SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
Texas 75-2713701
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
14110 North Dallas Parkway 75240
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(Address of Principal Executive Offices) (Zip Code)
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Securities to be registered pursuant to Section 12(b) of the Act:
Title Of Each Class Name of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
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None
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Securities to be registered pursuant to Section 12(g) of the Act:
THE COMPANY
Parallax Entertainment, Inc. is a Texas corporation formed on October 11, 1996 by Gust Kepler, its president and principal shareholder. Parallax is a music industry concern operating two separate but complimentary divisions, Parallax Records and ParallaxMusic.com. Parallax Records is a traditionally styled, independent record label that produces, licenses, acquires, promotes and distributes high quality recorded music for a variety of formats. ParallaxMusic.com is an online promotional vehicle and e-commerce solution for Musicians on the World Wide Web.
Risk Factors
An investment in our shares involves a high degree of risk. In deciding whether to purchase shares of our common stock, you should carefully consider the following risk factors, in addition to other information contained in this registration statement. This registration statement also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to differences in our actual results include those discussed in this section, as well as those discussed elsewhere in this registration statement.
We have a history of net losses. We expect to continue to incur net losses. We may never be profitable.
We had accumulated deficits of $858,710 as of December 31, 2000 and $288,685 as of December 31, 1999. We incurred net losses of $570,025 in calendar year 2000. We have only been able to generate small amounts of sales revenues since inception. Unless our revenues increase substantially and we become profitable, we will most likely cease operations.
We need substantial additional capital to continue operations.
Since Parallax's inception, we have funded operations out of capital raised from investors. We have generated minimum sales revenues. Unless we are able to raise additional capital to continue to fund operations until our sales revenues materially increase, we will go out of business.
Our success in the independent label division (Parallax Records) is dependent on our unproven ability to identify and put under contract recording artists that become popular with the public.
We believe that our future success in the independent label division (Parallax Records) depends on our ability to maintain our existing artist agreements and to secure additional agreements with artists. Our business will be adversely affected by any of the following:
o Inability to recruit new artists;
o Our existing artists do not achieve popularity:
o Poor performance or negative publicity of our artists
Our success is dependent upon our ability to identify recording artists and markets with growth potential and the ability to promote such artists as they gain acceptance and become popular with the consuming public. We have four artists under exclusive recording agreements.
Since inception through December 31, 2000, our artists have produced $72,190 in revenues. During this period, Parallax incurred $882,689 in operating expenses resulting in a $810,499 loss from operations before the additional interest expense for this period of $48,211.
Our success in the Internet division (ParallaxMusic.com) is dependent on our unproven ability to generate revenues from our website through the sale of artist memberships and merchandise.
We believe that our future success in Internet division of Parallax depends on our ability to generate substantial traffic to our website, charge members annual membership fees and facilitate a substantial volume of online sales. Our business will be adversely affected by any of the following:
o Inability to generate considerable traffic to the website.
o Inability to attract paying members to join the website.
o Inability to sell a substantial volume of product on the
website.
o Products on the website do not command enough margin to make
the company profitable.
We have a limited target market for our music.
Our artists are primarily in the alternative/rock music genre. Changing audience tastes in music could result in a decrease in the popularity of this type of music. If this occurs, we may never achieve any significant revenues.
We contract with others to manufacture our records, over whom we have no control.
Parallax is dependent on contract manufacturers to make our records. We could experience delays in delivery of our product resulting in reduced sales and other events which may have a negative effect on our revenues.
We are a very small entity that must compete with many much larger companies.
The recording industry is highly competitive, and our success depends on our ability to attract and promote artists. There can be no assurance that we will be able to attract artists, or, if we are able to attract such talent, that we will be able to develop that talent successfully or in such a manner that significant sales of artist product results.
We are a very small company in a huge industry. Many of our competitors in the record label industry have been in existence for a substantially longer period than we and most have much greater financial, marketing, personnel and other resources than Parallax.
We are essentially a one-man company at this time.
Our success substantially depends on the abilities and continued contributions of its President and Chief Executive Officer, Gust C. Kepler. Although we have obtained "key-man" insurance on the life of Mr. Kepler in the amount of $1,000,000, the loss of Mr. Kepler's services would have a material adverse affect on us. Further, there can be no assurance that we will be able to attract additional qualified employees or artists. Mr. Kepler founded Parallax and is essential to its growth. Currently, Mr. Kepler devotes 100% of his business time to Parallax.
We will recoup the financial advances for recording costs that we make to our artist only if they are successful.
As aforesaid, Parallax has recording contracts with four artists. Parallax has or will have to pay advances consistent with industry standards to secure the services of its artists. Should the artist's album not sell well, or should the artist fail to produce an album, the amount of the advance already paid to record the artists is generally not recovered. There can be no assurance that we will be able to attract additional artists, or, if we are able to attract such talent, that Parallax will be able to develop that talent successfully or in such a manner that significant sales of artist product results. There can also be no assurance that any of the recordings will produce sales revenue for Parallax, or if they do, that such revenue will be sufficient to recoup recording costs. In this regard, Parallax had a contract with an artist which has expired. We have incurred substantial costs to record that artist. It is unlikely that we will recover these advances if we cannot recoup them from continuing record sales from that artists catalogue.
Consumers use discretionary funds to buy records. An economic slowdown will be bad for business.
Parallax's results of operations will be adversely affected by economic downturns as its business is dependent on discretionary spending, which decreases during periods of economic slowdown.
Parallax competes with other entertainment providers for discretionary spending.
Parallax faces intense competition for discretionary consumer spending from numerous other record companies and other forms of entertainment offered by film companies, video companies and others. In addition, many consumers are downloading records from the internet for free, wholly avoiding payments to record companies like Parallax. If this practice continues and grows, Parallax's prospects for success will be materially hindered.
Parallax has less than 67 shareholders. We anticipate that there will not be, initially, active trading of our stock.
We anticipate that there will not be a public market of any significance for our common stock and no assurance can be given that any trading market of any significance will develop in the foreseeable future, if at all. No assurance can be given that purchasers of common stock will later be able to sell those shares on favorable terms or at all. Parallax is not obligated to create or support a secondary market in our shares.
Parallax has never paid dividends and anticipates not paying dividends for the foreseeable time.
Parallax has never paid dividends on its common stock. Our ability to pay dividends on the shares is limited to our ability to earn sufficient income. Payment of dividends is subject to the discretion of Parallax's Board of Directors. The Board of Directors has not formulated a policy regarding payment of dividends. No dividends will be paid for the foreseeable future.
Substantial Sales Of Our Common Stock Could Cause Our Stock Price To Fall.
If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. As of March 31, 2001 we have outstanding1,091,300 shares of common stock, assuming no conversion of outstanding notes, 399,300 of which are currently eligible for sale in the public market.
Note: In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. In reviewing this document potential investors should keep in mind other possible risks that could be important.
BUSINESS
Parallax Entertainment, Inc. was established and has been in operation for approximately four years. Parallax produces, licenses, acquires, markets, and distributes high quality recorded music for a variety of music formats. Parallax currently produces music for a variety of categories, including, but not limited to, rock, alternative rock, and progressive music under the Parallax Records label.
Parallax also has an Internet division that operates under the name ParallaxMusic.com. This division provides a medium to promote artists worldwide on the Internet.
Our operations have been established by, and include, the following:
o Distribution Channels. During the four years of operation, Parallax has established its distribution channels through Crystal Clear Sound which enjoys national distribution with major retail stores including Warehouse Music (formerly Blockbuster Music), Best Buy and Tower Music. Our existing revenue is derived from its distribution sales via Crystal Clear Sound.
o Record Production. Parallax has produced five records. Two of those records are by artists currently under contract with Parallax. The additional records or masters are property of Parallax and comprise back catalogue that Parallax stocks and sells.
o Internet Sales. In May 1999, we began distributing Parallax records via a link on the internet website "Amazon.com."
o Artist Membership Sales. ParallaxMusic.com offers a micropage to subscribing artists for a yearly fee which provides them exposure and facilitates online sales of members' recorded music and logo merchandise. In addition to the membership fee Parallax also receives a commission on those sales.
o Production and Public Relations. Parallax has secured production facilities and production personnel. In addition, our operations consist of creating product awareness and enhancing public relations. Parallax has three employees.
Bands currently under contract with Parallax are: (i)Track 10, (ii) Tek
3 , (iii) Hellafied Funk Crew, and (iv) Novachrome . Pursuant to recording
contracts between a record label, such as Parallax, and a band, the record label
acquires the right to market the music recorded by the bands. A record label
packages, promotes and sells pre-recorded music. In some cases, the record label
locates and acquires an artist, assists with the production of a record and,
finally, sells the product. A variety of different terms and provisions may be
included in each recording contract. In any event, the recording contracts do
not create either an employee-employer relationship or an agent or client
relationship between Parallax and the band. Thus, the band contracts with
Parallax may be viewed as assets. In addition, although not reflected in our
financial statements, we own the intellectual property rights of the five albums
produced and sold to date.
Parallax specializes in markets that we believe, based on our own experience, industry sources, and census data, offer growth and profit potential. Parallax primarily targets alternative rock music as such a market. While we project our primary sales to be in the alternative rock music market, Parallax also expects other markets to account for a significant percentage of its net revenues.
Our strategy for growth in the recorded music business is based on: (i)
selling diversified recorded music offerings in formats with growth potential;
(ii) introducing records by established artists with a history of successful
releases; and (iii) acquiring master recordings and music publishing rights from
other record companies at attractive prices.
Parallax expects to derive its income from a variety of sources, all of which are related to the production and distribution of their recorded music and ParallaxMusic.com membership sales and commissions. We take a hands on approach as an executive producer in overseeing the production of a record from start to finish which includes selection of artist's material, engaging a musical producer and or engineer, obtaining studio time, mastering recordings, and designing artwork and packaging for the finished product. Parallax distributes its records via a network of independent distributors. As a function of distributing a record, Parallax produces and promotes concerts and live shows featuring our artists. We do not represent artists in a management capacity, but do provide advice and guidance which is to the mutual benefit of the artists and the label. Parallax also derives revenue from the design, manufacture and sale of merchandise, including clothing and collectibles, via licensing agreements with our artists. As an additional potential form of revenue, we may be engaged in licensing activities involving the granting of rights to third parties in the master recordings and compositions we own.
ParallaxMusic.com
Our website, ParallaxMusic.com, serves as a promotional vehicle for musicians via the Internet. The service provided by Parallax will be available to artists worldwide and will not be limited just to artists affiliated with Parallax Records. ParallaxMusic.com will provide services for artists including but not limited to individual website accessible through ParallaxMusic.com. The ParallaxMusic.com website will provide information to record labels, booking agents, management companies, and entertainment related service companies that seek information or services of musicians. Artists will pay a fee based on the extent of the package provided by ParallaxMusic.com.
o Parallax Records Promotes ParallaxMusic.com. Parallax believes that the existing record label division will serve as a conduit and advertising vehicle for ParallaxMusic.com due to the growing popularity of Parallax Records and its current artists. ParallaxMusic.com will be promoted through a variety of vehicles to create an awareness in the music community. Product sold and distributed through Parallax Records will include informational booklets and the web address for ParallaxMusic.com. Parallax Records will distribute information about ParallaxMusic.com utilizing their signed artists as they tour nationally or internationally. This information will be in the form of booklets, banners, and occasionally the inclusion of ParallaxMusic.com information in radio commercials. Parallax believes that this form of grass roots promotion will be very effective in reaching the prospective acts that will utilize these services.
o Artists' Submissions to Parallax Records. Parallax Records receives numerous submissions from artists from a variety of genres and geographical locations interested in obtaining recording contracts from the record label. Due to budget limitations and obligations to current artists, it is unlikely that Parallax can sign additional artists in the immediate future. The other hopefuls are informed either verbally or by mail that we cannot offer them a recording contract. Parallax intends to use this frequent contact with the artists that are not accepted by the label to inform them about ParallaxMusic.com. If the artist elects to list with ParallaxMusic.com, the services provided can assist them in finding other prospective record labels, management, booking agencies, and other entertainment industry related music companies. It will also serve as a database for Parallax Records to contact the artist in the event that there is a future opportunity for the artist with the label.
o Promotions and Incentive Programs. ParallaxMusic.com will use contests, special events and product giveaways to entice prospective artists to join the ParallaxMusic.com website. Referral fee and commission programs will be implemented to reward members of ParallaxMusic.com for bringing additional members to the website.
The ParallaxMusic.com website will generate revenue for Parallax by:
o Membership Fees. Artists will pay a membership fee in return for posting their information on the ParallaxMusic.com website. A variety of packages starting at $100.00 are available to artists.
o Target Market Information Sales. Parallax intends to sell information gathered on its website database. Parallax believes this target market information will be in great demand by music industry concerns and other companies outside the music or entertainment industries.
o Web Advertisement. Parallax intends to sell space on the ParallaxMusic.com website in the form of paid links and banner advertisements to various entities wishing to advertise to the musically oriented target market on the Internet.
The ParallaxMusic.com website will work in conjunction with Parallax Records in a symbiotic fashion. Parallax believes that the record label division will serve as a dynamic promotional vehicle for the website and conversely, the website will generate significant revenue for us. The website will also give Parallax Records a powerful, low cost tool for seeking, recruiting, and scouting new artists.
The ParallaxMusic.com website officially started in September, 2000. However to date, it has not generated any significant revenue.
Competition
The music industry is highly competitive and comprised of approximately six major recorded music companies which dominate the 12 to 14 billion dollar recording industry along with their subsidiary labels: (1) Time/Warner; (2) Sony Music Group; (3) Bertelsmann Music Group; (4) Polygram; (5) Thorn-EMI; and (6) Universal Records Group. In addition, there are many smaller independent labels. In Texas alone there are approximately 500 independent labels.
We believe our principal competitors are other independent labels and music related websites. Many of the competing labels are larger than Parallax and have greater financial resources and distribution capabilities. We anticipate that competition for sales of recordings, merchandise and live show tickets will be based almost entirely upon the popularity of the artist and the particular recording. The number of units sold depends upon the demand for a particular recording. Similarly, sales prices for merchandising of clothing and collectibles are set at levels within the industry norm and the volume determined by the popularity of the artist. Competition and pricing for the sale of copyrighted works are determined on a case by case basis, also dependent on the popularity of the artist.
Parallax intends to utilize radio promotion, in store point of purchase vehicles, radio advertising and industry media to promote its artists. Parallax anticipates selling products at live concert venues and to utilize independent record promoters to assist in obtaining radio air play in major markets to increase product awareness and sales. Additionally, we intend to work with distributors to implement promotions at retail sites to increase product sales. With respect to our competitors, Parallax has not, and will not, rule out a joint venture with a major label in the event such an arrangement would benefit us financially in the long term.
Introduction To The Artists
We currently have four artists under contract which Parallax believes, based on its experience, third party critics, growing public following, and major label interest are very marketable within their respective genres of music. These artists are Track 10, Tek 3, Hellafied Funk Crew, and Novachrome.
Track 10
Track 10 is a four member band. Track 10's music is best described as alternative rock or pop rock. The band is very young as the oldest member is 21. Parallax believes that this band is marketable because of their youthful image and innovative brand of alternative rock. Track 10's first CD under the Parallax label is scheduled to be released mid-April, 2001.
TEK 3
Tek 3 is a three member band. Tek 3's music is a hybrid of rock, rap, and techno music. Parallax believes that the combination of those three elements makes Tek 3 unique and marketable. Tek 3 is in the studio now recording its debut release on Parallax Records.
Hellafied Funk Crew
The Hellafied Funk Crew is our most developed artist. With an audience located primarily in the Dallas/Fort Worth area of Texas, their popularity is spreading rapidly throughout the Southwest and Midwest. Hellafied Funk Crew is comprised of five members, and their music is a hybrid or fusion involving elements of rap and hip-hop lyrics, funk grooves, and heavy rock guitar sounds. Currently this hybrid of rock and hip-hop is one of the most popular types of music in the rock category. Parallax believes that Hellafied Funk Crew's version of this music is more innovative and appealing than other acts that are now very successful in this genre of music.
Novachrome
Novachrome is a five member band. Novachrome's music is both current and retrospective combining the sounds of today's alternative rock music with elements of the late 1970's and early 1980's punk rock era. Parallax believes this unique combination of guitar driven rock and layered vocal harmonies appeal to today's alternative rock audience.
MARKETING STRATEGIES
Because of our limited resources and the lack of success of the artists we presently have under contract, our marketing strategies have mainly not been implemented. However, if we are able to obtain the necessary financial resources and one of our artists becomes popular, these are the strategies that we intend to utilize.
Conventional Marketing Strategies
Parallax intends to utilize conventional marketing vehicles used by record labels to promote their artists. These vehicles include radio promotion and advertising, print advertising, and music videos.
Radio Promotions
Parallax plans to hire an independent record promoter to promote a selected artist in strategic markets. The record promoter acts as a liaison between Parallax and the program directors at various radio stations. The ultimate goal of a record promoter is to obtain air play for the artist. The industry term for repeat air play is "being in rotation". Once an artist is in rotation in a market, we believe that the continuous exposure when coupled with other marketing strategies, will drive record sales.
Radio Advertising
Parallax may also advertise an artist by purchasing radio spots in various target markets. Many times the product of an artist is advertised in conjunction with a live show by that artist in that market. Parallax has used this strategy in pilot markets and plans to expand this form of advertising to multiple markets.
Print Media
Parallax may elect to promote its artists using various print media. Examples of print media include posters, flyers, stickers, billboards, advertisements in music publications, and advertisements in industry or general publications.
Music Videos
We may elect to promote our artist via music videos. Music videos are an effective tool to introduce a band to the public. Many television shows specialize in music videos such as MTV and VH1. Parallax also anticipates the formation of many Internet video programs as streaming video technology continues to improve. Music videos are a very effective way of introducing the artist's image and music to a large target audience.
Tour Support
Parallax believes, based on its experience, that one of the best marketing strategies to promote an artist is live performances. It is necessary for an artist to tour on a regional or national level to build a following and increase its fan base. Parallax currently assists its artists with tour support and related promotions. Tour support includes paying transportation and lodging costs, artist per diem, promotional expenses, and other related expenses not covered by revenue generated from the live performances.
RETAIL MARKETING
Parallax plans to have a strong product presence in retail stores specializing in music. Management intends to be very creative within the retail outlets to entice potential customers to listen to and ultimately purchase our product.
Point of Sale Displays
We will use large high impact point-of-purchase displays to create in store awareness of our artists. In today's music retail market, almost all retail outlets selling music have listening stations. Listening stations are stereo systems in the store that allow potential customers to listen to product through headphones. Parallax feels that a product presence within the store incorporated with large color displays creates curiosity and will entice store customers to listen to the artist's music in the store at the listening stations. Parallax believes that a reasonable number of these listeners will ultimately purchase the product.
Interactive POP Displays
Parallax is also designing an interactive display system that dispenses product and also allows the retail customer to view still photos, video clips, and listen to sound bytes of the artist or artists. This display system is currently in the development phase. Parallax plans to complete prototypes and test them in select strategic markets to determine their impact on sales. We intend to be the first record label to introduce this interactive display system at a retail level.
INTERNET MARKETING
We believe the advent of the Internet will revolutionize the music industry and greatly benefit independent record labels. Parallax has a website and the web address is www.parallaxrecords.com. In addition, Parallax plans to utilize specific areas of the Internet to promote its artists and products.
Amazon.com
Parallax has a vendor agreement with Amazon.com to sell compact discs via the World Wide Web. Amazon.com is the largest online retailer of books and compact discs. We have a direct link from our web site to Amazon.com to expedite purchases by potential customers. Parallax believes that Amazon.com will alleviate gaps in distribution and serve as a worldwide source and distribution arm for our products.
Broadcast.com
Parallax has and will continue to broadcast selected live performances by its artists via Broadcast.com. Broadcast.com is the world's largest leading aggregation and broadcaster of streaming media programming on the world wide web. Parallax benefits greatly from these live broadcasts as they reach a potential world wide audience. Broadcast.com and Parallaxrecords.com share reciprocal links during live events featuring our artists hosted by Broadcast.com. These links create a pathway for the Broadcast.com listener to purchase products from our online as well as drive an enormous amount of web traffic to our website. Parallax believes that Broadcast.com has a growing audience and will serve as an international promotional tool to introduce our artists worldwide.
Backlog
We have no backlog of written firm orders for products and/or services as of March 31, 2001.
Sales of our records are not seasonal in nature. Typically, sales increase following the release of a new record or a large promotional campaign. Parallax has no backlog. Backlogs are not characteristic of our industry.
Employees
Parallax currently has four employees: (i) Gust C. Kepler, President and Chief Executive Officer, (ii) William R. Kepler, Vice President - Operations, (iii) Jason Abbott, Art Director and Promotions and (iv) Kim Donovan, Controller.
Parallax does not currently offer a 401(k) retirement plan or employee stock options. However, we intend to offer these benefits in the future, as Parallax believes its success is directly tied to its employees and Parallax desires to continue to attract and retain the best available talent in the market. Employee health insurance is not currently paid for by us.
None of our employees are subject to collective bargaining agreements, nor are there any plans for such agreements in the future. In addition, there have been no employee strikes in our history, nor are there any current threats of such strikes.
Property
Parallax leases office space on a month-to-month basis for $1,403 per month from a company owned by the principal shareholder of Parallax. Parallax believes that this arrangement is no less favorable to Parallax than is available from unrelated third parties.
Parallax does not intend to acquire any properties in the immediate future.
Intellectual Property Rights
Our operations are highly dependent upon intellectual property rights to our records and merchandise. Our master recordings are protected by international copyright laws including those in the United States and Texas. Under these laws, master recordings cannot be reproduced without contractual consent from the owners of such property.
Parallax has entered into contracts with the following bands:
Track 10. An Exclusive Recording Artist Agreement dated as of January 20, 1999 by and between Parallax and Joseph J. Donnelly, Joshua J. Sweley, and Kyle W. Van Vleet both individually and jointly, and p/k/a Slappy Yellow (to be known in the future as Track 10) (the "Track 10 Agreement"). The Track 10 Agreement provides that, among other things, Track 10 agrees to produce and deliver to us master recordings comprising sound alone sufficient to comprise one album during the initial period and one album during each of the three option periods. The term of the initial period expired. The three option periods extend the terms of the Track 10 Agreement for further periods commencing upon the expiration of the initial period and expiring twelve (12) months after delivery to Parallax of one album during each of the three option periods. Under the Track 10 Agreement, one album has been completed.
Tek 3 An Exclusive Recording Artist Agreement dated as of November 11, 2000 by and between Parallax and Jamie Coffee, Niel Swanson, Justin Jones individually and jointly, and p/k/a Tek 3 (the "Tek 3 Agreement"). The Tek 3 Agreement provides that, among other things, Tek 3 agrees to produce and deliver to us master recordings comprising sound alone sufficient to comprise one album during the initial period and one additional album during each of the two option periods. The term of the initial period shall expire nine (9) months after delivery to Parallax of one album during the initial period. The two option periods extend the terms of the Tek 3 Agreement for further periods commencing upon the expiration of the initial period and expiring nine (9) months after delivery to Parallax of one additional album during each of the two option periods. Under the Tek 3 Agreement, Tek 3 has begun recording their first record.
