EXHIBIT 10.2
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MARKETING AND CONSULTING AGREEMENT
This Marketing and Consulting Agreement (hereinafter the "Agreement") is
made and executed this 29th day of September, 1999 between The Guitron
Corporation (hereinafter the "Corporation"), a Canadian corporation with
principal offices at 38 Place du Commerce, Suite 230, Nuns' Island, Montreal,
Quebec Canada H38 1T8 and Marvin Chankowsky (hereinafter the "Contractor") with
offices at 34 Belsize, Hampstead, Quebec, Canada H3X 3J8.
1. Recitals
1.1 The Corporation is presently developing a musical instrument
known as the GUITRON. The GUITRON is an easy play guitar like instrument which
looks and sounds like a traditional guitar but is different in that it relies on
unique technological features for its playing and its sound. The Corporation
expects to complete commercial development of several models of the GUITRON
within the next six to twelve months.
1.2 Contractor desires to actively and diligently promote the sale
and use of the GUITRON within the Territory, as that term is hereinafter
defined, and has the knowledge, expertise, and resources to do so.
1.3 The Corporation is willing to grant Contractor the right to
market the GUITRON in the Territory, as that term is hereinafter defined, under
the terms and conditions hereinafter set forth.
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained, the parties agree as follows:
2. Definitions
2.1 Agreement. This document and any annex, exhibit, attachment,
schedule, addendum, or modification hereto, unless the context otherwise
indicates.
2.2 Contractor. Marvin Chankowsky
2.3 Customer. Any purchaser of a GUITRON.
2.4 GUITRON. An easy play guitar like musical instrument currently
being developed by the Corporation.
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2.5 MBC Marketing Ltd. A marketing and sales promotion company
affiliated with and controlled by the Contractor
2.6 Technical Information. Includes all know-how, designs, drawings,
specifications, catalogs, data sheets, sales and technical bulletins, service
manuals, mechanical diagrams, and all other information, whether or not reduced
to writing, relating to the design, manufacture and use of the GUITRON, as well
as any other information relating to the business of the Corporation that may be
divulged to the Contractor in the course of its performance of this Agreement
and that is not generally known in the trade.
2.7 Territory. (i) North America; and (ii) any additional geographic
areas that may be mutually agreed upon by the Corporation and the Contractor.
2.8 The Corporation. The Guitron Corporation, a Canadian
corporation.
3. Engagement and Scope
3.1 Engagement. Subject to the terms and conditions , and for the
term, of this Agreement, the Corporation hereby engages the Contractor to market
the GUITRON in the Territory and the Contractor hereby accepts such engagement
and agrees to use his best efforts to market and develop demand for the GUITRON
within the Territory and agrees to conduct his activities in accordance with the
terms and conditions of this Agreement and to devote such time and attention to
the performance of the duties entailed by such engagement, as shall be required
therefor.
3.2 Independent Contractor Status. The Contractor is an independent
contractor, therefore:
(a) Neither the Contractor nor any affiliate of the
Contractor shall be or be considered to be an agent,
representative or employee of the Corporation. The
Contractor is not granted and shall not exercise the
right or authority to assume or create any obligation or
responsibility, including without limitation contractual
obligations and obligations based on warranties or
guarantees, on behalf of or in the name of the
Corporation. The Contractor shall not misrepresent his
authority to any third party.
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(b) The detailed operations of the Contractor under this
Agreement shall be subject to the sole control and
management of the Contractor. Except for expressly
approved out of pocket expenses incurred by the
Contractor hereunder, the Contractor shall be
responsible for all of his own expenses and employees.
The Contractor agrees that it shall incur no expense
chargeable to the Corporation, except as may be
specifically authorized by this Agreement.
4. Product Acceptance and Delivery
4.1 Orders Subject to Acceptance. All orders for GUITRONS that
result from the marketing efforts of the Contractor hereunder shall be subject
to acceptance by the Corporation and shall not be unreasonably withheld.
4.2 Delivery of Products. The Corporation will use its best efforts
to fill accepted GUITRON orders resulting from the marketing efforts of the
Contractor as promptly as practicable, subject, however, to delays caused by
unforeseen transportation conditions, labor or material shortages, strikes or
other labor difficulties, fire or other natural disaster, or other cause of
whatever nature beyond the immediate control of the Corporation.
5. Obligations of the Contractor.
5.1 Sales Promotion. The Contractor, directly, or through a separate
contract with MBC Marketing Ltd., shall use his best efforts to promote the sale
and use of the GUITRON by potential Customers within the Territory. For that
purpose, the Contractor hereby undertakes to conduct the following activities:
(i) subject to approval of the Corporation's Board of Directors, acting
reasonably to devise and develop a marketing plan or plans for the Territory;
and (ii) to assist the Corporation to implement the marketing plan or plans for
the Territory.
5.2 Facilities and Personnel. The Contractor shall maintain, at its
own expense, such office space and facilities, and hire and train such
personnel, as he shall see fit, if any to carry out its obligations under this
Agreement.
