EXHIBIT (10.15)
DEVELOPMENT AND LICENSE AGREEMENT
Between
SEARS, ▇▇▇▇▇▇▇ AND CO.
and
CONSUMER PROGRAMS INCORPORATED
January 31, 2001
(PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)
TABLE OF CONTENTS
ARTICLE PAGE
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I. GENERAL .............................................. 2
1.1 Purpose of Agreement ........................... 2
1.2 Definitions .................................... 2
1.3 License Grant .................................. 5
1.4 Exclusivity Obligations ........................ 5
1.4.1 Licensee Obligations ..................... 5
1.4.2 Sears' Obligations ....................... 6
1.4.3 Reserved Rights .......................... 6
1.5 Kodak Licenses ................................. 6
1.6 Sears Participation in Licensee ................ 6
1.7 No Representations ............................. 7
II. DEVELOPING AND IMPLEMENTING THE LICENSED WEBSITE ..... 7
2.1 Overview ....................................... 7
2.2 Requirements Phase ............................. 7
2.3 Project Plan ................................... 7
2.3.1 Specifications ........................... 8
2.3.2 Performance Standards .................... 8
2.3.3 Implementation Workplan .................. 8
2.3.4 Testing Criteria ......................... 8
2.4 Implementation of the Project Plan ............. 9
2.4.1 Implementation Delays .................... 9
2.4.1.1 Additional Personnel ............. 9
2.4.1.2 Right to Withhold Payment ........ 9
2.4.1.3 No Obligation for Sears' Delays .. 9
2.4.2 Change Order Process ..................... 9
2.5 Testing and Certification ...................... 10
2.5.1 Certification ............................ 10
2.5.2 Failure to Achieve Certification ......... 10
2.5.3 Post-Certification Modifications to
Licensed Website ........................ 10
2.6 User Documentation ............................. 11
2.7 Source Code Escrow ............................. 11
2.7.1 Deposits ................................. 11
2.7.2 Timing of Deposits ....................... 11
2.7.3 Escrow Costs ............................. 12
2.7.4 License to Sears ......................... 12
III. ONGOING OPERATION OF THE LICENSED WEBSITE ............ 12
3.1 Operating Standards ............................ 12
3.1.1 General .................................. 12
3.1.2 Service Level Credits .................... 12
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TABLE OF CONTENTS (...continued)
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3.2 Hosting Services ............................... 13
3.3 Equipment ...................................... 13
3.4 Disaster Recovery Plan ......................... 13
3.5 Development Environment ........................ 13
3.6 Administration of Domain Names ................. 13
3.7 Licensee Customer Agreements ................... 14
3.8 Customer Care .................................. 14
3.9 Consistent Image ............................... 14
3.10 Permits and Licenses ........................... 14
3.11 No Sears' Obligations .......................... 14
3.12 Market-Leading Services and Technology ......... 14
IV. MARKETING OF THE LICENSED BUSINESS ................... 15
4.1 Promotion of Licensed Website .................. 15
4.1.1 Marketing Materials ...................... 15
4.1.2 Access to Sears Marketing Channels ....... 15
4.1.3 Associate Discounts ...................... 15
4.2 Links and Advertising Requirements ............. 16
4.2.1 Links to Sears Websites .................. 16
4.2.2 Links to Licensee or Third Party Sites ... 16
4.2.3 Advertising on Licensed Website .......... 16
4.3 Use of Sears Marks ............................. 16
4.3.1 Restrictions on Use of Sears Marks ....... 16
4.3.2 No Challenge to Sears Marks .............. 16
4.3.3 Rights in Sears Marks .................... 17
4.3.4 Registration of Marks .................... 17
4.3.5 License to Licensee Marks ................ 17
4.3.6 Injunctive Relief ........................ 17
4.3.7 No Continuing Rights Upon Termination .... 18
4.4 Content Licenses ............................... 18
4.4.1 General .................................. 18
4.4.2 Use Restrictions ......................... 18
4.5 No Unsolicited or Permissioned Email Campaigns
Without Sears' Approval ....................... 18
V. PERSONNEL ............................................ 19
5.1 Licensee Personnel ............................. 19
5.1.1 General .................................. 19
5.1.2 Employee Compensation .................... 19
5.2 Removal/Reassignment of Licensee Personnel by
Licensee ...................................... 19
5.3 Sears' Personnel ............................... 19
5.4 Subcontracting ................................. 20
5.5 Right to Access; Identification Credentials;
Facility Rules ................................ 20
5.5.1 Right of Access ................................ 20
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TABLE OF CONTENTS (...continued)
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5.5.2 Facility Rules ........................... 20
VI. PAYMENT TERMS ........................................ 20
6.1 Business Development Fee ....................... 20
6.2 Sears Fees ..................................... 21
6.3 Payment Methods for Sales ...................... 21
6.4 Payment Settlement ............................. 21
6.5 Payment of Sears Fees .......................... 22
6.6 Payment of Obligations ......................... 22
6.7 Rights of Recoupment and Setoff ................ 22
6.8 Survivability .................................. 23
VII. ADMINISTRATION OF THE AGREEMENT ...................... 23
7.1 Relationship Managers .......................... 23
7.2 Meetings ....................................... 23
7.2.1 Quarterly Review Meetings ................ 23
7.2.2 Weekly Status Meetings ................... 23
7.2.3 Agenda; Minutes .......................... 24
7.3 Reports ........................................ 24
7.3.1 Monthly Performance Reports .............. 24
7.3.2 Other Reports ............................ 25
7.4 Audit Rights ................................... 25
7.4.1 Financial ................................ 25
7.4.2 Operational .............................. 25
7.4.3 Underreporting ........................... 26
7.5 Survivability .................................. 26
VIII. REPRESENTATION AND WARRANTIES ........................ 26
8.1 Functionality and Performance Warranties ....... 26
8.1.1 Functionality of Licensed Website ........ 26
8.1.2 Performance Standards .................... 27
8.1.3 Scalability .............................. 27
8.1.4 Disabling Code Warranty .................. 27
8.1.5 Open Architecture Warranty ............... 27
8.1.6 Year 2000 Compliance ..................... 28
8.1.7 Correction of Failure to Meet Functionality
and Performance Warranties .............. 28
8.2 Complete Description of Licensee Software ...... 28
8.3 User Documentation Warranty .................... 28
8.4 Services Warranty .............................. 29
8.5 Provision of Goods and Services ................ 29
8.6 Intellectual Property Warranty ................. 29
8.7 Warranty of Authority .......................... 29
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TABLE OF CONTENTS (...continued)
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8.8 Pending Litigation Warranty .................... 29
8.9 Compliance With Law ............................ 29
IX. TERM AND TERMINATION ................................. 30
9.1 Term .......................................... 30
9.2 Mutual Right of Termination .................... 30
9.3 Termination of Agreement by Sears With Notice .. 30
9.4 Termination of Agreement by Sears Without
Further Notice ................................ 31
9.5 Termination of Agreement by Licensee ........... 31
9.6 Rights of Parties Upon Termination or Expiration
of Agreement .................................. 32
9.6.1 General .................................. 32
9.6.2 Expiration of Agreement Without Renewal .. 32
9.6.3 Termination Without Cause By Sears or
for Cause By Licensee ................... 32
9.6.4 Termination Without Cause By Licensee or
for Cause By Sears ...................... 33
9.6.5 Perpetual License to Licensee Software ... 34
9.7 Survivability .................................. 35
X. PROPRIETARY RIGHTS; CUSTOMER AND CONFIDENTIAL
INFORMATION ......................................... 35
10.1 Proprietary Rights ............................. 35
10.1.1 Licensee's Proprietary Rights ........... 35
10.1.2 Sears' Proprietary Rights ............... 35
10.1.3 Joint Ownership Rights .................. 35
10.1.4 Competitive Advantage Rights ............ 35
10.1.5 General Knowledge ....................... 36
10.2 Monitoring of Traffic and Sales ................ 36
10.3 Customer Information ........................... 36
10.4 Confidential Business Information .............. 36
10.4.1 Sears' Confidential Business Information. 36
10.4.2 Licensees' Confidential Business
Information ............................ 37
10.4.3 Agreement Confidential .................. 37
10.4.4 Treatment of Confidential Business
Information ............................ 37
10.4.5 Exceptions to Confidential Treatment .... 38
10.5 Confidential Personal Information ........ 39
10.5.1 Confidential Personal Information ....... 39
10.5.2 Treatment of Confidential Personal
Information ............................ 39
10.6 Injunctive Relief .............................. 40
10.7 Survivability .................................. 40
XI. DEFENSE AND INDEMNITY ................................ 41
11.1 By Licensee .................................... 41
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TABLE OF CONTENTS (...continued)
ARTICLE PAGE
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11.1.1 Defense ................................. 41
11.1.2 Indemnity ............................... 41
11.2 By Sears ....................................... 42
11.2.1 Defense ................................. 42
11.2.2 Indemnity ............................... 42
11.3 Survival ....................................... 43
XII. INSURANCE ............................................ 43
12.1 Types of Insurance ............................. 43
12.2 No Cancellation Without Notice ................. 44
12.3 Certificates ................................... 44
12.4 Expiration/Non-Renewal ......................... 44
XIII. DISPUTE RESOLUTION ................................... 45
13.1 Relationship Manager Level Performance Review .. 45
13.2 Executive Level Performance review ............. 45
13.3 Voluntary, Non-Binding Mediation ............... 45
13.4 Continued Performance .......................... 45
13.5 Equitable Relief ............................... 45
XIV. MISCELLANEOUS ........................................ 45
14.1 Relationship of Parties ........................ 45
14.2 Assignment ..................................... 46
14.2.1 General ................................. 46
14.2.2 Change of Control ....................... 46
14.2.3 Assignment to Centrics .................. 46
14.3 Assignment by Sears ............................ 48
14.4 Binding Nature ................................. 48
14.5 Publicity ...................................... 48
14.6 Cumulative Remedies ............................ 48
14.7 Bankruptcy ..................................... 48
14.8 Severability ................................... 48
14.9 Governing Law .................................. 49
14.10 Headings ....................................... 49
14.11 Interpretation ................................. 49
14.12 Notices ........................................ 49
14.13 Incorporation of Recitals ...................... 50
14.14 Entire Agreement ............................... 50
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TABLE OF CONTENTS (...continued)
SCHEDULES AND EXHIBITS
Schedule 1.2 Definitions
Schedule 1.2(b) Authorized Products
Schedule 1.2(e) Description of Licensed Business
Schedule 1.2(g) Licensee Software
Schedule 1.2(p) Sears Marks
Schedule 1.2(s) Source Code
Schedule 1.4.1 Exceptions to Licensee's
Exclusivity Obligations
Schedule 1.4.1(c) Direct Competitors
Schedule 2.3.1 Specifications
Schedule 2.3.2(a) Performance Standards
Schedule 2.3.2(b) Minimum Operating Standards
Schedule 2.5.3 Form for Approval for Post-
Certification Changes
Schedule 3.1.1 Privacy Policy
Schedule 3.1.2 Service Level Credits
Schedule 3.4 Disaster Recovery Plan
Schedule 3.6 Domain Names
Schedule 3.8 Customer Support Hours
Schedule 4.3.3 Licensee's Marks
Schedule 5.1.1 Licensee's Key Personnel
Schedule 5.4 Approved Contractors
Schedule 6.1 Business Development Fee
Schedule 6.2 Sears Fees
Schedule 6.3 Credit Card Conditions
Attachment 1 to
Schedule 6.3 Operating Instructions
Schedule 7.2.1 Agenda Items for Quarterly Review
Meetings
Schedule 7.3.2 Licensed Website Reports
Schedule 9.6.4(d) Transition Services
Schedule 9.6.4(f) Transfer of Know-How
Schedule 9.6.4(h) Assets of the Licensed Business
SCHEDULES AND EXHIBITS
Exhibit 1 Third Amendment to Sears Portrait
Studio License Agreement
Exhibit 2 Kodak Letter of Intent
Exhibit 3 Master Project Plan
Exhibit 4 Source Code Escrow Agreement
Exhibit 5 Photofinishing Services Agreement
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DEVELOPMENT AND LICENSE AGREEMENT
---------------------------------
This Development and License Agreement, together with all
Schedules and Exhibits attached hereto (collectively, the
"Agreement") is made as of January 31, 2001 (the "Effective
Date"), by and between SEARS, ▇▇▇▇▇▇▇ AND CO., a New York
corporation ("Sears"), and Consumer Programs Incorporated, a
Missouri corporation, by and on behalf of itself and its
Affiliates (jointly and severally, "Licensee").
R E C I T A L S
---------------
A. CURRENT RELATIONSHIP
WHEREAS, Sears and Licensee have a long-standing
relationship in which Licensee has and, pursuant to that
certain Portrait Studio License Agreement, dated January 1,
1999, as amended ("Portrait Studio License Agreement"),
continues to operate the Sears Portrait Studios.
WHEREAS, Licensee desires to expand its relationship with
Sears and the Sears Portrait Studio business through the
development and operation of an Internet-based business related
to photofinishing, archiving and related services, all more
fully described as the "Licensed Business" in Section 1.2(e) of
this Agreement.
B. PORTRAIT ARCHIVING FUNCTIONALITY
WHEREAS, a major factor in Sears entering into this
Agreement is Licensee's agreement, as part of the Licensed
Business, to develop certain functionality related to uploading
images and processing customer orders directly from the Sears
Portrait Studios to the Licensed Business ("Portrait Archiving
Functionality").
WHEREAS, in order for the Portrait Archiving Functionality
to be completely operational, Licensee must develop and implement
an interface from each of the Sears Portrait Studios
to the Licensed Business.
WHEREAS, to induce Sears to enter into this Agreement,
Licensee has entered into that certain Third Amendment to the
Portrait Studio License Agreement executed contemporaneously
with the execution of this Agreement, a copy of which is
attached hereto as Exhibit 1 ("Third Amendment") pursuant to
which Licensee has agreed to develop and implement the necessary
interfaces from the Sears Portrait Studios to the Licensed
Business, all in accordance with the terms of the Third
Amendment.
C. KODAK LICENSES
WHEREAS, through Licensee's due diligence efforts into the
feasibility of the Licensed Business, Licensee has discovered
that ▇▇▇▇▇▇▇ Kodak Company and one or more of its subsidiaries
(collectively, "Kodak") own certain inventions, namely the
inventions claimed in United States Patent Numbers 5,760,917;
6,017,157; 6,133,985; and 5,666,215 ("Kodak Inventions") that
appear to be related to the Licensed Business.
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WHEREAS, Sears desires to license to Licensee certain
rights with respect to the Licensed Business but only if and to
the extent that Licensee obtains, to Sears' sole satisfaction,
certain assurances from Kodak that Sears and the Licensed
Business will not be adversely affected by Kodak and the Kodak
Inventions, including, without limitation, Licensee obtaining a
license from Kodak with respect to all of the Kodak Inventions.
WHEREAS, Licensee has obtained from Kodak that certain
Letter Agreement, dated January 31, 2001, between Licensee and
Kodak, a copy of which is attached hereto as Exhibit 2 ("Kodak
Letter Agreement").
D. CENTRICS
WHEREAS, Licensee has expressed a desire to assign this
Agreement, at some future time, to a subsidiary of Consumer
Programs Incorporated that will operate under the name
"Centrics Technology" ("Centrics").
WHEREAS, to induce Sears to consider permitting such an
assignment to Centrics, Licensee has agreed to guarantee
Centrics' entire performance under this Agreement in accordance
with the terms set forth in this Agreement.
* * * * *
WHEREAS, based on the promises, covenants and
representations of Licensee set forth in these Recitals and in
this Agreement, Sears has agreed to enter into this Agreement.
NOW, THEREFORE, Sears and Licensee agree as follows:
I. GENERAL
1.1 PURPOSE OF AGREEMENT. This Agreement represents the
terms and conditions under which the parties will design,
develop, implement, promote the use of, operate, support and
maintain the Licensed Business.
1.2 DEFINITIONS. Capitalized terms used herein shall
have the meanings ascribed to them in the body of this
Agreement and/or in the Schedules, Exhibits, Attachments,
Addenda and other documents attached to this Agreement and
incorporated herein by reference, or as defined below.
Schedule 1.2 sets forth an index of all other defined terms.
(a) "Affiliate" means any person, firm, corporation,
partnership (including general partnerships, limited
partnerships, and limited liability partnerships), limited
liability company, joint venture, business trust,
association or other entity that now or in the future,
directly or indirectly: (i) controls, is controlled with
or by or is under common control with a party; or (ii) with
respect to Sears, is managed, operated or directed by
Sears. For purposes of the foregoing, "control" shall mean,
with respect to: (iii) a corporation, the ownership,
directly or indirectly, of fifty percent (50%) or more of
the voting
2
power to elect directors thereof or, for purposes
of foreign corporations, if less than fifty percent (50%),
the amount allowed by applicable law; and (iv) any other
entity, power to direct the management of such entity.
