INTERNET PHOTO SERVICES AGREEMENT
INTERNET PHOTO SERVICES
AGREEMENT
THIS
SERVICES AGREEMENT is effective this
29th
day of April, 2008, BETWEEN:
PHOTOCHANNEL NETWORKS INC., a
company having an office at ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇ ▇▇▇
(hereinafter called
"PhotoChannel")
- and -
COSTCO WHOLESALE CORPORATION,
a company having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
(hereinafter called
"Costco")
WHEREAS
PhotoChannel is the developer and owner of
a proprietary Internet based digital imaging network solution for the upload and distribution of digital images for printing
of photographs or other products;
AND
WHEREAS PhotoChannel is entitled to provide the Services (as hereinafter defined) to Costco
as provided herein;
AND
WHEREAS Costco wishes to use the System for its warehouse Photo Centers
(“Costco Photo Centers”) and online photo operations and to receive the Services on the terms and
conditions set out herein;
NOW
THEREFORE in consideration of the premises, the mutual covenants contained in
this Agreement, and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties agree as
follows:
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1.
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Definitions.
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1.1
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“ASRs”
means either party’s employees and any third party service providers,
agents, representatives, subcontractors and/or other authorized service
representatives.
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1.2
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“Branded
Site” means the Internet portal and pages designed, developed and hosted
by PhotoChannel and displaying Costco trademarks through which Costco
Members may upload photographs, store photographs, purchase prints and
other products for mail delivery or pick-up at Costco warehouses, pay for
said prints and products, and engage in related online
activities.
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1.3
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“Customized
Feature” means any improvement or modification to the Branded Site created
specifically at Costco’s
request.
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1.4
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“▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇”
means the website accessed through that address that provides
photographers with additional control over the printing and appearance of
prints ordered through the Branded
Site.
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Page 1 of
15
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1.5
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“End-Users”
means Costco Members and any individuals who access images on the Branded
Site with the Member’s permission. In this Agreement, “Members and
“End-Users” may be used
interchangeably.
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1.6
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“Fiscal
Period” means each of Costco’s thirteen four-week accounting periods
during its fiscal year.
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1.7
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“Fulfillment
Provider” means any third party who enters into an agreement with Costco
to provide Members photo-related products sold on the Branded
Site.
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1.8
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“Launch
Date” means the first date upon which Members may upload photographs to
the Branded Website. It is anticipated that the Launch date
shall be March 18, 2008. The Launch Date may be changed by
mutual written agreement.
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1.9
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“Member Data” includes, without limitation, Member
names, contact information, membership numbers, member address books,
payment-related information and images and information associated with
images that are transferred to PhotoChannel during the transition from
Costco’s previous system provider or that are uploaded and/or keyed into
the System through the Branded Site by Members during the
Term.
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1.10
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“Services” means the System and Branded Site
containing all functionality specified in Schedule A, along with any
Updates, Upgrades, Modifications and Customized Features provided during
the Term. Services shall be performed outside of the United
States.
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1.11
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“System”
means PhotoChannel’s software, software modifications, hardware, Branded
Site and services comprising PhotoChannel’s Internet based digital imaging
network solution for the upload, storage and distribution of digital
images for printing of photographs or other
products.
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1.12
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“Term”
means the period between the Launch Date and midnight on the three-year
anniversary of the actual Launch Date. Costco may extend the Term for additional one-year
periods (each such period, a
“Renewal Term”) unless written notice is provided by Costco to PhotoChannel at
least ninety (90) days prior to the end of the Term or the then
current Renewal Term (the Term and any and all Renewal Terms, as the case
may be, are collectively referred to herein as the “Term”).
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2. Pre-Launch Development and
Transition Services. Prior to Launch Date, PhotoChannel shall
develop, test and make ready for production the Branded Site containing all
functionality specified in Schedule A. The parties agree to
cooperate in good faith to meet the Launch Date, notify each other immediately
of any actual or anticipated delay in any agreed-upon time periods and
deadlines, and shall work in good faith, to minimize all delays and impact of
delays. PhotoChannel shall perform all pre-launch services at no cost
or expense to Costco.
3. The Branded
Site. PhotoChannel shall design,
host and operate the Branded Site as described in Schedule A and subject
to the following conditions:
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(a)
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Costco
shall have the right to preapprove the design, layout, content and look
and feel of the Branded Site, and any changes
thereto;
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(b)
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As
between the Member and PhotoChannel, Costco’s Terms and Conditions of Use
and Privacy Policy shall apply to the Branded Site. PhotoChannel shall
provide a link to Costco’s privacy policy on the Branded
Site;
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(c)
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Costco
will provide the jump page for the link from ▇▇▇▇▇▇.▇▇▇ to the Branded
Site. The form and content of the
jump page will be at Costco's
discretion;
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(d)
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PhotoChannel
shall create user interfaces, and ordering and payment capabilities for
products and services sold by Fulfillment Providers. Costco
controls all pricing for any products or services sold through the Branded
Site;
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(e)
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Except
for any links specifically authorized by this Agreement or otherwise
authorized in writing by Costco, the Branded Site will not be linked or
link to any other web site;
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(f)
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As
provided in Schedule A and throughout the Term of this Agreement, there
will be a staging site (“Staging Site”) available at all times for the
parties to test updates, upgrades and Customized
Features;
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(g)
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PhotoChannel
shall make the Branded Site at least as accessible to individuals with
disabilities as the ▇▇▇▇▇▇.▇▇▇ site, and provide, at a minimum alternate
text for images, form field labels, and keyboard compatibility for
scripted features. PhotoChannel shall work with Costco and take
commercially reasonable steps to ensure accessibility on the Branded Site
and when an area is identified that is not accessible PhotoChannel shall
make commercially reasonable efforts to make it accessible under a SOW (as
hereinafter defined) in a mutually agreed timely
manner;
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(h)
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The
data hosting facility where the System resides shall have backup power
capabilities to allow it to continue operating, uninterrupted, for a
period of seven days in the event of a catastrophic power
failure;
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(i)
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The
Branded Site may display a “Powered by PhotoChannel”
notice;
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(j)
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PhotoChannel
may only delete or cause to be deleted images stored in the System
pursuant to a written policy established by Costco;
and
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(k)
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The
Branded Site may be customized and/or localized for other Costco country
regions. The customization and/or localization will be provided
at no charge;
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(l)
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PhotoChannel
will maintain and update a disaster recovery plan for the Branded Site,
that requires, at a minimum, notification to Costco within one hour of
learning of the disaster and prompt creation of a mutually acceptable
response plan to restore full Branded Site functionality as soon as
reasonably possible, with hourly progress updates to Costco until full
functionality is restored. For purposes of this Agreement a
“disaster” means that fifty percent or more Members are unable to access
their images and/or data for 12 consecutive
hours.
