Agreement made and entered into as this _________ day of ___________, 1994, by and between RECORDS, INC. (d/b/a Records) ("Company") whose address is: and ______________________________________________________________, individually and collectively, and professionally known as _______________________________ ("Artist") whose address is: _________________________________________
1. (a) Company hereby engages Artist to perform recording services exclusively to Company. Artist will appear at one or more recording sessions designated by Company and render all services necessary to record and re-record master recordings (sometimes called "Masters") embodying the performances of Artist.
(b) The rights herein granted to Company and the obligations of Artist shall be for the world ("Territory").
2. (a) The Term of this Agreement shall consist of an initial period (the "First Contract Period") which shall commence on the date hereof and shall continue for a period of one (1) year or until six (6) months following the completion of Artist's "Recording Commitment" (as hereinafter defined), whichever is later.
(b) Artist hereby grants to Company five (5) separate and consecutive options to extend the Term for periods ("Option Periods" or "Contract Periods"), each to commence upon the expiration of the immediately preceding Period and continue until the later of one (1) year from commencement of such Period or until six (6) months following the completion of Artist's Recording Commitment for that Contract Period. Each option shall be deemed exercised, when the Company sends written notice to the Artist prior to the date the Term would otherwise expire.
3. (a) During each Contract Period, Artist shall record, produce and deliver to Company that minimum number of Masters embodying the performances of Artist to constitute one (1) "Album" (as hereinafter defined). Such Album(s), if any, are sometimes herein called the "First Album," "Second Album," "Third Album," "Fourth Album," "Fifth Album," and "Sixth Album" respectively, in order of their delivery to Company.
(b) The minimum number of Masters to be delivered in each Contract Period shall sometimes be referred to as the "Recording Commitment."
(c) In respect of each Contract Period, Artist shall deliver the Recording Commitment as follows:
(i) The entire Recording Commitment shall be delivered by Artist within five (5) months following the commencement of the applicable Period; and
(ii) Artist shall not deliver any Album within nine (9) months from the date of delivery of a prior Album, and Artist shall not commence recording any Album prior to ninety (90) days after the delivery to Company of a prior Album. Artist shall not record or deliver a Multiple Album without Company's prior written consent, which may be withheld in Company's sole discretion.
4. (a) The Masters recorded hereunder by Artist shall be recorded in a recording studio selected or approved by Company at such times as Company may designate or approve. Each Master delivered hereunder shall consist of Artist's newly recorded studio performances of material mutually selected by Company and Artist, and not previously recorded by Artist. Each Master shall be subject to Company's approval as technically and commercially satisfactory. Upon the request of Company, Artist shall re-record any selection until a technically and commercially satisfactory Master shall have been obtained.
(b) Company shall determine the recording budget for each of the Masters to be produced hereunder. Company shall pay all recording costs, and the amounts paid by Company shall be deemed advances against and shall be recouped from all royalties including mechanical royalties becoming payable to Artist under this Agreement or any other agreement between Artist and Company. If the recording costs exceed the approved budget because of Artist's actions or failure to appear or otherwise, Artist shall be solely responsible for and shall pay all of such excess recording costs upon Company's request. If Artist does not pay any or all of such excess recording costs as aforesaid, Company shall have the right to deduct any amounts so owing from any Advances or royalties payable to Artist under this Agreement or any other agreement between Artist and Company.
(c) Each Master subject hereto shall be produced by a producer ("Producer") mutually selected by Company and Artist (neither party shall unreasonably withhold approval of the Producer). Company shall pay royalties to the Producer(s) and deduct such amounts from the royalties payable to Artist.
5. Artist warrants and agrees that:
(a) During the Term, Artist shall not perform for the purpose of making records for anyone other than Company and shall not authorize the use of Artist's name, likeness, or other identification for the purpose of distributing, selling, advertising or exploiting records in the Territory for anyone other than Company.
(b) Artist shall not perform any selection recorded hereunder for the purpose of making records for anyone other than Company (i) for a period of five (5) years after the initial date of release of the respective record containing such selection or (ii) for a period of two (2) years after the expiration or other termination of this Agreement, whichever is later ("Re-recording Restriction").
(c) Should Artist make any sound recording during the Term for motion pictures, television, electrical transcriptions or any other medium or should Artist after the Term perform for any such purpose any selection recorded hereunder to which the Re-recording Restriction then applies, Artist will do so only pursuant to a written agreement prohibiting the use of such recordings, directly or indirectly, for record purposes. Artist shall furnish to Company a copy of the provisions of any such contract relating to the foregoing.
6. All Masters recorded by Artist 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 for the Territory free from any claims whatsoever by Artist or any person deriving any rights or interest from Artist. Without limiting the generality of the foregoing, Company and its designee(s) 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:
(a) To manufacture, advertise, sell, lease, license, distribute or otherwise use or dispose of, in any or all fields of use by any method now or hereafter known, records embodying the Masters, all upon such terms and conditions as Company may elect, or at its discretion, to refrain therefrom.
(b) To use and publish, and to permit others to use and publish, Artist's name (including any professional name heretofore or hereafter adopted by Artist), photographs, portrait, likeness, and biographical material concerning Artist for advertising and trade purposes in connection with all Masters recorded by Artist and all Pictures produced during the Term.
(c) To obtain copyrights and renewals thereof in sound recordings (as distinguished from the musical compositions embodied thereof) recorded by Artist during the Term, in Company's name as owner and employer-for-hire of such sound recordings; if for any reason Company is not considered the "employer-for-hire" of any recordings, then Artist hereby irrevocably assigns such copyrights and renewals to Company.
(d) To release records embodying the performances to be recorded hereunder under any name, trademark or label which Company or its subsidiaries, affiliates or licensees may from time to time elect.
(e) To perform the records publicly and to permit public performances thereof by means of radio broadcast, television or other method now or hereafter known.
7. Company shall pay to Artist the following sums, each of which shall be an advance ("Advance") against and recoupable by Company out of all royalties (other than mechanical or other music publishing royalties) becoming payable to Artist pursuant to this Agreement:
(a) In connection with the first Album hereunder, the sum of _________________________ payable as follows:
(i) ______________ Dollars ($______) upon the complete execution of this Agreement;
(ii) _____________ Dollars ($______) upon the delivery and acceptance of the First Album.