Hellafied Funk Crew. An Exclusive Recording Artist Agreement dated as of February 9, 1997 by and between Parallax and Charles Treadwell, Ryan Pyffer and Bob Kakaha, both individually and jointly, and p/k/a Hellafied Funk Crew (the "HFC Agreement"). The HFC Agreement provides, among other things, that Hellafied Funk Crew agrees to produce and deliver to Parallax master recordings comprising sound alone sufficient to comprise one album during the initial period and one additional album during each of the two option periods. The term of the initial period shall expire nine (9) months after delivery to Parallax of one album during the initial period. The two option periods extend the terms of the HFC Agreement for further periods commencing upon the expiration of the initial period and expiring nine (9) months after delivery to Parallax of one additional album during each of the two option periods. Under the HFC Agreement, one album has been completed and a second one is in progress.
Novachrome. An Exclusive Recording Artist Agreement dated as
of July 31, 1998 by and between Parallax and Johnny Hawkins and Craig
Reeves, both individually and jointly, and p/k/a Novachrome (the
"Novachrome Agreement"). The Novachrome Agreement provides that, among
other things, Novachrome agrees to produce and deliver to Parallax
master recordings comprising sound alone sufficient to comprise one
album during the initial period and one additional album during each of
the two option periods. The term of the initial period shall expire six
(6) months after delivery to Parallax of one album during the initial
period. The two option periods extend the terms of the Novachrome
Agreement for further periods commencing upon the expiration of the
initial period and expiring nine (9) months after delivery to Parallax
of one additional album during each of the two option periods. Under
the Novachrome Agreement, one album has been completed.
REGULATION
Parallax management does not foresee any material effects of federal, state or local regulation on any aspect of Parallax's operations.
MANAGEMENT'S PLAN OF OPERATION
As of the date of this registration statement, we have not raised sufficient funds to implement fully our marketing strategies.
For fiscal year ended December 31, 1999 Parallax incurred a net loss of ($82,385) or ($0.11) per share; and for fiscal year ended December 31, 2000, a net loss of ($570,025) or ($0.68) per share.
As of December 31, 2000, Parallax had a deficit book value of ($68,005) or ($0.08) per share.
We have incurred losses primarily because we have generated very little revenue from record sales or any other source to cover normal operation expenses. In order to address the causes underlying the losses, as an additional potential form of revenue, Parallax may license to third parties the master recordings and compositions it owns. In addition, Parallax intends to differentiate itself in order to effectively compete with those labels which seek only to license or sell rights to the major labels by manufacturing, distributing and promoting products at the retail level. Parallax intends to utilize radio promotion, in store point of purchase vehicles, radio advertising and industry media to promote its artists. Parallax anticipates selling products at live concert venues and to utilize independent record promoters to assist in obtaining radio air play in major markets to increase product awareness and sales. Additionally, Parallax intends to work with distributors to implement promotions at retail sites to increase product sales.
Parallax anticipates having cash flow or liquidity problems in the next 12 months. Parallax may be required to reduce its planned operations if we are unable to raise additional capital. At present, Parallax is not in default or in breach of any lease or any other obligation or indebtedness, except for $28,500 in 18% senior secured convertible notes that are past due and interest has not been paid. However, Parallax has not received any default letters or other communications from the holders of the past due notes. At present, we have no significant amount of trade payables that have not been paid within the stated trade term. Parallax is not presently subject to any unsatisfied judgments, liens or settlement obligations.
If we are unable to raise sufficient working capital of at least $1,500,000 Parallax may reduce its planned operations and implement its further development at a reduced scale and a lesser pace, resulting in smaller sales volumes than currently planned. There can be no assurance that we will be able to raise additional funds on favorable terms, if at all.
MANAGEMENT
Chief Executive Officer:
Name: Gust Charles Kepler
Title: President and Chief Executive Officer
Age: 36
Office Street Address:
14110 N. Dallas Parkway
Suite 130
Dallas, Texas 75240
Telephone No.: (972) 726-9203
Mr. Kepler is the founder, President and Chief Executive Officer of Parallax. Mr. Kepler currently manages all aspects of Parallax including sales, marketing, production, contracts and distribution. Mr. Kepler has extensive knowledge and experience in the music and entertainment industries. Mr. Kepler's involvement in the music industry began in 1977 when he joined his first rock band at age 13. After playing in various bands throughout high school, Mr. Kepler played and produced various projects between 1985 and 1987. Mr. Kepler produced his first complete record for the band Lead in 1994. In 1996, Mr. Kepler founded Parallax, released a retrospective record by Fever In The Funkhouse and released a second complete record by the critically acclaimed artist Reed Easterwood. Mr. Kepler was and still is directly responsible for all production, packaging, marketing and promotion of the Parallax records and compact discs. Mr. Kepler devotes 100% of his time managing Parallax.
Mr. Kepler previously served as President and CEO of Glance Toys, Inc., a Texas corporation and a sport toy company he founded in 1995. In this position, Mr. Kepler was involved in all financial decisions, sales and marketing, product development, oversight of daily operations, the implementation of systems and public relations. Today Mr. Kepler remains a principle of that company. Mr. Kepler has several years experience in positioning, marketing and distributing products to retail stores. Glance Toys, Inc. sells its products to WalMart, Toys-R-Us International, Target and a number of grocery stores, distributors and convenient store chains on a national level.
Prior to his position with Parallax, Mr. Kepler was a managing partner of Gust Properties, a Dallas-based real estate concern.
Mr. Kepler completed High School at Plano Senior High School in 1983 and one year of college at Southwest Texas State University.
Mr. Kepler is the sole director of Parallax.
Mr. Kepler's compensation for the past three years has been :
Year Salary ---- ------ 1998 $0.00 1999 $0.00 2000 $0.00 |
Mr. Kepler has not received any other form of compensation from Parallax.
Parallax does maintain key-man life insurance in the amount of $1,000,000 for Gust Kepler. If Mr. Kepler became unable to serve, then it is most likely that Parallax would wind up its affairs and discontinue operations.
Chief Operating Officer:
Name: William R. Kepler
Title: Vice President - Operations
Age: 30
Office Street Address:
14110 N. Dallas Parkway
Suite 130
Dallas, Texas 75240
Telephone No. (972) 726-9203
As Parallax's Vice President - Operations, Mr. Kepler is responsible for oversight of the daily operations at Parallax Entertainment, Inc. His position entails all aspects of office management, marketing, promotion, and inventory control. He works full time for Parallax.
Mr. Kepler has extensive knowledge of the music and entertainment industries. He obtained a Bachelor of Arts and Science degree in Radio, Television and Film from the University of North Texas. While attending the University of North Texas, William Kepler obtained an internship position at the campus radio station (KNTU). As an intern, William Kepler was exposed to promotional techniques by major record labels and the mechanics employed by a radio station to report and chart music. William Kepler also worked as a booking agent for the Dallas live music venue, The Pound. While working at The Pound, William Kepler gained experience in the live music performance industry including hiring bands, writing contracts, hiring sound personnel and promoting the live shows.
Mr. Kepler also serves as President of Internet Consulting Unlimited, a web- commerce company based in Dallas.
Chief Financial Officer:
Name: Kim Donovan,
Title: Controller
Age: 30
Office Street Address:
14110 N. Dallas Pkwy; Suite 130
Dallas, TX, 75240
Telephone No.: (214) 697-1100
Ms Donovan has been Controller for Parallax Records and Parallax Entertainment, September 1998 to present. Prior to that time she was an independent consultant. As our Controller, Ms. Donovan is responsible for all aspects of accounting.
Education (degrees, schools, and dates): University of Hawaii, B.B.A. in Accounting in May 1994.
PRINCIPAL STOCKHOLDERS
Shares Percent
Class of Owned of
Name Shares Beneficially Class
---- -------- ------------ -------
Gust C. Kepler Common 622,000 56% (1)
William R. Kepler Common 10,000 0.9%
Office Street Address:
14110 N. Dallas Parkway
Suite 130
Dallas, Texas 75240
Officers and Common 632,000 57%
directors (1)
as a group
(2 persons)
------------------------
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(1) Assumes conversion of $28,500 in principal amount of 18% senior convertible notes into 22,800 shares of common stock.
MANAGEMENT RELATIONSHIPS AND CERTAIN TRANSACTIONS
Gust C. Kepler and William R. Kepler are brothers.
Since Parallax's inception, Gust Kepler, its President and principal shareholder, has made non-interest bearing loans to Parallax in the aggregate principal amount of $89,142 for working capital. As of December 31, 2000, Parallax owed a balance of $13,060 to Gust Kepler.
Parallax leases office space on a month-to-month basis for $1,403 per month from a company owned by Mr. Kepler. We believe that this arrangement is no less favorable to Parallax than is available from unrelated third parties.
DESCRIPTION OF COMMON STOCK
Parallax has authority to issue 10,000,000 shares of common stock, par value $0.01 per share. Holders of common stock are entitled to one vote per share and to receive dividends or other distributions when and if declared by the board of directors. As of March 31, 2001, there were 1,091,300 shares of common stock outstanding held by 67 shareholders of record.
MARKET FOR OUR COMMON STOCK
Our common stock is not traded. We have applied to the NASD to have our common stock traded on the OTC Bulletin Board.
As of March 31, 2001, we have 1,091,300 shares of common stock issued and outstanding and held by 67 shareholders of record. Of these 1,091,300 outstanding shares, 399,300 shares could be sold under Rule 144 assuming the requirements of Rule 144 are met.
Holders of restricted securities must comply with the requirements of Rule 144 in order to sell their shares in the open market. In general, under Rule 144 as currently in effect, any affiliate of Parallax and any person (or persons whose sales are aggregated) who has beneficially owned his or her restricted shares for at least one year would be entitled to sell in the open market, within any three-month period, a number of shares that does not exceed the greater of: (i) 1% of the then outstanding shares of Parallax's common stock or (ii) the average weekly trading volume of our common stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain limitations on manner of sale, notice requirements, and availability of current public information about Parallax. Non-affiliates who have held their restricted shares for two years are entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates of Parallax for the three months preceding such sale.
In addition, each of the promoters of Parallax have entered into Lock-In Agreements with Parallax agreeing not to offer, sell, contract to sell or otherwise dispose of any promotional shares of Common Stock, an aggregate of 632,000 shares, for a period of at least two years ending March 1, 2002. Pursuant to the Lock-In Agreements, thereafter, 2.5% of promotional shares held in escrow may be released each quarter pro rata among the promoters, and all remaining promotional shares shall be released from escrow on March 1, 2004.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Articles of Incorporation of Parallax provide that Parallax shall indemnify and hold harmless directors, officers, employees and agents to the extent permitted by the Texas Business Corporation Act and may purchase and maintain liability insurance for such persons. Therefore, we may indemnify our officers, directors, employees and agents against attorneys' fees and other expenses and liabilities they incur to defend, settle or satisfy any civil or criminal action brought against them arising out of their association with or activities on behalf of us unless, in any such action, they are adjudged to have acted with gross negligence or to have engaged in willful misconduct. We may also bear the expenses of such litigation for any such persons upon their promise to repay such sums if it is ultimately determine that they are not entitled to indemnification. Such expenditures could be substantial and may not be recouped, even if it is ultimately determined that they are not entitled to indemnification. Such expenditures could be substantial and may not be recouped, even if we are so entitled. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
RECENT SALES OF UNREGISTERED SECURITIES
From June 1996 through March 1998, we made a private placement offering to 11 accredited investors for $89,500 in principal amount of 12% and 18% senior secured convertible notes. Such notes were issued in exchange for cash, consulting services, and for other services rendered. The sale of these notes were made in reliance upon Section 4(2) of the Securities Act, and Rule 506 pursuant to Regulation D, promulgated thereunder, as an offering only to accredited investors, and Rule 701 which provides for an exemption for offers and sales of securities pursuant to compensatory benefit plans and contracts relating to compensation.
In March, 2000, Parallax made a SCOR offering of 100,000 shares of common stock to 32 investors at a price of $5 per share. 77,850 of these shares were sold for $389,250 in cash to 18 investors (less costs of issue totaling $10,695) and 22,150 shares were sold to 14 investors for $110,750 in services to Parallax. The offering was registered with the Texas Securities Board. Parallax relied on Rule 504 of Regulation D as its exemption from registration under the federal Securities Act of 1933.
In December, 2000, Parallax opened a second SCOR offering of 250,000 shares of common stock to accredited investors at a price of $2.00 per share. Of the 250,000 shares 142,500 shares have been sold and 107,500 shares remain available for sale. This offering was also registered with the Texas Securities Board. Parallax relied on rule 504 of Regulation D as its exemption from the registration requirements of the Act.
INDEX TO EXHIBITS
3.1 Certificate and Articles of Incorporation of Parallax filed
with the Texas Secretary of State.
3.2 Bylaws of Parallax.
10.1 Exclusive Recording Artist Agreement dated as of February 9,
1997 between Parallax and the Hellafied Funk Crew band.
10.2 Exclusive Recording Artist Agreement dated as of October 25,
2000 between Parallax and the Track 10 bank.
10.3 Exclusive Recording Artist Agreement dated as of July 31, 1998
10.4 Exclusive Recording Artist Agreement dated as of November 11,
2000 between Parallax and the TEK3 band.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, hereunto duly authorized.
Parallax Entertainment, Inc.
Date: April 23, 2001 By: /s/ Gust Kepler
-------------------------------------
Gust Kepler
President and Chief Executive Officer
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PARALLAX ENTERTAINMENT, INC.
FINANCIAL STATEMENTS
December 31, 2000 and 1999
with Independent Auditors' Report
PARALLAX ENTERTAINMENT, INC.
INDEX TO AUDITED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.................................................F-2
Balance Sheets at December 31, 2000 and 1999.................................F-3
Statements of Operations for the Years Ended
December 31, 2000 and 1999..........................................F-4
Statements of Changes in Stockholders' Deficit
for the Years Ended December 31, 2000 and 1999......................F-5
Statements of Cash Flows for the Years Ended
December 31, 2000 and 1999..........................................F-6
Notes to Financial Statements................................................F-7
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Parallax Entertainment, Inc.
We have audited the accompanying balance sheets of Parallax Entertainment, Inc. as of December 31, 2000 and 1999 and the related statements of operations, changes in stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Parallax Entertainment, Inc. as of December 31, 2000 and 1999 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's significant operating losses and its working capital deficit and stockholders' deficit raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Jackson & Rhodes P.C.
Dallas, Texas
February 28, 2001
PARALLAX ENTERTAINMENT, INC.
BALANCE SHEETS
December 31, 2000 and 1999
Assets
2000 1999
--------- ---------
Current assets:
Accounts receivable, trade $ 10,500 $ --
Receivables from related parties 10,998 10,399
Advances to bands 44,703 715
Inventory 1,746 2,101
--------- ---------
Total current assets 67,947 13,215
--------- ---------
Furniture and equipment 17,592 7,592
Less accumulated depreciation (7,410) (4,045)
--------- ---------
10,182 3,547
--------- ---------
Other assets:
Deposits 1,317 1,317
--------- ---------
$ 79,446 $ 18,079
========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Bank overdraft $ 1,314 $ 8,936
Accounts payable 41,162 50,294
Accrued expenses 52,915 38,442
Payable to principal stockholder 13,060 51,692
Notes payable 8,500 8,500
Current portion of convertible notes payable 30,500 70,500
--------- ---------
Total current liabilities 147,451 228,364
Convertible notes payable -- 21,000
--------- ---------
Total liabilities 147,451 249,364
--------- ---------
Commitments and contingencies (Note 7) -- --
Stockholders' deficit:
Common stock, $.01 par value, 10,000,000 shares authorized,
888,800 and 740,000 shares issued and outstanding, respectively 8,888 7,400
Additional paid-in capital 781,817 50,000
Accumulated deficit (858,710) (288,685)
--------- ---------
Total stockholders' deficit (68,005) (231,285)
--------- ---------
$ 79,446 $ 18,079
========= =========
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See accompanying notes to financial statements.
PARALLAX ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 2000 and 1999
2000 1999
--------- ---------
Revenues $ 31,430 $ 25,074
--------- ---------
Expenses
Cost of sales 11,483 4,028
Recording costs 19,791 8,485
Selling, general and administrative 375,135 78,526
Debt conversion expense (Note 5) 183,000 --
--------- ---------
Total expenses 589,409 91,039
--------- ---------
Loss from operations (557,979) (65,965)
Interest expense (12,046) (16,420)
--------- ---------
Net loss $(570,025) $ (82,385)
========= =========
Basic loss per common share $ (0.68) $ (0.11)
========= =========
Weighted average number of
common shares outstanding 844,429 740,000
========= =========
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See accompanying notes to financial statements.
PARALLAX ENTERTAINMENT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years Ended December 31, 2000 and 1999
Common Stock Additional
--------------------- Paid-in Accumulated
Shares Par Value Capital Deficit Total
--------- --------- --------- --------- ---------
Balance, December 31, 1998 740,000 $ 7,400 $ -- $(206,300) $(198,900)
Conversion of stockholder advance
to additional paid-in capital -- -- 50,000 -- 50,000
Net loss -- -- -- (82,385) (82,385)
--------- --------- --------- --------- ---------
Balance, December 31, 1999 740,000 7,400 50,000 (288,685) (231,285)
Conversion of notes payable
to common stock 48,800 488 243,512 -- 244,000
Stock issued for services 22,150 221 110,529 -- 110,750
Stock issued for cash 77,850 779 377,776 -- 378,555
Net loss -- -- -- (570,025) (570,025)
--------- --------- --------- --------- ---------
Balance, December 31, 2000 888,800 $ 8,888 $ 781,817 $(858,710) $ (68,005)
========= ========= ========= ========= =========
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See accompanying notes to financial statements.
PARALLAX ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000 and 1999
2000 1999
--------- ---------
Cash flows from operating activities:
Net loss $(570,025) $ (82,385)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 3,365 1,244
Debt conversion expense 183,000 --
Stock issued for services 110,750 --
Changes in assets and liabilities:
Accounts receivable, trade (10,500) --
Receivables from related parties (599) (9,560)
Receivables from band members (43,988) (715)
Inventories 355 276
Prepaid expenses -- 256
Accounts payable (9,132) 24,095
Accrued expenses 14,473 17,999
--------- ---------
Net cash used by operating activities (322,301) (48,790)
--------- ---------
Cash flows from investing activities:
Additions to equipment (10,000) (872)
--------- ---------
Cash flows from financing activities:
Bank overdraft (7,622) 5,352
Proceeds from issuance of common stock 378,555 --
Proceeds from advances from principal stockholder, net (38,632) 33,810
Proceeds from notes payable -- 8,500
Proceeds from convertible notes payable -- 2,000
--------- ---------
Net cash provided by financing activities 332,301 49,662
--------- ---------
Net change in cash and temporary investments -- --
Cash and temporary investments at beginning of year -- --
--------- ---------
Cash and temporary investments at end of year $ -- $ --
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ -- $ --
========= =========
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Non-cash transactions:
During the year ended December 31, 2000, the Company converted $61,000 of
convertible debt into 48,800 shares of common stock.
During the year ended December 31, 1999, the Company converted the shareholder advance of $50,000 into additional paid-in capital.
See accompanying notes to financial statements.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
December 31, 2000 and 1999
1. Summary of Significant Accounting Policies
Description of Business
Parallax Entertainment, Inc. (the Company) is a Texas corporation formed on October 11, 1996. The Company's business plan is to produce, license, acquire, market and distribute high quality recorded music for a variety of music formats, including, but not limited to, rock, alternative rock and progressive music under the Parallax Records label.
Basis of Presentation
The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company is reporting cumulative net losses since inception of $858,710 as of December 31, 2000. The following is a summary of management's plan to raise capital and generate additional operating funds.
The Company successfully raised approximately $378,555 prior to December 31, 2000. Currently, the Company has a second SCOR offering of 250,000 shares of common stock available to accredited investors at a price of $2.00 per share. Of the 250,000 shares 142,500 have been sold totaling an additional $285,000 in capital paid to the Company as of March 31, 2001. There are presently 107,500 shares remaining available for sale. This offering was registered with the Texas Securities Board. Parallax relied on rule 504 of Regulation D as its exemption from the registration requirements of the Act.
The Companies success relies on its ability to derive revenues from the sale of the recorded music of its signed artists and memberships to its website. If the Company is unable to do this through the Management's Plan of Operation it will not be successful. The Company may be required to reduce its planned operations if it is unable to raise additional capital of at least $1,500,000. Without additional capital the company will have to implement its further development at a reduced scale and a lesser pace, resulting in a smaller sales volume than currently planned. There can be no assurance that the Company will be able to raise additional funds on favorable terms, if at all.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
1. Summary of Significant Accounting Policies (Continued)
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term investments with original maturities of three months or less to be cash equivalents.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term investments with original maturities of three months or less to be cash equivalents.
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years.
Inventory
Inventory consists of promotional merchandise and compact disk of music by the Company's recording artists and is recorded at the cost (lower of first-in, first-out) or market value.
Advertising Expense
Advertising expense is charged to expense in the year incurred. Total advertising and promotional expense for the years ended December 31, 2000 and 1999, amounted to $55,486 and $18,313, respectively.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
1. Summary of Significant Accounting Policies (Continued)
Advance Royalties and Recording Costs
Advance royalties and recording costs have been charged to expense as incurred because, based on performance and current popularity of the Company's artists, it is not possible to determine if the advances and recording costs will be collectible from future royalties.
Net Loss Per Common Share
Basic net loss per share is computed using the weighted average shares outstanding during each period. Diluted loss per share is not presented because the effect of conversion of the notes payable would be antidilutive.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 utilizes the asset and liability method of computing deferred income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
2. Related Parties
The Company leases office space on a month-to-month basis from a company owned by the principal stockholder of the Company. Rent expense amounts to $1,403 per month.
Related party receivable and payables are non-interest bearing advances.
3. Income Taxes
The Company has net operating loss carryforwards for tax purposes of approximately $665,000 at December 31, 2000. This carryforwards will expire, if not utilized, in 2011-2015. At December 31, 2000 and 1999, the Company had a deferred tax asset of $225,000 and $92,000, respectively, attributable to the loss carryforward which was offset entirely by a valuation allowance of an equal amount.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
4. Notes Payable
In February 1999, the Company borrowed $8,500 from an investor in accordance with a note that is unsecured, earns interest at 12 percent per year and was due on February 15, 2000. At December 31, 2000, the note is unpaid.
