By Steven R. Gordon
Steve Gordon is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business (www.futureofthemusicbusiness.com (Hal Leonard 4th ed. 2015)).
The author would like to thank attorney Wallace Collins for contributing a model band agreement contained in this article. He also gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article.
This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in this series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.
This is the ninth installment of an 11-part series on basic music industry agreements. It includes two different, though related, discussions. The first part of the article discusses business actions a band should take, and can take at no or little cost, without the services of an attorney. The second part of the article examines the elements and benefits of an agreement between members of a band or musical group pertaining to important issues, such as decision making, division of money (including performance and recording revenues), treatment of departing members, and ownership of band property (such as the band's name, songs, and masters).
Band agreements usually require the services of an experienced music attorney to draft a legally enforceable contract. A sample band agreement provided by my friend and colleague, veteran music attorney Wallace Collins, is included in this article. If you take just a brief glimpse at it, you will see it takes a lot of thought and work. Many experts, especially lawyers, advise clients to prepare and enter into a band agreement as soon as possible after the band's formation. The reason, they argue, is that's the time when everyone in the band is getting along well, whereas it would be difficult to complete an agreement if there is already a dispute among the members. On the other hand, the vast majority of bands and music groups rehearse and perform at clubs and other venues on a part-time basis, and make little if any money at the beginning of their careers. It may not be worthwhile (i) to spend the time needed to discuss and reach consensus on all the complicated issues usually covered by a band agreement, and (ii) spend the money on an experienced lawyer to draft an enforceable agreement.
The bottom line is, if there comes a time when a band starts making good money and it looks as if it has a real future, then that is the right time to consider taking the time and spending the money to create an enforceable band agreement. In the meantime, any band or musical group can and should take these basic business actions discussed in Section I below.
I. ESSENTIAL BUSINESS ACTIONS ANY BAND OR MUSICAL GROUP SHOULD & CAN DO WITHOUT INCURRING LEGAL FEES:
These are the actions a band can do without using a lawyer:
• Sign a "split sheet" for every song written by more than one individual;
• Register all songs and masters with the U.S. Copyright Office;
• Register every song with the appropriate Performing Rights Organization (PRO);
• Upload the set list of any live performance containing original songs for payment by its PRO;
• Write up a simple agreement that no departing member can use the name of the band without permission.
DO A SPLIT SHEET FOR EVERY SONG
What is a Split Sheet?
A split sheet is a document that states who owns what percentage of a song and sets forth the credit each person should have. A sample split sheet is provided at the end of this section. A split sheet should be created for each and every song that was created by more than one person, and should be filled out and signed by all the writers before ever shopping it to a third party or trying to license it for placements. Every day around the world, songwriters collaborate on songs and never clarify who wrote what. If a songwriter is ever fortunate enough to license a song for a commercial, movie, or TV show, the writer may find him or herself fighting over who owns what percentage of the revenues generated from the song.
Most songwriters and artists just want to create great music, and it may feel uncomfortable to introduce a split sheet and start dividing up shares of publishing when trying to be creative. Yet it's a necessary part of the songwriting process. It's important to have a meeting about split sheets prior to hitting the studio; this way everyone understands that it's not personal, it's just business. Doing this makes everyone feel as though their interests are protected, which can enhance creativity rather than inhibiting it.
How to Complete a Split Sheet
Split sheets should contain the following information:
- The name of each writer.
- Percent of ownership. This is key. If the song makes money, this will determine how much each writer will receive.
- Credit for each writer, including who wrote the lyrics and who composed the underlying music.
- Everyone's signature.
Below is a sample split sheet:
Single Song Writers' Split Letter
This is to confirm that we, the sole writers of the composition listed below, hereby agree among ourselves to the following writers' divisions:
Song Title: "_____________________"
Writers & % Ownership:
Writer Name: ________________ Ownership % _____________
Writer Name: ________________ Ownership % _____________
Writer Name: ________________ Ownership % _____________
Writer Name: ________________ Ownership % _____________
Lyrics by: __________, ___________
Music by: __________, ___________
Produced by: __________, ___________
If any samples are contained on this song for which the sampled writer(s)/ publisher(s) are to receive a copyright interest in and to the Composition and/ or payment of monies attributable to the Composition, then we agree that our own shares in the copyright and/or monies attributable to the Composition shall be reduced proportionately.
The following list of samples represents all of those samples embodied in the above composition:
Name of Song by Name of Writer
This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____.
Signature below will indicate agreement of the above.