(b) In connection with the Second through Sixth Album(s) recorded hereunder, the Advance shall be the following applicable amount:
(i) For the Second Album . . . $ _______
(ii) For the Third Album . . . $ _______
(iii) For the Fourth Album . . . $ _______
(iv) For the Fifth Album . . . $ _______
(v) For the Sixth Album . . . $ _______
(c) The Advance payable with respect to each Album shall be payable one-half (1/2) upon commencement of recording and the balance upon completion of all of Artist's services and acceptance by Company of such Album.
(d) All monies paid to Artist or on behalf of Artist or to or on behalf of any person, firm or corporation representing Artist (with Artist's consent), other than royalties payable pursuant to Paragraph 8 of this Agreement and music publishing royalties payable under Exhibit "B," shall constitute advances recoupable from any monies payable under this Agreement, unless Company shall otherwise consent in writing.
8. In consideration of Artist's full and faithful performance of each and all of the material terms hereof, Company shall pay Artist the royalties set forth in and computed pursuant to the terms and provisions of Exhibit "A" attached hereto. The foregoing royalty includes all royalties payable to the Producer(s).
9. Statements as to royalties payable hereunder shall be sent by Company to Artist in accordance with Paragraph 5 of Exhibit "A." Artist shall be deemed to have consented to all accountings rendered by Company hereunder and said accountings shall be binding upon Artist and shall not subject to any objection by Artist for any reason unless specific objection, in writing, stating the basis thereof, is given to Company within (2) years after the date rendered, and after such written objection, unless suit is instituted within three (3) years after the date rendered.
10. Artist shall have the right at Artist's sole cost and expense to appoint a Certified Public Accountant or other qualified representative who is not then currently engaged in an outstanding audit of Company to examine Company's 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 and 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.
11. (a) All notices to Artist shall be in writing and shall be sent postage paid, by registered or certified mail, return receipt requested (except that royalty statements and payments shall be sent by ordinary mail), addressed to Artist at the address first above. Copies of notices to Artist shall be sent to: ______________________
(b) All notices to Company shall be in writing and shall be sent postage prepaid by registered or certified mail, return receipt requested, addressed to Company's address first above written. Copies of notices to Company shall be sent to: Michael C. Bourbeau, Bourbeau & Bourbeau, 50 Beacon St. 4th Floor, boston, MA 02108
12. (a) All musical compositions or material recorded and released pursuant to this Agreement which are written or composed, in whole or in part by Artist or which are owned or controlled, directly or indirectly, in whole or in part, by Artist (herein called "Controlled Compositions") shall be subject to the terms and conditions of the publishing agreement attached hereto as Exhibit "B" and made a part hereof.
(b) Each Controlled Composition shall be and is hereby licensed to Company:
(i) For the United States, at a royalty per selection equal to seventy-five percent (75%) of the minimum statutory per selection rate (without regard to playing time) effective on the date such master is delivered hereunder. The aforesaid seventy-five percent (75%) per selection rate shall hereinafter sometimes be referred to as the "U.S. Per Selection Rate"; and
(ii) For Canada, at a royalty per selection equal to seventh-five percent (75%) of the statutory per selection rate (without regard to playing time) effective on the date such master is delivered hereunder, or, if there is no statutory rate in Canada on such date, seventh-five percent (75) of the per selection rate (without regard to playing time) then generally utilized by major record companies in Canada. The applicable aforesaid per selection rate shall hereinafter sometimes be referred to as the "Canadian Per Selection Rate."
(iii) Notwithstanding the foregoing, the maximum aggregate mechanical royalty rate which Company shall be required to pay in respect to any Single, Maxi-single or Album hereunder, regardless of the total number of compositions contained therein, shall not exceed two (2) times, three (3) times, and ten (10) times the applicable U.S. Per Selection Rate or Canadian Per Selection Rate, respectively, and in respect to any EP hereunder, regardless of the total number of compositions contained therein, shall not exceed the applicable U.S. Per Selection Rate or Canadian Per Selection Rate times the total number of Masters contained therein.
(iv) It is specifically understood that in the event that any Single, Maxi-single, EP or Album contains other compositions in addition to the Controlled Compositions and the aggregate mechanical royalty rate for said Single, Max-single, EP or Album shall exceed the applicable rate provided in subparagraph 12(b)(iii), the aggregate 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, Max-single, EP or Album, the aggregate mechanical royalty rate for which exceeds the applicable rate provided in subparagraph 12(b)(iii) to deduct such excess payable thereon from any and all monies payable to Artist pursuant to this or any other agreement. All mechanical royalties payable hereunder shall be paid on the basis of net records sold hereunder for which royalties are payable to Artist pursuant to this Agreement. Company may maintain reserves with respect to payment of mechanical royalties. If Company makes an overpayment of mechanical royalties in respect of compositions recorded under this Agreement, Company may recoup any such overpayment from any monies becoming payable to Artist pursuant to this or any other agreement. Mechanical royalty payments on records subsequently returned are considered overpayments. Notwithstanding anything to the contrary contained herein, mechanical royalties payable in respect of Controlled Compositions for sales of records for any use other than as described in paragraph 1 of Exhibit "A" hereof shall be seventy-five percent (75%) of the otherwise applicable U.S. Per Selection Rate or Canadian Per Selection Rate, as the case may be. Mechanical royalties for Controlled Compositions which are arranged versions of any musical compositions in the public domain, when furnished by Artist for recordings hereunder, shall be paid in the same proportion as the appropriate performing rights society grants performing credits to the publisher of such composition, provided Artist has 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. 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. If any Single, Maxi-single, EP or Album contains other compositions in addition to the Controlled Compositions, Artist will obtain for Company's benefit mechanical licenses covering such composition in a form no less favorable to Company than those contained in the then-current standard form Harry Fox Agency license; however, if such license contains terms less favorable to Company than those contained in this Agreement which are applicable to Controlled Compositions, then Company shall have the right to reduce mechanical royalties payable with respect to Controlled Compositions or to otherwise charge Artist's account under this or any other agreement for any such excess or differential.
