Lo-Torq pins

[Paul S. Larudee]

Bob,

Rather than wait to reach you by phone, I thought I'd draft a few
suggestions.  From the few things you said I got the impression that you
were reconsidering the original plan to order 100 sets of one size and
50 sets each of the other two sizes.

I am guessing that you are concerned about your potential exposure in
case the concept flies like a lead balloon.  I understand that and am
willing to share the risk.  However, when the product is launched, I
think that it is important to have supplies on hand and not to make
potential customers wait too long.  Furthermore, a minimum number of
sets needs to be available for beta testers.

Here is what I suggest.  If you will order the 200 sets as we discussed,
I will agree to buy any unsold sets remaining after one year from the
date they are offered for retail, at the price you paid for them. 
Furthermore, that offer will remain valid for another year - i.e. two
years from the retail sales offering date.  In other words, you will
have another year to decide whether you want to continue selling them or
have me take the stock.

As far as the beta testers and 3-pin samples are concerned, I am willing
to share or bear the costs, depending on the royalty/profitsharing
arrangements.  I would like to offer one free set each of any size pin
to a dozen or so selected beta testers who are among the most respected
piano rebuilders.  Additional free test sets might be made available
depending upon the amount of data provided in return.

As far as the price is concerned, I would like to see them retail for
about 20% more than your Diamond pins.  It doesn't make sense for Klinke
to compete with their own pins, so they should definitely carry at least
some cost premium.  However, if these things really take off, Klinke,
Pianotek and I will all be in the position of offering an entirely new
product, which will help all of us compete.  As far as Klinke's price to
you/us is concerned, it sounded like Alex was waiting for our
suggestion.  I suggest 10% more than he is charging you for the Diamond
pins.  The difference between that and the retail price will be the
total of your margin and my royalty.  If Klinke (and you) needs to raise
prices later to cover production costs, that should not be a problem
after the product catches on.

As far as my royalty is concerned, my original proposal was 10% of
retail.  You suggested, however, that it be based on wholesale, which is
OK with me.  I therefore suggest 10-20% of wholesale, depending upon the
amount of risk and costs I assume.  If you would like a risk
indemnification agreement like the one I outlined above, and if I
purchase the beta tester sets at cost from you, I would expect 20% until
I at least recover my costs (probably two years or more).  In this case,
the only contribution I would ask from you would be the 3-pin samples
for distribution at the conventions, for which I could write the
insert.  After I start to see some black ink and the risk and beta
testing are over, I would have no problem reducing the royalty to 10% of
wholesale.

Please let me know what you think and if you would like to revise this
in any way.  The important thing for me is to get this moving so that we
can launch it at the California convention in February, if possible. 
I'm going to register as a presenter on tuning pin physics and try to
have my article appear in the February issue of the Journal, which can
also be the insert in the sample packets.

Tell me whatever your concerns might be, and we'll find something that
works for you.  I'm planning to work with you for a long time unless the
whole idea falls flat on its face.

Also, if you wish to share any of this communication with Alex, I have
no objection.

Paul