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Exhibit 10.20
[COPYRIGHT CLEARINGHOUSE, INC. LETTERHEAD]
August 20, 1996
Xx. Xxxxx Xxxxx
President and CEO
Aristo International Corporation
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
Re: "PLAYNET" Service Agreement
Dear Xxxxx:
The following is the agreement between us pursuant to which we ("we" or "us")
will provide music licensing and consulting services to you or any companies
through which you now or in the future do business.
1. Services. We shall provide music licensing and consulting services in
matters relating to the system currently to be called "Playnet", which is an
on-line "virtual" jukebox. These services will include the key activities set
forth in Phase One and Phase Two on Exhibit A attached hereto. It is understood
that we will contact ASCAP, BMI, RIAA and such individual record labels and
publishers if and as we deem appropriate, with regard to blanket and per play
license fees for the performance of selections through the Playnet system. We
will attempt to negotiate an accounting standard with licensors for payment of
blanket and per play fees that may be due as a result of the installation of
the Playnet system. At such time as you are required to begin the continuing
distribution of per play royalties to licensors, we agree to negotiate in good
faith, a fee for providing such services to you. We will provide you with a
bi-weekly written report (due every other Friday) of the progress being made,
and the companies and societies being contacted.
2. Compensation. You shall pay us a minimum, non-cumulative, non-returnable,
monthly retainer against hourly fees. Hourly fees are $300 for Xxx Xxxxx, $250
for Xxxx Xxxxxxx, $250 for an additional attorney designated by us as
necessary, and $150 for associates. For the first three months of the
agreement, the retainer shall be $25,000 per month. Thereafter, the retainer
shall be $20,000 per month. Retainer fees are due on the first of each month.
We shall inform you when monthly xxxxxxxx are about to exceed the retainer. You
shall reimburse us for our
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Xx. Xxxxx Xxxxx
August 20, 1996
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reasonable expenses incurred in connection with rendering services, provided
such expenses receive your prior approval. Invoices for approved overages and
expenses will be billed monthly, and are due and payable upon receipt. All
statements will be prepared with sufficient detail to permit you to identify
the person performing the work, the specific task performed and the
amount of time spent.
a. Additional compensation:
i. At the end of the first full year of operation, you will also
pay to us a minimum floor of one (1)% of 100% of your gross
receipts, or 10% of your net revenues for the year, whichever is
greater.
ii. At the end of each three-month period, if this agreement has
not been terminated by you, we shall receive options to purchase
25,000 shares of your stock at $5.50 per share (i.e., a total of
100,000 shares at the end of the first year), which options shall
be exercisable only between September 1, 1997 (and not before) and
December 31, 2005, after which time such options shall expire if
not previously exercised.
3. Term of agreement. The term of this agreement is one year from the date
hereof. This agreement is terminable by either party on fifteen days prior
written notice. However, the additional compensation provided for in paragraph
2 a (i) above, shall become fully vested and payable if this agreement has not
been terminated by you prior to the beginning of the tenth month hereof.
4. Confidentiality. We agree that information regarding the number of individual
"plays" of recordings on the Playnet system (the "Confidential Play
Information") will not be used for any purpose other than rendering the
services provided for herein, without your prior written approval. We further
agree to keep the Confidential Play Information confidential, to safeguard it,
and not to disclose it, to any person, firm or corporation other than those
directly involved in providing our services and the licensors that require such
information, and that the obligation of confidentiality shall survive the
expiration or termination of this agreement. We acknowledge your ownership of
the Playnet system and concept, and we will not challenge that ownership or
attempt to incorporate or otherwise use it for our commercial gain. You
acknowledge that we may provide music licensing and consulting services to
others. You agree that information regarding the composers, publishers,
administrators, society affiliation, and percentage of ownership of individual
musical compositions and recordings contained in your proprietary music
ownership database, SONGDEX, (the Confidential Ownership Information) which may
be used by us in rendering services hereunder, is our property. To the extent
that the Confidential Ownership Information is disclosed to you, you agree to
keep the Confidential Ownership Information confidential, to safeguard it, and
not to disclose it, to any person, firm or corporation, other than those in your
company directly involved in the execution of license agreements and the
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August 20, 1996
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payment of per play royalties, and that the obligation of confidentiality shall
survive the expiration or termination of this agreement.
5. License agreements and initial license fee payments. You will promptly
review, sign and return to us all license agreements negotiated by us on your
behalf, together with any initial payments required thereby, made payable to
the content licensors. We will forward agreements and license fee payments to
the content licensors and will use best efforts to complete all documentation
required to establish your initial relationship with such content licensors.
These agreements and payments will be required to establish the initial
relationship between you and the content licensors, but this section will not
obligate us to administer any of the ongoing collection and distribution of
royalties and/or fees unless and until a separate compensation relationship is
agreed upon between us as described in section 1 herein.
6. Warranties and representations. Our services shall be performed in
accordance with our customary business practices. We represent that ownership
and/or licensing information regarding composers, publishers or record masters
comes from generally available music industry sources and not from a search of
the records of the United States Copyright Office. We shall undertake searches
of the Copyright Office only upon your request, and shall have no obligation or
liability to you in relying upon information secured from generally available
music industry sources. You agree to indemnify and hold us harmless from and
against any and all claims, damages, liability, cost and expense, including
reasonable attorneys' fees, arising out of your use of any copyright or
property right unless such claims, damages, liability, cost and expense are a
direct result of our negligence action or omission. In the event you obtain an
errors and omissions insurance policy in connection with your activities, we
shall be carried as an additional insured on said policy.
If the foregoing reflects your understanding of our agreement, please indicate
your acceptance by signing below and returning this letter to us along with a
check in the amount of $25,000.00 for the first month retainer. A duplicate
original is enclosed for your files.
Sincerely,
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, Esq.
President
Agreed and accepted:
/s/ Xxxxx Xxxxx
Xx. Xxxxx Xxxxx
Chief Executive Officer
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EXHIBIT A
I. Phase One: Planning, Consulting and SEC Filing
A. Time Line: 30 days
B. Key Activities
1. Recruit one or more major record companies to participate in the
MusicPlus program prior to the SEC filing. Seek exclusive relationships
and public relations cooperation where possible.
2. Develop negotiation strategies with publishers and the performing
rights societies to include blanket fees, per-use fees and an
appropriate carve-out. (Note: A blanket license fee allows a licensee to
perform any and all compositions from a performing rights society's
repertoire at any time in exchange for an annual fee. Per-use fees allow
a licensee to account and pay for performances, directly to the
copyright proprietor, on a per use basis. A Carve-out is the methodology
by which blanket fees are reduced when per-use fees are employed.
Carve-out licenses are complicated and require extensive negotiations
with publishers, the performing rights societies, record companies and
the RIAA.)
3. Develop strategies with record companies and the RIAA to include
blanket fees, per-use fees and an appropriate came-out.
II. Phase II: Negotiations, Clearance and License Administration
A. Time line: Ongoing after Phase I
B. Activities: Negotiate with publishers and/or the performing rights
societies and otherwise implement the agreed upon negotiating strategy;
Negotiate with record companies and/or the RIAA and otherwise implement
the agreed upon negotiating strategy; Draft and negotiate license forms;
Arrange for the payment of any required advances/guarantees and/or
initial license fees.