(v) In respect of all Controlled Compositions performed in Pictures, Company is hereby Granted an irrevocable perpetual worldwide license to record and reproduce such Compositions in such Pictures and to
distribute and perform such Pictures including, but not limited to, all Videoshows thereof, and to authorize others to do so. Company will 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 those Pictures, provided, however, that following Company's full recoupment of all costs in connection with a Picture, Company will negotiate in good faith with Artist regarding a royalty to be paid prospectively with respect to Controlled Compositions embodied in such Picture in connection with the commercial exploitation of such Picture.
(vi) Notwithstanding anything in 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 compositions as though the selection were embodied thereon only once.
13. Artist acknowledges that the sale of records is speculative and agrees that the reasonable judgment of Company with regard to any matter affecting the sale, distribution and exploitation of such records shall be binding and conclusive upon Artist.
14. (a) The word "Artist" as used in this Agreement refers individually and collectively to the members of the group (whether presently or hereafter signatories to or otherwise bound by the terms and provisions of this Agreement) professionally known as "________________________ (the "Group"). Productions hereby warrants and represents that the Group consists, as of the date of the execution hereof, of the individuals listed on Page 1 hereof. All of the terms, conditions, warranties, representations, and obligations applicable to the Group or Artist contained in this Agreement shall apply jointly and severally to each individual member of the Group.
(b) (i) Productions hereby represents and warrants that (i) Artist is and shall be the sole owner of the name " "(the Group Name") and will be the sole owner of any other professional name which Artist may use during the term hereof; (ii) Artist has and shall have the right and power to grant Company the right to use the Group Name and any other professional name which Artist may use during the Term hereof; (iii) Artist will not use any professional name other than the Group Name during the Term hereof without Company's prior written consent, which may be withheld for any reason; provided however, that in the event that a third party makes a claim regarding Artist's sole ownership of the Group Name, and Artist and Company agree that such claim is a bona fide claim, Artist shall thereafter not be obligated to use the Group Name and may designate another professional name, as provided hereinbelow; and (iv) during the Term hereof Artist will not use, or authorize any other person to use, the Group Name (or any other professional name used by Artist) in connection with the recording, production, manufacture, sale or advertising of phonograph records in the Territory hereof, or in connection with personal appearances (or any advertising related thereto) by any person other than Artist. If Company reasonably believes that the Group Name is not available for use by Company hereunder in any portion of the Territory hereof or that its availability in any portion of the Territory hereof is in question, then Artist shall, at Company's request, designate another professional name to be used by Artist. Notwithstanding anything to the contrary contained in this paragraph 14(b), Company's failure to object to Artist's use of a professional name, including the Group Name, or Company's approval of Artist's use of any such name, Productions' or Artist's warranties and representation hereunder.
(ii) Artist warrants, represents and agrees that, for so long as this Agreement shall be in effect, 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 agreed to be performed under this Agreement or leaves the Group, Artist shall give Company prompt written notice thereof. Said individual shall remain bound by this Agreement, including, but not limited to, the provisions of subparagraph 14(c) hereof or Company may, by notice in writing, (i) terminate this Agreement with respect to such individual or (ii) terminate this Agreement in its entirety without any obligation as to unrecorded or undelivered masters. The individual whose engagement is so terminated may not perform for others for the purpose of recording any selection as to which the applicable restrictive period specified in this Agreement has not expired. Any member of the Group 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 the property of Artist and those members in the Group who continue to perform their obligations hereunder and whose engagements are not terminated. The person, if any, engaged to replace the individual whose engagement is terminated shall be mutually agreed upon by Company, and the remaining individuals comprising Artist. Neither party shall unreasonably withhold agreement with regard thereto; and, if agreement cannot be reached, Company may terminate this Agreement by notice in writing. If an individual engagement is terminated by notice from Company, or by mutual consent, (i) each party shall be relieved and discharged from liability for masters unrecorded at the time of such notice or mutual consent and (ii) Artist will be solely responsible for and shall pay all monies required to be paid to any individual whose engagement is so terminated in connection with all masters theretofore or thereafter recorded under this Agreement and Artist will hold Company harmless with respect thereto. Each person added to this Agreement as a condition precedent to be so added.
(c) In addition to the rights provided in the preceding subparagraph 14(b), Company shall have, and Productions and Artist hereby grant to Company, an irrevocable option for the individual and exclusive services of such individual(s) comprising Artist for the purpose of making records. Said option with respect to such individual(s) may be exercised by Company giving Productions or Artist notice in writing within sixty (60) days after Company receives the notice provided for in subparagraph 14(b) to the effect that such individual(s) has refused, neglected or failed to perform with the other individuals comprising Artist or that such individual(s) has left the group or that the Group has disbanded. If Company does exercise such option, such individual(s) shall be deemed to have entered into a new and separate agreement with Company with respect to such individual's(s') exclusive recording services upon all the terms and conditions of this Agreement except that: (i) the "First Contract Period" shall be equal to the length of the "First Contract Period" as set forth in Paragraphs 2(a) and number of Option Periods then remaining under this Agreement; (ii) [intentionally omitted]; (iii) Company shall establish a separate account with respect to albums manufactured from Masters embodying the performances of such individual from and after the date such individual commenced recording pursuant to this Paragraph 14 and such account shall be cross-collateralized on a prorata basis with the royalty account relating to Artist hereunder; and (iv) recordings by such individual(s) shall not be applied in diminution of Artist's minimum recording commitment as set forth in this Agreement.
(d) If any individual member of Artist wishes to record his or her performances while such individual remains a member of the Group and continues to perform his or her obligations hereunder, Artist shall give Company prompt notice thereof. Company shall thereafter have the irrevocable option to acquire such recordings, and if exercised, such recordings shall be acquired upon the terms set forth in subparagrah 14(c). If Company shall decline to acquire any such recordings, then Artist hereby warrants, represents and agrees that such recordings shall not be made of if made, that no use, including, but not limited to, any commercial release thereof, shall be made by Artist or anyone deriving any rights therefrom.
