxxxxxx X. Xxxxx, Xx., Esquire
Loeb & Loeb
00 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
19
Any notice shall be sent either by certified or registered mail, return receipt
requested, or by personal delivery, or by overnight express courier and shall be
deemed served when same is deposited in the United States Mail or with any
overnight express courier addressed as aforesaid or personally delivered,
charges prepaid, as the case may be. Notices of change of address, however,
shall be effective only upon the date of receipt.
21. Definitions.
A. "Master recording" means the original material object in which
sounds, with or without visual images, are fixed by any method now known or
later developed and from which sounds, with or without visual images, can be
perceived, reproduced or otherwise communicated, either directly or with the aid
of a machine, device or process.
B. "Record" and "recording" mean any reproduction of a master
recording in any form now known or later developed in which sounds, with or
without visual images, are fixed by any method now known or later developed, and
from which sounds, with or without visual images, can be perceived, reproduced,
or otherwise communicated, either directly or with the aid of a machine, device
or process, and include the object in which sounds, with or without visual
images, are fixed, including, but not limited to, disc records, soundtracks,
film, tape, tape cartridges and cassettes.
C. "Material" means any work or series of musical, instrumental,
spoken or other sounds, in combination or otherwise, capable of fixation on a
record, whether dramatic, literary, musical or otherwise, and whether performed
vocally, instrumentally or otherwise, or in combination thereof.
D. "Side" means one (1) continuous performance of material, not
exceeding six (6) minutes of playing time.
E. "Delivery" as used with respect to the Masters means the thorough
and complete performance by you of all of your obligations hereunder with
respect to such Masters; the thorough and complete performance by the Producer
of all of his/her obligations with respect to such Masters; and the approval by
Company of such Masters.
F. "Singles record" means one (1) 7-inch 45 r.p.m. record (or the tape
or other equivalent thereof) or one (1) 12-inch 33-1/3 r.p.m. record (or the
tape or other equivalent thereof) containing not more than four (4) sides
thereon.
G. "Mini-LP" means one (1) 12-inch 33-1/3 r.p.m. record (or the tape
or other equivalent thereof) containing not less than five (5) nor more than
seven (7) sides thereon and totalling not less than twenty-two (22) minutes of
playing time (unless Company, in its discretion, agrees in writing that fewer
20
than twenty-two (22) minutes of playing time for a particular mini-LP is
acceptable).
H. "LP" or "album" means one (1) 12-inch 33-1/3 r.p.m. record (or
the tape or other equivalent thereof) containing not less than nine (9) nor
more than fourteen (14) sides thereon and totalling not less than thirty-five
(35) minutes of playing time (unless Company, in its discretion, agrees in
writing that fewer than thirty-five (35) minutes of playing time for a
particular LP is acceptable).
I. "Compact Disc" means a one hundred twenty millimeter (120mm)
diameter (or such other size) disc record primarily reproducing sound, the
signals of which are read from such disc by means of a laser beam.
J. "Multiple Album" means one (1) or more LPs packaged together by
Company for marketing as a single unit.
* K. "Records sold," "record sales" and "sales" mean XXXXXXXXX percent
of those records shipped by Company or under its authority hereunder for which
Company is paid and which are neither returned to nor exchanged by Company.
For the purpose of this subparagraph:
(1) If records are shipped subject to a discount or
merchandise plan, the number of such records deemed to have been shipped shall
be determined by reducing the number of records shipped by the percentage of
discount granted.
(3) If a discount is granted in the form of "free" or "bonus"
records, such "free" or "bonus" records shall not be deemed included in the
number of records sold.
L. If a discount is granted in the form of "free" or "bonus"
records, such "free" or "bonus" records shall not be deemed included in the
number of records sold.
M. "Person" and "party" mean any individual, corporation,
partnership, association or other organized group or combination of any or all
of the foregoing and their legal successors or representatives.
