Chapter Sixteen: The Relationship Between the Advertising Agency and Its Client

Form 2.16.2
Contract Between an Advertising Agency and Advertiser (Long Form, Typical
Relationships)
AGREEMENT effective [insert date] by and between [insert name of advertising agency]
(Agency), with offices located at [insert address], and [insert name of client] (Client), with
offices located at [insert address].
1. Appointment of Agency and Scope of Appointment
a. Client hereby appoints Agency as its [exclusive]lvii advertising agency during the
Term (as hereinafter defined) of this Agreement. During the Term, Agency will be
[the sole company]lviii charged with the responsibility of preparing and placing
advertising with respect to Clients product(s) and/or service(s) specified in Schedule 1,
attached hereto and collectively referred to herein as the Scheduled Appointment.
b. During the Term, Client may wish to assign additional projects, products, or services to
Agency beyond the Scheduled Appointment. Agency agrees to accept such assignment
upon written agreement by Client regarding compensation to be paid to Agency with
respect to such additional assignment.
c. In the performance of its services hereunder, Agency is authorized to act as Clients
agent in purchasing materials and services required to produce advertising on Clients
behalf.
2. Scope of Serviceslix
Agency will perform services for Client in connection with the planning, preparing,
and placing of advertising for Client as provided in Schedule 2, attached hereto.

3. Exclusivitylx
Subject to the provisions of Schedule 3, attached hereto, during the Term of this
Agreement, Agency will not accept any assignment with respect to products or
services competitive to those assigned by Client to Agency.

4. Compensation
Agencys compensation in consideration of its rendition of services to Client will be
as provided in Schedule 4, attached hereto.

5. Billing and Payment Procedures

Agency will invoice Client, and Client will pay Agency, in accordance with the
provisions of Schedule 5, attached hereto.

6. Commitments to Third Parties

a. Agency shall make no commitment for or on behalf of Client or for which Client shall
have any liability or responsibility unless Client shall have first given its approval. If
the cost of a given expenditure in connection with the foregoing exceeds the approved
amount by more than 10%lxi, Agency must obtain prior written approval from Client. If
Agency is unable, due to extraordinary circumstances, to obtain such approval in
writing, Agency may obtain Clients oral approval, provided Agency confirms such oral
approval in writing as soon as practicable, but no later than two (2) business days from
the time oral approval is obtained.
b. Client may, during the progress of any work hereunder, by written or oral order to
Agency, require additions, modifications, suspension, or termination of such assigned
work. Upon receipt of such instructions from Client, Agency shall take no action which
may increase the expense to Client hereunder beyond those expenses inherent in the
assignment which had been agreed to prior to the receipt of instructions to modify,
suspend, or terminate, and provided further that Client will hold Agency harmless with
respect to any costs incurred by Agency as a result thereof.
c. In purchasing any materials or services for Clients account, Agency will exercise due
care in selecting suppliers, and make every effort to obtain the lowest price for the
desired quality of materials or services. Wherever possible, Agency will obtain
competitive bids. In no event will Agency purchase any materials or services from any
supplier which is a subsidiary or affiliated company, or which is known to Agency to be
owned or controlled by any of Agencys directors or officers, without making full
disclosure to Client of any such relationship.
d. If at any time Agency obtains discounts or rebates from any supplier, whether based on
volume of work given to such supplier by Agency or otherwise, then and in such event,
Agency will remit to Client, within a reasonable time after Agencys receipt of such
discount or rebate, such proportion thereof as the volume of work given by Agency to
such supplier on Clients behalf bears to the total volume of work given by Agency to
such supplier from all of Agencys clients during the pertinent period to which the
discount or rebate is applicable. For all media purchased by Agency on Clients behalf,
Client agrees that Agency will be held solely liable for payments only to the extent
proceeds have cleared from Client to Agency for advertising disseminated in
accordance with this Agreement. For sums owing, but not cleared, to Agency, Client
agrees to be held solely liable.lxii Agency will use its best efforts to provide in all
contracts with media that Agency will be held solely liable for payments if Client has
provided proceeds to Agency sufficient to cover such payments.
7. Audit of Books
Agency shall maintain complete documentation and records relating to the media
and production transactions, including, but not limited to, transactions for point-ofpurchase and research billed to Client. Such documents include purchase orders,
bids, vendor invoices, canceled checks, written policies and procedures, vendor