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4. Storage of Member
Images. As part of the System, PhotoChannel shall provide
sufficient and secure storage of Member Data on a commercially reasonable basis
in accordance with generally accepted industry
standards. PhotoChannel may store Member Data only in the United
States and Canada. PhotoChannel shall maintain backup of all Member
Data as provided in Schedule A. Backup Data (as hereinafter defined)
shall be used in the event of any critical or major System outage (as described
in Schedule C) preventing Member access to Member Data. For purposes
of this Agreement, “Backup Data” shall mean, at a minimum, information
sufficient for a Member to access stored images and to print a 5x7
print.
5. Updates, Upgrades and
Modifications.
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(a)
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PhotoChannel
Software Updates and Upgrades. From time to time PhotoChannel
may issue generally available updates and upgrades to the
System. PhotoChannel will make these updates and upgrades
available to Costco on the Staging Site. Costco will test such
updates and upgrades within thirty (30) calendar days of receiving
notification of their availability. Costco will notify
PhotoChannel of its acceptance or rejection of the update or upgrade, and
if Costco accepts the update or upgrade, PhotoChannel shall implement it
on the Branded Site in the timeframe specified in the Statement of Work
(“SOW”) form similar to that attached hereto as Schedule B. If
Costco rejects an update or upgrade, it will notify PhotoChannel of its
reasons for rejection and, if requested by Costco, PhotoChannel shall
provide corrections for retesting by Costco. Any failure by
Costco to provide notification of acceptance or rejection shall be deemed
a rejection. Except in the limited circumstances set out below,
Costco shall not be required to implement an update or upgrade, provided,
however, that if an update or upgrade is provided by PhotoChannel in order
to avoid:
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(i)
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any
potential, actual or alleged infringement of a third-party’s intellectual
property rights; or
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Page 3
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(ii)
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any
potential, actual or alleged violation of any law, statute, Payment Card
Industry Data Security Standards (“PCI DSS”), or ordinance or an
administrative order, rule or regulation relating to the System, and the
update or upgrade does not materially degrade service or materially
adversely affect the functionality of the System, Costco must implement
the update or upgrade.
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(b)
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Storage
Capacity Upgrades. No less frequently than every three Fiscal
Periods the parties shall confer and agree on image upload volume
projections and peak daily image upload projections (including holiday
upload volumes) for the next three Fiscal Periods. If the
parties fail to agree on a volume projection, the volume projection shall
be the growth percentage exhibited in the comparable periods the previous
year. PhotoChannel shall promptly upgrade its hardware,
bandwidth and connectivity to meet volume projections. Nothing
herein prohibits PhotoChannel from implementing additional upgrades to its
storage capacity or diminishes any of PhotoChannel’s obligations under
this Agreement.
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(c)
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Customized
Features. Without limiting PhotoChannel’s rights under subsection 5(a), if
Costco desires a Customized Feature, Costco shall so notify
PhotoChannel. PhotoChannel shall promptly propose an
implementation plan for the Customized Feature, on a
SOW. If parties agree to the proposal, they shall sign a
SOW. Changes to any SOW must be mutually agreed upon in writing
and signed by both parties. Unless otherwise agreed by the
parties in the applicable SOW, Costco shall have an exclusive right to the
Customized Feature and derivatives thereof during the Term provided however, that
PhotoChannel may never allow use of the customized features by
Sam’s Club, Wal-Mart or BJ’s Wholesale and further provided that where
PhotoChannel can show that it had committed to delivering a Customized
Feature incorporating the same or substantially the same functionality as
said Customized Feature within a period of six (6) months from the date
Costco delivered the relevant SOW, no such exclusivity shall
apply.
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(d)
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Integrated
Shopping Cart. The Parties agree that an integrated shopping
cart is a mutually desirable feature for the Branded Site, and shall
cooperate with each other to implement this feature as soon as reasonably
practical without risking disruption to or degradation of User experience
on the Branded Site.
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6.
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Support and
Maintenance. PhotoChannel shall operate the
Branded Site and provide Members and Costco Photo Center employees service
level support as described in
Schedule C.
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7.
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Payment to
PhotoChannel. Costco shall pay PhotoChannel as provided
in Schedule F.
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8.
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Fulfillment
Providers. Prior to Launch and during the Term, Costco
may enter into agreements with Fulfillment Providers, in a form similar to
that attached to this Agreement as Schedule D. PhotoChannel
agrees to exert commercially reasonable efforts to implement connectivity
between the Branded Site and any Fulfillment
Provider. Integration between the System and the Fulfillment
Provider shall be without additional charge to Costco or its Fulfillment
Providers.
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(a)
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Payment. PhotoChannel
shall be Costco’s agent for collecting payment from Members for products
and services provided by Fulfillment Providers and, unless otherwise
agreed, paying Fulfillment Providers on behalf of
Costco. Payment mechanisms on the Branded Site shall allow
electronic payment by all methods then available on ▇▇▇▇▇▇.▇▇▇ (other than
Costco Cash Cards), and shall capture all transaction information captured
in ▇▇▇▇▇▇.▇▇▇ transactions. Payment shall be processed through
the credit card processor or processors designated by
Costco. Payments are not subject to offset and PhotoChannel
shall not actually or legally possess payments or monies owed to Costco
for the sale of products on the Branded Site, but will solely be
responsible for the secure receipt and relay of the Member’s credit card
information to Costco’s
payment processor.