N. "Recording costs" shall refer to all direct costs incurred in the
production of Masters (with the exception of cutting the final lacquer
master), including, without limitation, all sums paid to the individual
producer(s), musicians, vocalists, conductor, arrangers, orchestrators,
copyists and engineers; transportation costs, hotel, living expenses and per
diems incurred in connection with the attendance of artists, the individual
producer(s), musicians and other essential personnel at recording sessions and
the preparation therefor; payments to a union or guild trustee or fund based
on services at recording sessions (and not
* - Confidential portions omitted and filed separately with the Commission.
21
based on sales of records hereunder); payments for studio or rehearsal hall
rental; payments for tape, editing, mastering, mixing and other similar
functions; reference dubs; equalizing time; and all other costs and expenses
incurred hereunder, which are now or hereafter generally recognized as recording
and mastering costs in the phonograph record industry.
O. "Sales through normal retail channels" means all sales of records
referred to in paragraphs 1A and 1C(8) of Exhibit A attached hereto.
22. Merchandising. If, at any time during the term of this agreement (and
each time any third-party merchandising agreement that you may enter into or
have entered into expires), you desire to grant to a third party the right to
manufacture and sell products that embody your name and/or likeness (such rights
being herein referred to as "Merchandising Rights"), then prior to commencing
negotiations with such third party with respect to such Merchandising rights,
you shall notify Company thereof. In the event that Company or one of its
affiliates is actively engaged in the business of merchandising at such time and
has the ability to offer services and standards comparable with those of other
merchandising companies employed by artists of similar stature, Company and you
shall promptly begin good faith negotiations regarding the material terms and
conditions of an agreement relating to such Merchandising Rights (a
"Merchandising Agreement"). If, after such good faith negotiations, Company and
you are unable to agree on the material terms of such Merchandising Agreement,
then you shall have the right to enter into a Merchandising Agreement with any
other party with respect to such Merchandising Rights provided that such third
party Merchandising Agreement does not contain any material terms less favorable
than those offered by Company.
By mutual written approval of the parties hereto in each instance which may
be withheld for any reason), Company and its licensees shall have the exclusive
right and may grant others the right to reproduce album and packaging artwork
and adaptations thereof, graphic and photographic materials used for marketing
or publicity of LPs hereunder, and any and all other designs, logos, trademarks,
or other materials owned or controlled by Company on merchandise of any kind;
provided, however, if Company receives any payment for any use of your name or
likeness in connection with merchandise other than records ("Merchandise Uses"),
your royalty account will be credited with fifty percent (50%) of Company's net
receipts from those Merchandise Uses. As used hereunder, "net receipts" shall
mean gross receipts after deduction of any direct expenses actually incurred by
Company in connection with Merchandise Uses and a fifteen percent (15%)
distribution fee.
23. Unreleased Recordings. Upon expiration or termination of this
agreement, you may purchase any LP Masters delivered but unreleased by paying to
Company, within ninety (90)
22
days of the effective expiration or termination date, a sum equal to one hundred
percent (100%) of the Recording Costs paid or payable by Company with respect
thereto, assuming all of Company's duties and obligations with respect to such
LP Masters and executing such documents as Company may reasonably request in
connection with such purchase.
24. Legal Counsel. YOU STIPULATE AND ACKNOWLEDGE THAT YOU HAVE BEEN
REPRESENTED BY AND HAVE RELIED UPON INDEPENDENT LEGAL COUNSEL OF YOUR OWN
CHOOSING IN THE NEGOTIATION OF THIS AGREEMENT OR THAT YOU HAVE KNOWINGLY AND
VOLUNTARILY WAIVED YOUR RIGHT TO DO SO.
If the foregoing accurately reflects your and our agreement as you
understand it, please indicate your acceptance where indicated below.
Sincerely yours,
VERITAS MUSIC ENTERTAINMENT
ACCEPTED AND AGREED TO:
By: /s/ Xxx X. Xxxxxx
----------------------------------------
An Authorized Signatory
/s/ Xxxxxxxx Xxxxxx
-----------------------------
XXXXXXXX XXXXXX
Social Security #
-------------
23
EXHIBIT A
Royalty Provisions
The following provisions constitute an integral part of the agreement
between VERITAS MUSIC ENTERTAINMENT ("Company") and XXXXXXXX XXXXXX ("you,"
"your," etc.) dated as of December 31, 1995 (the "Agreement").
