Exhibit 10.26
STOCK OPTION AGREEMENT DATED AS OF JANUARY 7, 1997
BY AND BETWEEN THE CORPORATION AND
XXXXXX XXXXXXXXXX, INC.
LETTER OF AGREEMENT
This agreement is by and between Xxxxxx Xxxxxxxxxx, Inc., of 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (Agency) and Xxxxx Xxxxxx, Ltd. of 00-00 Xxxxxxx
Xxxxxx, Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000 (Client).
Agency and Client hereby agree to have the Agency serve as Client's advertising
agency from January 8, 1997 through January 7, 1998 in accordance with and
subject to the following terms and conditions:
1. The Agency will perform the following services for Client, with Client's
direction:
A. Study Clients products and/or services.
B. Analyze Client's present and potential markets.
C. Utilize Agency's knowledge of the factors of distribution and sales and their
methods of operation.
D. Write, design, illustrate, or otherwise prepare Client's advertisements, in a
final format, ready for distribution to the media.
E. Plan and order the space, time, or other means to be used for Client's
advertising while endeavoring to secure the most advantageous rates available.
F. Check, verify and analyze insertions, displays, broadcasts, or other means
used for Client's advertising.
G. Create and produce collateral materials to include video's, signage,
packaging and other marketing communications materials required for the Client
2. Agency is authorized to act as Client's agent in purchasing the materials and
services required to produce advertising on Client's behalf. Agency will obtain
from Client prior written approval to purchase all such materials and services.
However, if time does not permit Agency to obtain prior written approval, it may
proceed based on verbal approval with prompt confirmation in writing by Agency.
Agency will use its best efforts to secure the most competitive rates for both
materials and media. All such materials and services will become Client's
property upon payment to Agency by Client.
3. Agency will submit written proposals with estimated timetables and
budgetary requirements for Client's prior approval.
4. Agency will take every reasonable precaution to safeguard any and all of
Client's property entrusted to its custody or control, but in the absence of
gross negligence on Agency's part or willful disregard by Agency, Agency will
not be held responsible for any loss, damage, destruction, or unauthorized use
by others of any such property.
5. Client reserves the right to modify, reject, cancel, or stop any and all
plans, schedules, or work in process, and in such event Agency shall immediately
take proper steps to carry out Client's instructions; provided such action is
taken, Client agrees to assume Agency's liability for all previously approved
commitments, and to reimburse Agency for any losses it may incur in connection
with these canceled plans, in addition to paying Agency any compensation due it
prior to cancellation in accordance with the provisions of this agreement.
Agency will endeavor to the best of its knowledge and ability to guard against
any loss to Client through failure of media or suppliers to properly execute
their commitments, but Agency shall not be held responsible for failure on their
parts unless such failure is the result of Agency's negligence and/or
misconduct.
6. Agency shall not disclose Client's trade secrets or pending patents or other
confidential information used by Client in the operation of its business, nor
use the information in any way, directly or indirectly, except as required in
the performance of this contract.
7. Client shall be responsible for the accuracy, completeness, and propriety of
information concerning its products and services that it furnishes to Agency in
connection with performance of this agreement.
8. Except as is otherwise provided below, Client will indemnify and hold Agency
harmless from and against any liabilities and expenses (including attorney's
fees) reasonably incurred by Agency in respect of any action or proceeding
brought or threatened to be brought before any court, administrative body, or
other tribunal, which action arises out of the services rendered by Agency
hereunder including, without limitation, liabilities and expenses arising out of
claims with respect to advertising prepared by Agency. Agency agrees to
indemnify and hold Client harmless from and against any liabilities and expenses
(including attorney's fees) reasonably incurred by Client in respect to any
advertising materials prepared by Agency for Client that give rise to any claim
pertaining to libel, slander, defamation, trademark infringement, copyright
infringement, invasion of privacy, trade secrets, piracy and/or plagiarism
unless such claim results from information or materials furnished by Client. The
terms of this paragraph 8 will not terminate with termination of this agreement.
Agency represents that it has Professional Liability Insurance and will maintain
such coverage for the term of this contract in an amount of not less than
$1,000,000.