5. Convertible Notes Payable
The convertible notes payable earn interest at 12 percent and were due at various dates through December 29, 1999. The interest rates on the convertible notes increased to 18% after the notes became past due. The notes are collateralized by the Company's inventory and the Company's royalty, publishing, copyright, trademark, mechanical, reproduction or other rights the Company may have in and to any song, record, album, lyrics, music or combination thereof of any artist, group or band of musicians.
The notes are convertible at the option of the holders into common stock of the Company at the rate of $5.00 principal amount of note for four shares of common stock. The election to convert must be made on or before approximately October 18, 2000. During the year ended December 31, 2000, the Company converted $61,000 into 48,800 shares of common stock. The Company recorded $183,000 in expense because the Company changed the conversion rate from $5 per share, which was the fair market value, to $1.25 per share.
As of December 31, 2000 and 1999, the Company was delinquent in paying interest on all of the notes and all of the notes were past due.
At December 31, 1999, one of the notes, in the amount of $15,000, was payable to a relative of the principal stockholder of the Company and the Company had signed agreements to convert $21,000 of notes into common stock.
6. Stockholders' Equity
During the year ended December 31, 2000, the Company sold 77,850 shares of its previously unissued common stock at $5 per share pursuance to a "Small Business Offering Registration" (Form U-7). Offering costs were approximately $10,000. The proceeds of this offering were used to reduce accounts payable and other current liabilities and to provide working capital.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
6. Stockholders' Equity (Continued)
During the year ended December 31, 2000, the Company issued 22,150 shares of common stock for services. The shares were valued at $5 per share, the price that which the Company was issuing shares in the offering above.
7. Commitments and Contingencies
Lease Commitments
The Company leases its office under terms of an operating lease, which expires on September 30, 2002. Rent expense amounted to $18,045 and $10,950. Minimum lease commitments as of December 31, 2000 are as follows:
Year ending
December 31, Amount
------------ ----------
2001 17,340
2002 13,005
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Recording Agreements
The Company has entered into an Exclusive Recording Artist Agreement with three artists. These agreements provide that the Company will advance the recording costs of music albums and, in some instances, will make advances in excess of recording costs. Advances are recoupable against royalties owed to artists. Royalties generally vary between 16 percent and 22 percent of wholesale prices received from the sale of music products. The contracts provide the Company the option of extending the term of the agreements. Management of the Company is currently evaluating its options under the agreements.
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in deposits with major banks. Certain deposits, at times, are in excess of federally insured limits. The Company has not incurred losses related to its cash.
PARALLAX ENTERTAINMENT, INC.
Notes to Financial Statements
7. Commitments and Contingencies (Continued)
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or liabilities including cash and cash equivalents, receivables and accounts payable approximate carrying value due to the short-term maturity of the instruments. The fair value of notes payable approximates carrying value based on their effective interest rates compared to current market rates.
[GRAPHIC OMITTED]
The State of Texas
SECRETARY OF STATE
IT IS HEREBY CERTIFIED that the attached is/are true and correct copies of the following described document(s) on file in this office:
PARALLAX ENTERTAINMENT, INC.
CHARTER #1418309-00
ARTICLES OF INCORPORATION OCTOBER 10, 1996
IN TESTIMONY WHEREOF, I have herunto signed
my name officially and caused to be
impressed hereon the Seal of State at my
office in the City of Austin, on July 7,
1998.
[GRAPHIC OMITTED]
/s/: Alberto R. Gonzales
--------------------------------------------
Alberto R. Gonzales
Secretary of State
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ARTICLES OF INCORPORATION
of
PARALLAX ENTERTAINMENT, INC.
I, the undersigned natural person, acting as an incorporator of a corporation (hereinafter referred to as the "Corporation") under the Texas Business Corporation Act, as amended (the "TBCA"), do hereby adopt the following Articles of Incorporation for the Corporation:
The name of the Corporation is Parallax Entertainment, Inc.
The Corporation's period of duration is perpetual.
The purpose for which the Corporation is organized is to transact any and all lawful business for which corporations may be incorporated under the TBCA.
No holders of any shares of stock (whether now or hereafter authorized)
of the Corporation shall, as such holders, have any preemptive or preferential
right to receive, purchase, or subscribe for (i) any unissued or treasury shares
of any class of stock (whether now or hereafter authorized) of the Corporation;
(ii) any obligations, evidence of indebtedness, or other securities of the
Corporation, whether convertible into or exchangeable for, or carrying or
accompanied by any rights to receive, purchase, or subscribe for, any such
unissued or treasury shares; (iii) any right of subscription for or to receive,
or any warrant or option for the purchase of any of the foregoing securities; or
(iv) any other securities that may be issued or sold by the Corporation, other
than such right or rights (if any) as the Board of Directors of the Corporation,
in its sole and absolute discretion, may determine at any time or from time to
time.
The Corporation is authorized to issue one class of shares to be designated as "common." The Corporation is authorized to issue a total number of 10,000,000 common shares, and the par value of each such share is $0.01.
The Corporation will not commence business until it has received consideration for the issuance of its stock amounting to $1,000.00 in value consisting of money, labor done, or property actually received, or any combination thereof.
Except where otherwise provided in these Articles of Incorporation or Bylaws of the Corporation, the holders of the common stock shall have exclusive voting rights and powers at shareholders' meetings, including the exclusive right to notice of such shareholders' meetings.
Cumulative voting for the election of directors is prohibited.
The Board of Directors of the Corporation shall adopt the initial Bylaws of the Corporation and may thereafter alter, amend, or repeal the Bylaws of the Corporation or may adopt new Bylaws, subject to the shareholders' concurrent right to alter, amend, or repeal the Bylaws or to adopt new Bylaws. Any or all Bylaws altered, amended, repealed, or adopted by the shareholders shall not be altered, amended, re-enacted or repealed by the Board of Directors of the Corporation.
Any action of the Corporation that, under the provisions of the TBCA, is required to be authorized or approved by the holders of two-thirds, or any other specified fraction that is in excess of one-half or any specified percentage that is in excess of 50%, of the outstanding shares of the Corporation shall, notwithstanding any such provision of the TBCA, be deemed effectively and properly authorized or approved if authorized or approved by the vote of the holders of more than 50% of the outstanding shares entitled to vote thereon represented in person or by proxy at an annual or special shareholders' meeting. Nothing contained in this Article Ten is intended to require shareholder authorization or approval of any action of the Corporation whatsoever unless such authorization or approval is specifically required by the other provisions of these Articles of Incorporation, the Bylaws of the Corporation, or the TBCA. Any action that may be taken, or is required by the TBCA to be taken, at any annual or special meeting of the shareholders of the Corporation may be taken without a meeting, without prior notice, and without a vote if a written consent or consents setting forth the action so taken shall be signed by the holder or holders of shares having not less than the minimum number of votes that otherwise would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and all of such shares were voted.
A contract or transaction between the Corporation and any other Person (as used herein the term "Person" shall mean an individual, firm, trust, estate, partnership, joint venture, association, corporation, political subdivision or instrumentality, or other entity) shall not be affected or invalidated by the fact that (i) any director, officer, or security holder of the Corporation is also a party to, or has a direct or indirect interest in, such contract or transaction; or (ii) any director, officer, or security holder of the Corporation is in any way connected with such other Person or with any of its officers or directors.
Every person who may become a director of the Corporation is hereby relieved from any liability that might otherwise exist from contracting with the Corporation for the bewnefit of himself or herself or of any Person in which he or she has any interest, whether or not the interested director's presence at a meeting or his or her vote or votes were necessary to obligate the Corporation in such transaction, if such interest shall have been disclosed to, or known to, the Corporation's directors or shareholders who shall have approved such transaction.
The Corporation shall indemnify and hold harmless directors, officers, employees, and agents of the Corporation, and may purchase and may maintain liability insurance for such persons, as and to the extent permitted by the TBCA.
The Corporation is authorized to purchase, directly or indirectly, its own shares of stock to the extent of the unreserved and unrestricted surplus available therefor, without submitting such purchase to a vote of the shareholders of the Corporation.
The Board of Directors is expressly authorized, without the consent of the shareholders, except so far as such consent is herein or by law required, to issue and sell or otherwise dispose of, for any purpose, the Corporation's bonds, notes, debentures, or other securities or obligations, upon such terms and for such consideration as the Board of Directors shall deem advisable, and to authorize and cause to be executed mortgages, pledges, charges, and liens upon all or part of the real and personal property rights, interests, and franchises of the Corporation, including contract rights, whether at the time owned or thereafter acquired.
The address of the initial registered office of the Corporation is 12830 Hillcrest, Suite 111, Dallas, Texas 75230, and the name of its initial registered agent at such address is Gust C. Kepler.
The number of directors constituting the initial Board of Directors of the Corporation is one, and the name and address of the person who is to serve as director until the first annual meeting of shareholders, and until his successor is elected and qualified, is:
NAME ADDRESS
---- -------
Gust C. Kepler 12830 Hillcrest
Suite 111
Dallas, Texas 75230
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The name and address of the incorporator is:
NAME ADDRESS
---- -------
Ray A. Balestri Block & Balestri, P.C.
15851 Dallas Parkway
Suite 1020
Dallas, Texas 75248
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IN WETNESS WHEREOF, I have executed this document as of the 10'(degree)
day of October, 1996.
/s/: Ray A. Balestri ----------------------------- Ray A. Balestri |
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on the 9th day of October,
1996, by RAY A. BALESTRI.
/s/:Gayla Stewart
(SEAL) -----------------------------
GAYLA STEWART Notary Public, State of Texas
MY COMMISSION EXPIRES
September 23, 1998
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UNANIMOUS WRITTEN CONSENT OF DIRECTORS
in lieu of the
ORGANIZATIONAL MEETING
of
I, the undersigned, as the director named in the Articles of Incorporation of Parallax Entertainment, Inc., a Texas corporation (hereinafter referred to as the "Corporation"), hereby waive notice of the tune, place, date, and purpose of the organizational meeting of the Board of Directors of the Corporation and consent to and approve the following resolutions and each and every action effected thereby:
RESOLVED, that the Articles of Incorporation that was submitted to and reviewed by the director of the Corporation and filed with and approved by the Secretary of State of the State of Texas is hereby accepted, ratified, and adopted as the Articles of Incorporation of the Corporation, and the Secretary of the Corporation is hereby directed to insert a copy of such Articles of Incorporation in the minute book of the Corporation.
RESOLVED, that the Bylaws for the regulation of the affairs of the Corporation that were submitted to and reviewed by the director of the Corporation are hereby adopted as the Bylaws of the Corporation, and the Secretary of the Corporation is directed to insert a copy of the Bylaws in the minute book of the Corporation.
RESOLVED, that the minute book that was submitted to and reviewed by the director of the Corporation is approved and adopted as the minute book of the Corporation, and the Secretary of the Corporation is directed to authenticate the minute book, to retain custody thereof, and to insert therein minutes of any meeting or other proceeding (or written waivers and consents to any such meeting or proceeding) of the shareholders and/or director of the Corporation and other appropriate records of the Corporation.
RESOLVED, that the corporate seal, an impression of which appears in the margin hereof is hereby approved and adopted as the form of seal of the Corporation, provided, however, that the use of such seal shall not be required upon, and shall not affect the validity o& any instrument issued or executed by the Corporation.
RESOLVED, that the form of certificate representing the shares of common stock, $0.01 par value per share, of the Corporation that was submitted to and reviewed by the director of the Corporation, is hereby approved and adopted as the form of certificate representing such shares, and the Secretary of the Corporation is instructed to insert a specimen of the certificate in the minute book of the Corporation.
RESOLVED, that the following individuals are hereby elected to the offices of the Corporation set forth opposite their names, to serve as such until the first meeting of the director of the Corporation following the first annual meeting of the shareholders of the Corporation and their successors are elected and qualified, or until their removal from office:
Gust C. Kepler Chairman of the Board, President,
Chief Executive Officer, and Treasurer
William R Kepler Vice President and Secretary
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RESOLVED, that until further action by the Board of Directors of the Corporation, the determination of the amount of salaries and any other compensation to be paid to the officers of the Corporation for their services is to be made by the President of the Corporation.
RESOLVED, that the President is authorized to secure from such bank(s) as he deems appropriate printed certificates of resolutions prepared by such bank(s) authorizing officers to borrow and secure payment of obligations and/or designating said bank(s) as depository or depositories of the Corporation, to complete such certificates of resolutions in the manner prescribed by the bank(s), and to present such certificates of resolutions to the Board of Directors of the Corporation; and
RESOLVED, that when and if each of such certificates of resolutions has been signed by the director of the Corporation and dated, the Secretary is directed to insert such certificate of resolutions in the minute book of the Corporation, at which time the resolutions set out within such certificate will be considered adopted by consent of the Board of Directors.
RESOLVED, that until further action by the Board of Directors or the shareholders of the Corporation, one director shall constitute the entire Board of Directors of the Corporation, until the next annual meeting of the shareholders of the Corporation and their successor, if any, is elected and qualified or until their removal from the Board of Directors.
RESOLVED, that the annual meeting of the shareholders of the Corporation shall be held at a time and place to be set by the Board of Directors.
RESOLVED, that, until further action of the Board of Directors of the Corporation, the fiscal year of the Corporation shall be the calendar year.
RESOLVED, that the President is hereby authorized to pay all charges and expenses incident to and necessary for the organization of the Corporation and to reimburse any person who has made any disbursements therefor.
RESOLVED, that the President is hereby authorized, empowered, and directed to sign, execute, certify to, verify, acknowledge, deliver, accept, file, and record any and all such instruments, agreements, and documents, and to take, or cause to be taken, any and all such action, in the name and on behalf of the Corporation or otherwise, as he shall, in his sole discretion, deem necessary or desirable and in the best interest of the Corporation in order to effect the purposes of the foregoing resolutions, and such officer's signature, or such actions taken by such officer, shall be conclusive evidence that such officer did deem the same to be necessary or desirable and in the best interest of the Corporation in order to effect such purposes, and the attestation of any instrument, agreement, or document by the Secretary of the Corporation shall not be required for the validity thereof.
EXECUTED as of the 1st day of January, 1997.
/s/: Gust C. Kepler
----------------------------
Gust C. Kepler Sole Director
[Seal]
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BYLAWS
of
PARALLAX ENTERTAINMENT, INC.
A Texas Corporation
ARTICLE ONE: OFFICES......................................................... 1
1.01 Registered Office and Agent.................................. 1
1.02 Other Offices................................................ 1
ARTICLE TWO: SHAREHOLDERS.................................................... 1
2.01 Annual Meeting............................................... 1
2.02 Special Meetings............................................. 1
2.03 Place of Meetings; Unanimous Written Consent................. 1
2.04 Notice....................................................... 2
2.05 Voting List.................................................. 2
2.06 Voting of Shares............................................. 2
2.07 Quorum....................................................... 2
2.08 Majority Vote; Withdrawal of Quorum.......................... 3
2.09 Method of Voting; Proxies.................................... 3
2.10 Closing of Transfer Books; Record Date....................... 3
2.11 Presiding Officials at Meetings.............................. 4
ARTICLE THREE: DIRECTORS..................................................... 4
3.01 Management................................................... 4
3.02 Number; Election; Term; Qualification........................ 4
3.03 Removal...................................................... 4
3.04 Change in Number............................................. 4
3.05 Vacancies.................................................... 5
3.06 Place of Meetings............................................ 5
3.07 First Meetings............................................... 5
3.08 Regular Meetings............................................. 5
3.09 Special Meetings............................................. 5
3.10 Quorum; Majority Vote........................................ 5
3.11 Procedure; Minutes........................................... 6
3.12 Presumption of Assent........................................ 6
3.13 Compensation................................................. 6
ARTICLE FOUR: COMMITTEES..................................................... 6
4.01 Designation.................................................. 6
4.02 Number; Qualification; Term.................................. 6
4.03 Authority.................................................... 6
4.04 Committee Changes............................................ 7
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4.05 Regular Meetings............................................. 7
4.06 Special Meetings............................................. 7
4.07 Quorom; Majority Vote........................................ 8
4.08 Minutes...................................................... 8
4.09 Compensation................................................. 8
4.10 Responsibility............................................... 8
ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS........................ 8
5.01 Notice....................................................... 8
5.02 Waiver of Notice............................................. 9
5.03 Telephone and Similar Meetings............................... 9
5.04 Action Without Meeting....................................... 9
ARTICLE SIX: OFFICERS AND OTHER AGENTS....................................... 9
6.01 Number; Title; Election; Term................................ 9
6.02 Removal...................................................... 10
6.03 Vacancies.................................................... 10
6.04 Authority.................................................... 10
6.05 Compensation................................................. 10
6.06 Chairman of the Board........................................ 10
6.07 President.................................................... 10
6.08 Vice Presidents.............................................. 11
6.09 Treasurer.................................................... 11
6.10 Assistant Treasurers......................................... 11
6.11 Secretary.................................................... 11
6.12 Assistant Secretaries........................................ 11
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS................................. 12
7.01 Certificated and Uncertificated Shares....................... 12
7.02 Certficates for Certificated Shares.......................... 12
7.03 Issuance..................................................... 12
7.04 Consideration for Shares..................................... 12
7.05 Lost, Stolen, or Destroyed Certificates...................... 13
7.06 Transfer of Shares........................................... 13
7.07 Registered Shareholders...................................... 13
7.08 Legends...................................................... 14
-ii-
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ARTICLE EIGHT: MISCELLANEOUS PROVISIONS...................................... 15
8.01 Dividends.................................................... 15
8.02 Reserves..................................................... 15
8.03 Books and Records............................................ 15
8.04 Fiscal Year.................................................. 15
8.05 Seal......................................................... 15
8.06 Resignation.................................................. 15
8.07 Securities of Other Corporations............................. 16
8.08 Amendment.................................................... 16
8.09 Invalid Provisions........................................... 16
8.10 Headings..................................................... 16
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BYLAWS
of
PARALLAX ENTERTAINMENT, INC.
A Texas Corporation
1.01. Registered Office and Agent. The registered office and registered agent of Parallax Entertainment, Inc. (hereinafter referred to as the "Corporation") shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of Texas.
1.02. Other Offices. The Corporation may also have offices at such other places, both within and without the State of Texas, as the Board of Directors may from time to time determine or the business of the Corporation may require.
2.01. Annual Meetings. An annual meeting of the shareholders of the Corporation shall be held during each calendar year on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, and if a legal holiday, then on the next business day following, at the time specified in the notice of the meeting. At such meeting, the shareholders shall elect directors and transact such other business as may properly be brought before the meeting.
2.02. Special Meetings. A special meeting of the shareholders may be called at any time by the President, the Board of Directors, or the holders of not less than 10 percent of all shares entitled to vote at such meeting. Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting.
2.03. Place of Meetings: Unanimous Written Consent. The annual meeting
of shareholders may be held at any place within or without the State of Texas as
may be designated by the Board of Directors. Special meetings of shareholders
may be held at any place within or without the State of Texas as may be
designated by the person or persons calling such special meeting as provided in
Section 2.02. If no place for a meeting is designated, it shall be held at the
registered office of the Corporation. A written instrument or instruments signed
by all of the shareholders of the Corporation shall be sufficient to approve or
ratify any business or action otherwise required to be voted upon at, and may be
executed in lieu of, an annual or special shareholders' meeting.
2.04. Notice. Written or printed notice stating the place, day, and hour of each meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 days or more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the person calling the meeting, to each shareholder of record entitled to vote at such meeting.
2.05. Voting List. At least 10 days before each meeting of shareholders, the Secretary shall prepare a complete list of shareholders entitled to vote at such meeting, arranged in alphabetical order, including the address of each shareholder and the number of voting shares held by each shareholder. For a period of 10 days prior to such meeting, such list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder during usual business hours. Such list shall be produced at such meeting, and at all times during such meeting shall be subject to inspection by any shareholder. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or stock transfer books.
2.06. Voting of Shares. Treasury shares, shares of the Corporation's own stock owned by another corporation the majority of the voting stock of which is owned or controlled by the Corporation, and shares of the Corporation's own stock held by the Corporation in a fiduciary capacity shall not be shares entitled to vote or to be counted in determining the total number of outstanding shares of the Corporation. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without transfer of such shares into his or her name so long as such shares form a part of the estate and are in the possession of the estate being served by him or her. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, only after the shares have been transferred into his or her name as trustee. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without transfer of such shares into his or her name if authority to do so is contained in the court order by which such receiver was appointed. Shares standing in the name of another domestic or foreign corporation of any type or kind may be voted by such officer, agent, or proxy as the bylaws of such corporation may provide or, in the absence of such provision, as the board of directors of such corporation may by resolution determine. A shareholder whose shares are pledged shall be entitled to vote such shares until they have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote such shares.
2.07. Quorum. The holders of a majority of the outstanding shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at any meeting of shareholders, except as otherwise provided by law, the Articles of Incorporation, or these Bylaws. If a quorum shall not be present or represented at any meeting of shareholders, a majority of the shareholders entitled to vote at the meeting, who are present in person or represented by proxy, may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At any reconvening of an adjourned meeting at which a quorum shall be present or represented, any business may be transacted that could have been transacted at the original meeting if a quorum had been present or represented.
2.08. Majority Vote: Withdrawal of Quorum. If a quorum is present in person or represented by proxy at any meeting, the vote of the holders of a majority of the outstanding shares entitled to vote, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of law, the Articles of Incorporation, or these Bylaws a different vote is required, in which event such express provision shall govern and control the decision of such question. The shareholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding any withdrawal of shareholders that may leave less than a quorum remaining.
2.09. Method of Voting; Proxies. Every holder of record of common stock of the Corporation shall be entitled at every meeting of shareholders to one vote on each matter submitted to a vote for every share of common stock standing in his name on the original stock transfer books of the Corporation, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation. Such stock transfer books shall be prima facie evidence as to the identity of shareholders entitled to vote. At any meeting of shareholders, every shareholder having the right to vote may vote either in person or by a proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. If no date is stated on a proxy, such proxy shall be presumed to have been executed on the date of the meeting at which it is to be voted. Each proxy shall be revocable unless expressly provided therein to be irrevocable or unless otherwise made irrevocable by law.
2.10. Closing of Transfer Books: Record Date. For the purpose of determining shareholders entitled to notice of or to vote at, any meeting of shareholders or any reconvening thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books of the Corporation shall be closed for a stated period but not to exceed in any event 50 days. If the stock transfer books are closed for the purpose of determining shareholders entitled to notice of, or to vote at, a meeting of shareholders, such books shall be closed for at least 10 days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 50 days and, in case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and if no record date is fixed for the determination of shareholders entitled to notice of, or to vote at, a meeting of shareholders or entitled to receive payment of a dividend, the date on which the notice of the meeting is to be mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders.
2.11. Presiding ' Officials at Meetings. The President shall preside at, and the Secretary shall prepare minutes of each meeting of shareholders, and in the absence of either such officer, his other duties shall be performed by some person appointed at the meeting.
3.01. Management. The business and affairs of the Corporation shall be managed by the Board of Directors, and subject to the restrictions imposed by law, the Articles of Incorporation, or these Bylaws, the Board of Directors may exercise all the powers of the Corporation.