15. (a) If Artist for any reason fails to timely fulfill all of Artist's material commitments 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 notice to Artist: (i) to terminate this Agreement without further obligation to Artist as to unrecorded Masters, (ii) to reduce the minimum number of Masters required to be recorded during the then current Period to the number which have been timely recorded during such Period, or (iii) to extend the then current Period of the Term for the duration of such default, with the times for the exercise by Company of its options to extend the Term and the dates of commencement of subsequent Periods deemed extended accordingly. It is specifically understood that Company may exercise any or all of its rights pursuant to subparagraphs 15(a)(i), (ii) and (iii) at any time(s) prior to the date the Term would otherwise expire. Company's obligations hereunder shall be suspended for the duration of any such default.
(b) Nothing herein contained shall obligate Company to permit Artist to record the minimum number of Masters specified herein to be recorded during the Term hereof, it being understood that Company's sole obligation to Artist as to each unrecorded required Master shall be to pay Artist an amount equal to the minimum union scale payment which Company would have been required to pay to Artist had Artist in fact recorded such unrecorded Master.
(c) Company reserves the right, at its election, to suspend the operation of this Agreement (by written notice to Artist) 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 six (6) months.
(d) If Artist's voice or Artist's ability to perform as an instrumentalist should be materially or permanently impaired, then in addition to any other rights or remedies which Company may have, Company shall have the right, upon written notice to Artist, to terminate this Agreement and shall thereby be relieved of any liability in connection with unrecorded Masters.
16. Artist expressly acknowledges that Artist's services hereunder are of a special, unique and intellectual character which gives them peculiar value, and that in the event of a breach by Artist of any term, condition or covenant hereof, Company will be caused immediate irreparable injury. Artist expressly agrees that Company shall be entitled to seek injunctive and other equitable relief, as permitted by law, to prevent a breach of this Agreement, or any portion thereof, by Artist, which relief shall be in addition to any other rights or remedies, for damages or otherwise, available to Company.
17. (a) Artist warrants and represents that Artist is not under any disability, restriction or prohibition, whether contractual or otherwise, with respect to Artist's right to execute this Agreement or Artist's right to perform its terms and conditions. Without limiting the foregoing, Artist specifically warrants and represents that no prior obligations, contracts or agreements of any kind undertaken or entered in to by Artist will interfere in any manner with the complete performance of this Agreement by Company or Artist or with Artist's right to record any and all selections hereunder. Artist warrants and represents that there are now in existence no prior unreleased Masters embodying Artist's performances. Artist further warrants and represents that Company shall not be required to make any payments of any nature for, or in connection with, the rendition of Artist's services or the acquisition, exercise or exploitation of rights by Company pursuant to this Agreement, except as specifically provided herein.
(b) Artist warrants and represents that no materials, or any use thereof, will violate any law or infringe upon or violate the rights of any third party. "Materials," as used in this subparagraph 17(b) shall include: (i) all musical compositions and other material contained on Masters, (ii) each name used by Artist, in connection with Masters recorded hereunder, and (iii) all other materials, ideas, other intellectual properties or elements furnished by Artist and contained in or used in connection with any Masters recorded hereunder or the packaging, sale, distribution, advertising, publicizing or other exploitation thereof.
(c) Artist agrees to and does hereby indemnify, save and hold Company harmless from any and all loss and damage (including court costs and reasonable attorneys' fees) arising out of, connect with or as a result of any inconsistence with, failure of, or breach or threatened breach by Artist 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. In addition to any other rights or remedies Company may have by reason of any such inconsistency, failure, breach, threatened breach or claim, Artist shall reimburse Company, on demand, for any payment made by Company at any time after the date hereof with respect to any loss, damage or liability resulting therefrom; in addition thereto, Company shall have the right to deduct from any and all monies otherwise payable to Artist under this Agreement or any other agreement a sum equal to such loss, damage and liability (including anticipated and actual court costs and reasonable attorneys' fees). Company shall give Artist notice of any third party claim to which the foregoing indemnity applies, and Artist shall have the right to participate in the defense of any such claim through counsel of Artist's own choice and at Artist's expense. Pending the determination of any such claim, Company may withhold payment of all monies under this Agreement or any other agreement in an amount reasonably related to such claim.
18. Wherever in this Agreement Company's or Artist's approval or consent is required, such approval or consent shall not be unreasonably withheld. Either party may require the other to formally give or withhold such approval or consent by giving written notice requesting same and by furnishing the recipient with the information or material in respect of which such approval or consent is sought. The recipient shall give the requesting party written notice of approval or disapproval within five (5) days after such notice. In the event of disapproval or no consent, the reasons therefor shall be stated. Failure to give such notice to the requesting party as aforesaid shall be deemed to be consent or approval.
19. Artist warrants and represents 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 subject hereto shall be produced in accordance with the rules and regulations of all unions having jurisdiction.
20. (a) In addition to Artist's recording commitments as set forth in Paragraph 3 of this Agreement, but subject to Artist's prior professional commitments, Artist shall comply with requests, if any, made by Company in connection with the production of Pictures. In this connection, Artist shall appear on dates and at places requested by Company for the filming, taping or other fixation of audio-visual recordings. Artist shall perform services with respect thereto as Company deems desirable in a timely and first-class manner. Artist acknowledges that the production of Pictures involves matters of judgment with respect to art and taste, which judgment shall be exercised by Company in its discretion and that Company's decisions with respect thereto shall be final.
(b) (i) Each Pictures produced during the Term of the Agreement shall be owned by Company (including the worldwide copyrights therein and thereto and all extensions and renewals thereof) to the same extent as Company's rights in Masters made under this Agreement.
(ii) Company will have the unlimited right to manufacture Videoshows of the Picture and to rent, sell, distribute, transfer, sublicense or otherwise deal in such Videoshows under any trademarks, trade names and labels; to exploit the Picture by any means now or hereafter known or developed; or to refrain from any such exploitation, throughout the Territory.
(c) The costs of producing Pictures shall be recouped in the same manner as recording costs are recouped, inclusive of mechanicals.
(d) Conditioned upon Artist's full and faithful performance of all of the terms and conditions of this Agreement, Company shall pay Artist a royalty in accordance with Paragraph 4 of Exhibit "A."
(e) Company shall have the right to use and allow others to use each Picture for advertising and promotional purposes with no payment to Artist. As used herein, "advertising and promotional purposes" shall mean all uses for which Company receives no monetary consideration from licensees in excess of a reasonable amount as legal fees, administrative costs or similar type payments and as reimbursement for transaction costs incurred by Company in connection with such uses, such as tape, duplication costs, shipping, handling and insurance costs.