Read and Agreed: Read and Agreed:
Read and Agreed: Read and Agreed:
REGISTER SONGS & MASTERS WITH THE U.S. COPYRIGHT OFFICE
Registration is not a prerequisite for copyright protection. Under the Copyright Act of 1976, a copyright comes into existence as soon as a work is fixed in a tangible medium of expression, and registration is not a condition of protection. However, registration provides crucial benefits to copyright owners. Those benefits, which are set forth in the U.S. Copyright Office's website at www.copyright.gov/circs/circ01.pdf, include the following:
1. Registration establishes a public record of the copyright claim.
2. Before an infringement suit may be filed in court, registration is necessary for works of U.S. origin.
3. If made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.
4. If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.
5. Registration allows the owner of the copyright to record the registration with the U.S. Customs Service for protection against the importation of infringing copies.
Of the reasons to register set forth above, the most important are that a copyright owner (i) cannot start a lawsuit for copyright infringement before registering, and (ii) cannot secure statutory damages or attorneys' fees without registering. With respect to (ii), the Copyright Act provides for statutory damages of up to $150,000 per infringement and attorneys fees. It is crucial that if the work has been published, the registration occurs prior to any infringement. Otherwise, the plaintiff must prove actual damages, which can be difficult to quantify, or may equal a negligible amount unless the defendant earned a lot of money from the infringing work. Further, attorneys fees are only available for published works that are registered prior to the infringement. Similar to other litigation, a lawsuit for copyright infringement can take a great deal of work and time on the part of the attorney. That is why attorney fees can add up. It would be difficult or impossible to retain the services of an experienced copyright litigator without the potential for recovering fees.
Note that the only way to secure the benefits of copyright registration is to register with the U.S. Copyright Office. These benefits, contrary to a popular myth, cannot be obtained by sending a copy of one's song or master to oneself (even by certified or registered mail).
How to Register
To register a work, including a song or a master, a completed application form, a nonrefundable filing fee, and a nonreturnable copy of the work. must be submitted Here are answers to the most important questions regarding registration:
Where to apply? Find and complete the copyright registration application online at http://www.copyright.gov/eco (eco is an acronym for Electronic Copyright Office).
How much will it cost? The basic fee for registering any work, including a song or master, was raised from $35 to $55 in May 2014. However, the fee is still $35 for registering a single work by a single author.
What else needs to be done? It is also necessary to provide a "deposit" of the work. This can be done by uploading an MP3, or print out a "shipping slip" to be enclosed with a CD and mail it to the Copyright Office within 30 days of applying for the registration.
Is it possible to register a sound recording and a song in one application? Yes. To register a master and a song in one application, click on "Sound Recording" in the drop down menu in the part of the application asking for the type of work to be registered. Later in the application, there will be a page allowing you to claim music and lyrics as well as the sound recording.
The U.S. Copyright Office's website (www.copyright.gov) is an invaluable source of information not only on registration, but also on how copyright law protects songs and masters.
Multiple Writers and/or Producers
Any signatory to the split sheet can register the copyright in a song and/or master. All the other signatories to the spreadsheet should be included as joint "authors" in the application.
REGISTER WITH A PRO & UPLOAD SET LISTS FROM LIVE SHOWS TO MAKE SOME MONEY
What is a PRO?
Any user of music that publicly performs a song must secure a license and pay a royalty to do so. Songwriters and their music publishers use PROs to collect these royalties. In the U.S. there are three: ASCAP, BMI, and SESAC. A fourth PRO, recently launched by music industry mogul Irving Azoff, is Global Music Rights (GMR).
The PROs collect public performance royalties from radio, television, the Internet, as well as physical venues, such as bars, nightclubs, concert halls, arenas, and other places where live or recorded music is played.
In order to collect public performance monies, one must be a member of a PRO. Anyone can join ASCAP or BMI. SESAC, the smallest of the three, is selective.
When a song is registered with one of the PROs, the PRO will require the person registering the song to indicate the percent ownership of each writer. If the band has a manager, he or she can perform this function. The registration should reflect the breakdown of ownership in the split sheet. Even if no split sheet was ever signed, the registration will itself be a record of the percent ownership of each member in the band. That's why each member with an interest in a song should check to see if the information supplied to the PRO is accurate.
Live Performance Payments
Each of the PROs pays its writer and publisher affiliates for live performances at venues across the U.S. Basically, all the songwriter, who may also be an artist, has to do is submit a set list of songs performed at any venue showing which songs were written by him or her. Generally, he or she must also provide the venue name, address, size of venue and the dates of the performance. The songs must be registered first in order to complete this process. More information on each of the PROs' live performance programs is available at
Anecdotally, I know a singer/songwriter in New York City who played shows at bars and restaurants and made about $200 a gig from passing the hat. She made $1,250 from SESAC by reporting her set lists for a single calendar quarter.