3.02. Number: Election: Term; Qualification. The first Board of Directors shall consist of the number of directors named in the Articles of Incorporation. Thereafter, the number of directors that shall constitute the entire Board of Directors shall be determined by resolution of the Board of Directors at any meeting thereof or by the shareholders at any meeting thereof, but shall never be less than one. At each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting of shareholders and until their successors are elected and qualified. No director need be a shareholder, a resident of the State of Texas, or a citizen of the United States.
3.03. Removal. At any meeting of shareholders called expressly for that purpose, any director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote on the election of directors.
3.04. Chance in Number. No decrease in the number of directors constituting the entire Board of Directors shall have the effect of shortening the term of any incumbent director. In the case of any increase in the number of directors, the directorships to be filled by such increase may be filled by (a) the Board of Directors for a term of office continuing only until the next election of one or more directors by the shareholders, provided, however, that the Board of Directors may not fill more than two such directorships during the period between any two successive annual meetings of shareholders; or (b) the shareholders at any annual or special meeting of the shareholders.
3.05. Vacancies. Any vacancy occurring in the Board of Directors may be filled by (a) the shareholders at any annual or special meeting of shareholders; or (b) the affirmative vote of a majority of the remaining directors, regardless of whether such majority may constitute less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected to serve for the unexpired term of his predecessor in office.
3.06. Place of Meeting. The Board of Directors may hold its meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, including by telephonic or other electronic method of communication, within or without the State of Texas as the Board of Directors may from time to time determine.
3.07. First Meeting. Each newly elected Board of Directors may hold its first meeting, if a quorum is present, for the purpose of organization and the transaction of business immediately after and at the same place as the annual meeting of shareholders, and no notice of such meeting shall be necessary.
3.08. Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such times and places, including by telephonic or other electronic method of communication, as may be designated from time to time by resolution of the Board of Directors and communicated to all directors. Regular meetings of the Board of Directors may be held when and if needed, and no more than one regular meeting of the Board of Directors shall be required in any calendar year.
3.09. Special Meetings. A special meeting of the Board of Directors shall be held whenever called by any director at such time and place, including by telephonic or other electronic method of communication, as such director shall designate in the notice of such special meeting. The director calling any special meeting shall cause notice of such special meeting to be given to each director at least 24 hours before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of any special meeting.
3.10. Quorum: Majority Vote. At all meetings of the Board of Directors, a majority of the directors fixed in the manner provided in these Bylaws shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The vote of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the Board of Directors, unless the vote of a different number is required by law, the Articles of Incorporation, or these Bylaws.
3.11. Procedure: Minutes. At meetings of the Board of Directors, business shall be transacted in such order as the Board of Directors may determine from time to time. The Board of Directors shall appoint at each meeting a person to preside at the meeting and a person to act as secretary of the meeting. The secretary of the meeting shall prepare minutes of the meeting that shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation.
3.12. Presumption of Assent. A director of the Corporation who is present at any meeting of the Board of Directors at which action on any matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof, or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
3.13. Compensation. Directors, in their capacity as directors, may receive, by resolution of the Board of Directors, a stated salary or a fixed sum and expenses of attendance, if any, for attending meetings of the Board of Directors. No director shall be precluded from serving the Corporation in any other capacity or receiving compensation therefor.
4.01. Designation. The Board of Directors may, by a resolution adopted by a majority of the entire Board of Directors, designate executive and other committees.
4.02. Number: Qualification; Term. Each committee shall consist of one or more directors appointed by resolution adopted by a majority of the entire Board of Directors. The number of committee members may be increased or decreased from time to time by resolution adopted by a majority of the entire Board of Directors. Each committee member shall serve as such until the expiration of his term as a director or his earlier resignation, unless sooner removed as a committee member or as a director.
4.03. Authority. The executive committee, to the extent provided in the resolution establishing such committee, shall have and may exercise all of the authority of the Board of Directors in the management of the business and affairs of the corporation. Each other committee, to the extent expressly provided for in the resolution establishing such committee, shall have and may exercise all of the authority of the Board of Directors in such other matters and affairs concerning the Corporation. However, no committee shall have the authority of the Board of Directors in reference to any of the following:
(a) amending the Articles of Incorporation;
(b) approving a plan of merger or consolidation;
(c) recommending to the shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the Corporation other than in the usual and regular course of its business;
(d) recommending to the shareholders a voluntary dissolution of the Corporation or a liquidation thereof;
(e) amending, altering, or repealing these Bylaws or adopting new Bylaws;
(f) filling vacancies in, or removing members of, the Board of Directors or of any committee thereof;
(g) filling any directorship to be filled by reason of an increase in the number of directors;
(h) electing or removing officers or committee members;
(i) fixing the compensation of any committee member; or
(j) altering or repealing any resolution of the Board of Directors that, by its term, provides that it shall not be amendable or repealable.
In the resolution establishing an executive or other committee, the Board of Directors may expressly authorize such committee to declare dividends or to authorize the issuance of shares of the Corporation.
4.04. Committee Changes. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee. However, a committee member may be removed by the Board of Directors only if, in the judgment of the Board of Directors, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
4.05. Regular Meetings. Regular meetings of any committee may be held without notice at such times and places, including by telephonic or other electronic methods of communication, as may be designated from time to time by resolution of the committee and communicated to all committee members.
4.06. Special Meetings. A special meeting of any committee may be held whenever called by any committee member at such time and place, including by telephonic or other electronic methods of communication, as such committee member shall designate in the notice of such special meeting. The committee member calling any special meeting shall cause notice of such special meeting to be given to each committee member at least 24 hours before such special meeting. Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting.
4.07. Quorum: Majority Vote. At all meetings of any committee, a majority of the number of committee members designated by the Board of Directors shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting of any committee, a majority of the committee members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The vote of a majority of the committee members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the vote of a different number is required by law, the Articles of Incorporation, or these Bylaws.
4.08. Minutes. Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the Board of Directors. The minutes of the proceedings of each committee shall be delivered to the Secretary of the Corporation for placement in the minute books of the Corporation.
4.09. Compensation. Committee members may, by resolution of the Board of Directors, be allowed a stated salary or a fixed sum and expenses of attendance, if any, for attending any committee meetings.
4.10. Responsibility. The designation of any committee and the delegation of authority to it shall not operate to relieve the Board of Directors or any director of any responsibility imposed upon it or such director by law.
5.01. Notice. Whenever by law, the Articles of Incorporation, or these Bylaws notice is required to be given to any shareholder, director, or committee member and no provision is made as to how such notice shall be given, it shall be construed to mean that notice may be given either (i) in person; (ii) in writing, by mail; (iii) except in the case of a shareholder, by telegram, telex, cable, telecopy or facsimile transmission, or similar means; or (iv) by any other method permitted by law. Any notice required or permitted to be given hereunder (other than personal notice) shall be addressed to such shareholder, director, or committee member at his address as it appears on the books on the Corporation or, in the case of a shareholder, on the stock transfer records of the Corporation or at such other place as such shareholder, director, or committee member is known to be at the time notice is mailed or transmitted. Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when such notice is deposited in the United States mail, postage prepaid. Any notice required or permitted to be given by telegram, telex, cable, telecopy or facsimile transmission, or similar means shall be deemed to be delivered and given at the time transmitted.
5.02. Waiver of Notice. Whenever by law, the Articles of Incorporation, or these Bylaws any notice is required to be given to any shareholder, director, or committee member of the Corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the tune notice should have been given, shall be equivalent to the giving of such notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
5.03. Telephone and Similar Meeting,. Shareholders, directors, or committee members may participate in and hold a meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
5.04. Action Without Meeting. Any action that may be taken, or is required by law, the Articles of Incorporation, or these Bylaws to be taken, at a meeting of shareholders, directors, or committee members may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders, directors, or committee members, as the case may be, entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of such shareholders, directors, or committee members, as the case may be, and may be stated as such in any document filed with the Secretary of State of Texas or in any certificate or other document delivered to any person. The consent may be in one or more counterparts so long as each shareholder, director, or committee member signs one of the counterparts. The signed consent shall be placed in the minute books of the Corporation.
6.01. Number: Titles. Election: Term. The Corporation shall have a president, one or more vice presidents (and, in the case of each vice president, with such descriptive title, if any, as the Board of Directors shall determine), a secretary, a treasurer, and such officers and agents as the Board of Directors may deem desirable. The Board of Directors shall elect a president, vice president, treasurer, and secretary at its first meeting at which a quorum shall be present after the annual meeting of shareholders or whenever a vacancy exists. The Board of Directors then, or from time to time, may also elect or appoint one or more other officers or agents as it shall deem advisable. Each officer and agent shall hold office for the term for which he is elected or appointed and until his successor has been elected or appointed and qualified. Unless otherwise provided in the resolution of the Board of Directors electing or appointing an officer or agent, his term of office shall extend to and expire at the meeting of the Board of Directors following the next annual meeting of shareholders or, if earlier, at his death, resignation, or removal. Any two or more offices may be held by the same person. No officer or agent need be a shareholder, a director, a resident of the State of Texas, or a citizen of the United States.
6.02. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by a majority of the Board of Directors only if, in the judgment of a majority of the Board of Directors, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an offcer or agent shall not of itself create contract rights.
6.03. Vacancies. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors.
6.04. Authority. Officers shall have such authority and perform such duties in the management of the corporation as are provided in these Bylaws or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws.
6.05. Compensation. The compensation, if any, of officers shall be fixed, increased, or decreased from time to time by the Board of Directors, provided, however, that the Board of Directors may by resolution delegate to any one or more officers of the Corporation the authority to fix such compensation.
6.06. Chairman of the Board. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory, and management functions and duties as may be assigned to him from time to time by the Board of Directors.
6.07. President. The President shall be the chief executive officer of the Corporation and, subject to the supervision of the Board of Directors, shall have general management of the business and affairs of the Corporation in the ordinary course of its business with all such powers with respect to such business and affairs as may be reasonable incident to such responsibilities, including, but not limited to, the power to employ, discharge, or suspend employees and agents of the Corporation, to fix the compensation of employees and agents, and to suspend, with or without cause, any officer of the Corporation pending final action by the Board of Directors with respect to continued suspension, removal, or reinstatement of such officer. The President shall see that all orders and resolutions of the Board of Directors are carried into effect and shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe.
6.08. Vice Presidents. Each Vice President shall have such powers and duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President and (in the order as designated by the Board of Directors, or in the absence of such designation, as determined by the length of time each has held the office of Vice President continuously) shall exercise the powers of the President during that offcer's absence or inability to act.
6.09. Treasurer. The Treasurer shall have custody of the Corporation's funds and securities, shall keep full and accurate accounts of receipts and disbursements, and shall deposit all moneys and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors. The Treasurer shall audit all payrolls and vouchers of the Corporation; shall receive, audit, and consolidate all operating and financial statements of the Corporation and its various departments; shall supervise the accounting and auditing practices of the Corporation; and shall have charge of matters relating to taxation. Additionally, the Treasurer shall have the power to endorse for deposit, collection, or otherwise all checks, drafts, notes, bills of exchange, and other commercial paper payable to the Corporation and to give proper receipts and discharges for all payments to the Corporation. The Treasurer shall perform such other duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.
6.10. Assistant Treasurers. Each Assistant Treasurer shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President. The Assistant Treasurers (in the order as designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Treasurer continuously) shall exercise the powers of the Treasurer.
6.11. Secretary. The Secretary shall maintain minutes of all meetings of the Board of Directors, of any committee, and of the shareholders, or consents in lieu of such minutes, in the Corporation's minute books, and shall cause notice of such meetings to be given when requested by any person authorized to call such meetings. The Secretary may sign with the President, in the name of the Corporation, all contracts of the Corporation and affix the seal of the Corporation thereto. The Secretary shall have charge of the certificate books, stock transfer books, and stock papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection by any director at the office of the Corporation during business hours. The Secretary shall perform such other duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President.
6.12. Assistant Secretaries. Each Assistant Secretary shall perform such duties as may be prescribed from time to time by the Board of Directors or as may be delegated from time to time by the President. The Assistant Secretaries (in the order designated by the Board of Directors or, in the absence of such designation, as determined by the length of time each has held the office of Assistant Secretary continuously) shall exercise the powers of the Secretary during that officer's absence or inability to act.
7.01. Certificated and Uncertificated Shares. The shares of the Corporation may be either certificated shares or uncertificated shares. As used herein, the term "certificated shares" means shares represented by instruments in bearer or registered form, and the term "uncertificated shares" means shares not represented by such instruments and the transfers of which are registered upon books maintained for that purpose by or on behalf of the Corporation.
7.02. Certificates for Certificated Shares. The certificates for certificated shares of the stock of the Corporation shall be in such form as shall be approved by the Board of Directors in conformity with law. The certificates shall be consecutively numbered, shall be entered as they are issued in the books of the Corporation or in the records of the Corporation's designated transfer agent, if any, and shall state the shareholder's name, the number of shares, and such other matters as may be required by law. The certificates shall be signed by the President or any Vice President and also by the Secretary, an Assistant Secretary, or any other officer, and may be sealed with the seal of the Corporation or a facsimile thereof. If any certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the Corporation itself or an employee of the Corporation, the signatures of the foregoing officers may be a facsimile.
7.03. Issuance. Shares with or without par value may be issued for such consideration and to such persons as the Board of Directors may from time to time determine, provided, however, that except in the case of shares with par value, the consideration must be at least equal to the par value of such shares. Shares may not be issued until the full amount of the consideration has been paid.
7.04. Consideration for Shares. The consideration for the issuance of shares shall consist of money paid, labor done (including services actually performed for the Corporation), or property (tangible or intangible) actually received. Neither promissory notes nor the promise of future services shall constitute payment for shares. In the absence of fraud in the transaction, the judgment of the Board of Directors as to the value of consideration received shall be conclusive. When consideration, fixed as provided by law, has been paid, the shares shall be deemed to have been issued and shall be considered fully paid and nonassessable. The consideration received for shares shall be allocated by the Board of Directors, in accordance with law, between stated capital and capital surplus accounts.
7.05. Lost. Stolen. or Destroyed Certificates. The Corporation shall issue a new certificate in place of any certificate for shares previously issued if the registered owner of the certificate satisfies the following requirements:
(a) Claim. The registered owner makes proof in affidavit form that a previously issued certificate for shares has been lost, destroyed, or stolen;
(b) Timely Request. The registered owner requests the issuance of a new certificate before the Corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(c) Bond. The registered owner gives a bond in such form, and with such surety or sureties, with fixed or open penalty, as the Board of Directors may direct, in its discretion, to indemnify the Corporation (and its transfer agent and registrar, if any) against any claim that may be made on account of the alleged loss, destruction, or theft of the certificate; and
(d) Other Requirements. The registered owner satisfies any other reasonable requirements imposed by the Board of Directors.
When a certificate has been lost, destroyed, or stolen and the shareholder of record fails to notify the Corporation within a reasonable time after he has notice of it, if the Corporation registers a transfer of the shares represented by the certificate before receiving such notification, the shareholder of record is precluded from making any claim against the Corporation for the transfer or for a new certificate.
7.06. Transfer of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the shareholders thereof in person or by their duly authorized attorneys or legal representatives. With respect to certificated shares upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation or its agent shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. With respect to uncertificated shares, upon delivery to the Corporation of proper evidence of succession, assignment, or authority to transfer, the Corporation or its agent shall record the transaction upon its books.
7.07. Registered Shareholders. The Corporation shall be entitled to treat the shareholder of record as the shareholder in fact of any shares and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have actual or other notice thereof, except as otherwise provided by law.
7.08. Legends. If the Corporation is authorized to issue shares of more
than one class, each certificate representing shares issued by the Corporation
(a) shall conspicuously set forth on the face or back of the certificate a full
statement of (i) all of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued; and (ii) if the
Corporation is authorized to issue shares of any preferred or special class in
series, the variations in the relative rights and preferences of the shares of
each such series to the extent they have been fixed and determined and the
authority of the Board of Directors to fix and determine the relative rights and
preferences of subsequent series; or (b) shall conspicuously state on the face
or back of the certificate that (i) such a statement is set forth in the
Articles of Incorporation on file in the office of the Secretary of State; and
(ii) the Corporation will furnish a copy of such statements to the record holder
of the certificate without charge on written request to the Corporation at its
principal place of business or registered office.
If the Corporation has by its Articles of Incorporation limited or denied the preemptive right of shareholders to acquire unissued or treasury shares of the Corporation, every certificate representing shares issued by the Corporation (a) shall conspicuously set forth upon the face or back of the certificate a full statement of the limitation or denial of preemptive rights contained in the Articles of Incorporation; or (b) shall conspicuously state on the face or back of the certificate (i) that there is on file in the office of the Secretary of State a fill statement of the limitation or denial of preemptive rights contained in the Articles of Incorporation; and (ii) that the Corporation will furnish a copy of such statement to any shareholder without the charge upon written request to the Corporation at its principal place of business or registered office.
If the Corporation issues any shares that are not registered under the Securities Act of 1933, the transfer of any such shares shall be restricted in accordance with an appropriate legend.
In the event any restriction on the transfer, or registration of the
transfer, of shares shall be imposed or agreed to by the Corporation, each
certificate representing shares so restricted (a) shall conspicuously set forth
a fill or summary statement of the restriction on the face of the certificate;
(b) shall set forth such statement on the back of the certificate and
conspicuously refer to the same on the face of the certificate; or (c) shall
conspicuously state on the face or back of the certificate that such a
restriction exists pursuant to a specified document and (i) that the Corporation
will furnish to the record holder of the certificate without charge upon written
request to the Corporation at its principal place of business or registered
office a copy of the specified document; or (ii) if such document is one
required or permitted by law to be and has been filed, that such specified
document is on file in the office of the Secretary of State and contains a fill
statement of such restriction.
8.01. Dividends. Subject to the provisions of law and the Articles of Incorporation, dividends may be declared by the Board of Directors at any meeting and may be paid in cash, in property, or in shares of stock of the Corporation. Such declaration and payment shall be at the discretion of the Board of Directors.
8.02. Reserves. The Board of Directors may create out of finds of the Corporation legally available therefor such reserve or reserves as the Board of Directors from time to time, in its discretion, considers proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Corporation, or for such other purpose as the Board of Directors shall consider beneficial to the Corporation. The Board of Directors may modify or abolish any such reserve.
8.03. Books and Records. The Corporation shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its shareholders, Board of Directors, and any committee thereof, and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholder and the number and class of the shares held by each shareholder.
8.04. Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors, provided, however, that if such fiscal year is not fixed by the Board of Directors and the Board of Directors does not defer its determination of the fiscal year, it shall be the calendar year.
8.05. Seal The seal, if any, of the Corporation shall be in such form as may be approved from time to time by the Board of Directors.
8.06. Resignation. A director, committee member, offcer, or agent may resign by so stating at any meeting of the Board of Directors or by giving written notice to the Board of Directors, the President, or the Secretary. Such resignation shall take effect at the time specified therein, or immediately if no time is specified. Unless it specifies otherwise, a resignation is effective without being accepted.
8.07. Securities of Other Corporations. The President or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent, or take any other action with respect to any securities of another issuer that may be held or owned by the Corporation and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities.
8.08. Amendment. The power and authority to alter, amend, or repeal these Bylaws or to adopt new bylaws is vested in the Board of Directors, subject to the power of the shareholders to change or repeal any bylaws so made.
8.09. Invalid Provisions. If any part of these Bylaws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain and operative.
8.10. Headings. The headings used in these Bylaws are for convenience only and do not constitute matter to be construed in the interpretation of these Bylaws.
This Agreement is made as of the 9th day of February, 1997 by and between PARALLAX ENTERTAINMENT, INC. (hereinafter "Parallax") and Charles Treadwell, Ryan Pyffer and Bob Kakaha, both individually and jointly, and p/k/a HELLAFIED FUNK CREW (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01. Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment thereof by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs Parallax's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident in the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artist other than those listed on the attached Exhibit A; (b) that it owns all of the rights in and to the Masters listed on Exhibit A and that no recordings from those Masters will be released during the term hereof; (c) none of the Masters delivered to Parallax by Artist, nor the performances embodied thereon, nor any other Materials, nor any use thereof by Parallax or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used in this Paragraph, means all Controlled Compositions, each name. used by Artist, any logo used by Artist, and all other musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producer engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof.
2. TERM AND RECORDING COMMITMENT
2.01. The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring nine (9) months after delivery to Parallax of the Minimum Recording Commitment.
2.02. Artist hereby grants to Parallax two (2) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods") commencing immediately upon the expiration of the Initial Period and expiring nine (9) months after delivery to Parallax of the Minimum Recording Commitment for said Option Period. In order to exercise each option, Parallax must send notice to Artist prior to the end of the contract period then in effect.
EXCLUSIVE RECORDING ARTIST AGREEMENT -PAGE 1
2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to Parallax Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period--onek1) Album (the "First Album")
(b) during the First Option Period--one (1) Album (the "Second Album")
(c) during the Second Option Period--one (1) Album (the "Third Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to Parallax within four (4) months after the commencement of the applicable Initial Period or Option Period.
(b) Artist shall not commence the recording of any Album hereunder earlier than three (3) months following delivery to Parallax of the prior album.
(c) Parallax shall not be obliged to accept delivery of any Album
hereunder earlier than nine (9) months following the date of
delivery to Parallax of the prior album. If any such premature
delivery is tendered, the contractual date of delivery
hereunder of such Album shall be deemed to be the date nine
(9) months following the date of delivery of the prior album,
provided that the prior album has been recorded and delivered
in all respects in accordance with the provisions of this
Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period or the Option Periods, Artist produces more than the Minimum Recording Commitment, Parallax shall at its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of Parallax subject to the provisions of this Agreement.
(e) Each Album delivered shall consist of not less than ten (10) Masters and not less than forty-five (45) nor more than seventy-four (74) minutes of Artist's performances. Each Master shall consist of not less than two minutes and thirty seconds of Artist's performances. No album consisting of Artist's "live" performances shall be deemed to be in fulfillment of any of Artist's obligations hereunder except that upon mutual consent, in writing, a live recording may be accepted in fulfillment of Artist's Minimum Recording Commitment. If any such performances are recorded during the Term hereof, Parallax shall be the owner thereof and shall have the right to exploit same under the same terms as contained herein for the First Album, except that no advance will be paid to Artist. No Multiple Albums shall be delivered hereunder without Parallax's prior written consent; any such Multiple Album delivered to and accepted by Parallax shall be deemed a single Album for all purposes hereof. No Mini-Album shall form part of the Minimum Recording Commitment unless expressly agreed in writing by Parallax at its absolute discretion.
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 2
(f) Artist shall deliver to Parallax each Master hereunder in the form of a digital twotrack stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to Parallax in written form of all necessary information, consents, licenses and permissions that Parallax requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by Parallax shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to Parallax and shall perform for the purposes of making such music videos at such times and places as Parallax shall reasonably agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties, payable to Artist hereunder.