1. Company agrees to pay to you an all-in royalty (which shall be
inclusive of any and all royalties payable to any producers or remixers of
* Masters) based on XXXXXXXX percent of the net sales of phonograph records
embodying Masters, computed on the suggested retail list price ("SRLP") of
such records (except as otherwise provided herein) as follows:
A. (1) With respect to sales of the following LPs through normal
retail channels in the United States ("USNRC"), a royalty at the following
rates (the "Base Album Royalty Rate"):
---------------------Units------------------------
* LP XXXX XXXX XXXX XXXX XXXX
* 1-2 XX XX XX XX XX
* 3 XX XX XX XX XX
* 4 XX XX XX XX XX
* 5 XX XX XX XX XX
* 6 XX XX XX XX XX
(2) With respect to records sold through USNRC in the form
* of singles records and mini-LPs, for LP 1-3 a royalty at the rate of XXXXX
* percent and for LPs 4-6 a royalty at the rate of XXXXXX percent (the "Base
Singles Royalty Rate").
B. With respect to records sold outside of the United States, a
royalty at the following percentages of the applicable base rate set forth in
paragraph 1A above:
* Canada XXX
United Kingdom, Germany,
Australia, New Zealand
* and EEC territories XXX
* France and Japan XXX
* All other territories XXX
Such royalties shall, at Company's election, be based upon the
suggested retail price of such records in either the country of manufacture or
the country of sale (exclusive of all
* - Confidential portions omitted and filed separately with the Commission.
24
taxes, duties, and amounts allocated by Company to containers or packaging)
and shall be computed in the national currency of such country. You shall be
paid at the same rate of exchange as Company is paid; provided, however, that
royalties on such sales shall not be due and payable until payment therefor
has been received by Company in the United States of America. Company may
elect to accept payment of royalties in a foreign currency, and, in such case,
Company may elect to deposit to your credit in a depository selected by
Company (and at your expense) any payments in such foreign currency received
as royalties applicable to this agreement and will notify you thereof
promptly. Deposit in accordance with the foregoing provisions shall fulfill
Company's obligations under this agreement as to record sales to which such
royalty payments are applicable. Except as otherwise specified, only records
for which payment is received by Company in the United States shall be deemed
sold. The royalties in this paragraph 1B shall be without regard to
escalations.
C. Notwithstanding any of the foregoing:
(1) the royalty rate on records sold in the United States
through any direct mail or mail order distribution method, including, without
limitation, record club distribution (Company shall use its best efforts in
* the negotiation of agreements with record club licenses to have at least XXXXX
percent of records distributed through record clubs deemed royalty bearing
* units), shall be at the rate of XXXXXX of the royalty provided for in
paragraph 1A above based upon the net price actually charged to the club
members or direct mail purchasers, and the royalty rate on records sold
outside the United States through any such direct mail distribution shall be
one-half (1/2) of the royalty rate provided for in paragraph 1B above based
upon the net price actually charged to the club members or direct mail
purchasers;
(2) the royalty rate in respect of records sold on a "price
line" or "list category" which is lower than Company's top "price line" or
* highest "list category" shall be XXXXX of the otherwise applicable royalty
rate as calculated in accordance with the foregoing provisions with respect to
* "Mid-Line Records" and XXXXXX of the otherwise applicable royalty rate as
calculated in accordance with the foregoing provisions with respect to
"Budget-Line Records". As used herein, Mid-Line Records shall mean a record
bearing a retail sales price in excess of sixty-five percent (65%) and equal
to or less than eighty percent (80%) of the highest retail sales price of
top-line records of the same type and in the same configuration in the
territory concerned. As used herein, Budget-Line Records shall mean a record
bearing a retail sales price in excess of fifty percent (50%) and equal to or
less than sixty-five percent (65%) of the highest retail sales price of
top-line records of the same type and in the same configuration in the
territory concerned.
* - Confidential portions omitted and filed separately with the Commission.