contracts, and any other appropriate documentation to satisfy Client that

expenditures were within industry standards and the Client-approved budget. All
documents and records shall be maintained in accordance with generally accepted
accounting principles consistently applied, and in such manner as may be readily
audited. The documentation and records shall be available at all reasonable times
for audit by Clients internal audit function or by any independent audit firm
engaged by Client, both during the Term hereof and for two (2) years following the
expiration or termination date of the Agreement, or until all disputes, if any,
between Agency and Client have been finally resolved, whichever is later. With
respect to the latter obligation, only those records in dispute need be retained.

8. Safeguarding of Property
Agency will take all reasonable precautions to safeguard any of Clients property
entrusted to Agencys custody or control, but in the absence of negligence on
Agencys part or willful disregard by Agency for Clients property rights, Agency will
not be responsible for any loss, damage, destruction, or unauthorized use by others
of any such property. Agency will not be responsible for obtaining the return of
engravings from publications after their use in publications.

9. Indemnities
a. Client Indemnity. Client shall be responsible for the accuracy and completeness of
information concerning its organization, and the description of Clients products and
services which Client furnishes to Agency in connection with the performance of this
Agreement. If Client supplies any other elements to Agency for use in advertising, or
advises Agency that Client has the right to use the property of a third party in
advertising, Client shall be responsible for such elements. (Such information or
elements supplied by Client shall be referred to herein as Organizational
Information.) Client shall indemnify, defend, and hold harmless Agency, its
employees, officers, directors, and shareholders from and against any and all injury,
loss, damage, liability, claim, demand, costs, and expenses (including reasonable
attorneys fees and costs) which are incurred by Agency based upon or arising out of
any claim, allegation, demand, suit, or proceeding made or brought against Agency
with respect to any advertising or other products or services which Agency prepared or
performed for Client and which were approved by Client, to the extent that such claim,
allegation, demand, suit, or proceeding relates, in whole or substantial part, to the
accuracy or completeness of such Organizational Information; provided, however, that
Client shall not be required to indemnify Agency for any injury, loss, damage, liability,
claim, demand, or expense arising out of or in any way caused by the negligence or
willful misconduct of Agency.
b. Agency Indemnity. Subject to Clients responsibility with respect to Organizational
Information set forth above, Agency assumes full responsibility for, and shall
indemnify, defend, and hold harmless Client, its affiliates, its and their agents,
employees, officers, directors, and stockholders from and against, any and all injury,
loss, damage, liability, claims, demands, costs, and expenses (including reasonable

