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Exhibit 10.9
[Xxxxxxxx Xxxxx X'Xxxxx Letterhead]
August 20, 1999
Xxxxxxx Xxxxxxxxxx
Chief Executive Officer
XXXXXX.xxx LLC
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
RE: COMPENSATION AGREEMENT
Dear Xxxxxxx:
We are extremely pleased with your decision to appoint us as your advertising
agency. We will do everything that we possibly can to contribute to your
success. We're proud to join your team, and look forward to a mutually
profitable, long-term relationship.
The following summarizes the terms of our compensation arrangement that you and
I have discussed:
1. APPOINTMENT. XXxxxx.xxx (KB) appoints Xxxxxxxx Xxxxx X'Xxxxx, LLC (GMO),
and we accept such appointment, as your advertising agency of record for
purposes of and subject to the terms and conditions of this Agreement. As
such, you authorize us to act as your agent in purchasing the materials,
services and media required to produce advertising on your behalf.
2. BASIC SERVICES. The Basic Services to be rendered by GMO will include the
following: formulating advertising strategies; account management;
planning, preparing and placing of broadcast media, either directly or
through a buying service; account planning; preparation of copy for all
off-line media; producing broadcast commercials; designing, placing and
checking all print advertising (including all direct response print,
radio or broadcast advertising); checking invoices and making payments;
preparing comprehensive layouts, and finished storyboards; and conducting
qualitative research and advertising-related research projects, including
those in which field work is conducted by GMO personnel.
3. COMPENSATION FOR BASIC SERVICES.
a. GMO will receive a monthly fee of $166,667 beginning July 1, 1999,
payable on or before the 16th day of each month.
b. GMO will receive incentive compensation equal to 1.4% of KB's net
revenue (i.e., revenues received by KB less returns, rebates,
discounts, allowances and the like for such fiscal year), payable
quarterly.
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Xxxxxxx Xxxxxxxxxx
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August 20, 1999
Page 2.
4. MEDIA. GMO will pass-through costs related to media buying through a
buying service with no markup to KB.
5. PRODUCTION. Production will be billed at vendor costs plus a 15% markup.
Any such production expenses will be charged to KB in accordance with
estimates GMO will supply to KB and authorized by KB in advance.
6. RESEARCH.
a. Qualitative research and advertising-related research projects,
including those in which field work is conducted by GMO personnel,
will be billed at net vendor cost with no markup to KB.
b. Quantitative research other than advertising related will be
billed at net vendor cost with no markup to KB. GMO hours incurred
will be billed at a rate of 80% of GMO's standard hourly rates.
7. MEDIA MERCHANDISING. Media Merchandising will be billed at net vendor
cost with no markup to KB. GMO hours incurred will be billed at a rate of
80% of GMO's standard hourly rates.
8. COMPENSATION REVIEW. The parties agree to review this Agreement in 12
months to see that it remains fair and equitable to both parties. GMO
will issue quarterly labor reports to determine agency labor vs.
compensation delivered.
9. SPECIAL SERVICES. In addition to the Basic Services described in
Paragraph 2, GMO may perform additional services from time to time as
requested by KB. KB shall pay GMO its out-of-pocket expenses without any
markup on such expenses. These Special Services may include internally
produced mechanicals and photostats; color copies; preparation of sales
kits, sales manuals and sales presentation materials; trade show
materials; newsletters; annual and other reports; and POS and packaging
projects. For these Special Services, GMO will be entitled to a
project-based compensation in addition to that outlined elsewhere in this
Agreement. Any such project-based compensation will be charged to KB in
accordance with estimates GMO will supply to KB and authorized by KB in
advance.
10. TRAVEL. If any travel costs are incurred by GMO on behalf of KB, they
will be paid for by KB subject to KB's prior approval.
11. FINANCIAL RESPONSIBILITY. KB agrees that GMO will not be responsible for
financing its advertising.
12. INDEMNITY. KB and GMO each agree to indemnify each other as outlined in
the enclosed Indemnification Agreement.
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Xxxxxxx Xxxxxxxxxx
XXXXXX.xxx
August 20, 1999
Page 3.
13. TERMINATION. This Agreement may be terminated by either party upon 90
days written notice, during which time both parties will continue to
perform in accordance with this Agreement.
14. NONCOMPETE. During the term of this Agreement, GMO will refrain from
performing advertising services for companies directly competitive with
KB. For purposes of this Agreement, an entity is assumed to be directly
competitive with KB if it derives more than 20% of its net revenues from
the retail sales of children's merchandise.
15. SOLICITATION OF NEW BUSINESS. From the date of this Agreement through
August 15, 1999, GMO will neither solicit nor accept any solicitations
for new accounts.
We are excited about the opportunity to work with you and KB. We are confident
that we can add measurably to the quality and impact of your communications
efforts. You have my promise that I will do my best to deliver GMO in all
regards to make your programs the absolute best they can be.
If this meets with your approval, please acknowledge by signing and returning
one copy of each Agreement to us. Thanks for the opportunity to work together.
Regards,
ACCEPTED:
XXXXXXXX XXXXX X'XXXXX, LLC XXXXXX.XXX LLC
BY: /s/ Xxxxxx X. X'Xxxxxx BY: /s/ Xxxxxxx Xxxxxxxxxx
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Xxxxxx X. X'Xxxxxx Xxxxxxx Xxxxxxxxxx
ITS: SVP & Chief Financial Officer ITS: Chief Executive Officer
DATE: 8/20/99 DATE:
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Enclosure
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INDEMNIFICATION AGREEMENT
BETWEEN
XXXXXXXX XXXXX X'XXXXX, LLC
AND
XXXXXX.XXX LLC
Xxxxxxxx Xxxxx X'Xxxxx, LLC (GMO) agrees to exercise its best judgment in the
preparation and placing of XXXxxx.xxx LLC (KB) advertising and publicity with a
view to avoiding any claims, proceedings, or suits being made or instituted
against KB or GMO. GMO shall indemnify KB and its employees, officers,
directors, shareholders, licensees and agents (KB Indemnities) against any
loss, cost, liabilities and expenses (including reasonable attorney's fees) KB
or such other party may incur as the result of any claims pertaining to libel,
slander, defamation, copyright infringement, invasion of privacy, piracy and/or
plagiarism, or violations of any law or regulation governing advertising or
claims made in advertising, arising from any materials supplied by GMO for
advertising or publicity prepared by GMO for KB.
KB will indemnify GMO and its employees, officers, directors, shareholders,
licensees and agents against any loss, cost, liabilities and expenses (including
reasonable attorney's fees) GMO or such other party may incur as the result of
any claim, suit or proceeding made or brought against GMO based upon any
personal injury claims arising from use of any KB products, product claims
contained in advertising produced by GMO on behalf of KB that are based upon
information or materials provided by KB, and/or infringement claims based on
trademarks claimed by KB.
ACCEPTED:
XXXXXXXX XXXXX X'XXXXX, LLC XXXXXX.XXX LLC
By: /s/ XXXXXX X. X'XXXXXX By: /s/ XXXXXXX XXXXXXXXXX
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Xxxxxx X. X'Xxxxxx Xxxxxxx Xxxxxxxxxx
Its: SVP & Chief Financial Officer Its: Chief Executive Officer
Date: 8/20/99 Date:
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