25
(3) the royalty rate in respect of records sold for use as
premiums or in connection with the sale, advertising or promotion of any other
* product or service shall be XXXXX of the otherwise applicable royalty rate as
calculated in accordance with the foregoing provisions and shall be based upon
the price received by Company for such records as to those sold by Company,
and as to those sold by Company's licensees, upon the lesser of (a) the
average applicable selling price actually charged for such records from time
to time to distributors in each country which are selling such records or (b)
the price utilized by Company's licensees in accounting to Company;
(4) the royalty rate in respect of records sold to the
United States government, its subdivisions, departments or agencies,
(including records sold for re-sale through military facilities shall be
three-fourths [3/4]), and in respect of records sold to educational
* institutions or libraries, shall be XXXXXX of the otherwise applicable royalty
rate as calculated in accordance with the foregoing provisions, except that
royalties for each such category of records may be based on the average
applicable retail selling price of records in such category only;
(5) the royalty rate in respect of the sale of compilation
records embodying one (1) or more Masters licensed by Company or Company's
licensees to others and distributed and sold other than through Company or
Company's such licensee's normal distribution channels (such as, but not
limited to compilation records sold primarily by means of concentrated
* broadcast advertising) shall be an amount equal XXXXX percent of any net
royalty received by Company from such sales, less the amount accruable to the
credit of the individual producer involved.
(6) the royalty rate in respect of Masters licensed by
Company or Company's licensees for use in synchronization with motion picture
or television soundtracks or other nonphonorecord uses not specifically
mentioned or referred to elsewhere in this agreement shall be an amount equal
* to XXXXXX percent of the net sums received in respect of each such use, less
the amount accruable to the credit of the individual producer, and such amount
shall be the only royalty payable hereunder with respect to flat-fee use of
the Masters; for purposes of this subparagraph, "net sums received" shall mean
the gross amounts received by Company in connection with the subject matter
hereof, less duplication costs and less Company's out-of-pocket costs and any
amounts which Company is obligated to pay to third parties (such as, without
limitation, mechanical copyright payments, AFM and other union fund payments);
and
(7) the royalty rate in respect of records sold via
television and/or radio advertisements through mail order or special retail
outlets (such as "K-Tel" type packages), by licensees of Company, shall be
* XXXXXXX of the net receipts received
* - Confidential portions omitted and filed separately with the Commission.
26
by the Company from its licensees, less the amount accruable to the credit of
the individual producer. Notwithstanding the foregoing, in the event that
Company shall sell records directly (and not through licensees) via television
and/or radio advertisements through mail or phone order in the United States,
* the royalty rate with respect to such records sold shall be XXXXXXX of the
otherwise applicable royalty rate as calculated in accordance with the
foregoing provisions, but based on the actual selling price of said records
less any taxes and shipping and handling charges included therein, and less
any amounts reasonably allocated by Company to the price of any merchandise or
other products not embodying Masters but which are included for said selling
price.
(8) With respect to net sales of records in the form of
Compact Discs, your royalty with respect to each such records shall be the
following percentages of the rate specified in paragraph 1A, including
escalations:
* LP 1 XXX
* LP 2 XXX
* LP 3 & 4 XXX
* LP 5 & 6 XXXX
With respect to new mediums (all configurations other than
cassette, CD and vinyl), your royalty with respect to each such record shall
* be XXXXXXXX percent of the otherwise applicable royalty rate; provided,
however, that Company shall renegotiate this royalty in good faith promptly
following the period three (3) years after the introduction of each such new
medium into the marketplace and shall continue to have the right to sell such
new medium LPs at the current rate throughout the renegotiation period. In the
event Company agrees to pay a majority of the other feature artists under
contract to Company a royalty rate on new mediums which is higher than the
royalty rate payable to you pursuant to this paragraph, your royalty rate for
new mediums will be deemed automatically increased to such higher royalty
rate, and all royalty calculations and payments to you hereunder for new
mediums will be paid at such higher rate.
