Agreement - Amazon.com Commerce Services inc. and drugstore.com inc.
AGREEMENT
This Agreement, dated as of January 24, 2000 is made and entered into by
and between Amazon.com Commerce Services, Inc., ("ACI"), an indirect wholly
owned subsidiary of Amazon.com, Inc. ("Amazon.com"), and drugstore.com, inc.
("drugstore.com"). ACI and drugstore.com sometimes are referred to collectively
as the "Parties" and individually as a "Party." ACI and drugstore.com agree as
follows:
Section 1. Definitions
Whenever used in this Agreement with initial letters capitalized, the
following terms shall have the following specified meaning:
"Amazon.com Health and Beauty Section" means an Amazon.com Product Section,
to be created pursuant to this Agreement, featuring Drugstore Products and
Beauty Products, to be labeled either "Drugstore," "Health and Beauty" or such
other title as mutually agreed by the Parties.
"Amazon.com Product Section" means any discrete group of products and
services available at any time during the Term on the Amazon.com Site that is
identified by a tab or other top-level product category identifier on the
Amazon.com Site Home Page (such as "Books," "Music," "DVD and Video," "Toys,"
etc.), but excluding (a) the Amazon.com Site Home Page itself, and (b) any
mechanisms, areas or services on or through which independent third parties may
sell products or services through the Amazon.com Site (including, without
limitation, the existing "Auctions", "zShops", "Sothebys.amazon.com" and
"Amazon.com Advantage" areas and services of the Amazon.com Site, and any
successors or replacements thereto).
"Amazon.com Site" means that Web Site, the primary Home Page for which is
identified by the URL www.amazon.com (and any successor or replacement Web
Site). For the avoidance of doubt, the "Amazon.com Site" does not include any
other Web Sites maintained by or for Amazon.com, ACI or its Affiliates
(including, without limitation, those Web Sites with the primary Home Pages
identified by the URL's www.amazon.co.uk and www.amazon.de).
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"Amazon.com Site Functionality" means, collectively: (a) tab, search and
browse functionality available to users of the Amazon.com Site for navigating
through Amazon.com Product Sections; (b) payment and transaction functionality
available to users of the Amazon.com Site for purchasing products (including,
without limitation, "shopping cart" and "Payment with 1-Click" functionality),
(c) any other functionality available on the Amazon.com Site that ACI may make
available to drugstore.com from time to time, and (d) any future equivalents,
improvements and enhancements of any of the foregoing.
"Affiliate" means, with respect to either Party, any individual or entity
that directly or indirectly controls, is controlled by or is under common
control with that Party, or which such Party beneficially owns at least fifty
percent (50%) of the equity interests therein;
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excluding any entity for which a drugstore.com or Amazon.com does not directly
or indirectly control the operation and management thereof.
"Beauty Products" means cosmetics and other makeup products, fragrance
products, bathing products, skin care products and hair care products.
"Change of Control" means, with respect to drugstore.com, a transaction or
series of related transactions that results in (a) a sale of all or
substantially of the assets of drugstore.com, (b) the transfer of fifty percent
(50%) or more of the outstanding voting power of drugstore.com (other than to a
subsidiary corporation wholly-owned by drugstore.com), (c) the acquisition by a
person or entity, by reason of any contractual arrangement with one or more
persons or entities, of the right or power to appoint or cause to be appointed a
majority of the directors or officers of drugstore.com.
"Closing" means the consummation of the purchase of common stock of
drugstore.com by Amazon.com pursuant to the Stock Purchase Letter Agreement
between Amazon.com and drugstore.com (the "Purchase Agreement").