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Page 4
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(b)
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PhotoChannel
shall allow Members the option to store their credit card account numbers
until the Parties implement an integrated shopping cart. All
payment and payment-related activities shall comply with PCI DSS, as
amended from time to
time.
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(c)
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PhotoChannel
shall be Costco’s agent, by way of its hosting of the Branded Site, for
maintaining up-to-date sales tax information and charging Members sales
tax for purchases made through the Branded Site, through Vertax or a
similar sales tax program approved by Costco. PhotoChannel is
responsible for providing to Costco tax reports consistent with Costco’s
own tax reporting practices.
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(d)
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Special terms for
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇. The Branded Site shall provide a link and
continuous connectivity to ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and a notice to Members that
they are leaving the Branded Site and that the Terms and Conditions of Use
and Privacy Policy of ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ will apply to the Member’s use of
that site.
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9.
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Reports. PhotoChannel
will provide Costco with the following
reports and other reports as reasonably requested by Costco, in formats
mutually agreed by the parties. Unless otherwise specified,
each report is due within five days of the end of the prior
week. For purposes of this
Agreement a weeks is defined as Monday through
Sunday.
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(a)
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Weekly summary report of sales of products by
item description per unit (including item number and SKU), sell, total
units ordered, total dollars, per unit cost, total cogs. (This report is
currently called Costco Photo Center Revenue
Report)
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(b)
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Daily report that will include date, express
uploads, regular uploads, email uploads, organizer uploads, total uploads,
online prints, retail prints, total prints, wpu %, online prints per
order, retail prints per order, total prints per order, new registrants,
print orders, non-print orders, total orders. (This report is currently
called Costco Daily Report). This report will be compiled into
weekly and monthly
reports.
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(c)
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Weekly transaction report of upload fees by
warehouse location will include upload fee, # of uploads, fees calculated,
warehouse #, warehouse location, % of store revenue, uploads $ amount
calculated. (This report is currently called Costco Store
Report)
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(d)
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Monthly refunds reports by date of credit, refund
#, order #, order type, person issuing credit, return reason, comments,
amounts credit. (This report is currently called CS Refund
Report)
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(e)
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Monthly summary report of sales by item, sell
price, units, dollars, fiscal year totals and accumulated
total. (This report is currently called Costco Products by
Month Cumulative)
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(f)
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Monthly summary report of accounts deletions by
month, accounts deleted last month, accounts scheduled to be deleted this
month, % deleted scheduled vs. actual. (This report is
currently called Photo Center Accounts Deleted Total
Page)
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(g)
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Monthly report containing emails for all new
registrants
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(h)
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Weekly report summarizing customer service calls
and emails including weekly calls
received, calls answered, reason for call, resolution to call, calls
escalated for higher tier service, calls abandoned, percentage of calls
abandoned, average hold time, and average talk time. Same type
of information should be provided for email support including # of emails
received, reason for email, email response time, % resolved on initial
email.
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(i)
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Daily unshipped orders report including time at
fulfillment vendor, order basket id #, shipping method, order type, order
id #, customer id #, time order placed, time order received at fulfillment
vendor, time between Photo Channel and fulfillment vendor. (This report is
currently called the COSTCO Daily Ops Aging
Report)
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(j)
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Daily not acknowledged report including order
basket id #, received at Photo Channel, Sent to fulfillment vendor, status
code, order type, customer id #, Photo Channel order id #, member email
address. (This report is currently called COSTCO Daily Ops
▇▇▇▇▇ Reports)
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(k)
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Quantity and dollar amount, share emails, image uploads, and all Member and
Costco Photo Center employee telephone activity, including weekly calls received, calls answered, reason for
call, resolution to call, calls escalated for higher tier service, calls
abandoned, percentage of calls abandoned, average hold time, and average
talk time.
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(l)
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Weekly transaction report (“Transaction Report”)
showing the items listed below and in a format and delivery method agreed
upon by the parties. The Transaction Report shall be delivered
to Costco by noon Pacific Time of the Monday following the reporting
week. Transaction Reports may include
transactions and amounts from previous weeks, not previously reported, due
to operational delays such as the lapse of time between the placing of an
order and the receipt of shipping confirmation messages from external
Fulfillment Provider
systems.
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1.
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Costco Member name, address, county, city, state
zip
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2.
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Total amount for each member
transaction
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3.
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Type of credit card
used
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4.
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Type of product(s) and quantity
ordered
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5.
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Purchase amount for each
product
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6.
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Shipping and Handling
amount
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7.
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Tax
amount
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8.
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Total per image upload
fees
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(m)
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A weekly "Internet Report" showing, at
a minimum, (i) the number of express
uploads, regular uploads and total uploads by email and cell phone; (ii)
the number of mail order prints, mail order Fulfillment Provider products
and prints for pick-up at Costco Warehouses; (iii) total print orders;
(iv) total Fulfillment Provider product orders; (v) total orders, (vi)
Costco Member registrations and deactivations; and (vii) total
images deleted.
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(n)
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A
Fiscal Period site metrics report that at a minimum analyzes abandoned
carts, unique visitors, page views, total sessions, top pages browsed,
average session length, conversion rate, top visited pages, top departure
pages, natural research sites that are bringing in traffic by sessions,
buyers and visitors, number of error/error pages, site availability,
homepage load time, average and detail image download time and other
information mutually agreed upon between the
parties.
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10.
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Information
Security. PhotoChannel agrees
to establish and maintain adequate physical, technological and
administrative security measures to protect the security and
confidentiality of Member Data and Costco’s Confidential Information (as
defined in Section 13 below) that are consistent with industry standard
security practices. PhotoChannel shall immediately notify
Costco of any security breach, complaints received, and/or notices of
investigation related to or affecting Member Data or Confidential
Information as soon as reasonably possible after becoming aware of same,
and to cooperate with Costco to rectify any breach, satisfy any notice
requirement, and/or other legal requirements related to the
breach. PhotoChannel shall amend or correct any Member Data
upon request by Costco or the Member, and shall notify Costco of any
Member request for access to any Member Data and cooperate with Costco to,
subject to applicable law, provide or deny access as directed by
Costco. Costco, or its authorized representative upon
reasonable notice to PhotoChannel, may audit the security infrastructure
protecting Member Data.