9. Agency is a signatory to the Screen Actors Guild (SAG) and the American
Federation of Television and Radio Artists (AFTRA). Client agrees to abide by
regulations regarding these associations. Upon termination of this agreement,
Client agrees to sign a Transfer of Rights Agreement which will transfer all
talent obligations from Agency to Client.
10. Client agrees to pay Agency the actual, net costs of all media, materials
and third party services purchased on its behalf including reasonable
miscellaneous reimbursable expenses such as travel, telephone, photocopies,
facsimiles, postage and shipping. The exact amount of cash discounts allowed to
Agency by suppliers for prompt payment will be credited to Client provided
Client pays Agency in time to take the suppliers' discount and that there is not
an overdue indebtedness at the time of payment.
11. Compensation to the Agency for services rendered will be made in the form of
a retainer, Xxxxx Xxxxxx Ltd. common stock and hourly fees in the following
manner:
a) In consideration of services related to the development and placement of
advertising in the media during the term of this agreement, the Client will pay
a monthly retainer of $ 8,000 (to be billed the first of each month) and provide
Agency with a number of options to purchase shares of Client's Common Stock
equal to $ 54,000 divided by the closing price as reported by the NASDAQ Stock
Market on January 7,1997 (The Market Price). The options will have an exercise
price equal to The Market Price and vest in four (4) equal installments each on
April 7,1997, July 7, 19971 October 7, 1997 and January 7, 1998. The Client
agrees to register the shares of Common Stock issuable upon exercise of the
options prior to the date of vesting. The options will terminate two (2) years
from the date of vesting. If this agreement is terminated by the Client prior to
January 7, 1998, then the Agency shall retain the right to the option
installment which it would have earned during the contract year quarter which in
such termination occurs.
11b) For projects that are both unrelated to media advertising and do not
utilize graphics inherent to the advertising idea (e.g. corporate video's,
annual reports, research), Agency will bid on a project basis with compensation
based on hourly fees.
11c) For all Agency digital studio services (e.g., mechanicals, type, etc.),
Client will be billed standard Agency rates.
12. Client agrees to pay all invoices within thirty days of invoice date. Any
invoice not paid according to these terms is subject to a monthly finance charge
of 1 1/2% plus all collection costs, including reasonable attorney costs and
court fees.
13. The term of this agreement shall be from January 8, 1997 and shall continue
in force from that date until January 7, 1998 and may be terminated by thirty
days notice in writing given by either party to the other and sent registered
mail or overnight mail courier service to the principal place of business of the
party to whom such notice is addressed. This agreement may be terminated without
notice by either party if the other party is (a) in default or breach and the
default or breach has not been cured within ten (10) days, (b) bankrupt or
making an assignment for the benefit of creditors, (c) subject to a suit for
appointment of a receiver, or (d) dissolved or liquidated.
14. Agency, during the term of this agreement, will not act as advertising
agency for any product directly competitive with Client.
15. Agency will not utilize services or purchase products from a subsidiary or
other entity with which Agency has a financial interest unless Agency discloses
that information to Client and Client approves the transaction in writing.
16. Agency agrees that Client is under no obligation to approve or use the ideas
presented to Client by Agency.
17. Agency acknowledges that, except as set forth in paragraph 2, it is acting
as an independent contractor and no employment responsibility or obligation is
created with this agreement. All work product is made as work for hire and upon
termination all paid for work product will be delivered to Client at Client's
cost.
18. Client may at any time during the life of this contract, and upon reasonable
notice and during normal business hours, examine Agency's files and records that
pertain to the handling of Client's advertising.
19. This agreement, which is to be governed by the laws of New York, contains
the entire understanding of the parties and supersedes all prior discussion,
correspondence and understandings whether oral or written and may not be
changed, assigned or modified except in writing signed by both parties.
Xxxxxx Xxxxxxxxxx, Inc.: Xxxxx Xxxxxx Ltd.:
By /s/ ILLEGIBLE By /s/ Xxxxxx X. Xxxxx
----------------------------- -------------------------
Date 1/8/97 Date 1/9/97