3. GRANT OF RIGHTS
3.01. During the Term of this Agreement, Artist shall furnish to Parallax its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by Parallax. Artist shall promptly deliver to Parallax copies of the pertinent provisions of each such contract and Artist will cooperate fully with Parallax in any controversy dispute or litigation which may arise in relation to the rights of Parallax under this Paragraph.
3.02. Artist hereby grants and assigns to Parallax all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and to all results and products of Artist's services and performances hereunder, any and-all Masters; records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by Parallax hereunder or otherwise produced during the Option Terms and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in combination with any other material for any purpose in any manner, under any label, trademark, or other identification and by any means or method, whether known or not now known, invented, used, or contemplated, and to refrain from all or any part thereof.
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 3
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to Parallax the following rights throughout the Universe which Parallax may use or refrain from using as it elects in Parallax's sole discretion:
(a) the exclusive right during the Term hereof to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos reproducing Artist's performances;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made during the Option Terms hereunder;
(c) the exclusive right in all media and forms to advertise, publicize, and exploit anywhere in the Universe Phonograph Records and music videos produced during the Option Terms hereunder by any and every means, particularly, but without limiting the generality of the foregoing, to use the name, including the professional name, approved photograph and/or likeness of, and approved biographical material concerning Artist for advertising, publicizing, and otherwise exploiting said Phonograph Records and music videos, said approval not to be unreasonably withheld;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced during the Option Terms hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all of Parallax's rights hereunder.
3.04. (a) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Initial Term shall belong to Artist.
(b) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the term hereof shall, from the inception of its creation, be considered a "work made for hire" for Parallax within the meaning of the U.S. Copyright Law. If it is determined that a Master does not so qualify, then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and are hereby transferred and assigned to Parallax by this Agreement. Artist agrees to execute and deliver to Parallax any and all documents or instruments which Parallax may request in order to confirm Parallax's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions-derived therefrom, together with the performances embodied thereon, shall be entirely the property of Parallax in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 4
3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of Parallax, and Artist shall take reasonable measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (and the use of Artist's name and likeness in connection therewith) by any person or entity other than Parallax, its successors, licensees and assigns.
3.06. Artist grants Parallax the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.07. As used in this Agreement, "Phonograph Records" shall include any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and mastering, advances, and other similar costs customarily regarded in the industry as being recording costs). All such costs are sometimes herein referred to as "recording costs" and shall constitute advances recoupable from royalties payable hereunder. Parallax shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording costs. In the event that, as a result of an event within the control of the Artist, any recording costs shall exceed the amount of the recording fund specifically referred to in Paragraph 5.01 below, then the excess costs shall (if paid by Parallax) constitute a loan to Artist payable on demand and without prejudice to Parallax's other rights and the same shall, at Parallax's election, be recoverable by Parallax out of any moneys payable by Parallax to Artist or on Artist's behalf hereunder.
4.02.. Parallax and Artist shall, prior to the commencement of any
recording: (a) mutually designate the producer(s) of all Masters hereunder; and
(b) agree on a budget for recording costs. Parallax shall not unreasonably
withhold its consent to any budget for recording costs that is less than ninety
percent (90%) of the recording fund for that album as specified in Paragraph
5.01. Parallax has previously approved the budgets for the First and Second
Albums.
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 5
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by Parallax after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. Parallax and Artist shall mutually designate the material to be recorded and each Master shall be subject to Parallax's approval as technically and commercially satisfactory. Upon Parallax's request, Artist shall re-record any material until a Master, which in Parallax's sole judgment is satisfactory, shall have been obtained.
4.04. The Masters delivered to Parallax by Artist under this Agreement and the performances embodied therein shall be produced in accordance with the rules and regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by Artist under this Agreement prior to a date five (5) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
4.06. Without limiting the foregoing, Parallax shall not be required to make any payments of any kind for, or in connection with, the acquisition, exercise or exploitation of rights by Parallax except as specifically provided in this Agreement. Artist shall be solely responsible for all sums due to labor unions or guilds, individual musicians, producers and all other persons or entities entitled to receive royalties or other payments in connection with the sale of Phonograph Records derived from Masters hereunder, although Parallax will undertake to make all such payments to the extent of the recording fund specified in Paragraph 5.01. None of the persons whose performances are embodied in the Masters or whose services are used in recording the Masters shall be bound by any agreement that would restrict such performances or services, or to the extent they are otherwise bound or restricted, Artist shall obtain all necessary clearances in writing.
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable hereunder, Parallax agrees to pay with respect to each Album constituting the Minimum Recording Commitment hereunder a sum equal to the amount by which the applicable sum set forth below ("Album Recording Fund") exceeds the sum of the documented receipts for the recording costs concerned and any other advances made to Artist prior to delivery of the applicable Album:
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 6
Album Recording Fund: First Album $10,000
Second Album $20,000
Third Album $30,000
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5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01 (a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) units as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fund on the next subsequent album shall be increased by Ten Thousand Dollars ($10,000).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the delivery to Parallax of: (a) the Minimum Recording Commitment; (b) the documents required under Paragraph 2.04(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery. Parallax shall have the right to withhold ten percent (10%%) for ninety (90) days to provide for anticipated costs which have not yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, Parallax will pay to Artist for the rights granted herein and for the services performed hereunder the royalties set out below, being percentages of one hundred percent (100%) of the Parallax's published wholesale price, exclusive of taxes and duties actually paid by Parallax, and the container cost deductions specified below for all records and music videos manufactured, sold and not returned, and for which Parallax is paid, reproducing exclusively Masters recorded hereunder, namely:
(a) With respect to sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: Twenty Two percent (22%).
(b) The royalty rate with respect to compact-disc singles shall be sixteen percent (16%).
EXCLUSIVE RECORDING ARTIST AGREEMENT= PAGE 7
(c) The royalty rate with respect to the following is fifteen percent (15%): records sold to any government body, PX sales, sales to educational institutions, record clubs, soundtrack records, compilation records, budget records (defined as a record which is sold at a wholesale price of at least fifty percent but less than eighty percent of Parallax's published wholesale price), and EP records (defined as records containing between three and nine Masters); except that the royalty rate for compilations released exclusively on the Parallax label shall be twenty two percent (22%). Royalties for soundtracks and compilations on which Artist appears with other performers shall be pro-rated in the same proportion that Artist's Master(s) bear to the entire album.
(e) Foreign royalty rate: The rate for the records manufactured by Parallax or Parallax's affiliates and sold outside the United States will be sixty-six and two-thirds percent (66 2/3%) of the applicable royalty except that the royalty rate for masters licensed by Parallax outside the United States shall be fifty percent (50%) of the net income therefrom. Net income shall mean all income received less third party out of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
(f) Royalty rate for music videos sold and not returned shall be fifteen percent (15%) of Parallax's published wholesale price.
7. ROYALT YPAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31st for the preceding six (6) month period, in accordance with Parallax's regular accounting practices. Parallax shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If Parallax makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), Parallax shall have the right to offset such overpayment against any subsequent payment due to Artist from Parallax.
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with Parallax's regular accounting practices. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against Parallax with respect to such statement, unless Artist shall advise Parallax, in writing, of the specific basis of such claim within one (1) year after the date Parallax mails such statement. Parallax's accounting books and records will be kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist-shall- not be entitled to recover damages or to terminate this Agreement for any reason because of a claimed breach by Parallax of its material obligations hereunder, unless Parallax has failed to remedy such breach within sixty (60)
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 8
days following receipt of written notice thereof. Artist will not have the right to sue Parallax in connection with any royalty accounting, or sue Parallax for royalties accrued by Artist during the period a royalty accounting covers, unless Artist commences the suit within three (3) years after the date when the statement in question is rendered to Artist. If Artist commences suit on any controversy or claim concerning royalty accountings, - . rendered to Artist under this Agreement, the scope of the proceeding will be limited to the determination of the amount of royalties due for the accounting periods covered and reasonable attorney fees, and the court will have no authority to consider any other issues or award any relief except recovery of any royalties found owing. Artist's recovery of any such royalties and attorney's fees will be the sole remedy available to Artist by reason of Parallax's royalty accountings. Without limiting the generality of the preceding sentence, Artist will not have any right to seek termination of this Agreement or avoid the performance of their obligations under it by reason of any such claim.
7.04. Parallax agrees that Artist may, not more than once during any calendar year, but only once with respect to any statement rendered hereunder, audit its books and records for the purpose of determining the accuracy of Parallax's statements to Artist. If Artist wishes to perform any such audit, Artist will be required to notify Parallax at least fifteen (15) days before the date when Artist plans to begin the audit plans to begin the audit. If Artist's audit has not been completed within three (3) months from the time Artist begins it, Parallax may require Artist to terminate it on seven (7) days notice to Artist and Parallax will not be required to permit Artist to continue the examination after the end of that seven (7) day period. Artist shall not be entitled to examine any manufacturing records or any other records which do not specifically report sales of Records or calculation of net receipts on which royalties are accruable hereunder. All. , audits shall be made during regular business hours, and shall be conducted on Artist's behalf by an independent Certified Public Accountant. Each examination shall be made at Artist's sole expense at Parallax's regular place of business in the United States, where the books and records are maintained.
8. MECHANICAL LICENSES AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to Parallax and its licensees for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75%) of the current minimum U.S. statutory rate for royalty-bearing records sold and not returned and for which Parallax is paid, excluding any instance where Parallax and Artist are sharing income under Paragraph 6.01 (e) above. In no event shall the mechanical royalties payable hereunder for any Album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of Parallax, Parallax shall not recoup from mechanical royalties due to Artist any advances payable to Artist except: (a) excess recording costs under Paragraph 4.01; (b) overpayments under Paragraph 7.01; and (c) any advances of cash or consigned materials (or the like) to Artist.
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 9
8.02. If any record contains one or more compositions which are not, Controlled Compositions, then Parallax will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, HELLAFIED FUNK CREW. Artist warrants and represents that it is the sole owner of such name in connection with Phonograph Records during the term hereof. Artist shall not use a different name in connection with Phonograph Records unless Artist and Parallax mutually agree in writing. Artist agrees that Parallax may cause a search to be instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. Parallax may cause a federal application for trademark protection to be made in favor of Artist for Phonograph Record and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by Parallax pursuant to this Paragraph shall be deemed Advances hereunder. If the trademark search indicates that such name should not be used, Parallax and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of Parallax with respect to Artist's use of such name.
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical hooking agencies, print media, music publishers or the like, provided that such records do not exceed one hundred (100) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and one hundred (100) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of Parallax's published wholesale price will be a non-royalty bearing record.
10.02. During each applicable contract period, Parallax shall provide Artist with thirty (30) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
EXCLUSIVE: RECORDING ARTIST AGREEMENT- PAGE 10
11. CONTAINER COSTS
11.01. Parallax's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, and three dollars ($3.00) for double cassettes, music videos and long form video formats.
12. INDEMNIFICATION
12.01. Artist agrees to and does hereby indemnify, save and hold Parallax and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse Parallax on demand for any payment made or incurred by Parallax with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Parallax or its licensees. Pending the determination of any claim with respect to which Parallax is entitled to indemnity, Parallax may withhold moneys which would be otherwise payable to Artist up to the amount of its potential liability.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, Parallax may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for the duration of such default or breach and until the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by Parallax of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
14. FORCE MAJEUR
14.01 If Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artists affecting Parallax or Artist or the phonograph record industry, Parallax, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed one (1) .year, and in such-event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof. In the event that Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, Parallax, upon notice to Artist, may suspend its obligations under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE I 1
15. MERCHANDISING
15.01. Artist hereby grants Parallax the non-exclusive rights to merchandising Artist (Artist/Name/Logo) insofar as they relate to the manufacture, sale, licensing, distribution and exploitation throughout the Universe and by mail-order and through retail sources of, without limitation, the following: T-shirts, mirrors, sweatshirts, jackets, hats, pins, posters, bumper stickers, iron-on transfers, photographs, portraits and the like by any means whatsoever during the term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by Parallax during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
15.03. In the case of any such products or property manufactured and sold by Parallax or by any associated company, Artist shall be entitled to a royalty of twenty percent (20%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venue commissions and state sales tax where collected and actually paid. In the event that Parallax licenses to others any of its rights under this clause, then Artist shall receive fifty percent (50%) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by Parallax or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is that unreasonably withheld. During the Term of this Agreement, Artist shall cause the inclusion of Parallax's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, Parallax shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
16. ARTWORK
16.01. Artist agrees -that Parallax is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Option Terms of this Agreement. Artist shall have the right to use artwork which has been mutually approved by Parallax and Artist for the purpose of merchandising.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 12
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Certified Mail, Return Receipt Requested, or by telecopy (facsimile). Notice to Artist will be received by:_____________________________ and notice to Parallax will be received by: Gust Kepler, Parallax Entertainment, Inc., 12830 Hillcrest St., Suite 111, Dallas, Texas 75230.
18. PROMOTIONS AND ADVERTISING CAMPAIGNS
18.01. Any promotional moneys spent by Parallax on behalf of Artist, up to a maximum of $50,000 per Album, are fifty percent (50%) recoupable from moneys otherwise due to Artist from Parallax, excluding Mechanical Royalties, notwithstanding the source. Any promotional moneys spent on behalf of Artist in combination with other Parallax Artists shall be recoupable from Artists on a pro-rata basis.
18.02. Parallax is not obligated to produce a promotional video for Artist, but if Parallax undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties, notwithstanding the source.
19. CONTROLLING LAW
19.01. This Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this Agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
20. REMEDIES
20.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause Parallax irreparable damages, Parallax shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
21. HEADINGS
21.01. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
EXCLUSIVE: RECORDING ARTIST AGREEMENT- PAGE; 13
22. RELATIONSHIP
22.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist or its members as Parallax's agents or employees. This Agreement does not and ,shall not be construed to create a partnership or joint venture between the parties to this Agreement
23. VALIDITY AND MODIFICATIONS
23.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter. No change of this Agreement will he binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
24. ASSIGNMENT
24.01. Parallax may assign its rights under this Agreement in whole or in part.
25. LEGAL REPRESENTATION
25.01. Artist, by their signature hereto, confirms that Parallax has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
26. COOPERATION
26.01. Artist shall execute such other documentation and shall give such further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
27. DISCLAIMER
27.01. Parallax has not made and does not hereby make any representation or warranty with respect to the extent of the sale of records or the exploitation of music videos hereunder.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 14
PARALLAX ENTERTAINMENT, INC. p/k/a HELLAFIED FUNK CREW
By:_________________________ By:____________________________
Gust Kepler, President Printed name: Charles Treadwell
SSN: 000-00-0000
12830 Hillcrest St., Suite 111
Dallas, Texas 75230 By:____________________________
Printed name Ryan Pyffer
SSN: 2-37-6851
By:____________________________
Printed name: Bob Kakah
SSN: 000-00-0000
Artist Address:________________
ARTIST:
Cedar Springs Rd. #8
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Dallas, TX 75219
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EXHIBIT A
Appendix Of Existing Commercial Releases
Date Title Song Title Label
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 15
This Agreement is made as of the WJ r day of December, 1998 by and between PARALLAX ENTERTAINMENT, INC. (hereinafter "Parallax") and Charles Treadwell, Ryan j Pvffer and Bob Kakalia, both uudividually and jointly, and p/k/a HELLAFIED FU-1K CREW (hereinafter "Artist").
1. This Agreement modifies that certain Exclusive Recording Artist Agreement previously entered by the parties. The Excluslve Recording Artist Agreement remains in full force anal effect except as modified herein.
2. The Artist desires additional tinge to prepare and deliver its Second Album under the Exclusive Recording Artist Agreement. The-Artist also desire to increase the Album Recording Fund allotted to its Second Album. Parallax desires to accommodate these desires to the extent they are iii the mutual best interest of the parties.
3. Parallax and Artist agree that Artist shall deliver the Second Album under the Exclusive Recording Artist Agreement on or before June 30, 1999.
4. Parallax. and Artist agree that the Album Recording Fund for Artist's Second Album under the Exclusive Recording Artist Agreement shall be increased to $30,000.00.
SIGNED THIS 1st DAY OF DECEMBER, 1998.
PARALLAX ENTERTAINMENT, INC.
By:______________________________
Gust Kepler - President As of June 26th Parallax and Artist mutully
agree to extend the delivery date of the
ARTIST: Second Album for an additional 180 days
from todays date of 6-26-99.
p/k/a HELLAFIED FUNK CREW
By:______________________________ ______________________________
Printed name: Charles Treadwell Parallax Entertainment Inc.
By: Gust Kepler President
By:______________________________ Artist:
Printed name: Ryan Pyffer P/k/a Hellafied Funk Crew
By:______________________________ By:______________________________
Printed name: Bob Kakaha Charles Treadwell
By:______________________________
Ryan Pyffer
By:______________________________
Bob Kakaha
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EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 1
PARALLAX
ENTERTAINMENT INCORPORATED
Notification to Exercise Option
Please let this letter serve as formal notification that Parallax Entertainment, Inc. is exercising it's option to record a "Second Album" as referenced in the Exclusive Recording Artist Agreement dated February 9"', 1997 by and between Parallax Entertainment, Inc. and Charles Treadwell, Ryan Pyffer, and Bob Kakaha, both individually and jointly, and p/k/a Hellafied Funk Crew. (hereinafter "Artist")
This Notification shall be hand delivered to Artist by a representative of Parallax Entertainment, Inc., and receipt of this notice will be verified by Artist Signature.
14110 N. Dallas Parkway o Suite 130 o Dallas, Texas 75240 Phone (972) 726-9203 o Fax (972) 726-7749 www.parallaxrecords.com - E-Mail parallax@airmail.net
PARALLAX
ENTERTAINMENT INCORPORATED
Notification to Exercise Option
Please let this letter serve as formal notification that Parallax Entertainment, Inc. is exercising it's option to record a "Second Album" as referenced in the Exclusive Recording Artist Agreement dated February 9th, 1997 by and between Parallax Entertainment Inc. and Charles Treadwell Ryan Pyffer, and Bob Kakaha, both individually and jointly, and p/k/a Hellafied Funk Crew. (hereinafter "Artist")
This Notification shall be hand delivered to Artist by a representative of Parallax Entertainment Inc., and receipt of this notice will be verified by Artist signature.
14110 N. Dallas Parkway o Suite 130 o Dallas, Texas 75240
Phone (972) 726-9203 o Fax (972) 726-7749 www.parallaxrecords.com - E-Mail parallax@airmail.net
PARALLAX
ENTERTAINMENT-INCORPORATED
Notification to Exercise Option
Please let this letter serve as formal notification that Parallax Entertainment, Inc. is exercising it's option to record a "Second Album" as referenced in the Exclusive Recording Artist Agreement dated February 9th, 1997 by and between Parallax Entertainment, Inc. and Charles Treadwell, Ryan Pyffer; and Bob Kakaha, both individually and jointly, and p/k/a Hellafied Funk Crew.(hereinafter "Artist")
This Notification shall be hand delivered to Artist by a representative of Parallax Entertainment, Inc., and receipt of this notice will be verified by Artist signature.
14110 N. Dallas Parkway o Suite 130 o Dallas, Texas 75240
Phone (972) 726-9203 o Fax (972) 726-7749 www.parallaxrecords.com - E-Mail parallax@airmail.net
This Agreement is made as of the 25th day of October, 2000 by and between PARALLAX ENTERTAINMENT, INC. (hereinafter "Parallax") and Joseph Donnelly, Josh Sweley, and Kyle Van Vleet, both individually and jointly, and p/k/a "Track 10" or "Track Ten" (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01. Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment thereof by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs Parallax's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident in the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artist other than those listed on the attached Exhibit A; (b) that it owns all of the rights in and to the Masters listed on Exhibit A and that no recordings from those Masters will be released during the term hereof; (c) none of the Masters delivered to Parallax by Artist, nor the performances embodied thereon, nor any other Materials, nor any use thereof by Parallax or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used in this Paragraph, means all Controlled Compositions, each name used by Artist, any logo used by Artist, and all other musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producer engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof.
2. TERM AND RECORDING COMMITMENT
2.01. The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring nine months thereafter.
2.02. Artist hereby grants to Parallax three (3) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods") commencing immediately upon the expiration of the Initial Period and expiring one year after delivery to Parallax of the Minimum Recording Commitment for said Option Period. Each option shall be exercised by written notice from Parallax to Artist postmarked or delivered before upon the expiration of the prior term; provided that, Parallax shall have a thirty day right to cure any inadvertent failure to exercise such option.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 1
2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to Parallax Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period-- one (1) Album (the "First Album")
(b) during the First Option Period--one (1) Album (the "Second Album")
(c) during the Second Option Period--one (1) Album (the "Third Album")
(d) during the Third Option Period--one (1) Album (the "Fourth Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to Parallax within four (4) months after the commencement of the applicable Initial Period or Option Period. The Album currently being recorded by the Artist shall, when delivered, count as the Minimum Recording Commitment for the Initial Period.
(b) Artist shall not commence the recording of any Album hereunder earlier than three (3) months following delivery to Parallax of the prior album.
(c) Parallax shall not be obliged to accept delivery of any Album hereunder earlier than one year following the date of delivery to Parallax of the prior album. If any such premature delivery is tendered, the contractual date of delivery hereunder of such Album shall be deemed to be the date one year following the date of delivery of the prior album, provided that the prior album has been recorded and delivered in all respects in accordance with the provisions of this Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period or the Option Periods, Artist produces more than the Minimum Recording Commitment, Parallax shall at its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of Parallax subject to the provisions of this Agreement.
(e) Each Album delivered shall consist of not less than ten (10) Masters and not less than forty-five (45) nor more than seventy-four (74) minutes of Artist's performances. Each Master shall consist of not less than two minutes and thirty seconds of Artist's performances. No album consisting of Artist's "live" performances shall be deemed to be in fulfillment of any of Artist's obligations hereunder except that upon mutual consent, in writing, a live recording may be accepted in fulfillment of Artist's Minimum Recording Commitment. If any such performances are recorded during the Term hereof, Parallax shall be the owner thereof and shall have the right to exploit same under the same terms as contained herein for the First Album, except that no advance will be paid to Artist.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 2
No Multiple Albums shall be delivered hereunder without Parallax's prior written consent; any such Multiple Album delivered to and accepted by Parallax shall be deemed a single Album for all purposes hereof. No Mini-Album shall form part of the Minimum Recording Commitment unless expressly agreed in writing by Parallax at its absolute discretion.
(f) Artist shall deliver to Parallax each Master hereunder in the form of a digital twotrack stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to Parallax in written form of all necessary information, consents, licenses and permissions that Parallax requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by Parallax shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to Parallax and shall perform for the purposes of making such music videos at such times and places as Parallax shall reasonably agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties, payable to Artist hereunder.