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11.
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Access To
Facilities; Costco Audit Rights. Costco shall
at all reasonable times give PhotoChannel’s ASRs reasonable and sufficient
access to the Costco premises and assets of Costco as necessary to permit
PhotoChannel to fulfill its obligations under this
Agreement. At all times PhotoChannel's ASR’s shall observe all
generally-applicable employment and security rules and policies, as well
as the terms of this
Agreement.
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PhotoChannel
shall at all reasonable times give Costco’s ASRs reasonable and sufficient
access to the PhotoChannel premises and assets of PhotoChannel and its third
party vendors as necessary to permit Costco to audit PhotoChannel’s compliance
with this Agreement. At all times Costco’s ASR’s shall observe all
generally-applicable employment and security rules and/or the adequacy of data
security policies, as well as the terms of this
Agreement. PhotoChannel will also permit and actively cooperate with
state or federal regulatory authorities having jurisdiction over Costco to audit
PhotoChannel’s compliance with the terms and conditions of this
Agreement Costco shall bear all reasonable costs and
expenses of any audit conducted by Costco or its regulators unless: (i) the
reason for the audit is a breach of PhotoChannel security; (ii) the audit
reveals that PhotoChannel has materially underpaid taxes or made significant
revenue recording errors; or (iii) it is demonstrated that PhotoChannel has
overcharged Costco in the aggregate by more than five percent (5%) of the amount
actually due for the audit period. In the case of such events,
PhotoChannel will reimburse Costco all reasonable costs and expenses incurred as
a result of the audit and will also (if applicable) immediately repay any
amounts determined due to Costco.
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12.
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Designated
Contacts. Each party shall designate
relationship managers, technical contacts and project coordinators. These individuals
will, on behalf of the respective parties, make decisions and co-ordinate
activities as necessary to meet the Launch Date, to perform the parties’
respective obligations under this Agreement, and for operation of the
Branded Site. The parties’ Designated Contacts are listed on
Schedule E.
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13.
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Confidentiality.
"Confidential Information" means each party’s data and information,
whether accessed electronically or otherwise, of a confidential or
proprietary nature to which a party has access or that is provided
pursuant to this Agreement, including trade secrets, functional and
technical specifications, designs, drawings, translations, analysis,
research, processes, computer programs, beta versions, algorithms,
methods, ideas, “know how,” and other technical information, sales and
marketing research, materials, plans, projects, and other business
information, accounting and financial information, other information
concerning the products, services and business of the parties, the terms
of this Agreement, and information concerning Fulfillment Providers and
third-party suppliers or customers of the parties. Information shall be considered to be
Confidential Information: (a) if marked as such; (b)
if the disclosing party orally or in writing has advised the receiving
party of the confidential nature of the information; or (c) if, due to its
character or nature, reasonable people in a like position and under like
circumstances would treat it as confidential. Further, all sales related information, including,
without limitation, all information created or developed pursuant to
Section 9 and other such sales information, whether generated on the
Branded Site or otherwise (collectively, “Sales Information”) is Costco's
Confidential
Information.
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Each
party agrees that the Confidential Information of the other party will be held
in confidence to the same extent and the same manner as each party protects its
own Confidential Information, but each party agrees that in no event will less
than reasonable care be used. Each party however, shall, be permitted
to disclose relevant aspects of such Confidential Information to its officers,
employees, and consultants on a need-to-know basis, and provided that they have
undertaken to protect the Confidential Information to the same extent as
required under this Agreement. Each party agrees to use all
reasonable steps to ensure that the other party's Confidential Information
received under this Agreement is not disclosed in violation of this
Section. Each party agrees not to use the Confidential Information of
the other party other than in the performance of its obligations under this
Agreement.
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The
obligations set forth in this Section do not apply if and to the extent the
party receiving Confidential Information ("Receiving party") establishes
that:
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(a)
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the
information disclosed to the Receiving party was already known to the
Receiving party, without obligation to keep it
confidential;
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(b)
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the
Receiving party received the information in good faith from a third party
lawfully in possession thereof without obligation to keep such
information;
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(c)
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the
information was publicly known at the time of its receipt by the Receiving
party or has become publicly known other than by a breach of this
Agreement;
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(d)
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the
information is independently developed by the Receiving party without use
of the other party's Confidential Information;
or
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(e)
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the
information is required to be disclosed by applicable statute or
regulation or by judicial or administrative process; provided that, in the
case of (a) through (d) above, the Receiving party will use reasonable
efforts under the circumstances to notify the other party of such
requirements so as to provide such party the opportunity to obtain such
protective orders or other relief as the compelling court or other entity
may grant.
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Without limiting its obligations under this Section,
PhotoChannel acknowledges that all Member Data, is Costco's Confidential
Information. Member Data is not subject to the exceptions in clauses
13 (b), and (c).
Nothing in this Section reduces or modifies
PhotoChannel’s obligations under the PCI DSS.
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14.