6. Obligations of the Corporation
6.1 Notification of Changes. The Corporation shall immediately
notify the Contractor of any changes in or affecting the GUITRON or prices,
terms, and conditions of sale, sales, policies, projected delivery dates,
schedule changes, and other matters that the Corporation determines may affect
the procurement, processing and/or completion of orders attributable to the
Contractor.
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6.2 Payment of Compensation to Contractor. In consideration of the
services to be performed by the Contractor hereunder, the Corporation agrees to
compensate the Contractor as follows:
6.2.1 Issuance of Stock. Upon execution of this Agreement, the
Corporation shall issue 10,000 shares of its common stock to Contractor.
6.2.2 Issuance of Additional Stock. The Corporation agrees to issue
up to an additional 264,000 shares of its common stock to Contractor based upon
the gross sales price net of sales tax realized by the Corporation from
accepted, fulfilled and completed GUITRON orders within the Territory during the
term of this Agreement that are the clear and direct result of the marketing
efforts of Contractor, (such directly attributable gross sales net of taxes
realized by the Corporation from Guitron sales within the Territory during the
term of this Agreement are hereinafter referred to as the "Net Receipts") as
follows:
(i) 10,000 shares for every Cdn $100,000 of Net Receipts.
6.2.3 Sales Commissions.
(i) During the stock earn out period referred to in
Paragraph 6.2.2 above, Contractor shall be entitled to a
sales commission equal to 2% of the Net Receipts.
(ii) During the period subsequent to the stock earn out
period referred to in Paragraph 6.2.2 above, and
throughout the remaining term of this Agreement,
Contractor shall be entitled to a sales commission equal
to 6% of the Net Receipts.
6.3 Effect of Merger or Acquisition. In the event that during the
term of this Agreement, the Corporation is acquired by or merged into another
corporation with the result that shareholders of the Corporation at the time of
such merger or acquisition receive shares of stock in the acquiring corporation
or surviving corporation, as the case may be, in exchange for their stock in the
Corporation, Contractor will exchange all his shares in the Corporation on the
same basis as such other shareholders. Additionally, subsequent to such merger
or acquisition, in lieu of receiving stock of the Corporation to which
Contractor may be entitled pursuant to Paragraph 6.2.2 above, Contractor shall
receive shares in the acquiring or surviving entity, as the case may be, in an
amount that reflects the exchange rate provided for in such merger or
acquisition. By way of example, assume there is an acquisition of the
Corporation prior to any earn out of shares pursuant to said Paragraph 6.2.2 and
that pursuant to such acquisition, shareholders of the Corporation receive two
shares of the acquiring corporation in exchange for every one share they own in
the Corporation. Under this circumstance, Contractor would be entitled to 20,000
shares of the acquiring corporation for every Cdn $100,000 of Net Receipts (up
to a maximum of 528,000 shares)
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7. Representations and Warranties.
7.1 Representations and Warranties of the Contractor. The Contractor
represents and warrants the following:
7.1.1 Authority to Enter into Agreement. The Contractor represents
and warrants that he has full right, power and authority to enter into this
Agreement and to perform the same in accordance with the terms, provisions and
conditions hereof and in the manner herein specified.
7.1.2 Scope of Promotional and Solicitation Activities. The
Contractor represents and warrants that he shall limit its promotional
activities with respect to the GUITRON to Customers located within the
Territory.
7.1.3 Investment Representations. The Contractor represents and
warrants that with respect to any stock issued to him pursuant to this Agreement
that (i) Contractor will acquire such shares for investment, for his own account
and not with a view to their resale or distribution and does not intend to
resell or otherwise dispose of all or any part of such shares unless and until
they are subsequently registered under the Securities Act of 1933, as amended,
or an exemption from such registration is available; (ii) Contractor has the
ability to evaluate the merits and risks of an investment in the Corporation or
a successor thereof, based upon its knowledge and experience in financial and
business matters; (iii) Contractor understands that there is no current market
for such shares and that in the event Rule 144 of the Securities and Exchange
Commission hereafter becomes applicable to such shares, any routine sales of the
shares made thereunder can be made only in limited amounts in accordance with
the terms of Rule 144; (iv) Contractor understands that the Corporation has no
obligation to register such shares but that registration will be undertaken by
the Corporation; and (v) Contractor understands that before any transfer of any
such shares can be made by Contractor, written approval, which shall not be
unreasonably withheld, must be obtained from Corporation's counsel and that a
legend to this effect will be placed on the shares.
7.2 Representations and Warranties of the Corporation. The
Corporation represents and warrants that it is the sole and exclusive owner of
the GUITRON technology, all related patent applications, and any other
proprietary information relating to the GUITRON and that it has the sole right
and authority to grant the Contractor the right to market, the GUITRON in the
Territory. The Corporation warrants and acknowledges that it is a condition of
this agreement that it shall, in the event that any of its shares or those
shares envisaged by Section 6.3 hereof, be registered or qualified under
securities legislation in the USA or Canada, respectively, that the shares
issued or to be issued to the Contractor be registered or qualified at such
time.