(b) "Authorized Products" means the products and
services identified in Schedule 1.2(b), as may be amended
by: (i) Sears from time to time to reflect additional
products and services; and (ii) the mutual written consent
of the parties to reflect the removal of any product and/or
service from Schedule 1.2(b).
(c) "Enhancements" means any new releases,
improvements, modifications, upgrades, updates, fixes and
additions to the Licensee Software that Licensee or the
applicable vendor makes available to correct deficiencies
and/or improve or extend the capabilities, including
increases in the speed, efficiency or ease of operation of
the Licensee Software, as well as any new software
designated in writing by Licensee to be an Enhancement,
and shall include any re-platformed software, whether on
different operating systems or equipment. Enhancements
shall include all Web-based versions and any updated data,
replacement, improvement, patch, major product upgrade
(e.g., version 1.0 to 2.0), minor product upgrade (e.g.,
version 2.0 to 2.1) or maintenance upgrade (e.g., version
2.1 to 2.1a or 2.1.1).
(d) "Gross Sales" means all of Licensee's direct
or indirect sales of services, products, goods and/or
merchandise consummated through the Licensed Business,
including sales arising out of referrals, contacts or
recommendations obtained from customers through the
Licensed Business.
(e) "Licensed Business" means the business described
in Schedule 1.2(e), which may be amended from time to time
by the mutual written consent of the parties.
(f) "Licensed Website" means the web site located on
the World Wide Web at the IP addresses 129.250.35.31 on the
primary name server and 192.67.14.15 on the secondary name
server.
(g) "Licensee Software" means the software described
in Schedule 1.2(g) and any Enhancements thereto.
(h) "Net Sales" means Gross Sales, less sales taxes,
returns and allowances and any actual, documented expenses
charged by a Third Party service provider to, and paid by,
Licensee and then charged, without further ▇▇▇▇-up, by
Licensee to customers of the Licensed Business.
(i) "Permissioned Email" shall mean email messages
which are transmitted for the purpose of advertising or
promotion of the Authorized Products covered by this
Agreement, whereby the transmitter of such email messages
has first obtained from a customer: (a) such person's
email address; and
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(b) an affirmative expression of consent to receive
unsolicited advertising and/or promotional emails, which
customer's affirmative expression of consent is deemed
acceptable by Sears in Sears' sole discretion.
(j) "Release 1.0" means the Release of the Licensed
Website that incorporates the functionality for Release
1.0 as described in the Master Project Plan.
(k) "Release 1.1" means the Release of the Licensed
Website that incorporates the functionality for Release 1.1
as described in the Master Project Plan.
(l) "Release 1.2" means the Release of the Licensed
Website that incorporates the functionality for Release 1.2
as described in the Master Project Plan.
(m) "Release 2.0" means the Release of the Licensed
Website that incorporates the functionality for Release 2.0
as described in the Master Project Plan.
(n) "Release 3.0" means the Release of the Licensed
Website that incorporates the functionality for Release
3.0 as described in the Master Project Plan.
(o) "Sales" means Gross Sales and Net Sales.
(p) "Sears Marks" means the trademarks, service marks
and trade names identified in Schedule 1.2(p), as may be
amended by Sears from time to time.
(q) "Sears Site" means any web site operated under
a domain name proprietary to Sears.
(r) "Service Rates" means: (i) One Hundred
Twenty-Five Dollars ($125.00) per hour; provided, however,
Licensee may adjust the rate once annually by an amount
equal to the percentage change between the base salary for
software engineers in the then-current calendar year and
the base salary for software engineers in the prior year as
reported in the Datamasters Annual Computer Industry Salary
Survey for Software Engineers ("CISSE"); and (ii) the
reasonable actual, documented out-of-pocket expenses
incurred by Licensee in performing the Transition Services.
For example, if the CISSE salary for software engineers was
$100K in 2001, and had increased to $125K in 2002, the base
rate of $125 per hour would be multiplied by 1.25 to
compute an applicable service rate for 2002.
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(s) "Source Code" means computer software in the form
of source statements for the Licensee Software including
the items identified in Schedule 1.2(s).
(t) "Territory" means the United States, Puerto Rico
and Canada and any other country or territory into which
Sears expands the Licensed Business.
(u) "Third Party" means persons, corporations and
entities other than Sears, Licensee or any of their
Affiliates.
(v) "Third Party Site" means any web site on the
World Wide Web other than the Licensed Website or a Sears
Site.
(w) "Transition Period" means the period of time
following the effective date of termination of this
Agreement in which Licensee shall provide the Transition
Services and other services required for an orderly
transition of the Licensed Business to Sears or a Third
Party designated by Sears in its sole discretion.
(x) "Wind-Down Period" means the period of time
following the effective date of termination of this
Agreement in which Licensee shall wind-down the operation
of the Licensed Business.
1.3 LICENSE GRANT. During the Term and, as applicable,
any Wind-Down Period or Transition Period, subject to the terms
and conditions of this Agreement, Sears grants to Licensee the
non-exclusive (except to the extent set forth in Section 1.4.2),
non-transferable (except as permitted by Section 14.2), limited
license to: (a) operate the Licensed Business in the Territory
under the name "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇"; (b) operate the Internet-based
aspects of the Licensed Business solely through the Licensed
Website for fulfillment to customers in the Territory; and
(c) use the Sears Marks in the Territory in connection with the
Licensed Business.
1.4 EXCLUSIVITY OBLIGATIONS.
1.4.1 Licensee Obligations. Except as set forth in
Schedule 1.4.1, during the Term and for the applicable
restricted period identified in Section 9.6 following the
termination or expiration of this Agreement (the
"Restricted Period"), Licensee and its Affiliates shall
not, directly or indirectly, in the Territory: (a)
participate in or develop, implement, operate, host,
support and/or maintain any web site, interactive medium
or business that (i) competes with the Licensed Business
and/or (ii) offers products and/or services similar to the
products and services offered by the Licensed Business; (b)
have any direct or indirect, controlling or non-
controlling interest as a disclosed or beneficial owner,
investor, partner, director, officer, employee, manager,
consultant, representative or agent, or in any other
capacity in any web site, interactive medium or business
that (i) competes with the Licensed Business and/or (ii)
offers products and/or services similar to the products
and services offered by the Licensed Business; or
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(c) develop, support and/or maintain and/or license,
sublicense, sell, lease or otherwise transfer the Licensee
Software for or to: (i) any web site, interactive medium or
business that (A) competes with the Licensed Business and/or
(B) offers products and/or services similar to the products
and/or services offered by the Licensed Business; (ii) any
non-online business that offers or sells traditional and
digital camera photofinishing and archiving services,
professional portrait photography studio services and/or
related portrait products; or (iii) any of the companies
identified in Schedule 1.4.1(c) ("Direct Competitors").
If, during the Term, Sears elects to expand the Licensed
Business to any country or territory outside of the
Territory and Licensee has no operations similar to the
Licensed Business located within such country or territory,
Licensee's exclusivity obligations under this Section shall
expand automatically to such country or territory for the
remainder of the Term and during the applicable Restricted
Period.
1.4.2 Sears' Obligations. Subject to the terms of
Section 1.4.3, Sears shall not authorize any Third Party to
use the Sears Marks or any of the Domain Names to develop
and operate a business through the Internet that offers:
(a) traditional and digital camera photofinishing and
archiving; (b) the ability for customers to order, store,
organize and share photographic images through the
Internet; or (c) a mail-order service for traditional and
digital camera photofinishing.
1.4.3 Reserved Rights. Notwithstanding any terms of
this Agreement to the contrary, except as expressly set
forth in Section 1.4.2 above, Sears expressly reserves the
right to promote, offer and sell to its actual and
prospective customers, and to permit any Third Party to
promote, offer and sell, at any retail store operated by
Sears or any of its Affiliates, through any Sears Site
and/or through any Third Party Sites, products and/or
services that are similar to the Authorized Products or
that compete with the Licensed Business.
1.5 KODAK LICENSES. Following the Effective Date,
Licensee shall engage in good faith negotiations with Kodak to
obtain licenses to make, have made and use the Kodak Inventions
for purposes of Licensee and Sears fulfilling their respective
obligations under this Agreement. Licensee shall bear the sole
costs of obtaining such licenses and shall pay any and all
royalties or fees due to Kodak under the licenses or otherwise.
In the event Licensee and Kodak fail to execute, on or before
December 31, 2001, a definitive agreement with Kodak ("Kodak
Definitive Agreement") for all of the Kodak Inventions, which
license agreement shall be satisfactory to Sears, Sears shall
have the right to terminate this Agreement pursuant to Section
9.3.
1.6 SEARS PARTICIPATION IN LICENSEE. Following an
assignment by Consumer Programs Incorporated ("CPI") of this
Agreement in accordance with Section 14.2, Licensee shall
provide Sears with prior written notice of all meetings of
Centrics' board of directors or, in the event Centrics is not
formed as a corporation, its equivalent ("Centrics Board of
Directors"), and an individual selected by Sears ("Sears
Designee")
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shall have the right, during the Term and, as applicable, any
Wind-Down Period or Transition Period, to attend each meeting of
the Centrics Board of Directors, whether formal or informal,
only to the extent discussions are related to the Licensed
Business. Licensee shall have the right to excuse the Sears
Designee from any discussions: (a) not related to the Licensed
Business; or (b) related to the termination or breach of this
Agreement by either party. Licensee shall deliver notice of
such meetings to the Sears Designee in the same manner and at
the same time as notices are sent to all other members of the
Centrics Board of Directors. Sears shall have the right, at
any time, to replace the Sears Designee with another
individual selected by Sears.
1.7 NO REPRESENTATIONS. Sears makes no promises or
representations whatsoever as to the potential amount of
business Licensee can expect to generate at any time from the
Licensed Business. Licensee is solely responsible for any
expenses it incurs related to this Agreement, including
Licensee's employees or any expenditures for the development,
dissemination, or operation of the Licensed Website, the
Licensed Business or for any facilities or equipment acquired
in connection with its performance under this Agreement.
II. DEVELOPING AND IMPLEMENTING THE LICENSED WEBSITE
2.1 OVERVIEW. Licensee shall develop and implement the
Licensed Website in accordance with a master project plan
("Master Project Plan") that outlines the functionality that
Licensee will develop for each release ("Release") of the
Licensed Website. The Master Project Plan shall be developed
by Licensee and approved by Sears. Each Release of the
Licensed Website will add successively to the functionality
and performance of the Licensed Website and will be developed
and implemented in accordance with the Master Project Plan
and the terms of this Article II. Licensee shall:
(a) solicit Sears' input relating to the development and
implementation of each Release of the Licensed Website;
(b) allow Sears to have input into the functionality and
capabilities of each Release of the Licensed Website; and
(c) keep Sears fully informed as to the status of the
development and implementation of each Release of the Licensed
Website in accordance with the terms set forth in Sections 7.2
and 7.3. The initial version of the Master Project Plan, which
covers Release 1.0, Release 1.1, Release 1.2, Release 2.0 and
Release 3.0 and has been approved by Sears, is attached hereto
and incorporated herein as Exhibit 3.
2.2. REQUIREMENTS PHASE. Preparation for development of
each Release of the Licensed Website shall commence with a
requirements phase in which Licensee shall establish, with input
from Sears, the functional and performance requirements
("Requirements") for the applicable Release. Following the
requirements phase, Licensee shall develop a project plan
("Project Plan") in accordance with Section 2.3.
2.3 PROJECT PLAN. For each Release of the Licensed
Website, Licensee shall prepare a detailed Project Plan that
includes:
(a) the date for commencing development of the
applicable Release and the date of the initial launch of
the applicable Release ("Launch Date");
7
(b) Specifications developed in accordance with
Section 2.3.1;
(c) Performance Standards developed in accordance
with Section 2.3.2;
(d) an Implementation Workplan developed in
accordance with Section 2.3.3;
(e) Testing Criteria developed in accordance with
Section 2.3.4; and
(f) any other mutually agreed terms.
Licensee shall submit the Project Plan to Sears for Sears'
approval prior to beginning the development and implementation
of each applicable Release of the Licensed Website. Once
approved by Sears and Licensee, the Project Plan shall not
be changed, modified or amended except in accordance with the
terms set forth in Section 2.4.
2.3.1 Specifications. Licensee shall prepare
specifications ("Specifications") for each Release of the
Licensed Website, which Specifications shall be based on
the Requirements and shall include the items set forth in
Schedule 2.3.1. Upon Certification of the applicable
Release, Licensee shall incorporate the Specifications for
such Release into the Specifications for the prior
Release(s) and provide to Sears one complete set of
Specifications that reflects, in detail, the functionality
of the Licensed Business to date including any Interim
Modifications (defined in Section 2.5.3).
2.3.2 Performance Standards. Licensee shall prepare
performance standards ("Performance Standards") for each
Release of the Licensed Website, which Performance
Standards shall: (a) include a detailed description of
the items identified in Schedule 2.3.2(a); and (b) not be
less than the minimum operating standards set forth in
Schedule 2.3.2(b) ("Minimum Operating Standards").
2.3.3 Implementation Workplan. For each Release of
the Licensed Website, Licensee shall prepare a workplan
("Implementation Workplan") that identifies or sets forth,
as applicable: (a) all critical milestone events ("Critical
Milestones") and the commencement and completion dates for
such Critical Milestones; (b) a detailed description of all
activities to be performed by Sears including the
commencement and completion dates for each such activity;
(c) a detailed description of all activities to be performed
by Third Parties; and (d) any activities of Licensee that
Licensee desires to include in the Implementation Workplan.
2.3.4 Testing Criteria. Licensee shall be
responsible for testing each Release of the Licensed
Website in accordance with the test plan developed by
Licensee and any other testing criteria set forth in the
Project Plan (collectively,
8
the "Testing Criteria"), and shall provide Sears with
copies of the results of all such testing.
2.4 IMPLEMENTATION OF THE PROJECT PLAN. Once the
Project Plan has been approved by Sears: (a) Licensee shall
develop and implement the applicable Release of the Licensed
Website in accordance with the Project Plan; and (b) the
commencement date and Launch Date for each Release of the
Licensed Website and the Critical Milestones shall not be
changed without the prior written consent of Sears, unless
such dates are delayed due to a failure by Sears or a Third
Party contractor of Sears in accordance with Section 2.4.1.3,
in which event the applicable dates shall be delayed one (1)
day for each day the delay is caused by Sears or a Third Party
contractor of Sears. Any other changes, modifications,
additions or deletions to the Project Plan prior to
Certification of the applicable Release as described in
Section 2.5.1 shall be made in accordance with the Change Order
process set forth in Section 2.4.2.
2.4.1 Implementation Delays.
2.4.1.1 Additional Personnel. If Sears
reasonably determines that Licensee is likely to fail
to meet a Critical Milestone, or if Licensee has
failed to meet a Critical Milestone, then in
addition to any other rights and remedies that may be
available to Sears as provided in this Agreement, at
Licensee's sole cost and expense, Licensee shall
provide all additional Licensee personnel as may be
required or necessary to accelerate performance in
order to timely achieve the Critical Milestone or, if
Licensee has already failed to meet one (1) or more
Critical Milestones, complete the Critical Milestone
within a re-adjusted time frame established by Sears.
2.4.1.2 Right to Withhold Payment. In
addition to the rights set forth in Section 2.4.1.1,
Sears shall be entitled to withhold any and all
payments due from Sears to Licensee until such
Critical Milestone has been achieved.
2.4.1.3 No Obligation for Sears' Delays.
Notwithstanding any of the foregoing to the contrary,
Licensee shall not be obligated to provide additional
personnel as provided in this Section if and to the
extent Licensee's failure to achieve a Critical
Milestone is caused by a failure by Sears or a Third
Party contractor of Sears to timely perform any
material obligation that is a precondition to
Licensee's ability to timely achieve such Critical
Milestone, provided that such pre-condition is
identified in the Implementation Workplan or Licensee
has provided to Sears reasonable advance written
notice of same prior to the Critical Milestone date.
2.4.2 Change Order Process. Any changes to
the Project Plan for a particular Release or any
activity related to the Licensed Website may be
agreed
9
upon by the parties at the weekly status meetings
described in Section 7.2.2, in which case Licensee
shall update the Project Plan to reflect such changes
and deliver a copy of the updated Project Plan to
Sears. In addition to the foregoing, if Sears
believes that a change related to the Project Plan
for a particular Release or an activity related to
the Licensed Website is necessary or desirable,
Sears may request, no less than three (3) business
days prior to the next scheduled weekly status
meeting, that such change ("Change Request") be
placed on the agenda for such meeting. If Sears
initiates a Change Request, Licensee shall advise
Sears at such meeting as to: (a) the performance
impact, if any, on the Licensed Website, and the
modifications to the Licensed Website that will be
required as a result of the Change Request; (b) if
applicable, the effect of the Change Request on the
Project Plan, including any impact on Critical
Milestone dates or the Launch Date; (c) an
estimate of the cost to implement the Change Request;
and (d) such other information as may be requested by
Sears in its Change Request (collectively, the
"Change Response"). If Licensee presents a Change
Request to Sears at a weekly status meeting, such
Change Request shall include the information required
to be included in a Change Response. If Sears and
Licensee agree to make changes pursuant to a Change
Response or Licensee-initiated Change Request,
Licensee shall update the Project Plan to reflect
such changes and deliver a copy of the updated
Project Plan to Sears. Otherwise, Licensee shall
proceed to fulfill its obligations under this
Agreement without change.