attorneys fees and costs) which may be incurred by Client based upon or arising out of
any claim, allegation, demand, suit, or proceeding made or brought against Client
arising out of the production, distribution, or dissemination of materials produced
hereunder, including, without limitation: (i) libel, slander, defamation, infringement or
misuse of any proprietary rights, piracy, plagiarism, unfair competition, idea
misappropriation, or invasion of rights of privacy or publicity; or (ii) damage to or
destruction of personal property or injury to or death of any person, attributable to or
arising out of Agencys performance or nonperformance hereunder.
c. Notification of Claims. A party entitled to be indemnified pursuant to this paragraph 9,
subsection (a) or (b) above (the Indemnified Party) shall provide prompt written
notice to the party liable for such indemnification (the Indemnifying Party) of any
claim or demand which the Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement. The Indemnifying Party shall
promptly undertake to discharge its obligations hereunder. Additionally, the
Indemnifying Party shall employ counsel reasonably acceptable to the Indemnified
Party to defend any such claim or demand asserted against the Indemnified Party. The
Indemnified Party shall have the right to participate in the defense of any such claim or
demand, at its own expense. The Indemnified Party shall cooperate with the
Indemnifying Party in any such defense. The Indemnified Party may settle or
compromise such claim or demand. The Indemnified Party shall make available to the
Indemnifying Party or its agents all records and other materials in the Indemnified
Partys possession reasonably required by it for its use in contesting any third-party
claim or demand.
10. Ownershiplxiii
a. All campaigns, trademarks, service marks, slogans, artwork, written materials,
drawings, photographs, graphic materials, film, music, transcriptions, or other materials
that are subject to copyright, trademark, patent, or similar protection (collectively the
Work Product), developed or prepared by Agency or its employees, agents,
contractors, or subcontractors under this Agreement, are the property of the Client,
provided: (i) such Work Product is accepted by the Client within twelve months of
being proposed by Agency (and such acceptance is reflected in written form from
Client to Agency received within such twelve-month period); and (ii) Client pays all
fees and costs associated with creating, and, where applicable, producing such Work
Product. Subject only to the two aforesaid Conditions (the Conditions), all title and
interest to Work Product shall vest in Client as works made-for-hire within the
meaning of the United States Copyright Act. To the extent that the title to any such
Work Product may not, by operation of law or otherwise, vest in Client as a work
made-for-hire, or any such Work Product may not be considered a work made-for-hire,
all right, title, and interest therein is hereby irrevocably assigned by Agency to Client.
In order to assure that its employees, agents, contractors, and subcontractors do not
possess proprietary rights in the Work Product that are inconsistent with Clients
possession of such rights, Agency will, as necessary, obtain the assignment and
conveyance to Client, or to Agency for the benefit of Client, of any proprietary rights
that such persons or entities may have or may have in the future to such Work Product.

b. Without limiting the general rights of the Client as provided in paragraph 10(a), it is
understood that Agency may, on occasion, license materials from third parties for
inclusion in Work Product. In such circumstances, ownership of such licensed materials
remains with the licensor at the conclusion of the term of the license. In such instances,
Client agrees that it remains bound by the terms of such licenses and that it does not
obtain proprietary rights in such materials beyond the terms and conditions contained in
the pertinent license. Agency will keep Client informed of any such limitations.
c. Work Product that does not meet the two Conditions in paragraph 10(a) remains
Agencys property unless the failure to meet the first condition is due to the failure of
Agency to submit the Work Product to the Client with a specific request that the Client
either accept or reject the Work Product in question, in which case the acceptance of the
Client shall be deemed to have been given, and the first condition deemed satisfied.
Notwithstanding the foregoing, upon the request of Client made prior to the earlier of
(1) eighteen months after Work Product is proposed by Agency and (2) the termination
of this Agreement, Agency will grant Client an option to acquire at a future date all or a
portion of the rights to Work Product that was not accepted by Client pursuant to
paragraph 10(a) (the Option). The Option shall be subject to terms and conditions
(including, without limitation, terms relating to consideration for and duration of the
Option) negotiated in good faith by Agency and Client. Absent agreement on terms, no
rights will be transferred to Client.
11. Term of Agreement
a. The term of this Agreement will commence on [insert date], and will continue in full
force and effect until terminated by either party upon written notice of such intention
given ninety (90) days in advance, provided that in no event may this Agreement be
terminated effective prior to the expiration of twelve (12) months from the
commencement of the Term.lxiv The ninety-day period of notice is referred to herein as
the Notice Period.
b. The rights, duties, and responsibilities of Agency will continue in full force during the
Notice Period, including the ordering and billing of advertising in print media whose
published closing dates fall within such Notice Period and the ordering and billing of
advertising in broadcast media where the air dates fall within such Notice Period.
12. Rights Upon Termination
a. Upon termination of this Agreement, Agency will transfer, assign, and make available
to Client, or Clients representative, all Work Product in Agency possession or control
belonging to Client pursuant to paragraph 10 hereof; subject, however, to any rights of
third parties of which Agency has informed Client.
b. Agency also agrees to give all reasonable cooperation toward transferring to Advertiser
or Advertisers designee, with approval of third parties in interest, all contracts and
other arrangements with advertising media or others for advertising space, facilities,
and talent, and other materials yet to be used, and all rights and claims thereto and