3. GRANT OF RIGHTS
3.01. During the Term of this Agreement, Artist shall furnish to Parallax its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by Parallax. Artist shall promptly deliver to Parallax copies of the pertinent provisions of each such contract and Artist will cooperate fully with Parallax in any controversy dispute or litigation which may arise in relation to the rights of Parallax under this Paragraph.
3.02. Artist hereby grants and assigns to Parallax all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and to all results and products of Artist's services and performances hereunder, any and all Masters, records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by Parallax hereunder or otherwise produced during the Option Terms and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in combination with any other material for any purpose in any manner, under any label, trademark, or other identification and by any means or method, whether known or not now known, invented, used, or contemplated, and to refrain from all or any part thereof.
EXCLUSIVE RECORDING ARTIST AGREEMENT-PAGE 3
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to Parallax the following rights throughout the Universe which Parallax may use or refrain from using as it elects in Parallax's sole discretion:
(a) the exclusive right during the Term hereof to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos reproducing Artist's performances;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made during the Option Terms hereunder;
(c) the exclusive right in all media and forms to advertise, publicize, and exploit anywhere in the Universe Phonograph Records and music videos produced during the Option Terms hereunder by any and every means, particularly, but without limiting the generality of the foregoing, to use the name, including the professional name, approved photograph and/or likeness of, and approved biographical material concerning Artist for advertising, publicizing, and otherwise exploiting said Phonograph Records and music videos, said approval not to be unreasonably withheld;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced during the Option Terms hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all of Parallax's rights hereunder.
3.04. (a) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Initial Term shall belong to Artist. Artist grants Parallax a security interest in and to its copyright in the First Album to secure recoupment of all sums expended by Parallax in the recording and promotion of all Albums recorded under this agreement. Artist further agrees to execute any document reasonably necessary to perfect such security interest. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such security agreements.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 4
(b) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Option Terms shall, from the inception of its creation, be considered a "work made for hire" for Parallax within the meaning of the U.S. Copyright Law. If it is determined that a Master does not so qualify, then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and are hereby transferred and assigned to Parallax by this Agreement. Artist agrees to execute and deliver to Parallax any and all documents or instruments which Parallax may request in order to confirm Parallax's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions derived therefrom, together with the performances embodied thereon, shall be entirely the property of Parallax in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom. 3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of Parallax, and Artist shall take reasonable measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (and the use of Artist's name and likeness in connection therewith) by any person or entity other than Parallax, its successors, licensees and assigns.
3.06. Artist grants Parallax the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.07. As used in this Agreement, "Phonograph Records" shall include any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and mastering, advances, and other similar costs customarily regarded in the industry as being recording costs). All such costs are sometimes herein referred to as "recording costs" and shall constitute advances recoupable from royalties payable hereunder. Parallax shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording costs. In the event that, as a result of an event within the control of the Artist but unapproved by Parallax, any recording costs shall exceed the amount of the recording fund specifically referred to in
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 5
Paragraph 5.01 below, then the excess costs shall (if paid by Parallax) constitute a loan to Artist payable on demand and without prejudice to Parallax's other rights and the same shall, at Parallax's election, be recoverable by Parallax out of any monies payable by Parallax to Artist or on Artist's behalf hereunder. Any recording cost that exceeds the amount of the recording fund specifically referred to in Paragraph 5.01 below, but which has been approved by Parallax, shall be treated as an increase in said recording fund.
4.02. Parallax and Artist shall, prior to the commencement of any
recording: (a) mutually designate the producer(s) of all Masters hereunder; and
(b) agree on a budget for recording costs. Parallax shall not unreasonably
withhold its consent to any budget for recording costs that is less than ninety
percent (90%) of the recording fund for that album as specified in Paragraph
5.01. Parallax has previously approved the budgets for the First and Second
Albums.
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by Parallax after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. Parallax and Artist shall mutually designate the material to be recorded and each Master shall be subject to Parallax's approval as technically and commercially satisfactory. Upon Parallax's request, Artist shall re-record any material until a Master, which in Parallax's sole judgment is satisfactory, shall have been obtained.
4.04. The Masters delivered to Parallax by Artist under this Agreement and the performances embodied therein shall be produced in accordance with the rules and regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by Artist under this Agreement prior to a date five (5) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
4.06. Without limiting the foregoing, Parallax shall not be required to make any payments of any kind for, or in connection with, the acquisition, exercise or exploitation of rights by Parallax except as specifically provided in this Agreement. Artist shall be solely responsible for all sums due to labor unions or guilds, individual musicians, producers and all other persons or entities entitled to receive royalties or other payments in connection with the sale of Phonograph Records derived from Masters hereunder, although Parallax will undertake to make all such payments to the extent of the recording fund specified in Paragraph 5.01, and Artist's liability to producers for royalties shall be limited to two percent of retail. None of the persons whose performances are embodied in the Masters or whose services are used in recording the Masters shall be bound by any agreement that would restrict such performances or services, or to the extent they are otherwise bound or restricted, Artist shall obtain all necessary clearances in writing.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 6
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable hereunder, Parallax agrees to pay with respect to each Album constituting the Minimum Recording Commitment hereunder a sum equal to the amount by which the applicable sum set forth below ("Album Recording Fund") exceeds the sum of the documented receipts for the recording costs concerned and any other advances made to Artist prior to delivery of the applicable Album:
Album Recording Fund: First Album $15,000
Second Album $20,000
Third Album $35,000
Fourth Album $75,000
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5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01 (a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) units as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fund on the next subsequent album shall be increased by Ten Thousand Dollars ($10,000).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the delivery to Parallax of: (a) the Minimum Recording Commitment; (b) the documents required under Paragraph 2.04(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery. Parallax shall have the right to withhold ten percent (10%) for ninety (90) days to provide for anticipated costs which have not yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, Parallax will pay to Artist for the rights granted herein and for the services performed hereunder the royalties set out below, being percentages of one hundred percent (100%) of the Parallax's published wholesale price, exclusive of taxes and duties actually paid by Parallax, and the container cost deductions specified below for. all records and music videos manufactured, sold and not returned, and for which Parallax is paid, reproducing exclusively Masters recorded hereunder, namely:
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 7
(a) With respect to sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: Twenty percent (20%).
(b) The royalty rate with respect to 12-inch singles shall be fifteen percent (15%).
(c) The royalty rate with respect of 7-inch singles and other records shall be twelve percent (12%).
(d) The royalty rate with respect to the following is thirteen percent (13%): records sold to any government body, PX sales, sales to educational institutions, record clubs, soundtrack records, compilation records, budget records (defined as a record which is sold at a wholesale price of at least fifty percent but less than eighty percent of Parallax's published wholesale price), and EP records (defined as records containing between three and nine Masters); except that the royalty rate for compilations released exclusively on the Parallax label shall be twenty percent (20%). Royalties for soundtracks and compilations on which Artist appears with other performers shall be pro-rated in the same proportion that Artist's Master(s) bear to the entire album.
(e) Foreign royalty rate: The rate for the records manufactured by Parallax or Parallax's affiliates and sold outside the United States will be sixty-six and two-thirds percent (66 2/3%) of the applicable royalty except that the royalty rate for masters licensed by Parallax outside the United States shall be fifty percent (50%) of the net income therefrom. Net income shall mean all income received less third party out of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
(f) Royalty rate for music videos sold and not returned shall be ten percent (10%) of Parallax's published wholesale price.
7. ROYALTY PAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31 st for the preceding six (6) month period, in accordance with Parallax's regular accounting practices. Parallax shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If Parallax makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), Parallax shall have the right to offset such overpayment against any subsequent payment due to Artist from Parallax.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 8
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with Parallax's regular accounting practices. Said statements shall be provided to Artist within sixty (60) days of the end of each calendar quarter, even though royalty payments are semi-annual. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against Parallax with respect to such statement, unless Artist shall advise Parallax, in writing, of the specific basis of such claim within one (1) year after the date Parallax mails such statement. Parallax's accounting books and records will be kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist shall not be entitled to recover damages or to terminate this Agreement for any reason because of a claimed breach by Parallax of its material obligations hereunder, unless Parallax has failed to remedy such breach within sixty (60) days following receipt of written notice thereof. Artist will not have the right to sue Parallax in connection with any royalty accounting, or sue Parallax for royalties accrued by Artist during the period a royalty accounting covers, unless Artist commences the suit within two (2) years after the date when the statement in question is rendered to Artist. If Artist commences suit on any controversy or claim concerning royalty accountings rendered to Artist under this Agreement, the scope of the proceeding will be limited to the determination of the amount of royalties due for the accounting periods covered and reasonable attorney fees, and the court will have no authority to consider any other issues or award any relief except recovery of any royalties found owing. Artist's recovery of any such royalties and attorney's fees will be the sole remedy available to Artist by reason of Parallax's royalty accountings. Without limiting the generality of the preceding sentence, Artist will not have any right to seek termination of this Agreement or avoid the performance of their obligations under it by reason of any such claim. Artist's remedy for Parallax's willful refusal to permit it to record its Minimum Recording Commitment shall be limited to termination of this Agreement.
7.04. Parallax agrees that Artist may, not more than once during any calendar year, but only once with respect to any statement rendered hereunder, audit its books and records for the purpose of determining the accuracy of Parallax's statements to Artist. If Artist wishes to perform any such audit, Artist will be required to notify Parallax at least thirty (30) days before the date when Artist plans to begin the audit plans to begin the audit. If Artist's audit has not been completed within one (1) month from the time Artist begins it, Parallax may require Artist to terminate it on seven (7) days notice to Artist and Parallax will not be required to permit Artist to continue the examination after the end of that seven (7) day period. Artist shall not be entitled to examine any manufacturing records or any other records which do not specifically report sales of Records or calculation of net receipts on which royalties are accruable hereunder. All audits shall be made during regular business hours, and shall be conducted on Artist's behalf by an independent Certified Public Accountant. Each examination shall be made at Artist's sole expense at Parallax's regular place of business in the United States, where the books and records are maintained.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 9
8. MECHANICAL LICENSES AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to Parallax and its licensees for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75%) of the current minimum U.S. statutory rate (including the "long work" rate, if applicable) for royalty-bearing records sold and not returned and for which Parallax is paid, excluding any instance where Parallax and Artist are sharing income under Paragraph 6.01(e) above. In no event shall the mechanical royalties payable hereunder for any Album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of Parallax, Parallax shall not recoup from mechanical royalties due to Artist any advances payable to Artist except: (a) excess recording costs under Paragraph 4.01; (b) overpayments under Paragraph 7.01; and (c) any advances of cash or consigned materials (or the like) to Artist.
8.02. If any record contains one or more compositions which are not Controlled Compositions, then Parallax will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, "Track 10" or "Track Ten." Artist warrants and represents that it is the sole owner of such name in connection with Phonograph Records during the term hereof. Artist shall not use a different name in connection with Phonograph Records unless Artist and Parallax mutually agree in writing. Artist agrees that Parallax may cause a search to be instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. Parallax may cause one or more federal applications for trademark protection to be made in favor of Artist for Phonograph Record and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by Parallax pursuant to this Paragraph shall be deemed Advances hereunder. If the trademark search indicates that such name should not be used, Parallax and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of Parallax with respect to Artist's use of such name.
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical hooking agencies, print media, music publishers or the like, provided that such records do not exceed one hundred (100) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and one hundred (100) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of Parallax's published wholesale price will be a non-royalty bearing record.
EXCLUSIVE RECORDING ARTIST AGREEMENT -PAGE 10
10.02. During each applicable contract period, Parallax shall provide Artist with fifteen (15) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
11. CONTAINER COSTS
11.01. Parallax's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, three dollars ($3.00) for double cassettes, and four dollars ($4.00) for other formats, including double compact disks, and all video formats.
12. INDEMNIFICATION
12.01. Artist agrees to and does hereby indemnify, save and hold Parallax and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse Parallax on demand for any payment made or incurred by Parallax with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Parallax or its licensees. Pending the determination of any claim with respect to which Parallax is entitled to indemnity, Parallax may withhold monies which would be otherwise payable to Artist up to the amount of its potential liability.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, Parallax may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for the duration of such default or breach and until the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by Parallax of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 11
14. FORCE MA JEUR
14.01 If Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artists affecting Parallax or Artist or the phonograph record industry, Parallax, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed one (1) year, and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof. In the event that Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, Parallax, upon notice to Artist, may suspend its obligations under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof.
15. MERCHANDISING
15.01. Artist hereby grants Parallax the exclusive right to manufacture, sell, license, distribute and exploit, throughout the Universe and by mail-order and through retail sources of, without limitation, all merchandise of every kind featuring the Artist (name/logo/likenesses), during the term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by Parallax during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
15.03. In the case of any such products or property manufactured and sold by Parallax or by any associated company, Artist shall be entitled to a royalty of twenty percent (20%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venue commissions and state sales tax where collected and actually paid. In the event that Parallax licenses to others any of its rights under this clause, then Artist shall receive fifty percent (50%) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by Parallax or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is that unreasonably withheld. During the Term of this Agreement, Artist shall cause the inclusion of Parallax's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, Parallax shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 12
16. ARTWORK
16.01. Artist agrees that Parallax is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Option Terms of this Agreement. Artist shall have the right to use artwork which has been mutually approved by Parallax and Artist for the purpose of merchandising.
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Registered Mail, Return Receipt Requested, or by telecopy (facsimile). Notice to Artist will be received by:___________________________and notice to Parallax will be received by: Gust Kepler, Parallax Entertainment, Inc., 12830 Hillcrest St., Suite 111, Dallas, Texas 75230.
18. PROMOTIONS AND ADVERTISING CAMPAIGNS
18.01. Any promotional monies spent by Parallax on behalf of Artist are fifty percent (50%) recoupable from monies otherwise due to Artist from Parallax, excluding Mechanical Royalties, notwithstanding the source. Any promotional monies spent on behalf of Artist in combination with other Parallax Artists shall be recoupable from Artists on a pro-rata basis.
18.02. Parallax is not obligated to produce a promotional video for Artist, but if Parallax undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties, notwithstanding the source. The cost of producing nonpromotional videos intended for resale are fully recoupable.
19. CONTROLLING LAW
19.01. This Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this Agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
20. REMEDIES
20.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause Parallax irreparable damages, Parallax shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 13
21. HEADINGS
21.01. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
22. RELATIONSHIP
22.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist or its members as Parallax's agents or employees. This Agreement does not and shall not be construed to create a partnership or joint venture between the parties to this Agreement
23. VALIDITY AND MODIFICATIONS
23.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter. No change of this Agreement will he binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
24. ASSIGNMENT
24.01. Parallax may assign its rights under this Agreement in whole or in part.
25. LEGAL REPRESENTATION
25.01. Artist, by their signature hereto, confirms that Parallax has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
26. COOPERATION
26.01. Artist shall execute such other documentation and shall give such further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 14
27. DISCLAIMER
27.01. Parallax has not made and does not hereby make any representation or warranty with respect to the extent of the sale of records or the exploitation of music videos hereunder.
SIGNED THIS ________DAY OF AUGUST, 2000.
PARALLAX ENTERTAINMENT, INC.
By:__________________________
Gust Kepler, President
14110 North Dallas Parkway
Suite 130
Dallas, Texas 75240
ARTIST:
P/k/a _______________________
By:__________________________
Printed name: Joseph Donnelly
SSN: 000-00-0000
By:__________________________
Printed/name: Joshua J. Sweley
SSN: 505-04 6073
By:__________________________
Print name : Kyle an Vleet
SSN: 000-00-0000
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 15
This Agreement is made as of the 31 day of July, 1998 by and between PARALLAX ENTERTAINMENT; INC. (hereinafter "Parallax") and Johnny Hawkins and Craig Reeves, both individually and jointly, and p/k/a NOVACHROME (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01. Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment thereof by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs Parallax's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident in the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artist other than those listed on the attached Exhibit A; (b) that it owns all of the rights in and to the Masters listed on Exhibit A and that no recordings from those Masters will be released during the term hereof; (c) none of the Masters delivered to Parallax by Artist, nor the performances embodied thereon, nor any other Materials, nor any use thereof by Parallax or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used in this Paragraph, means all Controlled Compositions, each name used by Artist, any logo used by Artist, and all other. musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producer engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof.
2. TERM AND RECORDING COMMITMENT
2.01. The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring six (6) months after delivery to Parallax of the Minimum Recording Commitment.
2.02. Artist hereby grants to Parallax two (2) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods") commencing immediately upon the expiration of the Initial Period and expiring nine (9) months after delivery to Parallax of the Minimum Recording Commitment for said Option Period. In order to exercise each option, Parallax must send notice to Artist prior to the end of the contract period then in effect.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 1
2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to Parallax Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period--one (1) Album (the "First Album")
(b) during the First Option Period--one (1) Album (the "Second Album")
(c) during the Second Option Period --one (1) Album (the "Third Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to Parallax within three (3) months after the commencement of the applicable Initial Period or Option Period.
(b) Artist shall not commence the recording of the Second or Third Album hereunder earlier than four (4) months following delivery to Parallax of the prior album.
(c) Parallax shall not be obliged to accept delivery of the Second or Third Album hereunder earlier than nine (9) months following the date of delivery to Parallax of the prior album. If any such premature delivery is tendered, the contractual date of delivery hereunder of such Second or Third Album shall be deemed to be the date nine (9) months following the date of delivery of the prior album, provided that the prior album has been recorded and delivered in all respects in accordance with the provisions of this Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period or the Option Periods, Artist produces more than the Minimum Recording Commitment, Parallax shall at its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of Parallax subject to the provisions of this Agreement.
(e) The Second and Third Albums shall each consist of not less than ten
(10) Masters and not less than forty-five (45) nor more than seventy-four (74)
minutes of Artist's performances. No album consisting of Artist's "live"
performances shall be deemed to be in fulfillment of any of Artist's obligations
hereunder except that upon mutual consent, in writing, a live recording may be
accepted in fulfillment of Artist's Minimum Recording Commitment. If any such
performances are recorded during the Term hereof, Parallax shall be the owner
thereof and shall have the right to exploit same under the same terms as
contained herein for the First Album, except that no advance will be paid to
Artist. No Multiple Albums shall be delivered hereunder without Parallax's prior
written consent; any such Multiple Album delivered to and accepted by Parallax
shall be deemed a single Album for all purposes hereof. No Mini-Album shall form
part of the Minimum Recording Commitment unless expressly agreed in writing by
Parallax at its absolute discretion.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 2
(f) Artist shall deliver to Parallax each Master hereunder in the form of a digital two-track stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to Parallax in written form of all necessary information, consents, licenses and permissions that Parallax requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by Parallax shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to Parallax and shall perform for the purposes of making such music videos at such times and places as Parallax shall reasonably agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties, payable to Artist hereunder.
3. GRANT OF RIGHTS
3.01. During the Term of this Agreement, Artist shall furnish to Parallax its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by Parallax. Artist shall promptly deliver to Parallax copies of the pertinent provisions of each such contract and Artist will cooperate fully with Parallax in any controversy dispute or litigation which may arise in relation to the rights of Parallax under this Paragraph.
3.02. Artist hereby grants and assigns to Parallax all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and to all results and products of Artist's services and performances hereunder, any and all Masters, records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by Parallax hereunder or otherwise produced during the Term and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in combination with any other material for any purpose in any manner, under. any label, trademark, or other identification and by any means or method, whether known or not now known, invented, used, or contemplated, and to refrain from all or any part thereof.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 3
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to Parallax the following rights throughout the Universe which Parallax may use or refrain from using as it elects in Parallax's sole discretion:
(a) the exclusive right during the Term to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos reproducing Artist's performances;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made hereunder;
(c) the exclusive right in all media and forms to advertise, publicize, and exploit anywhere in the Universe Phonograph Records and music videos produced hereunder by any and every means, particularly, but without limiting the generality of the foregoing, to use the name, including the professional name, approved photograph and/or likeness of, and approved biographical material concerning Artist for advertising, publicizing, and otherwise exploiting said Phonograph Records and music videos,.said approval not to be unreasonably withheld;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all of Parallax's rights hereunder.
3.04. Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Term shall, from the inception of its creation, be considered a "work made for hire" for Parallax within the meaning of the U.S. Copyright Law. If it is determined that a Master does not so qualify, then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and are hereby transferred and assigned to Parallax by this Agreement. Artist agrees to execute and deliver to Parallax any and all documents or instruments which Parallax may request in order to confirm Parallax's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions derived therefrom, together with the performances embodied thereon, shall be entirely the property of Parallax in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 4
3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of Parallax, and Artist shall take reasonable measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (and the use of Artist's name and likeness in connection therewith) by any person or entity other than Parallax, its successors, licensees and assigns.
3.06. Artist grants Parallax the right to manufacture and sell one or more recompilation albums (e.g., a "Greatest Hits" album) containing Masters previously produced and delivered hereunder, provided that: (a) Parallax has previously accepted the Third Album by Artist; and (b) Parallax pays Artist an advance of fifteen thousand dollars ($15,000.00) for each such recompilation album. Upon satisfaction of these conditions, Parallax shall have the right to manufacture and sell such recompilation album(s) at any time, including after the expiration or termination of this Agreement.
3.07. Artist grants Parallax the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.08. As used in this Agreement, "Phonograph Records" shall include any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and mastering, advances, and other similar costs customarily regarded in the industry as being recording costs). All such costs are sometimes herein referred to as "recording costs" and shall constitute advances recoupable from royalties payable hereunder. Parallax shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording costs. In the event that, as a result of an event within the control of the Artist, any recording costs shall exceed the amount of the recording fund specifically referred to in Paragraph 5.01 below, then the excess costs shall (if paid by Parallax) constitute a loan to Artist payable on demand and without prejudice to Parallax's other rights and the same shall, at Parallax's election, be recoverable by Parallax out of any moneys payable by Parallax to Artist or on Artist's behalf hereunder.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 5
4.02. Parallax and Artist shall, prior to the commencement of any
recording: (a) mutually designate the producer(s) of all Masters hereunder; and
(b) agree on a budget for recording costs. Parallax shall not unreasonably
withhold its consent to any budget for recording costs that is less than ninety
percent (90%) of the recording fund for that album as specified in Paragraph
5.01.
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by Parallax after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. Parallax'and Artist shall mutually designate the material to be recorded and each Master shall be subject to Parallax's approval as technically and commercially satisfactory. Upon Parallax's request, Artist shall re-record any material until a Master, which in Parallax's sole judgment is satisfactory, shall have been obtained.
