10.3 Marketing Agreement between Company and Entertainment Marketing Group
Vertical Computer Systems Inc. - Entertainment Marketing Group Comprehensive
Agreement for Marketing and Promotion Services and Business Development
THIS AGREEMENT, effective as of October 16, 2000 between Vertical Computer
Systems, Inc., a corporation organized and existing under the laws
of the State of Delaware having its principal place of business at
0000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("VCSY" or
"Client") and Xatnu, Inc. dba Entertainment Marketing Group, a
marketing and promotion company having its principal place of
business at 0000 Xxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxx Xxxxxxxxx,
Xxxxxxxxxx 00000 ("EMG" or "Agency").
W I T N E S S E T H :
WHEREAS, the Agency is engaged in the business of providing marketing and
promotion and employs personnel with expertise in the rendering of such
services, and
WHEREAS, The Agency desires to provide trade and consumer marketing
services to Client, and
WHEREAS, Client desires to establish and promote the sale of Client
services and products (the "Products"), utilizing the marketing and creative
services of the Agency,
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein, the parties agree as follows:
I. Services. Client and the Agency have executed, of even date, three
agreements attached hereto as Exhibits A, B and C each of which is
incorporated by reference within. It is anticipated that Agency Services
shall include the services described in those Exhibits.
II. Compensation for Agency Services.
(a) The Agency agrees to accept as full compensation for its services
and expenses for the Client as described in Exhibit A for the
national radio promotional campaign and in Exhibit B for the
national television promotional campaign, commencing October 16,
2000, a total of (i) 379,688 shares of VCSY common stock at $0.16
per share for executing both the described national radio and the
national television promotional campaigns, all of which shares are
deemed earned as the date of execution of this Agreement, (ii)
$60,750 in commencement fees for both the radio and television
promotional campaigns payable to Agency upon execution of this
Agreement, (iii) $10,000 for producing, editing and duplicating a
high-end 0:30 television promotional spot, and (iv) up to $22,000 in
runner-up prizes for executing both the national radio and the
national television promotional campaigns, in the event EMG cannot
secure such prizing components for the respective campaigns at
gratis or at a reduced price as described in Exhibits A and B. All
of the 379,688 shares shall be sold into the market within six
months, in equal amounts each month, after registration of the
shares on Form S-8. If, at the end of the abovesaid six month
period, the net proceeds of the sale of all 379,688 shares is less
than $60,750, then Client shall immediately pay Agency the
difference between the net sales proceeds and $60,750.
(b) The Agency agrees to accept as full compensation for its services
and expenses with regards to assisting the Client in its business
development, creating third party introductions, creating third
party arrangements, and forging strategic alliances for VCSY,
commencing October 16, 2000, a grant of five-year options to
purchase 250,000 shares of VCSY common stock at $0.16 per share,
which grant is deemed earned as of the date of execution of this
Agreement. Client shall facilitate the cashless exercise of said
options.
(c) The Agency agrees to accept as full compensation from the Client for
its sales services and expenses with regards to selling on behalf of
the Client advertising programs for xxx.xxxxxxxxxxx.xxx and Client
related web
site portals, sponsorships, and other sales, fees in the amount of
twenty percent (20%) of the gross revenue or market value equivalent
to the Client, payable in cash to the Agency as described in Exhibit
C; and, additionally, a grant of five-year options to purchase
250,000 shares of VCSY common stock at $0.16 per share, which grant
is deemed earned as of the date of execution of this Agreement.
Notwithstanding, these options may be exercised only in increments
of no less than 50,000 shares and in amounts equivalent to dollars
of gross revenue generated from sales on behalf of Client as
described hereinabove in this subparagraph (c). Client shall
facilitate the cashless exercise of said options.
(d) Client agrees to register the above-described shares and the shares
underlying the warrants, described in this Section III, by whatever
means available (including on Form S-8) as soon as practical, but no
later than October __, 2000; and the Agency agrees and warrants that
Xxxxxxx Xxxx and Xxxx Xxxxxxxxx are the persons providing
substantially all of the services hereunder to Client and that all
of the above said shares and shares underlying the warrants are to
be issued two-thirds to Xxxxxxx Xxxx and one-third to Xxxx
Xxxxxxxxx.
III. Term.
(a) Term. The initial term of this Agreement shall commence on October
16, 2000, and shall continue until at least one year until or
October 16, 2001.
(b) Right Upon Termination. Upon termination of this Agreement, Client
shall have no obligations to the Agency, provided, however, any
non-cancelable contracts made on Client's behalf or uncompleted work
which cannot be assigned by the Agency to
Client shall, at the discretion of Client, be completed by the
Agency at Client's expense, and provided further that all indemnity
obligations of Client shall survive the termination of this
Agreement. Upon termination of this Agreement, the Agency shall
deliver to Client all Client property and materials in the Agency's
possession and all information regarding Client's advertising. The
Agency shall cooperate in the transfer of all contracts and
agreements with other parties for marketing materials and all rights
and claims thereto. All unused marketing plans, ideas and materials
prepared by the Agency for Client, but not accepted by Client prior
to the date of termination, shall remain Client's property and shall
be returned to Client.