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PhotoChannel’s
Warranties. PhotoChannel hereby represents and warrants
to Costco that:
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(a)
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The Branded Site will perform the functions set
out in, in the manner and to the standards provided in this Agreement and
in Schedule A. PhotoChannel shall promptly correct any errors,
malfunctions or defects in the System, including any hardware supplied or
sold by PhotoChannel to Costco;
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(b)
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It will perform its duties and obligations under
this Agreement using the highest standards of care, skill and diligence
used in its industry by those providing similar
services;
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(c)
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It will not act or fail to act in any way that
would injure the goodwill of
Costco;
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(d)
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It
has the full power and authority to enter into and perform this Agreement
and that the execution and delivery of this Agreement has been duly
authorized and that this Agreement does not violate any law or breach any
other agreement to which PhotoChannel is a party or is
bound;
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(e)
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All
software, hardware and Services will be provided free and clear of defects
in title, all liens, restrictions, reservations, encumbrances, and
security interests of all
kinds;
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(f)
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It
will not display anything on the Branded Site that contains any content,
features, or materials that: (i) violate or infringe the rights
of any person, (ii) are abusive, profane, offensive, obscene, pornographic
or sexually explicit, or (iii) are false or misleading, defamatory or
harassing, excessively violent, or which violate or encourage others to
violate any applicable law;
|
|
(g)
|
No
component of the System contains any program, routine, device or other
undisclosed feature, including without limitation, a time bomb, virus,
software lock, drop dead device, malicious logic, worm, Trojan horse or
trap or back door, or other harmful device which is designed to delete,
disable, deactivate, provide unauthorized access, interfere with or
otherwise harm any software, program, data, device, system or service, or
which is intended to provide unauthorized access or to produce
unauthorized modifications. It will use best-in-class virus
protection technology throughout the
Term;
|
Page 8
of 15
|
(h)
|
Except
as provided in Section 14(i), below, all software and any modifications
included in the System are the original work of PhotoChannel and do not
infringe or will not infringe the Intellectual Property Rights of any
third party. In this Agreement, "Intellectual Property Rights"
means all the intellectual property, industrial and other proprietary
rights, protected or protectable, under the laws of the United States, any
foreign country, or any political subdivision thereof, including, without
limitation, (i) all trade names, trade dress, trademarks, service marks,
logos, brand names and other identifiers; (ii) copyrights, moral rights
(including rights of attribution and rights of integrity); (iii) all trade
secrets, inventions, discoveries, devices, processes, designs, techniques,
trade secrets, ideas, know how and other confidential or proprietary
information, whether or not reduced to practice; (iv) all domestic and
foreign patents and the registrations, applications, renewals, extensions
and continuations (in whole or in part) thereof; and (v) all goodwill
associated therewith and all rights and causes of action for infringement,
misappropriation, misuse, dilution or unfair trade practices associated
with (i) through (iv) above;
|
|
(i)
|
If
PhotoChannel does not own all such software or modifications included in
the System, PhotoChannel has sufficient right, title, and interest in and
to all Intellectual Property Rights and other proprietary rights relating
to such software and modifications to enter into and perform under this
Agreement and to grant the rights and licenses in this
Agreement;
|
|
(j)
|
It
will operate the System and the Branded Site securely and in compliance
with all applicable laws and with Costco’s privacy policy, as amended from
time to time; and
|
|
(k)
|
It
has all necessary import and export licenses or license exemptions for
components of the System that cross international
borders.
|
|
15.
|
Costco’s
Warranties. Costco hereby
represents and warrants to PhotoChannel
that:
|
|
(a)
|
It
has the full power and authority to enter into and perform this Agreement
and that the execution and delivery of this Agreement has been duly
authorized and that this Agreement does not violate any law or breach any
other Agreement to which Costco is a party or is
bound;
|
|
(b)
|
It will not act or fail to act in any way that
would injure the goodwill of
PhotoChannel;
|
|
(c)
|
Costco’s
trademarks, domain names and any other material Costco provides for the
Branded Site do not infringe and will not infringe the Intellectual
Property Rights of any third party. "Intellectual Property
Rights" has the same meaning as set forth in Section 14 (h)
above.
|
|
(d)
|
No
component of ▇▇▇▇▇▇.▇▇▇ contains any program, routine, device or other
undisclosed feature, including without limitation, a time bomb, virus,
software lock, drop dead device, malicious logic, worm, Trojan horse or
trap or back door, or other harmful device which is designed to delete,
disable, deactivate, provide unauthorized access, interfere with or
otherwise harm any software, program, data, device, system or service on
the Branded Site, or which is intended to provide unauthorized access or
to produce unauthorized modifications to the Branded
Site.
|
|
(e)
|
It
will not provide any material for the Branded site that contains any
content, features, or components that: (i) violate or infringe
the rights of any person, (ii) are abusive, profane, offensive, obscene,
pornographic or sexually explicit, or (iii) are false or misleading,
defamatory or harassing, excessively violent, or which violate or
encourage others to violate any applicable
law.
|
|
(f)
|
It
will obey all laws as they apply to its relationship to PhotoChannel and
its performance of this
Agreement.
|
Page 9
of 15
16. Intellectual Property;
Licenses.
|
(a)
|
PhotoChannel’s
Intellectual Property. PhotoChannel hereby grants
Costco a non-exclusive license to use during the Term and all copyrighted
material, trademarks, inventions and all other industrial or intellectual
property rights (collectively, “PhotoChannel’s Intellectual Property”)
forming part of or necessary to use the System and the Branded
Site. Except as set forth
in this Section 16, Costco
acknowledges that pursuant to this Agreement it is not acquiring any
interest in or right to use any of PhotoChannel’s Intellectual Property
and, as between the parties, PhotoChannel will own exclusively all
right, title and interest in and to the System and acknowledges
that nothing herein shall be construed to accord to Costco any rights in
the System, except as expressly provided herein and Costco hereby
disclaims all such right, title and interest.
|
|
(b)
|
Costco’s Intellectual
Property. Costco hereby
grants PhotoChannel a limited, nonexclusive, non-transferable license to
use during the Term and Costco's proprietary trademarks and trade names,
and the domain name ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, but solely on the Branded Site and always in
accordance with Costco's then current trademark usage guidelines and prior
written approval. Costco further grants to PhotoChannel a
limited, nonexclusive, non-transferable license to create the links and
provide System connectivity from the ▇▇▇▇▇▇.▇▇▇ website to the Branded
Site and the to all Costco warehouse locations in the United States that
exist during the Term. Except as set forth in this Section 16,
PhotoChannel acknowledges that pursuant to this Agreement it is not
acquiring any interest in or right to use any of Costco’s Intellectual
Property or any other licenses and, as between the parties, Costco will
own exclusively all right, title and interest in and to the Costco
Intellectual Property, and PhotoChannel hereby disclaims all such
right, title and interest.
|
|
17.