2.5 TESTING AND CERTIFICATION.
2.5.1 Certification. "Certification" for each
Release of the Licensed Website shall occur when: (a)
Sears notifies Licensee in writing that Sears is
satisfied that Licensee has demonstrated adequately to
Sears that testing for the applicable Release has been
completed successfully in accordance with the Testing
Criteria; (b) Sears has approved all content for the
Licensed Website; (c) Sears has received from Licensee
the User Documentation described in Section 2.6 and a
final and complete set of Specifications for the
applicable Release of the Licensed Website; and (d) the
Source Code escrow has been updated with the Source Code
for the applicable Release of the Licensed Website and
Licensee Software. Unless otherwise approved by Sears
in writing, the applicable Release shall not be published
or launched until Certification for the applicable Release
has been achieved.
2.5.2 Failure to Achieve Certification. In the
event Certification is not achieved for a particular
Release of the Licensed Website within thirty (30)
calendar days following the Launch Date set forth in
the Project Plan, Sears shall have the right, at Sears'
sole option, to terminate this Agreement in accordance
with Section 9.3.
2.5.3 Post-Certification Modifications to Licensed
Website. If either party desires to make minor
modifications to the Licensed Website in any respect
(including modifications to the content contained therein)
after Certification of the applicable Release but prior to
launching the next Release, the applicable party
10
shall submit such modifications ("Interim Modifications")
to the other party for approval in substantially the form
attached as Schedule 2.5.3. Licensee shall submit such
Interim Modifications to Sears, for Sears' approval, prior
to launching the Interim Modifications. Sears shall have
five (5) business days from the date of its receipt of such
Interim Modifications in which to review and comment on
such Interim Modifications, and Licensee shall promptly
revise or omit such Interim Modifications in accordance
with Sears' comments. Licensee shall not publish,
distribute, display or otherwise implement in any way any
Interim Modifications to the Licensed Website that have
been rejected at any time by Sears without Sears' specific
prior written consent to such Interim Modifications.
Licensee shall update the Project Plan, User Documentation
and Specifications to reflect any Interim Modifications
approved by Sears and deliver copies of each to Sears.
2.6 USER DOCUMENTATION. In addition to the
Specifications, Licensee shall provide to Sears for each
certified Release of the Licensed Website written, printed,
electronic or other format materials, as determined by Sears,
that describe, in detail, to users and system administrators of
the Licensed Website and/or the Licensee Software, the
functional, operational and/or performance capabilities of
the Licensed Website and the Licensee Software ("User
Documentation").
2.7 SOURCE CODE ESCROW.
2.7.1 Deposits. As a condition to Certification of
each Release of the Licensed Website or as otherwise
requested by Sears, Licensee shall deposit the Source Code
and other Deposit Materials to the Licensed Website and the
Licensee Software pursuant to the terms of the Source Code
Escrow Agreement, in the form attached as Exhibit 4
("Source Code Escrow Agreement"), a copy of which shall be
executed by the parties concurrently with the parties'
execution of this Agreement. The Source Code Escrow
Agreement is supplementary to this Agreement. In the event
Licensee fails to provide to Sears or deposit in escrow
all the Source Code and Deposit Materials within the time
frames specified in this Agreement or the Source Code
Escrow Agreement, Sears, in its sole discretion, shall
have the right to terminate this Agreement in accordance
with Article IX and/or withhold payment of any and all
monies that may be owed to Licensee until such time as
Licensee complies with the terms of this Section;
provided, however, that Sears' election of its right to
withhold the payment of monies owed to Licensee as
provided herein shall not constitute a waiver of Sears'
right to later terminate this Agreement in accordance
with the terms of Article IX. In the event Sears elects
to withhold payment of such monies, Licensee's obligations
hereunder shall continue unabated during such period.
2.7.2 Timing of Deposits. Licensee represents and
warrants that, as of the Effective Date, Licensee has
deposited with the Escrow Agent for the Source Code Escrow
Agreement all of the Source Code and other Deposit
Materials to Release 1.0 of the Licensed Website and the
Licensee Software. Following the Effective Date, License
shall deposit the Source Code and Deposit Materials: (a)
11
for each Release of the Licensed Website as a condition of
Certification of the applicable Release; and (b) for all
other Enhancements to the Licensed Website and/or the
Licensee Software, as soon as practicable after the
Enhancement has been developed by Licensee but no later
than thirty (30) calendar days after the close of each
calendar quarter, provided that the parties may mutually
agree in writing to have the Source Code and Deposit
Materials deposited less frequently.
2.7.3 Escrow Costs. Licensee shall pay the Escrow
Agent all fees charged by the Escrow Agent for maintaining
the escrow of the Source Code and Deposit Materials for the
Licensed Website, the Licensee Software and any Enhancements
(the "Escrow Fees"). Licensee may deduct up to one-half of
the Escrow Fees from the Sales Fees payable by Licensee to
Sears under this Agreement.
2.7.4 License to Sears. Upon a release to Sears of
the Source Code and Deposit Materials to the Licensed
Website and/or the Licensee Software under the Source Code
Escrow Agreement, Sears shall have a perpetual, non-
exclusive, irrevocable fully-paid, non-assessable,
worldwide, royalty-free license to use, modify, adapt
and/or enhance the Licensed Website and/or the Licensee
Software, and any Enhancements thereto, solely for use
in connection with the Licensed Website and the Licensed
Business.
III. ONGOING OPERATION OF THE LICENSED WEBSITE.
3.1 OPERATING STANDARDS.
3.1.1 General. Licensee shall operate and maintain
the Licensed Website in accordance with: (a) the Minimum
Operating Standards; (b) the Performance Standards; and (c)
the privacy policy set forth in Schedule 3.1.1, as may be
modified by Sears from time to time ("Privacy Policy");
and (d) any other policies applicable to electronic
commerce as delivered to Licensee by Sears from time to
time. Licensee shall post the Privacy Policy, or a
hyperlink thereto, on the Licensed Website in those
locations where Customer Information is collected.
Licensee shall have a reasonable period of time to
modify the Licensed Website and its operation thereof
after notification by Sears of a modification of such
policies.
3.1.2 Service Level Credits. Commencing upon the
earlier of: (a) Certification of Release 2.0; and (b)
April 2, 2001, in the event Licensee fails to meet the
Minimum Operating Standards through Licensee or its
suppliers' and/or subcontractors' actions or inactions,
Sears shall be entitled to receive from Licensee service
level credits ("Service Level Credits"), which shall be in
the amounts and according to the terms set forth in
Schedule 3.1.2 all of which shall be based on Sears'
monitoring of Licensee's performance under this Agreement.
Sears shall have the right to set off any undisputed
amounts owed to Licensee against any Service Level Credits
determined in accordance with Schedule 3.1.2. For
purposes of calculating Service Level Credits, the
reference to "day" shall
12
mean calendar days unless otherwise indicated and any part
of a day shall be considered a full day.
3.2 HOSTING SERVICES. All services, facilities,
equipment, software and other items required to host the
Licensed Website ("Hosting Services") shall: (a) reside
initially at Licensee's facilities; (b) be provided and
maintained by Licensee in accordance with the Minimum Operating
Standards and the Performance Standards; and (c) not be
transferred, outsourced or subcontracted to a Third Party by
Licensee unless approved by Sears in accordance with Section
5.4. In the event Sears consents to a Licensee-initiated
transfer of the Hosting Services to a Third Party, Licensee
shall remain responsible for meeting the Minimum Operating
Standards and the Performance Standards.
3.3 EQUIPMENT. Licensee shall provide, at its sole
expense, all computer hardware, software and other equipment and
supplies necessary for the development and efficient
administration of the Licensed Website and for the transaction
of Sales and the prompt delivery of goods and services sold
through the Licensed Website.
3.4 DISASTER RECOVERY PLAN. Licensee's disaster and
recovery plan ("Disaster and Recovery Plan") is attached to this
Agreement as Schedule 3.4. Licensee shall not modify the
Disaster and Recovery Plan without Sears' prior written consent.
In addition, Licensee shall: (a) provide Sears with a copy of
any future third party certification report(s) that review the
Disaster and Recovery Plan when such report(s) is made available
to Licensee; (b) allow Sears or its agent on a semi-annual basis
to audit, test and review the Disaster and Recovery Plan
procedures; and (c) permit Sears to test Sears' backup data
communications links to Licensee' disaster recovery facility.
3.5 DEVELOPMENT ENVIRONMENT. Licensee shall establish,
operate, support and maintain a development environment
("Development Environment") for the development and/or testing
of new features, functionality and/or services for the Licensed
Website as well as testing of any enhancements for the Licensed
Website, all in accordance with the Minimum Operating Standards
and the Performance Standards. Sears' personnel shall have the
right to access the Development Environment at any time.
3.6 ADMINISTRATION OF DOMAIN NAMES. Sears acknowledges
that Licensee has assigned to Sears all right, title and
interest in and to the domain names "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" and
"▇▇▇▇▇▇▇▇▇▇▇.▇▇▇". Licensee shall execute all documents and
perform all actions necessary to effect the assignment of,
and/or to confirm Sears' rights in, such domain names. Sears
shall appoint Licensee as the technical contact for: (a) the
domain name "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇" for the sole purpose of operating
the Licensed Website in accordance with the terms of this
Agreement; and (b) the domain names identified in Schedule 3.6
for the sole purpose of redirecting customers and users to the
Licensed Website. Sears shall remain, at all times, the
administrative contact, registrant and owner of all such domain
names. Sears shall have the right, at any time, to remove
Licensee as the technical contact for any or all of the domain
names identified in this Section, and Licensee shall take all
actions necessary to effect such removal.
13
3.7 LICENSEE CUSTOMER AGREEMENTS. Licensee shall submit
to Sears, for Sears' prior written approval, the agreements
Licensee intends to use with customers in connection with the
Licensed Business.
3.8 CUSTOMER CARE. Licensee shall provide customer care
support, in accordance with the customer support hours set forth
in Schedule 3.8, to all customers or other users using the
Licensed Website or purchasing the Authorized Products provided
by the Licensed Website, including order processing, billing,
fulfillment and shipping information. Licensee shall maintain
at all times a general policy of "Satisfaction Guaranteed or
Your Money Back" to customers and shall adjust all complaints
of, and controversies with, customers arising out of the
operation of the Licensed Website and/or the Licensed Business
in accordance with such policy. In any case in which an
adjustment is unsatisfactory to the customer, Sears shall have
the right, at Licensee's expense, to make such further
adjustment as Sears deems necessary under the circumstances,
and any adjustment made by Sears shall be conclusive and binding
upon Licensee. Sears shall have the right to deduct the amounts
of any such adjustments from the sales receipts held by Sears as
described in Section 6.5. Licensee shall maintain files
pertaining to customer complaints and their adjustment and make
such files available to Sears. Licensee shall provide a written
report to Sears, at each Quarterly Review Meeting, summarizing
customer complaints reported during the prior quarter (including
root cause analysis) and Licensee's corresponding adjustments to
remedy such complaints and cause(s) therefor.
3.9 CONSISTENT IMAGE. Licensee shall ensure that the
Licensed Website strictly complies with all of Sears'
requirements set forth in Article IV, including page formatting,
colors, typefaces and fonts. Any modification to the Licensed
Website that could affect the consistency of Sears' image in any
form of public media shall be submitted for prior written
approval to the Sears Relationship Manager.
3.10 PERMITS AND LICENSES. Licensee shall obtain, at its
expense, all permits and licenses which may be required under
any applicable Federal, state, or local law, ordinance, rule or
regulation by virtue of any act performed in connection with the
operation of the Licensed Website and/or the Licensed Business.
3.11 NO SEARS' OBLIGATIONS. Licensee shall not make
purchases or incur any obligation or expense of any kind in the
name of Sears. Prior to entering into any commercial
relationship relating to the Licensed Website, including any
relationship with an Approved Contractor, Licensee shall secure
the written agreement of the other parties involved that Sears
is not responsible for any obligations incurred by Licensee in
connection therewith.
3.12 MARKET-LEADING SERVICES AND TECHNOLOGY. Licensee
acknowledges that a primary consideration in determining whether
Sears will renew the Term of this Agreement will be Licensee's
market position at the time of such renewal and customers'
acceptance of the Licensed Business. Accordingly, the parties
shall review and discuss, at the Quarterly Review Meetings, the
development and implementation of new and emerging technologies
and innovative services as well as Licensee's research and
14
development plans for the next succeeding quarter. Licensee is
and shall remain committed to developing and making the Licensed
Business a market leader for the Authorized Products and in the
online photo development, photo finishing and photo archiving
markets, and, in furtherance of such goal, Licensee commits to
investing sufficient capital to ensure that the Licensed
Business is competitive and maintains its position as a market
leader. Licensee further commits to develop and implement
additional features, functionality and/or services reasonably
requested by Sears and that any and all innovative services and
functionality developed by Licensee, offered generally to
Licensee's other customers and related to the Licensed Business
shall be made available for use in connection with the Licensed
Business at no additional cost.
IV. MARKETING OF THE LICENSED BUSINESS.
4.1 PROMOTION OF LICENSED WEBSITE. Licensee shall
actively market and promote the Licensed Website, the Licensed
Business and the Authorized Products subject to the terms of
this Article IV.
4.1.1 Marketing Materials. All advertisements,
brochures and other promotional materials (collectively,
"Marketing Materials") prepared by or on behalf of Licensee
must be approved by Sears in accordance with this Section.
Prior to use in connection with the Licensed Website
and/or the Licensed Business, Licensee shall submit to the
Sears Relationship Manager, or his or her designee, all
Marketing Materials, including: (a) all signs and
advertising copy (including sales brochures, newspaper
advertisements, radio and television commercials and
Internet advertising) that pertain to the Licensed Website
and/or the Licensed Business; and (b) all sales promotional
plans and devices pertaining to the Licensed Website and/or
the Licensed Business. Licensee shall not use any such
Marketing Materials without the prior written approval of
the Sears Relationship Manager. Sears shall have the
right, in its sole discretion, to disapprove or require
modification of any and all Marketing Materials. Sears
shall have the right to audit all Marketing Materials and
related sales and marketing practices to determine
Licensee's compliance with this Agreement, including
compliance with all laws. 4.1.2 Access to Sears Marketing
Channels. Sears shall exercise commercially reasonable
efforts to provide Licensee with access to marketing
channels within Sears' organization to substantially the
same extent that Sears provides such opportunities to other
unaffiliated Third Parties, provided that: (a) all of
Sears' internal marketing needs shall first be satisfied,
which Licensee acknowledges may not provide Licensee with
an opportunity to market through a particular channel; and
(b) Licensee shall reimburse Sears for the fair market
value of any costs associated with such opportunities.
4.1.3 Associate Discounts. Licensee shall offer
goods and services authorized for sale under this Agreement
to Sears, its associates and retirees and their family
members, to the extent that such family members are
eligible for
15
Sears associate discounts, at the ten percent (10%)
discount only if such purchases are paid for with the
Sears card and accompanied by a valid Sears discount card.
4.2 LINKS AND ADVERTISING REQUIREMENTS.
4.2.1 Links to Sears Websites. Sears shall have the
right, at any time, to require that Licensee implement on
the Licensed Website, within fifteen (15) days after Sears'
request, a reasonable number of hyperlinks to any Sears
Site.
4.2.2 Links to Licensee or Third Party Sites.
Licensee shall submit all proposed links from the Licensed
Website to any Third Party Site and to any web site of
Licensee (collectively, "Sites") to the Sears Relationship
Manager for approval. Licensee shall not link the Licensed
Website to any Site of a competitor of: (a) Sears; and/or
(b) the Licensed Business.
4.2.3 Advertising on Licensed Website. Licensee
shall submit all proposed advertising on the Licensed
Website to the Sears Relationship Manager for prior written
approval.
4.3 USE OF SEARS MARKS. The license to use the Sears
Marks granted to Licensee under Section 1.3 shall be subject to:
(a) Sears' style and quality control guidelines, as such
guidelines may be amended by Sears from time to time; (b) the
other terms and provisions of this Agreement; and (c) the prior
review and written approval of the Sears Relationship Manager of
any use of the Sears Marks.