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8. Assignment
This Agreement may be assigned by the Corporation as part of the
sale of substantially all of its business, provided however, that the purchaser
shall expressly assume all obligations of the Corporation under this Agreement.
Further, this Agreement may be assigned by the Corporation to an affiliate,
provided that any such affiliate shall expressly assume all obligations of the
Corporation under this Agreement, and provided further that the Corporation
shall then fully guarantee the performance of the Agreement by such affiliate.
Contractor agrees that if this Agreement is so assigned, all the terms and
conditions of this Agreement shall obtain between assignee and himself with the
same force and effect as if said Agreement had been made with such assignee in
the first instance. This Agreement shall not be assigned by the Contractor
without the express written consent of the Corporation.
9. Term and Termination
9.1 Term. Unless earlier terminated, this Agreement shall continue
in full force and effect for an initial term of thirty months, which shall
commence at such time that commercial development of the GUITRON has been
completed and the Corporation has confirmed in writing to the Contractor that it
is prepared to fill orders obtained by the Contractor in accordance with the
usual commercial terms typically employed by manufacturers of musical
instruments. At the end of such term, this Agreement may be renegotiated by the
parties in good faith for a new term.
9.2 Early Termination. This Agreement may be terminated prior to the
end of its term (i) by mutual consent of the parties; (ii) by one party in the
case of the declared or admitted insolvency or bankruptcy of the other party; or
(iii) by one party in the case of the other party's failure to fulfill an
obligation hereunder and to cure such default within 30 days of the defaulting
parties receipt of notice.
10. Confidentiality and Proprietary Rights
10.1 Confidentiality of Technical Information and Proprietary
Rights. The Contractor shall hold in strict confidence the Technical Information
supplied to him by the Corporation and shall not divulge the same to an other
person, firm, or corporation without the prior written permission of the
Corporation, except as reasonably required to perform his obligations under this
Agreement. The Contractor, his agents, and employees shall use their best
efforts to maintain such Technical Information secret and confidential and shall
exercise the same degree of care for such purpose as the Corporation would
normally exercise with respect to a new product or material that the Corporation
desires to keep secret and confidential shall survive termination of this
Agreement for any reason. Upon termination of this Agreement, the Contractor
shall return to the Corporation all Technical Information it then has in its
possession.
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10.2 Use of Technical Information and Proprietary Rights. The
Contractor shall not, without the Corporation's prior specific written consent,
use for any purpose other than implementation of this Agreement any portion of
the Technical Information supplied by the Corporation hereunder or any patent,
trademark, or other industrial property right of the Corporation nor copy any of
the Corporation's designs of the GUITRON. Acknowledging that the damages
sustainable by the Corporation as a consequence of any breach of the
Contractor's obligations under this Paragraph 13.2 may be difficult to measure
in monetary terms, the Contractor hereby agrees that the Corporation shall be
entitled to have the continuation of any such breach permanently enjoined.
10.3 Protection of Proprietary Rights. The Contractor agrees to
cooperate with and assist the Corporation, at the Corporation's expense, in the
protection of trademarks or patents, owned by the Corporation and shall inform
the Corporation immediately of any infringements or other improper action with
respect to such trademarks or patents that shall come to the attention of the
Contractor.
11. Miscellaneous
11.1 Further Assurances. At any time, and from time to time, after
the date of this Agreement, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party to carry
out the intent and purposes of this Agreement.
11.2 Notices. Any notice or report required hereunder shall be in
writing and shall be given by personal delivery, recognized courier service,
telecopier, or prepaid certified mail, return receipt requested, properly
addressed or transmitted to the party to whom sent at its or his principal place
of business or principal residence. All such notices and reports shall be deemed
to have been given or made on the date upon which the same is actually received
at the address of the addressee thereof.
11.3 Complete Agreement. This Agreement constitutes a complete
statement of all of the arrangements, understandings and agreements between the
parties with respect to the subject matter hereof. All prior memoranda and oral
understandings with respect thereto are merged into this Agreement. Except as
aforesaid, neither of the parties hereto shall rely on any statement by or in
behalf of any other party which is not contained in this Agreement.
11.4 Interpretation. Whenever possible, each Article of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any Article is unenforceable or invalid under such law,
such Article shall be ineffective only to the extent of such unenforceability or
invalidity, and the remainder of such Article and the balance of this Agreement
shall in such event continue to be binding and in full force and effect.
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11.5 Non-Waiver. The terms, provisions and covenants hereinbefore
contained shall be specifically enforceable. The failure by either party hereto
to enforce any provision of this Agreement shall not operate or be construed as
a waiver of any right, power or privilege contained in that provision or any
other provision of this Agreement.
11.6 Headings. The headings of all Articles or within any Articles
herein specified are for the convenience of locating information only and shall
have no substantive effect on or be construed as assisting in the interpretation
of any of the terms, covenants or conditions of this Agreement.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed the day and year first above written.
/s/ Marvin Chankowsky
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Marvin Chankowsky
THE GUITRON CORPORATION
By:/s/ Richard Duffy
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Richard F. Duffy, President
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