therein, upon the Advertiser duly releasing the Agency from the obligation thereof.
c. Client recognizes that talent contracts with members of certain labor unions or guilds
generally cannot be assigned except to signatories to the collective bargaining
agreements governing the services rendered by such talent.
d. Upon termination of this Agreement, any projects or arrangements which remain
incomplete and cannot be assigned to Client or Clients designee (as determined by
Client, and in Clients sole judgment) shall be completed by Agency consistent with the
terms and conditions of this Agreement. Except as provided in the previous sentence,
upon termination of this Agreement, Agency shall immediately deliver to Client or
Clients designee all Work Product (as herein defined) belonging to Client.
Notwithstanding the foregoing, it is understood by the parties that Agency may keep
archival copies of Work Product for historical purposes and internal use.
e. In addition to the foregoing, upon termination of this Agreement, Agency shall
cooperate with Client and any successor agency designated by Client, and shall
facilitate the assignment of all contracts relating to Clients advertising to the successor
agency or such other party designated by Client. Client shall assume from Agency all
outstanding non-cancellable contractual obligations to third parties incurred by Agency
in connection with the services of Agency rendered pursuant to this Agreement,
including, but not limited to, obligations to purchase materials and services for Clients
account and obligations for uncompleted work approved by Client.
13. Governing Law, Jurisdiction, and Venue
This Agreement and the rights of the parties hereunder shall be governed by and
interpreted in accordance with the internal laws of the State of [insert name of
state], without regard to its conflict of laws, rules, or choice of law principles.
Exclusive jurisdiction and venue for any claims made by either party against the
other shall be within the state and federal courts located in the State of [insert
name of state].

14. Entire Agreement

This Agreement constitutes the entire agreement between Agency and Client
relating to the subject matter hereof, and supersedes any prior agreement or
understandings between them. This Agreement may not be modified or amended
unless such modification or amendment is agreed to by both Agency and Client in
writing.

15. Notices
a. Notices under this Agreement are sufficient if given by nationally recognized overnight
courier service, certified mail (return receipt requested), facsimile with electronic
confirmation, or personal delivery to the other party at the address below:
If to Client:

[name of advertiser]
[address of advertiser]
[name and/or title of person to receive delivery]
[phone number]
[fax number]
[e-mail address]
If to Agency:
[name of agency]
[address of agency]
[name and/or title of person to receive delivery]
[phone number]
[fax number]
[e-mail address]
b. Notice is effective: (i) when delivered personally; (ii) three (3) business days after
being sent by certified mail; (iii) on the business day after being sent by a nationally
recognized courier service for next-day delivery; or (iv) on the business day after being
sent by facsimile with electronic confirmation to the sender. A party may change its
notice address by giving notice in accordance with this paragraph.
16. Additional Documents
Each party agrees to execute and deliver such additional documents and
instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out, and perform all of the terms, provisions, and
conditions of this Agreement and the transactions contemplated hereby.

17. No Third-Party Beneficiaries

This Agreement is made solely and specifically among and for the benefit of the
parties hereto and their respective successors and assigns, and no other person will
have any rights, interest, or claims hereunder or be entitled to any benefits under or
on account of this Agreement as a third-party beneficiary or otherwise.

18. Waiver
The failure of any party to seek redress for violation of, or to insist upon the strict
performance of, any agreement, covenant, or condition of this Agreement shall not

constitute a waiver with respect thereto or with respect to any subsequent act.

19. Successors and Assigns

This Agreement shall be binding upon and inure to the benefit of the parties and
their permitted successors and assigns.