|
Termination. A party shall be entitled to
terminate this Agreement
if:
|
|
(a)
|
The other party makes a general assignment for the
benefit of its creditors or a proposal or arrangement under the United
States or Canadian Bankruptcy laws, if a petition is filed against the
other party under any such laws, if the other party is declared or
adjudicated bankrupt, if a liquidator, trustee in bankruptcy, custodian,
receiver, manager or any other officer with similar powers shall be
appointed, either privately or judicially, of or for the other party or if
the other party shall commit an act of bankruptcy or propose a compromise,
arrangement or otherwise have recourse to any law for the protection of
debtors;
|
|
(b)
|
If the other party fails to fulfill any of its
obligations hereunder and does not cure such failure, to the reasonable
satisfaction of the non-breaching party, within thirty (30) days
after receiving written notice of such failure;
|
|
(c)
|
The System experiences a critical outage (as
defined in Schedule C) that persists for seventy-two (72) hours;
or
|
|
(d)
|
Costco may terminate this Agreement, in its
sole discretion, without cause, upon one-hundred and eighty 180) days
prior written notice.
|
|
18.
|
Effect of
Termination. If Costco
elects to transition the services to another party, PhotoChannel shall
fully and promptly cooperate with Costco and its designees to transition
all Member Data and information and services as necessary to allow any new
entity or entities designated by Costco to provide without interruption
any or all of the services provided by PhotoChannel under this
Agreement. Transition shall occur on a reasonable schedule to
be determined by Costco in consultation with PhotoChannel, provided,
however, that Costco may at its sole discretion extend the Term of this
Agreement for up to 90 days after the termination date in order to
facilitate transition. PhotoChannel shall use commercially
reasonable efforts to ensure that any transition occurs without service
interruption. Services for orders outstanding at the time of
termination shall be processed as directed by Costco.
|
Page 10
of 15
Upon
completion of transition or upon termination if there is no transition,
PhotoChannel shall immediately return to Costco all Member Data, including the
digital images, or at Costco’s request, certify destruction of
same. Each party will be responsible for its own transition costs,
and Costco (or PhotoChannel’s successor) will be responsible for connectivity
charges incurred to transfer Member Data. Notwithstanding the foregoing, should
Costco elect to terminate this Agreement, without cause, upon one hundred eighty
(180) days prior written notice before the Agreement has been effective for
thirty (30) months, Costco shall be responsible for all costs associated with
the transition to a new provider per this section and shall reimburse
PhotoChannel up to six hundred thousand dollars of its cost of procuring
sufficient storage for the performance of this Agreement, such reimbursement to
be reduced on a declining balance basis according to the following
schedule:
|
(a)
|
The
$600,000.00 termination liability shall be reduced by $33,333.00 per month
during the first twelve months of the
Agreement.
|
|
(b)
|
The
balance of the termination liability remaining at the end of the first
twelve months, which shall be $200,000.00, shall be further reduced by
$16,666.00 per month during the second twelve months of the
Agreement.
|
|
19.
|
Contingency for PhotoChannel
Inability to Perform. Schedule E contains the names and
contact information of at least three employees at PhotoChannel who are
capable of operating the Branded Site and who have expertise in the
System. PhotoChannel shall update the employee information as
necessary throughout the Term to maintain its
accuracy. PhotoChannel employees shall be informed that they
have been designated as contingency contacts for Costco. PhotoChannel
shall arrange for Costco to have access to its hosting facility and all
other assets and facilities used to operate the Branded Site or in the
performance of this Agreement in the event that PhotoChannel becomes
unable to perform this Agreement without transferring its obligations to a
capable successor. It is the parties’ mutual intent that if
such event occurs, Costco shall have access to expertise and facilities as
necessary to continue undiminished and uninterrupted operations of the
Branded Site for at least as long as required to transition to a new
provider. PhotoChannel shall not enter into any agreements or
arrangements that would diminish or impair Costco’s rights under this
section.
|
|
20.
|
Indemnification by
PhotoChannel. PhotoChannel
shall hold harmless, defend and indemnify Costco and its affiliates
(and their respective employees, directors and representatives) against
any and all claims, actions, proceedings and suits and any and all
liabilities, damages, settlements, penalties, fines, costs or expenses
(including reasonable attorneys' fees and other litigation expenses)
(collectively, “Losses”) incurred by Costco, arising out of or relating
to:
|
|
(a)
|
any
actual or alleged infringement or misappropriation of the intellectual
property rights of any person or entity by (i) PhotoChannel’s Intellectual
Property, (ii) the System, or (iii) any services provided on the Branded
Site by PhotoChannel or its
ASR’s;
|
|
(b)
|
any
actual or alleged violation by PhotoChannel of any law, statute, PCI DSS,
or ordinance or an administrative order, rule or regulation relating to
the System or any services provided on the Branded Site by PhotoChannel,
or its ASR’s in connection with this
Agreement;
|
|
(c)
|
any
act, activity or omission of PhotoChannel, or any of its ASR’s, including
activities on Costco's premises and the use of any vehicle, equipment,
fixture or material of PhotoChannel in connection with any service or
right provided by PhotoChannel under this Agreement;
or
|
|
(d)
|
PhotoChannel's
breach of any of its representations, warranties or undertakings in this
Agreement.
|
Provided
that PhotoChannel shall have no indemnification obligations under this section
to the extent that:
|
(e)
|
such
Losses arise from Costco’s failing to implement all mandatory updates
pursuant to subsection 5(a);
or
|
|
(f)
|
such
Losses arise from the acts or omissions of Members that are inconsistent
with Costco’s Terms and Conditions of Use and Privacy
Policy.
|
Page 11
of 15
|
21.
|
Indemnification by
Costco. Costco shall
hold harmless, defend and indemnify PhotoChannel and its affiliates
(and their respective employees, directors and representatives) against
any and all claims, actions, proceedings and suits and any and all
liabilities, damages, settlements, penalties, fines, costs or expenses
(including reasonable attorneys' fees and other litigation expenses)
incurred by PhotoChannel, arising out of or relating
to:
|
|
(a)
|
any
actual or alleged infringement or misappropriation of the intellectual
property rights of any person or entity by Costco’s Intellectual
Property;
|
|
(b)
|
Costco's
breach of any of its representations, warranties or undertakings in this
Agreement
|
|
22.