PROTECTING THE BAND NAME
Make Everyone Agree That Departing Members Will Not Be Able To Use the Band Name
Even in the absence of a full band agreement, a band or musical group can handle the issue of who owns the name by using a form such as this:
Band Name Agreement
Re "__________" [Name of band]
This is to confirm that we, the sole members the above referenced band, hereby agree among ourselves that each member of the band is a joint owner of the name of the band, provided that no leaving member, whether that member leaves voluntarily or not, shall be able to use the name of the band in connection with the entertainment industry including the music business.
This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____. [Use the state where the band members reside]
Signature below will indicate agreement of the above.
Signature below will indicate agreement of the above.
Read and Agreed: Read and Agreed:
Read and Agreed: Read and Agreed:
Note that sometimes a band will want to handle ownership of the band's name in a different manner than in the sample agreement. For instance, where two of the members founded the band and then added a third or more members later, the founders may want to exclusively own the rights in the name, or they may wish to allow departing members the right to use the band's name, provided that the leaving member uses the words "formally of". For a band that wishes to treat the ownership or use of the band's name in a different manner than the sample agreement, it may be wise to hire a lawyer.
Consider Registration of the Band Name with the U.S. Trademark Office
A band should also consider registering its name as a trademark with the U.S. Patent and Trademark Office (PTO, www.uspto.gov/trademark). In the U.S., it isn't necessary to register a mark to obtain protectable rights. You can establish "common law" rights in a mark based solely on use of the mark in commerce without a registration. However, owning a federal trademark registration provides a number of significant advantages over common law rights alone, including:
1. A legal presumption of ownership of the mark and exclusive right to use the mark nationwide.
2. The ability to bring an action concerning the mark in federal court.
3. The use of the U.S. registration as a basis to obtain registration in foreign countries.
Registration fees depend on the kind of form used and the number of International Classes listed in the application. International Classes refer to good and services for which the mark is used. A band would always want to file under International Class 41, which includes entertainment services. Another possibility may be to consider filing for International Class 25, which includes clothing, such as t-shirts and hats. The cheapest form is called "Trademark Electronic Application System (TEAS) Plus" and costs $225 per class. However, this form requires somewhat more information and is slightly more difficult to complete than two other possible forms: TEAS Reduced Fee (which costs $275 per class), and TEAS Regular Filing (which has the least number of requirements, and costs $325 per class). Of course, these fees only apply to marks in use in commerce. Additional fees apply if one is filing an Intent to Use.
Unlike the other recommended business actions previously discussed in this article, it is advisable to use an attorney in this situation. Filing a trademark application, or even deciding on the right form to use, is a bit tricky, and experience in filling out the appropriate application and dealing with the PTO is important. For instance, a failure to correctly list the goods/services with which the mark is used, or intended to be used, may prevent one from registration, and no refund of any fees paid is possible.
II. BAND AGREEMENTS
When two or more people associate for the purpose doing business, arguably they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can bind the partnership, and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between the group members as partners is preferable to general partnership law.
For instance, if one person creates a band and comes up with the band's name, he or she may want exclusive rights to make the band's decisions and the right to fire any new band member. That person may also want a bigger percentage of band profits, especially if he or she pays more money than other band members for touring or studio time. As an example, I represent one person who started a band in China. He created the name and moved to the U.S., where he selected all new band members. He's the lead singer and writes all the songs. In this situation, it may be better to simply employ the other band members as freelancers and pay them a certain percentage of money from live gigs, but stipulate that he can replace them at will.
WHEN TO DO IT?
When a time comes that a band is beginning to make decent money and it's clear that it actually has a future, that may be a good time to take the plunge. It will involve considering the issues discussed below, coming to a consensus among all the members of the band, and then hiring an attorney to draft an enforceable agreement.
A band agreement is an agreement between/among the members of a band that covers basic business issues. The most important issues are:
- Decision making
- Hiring and firing
- Profits and Losses
- Treatment of Leaving Members
- Band name
- Ownership of Songs and Masters
The issue of control is very important. In most cases, each member will have an equal vote and a majority will rule. However, as set forth in the sample agreement provided by Wallace Collins below, a particular member may have two votes, and the manager may have a tie-breaking vote. The agreement may also provide that certain matters, such as requiring financial contributions from group members or incurring debts on behalf of the band, require a unanimous vote. Again, there are endless variations, including situations where a particular member makes all of the decisions, or where new members do not have a vote on band business. For instance, a band could agree on what might be called a "reverse democracy"; each member has one vote, but if any member votes against doing something, then the band would not do it. In other words, this arrangement requires unanimous consent to proceed with an activity.