4.3.1 Restrictions on Use of Sears Marks. Subject
to the terms of this Agreement, Licensee shall use the
Sears Marks only on the Licensed Website, in the Marketing
Materials promoting the Licensed Business and approved by
Sears in accordance with Section 4.1 or as otherwise
specifically approved prior to use by Sears Relationship
Manager. Licensee shall not: (a) use any ▇▇▇▇▇ ▇▇▇▇ for
any other purpose; (b) use the Sears Marks in any way to
that may tend to impair their validity as proprietary
trademarks, service marks, trade names and/or trade
dress; (c) take any action that would jeopardize or impair
Sears' ownership of any Sears Marks or their legality or
enforceability; (d) incorporate, directly or indirectly,
unless otherwise expressly permitted in writing by Sears,
any Sears Marks as part of any corporate or trade name or
with any prefix, suffix or other modifying trademarks,
logos, words, terms, designs or symbols, or use any Sears
Marks in any modified form; or (e) take any action and/or
cease taking any action that may in any way disparage the
Sears Marks or impair the goodwill associated with the
Sears Marks. All communications with persons or entities
other than customers or potential customers of the Licensed
Website and/or the Licensed Business or customers contacted
through the Licensed Website shall be done solely in
Licensee's own name.
4.3.2 No Challenge to Sears Marks. Licensee hereby
acknowledges and agrees that, as between Licensee and Sears,
the Sears Marks are the exclusive intellectual property of
Sears, and Licensee shall not question, contest or
16
challenge, either during or after the Term of this
Agreement: (a) Sears' ownership of the Sears Marks; (b)
Sears' exclusive rights to the Sears Marks; or (c) the
validity of any ▇▇▇▇▇ ▇▇▇▇. Licensee shall claim no
right, title or interest in any ▇▇▇▇▇ ▇▇▇▇, except the
right to use the same pursuant to the terms and conditions
of this Agreement, and shall not register, attempt to
register or renew any ▇▇▇▇▇ ▇▇▇▇ with the applicable
registration body unless specifically requested by Sears.
Upon demand by Sears, Licensee shall transfer and assign
any and all rights in any ▇▇▇▇▇ ▇▇▇▇ that Licensee may
have obtained by registration or any other means. Licensee
shall notify Sears promptly in writing of any infringement
claim related to the Sears Marks of which Licensee becomes
aware.
4.3.3 Rights in Sears Marks. Any and all
trademarks, service marks, trade names, or domain names
used in connection with the Licensed Website, except for
those trademarks, service marks, trade names or domain
names owned by Licensee or licensed to Licensee by a Third
Party, as listed in Schedule 4.3.3 to this Agreement (the
"Licensee Marks"), shall be the sole property of Sears and shall
be considered "Sears Marks" for purposes of this Agreement.
Licensee recognizes and acknowledges that the use of any
▇▇▇▇▇ ▇▇▇▇ does not confer on Licensee any proprietary
rights in such Sears Marks, and all use of the Sears Marks
shall inure to the benefit of Sears for all purposes.
Licensee shall execute all documents that Sears requests to
effect the assignment of, or to confirm Sears' rights in,
any Sears Marks. Upon expiration or termination of this
Agreement and any Transition Period, Licensee shall
immediately stop using all Sears Marks. Nothing in this
Agreement shall be construed to bar Sears from protecting
its right to the exclusive ownership of Sears Marks and the
associated goodwill.
4.3.4 Registration of Marks. Either party shall
have the right to adopt, apply for, and register in its own
name any and all marks, owned by such party. Each party
shall cooperate in any registration or application for
registration of such marks by the owner of such marks.
4.3.5 License to Licensee Marks. Licensee hereby
grants to Sears, during the Term and any Transition Period,
a non-exclusive, royalty-free, worldwide license to use all
Licensee Marks in connection with the Licensed Business and
in any marketing, advertising or promotional materials
developed by Sears to promote the Licensed Website and/or
the Licensed Business in accordance with this Agreement,
subject to Licensee's prior written approval of such
materials prior to publication thereof. Licensee shall
respond to Sears' request for written approval within three
(3) calendar days of such request. Any Licensee Marks used
in connection with the Licensed Website and/or the
Licensed Business shall be subject to the prior written
consent of the Sears Relationship Manager.
4.3.6 Injunctive Relief. Each party acknowledges
that the marks of the other party possess a special, unique
and extraordinary character, which makes it difficult to
assess the monetary damages a party would sustain in the
event of unauthorized use. Each party acknowledges that
irreparable injury would be
17
caused to the other party by such unauthorized use.
Accordingly, each party agrees that in the event of breach
of this Article IV by Licensee there would be no adequate
remedy at law and preliminary or permanent injunctive
relief would be appropriate
4.3.7 No Continuing Rights Upon Termination. Upon
termination of this Agreement for any reason and expiration
of the Transition Period, each party shall: (a) immediately
cease all display, advertising and use of the other party's
marks and thereafter shall not use, advertise or display
any of the other party's marks or any part thereof that is
likely to cause confusion with any of the other party's
marks; and (b) bear any costs incurred by a party related
to the display, advertising or use of such marks or any
Marketing Materials or other advertising.
4.4 CONTENT LICENSES.
4.4.1 General. All text, pictures, patterns,
graphics and other works appearing on the Licensed Website
at any time and the "look and feel" of the Licensed Website
are referred to collectively herein as "Sears Content" and
shall be the sole and exclusive property of Sears. All
Sears Content shall be part of the Specifications,
regardless of whether such Sears Content is included in the
written Specifications. During the Term and any Transition
Period, subject to the terms of this Agreement, Licensee
shall have a non-exclusive, non-transferable license
to use the Sears Content solely on the Licensed Website
and in any Marketing Materials approved by Sears in
accordance with Section 4.1.1. Licensee shall review,
delete, edit, create, update and otherwise manage all Sears
Content available on or through the Licensed Website in
accordance with the terms of this Agreement. Licensee
shall ensure that the Sears Content is accurate and does
not disparage Sears. In the event that Sears notifies
Licensee of inappropriate Sears Content, Licensee shall
take reasonable steps to remove such Sears Content. In the
event that Licensee cannot remove inappropriate Sears
Content, Sears shall have the right, in its sole
discretion, to block public access to the Licensed Website.
4.4.2 Use Restrictions. Notwithstanding the
foregoing, Licensee shall not use, disseminate, display or
publish any material portion of the Sears Content or any
works or materials substantially similar to any Sears
Content for any application or purpose other than the
Licensed Website or the Marketing Materials approved by
Sears in accordance with Section 4.1.1, unless otherwise
specifically authorized by the Sears Relationship Manager
in writing. This Section shall survive any expiration or
termination of this Agreement in perpetuity.
4.5 NO UNSOLICITED OR PERMISSIONED EMAIL CAMPAIGNS
WITHOUT SEARS' APPROVAL. Licensee shall not undertake or
implement any Permissioned Email marketing campaigns using
Customer Information (defined in Section 10.3) unless: (a) such
Permissioned Email campaigns are designed and implemented by Sears
and/or Sears designee, for which campaign Licensee shall pay to Sears
a separate fee to be negotiated
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by the parties on a case-by-case basis; or (b) such Permissioned
Email campaign, if designed and implemented by Licensee, is
approved, in writing in advance, by Sears, which approval may be
granted or withheld by Sears in Sears' sole discretion. To the
extent Licensee has obtained: (x) email addresses; and (y)
such customers have consented to receive Permissioned Email from
Sears and/or Sears designee(s), Licensee shall, not less
frequently than weekly transmit such information to Sears (or
Sears designee).
V. PERSONNEL
5.1 LICENSEE PERSONNEL.
5.1.1 General. Licensee shall provide sufficient
qualified personnel to perform Licensee's obligations under
this Agreement. Schedule 5.1.1 identifies the Licensee
Relationship Manager and certain key Licensee personnel
("Key Personnel"). The Licensee Relationship Manager shall
act as a liaison between Licensee and Sears for all matters
related to this Agreement and shall have overall
responsibility for ensuring Licensee's performance of its
responsibilities and obligations as set forth in this
Agreement. Licensee has no authority to employ persons on
behalf of Sears, and no employees of Licensee shall be
deemed to be employees or agents of Sears. Licensee has
sole and exclusive control over its labor and employee
relations policies, and its policies relating to wages,
hours, working conditions, or conditions of its employees.
Licensee has the sole and exclusive right to hire,
transfer, suspend, lay off, recall, promote, assign,
discipline, adjust grievances and discharge its employees;
provided, however, that Sears shall have the right to
request at any time that Licensee remove any employee who
is objectionable to Sears because of risk of harm or loss
to the health, safety and/or security of Sears' customers,
employees or Authorized Products and/or whose manner
impairs Sears' customer relations.
5.1.2 Employee Compensation. Licensee is solely
responsible for paying all salaries and other compensation
of its employees and Licensee shall make all necessary
salary deductions and withholdings from its employees'
compensation. Licensee is solely responsible for paying
any and all contributions, taxes and assessments and all
other requirements of the Federal Social Security, Federal
and state unemployment compensation and Federal, state and
local withholding of income tax laws on all salary and
other compensation of its employees.
5.2 REMOVAL/REASSIGNMENT OF LICENSEE PERSONNEL BY
LICENSEE. Licensee shall not remove or temporarily reassign the
Licensee Relationship Manager unless: (a) Licensee provides at
least thirty (30) days prior written notice to Sears of such
removal or reassignment; and (b) Licensee replaces such person
prior to their termination or reassignment.
5.3 SEARS' PERSONNEL. Sears shall provide personnel to
perform its obligations under this Agreement, including the
Sears Relationship Manager who shall act as a
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liaison between Licensee and Sears, coordinate Sears' resources,
coordinate Sears' personnel and have overall responsibility for
meeting Sears' responsibilities and obligations.
5.4 SUBCONTRACTING. Sears acknowledges that Licensee
may engage independent contractors approved by Sears ("Approved
Contractors") as listed on Schedule 5.4, which may updated from
time-to-time by mutual written agreement of the parties, to
develop and administer the Licensed Website and/or perform
ancillary services in connection with the Licensed Business or
Sales (such as fulfillment, distribution and payment
processing), provided that such Approved Contractors (a) execute
a confidentiality agreement, in a form acceptable to Sears, to
protect any Sears' Confidential Business Information and
Confidential Personal Information that they may obtain or gain
access to while performing their services; (b) agree in writing
to assign to Sears and/or Licensee all of their right, title and
interest in any content or work product; and (c) agree in
writing to abide by all terms of this Agreement applicable to
their performance, including the Minimum Operating Standards,
the Performance Standards and provisions requiring compliance
with Sears' policies. Notwithstanding performance or failure
to perform by any Approved Contractor, Licensee shall remain
fully responsible for the performance of all of its obligations
under this Agreement. Licensee shall obtain from all Approved
Contractors assignments and other appropriate documentation as
necessary to establish or confirm Sears' ownership of any Sears
Proprietary Rights, Sears Marks and Sears Content.
5.5 RIGHT TO ACCESS; IDENTIFICATION CREDENTIALS;
FACILITY RULES.
5.5.1 Right of Access. Upon reasonable prior
written notice, Licensee shall provide Sears reasonable
access to its facilities in connection with the performance
of Licensee's obligations hereunder. In addition to the
foregoing, Licensee shall arrange for Sears to obtain
access to any Third Party facilities that provide any
support to and/or for the Licensed Website, including the
hosting facilities and the disaster recovery site. Any
access granted pursuant to this Section shall be subject to
all security rules, policies and procedures of the party
providing access. No charge shall be made for such
access.
5.5.2 Facility Rules. All employees, agents,
representatives and subcontractors of a party, while on the
other party's premises, shall comply with all rules and
regulations that have been provided to such party. Neither
party shall stop, delay or interfere with the other party's
day-to-day operations without the prior written consent of
an authorized representative of the other party.
VI. PAYMENT TERMS
6.1 BUSINESS DEVELOPMENT FEE. Sears shall pay Licensee
the business development fee ("Business Development Fee") set
forth on Schedule 6.1 on the Effective Date. Licensee
acknowledges that the entire Business Development Fee shall be
used solely for the purpose of reimbursing Licensee for expenses
incurred as of the
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Effective Date for the development, operation and marketing of
the Licensed Business and the Authorized Products under Release
1.0.
6.2 SEARS FEES. Licensee shall pay Sears' fees
(collectively, the "Sears Fees") as described on Schedule 6.2 of
this Agreement.
6.3 PAYMENT METHODS FOR SALES.
(a) Subject to the terms and conditions outlined
in Schedule 6.3 (the "Credit Card Conditions"), Licensee
shall accept any Sears Card, Sears Master Card and Sears
Premier Card (each a "Sears Credit Card") issued by Sears
National Bank ("Bank") for payment for Sales transactions
(the "Authorized Sales") from holders of a Sears Credit
Card (each a "Cardholder"). Credit Sales Data (defined in
Schedule 6.3) for all Sears Credit Card transactions shall
be submitted to Sears for settlement. Sears shall cause
Bank to process such transactions as if Sears itself had
engaged in such transactions. Subject to all of the terms
and conditions of this Agreement, including Sears' rights
under Section 6.7, Sears shall pay all sums due Licensee on
each Authorized Sale made by Licensee to a Cardholder that
is charged to a Sears Credit Card account (a "Sears Card
Sale").
Payment to, or settlement with, Sears by Bank for each Sears
Card Sale shall be deemed to be settlement by Bank with
Licensee, and Bank shall have no payment or other
obligation whatsoever to Licensee, whose sole recourse
shall be to Sears. All losses sustained by Sears as a
result of on-payment on a Sears Credit Card account shall
be borne by Sears, provided that Licensee has complied
with the Credit Card Conditions. Except for non-payment on
a Sears Credit Card account, Sears shall have no liability
whatsoever to Licensee for Sears' failure to properly
accept or reject a Cardholder's charge.
(b) Licensee also shall accept Third Party credit
cards that are issued by a reputable bank and generally
recognized by merchants (i.e. visa, mastercard, etc.) and
obtain Sears' approval for any private labeled Third Party
credit cards (collectively, "Third Party Credit Cards") in
payment for the Authorized Sales. Licensee and any Third
Party engaged by Licensee to clear any Third Party Credit
Card charges shall comply fully with all applicable Sears
policies, including those relating to data security,
privacy and customer information and with all provisions of
federal and state laws governing credit sales, and their
solicitation, including provisions dealing with disclosures
to customers and finance charges. As between the parties
to this Agreement, all risk of non-payment on any Third
Party Credit Card shall be borne by Licensee. Licensee
shall be responsible for payment of the applicable discount
fee or merchant's fee on all Third Party Credit Card
transactions. Licensee shall not advertise, or solicit any
customer applications for, any Third Party Credit Card in
or through the Licensed Business.
6.4 PAYMENT SETTLEMENT. Licensee shall furnish a point
of sale terminal ("POS Terminal") for processing all Sales
transactions from the Licensed Business. The POS Terminal shall
interface with a point of sale settlement system ("Settlement
System") that is compatible with Sears' accounting systems and
shall have the capability
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of processing Sears Credit Card, in addition to the reporting of
Third Party Credit Card and cash and check transactions, if
applicable. Licensee shall make arrangements with a Sears'
approved vendor to supply the Settlement System equipment and
provide access for processing transactions through the
Settlement System. Licensee shall pay for the Settlement
System equipment, including any necessary peripheral equipment
(i.e. terminal, modems, printers, etc.) required to operate the
Settlement System, and for all installation and phone line
charges. For all Gross Sales transactions entered into the
Settlement System, Licensee will pay the transaction fees to the
Sears' approved vendor or any other processing service with whom
Sears has an agreement to provide access for the Settlement
System to the appropriate Sears credit system. Licensee shall
submit the total dollar amount of all Gross Sales transactions
from the Licensed Business, including sales taxes, through the
Settlement System. Licensee shall enter all Sears Credit Card
and Third Party Credit Card transactions into the Settlement System
as they occur and shall enter cash and check transactions
into the Settlement System once daily as a single transaction.
Gross Sales are deemed to be made when Licensee receives a
customer's order for goods and services and payment information
sufficient to process such order.
6.5 PAYMENT OF SEARS FEES. A settlement between the
parties shall be made at the end of each Sears fiscal month for
all transactions of Licensee during such period in accordance
with Sears' customary accounting procedures. On a weekly basis,
Sears will advance to Licensee the previous week's Net Sales
from Sears Credit Cards transactions and Third Party Credit Card
transactions (if Third Party Credit Card transactions are
processed through the Settlement System), less the Sears Fees.
Such advances shall be deducted and reconciled in the next
regular settlement. All Net Sales, fee deductions, sales tax
reimbursement and other adjustments applicable under this
Agreement will appear on the month-end settlement
reconciliation. All settlements and advances shall be made by
electronic funds transfer (EFT) to a bank account designated by
Licensee. Licensee shall reimburse Sears at each settlement for
all invoiced expenses, including any advertising expense,
incurred by Sears at Licensee's request, outstanding at the time
of such settlement. If Sears is not reimbursed at such
settlement, then Sears shall have the right, but not the
obligation, to retain out of Licensee's sales receipts the
amount of such expenses with interest, if any, due Sears. Sales
are deemed to be made when Licensee receives a customer's order
for goods and services and payment information sufficient to
process such order.