20. Paragraph Headings and Captions

Paragraph headings and captions contained in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend the scope or intent of
this Agreement or any provision thereof.

21. Severability
Wherever possible, each provision of this Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or determined to be invalid under any such law,
such provision shall be limited to the minimum extent necessary to render the same
valid or shall be excised from this Agreement, as the circumstances require, and this
Agreement shall be construed as if said provision had been incorporated herein as
so limited or as if said provision had not been included herein, as the case may be,
and enforced to the maximum extent permitted by law.

22. Counterparts
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.

23. Force Majeure

Neither Client nor Agency shall be liable to the other for any failure, inability, or
delay in performing hereunder if caused by any cause beyond the reasonable
control of the party so failing, including, without limitation, an Act of God, war,
strike, or fire; but due diligence shall be used in curing such cause and in resuming
performance.

24. Assignment
Except as may be necessary in the rendition of Agencys services as provided
herein, neither Agency nor Client may assign any part or all of this Agreement, or
subcontract or delegate any of their respective rights or obligations under this
Agreement, without the other partys prior written consent. Any attempt to assign,
subcontract, or delegate in violation of this paragraph is void in each instance.

25. Public Announcement

Neither Agency nor Client may issue, without the consent of the other party, any
press release, or make any public announcement with respect to this Agreement or

the transactions contemplated hereby, except as may be required by law (and, if so

required, such party shall give the other party a reasonable opportunity to comment
thereon, if possible).

26. Compliance with Laws

Both parties will comply with the provisions of all federal, state, and local laws,
ordinances, and regulations applicable to the performance of their obligations under
this Agreement.

27. Independent Contractors; No Partnership or Joint Venture

Except only as otherwise specifically provided herein and necessary in connection
with Agencys services provided hereunder, the parties are independent
contractors, and nothing herein contained shall be construed as creating any
relationship of employer/employee, partnership, agency, joint venture, or otherwise
between the parties hereto, nor shall this Agreement be construed as conferring on
any party any express or implied right, power, or authority to enter into any
agreement or commitment, express or implied, or to incur any obligation or liability,
on behalf of any other party. In addition, this Agreement shall not be construed as
creating any relationship between one party and the other partys employees.
Accordingly, neither party nor its employees shall be entitled, as a result of this
Agreement, to any of the benefits under any employee benefit plan that the other
party presently has in effect or may put into effect; nor will either party or its
employees be considered employees of the other party for any purpose.

IN WITNESS WHEREOF, Agency and Client have executed this Agreement on the day and date
as first appears.
[AGENCY]
By:
Name:
Title:
[CLIENT]
By:
Name:
Title:

Endnotes:

lvii

Depending upon the nature of the relationship, an agency may be appointed as an

advertisers exclusive advertising agency in general or connection with a particular
assignment. While such exclusivity is not common, it is appropriate in some
instances.

lviii

See footnote 2.

lix

It is important that the advertising agency and advertiser understand the scope of the
services to be provided. If appropriate attention is not paid to this issue, advertisers
may find themselves quite disappointed at what the advertising agency is willing or
capable of doing within the compensation structure.

lx

Advertisers are often sensitive to advertising agencies dealing with product or service
categories that the advertiser deems competitive or antithetical to its products or
services. While advertising agencies should certainly agree not to handle any directly
competitive products or services, restrictions can become more complicated if defined
too broadly.

lxi

While there is no required percentage allowance, 10% is typical. It is not unusual,

however, that there be no tolerance without the advertisers written approval.

lxii

This is a somewhat controversial provision. Sequential Liability is not an

established legal principle. It is a concept adopted by the American Association of
Advertising Agencies in the 1990s. A significant portion of the media industry has
rejected the concept, taking the position that the advertising agency and advertiser are
jointly and severally liable ( a concept that is similarly rejected by the advertising
industry).