Hiring and Firing of Band Members
Another issue of control that must be decided concerns the hiring and firing of band members: How votes are calculated (e.g., will each member get one vote or will a particular member's vote count double or more) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member. In most cases, a new member voted into the group will then be required to sign the band agreement. It must also be decided how to vote on any amendments to the band agreement, since this may materially affect the relationship between/among the members after the group has started. In most cases, a majority vote will be deemed determinative, but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.
Profits and Losses
The band agreement should contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group, and another may pertain to after the departure of a member or the break-up of the group. In most cases, a new group will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep). Where an established group adds new members, the provision may provide that a new member gets a smaller percentage than the founding members.
Treatment of Departing Members
The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his or her full partnership share of profits earned during his or her tenure, with a reduced percentage (or no percentage) of profits derived from activities after the departure; or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days), and then nothing thereafter. This is an easier issue to deal with regarding live performances than record royalties. In most cases, bands will agree that leaving members should receive their shares of live performance during the time when the members were in the band, even if the shares are received after a departure. The group also needs to determine what happens, for example, when a member performs on three albums, but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the departing member any royalties on the fourth and future albums recorded by the group under a record contract the leaving member signed as part of the group, it might not be fair to refuse to pay that individual his or her share of royalties from the three albums that were recorded with the band. Of course, this might vary depending on whether the leaving member quit or was fired.
Another important financial issue is the question of the departing member's share of partnership property, such as band recording equipment or a sound system. Again, the agreement might specify a monetary payout to the leaving member if he or she is terminated, but a forfeiture if the leaving member quits. If merchandise with the departing member's name and likeness is in inventory and sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his or her name and likeness.
A band contract should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. Whether the leaving member quits or is fired, the agreement may provide that that individual waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he or she may waive any right to and benefit derived from the hard assets, such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro rata percentage of the current value of the hard assets. With respect to this payout, the band contract may provide that if the valuation exceeds a certain amount or would put the partnership in financial distress, the payout would be in a certain number of equal monthly installments.
Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group, with the help of an attorney, has to find its own solutions.
As previously discussed, an important issue is who owns the group name if one member leaves or if a group disbands. Under partnership law, the partners would be the owners of the name, and any member would arguably be permitted to use the name. Trademark rights are determined based on the 'use' of a mark, not on who thought of it, so each of the members of the group would be an equal co-owner of the group name under trademark law (this of course depends on how the application was completed; whether the band members were listed as co-owners, or whether the partnership or other business entity owned the mark). The end result could be chaos, with several bands all with the same name but different players.
One solution would be to use the brief agreement previously discussed. The matter can also be handled in the context of a full scale band agreement. In most cases, the band agreement will state, as the short form agreement previously discussed, that if a particular member leaves the band, either because he or she quits or is fired, that person will not be entitled to use the band name. The band agreement could fine tune this provision by stating that the leaving member may describe him or herself as a "former member" of the band.
However, if one member thought up the group name, then the band agreement may state that only a group including that member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member creates a new band.
Rights in the group name may also concern revenues in addition to the use rights, specifically as they concern merchandise, such as t-shirts, caps, buttons, and posters. The band agreement may deal with how much each member of the band will receive from sales of such merchandise.
Ownership of Songs and Masters
It was previously discussed how important it is to confirm who are the writers of a band's songs, and that a split sheet can be used to confirm ownership. The band agreement could include a provision incorporating split sheets, or provide that any song created by any member of the band would be jointly owned by all the band members. This last example would only make sense where the band operates as a collective, and every member is invited to and makes contributions to the creation of each song.
The band agreement could also confirm that every member of the band is a joint owner of any recordings made during the life of the band. This makes sense if each member of the band is performing on recorded tracks.
Advantages of Forming a Limited Liability Company and entering into an "Operating Agreement instead of a Band Agreement
An alternative to a traditional band agreement would be forming a limited liability company (LLC) and then drafting an Operating Agreement that would look pretty much the same as a band agreement, except that each member of the band would be a Member. The advantage to this approach is that when the band enters into agreements with third parties, such as investors, the personal assets of the band members would not be at risk.
Role of the Lawyer
If each member of a band or music group could afford his or her own lawyer, then the lawyers could work out an arrangement on behalf of their clients, which doesn't often occur. Instead, after a band decides on the issues discussed above, it should engage an attorney to review its decisions and write up a legally enforceable agreement. An attorney cannot represent each member of the band. That would create a conflict of interest; however, an attorney can be a "scribe" who enforces the decisions of the band by preparing an agreement that is legally enforceable. Fees can range from a $1,000 to $5,000 or more, depending on the lawyer and the complexity of the deal.