6.6 PAYMENT OF OBLIGATIAONS. Licensee shall pay and
discharge, at Licensee's sole expense, all license and permit
fees and all business, use, sales, gross receipts, income,
property or other applicable taxes or assessments which may be
charged or levied, now or in the future, against the Licensed
Business or any goods or services offered or sold through the
Licensed Business, excluding, however, all taxes and assessments
applicable to Sears' income from Sears Fees.
6.7 RIGHTS OF RECOUPMENT AND SETOFF. Sears shall have the
absolute right to withhold, recoup from or set off against any
payment or other liability or obligation that Sears may owe or
have due to Licensee under this Agreement or any other agreement
between Sears and Licensee, and Sears shall have the right to
reduce any such payment, liability or obligation by an amount up
to the amount of any payment, liability or
22
obligation that Licensee may have to Sears. Any of Licensee's
undisputed liabilities or obligations that remain outstanding
after any exercise of Sears' rights under this Section 6.7 shall
be paid by Licensee promptly upon demand by Sears. Sears' rights
under this Section 6.7 are cumulative, shall be in addition to
all other rights, remedies available at law or in equity, and
shall survive the expiration or termination of this Agreement.
6.8 SURVIVABILITY. The terms of Sections 6.6 and 6.7
and the obligations of the parties with respect to any final
settlements under this Article VI shall survive the
expiration or termination of this Agreement for a period of two
(2) years.
VII. ADMINISTRATION OF THE AGREEMENT
7.1 RELATIONSHIP MANAGERS. Each party shall designate a
relationship manager (each, a "Relationship Manager") who, among
other things, shall be responsible to:
(a) Serve as the single point of contact at
his/her respective organization to administer all aspects
of this Agreement;
(b) Ensure that all policies and procedures relating
to the administration of this Agreement are applied
consistently across his/her respective organization;
(c) Have working knowledge of the terms and status of
this Agreement and each Release of the Licensed Website;
(d) For the Licensee Relationship Manager, coordinate
and provide all reports required under this Agreement
including those reports required under Sections 7.3.1 and
7.3.2; and
(e) Attend all executive briefings and Quarterly
Review Meetings and, on an as-needed basis, status
meetings.
The Relationship Manager for Sears initially shall be the Sears
Online Manager. Each party shall have the right to change its
Relationship Manager at any time upon written notice to the
other party, subject to the terms of Section 5.2.
7.2 MEETINGS.
7.2.1 Quarterly Review Meetings. The President and
Chief Executive Officer of Licensee shall meet quarterly
with representatives of Sears at Sears' offices in Hoffman
Estates, Illinois ("Quarterly Review Meetings") to review
and discuss, among other things, the items set forth in
Schedule 7.2.1.
7.2.2 Weekly Status Meetings. On a weekly basis,
unless otherwise agreed by the parties, the Licensee
Relationship Manager, the Sears Relationship Manager, other
appropriate representatives of the parties (including Key
23
Personnel, if requested by Sears) and any necessary Third
Parties shall meet at a Sears-designated site or by
telephone conference, as determined by Sears, to discuss:
(a) the status of the implementation, including any
difficulties or issues that may exist (including personnel
issues) and any proposed changes to any Critical
Milestones and/or changes to any other date or other item
set forth in the Implementation Workplan; (b) suggestions
and proposed actions for dealing with and resolving any
identified difficulties and the anticipated results during
the next reporting period; (c) identification of any Sears
or Third Party delays or other circumstances that Licensee
claims have impacted or will impact its ability to meet
any Critical Milestone; and (d) operation of the Licensed
Website and Licensed Business. Each party shall have the
right to assume that the other party does not know of any
problems, difficulties or issues that may have an adverse
impact on any Release (whether from a timing, cost or
performance standpoint) unless a party specifically
identifies, in a timely manner, such problems, difficulties
or issues during such status meetings. Licensee shall keep
minutes of all status meetings in form and substance
reasonably satisfactory to Sears, and Licensee shall issue
copies of the minutes to all meeting attendees within
forty-eight (48) hours of each meeting.
7.2.3 Agenda; Minutes. The parties jointly shall
prepare and distribute a meeting agenda for each Quarterly
Review Meeting and weekly status meeting. Licensee shall
keep reasonably detailed minutes of all meetings, and
Licensee shall issue copies of the minutes to all meeting
attendees within five (5) business days of each meeting.
Each party shall be responsible for its own travel or
out-of-pocket expenses incurred in connection with
attending such meetings.
7.3 REPORTS.
7.3.1 Monthly Performance Reports. Within five (5)
business days following the end of each calendar month or
as otherwise requested by Sears, Licensee shall present to
Sears written reports of the performance of the Licensed
Business as measured against the Minimum Operating
Standards and the Performance Standards. The report shall
include a summary, in such detail as Sears shall reasonably
request, of: (a) the monthly performance of the Licensed
Website in relation to the Minimum Operating Standards and
the Performance Standards; and (b) a comprehensive and
consolidated log, which shall include: (i) any
accomplishments and difficulties encountered during the
prior reporting period; (ii) suggestions and proposed
actions for dealing with and resolving any identified
difficulties and the anticipated results during the next
reporting period; and (iii) all outstanding support and
technical problems identified by Sears and Licensee that
remain to be resolved. Sears and Licensee shall promptly
notify each other of any problems, difficulties or issues
of which each is aware that may have a material adverse
impact on the Licensed Business (whether from a timing,
cost or performance standpoint). Licensee's failure to
provide reports within the time frames set forth in this
Section shall result in Service Level Credits as set
forth in Schedule 3.1.2.
24
7.3.2 Other Reports. If requested by Sears,
Licensee shall provide to Sears additional reports, in a
manner and format prescribed by Sears as defined in
Schedule 7.3.2, pertaining to customer access to the
Licensed Website, Sales and/or Sears Fees, together with
any other information Sears may require for its records or
auditing purposes. If requested by Sears, Licensee shall
submit to Sears' Licensed Business Financial Manager,
within forty-five (45) calendar days following the close of
Licensee's fiscal year, the following financial reports:
(a) if Centrics' financials are reported on a consolidated
basis with CPI, Licensee shall submit an unaudited
financial statement consistent with generally accepted
accounting principles; or (b) if Centrics' financials are
not reported on a consolidated basis with CPI, a financial
statement audited by a certified public accountant
acceptable to Sears. Such report shall include Licensee's
profit and loss statement for such fiscal year and balance
sheet at the end of such fiscal year, and shall be prepared
in accordance with generally accepted accounting
principles. If Licensee is a publicly held corporation,
this requirement may be fulfilled by submission of
Licensee's Annual Report on Form 10-▇. ▇▇▇▇▇ shall not
disclose any such information that is not
available to the public to any Third Parties without
Licensee's prior consent.
7.4 AUDIT RIGHTS.
7.4.1 Financial. Licensee shall keep and maintain
books and records that accurately reflect Sales, the
expenses that Licensee incurs in performing its
obligations under this Agreement and Licensee's use of the
Business Development Fee. Sears shall have the right upon
no less than five (5) calendar days notice to Licensee to
review and audit the books and records of Licensee
regarding this Agreement during Licensee's regular business
hours. Such books and records shall be kept and maintained
according to generally accepted accounting principles.
7.4.2 Operational. Sears and its auditors shall
have the right to conduct, at Sears' expense, operational
audits, on a monthly basis upon written notification
to Licensee, to verify that Licensee is in compliance with
this Agreement. Licensee shall cooperate with Sears during
such audits and shall afford all persons involved in any
such audit reasonable access, during Licensee's regular
business hours, to Licensee's facilities or any other
facilities where the Licensed Website is hosted or the
Licensed Business is conducted. After such time that
Licensee demonstrates to Sears' reasonable satisfaction
that Licensee is operating in substantial accordance with
this Agreement for a period of three (3) consecutive
months, the frequency of such operational audits shall
convert to an ad hoc basis, which in no event shall be less
than annual. If, at any time, such an audit reveals that
Licensee' operations are not in substantial compliance with
the terms of this Agreement, Sears retains the right to
revert the frequency of such operational audits to a
monthly basis.
25
7.4.3 Underreporting. If an audit reveals that
Gross Sales were under-reported by more than five percent
(5%) of the total Gross Sales reported by Licensee, then
Licensee shall reimburse Sears for all costs incurred in
performing such audit, and Licensee shall, at its option:
(a) pay (i) Sears Fees on all estimated
unreported Gross Sales for each year, as calculated
by annualizing the rate by which Gross Sales were
under-reported in the audit sample and (ii) an
administrative fee which shall be calculated by
multiplying the annualized under-reported Sears Fees
by the percent of under-reported Gross Sales; or
(b) pay (i) for a complete audit by Sears or
its designee of Licensee's books and records relating
to Sales for the audit sample year and any other
years under this Agreement, (ii) Sears Fees on all
actual unreported Gross Sales as revealed through
such audit and (iii) an administrative fee for each
year audited, which will be calculated by multiplying
the amount of unpaid Sears Fees for such year by the
percentage by which Gross Sales were under-reported
in such year. If an audit reveals under-reported
Gross Sales, Licensee's Sales shall be subject to
another audit (at Licensee's expense) approximately
one year after the initial audit. If the subsequent
audit reveals that Gross Sales were under-reported by
more than five percent (5%) of reported Gross Sales,
Licensee shall pay Sears Fees on such Gross Sales as
per the above except that, due to the increased
expenses incurred by Sears in heightened review of
Licensee's future Sales reports, the administrative
fee shall be doubled.
If an audit reveals that Gross Sales were under-
reported by five percent (5%) or less of reported
Gross Sales, Licensee shall pay the Sears Fees due on
all unreported Gross Sales. Further, Sears also
shall have the right to collect from Licensee
interest on all unpaid Sears Fees for the period from
the close of the year in which the corresponding
Sales were made until the date of payment of such
Sears Fees. Interest shall be at the rate of prime
(as published in the Wall Street Journal as of the
date of the completion of the audit) plus one percent
(1%). Licensee, at its expense, shall develop and
implement a program to conduct audits of Sales,
including any Sales processed by Approved
Contractors, to verify the accuracy of their reports
on Gross and Net Sales and Sears Fees.
7.5 SURVIVABILITY. The terms of Sections 7.3.2, 7.4.1,
7.4.2 and 7.4.3 shall survive the expiration or termination of
this Agreement for a period of two (2) years.
VIII. REPRESENTATION AND WARRANTIES
8.1 FUNCTIONALITY AND PERFORMANCE WARRANTIES.
8.1.1 Functionality of Licensed Website. Licensee
represents and warrants to Sears that the Licensed Website
shall function in accordance with the
26
Specifications and User Documentation as such
Specifications and User Documentation may be revised from
time to time in accordance with this Agreement.
8.1.2 Performance Standards. Licensee represents
and warrants to Sears that Licensee shall operate, maintain
and support the Licensed Business and the Licensed Website,
at all times, in accordance with the Minimum Operating
Standards and the Performance Standards. Licensee shall
operate the Licensed Business and consummate any Sales in a
prompt, courteous, efficient and ethical manner.
8.1.3 Scalability. Licensee represents and warrants
to Sears that Licensee will be capable of scaling the
Licensed Website and/or Licensee's operations to meet the
requirements of the Licensed Business (including algorithms
relating to transaction rates, services and customers), as
set forth in this Agreement.
8.1.4 Disabling Code Warranty. Licensee represents
and warrants to Sears that: (a) the Licensed Website and
the Licensee Software does not contain and will not receive
from a Licensee data transmission or any other Licensee
medium, nor will Licensee transmit to Sears or any other
user of the Licensed Website, any virus, worm, trap door,
back door, timer, clock, counter or other limiting routine,
instruction or design that is designed to erase data or
programming or otherwise cause any system to become
inoperable or incapable of being used in the full manner
for which it was designed and created (collectively, a
"Disabling Code"); and (b) Licensee shall maintain and use,
at all times, software or other technology that is designed
to: (i) detect the presence of Disabling Code in the
Licensed Website and/or the Licensee Software; and (ii)
prevent the introduction of the Disabling Code into the
Licensed Website and/or the Licensee Software. In the
event a Disabling Code is identified, in addition to
any other rights and remedies that may be available to
Sears as described in Section 8.1.7, Licensee shall take
all steps necessary, at no additional cost to Sears, to:
(x) restore and/or reconstruct any and all data lost by
the Licensed Business and/or Sears, its customers and/or
suppliers as a result of such Disabling Code; (y) furnish a
new copy of the Licensed Website and/or the Licensee
Software, as applicable, without the presence of Disabling
Codes; and (z) promptly install and implement such new copy
of the Licensed Website and/or the Licensee Software, as
applicable.
8.1.5 Open Architecture Warranty. Licensee
represents and warrants to Sears that the Licensed Website
is designed and will continue to be designed to operate in
an Open Architecture environment and, as such, all Licensee
interface specifications will be published and generally
available. For purposes of the foregoing, an "Open
Architecture" is an architecture that adheres to a publicly
known set of interface specifications so that any
applications that have been implemented to those interface
specifications will be able to intemperate with any
other Third Party application that adheres to the same
interface specifications.
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Notwithstanding the foregoing, Licensee shall not be
deemed to be in breach of the foregoing representation and
warranty with respect to a Third Party that implements to
the interface specifications in a manner that is not
consistent with the general industry understanding of the
meaning of such interface specifications.
8.1.6 Year 2000 Compliance. Licensee represents and
warrants that the Licensed Website, the Licensee Software
and Licensee's point of sale system utilizes and includes
four-digit year elements (e.g. 1999, 2000, etc.) and that
the use, entry or creation of dates before, on or after
January 1, 2000, will neither cause failure nor produce
incorrect results on the Licensed Website, the Licensee
Software or in the transmission of any data to Sears
through any electronic data interchange system.
8.1.7 Correction of Failure to Meet Functionality
and Performance Warranties. Upon any failure to comply
with the representations, warranties and/or covenants set
forth in Sections 8.1.1 through 8.1.6, Licensee shall
either: (a) repair, replace or correct, within thirty (30)
calendar days of notice of the failure, the applicable
component(s) of the Licensed Website or the Licensee
Software including providing any additional software,
equipment and/or services that may be necessary; or (b) if
Licensee is not able to repair, replace or correct the
component(s) of the Licensed Website or the Licensee
Software within the time frame set forth above, provide to
Sears a plan to repair, replace or correct the applicable
component(s) of the Licensed Website or the Licensee
Software that is acceptable to Sears in its sole discretion
including providing any additional software, equipment
and/or services that may be necessary. The rights and
remedies set forth in subsections (a) and (b) above shall
be in addition to any other remedies that may be specified
in this Section 8.1. Licensee shall be solely responsible
for costs and expenses associated with any repair,
replacement and/or correction provided by Licensee as
provided in this Section, and the costs and expenses
associated with any other remedy set forth in this Section
8.1.
8.2 COMPLETE DESCRIPTION OF LICENSEE SOFTWARE. Licensee
represents and warrants to Sears that the Licensee Software, as
described in Schedule 1.2(g), is a complete and accurate list
and description of all of the software necessary to operate the
Licensed Business.
8.3 USER DOCUMENTATION WARRANTY. Licensee represents and
warrants to Sears that the User Documentation provided by
Licensee for each Release of the Licensed Website shall be
detailed and complete and shall accurately describe the
functional and operational characteristics of the Licensed
Website. Licensee further represents and warrants to Sears that:
(a) it will provide to Sears updated versions of all such User
Documentation as soon as reasonably practical, but in no event
later than sixty (60) calendar days, following Certification of
the applicable Release or approval of the Interim Modifications,
as applicable; and (b) all such updated User Documentation will
be complete and accurate and will be at least as detailed as
the User Documentation issued to Sears with the initial Release
of the Licensed Website.
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8.4 SERVICES WARRANTY. Licensee represents and warrants
to Sears that it shall perform the services required by this
Agreement in a good and workmanlike manner in accordance with
industry practices and standards generally applicable to such
services; provided, however, that where this Agreement specifies
a particular standard or criteria for performance, this warranty
is not intended to and does not diminish that standard or
criteria for performance.
8.5 PROVISION OF GOODS AND SERVICES. Licensee represents
and warrants to Sears that all goods and services offered or
sold through the Licensed Business and/or the Licensed Website
and the promotion, sale and after-sales service relating to such
goods and services shall comply with all applicable require-
ments as set forth in this Agreement.