4.04. The Masters delivered to Parallax by Artist under this Agreement and the performances embodied therein shall be produced in accordance with the rules and regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by Artist under this Agreement prior to a date five (5) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
4.06. Without limiting the foregoing, Parallax shall not be required to make any payments of any kind for, or in connection with, the acquisition, exercise or exploitation of rights by Parallax except as specifically provided in this Agreement. Artist shall be solely responsible for all sums due to labor unions or guilds, individual musicians, producers and all other persons or entities entitled to receive royalties or other payments in connection with the sale of Phonograph Records derived from Masters hereunder, although Parallax will undertake to make all such payments to the extent of the recording fund specified in Paragraph 5.01. None of the persons whose performances are embodied in the Masters or whose services are used in recording the Masters shall be bound by any agreement that would restrict such performances or services, or to the extent they are otherwise bound or restricted, Artist shall obtain all necessary clearances in writing.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 6
4.07 Parallax acknowledges that Artist has previously incurred the sum of ______________ ($__________) in recording costs associated with the First Album (the "Artist Costs"). Artist agrees that all Masters produced as a result of the Artist Costs shall be deemed produced hereunder for all purposes, including paragraph 3.04. In consideration for such Masters and the Artist Costs, Parallax agrees to pay Artist the Bonus Royalty described in paragraph 6.02.
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable hereunder, Parallax agrees to pay with respect to each Album constituting the Minimum Recording Commitment hereunder a sum equal to the amount by which the applicable sum set forth below ("Album Recording Fund") exceeds the sum of the documented receipts for the recording costs concerned and any other advances made to Artist prior to delivery of the applicable Album:
Album Recording Fund: First Album $ 2,500 Second Album $30,000 Third Album $35,000
5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01(a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) units as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fund on the next subsequent album shall be increased by Ten Thousand Dollars ($10,000).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the delivery to Parallax of: (a) the Minimum Recording Commitment; (b) the documents required under Paragraph 2.04(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery. Parallax shall have the right to withhold ten percent (10% %) for ninety (90) days to provide for anticipated costs which have not yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 7
6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, Parallax will pay to Artist for the rights granted herein and for the services performed hereunder the royalties set out below, being percentages of one hundred percent (100%) of the Parallax's published wholesale price, exclusive of taxes and duties actually paid by Parallax, and the container cost deductions specified below for all records and music videos manufactured, sold and not returned, and for which Parallax is paid, reproducing exclusively Masters recorded hereunder, namely:
(a) With respect to sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: Twenty percent (20 % ).
(b) The royalty rate with respect to 12-inch singles shall be fifteen percent (15 % ).
(c) The royalty rate with respect of 7-inch singles and other records shall be twelve percent (12 % ).
(d) The royalty rate with respect to the following is thirteen percent (13%): records sold to any government body, PX sales, sales to educational institutions, record clubs, soundtrack records, compilation records, budget records (defined as a record which is sold at a wholesale price of at least fifty percent but less than eighty percent of Parallax's published wholesale price), and EP records (defined as records containing between three and nine Masters); except that the royalty rate for compilations released exclusively on the Parallax label shall be twenty percent (20%). Royalties for soundtracks and compilations on which Artist appears with other performers shall be pro-rated in the same proportion that Artist's Master(s) bear to the entire album.
(e) Foreign royalty rate: The rate for the records manufactured by Parallax or Parallax's affiliates and sold outside the United States will be sixty-six and two-thirds percent (66 2/3 %) of the applicable royalty except that the royalty rate for masters licensed by Parallax outside the United States shall be fifty percent (50%) of the net income therefrom. Net income shall mean all income received less third party out of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
(f) Royalty rate for music videos sold and not returned shall be ten percent (10%) of Parallax's published wholesale price.
6.02. Parallax shall pay Artist a Bonus Royalty equal to one dollar ($1.00) for each copy of the First Album sold and not returned, and for which Parallax is paid, until Artist's Costs have been recouped by Artist. The Bonus Royalty shall not be subject to recoupment of any other cost or expense by Parallax.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 8
7. ROYALTY PAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31st for the preceding six (6) month period, in accordance with Parallax's regular accounting practices. Parallax shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If Parallax makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), Parallax shall have the right to offset such overpayment against any subsequent payment due to Artist from Parallax.
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with Parallax's regular accounting practices. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against Parallax with respect to such statement, unless Artist shall advise Parallax, in writing, of the specific basis of such claim within one (1) year after the date Parallax mails such statement. Parallax's accounting books and records will be kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist shall not be entitled to recover damages or to terminate this Agreement for any reason because of a claimed breach by Parallax of its material obligations hereunder, unless Parallax has failed to remedy such breach within sixty (60) days following receipt of written notice thereof. Artist will not have the right to sue Parallax in connection with any royalty accounting, or sue Parallax for royalties accrued by Artist during the period a royalty accounting covers, unless Artist commences the suit within two (2) years after the date when the statement in question is rendered to Artist. If Artist commences suit on any controversy or claim concerning royalty accountings rendered to Artist under this Agreement, the scope of the proceeding will be limited to the determination of the amount of royalties due for the accounting periods covered and reasonable attorney fees, and the court will have no authority to consider any other issues or award any relief except recovery of any royalties found owing. Artist's recovery of any such royalties and attorney's fees will be the sole remedy available to Artist by reason of Parallax's royalty accountings. Without limiting the generality of the preceding sentence, Artist will not have any right to seek termination of this Agreement or avoid the performance of their obligations under it by reason of any such claim.
7.04. Parallax agrees that Artist may, not more than once during any calendar year, but only once with respect to any statement rendered hereunder, audit its books and records for the purpose of determining the accuracy of Parallax's statements to Artist. If Artist wishes to perform any such audit, Artist will be required to notify Parallax at least thirty (30) days before the date when Artist plans to begin the audit plans to begin the audit. If Artist's audit has not been completed within one (1) month from the time Artist begins it, Parallax may require Artist to terminate it on seven (7) days notice to Artist and Parallax will not be required to permit Artist to continue the examination after the end of that seven (7) day period. Artist shall not be entitled to examine any manufacturing records or any other records which do not specifically report sales of Records or calculation of net receipts on which royalties are accruable hereunder. All audits shall be made during regular business hours, and shall be conducted on Artist's behalf by an independent Certified Public Accountant. Each examination shall be made at Artist's sole expense at Parallax's regular place of business in the United States, where the books and records are maintained.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 9
8. MECHANICAL LICENSES AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to Parallax and its licensees for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75 %) of the current minimum U.S. statutory rate (including the "long work" rate, if applicable) for royalty-bearing records sold and not returned and for which Parallax is paid, excluding any instance where Parallax and Artist are sharing income under Paragraph 6.01(e) above. In no event shall the mechanical royalties payable hereunder for any Album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of Parallax, Parallax shall not recoup from mechanical royalties due to Artist any advances payable to Artist except: (a) excess recording costs under Paragraph 4.01; (b) overpayments under Paragraph 7.01; and (c) any advances of cash or consigned materials (or the like) to Artist.
8.02. If any record contains one or more compositions which are not Controlled Compositions, then Parallax will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the, amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, Novachrome. Artist warrants and represents that it is the sole owner of such name in connection with Phonograph Records during the term hereof. Artist shall not use a different name in connection with Phonograph Records unless Artist and Parallax mutually agree in writing. Artist agrees that Parallax may cause a search to be instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. Parallax may cause a federal application for trademark protection to be made in favor of Artist for Phonograph Record and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by Parallax pursuant to this Paragraph shall be deemed Advances hereunder. If the trademark search indicates that such name should not be used, Parallax and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of Parallax with respect to Artist's use of such name.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 10
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical booking agencies, print media, music publishers or the like, provided that such records do not exceed two hundred (200) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and two hundred (200) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of Parallax's published wholesale price will be a non-royalty bearing record.
10.02. During each applicable contract period, Parallax shall provide Artist with thirty (30) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
11. CONTAINER COSTS
11.01. Parallax's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, and three dollars ($3.00) for double cassettes, music videos and long form video formats.
12. INDEMNIFICATION
12.01. Artist agrees to and does hereby indemnify, save and hold Parallax and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse Parallax on demand for any payment made or incurred by Parallax with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Parallax or its licensees. Pending the determination of any claim with respect to which Parallax is entitled to indemnity, Parallax may withhold moneys which would be otherwise payable to Artist up to the amount of its potential liability.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, Parallax may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for the duration of such default or breach and until, the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by Parallax of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 11
14. FORCE MAJEUR
14.01 If Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artists affecting Parallax or Artist or the phonograph record industry, Parallax, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed one (1) year, and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof. In the event that Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, Parallax, upon notice to Artist, may suspend its obligations under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof.
15. MERCHANDISING
15.01. Artist hereby grants Parallax the non-exclusive rights to merchandising Artist (Artist/Name/Logo) insofar as they relate to the manufacture, sale, licensing, distribution and exploitation throughout the Universe and by mail-order and through retail sources of, without limitation, the following: T-shirts, mirrors, sweatshirts, jackets, hats, pins, posters, bumper stickers, iron-on transfers, photographs, portraits and the like by any means whatsoever during the term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by Parallax during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
15.03. In the case of any such products or property manufactured and sold by Parallax or by any associated company, Artist shall be entitled to a royalty of twenty percent (20%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venue and sales commissions and state sales tax where collected and actually paid. In the event that Parallax licenses to others any of its rights under this clause, then Artist shall receive fifty percent (50 %) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by Parallax or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 12
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is that unreasonably withheld. During the Term of this Agreement, Artist shall cause the inclusion of Parallax's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, Parallax shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
16. ARTWORK
16.01. Artist agrees that Parallax is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Term of this Agreement. Artist shall have the right to use artwork which has been mutually approved by Parallax and Artist for the purpose of merchandising.
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Registered Mail, Return Receipt Requested, or by telecopy (facsimile). Notice to Artist will be received by James King, and notice to Parallax will be received by: Gust Kepler, Parallax Entertainment, Inc., 12830 Hillcrest St., Suite 111, Dallas, Texas 75230.
18. LEAVING MEMBER CLAUSE
18.01. If any member(s) of Artist ceases to perform as a member of the group ("Leaving Member"), Artist shall promptly give Parallax written notice of such occurrence and of the name and address of any replacement member, and Parallax shall have the right within thirty (30) days of receipt of such notice to terminate this Agreement or accept the named replacement member(s). Artist hereby grants Parallax the irrevocable option to engage in exclusive services of any Leaving Member(s) as a recording artist for a period equal to the balance of the Term hereof. Said option, with respect to such individual, may be exercised by Parallax by giving Artist (the Leaving Member(s)) notice at any time before the expiration of ninety (90) days after Parallax's receipt of notice by the Leaving Members. In the event of Parallax's exercising such option, such Leaving Member(s), shall be deemed to have entered into an agreement with Parallax with respect to such individual(s) exclusive recording services upon all the same terms and conditions as contained in this Agreement. In any event, the Leaving Member is only responsible for their pro rata share of any unrecouped balance as of the date of their departure. Leaving member(s) shall not, without Parallax's consent, use the professional name of the group in any commercial or artistic endeavor. Any replacement member accepted by Parallax shall be required to sign this Agreement and shall be bound by its terms from the date that Parallax accepted such replacement member.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 13
19. PROMOTIONS AND ADVERTISING CAMPAIGNS
19.01. Any promotional moneys spent by Parallax on behalf of Artist are fifty percent (50 %) recoupable from moneys otherwise due to Artist from Parallax, excluding Mechanical Royalties, not withstanding the source. Any promotional moneys spent on behalf of Artist in combination with other Parallax Artists shall be recoupable from Artists on a pro-rata basis.
19.02. Parallax is not obligated to produce a promotional video for Artist, but if Parallax undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties, notwithstanding the source.
20. CONTROLLING LAW
20.01. This Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this Agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
21. REMEDIES
21.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause Parallax irreparable damages, Parallax shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
22. HEADINGS
22.01. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
23. RELATIONSHIP
23.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist or its members as Parallax's agents or employees. This Agreement does not and shall not be construed to create a partnership or joint venture between the parties to this Agreement
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 14
24. VALIDITY AND MODIFICATIONS
24.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter. No change of this Agreement will he binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
25. ASSIGNMENT
25.01. Parallax may assign its rights under this Agreement in whole or in part.
26. LEGAL REPRESENTATION
26.01. Artist, by their signature hereto, confirms that Parallax has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the - terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
27. COOPERATION
27.01. Artist shall execute such other documentation and shall give such further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
28. DISCLAIMER
28.01. Parallax has not made and does not hereby make any representation or warranty with respect to the extent of the sale of records or the exploitation of music videos hereunder.
PARALLAX ENTERTAINMENT, INC.
By:_________________________
Gust Kepler, President
12830 Hillcrest St., Suite 111 Dallas,
Texas 75230
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 15
ARTIST:
p/k/a Novachrome
By:_________________________
Printed name: Johnry Hawkins
SSN: 000-00-0000
By:_________________________
Printed name: Craig Reeves
SSN: 000-00-0000
EXHIBIT A
Appendix Of Existing Commercial Releases
Date Title Song Title Label
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 16
This Agreement is made as of the 11th day of November, 2000 by and between PARALLAX ENTERTAINMENT, INC. (hereinafter "Parallax") and Neil Swanson, Justin Jones, and Jamie Coffee, both individually and jointly, and p/k/a "TEK 3" (hereinafter "Artist").
1. ARTIST'S WARRANTIES AND REPRESENTATIONS
1.01. Artist represents and warrants that: (a) it is authorized, empowered and able to enter into and fully perform its obligations under this Agreement; (b) neither this Agreement nor the fulfillment thereof by any party infringes upon the rights of any other person or entity; (c) it has not and will not do anything that impairs Parallax's rights under this Agreement, nor will it permit any other person or entity to do so; and (d) Artist is resident in the United States of America for income tax purposes.
1.02. Artist further represents and warrants that: (a) there now exist no prior recorded performances by Artist other than those listed on the attached Exhibit A; (b) that it owns all of the rights in and to the Masters listed on Exhibit A; (c) none of the Masters delivered to Parallax by Artist, nor the performances embodied thereon, nor any other Materials, nor any use thereof by Parallax or its grantees, licensees or assigns, will violate or infringe upon the rights of any third party. "Materials," as used in this Paragraph, means all Controlled Compositions, each name used by Artist, any logo used by Artist, and all other musical, artistic, literary and other materials, ideas and other intellectual properties furnished by Artist or any other producer engaged by Artist and contained or used in connection with any Masters made hereunder, or the packaging, sale, advertising or other exploitation thereof. Notwithstanding the foregoing, the parties acknowledge that the recordings listed in Exhibit A are being acquired by Parallax under this Agreement, and shall count toward Artist's Minimum Recording Commitment. In addition, the parties acknowledge that Artist has already begun recording its Minimum Recording Commitment for the Initial Period.
2. TERM AND RECORDING COMMITMENT
2.01. The Term of this Agreement shall be for an Initial Period commencing on the date hereof and expiring nine months thereafter.
2.02. Artist hereby grants to Parallax three (3) separate and irrevocable options to extend the Term of this Agreement for further periods (the "Option Periods") commencing immediately upon the expiration of the Initial Period and expiring nine months after delivery to Parallax of the Minimum Recording Commitment for said Option Period. Each option shall be exercised when Parallax sends a written notice to Artist that the option is being exercised at least sixty days prior to the commencement of the Option Period; provided that Parallax shall have a right to cure any failure to send such notice at any time up to ten days following receipt of a written notice from Artist that the deadline for exercising an option has passed.
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2.03. During the Term of this Agreement (as the same may be extended) Artist agrees to produce and Artist shall deliver to Parallax Masters comprising sound alone sufficient to comprise the following (the "Minimum Recording Commitment"):
(a) during the Initial Period-- one (1) Album (the "First Album")
(b) during the First Option Period--one (1) Album (the "Second Album")
(c) during the Second Option Period--one (1) Album (the "Third Album")
(d) during the Third Option Period--one (1) Album (the "Fourth Album")
2.04. Notwithstanding anything else herein to the contrary:
(a) Each Album shall be delivered to Parallax within five (5) months after the commencement of the applicable Initial Period or Option Period.
(b) Artist shall not commence the recording of any Album hereunder earlier than three (3) months following delivery to Parallax of the prior album.
(c) Parallax shall not be obliged to accept delivery of any Album hereunder earlier than nine months following the date of delivery to Parallax of the prior album. If any such premature delivery is tendered, the contractual date of delivery hereunder of such Album shall be deemed to be the date one year following the date of delivery of the prior album, provided that the prior album has been recorded and delivered in all respects in accordance with the provisions of this Agreement and comprises acceptable Masters as herein provided.
(d) In the event that, during the Initial Period or the Option Periods, Artist produces more than the Minimum Recording Commitment, Parallax shall at its sole option be entitled to treat such additional material (or some of it) as counting towards the Minimum Recording Commitment (or not) but said additional material shall be and remain the sole and exclusive property of Parallax subject to the provisions of this Agreement.
(e) Each Album delivered shall consist of not less than ten (10) Masters and not less than forty-five (45) nor more than seventy-four (74) minutes of Artist's performances. Each Master shall consist of not less than two minutes and thirty seconds of Artist's performances. No album consisting of Artist's "live" performances shall be deemed to be in fulfillment of any of Artist's obligations hereunder except that upon mutual consent, in writing, a live recording may be accepted in fulfillment of Artist's Minimum Recording Commitment. If any such performances are recorded during the Term hereof, Parallax shall be the owner thereof and shall have the right to exploit same under the same terms as
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contained herein for the First Album, except that no advance will be paid to Artist. No Multiple Albums shall be delivered hereunder without Parallax's prior written consent; any such Multiple Album delivered to and accepted by Parallax shall be deemed a single Album for all purposes hereof. No Mini-Album shall form part of the Minimum Recording Commitment unless expressly agreed in writing by Parallax at its absolute discretion.
(f) Artist shall deliver to Parallax each Master hereunder in the form of a digital two-track stereo tape master, as well as reference discs which are representative of such tape masters. Artist shall also deliver at the same time any multi-track master tapes recorded in connection with the same project. The two-track stereo master tape shall be fully edited, mixed, equalized and leadered for the production of parts from which satisfactory Phonograph Records can be manufactured.
(g) As used in this Agreement, "delivery" shall mean the receipt of all tape masters as provided herein, as well as Artist's submission to Parallax in written form of all necessary information, consents, licenses and permissions that Parallax requires to manufacture, distribute and release the Masters as Phonograph Records, including, but not limited to, mechanical licenses, credits, musician and producer releases, and any information required to be delivered to unions or other third parties. Payment of funds due at delivery by Parallax shall not be deemed a waiver of information or documents required hereunder.
(h) Artist shall be available to Parallax and shall perform for the purposes of making such music videos at such times and places as Parallax shall reasonably agree with Artist. The cost of making such music videos shall be deemed advances hereunder and shall be fifty percent (50%) recoupable from all sources, excluding Mechanical Royalties and merchandise royalties, payable to Artist hereunder.
(i) Parallax shall release a minimum of one thousand copies of each Album delivered by Artist, within ninety days of its delivery. Parallax shall have a right to cure any failure to timely make such release at any time up to ten days following receipt of a written notice from Artist that the deadline for release has passed. Failure to cure by Parallax shall entitle Artist to buy the unreleased Masters for one hundred ten percent (110%) of the Recording Costs spent by Parallax on the Masters, provided that Artist delivers written notice of its ,intent to buy the Masters within ten days of the expiration of Parallax's right to cure, and pays the purchase price in full within ninety days of delivery of its notice of intent.
3. GRANT OF RIGHTS
3.01. During the Term of this Agreement, Artist shall furnish to Parallax its exclusive recording services throughout the Universe. Any contract entered into by Artist or on Artist's behalf during the Term hereof or any extensions thereof for Artist's performances in television or radio broadcasts or motion pictures or stage productions shall specifically exclude the right to use any recording of such performance for the manufacture and sale of Phonograph Records or music videos unless previously authorized in writing by Parallax, which authority shall not be unreasonably withheld.
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Artist shall promptly deliver to Parallax copies of the pertinent provisions of each such contract and Artist will cooperate fully with Parallax in any controversy dispute or litigation which may arise in relation to the rights of Parallax under this Paragraph.
3.02. Artist hereby grants and assigns to Parallax all rights of every kind and the complete, unconditional, exclusive, perpetual, unencumbered title throughout the Universe in and to all results and products of Artist's services and performances hereunder(being the recording of musical performances and the sound recordings in Exhibit A), any and all Masters, records, tapes, sound recordings, music videos, long form videos, and other material of every kind made or authorized by Parallax hereunder or otherwise produced during the Initial Term and/or Option Terms and which include the voice, instrumental or other sound and/or visual effects, services, or performances of Artist, including without limitation the right to record, reproduce, broadcast, transmit, publish, sell, exhibit, distribute, advertise, exploit, perform, and use the same separately or in combination with any other material for any purpose in any manner, under any label, trademark, or other identification and by any means or method, whether known or not now known, invented, used, or contemplated, and to refrain from all or any part thereof.
3.03. Without in any way limiting the generality of the foregoing, Artist hereby grants to Parallax the following rights throughout the Universe which Parallax may use or refrain from using as it elects in Parallax's sole discretion:
(a) the exclusive right during the Term hereof to manufacture, distribute, and sell anywhere in the Universe Phonograph Records and music videos reproducing Artist's performances;
(b) the exclusive right for the full periods of copyright to manufacture, distribute, and sell throughout the Universe Phonograph Records and music videos produced from Masters made during the Terms hereunder;
(c) the exclusive right in all media and forms to advertise, publicize, and exploit anywhere in the Universe Phonograph Records and music videos produced during the Terms hereunder by any and every means, particularly, but without limiting the generality ,of the foregoing, to use the name, including the professional name, approved photograph, and/or likeness of, and approved biographical material concerning Artist for advertising, publicizing, and otherwise exploiting said Phonograph Records and music videos, said approval not to be unreasonably withheld;
(d) the exclusive right to authorize public performances in the Universe of Phonograph Records and music videos produced during the Terms hereunder;
(e) the right to permit and authorize others to exercise, directly or through persons designated by them, any and all of Parallax's rights hereunder.
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3.04. (a) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Initial Term shall belong to Artist. Artist grants Parallax a security interest in and to its copyright in the First Album to secure recoupment of all sums expended by Parallax in the recording and promotion of all Albums recorded under this agreement. Artist further agrees to execute any document reasonably necessary to perfect such security interest. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such security agreements.
(b) Each Master (including all sound recordings embodied thereon) produced hereunder or embodying Artist's performances and recorded during the Terms shall, from the inception of its creation, be considered a "work made for hire" for Parallax within the meaning of the U. S. Copyright Law. If it is determined that a Master does not so qualify, then such Master, together with all rights in it (including the sound recording copyright), shall be deemed, and are hereby transferred and assigned to Parallax by this Agreement. Artist agrees to execute and deliver to Parallax any and all documents or instruments which Parallax may request in order to confirm Parallax's acquisition and/or title to the Masters (including the copyright) as described herein. In the event Artist fails to execute any such documents or instruments Artist hereby irrevocably grants to Parallax power of attorney, coupled with an interest, to execute all such documents of conveyance. All Masters recorded by Artist from the inception of the recording thereof and all reproductions derived therefrom, together with the performances embodied thereon, shall be entirely the property of Parallax in perpetuity, throughout the Universe, free of any claim whatsoever by Artist or any persons deriving any rights or interests therefrom.