D. Notwithstanding anything herein to the contrary, no royalties
shall be payable in respect of:
(1) a reasonable number of records furnished on a no-charge
basis or sold for less than fifty percent (50%) of Company's (or its
licensee's) posted wholesale list price to disc jockeys, publishers, employees
of Company (or its licensees), motion picture companies, radio and television
stations, and other customary recipients of free, discounted or promotional
records;
(2) records sold by Company (or its licensees) at close-out
or cut-out prices or for scrap (i.e., scrap shall mean
* - Confidential portions omitted and filed separately with the Commission.
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a sale to a third party for purposes of utilizing the raw material of which
the records are made), or at less than Company's (or its licensees') inventory
cost;
(3) records (or fractions thereof) given away or shipped on
a so-called "no-charge" or "freebie" basis or sold for fifty percent (50%) or
less of Company's posted wholesale list price to distributors,
subdistributors, dealers and others whether or not such records are intended
for sale to third parties; provided, however, that records under this
paragraph 1D(3) shall not exceed fifteen percent (15%) of the aggregate units
of each LP shipped.
E. Notwithstanding anything to the contrary contained herein, the
following shall be excluded from the base against which the applicable royalty
rate is to be applied:
(1) all sales, use, excise, transactional, V.A.T. and other
similar taxes included in the retail or other applicable price of records;
(2) in the case of records sold in or with jackets,
cartridges, cassettes, boxes, reels or other devices or containers, an amount
* equal to XXXXXXX percent of the SRLP for single-pocket albums, 7-inch single
* records in special sleeves, and 12-inch single records, XXXXXX percent thereof
for multi-fold albums or albums with cardboard sleeves or special inserts or
* attachments and analog tape cassettes; and XXXXXXX percent thereof for records
in the form of Compact Discs or new or any other configurations or Videos.
F. The royalty rate payable to you hereunder with respect to
phonograph records embodying Masters hereunder together with other master
recordings shall be computed by multiplying the otherwise applicable royalty
rate by a fraction, the numerator of which shall be the number of Masters
recorded by you hereunder which are embodied thereon, and the denominator of
which shall be the total number of royalty-bearing master recordings embodied
thereon;
G. Any monies payable to you hereunder with respect to any Master
recorded hereunder by you jointly with any other artist or musician to whom
Company is obligated to pay or credit a royalty in respect of such Master
shall be computed by multiplying the otherwise applicable sums by a fraction,
the numerator of which shall be one (1) and the denominator of which shall be
the sum of one (1) and the total number of such other artists (a group signed
as a single artist to a recording contract with Company or other record label
shall be deemed to be one artist for the purposes of this paragraph) or
musicians whose performances are embodied thereon, and Company will negotiate
with you in good
* - Confidential portions omitted and filed separately with the Commission.
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faith to determine the portion of recording costs which shall be attributable
to such Master hereunder and which thus shall be recoupable from royalties
otherwise payable to you;
H. The royalty rate applicable to a given Master shall be the net
rate specified for the Contract Period in which said Master was initially
required to be recorded hereunder pursuant to the terms and provisions hereof;
the royalty rate applicable to a "Greatest Hits" album shall be the highest
rate achieved as of the release of such "Greatest Hits" album on a
master-by-master basis;
* I. Company shall pay to you a royalty equal to XXXXXX of Company's
net receipts, if any, which are specifically referable (in reports to Company)
for United States public performances of Masters less any portion thereof
which is payable by Company to producers with respect to such public
performance; provided that if you receive payment in respect thereof from a
third party, Company shall pay you such amount as shall provide you with a
* total (including the share from third parties) equal to XXXXXXX of the
aggregate amount paid to Company, you and any individual producers.
2. A. (1) For purposes of this paragraph 2 only, the account created by
Company with respect to royalties accruing to your credit under paragraph 1
above shall be referred to as the "Audio Account."
(2) Company shall create a separate account with respect to
revenues derived from the exploitation of and costs incurred in connection
with the production of Videos (the "Video Account") and, except as provided in
subparagraph 2B(1) below, the Video Account shall not be cross-collateralized
with the Audio Account.