8.6 INTELLECTUAL PROPERTY WARRANTY. Licensee represents
and warrants to Sears that the Licensed Website, the Licensee
Software and the Licensee Marks, the use of the Licensed
Website, Licensee Software and/or the Licensee Marks, the
operation of the Licensed Business and all other intellectual
property used in connection with the Licensed Business do not
and shall not infringe upon, dilute or misappropriate, as
applicable, any patent, trademark, copyright, trade secret or
other intellectual property or proprietary right of any Third
Party, and there currently is no actual or threatened suit
against Licensee by any Third Party based on an alleged
violation of any such right. This warranty shall survive the
expiration or termination of this Agreement.
8.7 WARRANTY OF AUTHORITY. Each party represents and
warrants to the other that: (a) it has the right to enter into
this Agreement; (b) subject to the terms of this Section, there
are no outstanding assignments, grants, licenses, encumbrances,
obligations or agreements (whether written, oral or implied)
that are inconsistent with this Agreement and the rights granted
or transferred herein; and (c) consummating this Agreement and
the transactions contemplated herein shall not violate any
agreement, including the agreement between Sears and America
Online, or understanding (whether written, oral or implied)
between such party or any of its Affiliates and any other person
or entity. Notwithstanding the foregoing, Licensee acknowledges
that Sears has informed Licensee about the existence of an
agreement between Sears and America Online, which agreement
Licensee understands may affect Sears' future authorization of
products and services related to the Licensed Website and/or the
Licensed Business. These warranties shall survive the expiration
or termination of this Agreement.
8.8 PENDING LITIGATION WARRANTY. Licensee represents
and warrants to Sears that there is no action, suit, claim,
investigation or proceeding pending, or to the best of
Licensee's knowledge, threatened against, by or affecting
Licensee, the Licensed Business, the Licensed Website or the
Licensee Software that, if adversely decided, might adversely
affect: (a) Licensee's ability to enter into this Agreement;
(b) Licensee's performance of its obligations herein; or (c) the
use of the Licensed Website and the Licensee Software.
8.9 COMPLIANCE WITH LAW. Licensee shall comply fully
with all applicable Federal, state and local laws, ordinances,
rules and regulations, including all rules and
29
regulations of the Federal Trade Commission and Federal
Communications Commission. In addition, Licensee represents and
warrants that Licensee and all subcontractors and agents
involved in the production or delivery of the Licensed Business
and the merchandise and services to be sold in connection with
the Licensed Business shall strictly adhere to all applicable
laws, regulations and prohibitions of the United States and all
country(ies) in which such merchandise and services are produced
or delivered with respect to the operation of their production
facilities and their other businesses and labor practices,
including laws, regulations and prohibitions governing the
working conditions, wages and minimum age of the work force.
Licensee further represents and warrants that the Licensed
Website, the Licensed Business and such merchandise to be sold
in connection with the Licensed Business shall not be produced
or manufactured, in whole or in part, by convict or forced
labor.
IX. TERM AND TERMINATION
9.1 TERM. The term of this Agreement ("Term") shall
begin on the Effective Date and end at the close of business on
December 31, 2008, unless sooner terminated under any of the
provisions of this Agreement.
9.2 MUTUAL RIGHT OF TERMINATION. Subject to the terms
set forth in Section 9.6, either party may terminate this
Agreement without cause, without penalty and without liability
for any damages as a result of such termination, provided that
the effective date of termination is no earlier than February 4,
2004, and further provided that the party seeking to terminate
the Agreement provides the other party at least ninety (90)
calendar days' prior written notice specifying the effective
date of termination.
9.3 TERMINATION OF AGREEMENT BY SEARS WITH NOTICE.
Sears shall have the right to terminate this Agreement effective
upon delivery of notice of termination to Licensee if: (a)
Licensee fails to secure, surrenders or transfers to any Third
Party the control, ownership or administration of the Licensed
Business, Licensed Website, any Sears Content and/or any
intellectual property rights in the Licensed Business, the
Licensed Website or Sears Content without Sears' prior written
consent; (b) Licensee uses any Sears Content or other content in
material violation of this Agreement; (c) Licensee materially
fails to operate and maintain the Licensed Website in accordance
with the Specifications and/or Minimum Operating Standards and
the Performance Standards; (d) Licensee fails to achieve
Certification of any Release in accordance with Section 2.5.2;
(e) Licensee attempts to assign, sublicense, transfer or convey
any of its rights in violation of Section 14.2; (f) CPI fails to
abide by any of the covenants set forth in Section 14.2.3; (g)
Licensee attempts to subcontract any of its obligations under
this Agreement to any contractor that is not an Approved
Contractor and fails to terminate such relationship within ten
(10) calendar days after written notice is delivered to
Licensee; (h) Licensee materially misuses or makes an
unauthorized use of the Licensed Website, any ▇▇▇▇▇ ▇▇▇▇ or
Sears Content; (i) Licensee or any of its owners is convicted of
or pleads no contest to a felony, or engages in any conduct that
is likely to adversely affect the reputation of Licensee, the
Licensed Website, the Licensed Business or Sears; (j) Licensee
makes any unauthorized use, duplication or disclosure of any
Customer Information, Sears Confidential Business Information,
Sears Confidential Personal
30
Information and/or Developments or otherwise breaches Section
10.5 of the Agreement; (k) Licensee fails to secure and maintain
appropriate insurance coverage as set forth in Article XII; (l)
Licensee fails to make payment of any Sears Fees or any other
amounts due Sears, provided such failure is not cured by
Licensee within ten (10) calendar days after written notice of
such failure is delivered by Sears to Licensee; (m) Licensee
materially breaches any representation or warranty set forth in
this Agreement; (n) Licensee fails to comply with any other
provision of this Agreement, provided such failure is not cured
by Licensee within thirty (30) calendar days after written
notice of such failure to comply is delivered by Sears to
Licensee; (o) the Licensed Website experiences excessive
service outages or blackout periods in comparison to other
public sites on the World Wide Web; (p) any Third Party alleges
that the Licensed Website, any software (including Licensee
Software), hardware or other equipment or supplies used in
supporting the Licensed Business, or any goods or services sold
through the Licensed Business infringe any patent, copyright,
trade secret, trademark, service ▇▇▇▇ or trade name (other than
a ▇▇▇▇▇ ▇▇▇▇), or any other intellectual property right or
defames, invades the privacy of, or misappropriates the likeness
of any Third Party and, Licensee fails to provide Sears, within
thirty (30) calendar days after written notice of such
allegations is delivered by Sears to Licensee, assurances
satisfactory to Sears that such allegations are without merit;
(q) the Portrait Studio License Agreement, dated January 1,
1999, as amended, by and between Sears and Consumer Programs
Incorporated terminates or expires in accordance with its terms;
(r) the Kodak Letter Agreement terminates for any reason other
than (i) the execution of a definitive license agreement for
all of the Kodak Inventions, which agreement satisfies the terms
and conditions set forth in Section 1.5 or (ii) all of the Kodak
Inventions being invalidated by a final, non-appealable order
of a court of competent jurisdiction; (s) Licensee and Kodak
fail to execute, on or before December 31, 2001, a definitive
license agreement for all of the Kodak Inventions that satisfies
the terms and conditions set forth in Section 1.5; (t) Licensee
fails to comply with the terms of the Kodak Letter Agreement or
the Kodak Definitive Agreement; or (u) any of the licenses to
any of the Kodak Inventions terminate for any reason other than
all of the Kodak Inventions being invalidated by a final,
non-appealable order of a court of competent jurisdiction. All
notices to be delivered under this Section shall be deemed
delivered if delivered in accordance with Section 14.12.
9.4 TERMINATION OF AGREEMENT BY SEARS WITHOUT FURTHER
NOTICE. This Agreement shall terminate without further action
by Sears or notice to Licensee if: (a) a petition is filed
either by or against Licensee in any bankruptcy or insolvency
proceeding; (b) Licensee shall fail to consent to in a timely
and appropriate manner, shall consent to, or there shall occur,
the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of such Licensee or of any substantial part
of such Licensee's assets; (c) Licensee shall make an assignment
for the benefit of creditors; (d) Licensee shall take any
corporate action in furtherance of any of the events described
in the foregoing subsections (a),(b) or (c) or for the
dissolution or winding up of the affairs of Licensee; or (e)
Licensee admits in writing its inability to, or shall be
generally unable to, pay its debts as such debts become
due.
9.5 TERMINATION OF AGREEMENT BY LICENSEE. Licensee
shall have the right to terminate this Agreement upon Sears'
breach of a material obligation under this
31
Agreement; provided such breach is not cured by Sears within
thirty (30) calendar days after written notice is delivered by
Licensee to Sears specifying the nature of the breach. All
notices to be delivered under this Section shall be deemed
delivered if delivered in accordance with Section 14.12.
9.6 RIGHTS OF PARTIES UPON TERMINATION OR EXPIRATION OF
AGREEMENT.
9.6.1 General. Upon termination of this Agreement
for any reason, including expiration of the Term, except as
expressly set forth elsewhere in Section 9.6, Sears shall
have no liability or obligation to Licensee with respect to
any costs incurred by Licensee in creating, developing,
deploying or administering the Licensed Website or the
Licensed Business, including any costs incurred in
performing Licensee's obligations under this Agreement.
9.6.2 Expiration of Agreement Without Renewal. Upon
expiration of this Agreement due to lapse of the Term
without renewal:
(a) the Wind-Down Period shall be six (6)
months following expiration of the Agreement;
(b) during the Wind-Down Period, the parties
shall cooperate with each other to wind-down the
operation of the Licensed Business including, without
limitation, providing the appropriate notices to all
of the customers of, and suppliers to, the Licensed
Business and Licensee fulfilling any customer orders
in progress;
(c) unless otherwise requested by Sears,
Licensee shall cease, as of the expiration of the
Term, to accept any new business from any new
or existing customers;
(d) during the Wind-Down Period, Licensee
shall continue to pay Sears the Sales Fees in
accordance with Article VI;
(e) during the Wind-Down Period, Licensee
shall continue to bear the costs normally associated
with operating the Licensed Business during the Term
("Normal Operating Expenses") as evidenced by
Licensee's financial statements;
(f) during the Wind-Down Period, Licensee
shall bear any other costs associated with the
wind-down of the Licensed Business; and
(g) the Restricted Period shall be six (6)
months following expiration of the Term.
9.6.3 Termination Without Cause By Sears or for
Cause By Licensee. Upon termination of this Agreement by
Sears in accordance with Section 9.2 or by Licensee in
accordance with Section 9.5:
32
(a) the Wind-Down Period shall be six (6)
months following the effective date of termination;
(b) during the Wind-Down Period, the parties
shall cooperate with each other to wind-down the
operation of the Licensed Business including, without
limitation, providing the appropriate notices to all
of the customers of, and suppliers to, the Licensed
Business and Licensee fulfilling any customer orders
in progress;
(c) unless otherwise requested by Sears,
Licensee shall cease, as of the effective date of
termination, to accept any new business from any new
or existing customers;
(d) during the Wind-Down Period, Licensee
shall continue to pay Sears the Sales Fees in
accordance with Article VI;
(e) during the Wind-Down Period, Licensee
shall continue to bear the Normal Operating Expenses;
(f) during the Wind-Down Period, Sears shall
bear the costs of any actual, documented, reasonable
out-of-pocket expenses over and beyond the Normal
Operating Expenses that are incurred as a result of
the wind-down of the Licensed Business;
(g) there shall be no Restricted Period; and
(h) with respect to termination by Licensee
in accordance with Section 9.5 only, Licensee shall
have the right to pursue any additional rights and/or
remedies available at law and/or in equity.
9.6.4 Termination Without Cause By Licensee or for
Cause By Sears. Upon termination of this Agreement by
Licensee in accordance with Section 9.2 or by Sears in
accordance with Section 9.3 or Section 9.4:
(a) the Transition Period shall be one (1)
year following the effective date of termination;
(b) at Sears' request, Licensee shall
continue to operate the Licensed Business in
accordance with the terms of this Agreement up until
the date on which the Licensed Business has been
completely transitioned to Sears or a Third Party
designated by Sears and is fully operational as
determined by Sears (the "Transition Date");
(c) Licensee shall continue to pay Sears the
Sales Fees in accordance Article VI up until the
earlier of: (i) the Transition Date; and (ii) the
date on which Sears notifies Licensee in writing that
Sears desires to discontinue operation of the
Licensed Business;
33
(d) up until the Transition Date: (i) Licensee
shall provide any and all services necessary for the
orderly transition of the Licensed Business to either
Sears or a Third Party designated by Sears including,
without limitation, the services described in
Schedule 9.6.4(d) ("Transition Services"); and (ii)
Licensee shall continue to bear the Normal Operating
Expenses as evidenced by Licensee's financial
statements;
(e) following the Transition Date and until
the end of the Transition Period, Licensee shall
provide any Transition Services requested by Sears at
no cost to Sears;
(f) during the Transition Period, Licensee
shall train and transfer, at no cost to Sears,
know-how as described in Schedule 9.6.4(f)
regarding the Licensed Website and the Licensed
Business ("Know-How"), to Sears and/or its Third
Party designees so that Sears can become self-reliant
with respect to the day-to-day operations and support
and maintenance of the Licensed Website and the
Licensed Business;
(g) the Restricted Period shall be two (2)
years following the effective date of termination;
(h) at Sears' request, Licensee shall
transfer to Sears or a Third Party designated by
Sears, at no cost to Sears or such third party, all
of the assets and materials necessary for the
continued operation of the Licensed Business
including, without limitation, the items identified
in Schedule 9.6.4(h);
(i) Sears shall have the license set forth in
Section 9.6.5;
(j) following the Transition Date, Licensee
shall not be entitled to any monies whatsoever
related to any Sales or other transactions related
to the Licensed Business; and
(k) with respect to termination by Sears in
accordance with Section 9.3 or Section 9.4 only,
Sears shall have the right to pursue any additional
rights and/or remedies available at law and/or in
equity.
9.6.5 Perpetual License to Licensee Software. Upon
termination of this Agreement by Licensee in accordance
with Section 9.2 or by Sears in accordance with Section 9.3
or Section 9.4, Sears shall have a perpetual, irrevocable,
non-assessable, non-exclusive (subject to the terms of
Section 1.4.1) license to use, modify, adapt and/or enhance
the Source Code to the Licensed Website and the Licensee
Software, and any Enhancements thereto, in connection with
the Licensed Business in the Territory. In the event Sears
wants to expand the use of the license granted in this
Section beyond the Territory, Licensee shall expand the
license to any additional country or territory upon Sears'
payment of a reasonable license fee agreed by the parties.
34
9.7 SURVIVABILITY. The provisions of this Section IX,
as well as any other provisions of this Agreement that by their
nature survive expiration or termination of this Agreement shall
survive any expiration or termination of this Agreement.
X. PROPRIETARY RIGHTS; CUSTOMER AND CONFIDENTIAL
INFORMATION
10.1 PROPRIETARY RIGHTS.
10.1.1 Licensee's Proprietary Rights. Except for
Sears Content and as otherwise set forth in Sections
10.1.2, 10.1.3, and 10.1.4, title to the Licensed Website
and to the Licensee Software shall at all times remain with
Licensee.
10.1.2 Sears' Proprietary Rights. Licensee, at
all times, shall identify Sears as the copyright owner of
all of the content appearing on the Licensed Website except
for any content licensed from a Third Party. In addition
to the foregoing, the parties may agree in a Project Plan
that certain concepts, works, information, data, computer
programs, program materials, flow charts, notes, outlines
and other ideas and materials developed, invented, prepared
or discovered by Licensee pursuant to this Agreement
(collectively, the "Developments") are the sole property of
Sears. In such event, Licensee hereby assigns to Sears
Licensee's entire right and interest in any such
Developments and will execute any documents in connection
therewith that Sears may reasonably request; provided that
to the fullest extent permissible by applicable law, any
and all copyrightable aspects of the Developments shall be
considered "works made for hire." Licensee shall enter
into agreements with all of its employees, agents and
contractors necessary to establish and assign to Sears sole
ownership in the Developments, and Licensee agrees to
provide Sears with copies of such agreements as they are
executed. Licensee hereby appoints Sears as its true and
lawful attorney-in-fact with the right to execute
assignments of and to register any and all rights to the
Developments. This appointment is coupled with an interest
and shall survive termination of this Agreement.
10.1.3 Joint Ownership Rights. The parties may
agree in a Project Plan that certain deliverables shall be
jointly owned by the parties and that the parties shall be
considered "joint developers" of such deliverables. In
such event: (a) each party shall assist the other in
perfecting, obtaining and/or enforcing the other party's
intellectual property rights in and to the deliverables;
and (b) each party's rights in and to the deliverables
shall be limited as mutually agreed by the parties and set
forth in the Project Plan.