(f) (i) During the Term of this Agreement, no person, firm or corporation other than Company will be authorized to make, sell, broadcast or otherwise exploit audio-visual materials unless: (A) Artist first notifies Company of all of the material terms and conditions of the proposed agreement pursuant to which the audio-visual materials is to be made, sold, broadcast or otherwise exploited, including, but not limited to, the titles of the compositions covered by the proposed agreement, the format to be used, the manner of exploitation proposed and the identities of all proposed parties to the agreement, and (B) Artist offers to enter into an agreement with Company containing the same terms and conditions described in such notice and otherwise in the same form as this Agreement. If Company does not accept Artist's offer within sixty (6) days after Company's receipt of same, Artist may then enter into that proposed agreement with the same parties mentioned in such notice, subject to subparagraph 20(f)(ii) hereof and provided that such agreement is consummated with those parties within thirty (30) days after the end of that sixty (60) day period upon the same terms and conditions set forth in Artist's notice and offer to Company. If that agreement is not consummated within said thirty (30) day period, no party except Company will be authorized to make, sell, broadcast or otherwise exploit such audio-visual materials unless Artist first offers to enter into an agreement with Company as provided in the first sentence of this subparagraph 20(f). Company will not be required, as a condition of accepting any offer made to Company pursuant to this subparagraph 20(f), to agree to any terms or conditions which cannot be fulfilled
by Company as readily as by any other party (for example, but without limitation, the employment of a particular producer or director).
(ii) If Company does not accept an offer made to it pursuant to this subparagraph 20(f), such non-acceptance shall not be considered a waiver of any of Company's rights pursuant to this Agreement. Such rights include, without limitation, the right to prevent Artist from exploiting audio-visual material featuring Artist in the form of Videoshows, and the right to prevent Artist from authorizing any use of masters owned by or exclusively licensed to Company unless Company so agrees. Artist shall not act in contravention of such rights.
(g) In all other respects (e.g., the times for accountings to be rendered, and warranties and representations made by Artist), Pictures and Video Masters shall be governed by the same terms and conditions as are applicable to Masters subject to this Agreement, except that fifty percent (50%) of the costs of Pictures shall be recoupable from record royalties (100% from Picture royalties).
21. Company hereby guarantees each member of Artist compensation for Artist's exclusive recording services at the rate of at least Six Thousand Dollars ($6,000) per annum. All monies paid to Artist to meet the guarantee shall be deemed advances against royalties payable to Artist under this Agreement.
22. For the purposes of this Agreement, the following definitions shall apply:
(a) "Masters" and "master recordings" - every recording of sound, whether or not coupled with visual images, by any method and on any substance or material, whether now or hereafter known, which is useful in the recording, production and/or manufacture of phonograph records.
(b) "Album" - A record of not less than 35 minutes of playing time. Multiple sets which consist of more than one (1) Album intended to be released, packaged and sold together for a single overall price shall be deemed to be the equivalent of one (1) Album for the purposes of this Agreement, but shall not be recorded hereunder without Company's and Artist's prior written consent.
(c) "Records," "phonograph records," "recordings" and "sound recordings" - All forms of recording and reproduction by which sound may be recorded now known or which may hereafter become known, manufactured or sold primarily for home use, juke box use, or use on or in means of transportation, including, without limiting the foregoing, magnetic recording tape, film, electronic video recordings and any other medium or device for the production of artistic performances manufactured or sold primarily for home use, juke box use or use on or in means of transportation, whether embodying (i) sound alone or (ii) sound synchronized with visual images, e.g. "sight and sound" devices.
(d) "Recording Costs" - Wages, fees, advances and payments of any nature to or in respect of all musicians, vocalists, conductors, arranges, 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; costs of clearing "samples;" all studio, tape, editing, mixing, re-mixing, mastering and engineering costs; all costs of travel, 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 for reasons caused by Artist; and all other costs and expenses incurred in producing the Masters hereunder which are then customarily recognized as recording costs in the recording industry.
(e) "Pictures" - motion pictures and other audiovisual works that have a soundtrack substantially featuring the vocal/musical performances of Artist.
(f) "Videoshows" - Videocassettes, Videodiscs or any other devices, now or hereafter known or developed, that enable the Picture to be perceived visually, with or without sound, when used in combination with or as part of a piece of electronic, mechanical or other apparatus.
23. Company shall have the right to assign this Agreement in whole or in part of any corporation owned or controlled by Company, or to any other person, firm or corporation acquiring all or substantially all of Company's stock or assets. Artist shall not have the right to assign this Agreement in whole or in part.
24. 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 either party unless confirmed by a written instrument signed by both parties. A waiver 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 of Company's 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. 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 provisions had not been contained herein. It is agreed that all accountings and payments required herein, and all grants made herein, shall survive and continue beyond the expiration or earlier termination of this Agreement. No breach of this Agreement by either party shall be deemed material unless the party claiming breach shall serve written notice thereof to the other specifying the nature thereof and the recipient fails to cure such breach, if any and if curable, within thirty (30) days after receipt of such notice.
25. This Agreement shall be deemed to have been made in the State of California and its validity, construction, performance and breach shall be governed by the laws of the State of California applicable to agreements made and to be wholly performed therein.
26. Artist grants to Company the exclusive right during the Term of this Agreement to utilize the name, symbols, emblems, designs, likeness, visual representations, servicemarks, and/or trademarks of Artist, including any caricatures or other likeness of Artist designed for commercial distribution through customary film and television properties and related products (hereinafter "Licensed Property") in connection with the manufacture, advertisement, distribution, and sale by Company and/or its licensees of any products (hereinafter "Licensed Products") utilizing the Licensed Property throughout the Territory. Company agrees to pay to Artist seventy-five percent (75%) of any and all sums received from the sale of Licensed Products within thirty (30) days of receipt of the payment concerned. Company shall have the right to license others to manufacture, and/or sell such products on its behalf.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
RECORDS, INC.
By: __________________________________
an authorized signatory
__________________________________________
ARTIST
_______________________________________
ARTIST
The following provisions constitute an integral part of the agreement between RECORDS, INC., ("Company") and ("Artist") dated ______________, and such provisions are incorporated therein by this reference.