|
Special Terms Related to
Interruption of Basic Functionality. PhotoChannel shall maintain
web, registration, authentication, transactional, security, email and
upload standards in compliance with Section (1)(a) of Schedule C (“basic
functionality”). The parties agree that in the event of a critical, major
or important failure of basic functionality, Costco’s actual damages,
including damage to its goodwill and Member relationships, will be
difficult or impossible to determine. To the extent System
outages exceed the standard set forth in Schedule C (1)(a) in any rolling
four-week period, Costco shall be entitled as liquidated damages and not
as a penalty an amount equal to twenty-five percent (25%) of the average
amount of gross sales generated per hour through the Branded Site during
the immediately preceding week, times the number of hours or portion of
hours during which the outage persists. PhotoChannel’s liability under
this section shall not exceed five hundred thousand dollars US (USD
500,000).
|
|
23.
|
Limitation of Liability.
OTHER THAN THE PARTIES’ INDEMNIFICATION OBLIGATIONS, PHOTOCHANNEL’s
OBLIGATIONS UNDER SECTION 22 OR A BREACH OF THE CONFIDENTIALITY
OBLIGATIONS HEREIN, TO THE MAXIMUM EXTENT PERMITTED BY LAW, NEITHER PARTY
HERETO SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL,
EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR SPECIAL DAMAGES, HOWEVER
ARISING, INCLUDING WITHOUT LIMITATION DAMAGES ARISING OUT OF OR IN
CONNECTION WITH ANY LOSS OF PROFIT, OR LOSS OF BUSINESS OR ANTICIPATORY
PROFITS, WHETHER IN CONTRACT, TORT, NEGLIGENCE OR OTHERWISE, EVEN IF SUCH
PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH
DAMAGES.
|
|
24.
|
Indemnification
Procedure. The indemnified party shall promptly
notify the other party in the event of a claim or other occurrence for
which the indemnified party claims a right to indemnity, and if the
occurrence involves a claim by a third party, shall tender defence of the
claim to the indemnified party. The indemnifying party shall
assume defence of any third party claim, provided, however that the
indemnified party shall have the right to participate in the defence of
any claim with separate counsel of its choosing and at its own
expense. Any settlement that contains a remedy other than the
payment of money damages must be approved in writing in advance by the
indemnified party, which approval shall not be unreasonably withheld or
delayed. If it is ultimately determined by a court or
arbitrator that the indemnifying party had no obligation to defend or
indemnify, then the indemnified party shall promptly reimburse the
indemnifying party all costs and expenses of indemnification, excluding
any cost or expense relating to the determination of the indemnification
obligation itself.
|
|
25.
|
Arbitration. All
claims and disputes other than claims that would determine the extent or
general validity of either party’s Intellectual Property and that (1) are
between PhotoChannel and Costco or either’s subsidiaries, parents,
affiliates, officers, directors and/or employees, and (2) arise out of or
relate to this Agreement or its subject matter, interpretation,
performance or enforcement, (including any tort or statutory claim)
("Dispute") shall be arbitrated by a sole arbitrator in Seattle,
Washington, in accordance with the Center for Public Resources' Rules for
Non-Administered Arbitration (the "CPR Rules") and judgement upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction thereof.
|
Page 12
of 15
All
documents and information relevant to the Dispute in the possession of any party
shall be made available to the other party not later than sixty (60) days after
the demand for arbitration is served, and the arbitrator may permit such
depositions or other discovery deemed necessary for a fair
hearing. The hearing may not exceed two days. The award
shall be rendered within 120 days of the demand. The parties have
included these time limits to expedite the proceeding, but they are not
jurisdictional, and the arbitrator may for good cause permit reasonable
extensions, which shall not affect the validity of the award. The
arbitrator may award interim and final injunctive relief and other remedies, but
may not award punitive, exemplary, treble, or other enhanced
damages. To the fullest extent permitted by applicable law, no
arbitration described herein shall be joined to an arbitration involving any
other party, whether through class arbitration proceedings or
otherwise. In the case of contradiction between the provisions of
this Section and the CPR Rules, this Section shall prevail. The
limitations on remedies described above may be deemed ineffective to the extent
necessary to determine the validity or general extent of either party’s
Intellectual Property Rights or preserve the enforceability of the agreement to
arbitrate. If any provision of this agreement to arbitrate is held
invalid or unenforceable, it shall be so held to the minimum extent required by
law and all other provisions shall remain valid and
enforceable.
|
26.
|
Insurance. PhotoChannel shall give Costco Certificates
of Insurance for all times relevant to the Agreement naming Costco
Wholesale Corporation as an "additional insured" in protecting all parties
from liability under this Agreement. PhotoChannel's insurers
must be Best’s rated B+, V11 or better. Evidence of the
following coverage is
required:
|
|
(a)
|
Commercial
General Liability insurance (occurrence form) including contractual
liability, products and completed operations, personal and advertising
injury, and contractual liability enforcement, with minimum primary limits
of $1 million for each occurrence and an aggregate cap of no less than $2
million;
|
|
(b)
|
U.S.
Workers’ Compensation insurance, for U.S. employees, with statutory limits
and employer’s liability insurance with minimum limits of
$2,000,000;
|
|
(c)
|
Proof
of PhotoChannel’s account standing with the Canadian Workers’ Compensation
Board;
|
|
(d)
|
Automobile
Liability insurance with $1,000,000 coverage limits for each accident,
including owned, non-owned and hired vehicles;
and
|
|
(e)
|
Professional Liability Insurance:
covering errors and omissions and wrongful acts in the performance of this
Agreement. Such errors and omissions insurance will include
coverage for claims of infringement of the copyrights, trademarks, trade
dress and patents and misappropriation of trade secrets. Such
insurance will bear a combined single limit per occurrence of not less
than $2,000,000.