10.1.4 Competitive Advantage Rights. Licensee
acknowledges that certain knowledge, skills, methodologies,
ideas, concepts, know-how, processes, techniques and
adaptations learned during the course of work for Sears may
provide Sears with a competitive advantage over its
competitors and other Third Parties. Accordingly, the
parties may agree in a Project Plan that certain
deliverables, or portions thereof, provide Sears with a
competitive advantage, in
35
which case Sears shall have the right to use the features
and functionality represented by any such deliverables on
an exclusive basis for a period of time following
Certification of such deliverables (the "Exclusivity
Period"). The term of the Exclusivity Period shall be
mutually agreed upon by the parties in the applicable
Project Plan. During the Exclusivity Period, Licensee
shall be precluded from exercising any rights under Section
10.1.5 as it relates to the features and functionality
protected under this Section and shall not provide the
features and functionality represented by such deliverables
to any Third Party without Sears' prior written consent,
which Sears may withhold in its sole discretion.
10.1.5 General Knowledge. Subject to the terms
set forth in Section 1.5.1, this Agreement shall not
preclude Licensee from using its general knowledge, skills
and experience for its other clients, provided that
Licensee does not use in connection therewith any
Developments, or Sears' Confidential Business Information
and/or Confidential Personal Information.
10.2 MONITORING OF TRAFFIC AND SALES. Subject to the
terms of the Privacy Policy, Sears shall have the right to use
any electronic methods available to obtain information about
customers, visitors or end users who access the Licensed Website
and to collect Sales data, so long as such methods do not
unreasonably interfere with the operation of the Licensed
Website.
10.3 CUSTOMER INFORMATION. As between Sears and Licensee,
all information and materials (including archived non-
professional photographs) collected from or about any customers
of the Licensed Business, including customer names, addresses,
phone numbers, email addresses, account numbers, demographic,
financial and transactional information and personal preference
and shopping habit information (collectively, Customer
Information") shall be the sole and exclusive property of
Sears. Sears hereby grants Licensee a limited license to use the
Customer Information for the purpose of promoting the sale of
merchandise and services through the Licensed Business. To the
extent Licensee and/or any Approved Contractor is required to
maintain Customer Information for purposes of operating the
Licensed Business in accordance with the terms of this
Agreement, Licensee and any Approved Contractors shall maintain
Customer Information in a manner that enables Licensee, the
Approved Contractor and/or Sears to identify and extract
separately: (a) the Customer Information of Sears without
extracting or otherwise affecting any Third Party Customer
Information; and (b) any Third Party Customer Information
without extracting or otherwise affecting the Customer
Information of Sears. If requested by Sears, Licensee shall
provide to Sears the current database of Customer Information,
in a format prescribed by Sears.
10.4 CONFIDENTIAL BUSINESS INFORMATION.
10.4.1 Sears' Confidential Business Information.
"Sears' Confidential Business Information" means any
information, whether disclosed in oral, written, visual,
electronic or other form, which Sears or its Affiliates
disclose or Licensee observes from Sears, its agents or
contractors in connection with Licensee's
36
performance of the services. Sears' Confidential Business
Information includes Developments; Sears' or its
Affiliates' business plans, strategies, forecasts, projects
and analyses; Sears' or its Affiliates' financial
information; Sears' or its Affiliates' employee and vendor
information; Sears' or its Affiliates' software (including
all documentation, code and specifications); hardware and
system designs, architectures, structure and protocols;
Sears' or its Affiliates' product and service
specifications; Sears' or its Affiliates' manufacturing,
purchasing, logistics, sales, marketing and other business
processes. In addition, Sears' Confidential Business
Information shall include information disclosed by Sears or
its Affiliates to the Licensee, prior to the Effective Date,
during the discussions or negotiations relating to this
Agreement or the project(s) which are the subject of this
Agreement.
10.4.2 Licensee's Confidential Business Information.
"Licensee's Confidential Business Information" means any
information, whether disclosed in oral, written, visual,
electronic or other form, which Licensee discloses or Sears
observes from Licensee, its agents or contractors in
connection with this Agreement, related to the Licensee
Software and any User Documentation or which: (a) if in
tangible form or other media that can be converted to
readable form, is marked clearly as "secret, confidential
or proprietary" when disclosed; or (b) if oral or visual,
is identified as secret, confidential or proprietary prior
to disclosure and is summarized in a writing marked secret,
confidential or proprietary and delivered within ten (10)
days following the oral or visual disclosure In addition,
Licensee's Confidential Business Information shall include
"Confidential Information" disclosed to Sears, prior to
the Effective Date, during the discussions or negotiations
relating to this Agreement or the project(s) which are the
subject of this Agreement. Sears' Confidential Business
Information and Licensee's Confidential Business
Information are collectively referred to herein as
"Confidential Business Information".
10.4.3 Agreement Confidential. Except as otherwise
expressly permitted in this Section, the parties will treat
the terms and existence of this Agreement as Confidential
Business Information. Notwithstanding the foregoing, each
party may disclose the terms of this Agreement in connection
with the requirements of a public offering or securities
filing, provided that the party intending to disclose the
terms of this Agreement shall provide the other party with
prior written notice, an independent opinion of counsel
that such disclosure is required and opportunity to seek
confidential treatment of the Agreement, or any portion
thereof, and shall cooperate with the other party to obtain
confidential treatment of those portions of the Agreement,
that each party deems to be confidential and not subject to
disclosure.
10.4.4 Treatment of Confidential Business
Information. The party receiving Confidential Business
Information (the "Receiving Party") from the other party
(the "Disclosing Party") shall use such Confidential
Business Information only as necessary to perform
the services and its other obligations
37
under this Agreement. The Receiving Party shall: (a)
restrict disclosure of Confidential Business Information
to its employees, agents and contractors (collectively,
its "Personnel"), who have a need to know such information
to perform the services and who have first agreed to be
bound by the terms of this Section 10.4, and (b) require
its Personnel to execute a document stating such
agreement. In any case, the Receiving Party is liable for
any unauthorized disclosure or use of Confidential
Business Information by any of its Personnel. Within ten
(10) calendar days after receiving the Disclosing Party's
written request, the Receiving Party shall destroy, in
such a manner that it cannot be retrieved, or return to
the Disclosing Party (as instructed by the Disclosing
Party) any materials containing Confidential Business
Information. The Receiving Party shall certify to the
Disclosing Party that it has satisfied its obligations
under Section 10.4.
10.4.5 Exceptions to Confidential Treatment.
(a) The obligations under Section 10.4
do not apply to any Confidential Business Information
that the Receiving Party can demonstrate:
(i) the Receiving Party possessed prior
to disclosure by the Disclosing Party
without an obligation of confidentiality;
(ii) is or becomes publicly available
without breach of this Agreement by the
Receiving Party;
(iii) is independently developed by the
Receiving Party without use of any
Confidential Business Information; or
(iv) is received by the Receiving Party
from a Third Party that does not have an
obligation of confidentiality to the
Disclosing Party.
(b) The Receiving Party may disclose
Confidential Business Information to the extent that,
in the reasonable opinion of the Receiving Party's
legal counsel, it is legally required to be
disclosed. The Receiving Party shall notify the
Disclosing Party within a reasonable time prior to
disclosure and allow the Disclosing Party a
reasonable opportunity to seek appropriate protective
measures.
(c) The Receiving Party shall have the burden
of proving the applicability of any the foregoing
exceptions.
38
10.5 CONFIDENTIAL PERSONAL INFORMATION.
10.5.1 Confidential Personal Information.
Licensee agrees that all information about Sears' or
its Affiliates' individual customers provided
by Sears or its Affiliates to Licensee, including
names, addresses, telephone numbers, account numbers,
customer lists, and demographic, financial and
transaction information, and all Customer
Information (collectively, "Confidential Personal
Information"), shall be deemed confidential.
Section 10.5 shall not apply to information
independently developed by Licensee, without the use
of Confidential Personal Information, provided
that Licensee is not using such information on
Sears' or its Affiliates behalf. In the event
information may be deemed to be both Sears'
Confidential Business Information and Confidential
Personal Information, the provisions of Section 10.5
shall control.
10.5.2 Treatment of Confidential Personal
Information.
(a) Licensee shall use Confidential Personal
Information only as necessary to perform the services
and its other obligations under this Agreement. To
the extent Licensee and/or any Approved Contractor is
required to maintain Confidential Personal
Information for purposes of operating the Licensed
Business in accordance with the terms of this
Agreement, Licensee and any Approved Contractors
shall maintain Confidential Personal Information in a
manner that enables Licensee, the Approved Contractor
and/or Sears to identify and extract separately: (i)
the Confidential Personal Information without
extracting or otherwise affecting any Third Party
customer information; and (ii) any Third Party
customer information without extracting or otherwise
affecting the Confidential Personal Information.
Licensee shall restrict disclosure of Confidential
Personal Information to its Personnel who have a need
to know such information to perform the services and
who have first agreed to be bound by the terms of
Section 10.5. Licensee shall require its Personnel
to execute a document stating such agreement.
Licensee is liable for any unauthorized disclosure or
use of Confidential Personal Information by any of
its Personnel.
(b) Licensee shall not disclose the
Confidential Personal Information to any Third Party,
including an affiliate of Licensee or a permitted
subcontractor, without prior written consent of Sears
and the written agreement of such Third Party to be
bound by the terms of Section 10.5. Unless otherwise
prohibited by law, Licensee shall (i) immediately
notify Sears of any legal process served on Licensee
for the purpose of obtaining Confidential Personal
Information and (ii) permit Sears or its Affiliates
adequate time to exercise its legal options to
prohibit or limit such disclosure.
39
(c) Licensee shall establish and maintain
written policies and procedures designed to ensure
the confidentiality of the Confidential Personal
Information. Copies of such policies and procedures
shall be provided to Sears upon Sears' request.
(d) Within ten (10) calendar days following
termination of this Agreement or ten (10) calendar
days following the completion of a project for which
the Confidential Personal Information has been
provided, whichever first occurs, Licensee shall, at
Sears' discretion, (i) return the Confidential
Personal Information to Sears or (ii) certify in
writing to the Sears that such Confidential Personal
Information has been destroyed in such a manner that
it cannot be retrieved.
(e) Licensee shall notify Sears promptly upon
the discovery of the loss, unauthorized disclosure or
unauthorized use of the Confidential Personal
Information and shall indemnify and hold Sears and
its Affiliates harmless in accordance with Article
XI.
(f) Licensee shall permit Sears to audit
Licensee's compliance with the provisions of Section
10.5 at any time during Licensee's regular business
hours.
(g) A breach of Section 10.5 shall be grounds
for immediate termination of this Agreement in
accordance with Section 9.3.
10.6 INJUNCTIVE RELIEF. In addition to any other rights
the Disclosing Party may have under this Agreement, or under
applicable law, since unauthorized use or disclosure of the
Confidential Business Information and/or the Confidential
Personal Information may result in immediate and irreparable
injury to the Disclosing Party and/or its Affiliates for which
monetary damages may not be adequate, in the event the Receiving
Party or any officer, director, employee, agent or subcontractor
of the Receiving Party uses or discloses or in the Disclosing
Party's sole opinion, the Receiving Party is likely to use or
disclose the Confidential Business Information and/or the
Confidential Personal Information in breach of the Receiving
Party's obligations under this Agreement, the Disclosing Party
and/or its Affiliates shall be entitled to equitable relief,
including temporary and permanent injunctive relief and specific
performance. The Disclosing Party and/or its Affiliates also
shall be entitled to the recovery of any pecuniary gain realized
by Licensee from the unauthorized use or disclosure of the
Confidential Business Information and/or the Confidential
Personal Information.
10.7 SURVIVABILITY. The provisions of Article X shall
survive the expiration or termination of this Agreement for any
reason.
40
XI. DEFENSE AND INDEMNITY
11.1 BY LICENSEE.
11.1.1 Defense. Licensee shall defend, at its own
expense, all allegations asserted by any Third Party in any
claim, action, lawsuit or proceeding (even though such
allegations may be false, fraudulent or groundless) against
Sears, its Affiliates and subsidiaries and/or their
respective directors, officers, employees, agents and
independent contractors (collectively, the "Sears
Indemnified Parties") arising out of any of the following
(collectively, the "Claims"), whether actual or alleged and
whether or not Licensee's indemnity obligations under
Section 11.1.2 apply:
(a) personal injury or death of any person,
damage to any property or any other damage or loss
alleged to result from the development, publication,
display, distribution, administration, operation
or use of the Licensed Website or Licensed Business
Marketing Materials and/or any Sales of goods or
services (including the Sears Content), including
alleged defamation, invasion of privacy or
misappropriation of likeness, antitrust violations or
other business injuries;
(b) infringement, dilution, or misappropria-
tion of any patent or claim of patent, copyright,
trademark, service ▇▇▇▇, trade name, trade dress,
trade secret, right of publicity or other proprietary
right in connection with the Licensed Business or any
other use by Licensee or Sears (including, without
limitation, allegations that the Licensee Marks
infringe a Third Party's rights, but excluding any
Claims only to the extent of any allegations that the
"Sears" name or any trademark, service ▇▇▇▇, trade
name or trade dress created and owned solely by Sears
infringes or misappropriates a trademark, service
▇▇▇▇, trade name and/or trade dress owned by a Third
Party);
(c) advertising and/or trade practices of
Licensee, including defamation and/or claims of false
advertising, consumer deception, fraud and unfair
competition;
(d) relations between Licensee and any of
Licensee's current or former employees, agents or
subcontractors and/or any customer of the Licensed
Business, including claims of wrongful termination,
discrimination, harassment and denial of benefits,
and/or any allegations of employment or co-employment
relationships involving Sears;
(e) Licensee's breach of any of its obliga-
tions undertaken or representations, warranties
and/or covenants made in this Agreement;
(f) the omission or commission of any act,
lawful or unlawful, by Licensee, its affiliates and
subsidiaries and/or their respective directors,
41
officers, employees agents or independent
contractors, whether or not such act is within the
scope of the authority or employment of such
persons;
(g) the loss, unauthorized disclosure or
unauthorized use of the Confidential Personal
Information; and/or
(h) failure to collect sales, use and any
other taxes applicable to the Licensed Business.
Licensee shall use counsel satisfactory to Sears in the defense
of all Claims. Sears shall have the right, at its election, to
take control of the defense and/or investigation of any Claims
and shall have the right to employ and engage attorneys of its
own choice to manage and defend such Claims, at Licensee's risk
and expense, provided that Sears and its counsel shall proceed
with diligence and good faith with respect thereto. If Licensee
negotiates a settlement of any such Claim, such settlement shall
be subject to Sears' prior written approval, which shall not be
unreasonably withheld.
11.1.2 Indemnity. Licensee shall hold harmless and
indemnify the Sears Indemnified Parties from and against
any and all claims, demands, actions, lawsuits,
proceedings, liabilities, losses, costs and expenses
(including fees and disbursements of counsel) incurred by a
Sears Indemnified Party in connection with any Claim(s).
The provisions of this Section 11.1.2 shall not apply to
the extent any injury or damage is determined by a final,
non-appealable order of a court of competent jurisdiction
to have been caused solely by Sears' negligence or willful
misconduct.
11.2 BY SEARS.
11.2.1 Defense. Sears shall defend, at its own
expense, any claim, action, lawsuit or proceeding (even
though such allegations may be false, fraudulent or
groundless) brought by a Third Party against Licensee, its
Affiliates and subsidiaries and/or their respective
directors, officers, employees, agents and independent
contractors (collectively, the "Licensee Indemnified
Parties") alleging that the "Sears" name or any trademark,
service ▇▇▇▇, trade name or trade dress created and owned
solely by Sears infringes or misappropriates a trademark,
service ▇▇▇▇, trade name and/or trade dress owned by a
Third Party.
11.2.2 Indemnity. Sears shall hold harmless and
indemnify the Licensee Indemnified Parties from and against
any and all claims, demands, actions, lawsuits,
proceedings, liabilities, losses, costs and expenses
(including fees and disbursements of counsel) incurred by a
Licensee Indemnified Party due to a claim, action, lawsuit
or proceeding brought by a Third Party alleging that the
"Sears" name or any trademark, service ▇▇▇▇, trade name or
trade dress created and owned solely by Sears infringes or
misappropriates a trademark, service ▇▇▇▇, trade name
and/or trade dress owned by a Third Party. The provisions
of this Section 11.2.2 shall not apply to the extent any
damage is determined by a
42
final, non-appealable order of a court of competent
jurisdiction to have been caused by Licensee's negligence
or willful misconduct.
11.3 SURVIVAL. The provisions of this Article XI shall
survive the expiration or termination of this Agreement for any
reason.
XII. INSURANCE
12.1 TYPES OF INSURANCE. Licensee shall obtain and
maintain, at its sole expense, during the Term of this Agreement
the following policies of insurance from companies having a
rating of at least A-/VII or better in the current Best's
Insurance Reports published by A.M. Best Company and adequate to
fully protect Sears as well as Licensee from and against all
expenses, claims, actions, liabilities and losses related to the
subjects covered by the policies of insurance below:
(a) Worker's Compensation insurance covering all
costs, benefits and liabilities under Workers Compensation
and similar laws which may accrue in favor of any person
employed by Licensee for all states in which Licensee
operates, and Employer's Liability insurance with limits
of liability of at least One Hundred Thousand Dollars
($100,000) per accident or disease and Five Hundred
Thousand Dollars ($500,000) aggregate by disease. Such
insurance shall contain a waiver of subrogation in favor of
Sears. Limits of liability requirements for Employer's
Liability may be satisfied by a combination of Employer's
Liability and Umbrella Excess Liability policies.