The below model band agreement has been graciously provided by Wallace Collins, Esq. (www.wallacecollins.com). Wallace is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before attending Fordham law school.
BAND PARTNERSHIP AGREEMENT
This agreement is made and entered into this ___ day of April, 2015, by and among the following persons:
The foregoing individuals are hereinafter each individually referred to as "Partner" and in the plural as "Partners".
With respect to any gender reference in this Agreement, wherever required in this Agreement, the singular shall include the plural, and the masculine gender shall include the feminine and neuter.
1. THE PARTNERSHIP.
The Partners hereby constitute themselves as a general partnership (the "Partnership") to be known as "_____" (the "Group") under the laws of the State of_______________ for the purposes of live performances, creating sound recordings for use and commercial exploitation in all mediums and by any means whether now or hereafter devised of recording musical performances for reproduction ("Recordings"), exploiting and merchandising the names (both legal and professional) and likenesses of the Group and the members of the Group, using and commercially exploitation musical compositions composed by any Partner individually or jointly with any other person and recorded by the Group for the purpose of exploiting Recordings (the "Group Compositions"), and all other present and future activities of the Partners as members of the Group in the entertainment field during the term of this Agreement. Except as otherwise expressly provided herein, the Partnership shall have the exclusive right to the services of each Partner as a member of the Group in the entertainment field. The principal place of business of the Partnership shall be at such place as the Partners may determine pursuant to the provisions of this Agreement.
2. THE NAME.
The Partnership shall do business as "_____" (the "Group Name") and any and all trademarks and related intellectual property rights therein and thereto shall be the sole and exclusive property of the Group.
3. DURATION OF PARTNERSHIP.
The term for which this Partnership is to exist shall commence as of the effective date hereof and shall continue until dissolved in any manner provided herein.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Each of the Partners warrants and represents to each of the other Partners that he is free to enter into this Agreement, and that he is under no disability, restriction or prohibition which will interfere in any way with his full compliance with all of his obligations under this Agreement. Each Partner warrants and represents that he has not done nor will he do any act or thing that will or might impair the full enjoyment by the Partnership of any of the rights granted to it under this Agreement or the commencement or continuation of the Partnership business in the manner herein contemplated. Each Partner further warrants and represents that he will not sell, assign, transfer or hypothecate any right, title or interest in or to any asset of the Partnership without the prior written consent of all other Partners. Each Partner covenants and agrees that he will perform the services provided to be performed by him hereunder diligently, fully and to the best of his ability during the Term of this Agreement, in a competent and professional manner, and will refrain from participating in activities which with reasonable foreseeability could limit or prohibit him from so performing. Each of the Partners acknowledges that preservation and enhancement of the value of the Partnership may be hindered by the failure of an individual Partner to apply himself diligently to the business of the Partnership or by actions in a manner injurious to the rights of the other Partners.
As a contribution to the Partnership, each Partner is contributing his exclusive services as a recording artist with respect to Recordings embodying musical performances of the Group, his exclusive services as a musical performer in all media and on the live stage with respect to his activities as a member of the Group, his Merchandising Rights with respect to his activities as a member of the Group, his exclusive services as a songwriter and publisher with respect to the Group Compositions, and generally his exclusive services as a member of the Group within the entertainment field. No Partner shall be required to make any capital contributions except upon the unanimous agreement of the Partners.
6. PROFITS AND LOSSES.
(a) Subject to Paragraph 6(b) below, and unless agreed otherwise in writing by all of the Partners, the Partners shall share equally in all of the profits, losses, rights and obligations of the Partnership. Should any Partner at any time bear or satisfy a disproportionate share of the financial obligations of the Partnership, he shall be entitled to reimbursement therefore from the other Partners proportionately out of sums otherwise distributable to them as Partners. "Net profits" (as hereinafter defined) shall be distributed in cash to the Partners from time to time, but only as expressly authorized by a vote of a majority of the then-existing Partners. "Net profits" as used herein shall mean all commissions, royalties (including Recording royalties but excluding the so-called "songwriter's share" and "publisher's share" of music publishing royalties), bonuses, payments (other than repayment of loans), fees (including synchronization fees), dividends, stock bonuses, interests or monies of any kind or nature which shall be paid to the Partnership or to any Partner as a result of the Partnership activities after deducting the sum total of all reasonable salaries, rent, promotional costs, travel costs, office expenditures, telephone costs, accounting and legal fees, entertainment costs, and any and all legitimate Partnership expenses incurred by the Partnership while conducting Partnership business. No Partner shall receive any salary, bonus or goods or other assets of the Partnership in excess of that received by any other Partner, except as set forth herein or otherwise upon the unanimous vote of all of the Partners.