1. Company agrees to pay to Artist a royalty at the rates set forth below based on one hundred percent (100%) of net sales through normal retail channels of records embodying Masters, computed on the SRLP of such records (except as otherwise provided herein), as follows:
(a) With respect to U.S. Net Sales of each Album, twelve percent (12%) (the "U.S. Album Royalty Rate").
(b) With respect to U.S. Net Sales of single records, ten percent (10 %) (the "U.S. Single Royalty Rate").
(c) (i) With respect to net sales of each Album through normal retail channels in the Territory but outside the United States, and with respect to each Master initially embodied therein as embodied in other albums in any of such other countries (including records sold for export to licensees in any of such other countries), fifty percent (50%) of the U.S. Album Royalty Rate.
(ii) With respect to net sales of single records through normal retail channels in the Territory but outside the United States, (including records sold for export to licensees in any of such other countries), fifty percent (50%) of the U.S. Single Royalty Rate.
(d) Notwithstanding anything to the contrary contained in this Agreement, the royalty rate for each country of the Territory in respect of net sales through normal retail channels of copies of any record in CD configuration and any record in any so-called "New Medium" shall be eighty percent (80%) of the otherwise applicable royalty rate of such record through normal retail channels in the applicable country pursuant to this Exhibit "A" based upon the actual or imputed SRLP of such record in the applicable configuration.
2. Notwithstanding anything to the contrary contained herein, Company agrees to pay to Artist a royalty at the rates set forth below with respect to the following types of net sales of records embodying Masters and on certain other types of exploitation of Masters under this agreement, computed on the
SRLP of such records (except as otherwise provided herein), as follows:
(a) With respect to net sales of records sold via direct mail or through mail order operations (including, without limitation, record club plans) by licensees of Company, Artist's royalty shall be one-half (1/2) of Company's net receipts in connection with such sales.
(b) With respect to the following types of records, the royalty rate shall be one-half (1/2) of the otherwise applicable royalty rate, based on the SRLP of the record involved unless otherwise indicated: (i) records sold as premiums in connection with other products or services, and the SRLP for premiums shall be deemed the net amount received by Company from an actual sale of such records; and (ii) records sold to governmental agencies or institutions (including, without limitation, their agencies and departments, but excluding Armed Forces Post Exchanges and similar retail-type facilities).
(c) If Company sells records directly (and not through licensees) via television and/or radio advertisements or through mail or phone order in the United States, then such sales for purposes of paragraph 1(a) hereof shall be deemed U.S. Net Sales and, accordingly, Artist shall be paid royalties with respect thereto at fifty percent (50%) of the U.S. Album Royalty Rate.
(d) With respect to records sold through Armed Forces Post Exchanges, ship's stores and other military facilities ("PX Records"), the royalty rate shall be the otherwise applicable royalty rate, based on the SRLP of the record involved in the Armed Forces Post Exchanges, ship's stores and other military facilities, as applicable; provided, that with respect to PX Records sold in the Territory but outside the United States, the royalty rate, based on the SRLP of the record involved in the Armed Forces Post Exchanges, ship's stores and other military facilities, as applicable.
(e) With respect to net sales of budget records by Company through normal retail channels, the royalty rate shall be one-half (1/2) of the otherwise applicable royalty rate.
(f) With respect to net sales of mid-priced records by Company through normal retail channels, the royalty rate shall be three-fourths (3/4) of the otherwise applicable royalty rate with respect to sales in the United States and two thirds (2/3) of the otherwise applicable royalty rate with respect to sales outside of the United States.
(g) With respect to net sales of Mini-LPs by Company through normal retail channels, the royalty rate shall be three-fourths (3/4) of the royalty rate which would be applicable to the first net sale of a Commitment Album delivered on the date when the Masters constituting the applicable Mini-LP were delivered.
(h) (i) If Company shall sell Consumer Compilations or other records via telephone, satellite, cable or other direct mission to consumers over wire or through the air, then such sales shall be deemed sales of such "records" through normal retail channels for all purposes and, accordingly, Artist shall be paid royalties with respect thereto on a configuration-by-configuration basis at the otherwise applicable rates herein and in the manner set forth in paragraph 1 of this Exhibit "A," but with respect to any such sales in the United States, royalties shall only be payable with respect to eighty-five percent (85%) of such sales. For purposes of calculating royalties payable in connection with such sales, the SRLP of such "records" shall be deemed to be the then-current SRLP of tape copies of such records, and the same packaging deduction shall be made for such sales in accordance with paragraph 3(c)(ii) of this Exhibit "A" as is applicable to tape copies of such records.
(ii) If Company shall license third parties to sell Consumer Compilations or other records in the manner described in paragraph 2(h)(i) above then, notwithstanding the provisions of paragraph 2(i) below, Artist shall be paid royalties with respect thereto in accordance with paragraph 2(h)(i) above; provided, that in no event shall such royalties exceed one-half (1/2) of Company's net receipts in connection with such sales.
(i) (i) With respect to Masters licensed to third parties by Company on a flat fee, royalty rate or cent rate basis for any type of use not specifically covered elsewhere in this paragraph 2, Company shall credit Artist's royalty account with one-half (1/2) of Company's net receipts in respect thereof.
(ii) With respect to Masters embodied in Consumer Compilations sold in-store [as opposed to via the methods described in paragraph (h) above], Artist shall be paid, on a Master-by-Master basis, an amount equal to one-tenth (1/10) of the royalty (in pennies) that Artist was paid for the first net sale in cassette tape form in the applicable country of the Album on which the applicable Master was initially embodied, but with respect to such sales in the United States, royalties shall only be paid on eighty-five percent (85%) of such net sales. Notwithstanding the foregoing, Artist's such royalty shall not exceed fifty percent (50%) of Company's net receipts from the sale of the
applicable Master(s) on the particular Consumer Compilation involved.
3. Notwithstanding anything to the contrary contained herein:
(a) If Company couples Masters with recordings which are not Masters, then the amounts otherwise payable to Artist hereunder shall be multiplied by a fraction, the numerator of which is the number of Masters which are embodied in the record involved and the denominator of which is the aggregate number of recordings (including Masters) embodied in such record. If Company couples together on a particular record Masters to which different royalty rates are applicable hereunder, then a prorata share of the applicable SRLP of such record shall be attributed to each Master involved.