lxiii

Ownership of creative is a major issue, particularly creative that is either rejected or

not used by the advertiser. Some advertisers, particularly when they are paying the
agency on a fee basis as opposed to a media commission basis, take the position that
everything presented to the advertiser, whether accepted or used, is owned by the
advertiser. Advertising agencies, on the other hand, contend that their stock in trade is
ideas and their execution. If rejected or not used by an advertiser, the creative should
therefore be owned by the advertising agency. This form attempts to reach a
compromise. Whether such a compromise is appropriate in a particular deal will
depend upon the needs of the respective parties.

lxiv

There is some question whether a ninety day cancellation period or a one year
minimum term is standard. Depending upon the nature and complexity of the
assignment, however, such terms may be appropriate. Caution must be exercised by
both parties with regard to the cancellation period to be certain that work in process
can be completed in the time frame provided. In that regard, ninety days is generally
regarded as an appropriate period, although it is not unusual to see sixty or even forty
five day periods. The one year minimum is appropriate where there is a considerable
lead time before advertising will be produced or where an advertising agency must
make a significant investment in materials, equipment, and personnel to properly

service the advertiser. A minimum term of one year may be necessary to insure a
proper ramp up and return on investment for the advertising agency.

Schedule 1: Scope of Assignment

[insert description]

Schedule 2: Scope of Serviceslxv

A. Study Clients products or services;
B. Analyze Clients present and potential markets;
C. Create, prepare, and submit to Client for approval, advertising ideas and programs;
D. Employ, on Clients behalf, Agencys knowledge of available media and means that can be
profitably used to advertise Clients products or services;
E. Prepare and submit to Client for approval, estimates of costs of recommended advertising
programs;
F. Write, design, illustrate, or otherwise prepare Clients advertisements, including
commercials to be broadcast, or other appropriate forms of Clients message;
G. Order the space, time, or other means to be used for Clients advertising, endeavoring to
secure the most advantageous rates available;
H. Properly incorporate the message in mechanical or other form and forward it with proper
instructions for the fulfillment of the order;
I. Check and verify insertions, displays, broadcasts, or other means used, to such degree as is
usually performed by advertising agencies; and
J. Audit invoices for space, time, material preparation, and services.
Endnotes:
lxv

This is a relatively comprehensive list of potential advertising agency services and

should be reviewed and edited according to the nature of the relationship and
assignment.

Schedule 3: Exclusivity and Exceptions Thereto

[insert details]

Schedule 4: Compensationlxvi
A. Client will pay a [monthly]lxvii fee of $___________ in consideration of the advertising
services performed by Agency. Such fee will be deemed a nonrefundable advance against
commissions to be received by Agency as follows:
(1) On all media purchased by Agency, Agency will bill Client at the published card rates,
or negotiated rates, as may be applicable. If no Agency commission, or less than [insert
amount] percentlxviii ([insert amount]%) Agency commission (the Commission Rate),
is granted or allowed on any such purchases, Client agrees that Agency may invoice
Client an amount which, after deduction of Agencys cost, will yield Agency the
aforesaid Commission Rate on such amount as Agency commission. During the Notice
Period following notice of termination, Agency will be entitled to commissions on all
orders of advertising in print media whose published closing dates fall within the
Notice Period and of broadcast media where the air dates fall within the Notice Period,
regardless of who may place such orders.
(2) With respect to the engagement of talent, Agency will bill Client the authorized
engagement rate, plus any taxes, insurance, pension and health fund contributions, etc.
applicable thereto, plus an amount which, after deduction of Agencys cost, will yield
Agency the Commission Rate on such amount as Agency commission. Client
recognizes that Agency is a signatory to collective bargaining agreements with Screen
Actors Guild and American Federation of Television and Radio Artists, and that the
hiring of talent by Agency on Clients behalf will be subject to the terms of such
agreements.lxix
(3) On broadcast production, artwork, engravings, type compositions, and any and all art
and mechanical expenses incurred by Agency pursuant to Clients authorization,
Agency will invoice Client an amount which, after deduction of Agencys cost, will
yield Agency [insert Commission Rate or other percentage] on such amount as Agency
commission.
(4) Advances against commissions will be reconciled against commissions actually
received on a [monthly, quarter-annual, or other] basis. Agency will issue the
appropriate credit or debit invoices.
B. Client agrees to reimburse Agency for such cash outlays as Agency may incur, such as
forwarding and mailing, telephoning, telegraphing, and travel, in connection with services
rendered in relation to Clients account.
C. The Agency shall be compensated during the Notice Period as provided in Schedule 4.
Compensation shall include, but not be limited to, retainer and all other commissions due
the Agency. Agency shall be entitled to receive the then-monthly fee whether advertising is
created and/or placed by Agency or another entity. Within sixty (60) days following the
Termination Date, Client and Agency shall reconcile any disparity between amounts paid
pursuant to any estimate, and actual media and production billings incurred by Agency