(b) Notwithstanding anything to the contrary contained herein, and unless agreed otherwise in writing by all of the Partners, net profits arising from the copyrighting, publishing and exploiting of a particular Group Composition ("Publishing Profits," which includes, without limitation, the so-called "songwriter's share" and publisher's share" of music publishing royalties) shall be shared solely among the Partners who are the authors of such Group Compositions.
(a) Each Partner shall have the right to participate equally in the control, management and direction of the business of the Partnership. In exercising this control, management and direction, each Partner shall have the same vote as each other Partner. No Partner shall have the right to make any expenditure in excess of $100 or incur any major obligation (including, without limitation, borrow or lend money, make, deliver, accept or endorse any commercial paper, compromise or release debts owing to the Partnership, sell, lease, license, assign or hypothecate any Partnership property or enter into any contract for any purpose) on behalf of the Partnership, except as expressly authorized by a vote of three-fifths (3/5) of the then-existing Partners. No Partner shall hold or accept from any third party any gratuity or other consideration in consideration of his exercising or declining to exercise his rights hereunder in any manner. The Partners may, by 3/5 vote, delegate all or any of their management functions to one or more professional managers upon such terms and conditions as the Partners so voting shall designate.
(b) Notwithstanding anything to the contrary contained herein, but subject to any future agreement, if any, between the Partnership and a third-party co-publisher or administrator, the Partner(s) who is/are credited as the writer(s) of a particular Composition shall have the exclusive right to sell or grant rights (by means of license or otherwise) in respect to such Composition in his/their sole reasonable discretion; provided that any Partner disassociated from the Partnership pursuant to Paragraph 11 hereof shall thereafter retain the right to sell or grant rights in respect to any Composition for which he is credited as a writer, subject to Paragraphs 7(b)(i) and (ii) hereof and the continuing rights of the other Partners in any net profits derived therefrom as provided in Paragraph 6 hereof. A disassociated Partner shall keep the Partnership informed as to his address and telephone number for the purpose of transacting business in respect to the Compositions. If a Composition is co-written by a remaining Partner and a disassociated Partner and the remaining Partner seeks to pursue a commercial opportunity in respect to such Composition, he shall send the disassociated Partner written notice thereof by certified mail, return receipt requested. If the disassociated Partner does not respond within fourteen (14) days after the date of such notice, then the remaining partner shall have the authority to grant rights in such composition to a third party, subject to the disassociated Partner's right to share in any net profits in respect thereto as provided herein.
(c) Notwithstanding the foregoing, the Partner or Partners who are the authors of any Group Composition hereby grant the Group a mechanical license for use of the Compositions in any Group Recording at the full statutory mechanical rate.
8. BOOKS OF ACCOUNTS AND RECORDS.
The Partnership books and records, together with all other documents and papers pertaining to the business of the Partnership, shall be maintained at its principal place of business or at such other place as shall be designated by the Partners, and shall be available for inspection at all reasonable times by any Partner or any designated representative of any Partner. The maintenance of such books and records shall be in accordance with generally accepted accounting practices and principles, consistently applied, and at the cost of the Partners, pro rata. The fiscal year of the Partnership shall end on December 31. The Partnership shall render yearly accountings to each Partner on the first day of February in every year during the term of the Partnership. At the sole cost and expense of the Partners, the Partners may retain any duly licensed firm of accountants and/or attorneys in connection with the business of the Partnership, including the rendition of said accountings.
(a) This Agreement shall terminate, and the Partnership shall be dissolved, upon the first to occur of the following events:
(i) The written agreement of all of the Partners to dissolve the Partnership; or
(ii) By operation of law, except as otherwise provided herein. The addition of a new Partner (as provided in Paragraph 10 hereof) or the disassociation of a Partner (as provided in Paragraph 11 hereof) shall not terminate this Agreement, and it shall remain in full force and effect among the remaining Partners.