(b) No royalties shall be payable in respect of:
(i) Records furnished on a no-charge basis or sold by Company or Company's Licensees for less than fifty percent (50%) of posted wholesale list price to disc jockeys, publishers, employees of Company or Company's Licensees, motion picture companies, radio and television stations and other customary recipients of free, discounted or promotional records; records sold by Company or Company's Licensees at close-out, overstock or cut-out prices or for scrap or at less than Company's or Company's Licensees' inventory cost; and samples records including promotion; and
(ii) Records (or fractions thereof) given away or distributed on a so-called "no-charge" or "freebie" basis or sold for fifty percent (50%) or less of Company's or Company's Licensees' posted wholesale list price to distributors, subdistributors, dealers and others which are intended for re-sale to third parties; if Company or Company's Licensees sell records which are intended for re-sale to third parties at a discount from Company's or Company's Licensees', as applicable, posted wholesale list price [but for more than fifty percent (50%) of such price], the number of such records (or fractions thereof) which are deemed to have been given away shall be determined by applying such discount to the total number of such records distributed. For convenience, those records referred to in this paragraph 3(b)(ii) are collectively sometimes referred to herein as "Free Goods." References in this agreement to "records for which no royalties are payable hereunder," or words of similar connotation, shall include, without limitation, all Free Goods. Free Goods embodying albums or Mini-LPs hereunder are sometimes referred to herein as "Album Free Goods," and Free Goods embodying single records hereunder are sometimes referred to herein as "Single Free Goods." Company and Artist acknowledge and agree that fifteen percent (15%) of the aggregate units of all albums and Mini-LPs sold by Company hereunder shall be Album Free Goods ("Standard Album Free Goods"). Company and Artist acknowledge and agree that twenty-three (23%) of the aggregate units of all such single records sold by Company hereunder shall be Single Free Goods ("Standard Single Free Goods"). Standard Album Free Goods and Standard Single Free Goods are sometimes herein collectively referred to as "Standard Free Goods." In addition to the distribution of Standard Free Goods, from time to time Company may conduct special programs with respect to the marketing and merchandising of recordings of various artists which may include Artist or special "impact" programs concerning the marketing and merchandising of recordings hereunder, and all of said special programs may involve the distribution of Free Goods which are in addition to Standard Free Goods. All such additional Free Goods distributed pursuant to any such special program are herein referred to as "Special Free Goods," all additional Album Free Goods distributed pursuant to any such special program are herein referred to as "Special Album Free Goods" and all additional Single Free Goods shipped pursuant to any such special program are herein referred to as "Special Singe Free Goods." Company shall have the right to ship Special Album Free Goods, but not in excess of ten percent (10%) of the aggregate units of all albums and Mini-LPs distributed by Company hereunder. Further, Company shall have the right to ship Special Single Free Goods, but not in excess of ten percent (10%) of the aggregate units of all single records distributed by Company hereunder. If Company distributes Standard Free Goods and/or Special Free Goods in excess of the limits set forth above, then Company shall not be deemed in breach hereof, and Company's only obligation to Artist in such event shall be to pay Artist's royalties as provided herein in respect of such excess Standard Free Goods or Special Free Goods, as applicable.
(c) Notwithstanding anything to the contrary contained herein, the following shall be excluded from the base prices against which the applicable royalty rates are to be applied:
(i) All sales, use, excise, transactional, V.A.T. and other similar taxes included in the retail or other applicable price of records, whether such taxes are collected by the taxing authority from the retailer, the distributor or the manufacturer; and
(ii) As a container charge, an amount equal to (A) ten percent (10%) of the SRLP for all disc albums, Mini-LPs and 12-inch singles packaged in Company's then-current standard container therefor and for disc 7-inch and 12-inch single records packaged in special sleeves; (B) fifteen percent (15%) of the SRLP for all disc records packaged in multi-fold containers or containers with cardboard inner sleeves or special inserts or attachments; (C) twenty percent (20%) of the SRLP for tapes; and (D) twenty-five percent (25%) of the SRLP for CD records (other than CDV Devices) and records not otherwise specified above.
(d) For the purpose of sales outside the United States, the SRLP shall be the SRLP from time to time of such records in the country of manufacture or the country of sale, as Company is paid. If there are no SRLPs of records in any particular country, then for the purpose of computing royalties hereunder, the prices of records in such country which are generally regarded as the equivalent thereof shall be deemed the SRLPs of such records. Royalties on foreign sales shall be computed in the national currency of the country involved and shall be deemed earned only when monies from sales on which such royalties are based are received by Company in the United States (or credited against an advance theretofore so received) at the dollar equivalent of the rate of exchange at which Company is paid, net of Artist's proportionate share of any and all foreign taxes. If Company does not receive payments in United States dollars in the United States as a result of governmental restrictions and elects to accept payment in a foreign currency, then Company may deposit Artist's royalties in such foreign currency to Artist. Deposit as aforesaid of payments representing royalties applicable hereto shall satisfy Company's obligations hereunder for the sales to which such royalty payments are applicable.
(e) Company may at any time elect to use a different method of computing royalties from that specified in this agreement so long as such method or methods are applicable to substantially all persons similarly engaged by Company, and provided that no such method reduces the net monies due Artist. If Company shall no longer designate a SRLP for records hereunder in any particular configuration and price category (e.g., full-price, mid-price and budget records) in the United States, then for the purpose of computing royalties hereunder with respect to sales of records in such configuration and price category through normal retail channels in the United States, the following method of computation shall be deemed to satisfy the requirements of the foregoing sentence: the SRLP of such records in such configuration and price category shall be deemed to be a dollar amount computed by multiplying Company's price to subdistributors (before consideration of any discount resulting from the distribution of Free Goods) for such records in such configuration and price category by a fraction, the numerator of which is the SRLP for the majority of Company's records in such configuration and price category as of the date when Company ceases to designate a SRLP for records in such configuration and price category and the denomination of which is Company's price to subdistributors for the majority of Company's records in such configuration and price category as of the date when Company ceases to designate a SRLP for records in such configuration and price category (before consideration of any discount resulting from the distribution of Free Goods).