|
Policy
limits may not be reduced, terms changed if the changes reduce Costco’s
protection under this section, or policies cancelled with less than thirty (30)
days prior written notice to Costco. PhotoChannel's insurance shall
be primary and contain a waiver of subrogation by PhotoChannel's insurance
carrier with respect to all obligations assumed by PhotoChannel pursuant to the
Agreement. If any penalties, etc. are applied to Costco or its
subsidiaries as a result of inadequate Workers’ Compensation coverage in either
the United States or Canada, PhotoChannel will be responsible to reimburse
Costco for the full amount. PhotoChannel understands
that statutory liability limitations may apply to claims by its employees, and
waives those limits to the extent they might apply to any claim for
indemnification by Costco. Coverages and limits will not limit
the liability of PhotoChannel.
|
27.
|
Employment Practices; Costco’s
Approval of ASRs. In providing the Services,
PhotoChannel shall not permit employment of unfit persons or persons not
skilled in tasks assigned to them. PhotoChannel and its ASR’s
shall comply with all laws, statutes, ordinances, administrative orders,
rules and regulations, including (without limitation) immigration laws,
relating to the services provided under this
Agreement. PhotoChannel and any ASRs shall pay their employees
at least ninety percent (90%) of Prevailing Wage for performance of
services.
|
Page 13
of 15
For
purposes of this Section, Prevailing Wage shall mean the hourly wage customarily
paid for similar work in the local trade area where the services are performed
by competitive service providers that comply with the law. PhotoChannel agrees
not to allow any third party ASRs to work on the Branded Site without Costco’s
prior written approval.
|
28.
|
Code of Conduct. PhotoChannel acknowledges receipt of
and agrees to comply with Costco’s Code of Conduct applicable to all
vendors, as such code may be amended during the
Term.
|
|
29.
|
Notices. All notices, demands, approvals,
consents and acceptances under this Agreement shall be in writing and
shall be deemed to have been duly given if mailed or delivered to a party
at its address mentioned above or faxed to the attention
of:
|
|
TO:
|
PhotoChannel Networks, Inc.
|
TO:
|
Costco Wholesale
Corporation
|
|
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
||
|
▇▇▇▇▇ ▇▇▇
|
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
||
|
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|||
|
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
|
|||
|
Attn:
|
President
|
Attn:
|
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
AGMM/Operations
|
|
Manager, Image Processing &
Film
|
|||
|
Fax No.: ▇▇▇.▇▇▇.▇▇▇▇
|
Fax No: ▇▇▇.▇▇▇.▇▇▇▇
|
||
|
With a copy to: Corporate
Counsel
|
|||
|
▇▇▇.▇▇.
425.313-8114
|
|||
|
30.
|
Opportunity for Costco
Affiliates. Costco affiliates
operating in other countries may enter into agreements with PhotoChannel
for the same terms as described in this Agreement on terms that are in the
aggregate at least as favourable to the Costco affiliate as the terms of
this Agreement.
|
|
31.
|
Severability – If any provision of this Agreement is held to be
unenforceable, in whole or in part, such holding will not affect the
validity of the other provisions of this
Agreement.
|
|
32.
|
Non-Assignability. Neither party may assign this
Agreement without the prior written consent of the other party, such
consent not to be unreasonably withheld; provided that both parties
have the unrestricted right to transfer and assign its interest in this
Agreement, in whole or in part, to any entity: (a) acquiring
all or substantially all of its assets or stock, (b) surviving a merger
with or resulting from a reorganization, or (c) to any
affiliate. An “affiliate” is an entity controlling, controlled
by or under common control with the assigning party. Subject to
the provisions of this Section 32, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns.
|
|
33.
|
Publicity. Neither party will issue a press
release or other public announcement concerning the existence of this
Agreement or its contents or the transactions contemplated herein without
the express written consent of the other
party.
|
|
34.
|
Relationship. Nothing in this Agreement is intended
to create an agency, partnership or joint venture
relationship. The parties are acting solely as independent
contractors, and have no fiduciary duty to one
another. PhotoChannel is solely responsible for the wages,
benefits, withholding taxes and/or compensation of its employees and
ASR’s.
|
Page 14
of 15
|
35.
|
Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Washington,
U.S.A. Each party submits to the non-exclusive jurisdiction of
the courts of the State of Washington, U.S.A.
|
|
36.
|
Waiver. No waiver of breach of any provision
of this Agreement by either party will constitute a waiver of any
subsequent breach of the same or of any other provision, nor shall any
waiver be effective unless in writing and signed by both
parties.
|
|
37.
|
Force Majeure. Except as preventable by compliance
with the terms of this Agreement, neither party shall be liable for
inability to perform due to natural catastrophes, governmental acts or
omissions, laws or regulations, transportation stoppages, or acts of war
or terrorism.
|
|
37.
|
Interpretation. The captions and headings used in this
Agreement are for convenience only and do not constitute substantive
matter and are not to be construed as interpreting the contents of this
Agreement. The word “or” is not exclusive and the word
“including” is not limiting (whether or not non-limiting language such as
“without limitation” or “but not limited to” or other words of similar
import are used with references
thereto).
|
|
39.
|
Survival. The provisions of Sections
13(Confidentiality), 18(Effect of Termination), 19
(Contingency), 20(Indemnification by PhotoChannel),
21(Indemnification by Costco), 24(indemnification Procedure),
25(Arbitration), 29(Notices), 31(Severability) and 34-40 of this Agreement
shall survive its
termination.
|
|
40.
|
Entire
Agreement. This Agreement, together with its
attachments, constitutes the entire understanding and agreement between
the parties with respect to the subject matter hereof and supersedes any
and all prior or contemporaneous oral or written communications with
respect hereto. This Agreement may not be altered, amended, or
modified except by a written instrument signed by an authorized employee
of each party. If there is any conflict between this Agreement
and any Schedules or Exhibits attached hereto, this Agreement shall
supersede.
|
In
WITNESS WHEREOF, the undersigned have caused this License and Service Agreement
to be duly executed and delivered as of the effective date of this
Agreement.
|
PHOTOCHANNEL NETWORKS INC.
|
COSTCO WHOLESALE
CORPORATION
|
|
|
By:
|
By:
|
|
|
Name:
|
Name:
|
|
|
Title:
|
Title:
|
|
Page 15
of 15