(b) Upon termination of the Partnership, the Partnership's receivables shall be collected and its assets liquidated forthwith (except as provided in subparagraphs (d) and (e) below). The proceeds from the liquidation of the Partnership assets and collection of the Partnership receivables shall be applied in the following order:
(i) First, to the expense of liquidation and debts of the Partnership other than debts owing to any of the Partners;
(ii) Next, to the debts owing to any of the Partners, including debts arising from loans made to or for such Partners, except that if the amount of such proceeds is insufficient to pay such debts in full, payment shall be made on a pro rata basis;
(iii) Next, in payment to each Partner of any financial capital investment made by him in the Partnership belonging to him, except that if the amount of such proceeds is insufficient to pay such financial capital investment in full, payment shall be made on a pro rata basis;
(iv) Next, in payment to each Partner on a pro rata basis of any of such proceeds remaining.
(c) The Partners shall execute all such instruments for facilitating the collection of the Partnership receivables and liquidation of the Partnership assets, and for the mutual indemnity or release of the Partners as may be appropriate under all then-present circumstances.
(d) Any property, including, but not limited to, the Group Name, all rights and interests in contracts, agreements, options, choses in actions and Merchandising Rights, owned or controlled by the Partnership at the time of dissolution from which income is being derived, shall not be sold, but shall be retained and distributed in the manner hereinafter set forth. After the payments provided for in Paragraph 9(b)(i), (ii) and (iii) have been made in full, any such property owned by the Partnership and the continuing earnings received as a result of the exploitation thereof shall be valuated by an accountant selected by the Partners who is experienced in the music industry. Said property shall then be distributed, as nearly as possible, among the Partners in a manner consistent with the terms set forth in Paragraph 6 hereof.
10. ADDITION OF A PARTNER.
A new partner may be admitted to the Partnership but only with the written consent of all of the Partners. Each new Partner shall be admitted only if he shall have executed an agreement with the Partnership under the terms of which such Partner agrees to be bound by all of the provisions hereof, as amended, as if a signatory hereto. Notwithstanding anything to the contrary contained herein, such new Partner shall have no right, title or interest in any of the assets or property of the Partnership existing at the time of his admission to the Partnership ("existing property") or in any of the proceeds derived from such existing property or from the sale, exchange, or liquidation thereof. Such new Partner shall have no interest whatsoever in the Group Name apart from the limited right to be known as a member of the Group, and upon the termination of the Partnership his interest in any assets, property, net profits and losses of the Partnership shall attach only to such assets, property, net profits and losses acquired by the Partnership after his admission to the Partnership. Such new Partner's capital contribution, if any, and share of the Partnership's net profits and losses shall be set forth in the written consent of all of the Partners approving the admission of the new Partner.
(a) A Partner may become disassociated from the Partnership by reason of his death, his disability, his resignation or by the written vote of all of the other Partners. For purposes of this Agreement, a Partner shall be deemed disabled if he is unable to perform services as required hereunder for any reason for a period in excess of one hundred eighty (180) consecutive days, or two hundred seventy (270) days out of the year. If a Partner resigns, he shall give thirty (30) days prior written notice of such resignation to each of the other Partners. A Partner (or, in the event of disassociation by death, his executor or personal representative) who is disassociated shall be entitled to receive an amount equal to his proportionate share of the net worth of the Partnership as of the date of his disassociation, exclusive of any value attributable to the Group Name, but he shall not be entitled to any of the earnings of the Partnership received thereafter or any interest in the Group Name, nor shall he be subject to any of the liabilities of the Partnership incurred thereafter; provided, however, that such Partner shall be entitled to receive his applicable proportionate share (as set forth in Paragraph 6 hereof) of any royalties (other than any share of Publishing Profits provided for in Paragraph 6(b)(ii)(A) in respect to Group Compositions which are not written, in whole or in part, by the disassociated Partner(s)) earned from the exploitation of (a) any Recording recorded hereunder and embodying his performances, and (b) the Group Compositions which have been recorded by the Group prior to the date of his disassociation, as and when such profits are actually received by the Partnership, less his pro rata or other agreed share of any expenses and/or liabilities relating thereto.
(b) The net worth of the Partnership shall be determined as of the date of the disassociation by an accountant selected by the remaining Partner(s) other than the Partnership's regular accountant, and other than the personal accountant of any Partner, which accountant shall be familiar with the music industry. The accountant shall make said determination in accordance with generally accepted accounting practices and principles, taking into consideration, among other factors, the fair market value of the assets of the Partnership other than the Group Name, its liabilities (including the disassociated Partner's entitlement to future royalties as provided in subparagraph (a) hereinabove), its past profits and losses. In the event of voluntary resignation, the determination of said accountant shall be final. However, if the disassociated Partner or his legal representative should disagree with the accountant's determination in the event of disassociation for any other reason, the disassociated Partner or such representative may within thirty (30) days after receipt of the accountant's determination submit the issue of the fair market value of the Partnership to arbitration in New York, under the applicable rules of the American Arbitration Association by one (1) arbitrator selected by such organization from its panel of arbitrators in accordance with its usual procedures. Unless the remaining Partner(s) elect to pay the disassociated Partner's share of the value of the Partnership sooner, said share shall be payable (without any interest accruing thereon) in twelve (12) approximately equal monthly installments commencing one month following the date of the final determination of said net worth; provided however, that if said share is in excess of $10,000 but less than $25,000, the remaining Partner(s) may elect to pay same in twenty-four (24) approximately equal monthly installments, and provided further, that if said share is in excess of $25,000, the remaining Partner(s) may elect to pay same in thirty-six (36) approximately equal monthly installments.