prior to the Termination Date, with a refund by Agency to Client or an additional payment
from Client to Agency, as appropriate. Advances against commissions shall similarly be
reconciled by such date.
D. Prior to the conclusion of each calendar year during the Term, Agency and Client will meet
to discuss and resolve Agencys compensation for the next subsequent year. If Agencys
compensation is not agreed upon prior to the beginning of the next calendar year, Client
shall continue to pay Agency as otherwise provided in this Schedule 4 until the parties
negotiate such compensation or until this Agreement is terminated, whichever occurs first.
Endnotes:
lxvii

While monthly is common, the period of payment can be longer, e.g., quarterly.

lxviii

15% is a common commission paid, although the rate is under constant challenge and
can no longer be described as the norm. It is not uncommon to see commissions as
low at 10%. Advertisers that are paying on commission must be realistic and be
certain that their commission rate affords the advertising agency an appropriate profit
margin to insure that the quality of the work is not adversely effected by a losing
relationship.

lxix

Not all advertising agencies are signatory to union agreements dealing with the
employment of actors in commercials. Where an advertising agency is not a
signatory, this paragraph should be eliminated.

Schedule 5: Billing and Payment Procedures

A. Estimates
Agency will furnish Client with written cost estimates, specifying in reasonable detail
all anticipated costs arising in connection with all services provided under this
Agreement, when the cost to Client of such service is estimated to exceed $[insert
amount].

B. Bids for Jobs

Except as authorized in writing in advance by Client, Agency will obtain at least
three (3) bids for all production jobs which require outside suppliers in the
performance of service hereunder and which are estimated to cost in excess of $
[insert amount] for each individual project. Client will advise Agency as to the form
and scope of bids and qualifications required for the respective suppliers.

C. Itemized Invoices
All bills and invoices submitted to Client for payment shall be itemized in reasonable
detail, supportable by appropriate documentation and proof of performance, and
allocated to Clients accounts as may be specified by Client from time and in

accordance with Clients accounting practices. When applicable, manufacturers and

retailers excise, state, or municipal sales and use taxes shall be billed to Client as
separate items on invoices; provided, however, Client shall in no event be liable for
the payment of any taxes based on Agencys net income or gross receipts, or any
property taxes. Agency agrees to furnish, on request of Client, statements
evidencing that such taxes as are properly billed to Client have been paid. Under no
circumstances will penalties and/or interest resulting from the late payment or nonpayment of any tax by Agency become an obligation of Client, unless Client was
responsible for incurring such penalty or interest. Client shall have the right to
require Agency to contest with the imposing jurisdiction, at Clients expense and
within Clients control, any taxes which Client may deem to be improperly levied.

D. Advance Invoicing
Agency will invoice Client for all media and third-party costs sufficiently in advance
of the due date to permit payment by Client to Agency in order to take advantage of
all available cash discounts or rebates.

E. Proof
On all outside purchases other than for media, Agency will attach to the invoice
proof of billed charges from suppliers.

F. Timing
All invoices will be rendered on or about the first day of each month and will be
payable the tenth day of the month.