(b) Commercial General Liability insurance, including
premises/operations liability, contractual liability,
personal and advertising injury liability (including
trademark infringement), and products and completed
operations liability, with limits of at least One Million
Dollars ($1,000,000) for bodily injury and property damage
combined. Sears shall be named as an additional insured.
Such insurance shall be maintained for three (3) years
after this Agreement expires, without renewal, or
terminates for any reason.
(c) Umbrella Excess Liability insurance, including
but not limited to, premises/operations liability,
contractual liability, personal and advertising injury
liability, and products and completed operations
liability, with limits of at least Five Million Dollars
($5,000,000) for bodily injury and property damage
combined. Sears shall be named as an additional insured.
Such insurance shall be maintained for three (3) years
after this Agreement expires, without renewal, or
terminates for any reason.
(d) Motor Vehicle Liability insurance, for owned,
non-owned and hired motor vehicles used in connection with
the Licensed Website, with limits of at least One Million
Dollars ($1,000,000) for bodily injury and property damage
combined. If only private passenger vehicles are owned or
shall be used in conjunction with this Agreement, a Five
Hundred Thousand Dollar ($500,000) combined single limit of
liability is acceptable. If no vehicles are owned or leased
43
by Licensee, the Commercial General Liability insurance
shall be extended to provide insurance for non-owned and
hired motor vehicles. Limits of liability requirements may
be satisfied by a combination of Motor Vehicle Liability
and Umbrella Excess Liability policies.
(e) Errors and Omissions insurance, covering injury
or damage arising out of the rendering of or failure to
render professional services, with limits of at least Three
Million Dollars ($3,000,000) per claim.
(f) Fidelity insurance with limits of liability of
at least Fifty Thousand Dollars ($50,000). Sears shall be
named as an additional insured.
(g) Any other forms of insurance in such amounts,
with such deductibles and against such risks and losses as
are reasonable for the business and assets of the Licensed
Business including protection against loss of Customer
Information, hacking and business interruption.
12.2 NO CANCELLATION WITHOUT NOTICE. Licensee's policies
of insurance shall expressly provide that they shall not be
subject to material change or cancellation without at least
thirty (30) days' prior written notice to Sears Certificate
Management Services, c/o Near North Technology Services, ▇.▇.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or other address of
which Licensee is notified.
12.3 CERTIFICATES. Licensee shall furnish Sears with
certificates of insurance or, at Sears' request, certified
endorsements and/or copies of policies, prior to execution of
this Agreement and upon each policy renewal during the Term of
this Agreement. If Licensee does not provide Sears with such
certificates of insurance or, in Sears' opinion, such policies
do not comply with Section 12.1, Sears shall so advise Licensee,
and if Licensee does not furnish evidence of acceptable coverage
within five (5) calendar days, Sears shall have the right to
immediately terminate this Agreement upon written notice
to Licensee.
12.4 EXPIRATION/NON-RENEWAL. If Licensee's policies of
insurance expire or are canceled during the Term of this
Agreement or are materially modified, Licensee shall promptly
notify Sears of such expiration, cancellation or material
modification. If such policies of insurance are materially
modified such that, in Sears' opinion, such policies do not
afford adequate protection to Sears, Sears shall so advise
Licensee. If Licensee does not furnish evidence of acceptable
replacement coverage within five (5) calendar days after the
expiration or cancellation of coverage or the notification from
Sears that modified policies are not in compliance with Section
12.1, Sears shall have the right, at its option, to immediately
terminate this Agreement upon written notice to Licensee
pursuant to Section 9.3. Any approval by Sears of any of
Licensee's insurance policies shall not relieve Licensee
of any responsibility under this Agreement, including liability
for claims in excess of described limits.
44
XIII.DISPUTE RESOLUTION
13.1 RELATIONSHIP MANAGER LEVEL PERFORMANCE REVIEW. The
Licensee Relationship Manager and Sears Relationship Manager
shall meet as often as shall reasonably be required to review
the performance of the parties under this Agreement and to
resolve any disputes. Written minutes of such meetings shall be
kept by Licensee for review and approval by Sears. If these
representatives are unable to resolve a dispute within ten (10)
calendar days after the initial request for a meeting, then the
dispute shall be submitted to an executive level performance
review as described in Section 13.2.
13.2 EXECUTIVE LEVEL PERFORMANCE REVIEW. Face-to-face
negotiations regarding any dispute not resolved in accordance
with Section 13.1 shall be conducted by senior executive
officers of Sears and Licensee. If these representatives are
unable to resolve the dispute within ten (10) calendar days
after the representatives have commenced negotiations, or
twenty (20) calendar days have passed since the initial request
for negotiations at this level, then the parties may agree in
writing to submit the dispute to mediation.
13.3 VOLUNTARY, NON-BINDING MEDIATION. If executive-level
performance review is not successful in resolving the dispute,
the parties may, but shall not be obligated to, mutually agree
in writing to submit the dispute to non-binding mediation.
Mediation must occur within five (5) business days after the
parties agree to submit the dispute to mediation, and the
duration of the mediation shall be limited to one (1) business
day. The parties mutually shall select an independent mediator
experienced in commercial contract disputes, and each shall
designate a representative(s) to meet with the mediator in good
faith in an effort to resolve the dispute. The specific format
for the mediation shall be left to the discretion of the
mediator and the designated party representatives and may
include the preparation of agreed-upon statements of fact or
written statements of position furnished to the other party.
13.4 CONTINUED PERFORMANCE. Except where clearly
prevented by the area in dispute, both parties shall continue
performing their obligations under this Agreement while the
dispute is being resolved under this Article unless and until
the dispute is resolved or until this Agreement is terminated as
provided herein.
13.5 EQUITABLE RELIEF. Notwithstanding anything contained
in this Agreement to the contrary, the parties shall be entitled
to seek injunctive or other equitable relief whenever the facts
or circumstances would permit a party to seek such equitable
relief in a court of competent jurisdiction.
XIV. MISCELLANEOUS
14.1 RELATIONSHIP OF PARTIES. Licensee is an independent
contractor. Nothing contained in or done pursuant to this
Agreement shall be construed as creating a partnership, agency,
or joint venture; and neither party shall become bound by any
representation, statement or act of the other party.
45
14.2 ASSIGNMENT.
14.2.1 General. Notwithstanding any other provision
contained in this Agreement, except as provided in Section
14.2.2, Licensee shall not assign, transfer, sublicense or
convey any of its rights or obligations under this
Agreement in whole or in part, without Sears' prior written
consent, which consent Sears shall have the right to
withhold in its sole and absolute discretion. Licensee
acknowledges and agrees that no assignment or other
transfer of this Agreement shall be effective until such
time as: (a) Releases 1.1, 2.0 and 3.0 each have achieved
Certification; (b) Licensee and Kodak have entered into a
definitive written agreement that permits Licensee to make,
have made and use the Kodak Inventions for purposes of
Licensee, its assignees and Sears fulfilling their
respective obligations under this Agreement; and (c) the
Portrait Archiving Functionality (defined in the Third
Amendment) has been successfully implemented and tested, to
Sears' sole satisfaction, in all one hundred twenty-five
Test Studios (defined in the Third Amendment)
(collectively, the "Conditions Precedent to Assignment").
14.2.2 Change of Control. Any Change of Control of
Licensee shall constitute an assignment of this Agreement
pursuant to Section 14.2.1, for which Sears' prior written
consent is required. Any attempted assignment, transfer,
sublicense, conveyance or Change of Control without Sears'
prior written consent is void and shall be a cause for
termination by Sears under Section 9.3. For purposes of
this Agreement, a "Change of Control" means an asset or
stock sale, merger, consolidation, or any other transaction
or arrangement the effect of which is that fifty percent
(50%) or more of the total voting power entitled to vote in
the election of Licensee's board of directors (or in the
event Licensee is not formed as a corporation, its
equivalent) is held by a person or persons other than
either the shareholders or members of Licensee, who,
individually or as a group, held fifty percent (50%) or
more of such voting power immediately prior to such event.
14.2.3 Assignment to Centrics. At any time after
the Conditions Precedent to Assignment have been satisfied,
Licensee may request Sears' approval to assign this
Agreement to Centrics. Licensee acknowledges and agrees
that any such request must satisfy the following conditions
to Sears' sole satisfaction:
(a) Centrics is duly organized, validly
existing and in good standing under the laws of the
state of incorporation or formation and qualified to
do business in those jurisdictions where it is
conducting such business, as evidenced by the
certificate of incorporation or formation of Centrics
and a certificate of good standing with respect to
Centrics, each certified by the Secretary of State of
the state of incorporation or formation as of a date
not more than ten (10) business days prior to the
effective date of the assignment hereunder;
46
(b) Centrics agrees, in writing, to be bound
by the terms and conditions of this Agreement and the
Source Code Escrow Agreement; and
(c) Centrics has obtained insurance coverage
in accordance with the terms of Article XII of the
Agreement and has delivered to Sears evidence of such
coverage in accordance with Section 12.3 of the
Agreement.
Notwithstanding the foregoing, Sears shall have the right
to withhold its approval for any assignment of this
Agreement to Centrics in Sears' sole and absolute
discretion. Following a valid assignment to Centrics,
Consumer Programs Incorporated shall:
(d) own, at all times, no less than fifty
percent (50%) of the total voting power entitled to
vote in the election of the Centrics Board of
Directors;
(e) maintain, at all times, sufficient control
over the operations of Centrics so as to ensure
Centrics' performance under this Agreement;
(f) remain primarily liable for any and all of
CPI's and/or Centrics' defense and indemnification
obligations under this Agreement and payment of any
and all other amounts due to Sears under this
Agreement;
(g) remain secondarily liable for Centrics'
performance of any other obligation of Licensee under
this Agreement;
(h) not raise any defenses on behalf of
either CPI or Centrics for either CPI's or Centrics'
failure to perform under this Agreement that are not
related solely to its rights and obligations pursuant
to or under this Agreement;
(i) remain, along with its Affiliates, subject
to the terms of Section 1.4.1 of the Agreement; and
(j) permit Sears' rights under Section 6.7 to
apply to CPI and any amounts due or owing under any
current or future agreement between Sears and CPI.
In the event CPI fails to abide by the covenants set forth
in this Section, Sears shall have the right to terminate
this Agreement in accordance with Section 9.3. Following
a valid assignment of this Agreement to Centrics, no other
assignment shall be permitted under this Section.
47
14.3 ASSIGNMENT BY SEARS. This Agreement is fully
transferable by Sears and shall inure to the benefit of any
transferee or other legal successor to Sears' interest
herein.
14.4 BINDING NATURE. The provisions of this Agreement
shall be binding upon Licensee and upon Licensee's successors
and assigns and shall be binding upon and inure to the benefit
of Sears, its successors and assigns.
14.5 PUBLICITY. Licensee shall not issue any publicity
or press release regarding its contractual relations with Sears
or regarding the Licensed Website or the Licensed Business, and
Licensee shall refrain from making any reference to this
Agreement or to Sears in any prospectus, annual report or other
filing required by Federal or state law, or in the solicitation
of business without obtaining Sears' prior written approval of
such action from Sears Relationship Manager and Sears Public
Relations Manager. Licensee shall adhere, at all times, to
Sears' policies regarding interaction with the media, related to
all communications regarding the Licensed Website, the Licensed
Business and this Agreement.
14.6 CUMULATIVE REMEDIES. The remedies provided in this
Agreement are cumulative, and shall not affect in any manner any
other remedies that either party may have for any default or
breach by the other party. The exercise of any right or remedy
shall not constitute a waiver of any other right or remedy under
this Agreement or provided by law or equity. No waiver of any
such right or remedy shall be implied from failure to enforce
any such right or remedy other than that to which the waiver is
applicable, and only for that occurrence.
14.7 BANKRUPTCY. In the event Licensee voluntarily or
involuntarily becomes a debtor in a case under the Bankruptcy
Code and Licensee or the trustee in bankruptcy rejects this
Agreement under Section 365 of the Bankruptcy Code, Sears shall
have all of the rights of a licensee under Section 365(n)(1) of
the Bankruptcy Code, including, the right to: (a) treat this
Agreement as terminated; or (b) retain Sears' rights under this
Agreement, specifically including the right to exercise its
rights granted herein to the Licensed Website and/or the
Licensee Software (and to all work-in-progress relating
thereto). Failure by Sears to assert its right to retain its
benefits to the intellectual property embodied in the Licensed
Website and/or the Licensee Software pursuant to Section
365(n)(1)(B) of the Bankruptcy Code with respect to this
Agreement if it is rejected by Licensee or the trustee in
bankruptcy shall not be construed by the courts as a termination
of such Agreement by Sears under Section 365(n)(1)(A) of the
Bankruptcy Code.
14.8 SEVERABILITY. If any provision in this Agreement is
held to be invalid, illegal or unenforceable by a court of
competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been
included.
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14.9 GOVERNING LAW. This Agreement shall be interpreted
and governed by the internal substantive laws of the State of
Illinois, without regard to its conflict of law principles.
This Agreement shall not be effective until it has been received
and executed by Sears in Hoffman Estates, Illinois. The federal
and/or state courts of Illinois shall have personal and subject
matter jurisdiction over, and the parties each hereby submit to
the venue of such courts with respect to, any dispute arising
pursuant to this Agreement, and all objections to such
jurisdiction and venue and hereby waived.
14.10 HEADINGS. The paragraph titles in this Agreement
are for the mere convenience of the parties, and shall not be
considered in any construction or interpretation of this
Agreement.
14.11 INTERPRETATION. The parties agree that any principle
of construction or rule of law that provides that an agreement
shall be construed against the drafter of the agreement in the
event of any inconsistency or ambiguity in such agreement shall
not apply to the terms and conditions of this Agreement. As
used herein, "include" and its derivatives (including, "e.g.")
shall be deemed to mean "including but not limited to". The
following order of precedence shall be followed in resolving any
inconsistencies between the terms of this Agreement and the
terms of any Schedules, Exhibits, Attachments, Addenda and other
documents attached hereto: (a) first, the terms contained in the
body of this Agreement; (b) second, the terms of the other
Schedules, Exhibits, Attachments and Addenda to this Agreement,
provided that no order of precedence shall be applied among such
Schedules, Exhibits (excluding the Master Project Plan
and any Release-specific Project Plans), Attachments and
Addenda; (c) third, the terms of a Release-specific Project
Plan; (d) fourth, the terms of the Master Project Plan; and
(e) fifth, User Documentation.
14.12 NOTICES. All notices provided for or which may be
given in connection with this Agreement shall be in writing and
given by personal delivery, certified mail with postage prepaid
and return receipt requested or its equivalent, such as private
express courier, or by facsimile transmission (with a
confirmation copy sent by regular mail).
Notices given by Licensee to Sears shall be
addressed to:
SEARS, ▇▇▇▇▇▇▇ AND CO.
Attention: Vice President and General
Manager of Licensed Businesses
Department 725
Location: E3-348B
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
SEARS, ▇▇▇▇▇▇▇ AND CO.
Attention: General Counsel
49
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices given by Sears to Licensee shall be
addressed to:
CONSUMER PROGRAMS INCORPORATED
Attention: President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
CONSUMER PROGRAMS INCORPORATED.
Attention: General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Notices if so sent by mail shall be deemed to have been given
when deposited in the mail or with the private courier and if so
sent by facsimile transmission shall be deemed to have been
given when sent. All changes of address must be communicated to
the other party in writing.
14.13 INCORPORATION OF RECITALS. The Recitals set forth
on page one of this Agreement are hereby incorporated into this
Agreement by this reference and made a part of this Agreement.
14.14 ENTIRE AGREEMENT. This Agreement, together with all
Schedules, Attachments, Addenda and Exhibits thereto, sets forth
the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, between the parties
including the Letter Agreement, dated November 15, 2000, as
amended (the "Letter Agreement"), between the parties; provided,
however, that the confidentiality and indemnification
obligations of the parties under this Agreement also shall apply
for the term of the Letter Agreement, which term commenced on
November 15, 2000 and remained in effect until the Effective
Date. This Agreement shall not be supplemented, modified or
amended except by a written instrument signed by duly authorized
representatives of Licensee and Sears, and no other person has
or shall have the authority to supplement, modify or amend this
Agreement in any other manner.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused their respective
authorized representatives to execute this Agreement as of the
Effective Date.
SEARS, ▇▇▇▇▇▇▇ AND CO.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Its: Vice President and General Manager,
Licensed Businesses
CONSUMER PROGRAMS INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
51