4. Company shall pay to Artist a royalty with respect to the Income-Producing Exploitation of Pictures as follows:
(a) (i) With respect to all Income-Producing Exploitation uses of uses of Pictures by licensees of Company other than the uses specified in paragraph 4(b) below, a royalty equal to one-half (1/2) of the Adjusted Gross Video Receipts (as herein defined).
(ii) As used herein, the term "Adjusted Gross Video Receipts" means one hundred percent (100%) of monies actually received by Company (or credited to Company's account) in the United States which are specifically allocated to Territory-wide Income-Producing Exploitation of Pictures hereunder, less the following deductions in the following order:
(A) An amount equal to twenty-five percent (25%) thereof, which Company shall be entitled to retain for its own account as an administration fee;
(B) All distribution expenses of Pictures hereunder;
(C) All payments required to be made to third parties, including, without limitation, to unions or guilds (or their funds) or to publishers of Non-Controlled Compositions (but expressly excluding any Royalty Participant, as herein defined) in connection with the production and/or exploitation of Pictures; and
(D) All sales, gross receipts, turnover, foreign withholding, excise, use, value added and personal property or similar taxes levied upon, payable with respect to, or arising in connection with the exploitation, use, production, distribution, revenues, or materials of such Pictures, but specifically excluding any corporate franchise or excess profits tax.
(iii) Artist shall be solely responsible for and shall pay any and all monies payable to the producers of the Masters embodied in Pictures, the producers and directors of the visual portion of Picturers and to any other persons (except the publishers of Non-Controlled Compositions which are embodied in Pictures and any unions or guilds or their funds) who are entitled to a royalty or any other payment in respect of the exploitation of Pictures (each such person being herein referred to as a "Royalty Participant") if the applicable Royalty Participant is entitled to any monies in connection with the applicable Picture. Notwithstanding the foregoing, if Company shall pay or be required to pay any such monies directly to any Royalty Participant, then Company shall have the right to deduct same from any and all royalties payable to Artist hereunder.
(b) (i) If Company manufactures and distributes Home A/V Devices if the United States embodying one or more Pictures, then Company shall pay to Artist a royalty with respect to net sales of such Home A/V Devices by Company in the United States, subject to paragraphs 4(c) and 4(d) below, equal to (A) ten percent (10%) of Company's Video Royalty Base Price (as herein defined) with respect to Home A/V Devices with a SRLP of Seventeen Dollars ($17) or less, and (B) fifteen percent (15%) with respect to Home A/V Devices with a SRLP in excess of Seventeen Dollars ($17). Such royalties shall at all times be subject to retroactive adjustment for returns, refunds, credits, settlements, allowances, rebates, discounts and other similar adjustments. As used herein, the term "Video Royalty Base Price" means (1) with respect to Home A/V Devices sold by Company through normal retail channels, the wholesale receipts from subdistributors of such Home A/V Devices less an amount equal to ten percent (10%) thereof, and Devices less an amount equal to ten percent (10%) thereof, and (2) with respect to Home A/V Devices sold by Company (as opposed to Company's licensees) through mail order and other direct-to-consumer operations (aa) if sold directly by Company and not through a distributor, a price equal to the average Video Royalty Base Price applicable to sales by Company through normal retail channels of the applicable Home A/V Device during the accounting period during which such mail order or other direct-to-consumer sales occurred, and (bb) if sold through a distributor, an amount equal to the price at which Company sells such Home A/V Devices to such distributor less ten percent (10%) thereof.
(ii) The royalties payable in accordance with this paragraph 4(b) shall be inclusive of all royalties that may be payable to all third parties (other than unions or guilds and their funds), including, without limitation, producers of Pictures, producers and directors of the visual portion of Pictures, and publishers of both Controlled Compositions and Non-Controlled Compositions. If Company makes any payments to third parties with respect to any such Home A/V Devices, then Company shall have the right to deduct such payments from royalties otherwise payable to Artist with respect to Home A/V Devices.
(iii) The provisions of paragraph 3(b) above shall be applicable to the sale of Home A/V Devices by Company; provided, that Company shall not distribute Standard Free Goods with respect to Home A/V Devices but shall have the right to distributer Special Free Goods with respect to Home A/V Devices.
(c) If Company couples Pictures with video songs which are not Pictures hereunder, then the amounts otherwise payable to Artist hereunder with respect to such coupled Pictures shall be multiplied by a fraction, the numerator of which is the number of Pictures involved and the denominator of which is the aggregate number of video songs (including Pictures) involved, and each selection embodied in each Picture and video song involved shall count as one(1) Picture or video song for such purposes.
(d) The provisions of paragraph 5 below shall apply with respect to Company's obligations to render accountings to Artist and to pay Artist royalties with respect to Pictures and to Artist's rights to object to such statements and to audit Company's books and records with respect thereto. Artist's royalty account with respect to Pictures shall be a single account which is separate from Artist's royalty account with respect to audio-only records except to the extent otherwise provided in this Agreement.
5. (a) No royalties shall be payable to Artist unless and until Company is in a "recouped position" (i.e., unless and until Company has recouped from royalties otherwise payable hereunder, in accordance with this Agreement, all recoupable recording costs, advances, expenses and other charges incurred or borne by Company hereunder which are recoupable in accordance with the terms and conditions hereof). If, at Artist's request, Company makes a payment to Artist or to a third party designee of Artist of amounts not provided for in this Agreement (which Company is in no way obligated to do), then such payments shall also be recoupable from any and all monies payable under this Agreement unless Company agrees otherwise in writing. Prior to final determination thereof, Company may withhold a reasonable reserve against returns, exchanges, refunds, credits and the like, such reserve to be established by Company in its sound discretion, based on, among other factors, Artist's sale experience. Company agrees that, in the United Sates, records which are returned shall be debited to Artist's account at an SRLP equal to the SRLP at which the applicable third-party customer's account is credited therefor.
(b) Within ninety (90) days after June 30 and December 31 of each year during which applicable records are sold, Company shall render a statement of accrued royalties earned under this Agreement during the preceding calendar half-year, less all amounts chargeable there against under this Agreement (including, to the extent lawful or as permitted hereunder, all or any portion of any indebtedness then owing by Artist to Company).