3.05. Artist shall not authorize or permit Artist's performances to be recorded for any purpose without obtaining an express written approval of Parallax, and Artist shall take reasonable' measures to prevent the manufacture, distribution and sale of Phonograph Records or music videos containing its performances (and the use of Artist's name and likeness in connection therewith) by any person or entity other than Parallax, its successors, licensees and assigns.
3.06. Artist grants Parallax the right to include any Master produced and delivered hereunder in a soundtrack or compilation album, at any time, and without any further advance, except that royalties shall be payable as provided herein.
3.07. As used in this Agreement, "Phonograph Records" shall mean any and all mechanical reproductions of the Masters produced and delivered hereunder, in any format, whether now known or unknown, including but not limited to compact discs, cassette tapes, vinyl records, DAT tapes or any future format.
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4. RECORDING COSTS AND PROCEDURES
4.01. Advances payable to Artist pursuant to this Agreement are and shall be inclusive of all costs incurred in the course of producing and recording Masters hereunder (including without limitation, the costs of studio time, musician fees, union payments, instrument hire, producer's fees, and the cost of tape editing, mixing, remixing and mastering, advances, and other similar costs customarily regarded in the industry as being recording costs). All such costs are sometimes herein referred to as "recording costs" and shall be paid by Parallax and constitute advances recoupable from royalties payable hereunder. Parallax shall, in accordance with the provisions of this Agreement, deduct and retain out of said advances such sums as may be necessary to pay the said recording costs. In the event that, as a result of an event within the control of the Artist, any recording costs shall exceed the amount of the recording fund specifically referred to in Paragraph 5.01 below, then the excess costs shall (if paid by Parallax) constitute a loan to Artist payable on demand and without prejudice to Parallax's other rights and the same shall, at Parallax's election, be recoverable by Parallax out of any monies payable by Parallax to Artist or on Artist's behalf hereunder.
4.02. Parallax and Artist shall, prior to the commencement of any
recording: (a) mutually designate the producer(s) of all Masters hereunder; and
(b) agree on a budget for recording costs. Parallax shall not unreasonably
withhold its consent to any budget for recording costs that is less than ninety
percent (90%) of the recording fund for that album as specified in Paragraph
5.01.
4.03. Artist shall be properly rehearsed and shall appear at the times and places designated by Parallax after consultation with and reasonable notice to Artist from time to time for all recording sessions required hereunder and at each session Artist shall tender their professional services to the best of their ability. Parallax and Artist shall mutually designate the material to be recorded and each Master shall be subject to Parallax's approval as technically satisfactory and similar in style to Artist's current performances. Upon Parallax's request, Artist shall re-record any material until a Master, which in Parallax's sole judgment is satisfactory, shall have been obtained.
4.04. The Masters delivered to Parallax by Artist under this Agreement and the performances embodied therein shall be produced in accordance with the rules and regulations of the American Federation of Musicians, the American Federation of Television and Radio Artists and all other unions having jurisdiction. Artist is or will become and remain, to the extent necessary to fulfill this Agreement, a member in good standing of all labor unions or guilds in which membership may be required for the performance of Artist's services hereunder.
4.05. Artist shall not perform for or in connection with (and shall not permit any other person or entity to use Artist's name or likeness in connection with) the recording or exploitation of any Phonograph Record embodying any Composition recorded by Artist under this Agreement prior to a date four (4) years subsequent to the expiration or termination of the term of this Agreement, or any extensions thereof.
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4.06. Without limiting the foregoing, Parallax shall not be required to make any payments of any kind for, or in connection with, the acquisition, exercise or exploitation of rights by Parallax except as specifically provided in this Agreement. Artist shall be solely responsible for all sums due to labor unions or guilds, individual musicians, producers and all other persons or entities entitled to receive royalties or other payments in connection with the sale of Phonograph Records derived from Masters hereunder, although Parallax will undertake to make all such payments to the extent of the recording fund specified in Paragraph 5.01. None of the persons whose performances are embodied in the Masters or whose services are used in recording the Masters shall be bound by any agreement that would restrict such performances or services, or to the extent they are otherwise bound or restricted, Artist shall obtain all necessary clearances in writing.
5. ADVANCES AND RECORDING FUND
5.01. As advances against and recoupable from royalties payable hereunder, Parallax agrees to pay with respect to each Album constituting the Minimum Recording Commitment hereunder a sum equal to the amount by which the greater of (1) the applicable sum set forth below; or (2) a sum equal to two-thirds of the royalties actually accruing to Artist on the immediate prior Album exceeds (3) the sum of the documented receipts for the recording costs concerned and any other advances made to Artist prior to delivery of the applicable Album("Album Recording Fund"):
Album Recording Fund: First Album $10,000
Second Album $20,000
Third Album $35,000
Fourth Album $50,000
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5.02. If net sales through normal retail channels in the United States for which royalties are payable pursuant to Paragraph 6.01 (a) below, net of applicable reserves of any album shall exceed seventy-five thousand (75,000) units as of the date nine (9) months after the initial release of that album in the United States, then the Album Recording Fund on the next subsequent album shall be increased by Ten Thousand Dollars ($10,000).
5.03. The advances due under Paragraph 5.01 shall be payable promptly following the delivery to Parallax of (a) the Minimum Recording Commitment; (b) the documents required under Paragraph 2.04(g); and (c) all invoices pertaining to the recording of the Minimum Recording Commitment. With respect to payments to be made following delivery. Parallax shall have the right to withhold ten percent (10%) for ninety (90) days to provide for anticipated costs which have not yet been paid.
5.04. All advances paid to Artist or on Artist's behalf shall be recoupable against the royalties payable under this Agreement, from whatever the source, except that advances shall not be recoupable against Mechanical Royalties except as provided for in Paragraph 8.01.
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6. ROYALTIES
6.01. Subject to Artist's compliance with all obligations required of Artist hereunder and subject as otherwise granted herein, Parallax will pay to Artist for the rights granted herein and for the services performed hereunder the royalties set out below, being percentages of one hundred percent (100%) of the Parallax's published wholesale price, exclusive of taxes and duties actually paid by Parallax, and the container cost deductions specified below for all records and music videos manufactured, sold and not returned, and for which Parallax is paid, reproducing exclusively Masters recorded hereunder, namely:
(a) With respect to sales for distribution in the United States of Albums reproducing exclusively Masters hereunder: Twenty Five percent (25%). This royalty reverts to Twenty percent (20%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.
(b) The royalty rate with respect to 12-inch singles shall be twenty percent (20%). This royalty reverts to fifteen percent (15%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.
(c) The royalty rate with respect of 7-inch singles and other records shall be fifteen percent (15%). This royalty reverts to twelve percent (12%) if this Agreement is assigned to a Major Record Label or a label distributed by a Major Record Label.
(d) The royalty rate with respect to the following is fifteen percent (15%)
[thirteen percent (13%) if this Agreement is assigned to a Major Record Label or
a label distributed by a Major Record Label]: records sold to any government
body, PX sales, sales to educational institutions, record clubs, soundtrack
records, compilation records, budget records (defined as a record which is sold
at a wholesale price of at least fifty percent but less than eighty percent of
Parallax's published wholesale price), and EP records (defined as records
containing between three and nine Masters); except that the royalty rate for
compilations released exclusively on the Parallax label shall be twenty five
percent (25%) [twenty percent (20%) if this Agreement is assigned to a Major
Record Label or a label distributed by a Major Record Label.] Royalties for
soundtracks and compilations on which Artist appears with other performers shall
be pro-rated in the same proportion that Artist's Master(s) bear to the entire
album.
(e) Foreign royalty rate: The rate for the records manufactured by Parallax or Parallax's affiliates and sold in Canada will be eighty five percent (85%) of the applicable royalty rate, and sales outside the United States and Canada will be seventy five percent (75%) of the applicable royalty rate. The royalty rate for masters licensed by Parallax outside the United States shall be fifty percent (50%) of the net income therefrom. Net income shall mean all income received less third party out of pocket expenses to establish the license, third party out of pocket collection costs, foreign currency exchange, wire transfer fees and applicable taxes.
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(f) Royalty rate for music videos sold and not returned shall be twenty percent (20%) of Parallax's published wholesale price. The royalty rate for videos licensed by Parallax shall be fifty percent (50%) of the net income therefrom.
7. ROYALTY PAYMENTS
7.01. Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31 st for the preceding six (6) month period, in accordance with Parallax's regular accounting practices. Parallax shall, however, have the right to establish reasonable reserves for returns and exchanges, said reserves not to exceed thirty percent (30%). Each reserve established hereunder shall be liquidated at the end of the following semi-annual period. If Parallax makes any overpayment of royalties (e.g., by reason of an accounting error or paying royalties on Records returned later), Parallax shall have the right to offset such overpayment against any subsequent payment due to Artist from Parallax, excluding mechanical royalties and merchandise royalties.
7.02. Each royalty payment hereunder shall be accompanied by a statement in accordance with Parallax's regular accounting practices. Each statement shall become binding upon Artist and Artist shall neither have nor make any claim against Parallax with respect to such statement, unless Artist shall advise Parallax, in writing, of the specific basis of such claim within two (2) years after the date Parallax mails such statement. Parallax's accounting books and records will be kept and maintained in accordance with generally accepted accounting principles, consistently applied.
7.03. Artist shall not be entitled to recover damages or to terminate this Agreement for any reason because of a claimed breach by Parallax of its material obligations hereunder, unless Parallax has failed to remedy such breach within sixty (60) days following receipt of written notice thereof. Artist will not have the right to sue Parallax in connection with any royalty accounting, or sue Parallax for royalties accrued by Artist during the period a royalty accounting covers, unless Artist commences the suit within two (2) years after the date when the statement in question is rendered to Artist. If Artist commences suit on any controversy or claim concerning royalty accountings rendered to Artist under this Agreement, the scope of the proceeding will be limited to the determination of the amount of royalties due for the accounting periods covered and reasonable attorney fees, and the court will have no authority to consider any other issues or award any relief except recovery of any royalties found owing. Artist's recovery of any such royalties and attorney's fees will be the sole remedy available to Artist by reason of Parallax's royalty accountings. Without limiting the generality of the preceding sentence, Artist will not- have any right to seek termination of this Agreement or avoid the performance of their obligations under it by reason of any such claim. However, in the event that Parallax is found by a court to have breached its obligation to account for and pay royalties to Artist, then any unexercised options to extend the term of this agreement shall be void. Artist's remedy for Parallax's willful refusal to permit it to record its Minimum Recording Commitment shall be an option to terminate this Agreement.
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7.04. Parallax agrees that Artist may, not more than once during any calendar year, but only once with respect to any statement rendered hereunder, audit its books and records for the purpose of determining the accuracy of Parallax's statements to Artist. If Artist wishes to perform any such audit, Artist will be required to notify Parallax at least ten (10) days before the date when Artist plans to begin the audit plans to begin the audit. If Artist's audit has not been completed within one (1) month from the time Artist begins it, Parallax may require Artist to terminate it on seven (7) days notice to Artist and Parallax will not be required to permit Artist to continue the examination after the end of that seven (7) day period. Artist shall not be entitled to examine any manufacturing records or any other records which do not report sales of Records or calculation of net receipts on which royalties are accruable hereunder. All audits shall be made during regular business hours, and shall be conducted on Artist's behalf by an independent Certified Public Accountant and/or a licensed attorney. Each examination shall be made at Artist's sole expense at Parallax's regular place of business in the United States, where the books and records are maintained.
8. MECHANICAL LICENSES AND ROYALTIES
8.01. All Controlled Compositions (defined as musical compositions composed in whole or in part by any individual member of Artist) are hereby licensed to Parallax and its licensees for reproduction on Phonograph Records anywhere in the Universe. Royalties for the mechanical license herein granted shall be at a rate equal to seventy-five percent (75%) of the minimum U. S. statutory rate in effect at the time the recording is first released (including the "long work" rate, if applicable) for royalty-bearing records sold and not returned and for which Parallax is paid, excluding any instance where Parallax and Artist are sharing income under Paragraph 6.01(e) above. In no event shall the mechanical royalties payable hereunder for any Album exceed ten (10) times the rate set forth above. The foregoing also applies to music videos, as well as to any instance where such a license must be executed in favor of Parallax, Parallax shall not recoup from mechanical royalties due to Artist any advances payable to Artist except any advances of cash or consigned materials (or the like) to Artist.
8.02. If any record contains one or more compositions which are not Controlled Compositions, then Parallax will have the right to reduce the amount of Mechanical Royalties payable on the Controlled Compositions by an amount equal to the amount of mechanical royalties payable on non-Controlled Compositions.
9. TRADEMARKS
9.01. Artist shall perform under the professional name, "Tek 3." Artist warrants and represents that it is the sole owner of such name in connection with Phonograph Records during the term hereof. Artist shall not use a different name in connection with
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Phonograph Records unless Artist and Parallax mutually agree in writing. Artist agrees that Parallax may cause a search to be instituted for the purpose of determining whether any professional name used by Artist has been or is being used by another person in connection with Phonograph Records. Parallax may require Artist to file a federal application for trademark protection to be made in favor of Artist for Phonograph Record and/or entertainment purposes. Any amounts up to One Thousand Seven Hundred Dollars ($1,700.00) expended by Artist in successfully obtaining a requested trademark registration pursuant to this Paragraph shall be reimbursed by Parallax and deemed Advances hereunder. If the trademark search indicates that such name should not be used, Parallax and Artist shall mutually agree on a substitute name for Artist. Nothing contained herein shall release Artist from its indemnification of Parallax with respect to Artist's use of such name.
10. FREE GOODS
10.01. No royalties shall be payable with respect to records given away or furnished on a "no charge" basis to one-stops, rack jobbers, distributors, dealers, radio stations, television stations or film companies, theatrical hooking agencies, print media, music publishers or the like, provided that such records do not exceed one hundred (100) non-royalty bearing Singles out of every one thousand (1,000) Singles distributed and one hundred (100) non-royalty bearing Albums out of every one thousand (1,000) Albums. Any record sold for less than fifty percent (50%) of Parallax's published wholesale price will be a non-royalty bearing record.
10.02. During each applicable contract period, Parallax shall provide Artist with thirty (30) non-royalty bearing copies of Artist's then current Album at no charge to the Artist.
ll. CONTAINER COSTS
11.01. Parallax's container deduction shall be a sum equal to: one dollar ($1.00) for singles, one dollar and fifty cents ($1.50) for LPs and cassettes, two dollars ($2.00) for double LP sets and compact discs, three dollars ($3.00) for double cassettes, and four dollars ($4.00) for other formats, including double compact disks, and all video formats.
12. INDEMNIFICATION
12.01. Artist agrees to and does hereby indemnify, save and hold Parallax and its licensees harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any breach of this Agreement or any claim which is inconsistent with any of the warranties or representations made by Artist in this Agreement, and Artist agrees to reimburse Parallax on demand for any payment made or incurred by Parallax with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Parallax or its licensees. Pending the determination of any claim with respect to which Parallax is entitled to indemnity, Parallax may withhold monies which would be otherwise payable to Artist up to the amount of its potential liability.
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12.02. Parallax agrees to defend and does hereby indemnify, save and hold Artist harmless of and from any and all liability, loss, damage, cost, or expense (including all legal expenses and reasonable attorney fees) arising out of or connected with any claim which is inconsistent with any of the warranties or representations made by Parallax in this Agreement, and Parallax agrees to reimburse Artist on demand for any payment made or incurred by Artist with respect to the foregoing if the claim concerned is settled or has resulted in a final judgment against Artist.
13. DEFAULT AND TERMINATION
13.01. In the event of any default or breach by Artist in the performance of any of Artist's obligations hereunder, Parallax may, without prejudice to its other rights, claims or remedies, suspend its obligations hereunder for the duration of such default or breach and until the same has been cured and may, at its option, extend the Term for a period equal to all or any part of the period of such default or breach, and in such event the dates for the exercise by Parallax of the Option Periods hereunder and the dates of commencement of each subsequent Option Period shall be extended accordingly.
14. FORCE MAJEUR
14.01 If Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any act of God, fire, earthquake, strike, act of government or any order, regulation, ruling, or action of any labor union or association of artists affecting Parallax or Artist or the phonograph record industry, Parallax, upon notice to Artist may suspend its obligations under this Agreement for a period not to exceed ninety days, and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof. In the event that Parallax's material performance hereunder is delayed or becomes impossible or impractical because of any civil strife, Parallax, upon notice to Artist, may suspend its obligations under this Agreement for the duration of such delay, impossibility or impracticability and in such event the number of days equal to the number of days of such suspension shall be added to the then-current period of the Term thereof.
15. MERCHANDISING
15.01. Artist hereby grants Parallax the exclusive right to manufacture, sell, license, distribute and exploit, throughout the Universe and by mail-order and through retail sources of, without limitation, all merchandise of every kind featuring the Artist (name/logo/likenesses), during the term of this Agreement.
15.02. It is expressly agreed and understood that any contract for the purpose of merchandising Artist entered into by Parallax during the Term shall continue in full force and effect in accordance with the provisions thereof for a period not to exceed one (1) year following the expiration of the term of this Agreement.
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15.03. In the case of any such products or property manufactured and sold by Parallax or by any associated company, Artist shall be entitled to a royalty of thirty four percent (34%) of the adjusted gross receipts therefrom. As used in this paragraph, the term "adjusted gross" shall mean gross revenues from the sale of applicable merchandise, less venue commissions and state sales tax where collected and actually paid. In the event that Parallax licenses to others any of its rights under this clause, then Artist shall receive sixty percent (60%) of the net receipts therefrom. As used in this paragraph, the term "net receipts" shall be calculated as gross revenues from the sale of the applicable merchandise, less the cost actually incurred and paid by Parallax or its licensing company for manufacturing; sales personnel salaries and/or commissions, venue commissions and state sales tax where collected and actually paid.
15.04. Artist has the right of approval of all merchandising artwork, so long as said approval is not unreasonably withheld. During the Term of this Agreement, Artist shall cause the inclusion of Parallax's logo and proper name at a reasonable size and position on all merchandise.
15.05. No royalties shall be payable with respect to merchandise given away or furnished on a no-charge basis. Upon Artist's request, Parallax shall provide Artist with twenty (20) non-royalty-bearing samples of each item of merchandise at no charge.
15.06. The parties agree to negotiate in good faith a long-form agreement for the sale of merchandise that is consistent with the terms contained herein.
16. ARTWORK
16.01. Artist agrees that Parallax is the owner of any and all artwork, LP jacket art, and promotional artistic renderings undertaken or completed within the Term of this Agreement. Artist shall have the right to use artwork which has been mutually approved by Parallax and Artist for the purpose of merchandising.
17. NOTICES
17.01. All notices, demands or the like which are required to be given hereunder shall be in writing and may be served upon the other party personally by Registered Mail, Return Receipt Requested, or by telecopy (facsimile). Notice to Artist will be received by: and notice to Parallax will be received by: Gust Kepler, Parallax Entertainment, Inc., 14110 North Dallas Pkwy, Suite 130, Dallas, Texas 75240.
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 13
18. PROMOTIONS AND ADVERTISING CAMPAIGNS
18.01. Any promotional monies spent by Parallax on behalf of Artist are fifty percent (50%) recoupable from monies otherwise due to Artist from Parallax, excluding Mechanical Royalties and merchandise royalties, notwithstanding the source. Container costs shall not be considered promotional monies. Any promotional monies spent on behalf of Artist in combination with other Parallax Artists shall be recoupable from Artists on a pro-rata basis.
18.02. Parallax is not obligated to produce a promotional video for Artist, but if Parallax undertakes to produce said video, the cost is fifty percent (50%) recoupable from royalties, excluding Mechanical Royalties and merchandise royalties, notwithstanding the source. The cost of producing nonpromotional videos intended for resale are fully recoupable.
19. CONTROLLING LAW
19.01. This Agreement is entered into and performable in Dallas County, Texas and the validity, interpretation and legal effect of this Agreement shall be governed by Texas law. Venue for any legal action shall be in Dallas County, Texas.
20. REMEDIES
20.01. Artist acknowledges, recognizes and agrees that his services hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated for by damages in an action of law. Inasmuch as a breach of such services will cause Parallax irreparable damages, Parallax shall be entitled to injunctive and other equitable relief, in addition to whatever legal remedies are available, to prevent or cure any such breach or threatened breach.
21. HEADINGS
21.01. The headings of the clauses herein are intended for convenience only, and shall not be of any effect in construing the contents of this Agreement.
22. RELATIONSHIP
22.01. Artist has the status of an independent contractor and nothing herein contained shall contemplate or constitute Artist or its members as Parallax's agents or employees. This Agreement does not and shall not be construed to create a partnership or joint venture between the parties to this Agreement
23. VALIDITY AND MODIFICATIONS
23.01. The invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. This Agreement contains the entire understanding of the parties relating to its subject matter.
EXCLUSIVE RECORDING ARTIST AGREEMENT - PAGE 14
No change of this Agreement will he binding unless signed by all parties hereto or their duly authorized representatives. A waiver by either party of any provision of this Agreement in any instance shall not be deemed to waive it for the future. All remedies, rights, undertakings and obligations contained in this Agreement shall be cumulative and none of them shall limit any other remedy, right, undertaking or obligation.
24. ASSIGNMENT
24 01 . Parallax may assign its rights under this Agreement in whole or in part to any Major Record Label, or its subsidiary or legal successor. Parallax may assign its rights under this Agreement in whole or in part to any other Company with Artist's consent, such consent not to be unreasonably withheld.
25. LEGAL REPRESENTATION
25.01. Artist, by their signature hereto, confirms that Parallax has advised Artist to take independent legal counsel, from a lawyer specializing generally in the music business and specifically in the negotiation of recording agreements, on the terms and conditions of this Agreement and on the obligations being undertaken by Artist in executing the Agreement.
26. COOPERATION
26.01. Artist shall execute such other documentation and shall give such further assurances as may reasonably be necessary or desirable for the purpose of vesting, confirming, protecting or further assuring any of the rights granted herein.
27. DISCLAIMER
27.01. Parallax has not made and does not hereby make any representation or warranty with respect to the extent of the sale of records or the exploitation of music videos hereunder.
SIGNED THIS 11th DAY OF NOVEMBER, 2000.
PARALLAX ENTERTAINMENT, INC.
By:_________________________
Gust Kepler, President
14110 North Dallas Parkway
Suite 130
Dallas, Texas 75240
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 15
ARTIST:
By:__________________________
Printed name: Neil Swanson
SSN: 000-00-0000
By:__________________________
Printed name: Jamie Coffey
SSN:000-00-0000
By:__________________________
Printed name: Justin Jones
SSN:000-00-0000
EXHIBIT A
Appendix Of Existing Commercial Releases
Date Title Song Title Label
EXHIBIT B
APPROVED LABELS
EXCLUSIVE RECORDING ARTIST AGREEMENT- PAGE 16