IV. Ownership of Materials.
All products, ideas, concepts, themes and other intellectual
property rights or marketing materials created by the Agency on
Client's behalf shall be and will remain the property of Client.
V. Storage and Preservation.
The Agency shall properly store all tapes, files or other materials
developed by or transferred to the Agency by Client. The Agency
shall ensure that all materials be preserved by copying whenever
necessary. VI. Exclusivity.
Nothing in this Agreement shall be construed as requiring Client to
assign all or any specific portion of its marketing work exclusively
to the Agency for the terms of this Agreement.
XIV. Indemnification.
The Agency shall indemnify and hold harmless Client, its affiliates,
agents and employees from and against any and all claims, losses,
actions, damages, expenses and all other liabilities, including but
not limited to reasonable attorneys' fees, arising out of services
performed by the Agency for Client. Client shall give prompt notice
to the Agency of any such claim, loss, action, damage, expense or
other liability, and shall fully cooperate in the defense of any
such action.
X. Legal Review.
The Agency shall provide, at its own expense, legal review and
approval of all work and services provided hereunder prior to
publication of any marketing material.
XI. Authorizations.
The Agency shall obtain releases, licenses, permits or other
necessary authorization to use photographs, copyrighted materials,
artwork or any other property or rights belonging to third parties
obtained by the Agency for use in performing Agency Services and
shall hold Client harmless from all claims, demands, expenses
including reasonable attorneys' fees), liabilities, suits and
proceedings arising out of such use brought before any court,
administrative body, arbitration panel or other tribunal. Client
shall obtain releases, licenses, permits or other necessary
authorization for any property or rights obtained by Client which
are used by the Agency in performing Agency Services, and shall hold
the Agency harmless from all claims, demands, expenses (including
reasonable attorneys' fees), liabilities, suits and proceedings
arising out of such use.
XII. Independent Contractor.
All persons employed by the
Agency in performance of services hereunder shall be under the sole
and exclusive direction and control of the Agency, and shall not be
considered the employees of Client for any purpose whatsoever. The
Agency shall remain at all times an independent contractor.
XIII. Safeguarding Information.
The Agency shall not, during the period of this Agreement and
extensions thereto or at any time thereafter, reveal or otherwise
make available to any other person, or use for any purpose other
than to benefit Client, any information or trade secrets regarding
Client's Products, services, business, customers, or methods of
operation learned by the Agency while providing services hereunder.
Any specifications, drawings, sketches, models, samples, tools,
computer programs, technical or business information or data,
written, oral, in graphic form or otherwise ("Information")
furnished to the Agency hereunder or in contemplation hereof shall
remain the property of Client. The provisions of this Section shall
apply to all Agency subcontractors. The Agency shall be responsible
for informing subcontractors of any Information included in any work
subcontracted hereunder, and shall ensure that all subcontractors
are in compliance with this Section.
XIV. Use of Client Name.
The Agency shall not use Client's name, or the name of any affiliate
of Client, as a reference without prior written approval of Client
or such affiliate, provided, however, the Agency may list Client as
one of its clients when furnishing proposals to provide marketing
services to prospective clients. Approval will not be given in any
case in which an endorsement might be inferred. The provisions of
this Section shall apply to Agency Affiliates and to all
subcontractors of the Agency.
XV. Assignment.
The Agency may not assign this Agreement or any part
thereof to any Agency Affiliate or any other entity without the
prior written consent of Client.
XVI. Insolvency.
Either party may terminate this Agreement if the other party is
insolvent or makes an assignment for the benefit of creditors.
XVII. Notices.
All notices which may be given by either party to the other shall be
deemed to have been duly given when made in writing and delivered in
person or deposited in the United States mail, postage prepaid, and
addressed to such party at such party's address set forth at the
beginning of this Agreement (or to such other address as such party
may designate by written notice delivered hereunder).
XVIII. Waiver.
Failure to enforce any provision hereof shall not constitute a
waiver of that or any other provision in any other circumstances.
XVIX. Entire Agreement.
This Agreement shall constitute the entire Agreement between the
parties with respect to the subject matter and supersedes all
previous agreements and understandings between Client and the Agency
relating to the subject matter hereof.
XX. Governing Law.
This Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
Vertical Computer Systems, Inc.
By:___________________________
Xxxxxxx Xxxx, President
Xatnu, Inc. dba Entertainment Marketing Group
By:_________________________
Xxxxxxx Xxxx, Chief Financial Officer