All accountings and notices to be given hereunder, and notices of any action by the Partnership which has the effect of altering any Partner's share of profits or losses shall be given in writing, by personal delivery or by mail or by telegram at the respective addresses of the Partners set forth above, or at such other addresses as may be designated in writing by registered mail by any Partner. Notice given by mail or by telegram shall be deemed given on the date of mailing thereof or on the date of delivery of such telegram to a telegraph office, charged prepaid or to be billed.
13. PARTNERSHIP BANK ACCOUNTS.
One or more Partnership bank accounts may be opened and maintained by the Partners with such bank or banks as the Partners may determine and any checks or withdrawals from or against any bank account or accounts shall be upon the signature of any of any person as the Partners may unanimously select; provided, however, that such checks or withdrawals shall be subject to the approval process set forth in Paragraph 7 hereinabove.
14. ASSIGNMENT OF PARTNERS' INTEREST.
No Partner, or executor or administrator of a deceased Partner, shall sell, assign or transfer all or any portion of his financial or other interest in the Partnership or right to receive a share of Partnership assets, profits or other distribution without the prior written consent of all of the other Partners and any such purported sale, assignment or transfer in contravention of the foregoing shall be null and void. The Partners acknowledge that a part of the capital contribution of each Partner is the unique personal services required to be rendered for the exclusive account of the Partnership by each Partner, for which no presently adequate substitute exists; and that the other Partners are the sole and exclusive judges of the adequacy of any future substitution.
15. GENERAL PROVISIONS.
(a) Liability. The liability of the Partnership or the Partners arising out of any activities of the Partnership shall to the extent possible be covered by appropriate policies of insurance. In the event that any liability shall not adequately be covered by insurance, the amount of liability not so insured against shall first be satisfied out of the assets of the Partnership.
(b) Indemnity. Each Partner hereby indemnifies the other Partner(s) and holds such other Partner(s) harmless against and from all claims, demands, actions and rights of action which shall or may arise by virtue of anything done or admitted to be done by him (through or by agents, employees or other representatives) outside the scope of or in breach of the terms of this Agreement. Each Partner shall promptly notify the other Partner(s) if such Partner knows of the existence of a claim, demand, action or right of action.
(c) Successors and Assigns. Subject to the restrictions on assignments set forth in this Agreement, the provisions of this Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the Partners.
(d) Severability. If any term, provision, covenant or condition of this Agreement is held to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York. In the event of any action, arbitration, suit or proceeding arising from or under this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs of said action, suit, arbitration or proceeding. This is the entire understanding of the parties relating to the subject matter hereof and supersedes all prior and collateral agreements, understandings, and negotiations of the parties. Each party acknowledges that no representations, inducements, promises, understandings or agreements, oral or written, with reference to the subject matter hereof have been made other than as expressly set forth herein. Each Partner acknowledges that he has consulted with legal counsel of his choice with respect to the contents of this Agreement prior to execution hereof, and has been advised by such counsel with respect to the meaning and consequences hereof. This Agreement cannot be changed, rescinded or terminated except by a writing signed by each of the Partners. The titles of the paragraphs of this Agreement are for convenience only, and shall not in any way affect the interpretation of any paragraphs of this Agreement or of the Agreement itself.
NOTWITHSTANDING THE REPRESENTATION OF THE PARTNERSHIP BY WALLACE COLLINS AS LEGAL COUNSEL, EACH OF THE PARTNERS HAS BEEN ADVISED OF THEIR RIGHT TO RETAIN INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS LEGAL DOCUMENT AND EACH PARTNER HAS EITHER RETAINED AND BEEN REPRESENTED BY SUCH LEGAL COUNSEL OR HAS KNOWINGLY AND VOLUNTARILY WAIVED RIGHT TO SUCH LEGAL COUNSEL.
IN WITNESS WHEREOF, the parties hereto have executed and sealed this agreement on the date first above written. "PARTNERS"