B. (1) Company shall charge the Production Costs to the Video Account
but, at its election, may at any time transfer and charge to the Audio Account
up to fifty percent (50%) of such Production Costs and may recoup the
transferred Production Costs from any and all royalties accruing to the Audio
Account. If any Production Costs are recouped from royalties accruing to the
Audio Account and are subsequently recouped from royalties accruing to the
Video Account, the amount of such Production Costs shall be recredited to the
Audio Account.
(2) With respect to sales of Videograms by Company, the
royalty accruing to the Video Account hereunder shall be computed in
accordance with the provisions of paragraph 1 above, except that with respect
* to sales of Videograms in the United States, the royalty rate shall be XXXXXXX
percent and with respect to sales of Videograms outside the United States, the
* royalty rate shall be XXXXXXX percent. For the purposes hereof, the royalty
* - Confidential portions omitted and filed separately with the Commission.
29
base of such Videograms shall be Company's published wholesale price to
subdistributors of such Videograms as of the commencement of the accounting
periods concerned, less container deductions and any taxes. Said royalty shall
be inclusive of any third party payments required to be made by Company in
connection with the manufacture and exploitation of Videograms and Exhibition
Copies other than payments to music publishers.
C. (1) With respect to (a) Videos licensed by Company to others
(including, without limitation, entities affiliated with Company) on a flat fee
or royalty basis for the manufacture and sale of Videograms of (b) the
exploitation of Exhibition Copies, the royalty accruing to the Video Account
hereunder shall be an amount equal to fifty percent (50%) of the Net Royalty or
Net Flat Fee from the sale of such Videograms or exploitation of such Exhibition
Copies. Said royalty shall be inclusive of any third party payments required to
be made by Company in connection with the manufacture and sale of Videograms and
Exhibition Copies other than payments to music publishers.
(2) As used in subparagraph 2C(1) above, the terms "Net Royalty"
or "Net Flat Fee" shall mean an amount equal to the royalty or flat fee, as the
case may be, received by Company from a third party as a result of the
exploitation by that third party of those Videograms and Exhibition Copies (and
in the case of Exhibition Copies, less ten percent (10%) of those monies as a
distribution fee).
D. With respect to any Videogram or Exhibition Copy which embodies a
Video, in whole or in part, coupled with other Videos and/or other audiovisual
works, royalties accruing to the Video Account hereunder attributable to such
Video shall be at that proportion of the applicable royalty which the playing
time of such Video, as embodied in such Videogram or Exhibition Copy (as
applicable) bears to the aggregate playing time of such Videogram or Exhibition
Copy (as applicable).
E. Royalties with respect to Videos earned hereunder will be accrued,
in accordance with Company's regular accounting practices, semi-annually to the
Video Account in the manner set forth above, and such royalties shall be paid,
less all advances and any charges, in accordance with the provisions of
paragraph 7 of the Agreement and accompanied by royalty accounting statements in
accordance with the provisions of paragraph 7 of the Agreement; provided that
Company shall have no obligation to furnish statements with respect of any
semiannual period after the expiration of the term hereof in which no payments
are due pursuant to this subparagraph unless specifically requested by you.
Company shall have the right to establish reasonable reserves (upon same terms
as set forth in paragraph 7A above) for returns and exchanges which shall be
fully and equally liquidated over the four (4)
30
accounting periods subsequent to that in which the account is taken.
3. No royalties shall be payable to you unless and until your Audio Account
or Video Account, as the case may be, is in a "recouped position" (i.e., Company
has recouped from royalties otherwise payable hereunder, in accordance with the
Agreement, all recoupable recording costs, video costs, independent promotion
and deficit tour support, advances, expenses, and other charges incurred or
borne by Company under the Agreement which are recoupable in accordance with the
terms and conditions thereof). If, at your request or with your approval or
consent, Company makes payment to you or any person or entity on your behalf or
for your benefit of amounts not provided for in the Agreement (which Company is
in no way obligated to do), such payments shall be deemed advances and shall
also be recoupable, as aforesaid, unless Company agrees otherwise in writing.
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