"Confidential Information" means all nonpublic information relating to a
Party or its Affiliates that is designated as confidential or that, given the
nature of the information or the circumstances surrounding its disclosure,
reasonably should be considered as confidential, including without limitation
any information disclosing that a specific end-user traveled from the Amazon.com
Site to the drugstore.com Site (however obtained). Confidential Information
includes, without limitation, (a) all nonpublic information relating to a
Party's or its Affiliates' technology, customers, business plans, promotional
and marketing activities, finances and other business affairs and (b) all third
party information that a Party or its Affiliates is obligated to keep
confidential. Confidential Information may be contained in tangible materials,
such as drawings, data, specifications, reports and computer programs, or may be
in the nature of unwritten knowledge. Confidential Information does not include
any information that (i) has become publicly available without breach of this
Agreement, (ii) can be shown by documentation to have been known to the
Receiving Party at the time of its receipt from the Disclosing Party or its
Affiliates, (iii) is received from a third party who did not acquire or disclose
such information by a wrongful or tortious act or (iv) can be shown by
documentation to have been independently developed by the Receiving Party
without reference to any Confidential Information.
"Disclosing Party" means a Party that discloses Confidential Information to
the other Party in connection with this Agreement.
"Drugstore Products" means health, beauty, wellness, personal care and
prescription drug products, including over-the-counter drugs, first aid,
contraceptives, vitamins and fitness supplements, natural health remedies (such
as nutritional supplements, herbs and homeopathy), medical devices for home
health care and other durable medical goods, and other products relating to
hair, body, skin and eye care (e.g. contact lenses and contact lens solutions).
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"drugstore.com Site Functionality" means, collectively: (a) functionality
available on the drugstore.com Site that drugstore.com may make available to ACI
or Amazon.com from time to time, and (b) any future equivalents, improvements
and enhancements of any of the foregoing.
"drugstore.com Site" means, collectively: (a) that Web Site, the primary
Home Page for which is identified by the URL www.drugstore.com (and any
successor or replacement Web Site); (b) that Web Site, the primary Home Page for
which is identified by the URL www.beauty.com (and any successor or replacement
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Web Site); and (c) any other Web Sites operated by or for drugstore.com or its
Affiliates from time to time through which Drugstore Products or Beauty Products
are sold or offered for sale.
"Home Page" means, with respect to a Web Site, the Web page designated by
the operator of the Web Site as the initial and primary end user interface for
the Web Site.
"Intellectual Property Right" means any patent, copyright, trademark,
service mark, trade dress, trade name or trade secret right and any other
intellectual property or proprietary right.
"Launch Date" means the date on which the Amazon.com Health and Beauty
Section is made generally available to all Amazon.com customers, which date
shall be mutually agreed by the Parties, but which date shall occur no later
than 90 days after the Closing.
"Receiving Party" means a Party that receives Confidential Information from
the other Party in connection with this Agreement.
"Site" means the Amazon.com Site or the drugstore.com Site, as required by
the context.
"Technology" means any design, specification, content (which includes
product files, catalogs, images, and editorial content), data, URL, domain name,
software, code, user interface, "look and feel," technique, algorithm, method,
process, device, procedure, functionality or other technology or item.
"Term" means the term of this Agreement as defined in Section 10.
"Trademark" means any trademark, service mark, trade name, trade dress,
proprietary logo or insignia or other source or business identifier.
"Transition Page" means a page of the Amazon.com Health and Beauty Section
that is part of the Amazon.com Site and contains representations of the
drugstore.com site and contains live links to pages on the drugstore.com Site,
as further described in Section 2.1.
"Web Site" means any point of presence maintained on the Internet or on any
other public data network. With respect to any Web Site maintained on the World
Wide Web or any successor public data network, such Web Site includes all HTML
pages (or similar unit
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of information presented in any relevant data protocol) that either (a) are
identified by the same second-level domain (such as http://www.amazon.com) or by
the same equivalent level identifier in any relevant address scheme, or (b)
contain branding, graphics, navigation or other characteristics such that a user
reasonably would conclude that the pages are part of an integrated information
or service offering.
"Year" means any period of twelve (12) consecutive months commencing on the
Closing, or on any anniversary of the Launch.
Section 2. Amazon.com Health and Beauty Section
The overall goal of the Parties is to maximize drugstore.com customers and
revenues through the Amazon.com Health and Beauty Section and create a superior
customer experience on the Amazon.com Health and Beauty Section.
2.1 Phase One -- Transition Page(s). ACI will create and, following the
Launch Date, maintain on the Amazon.com Site during the Term the Amazon.com
Health and Beauty Section, which shall include the Transition Page(s) ("Phase
One"). The Amazon.com Health and Beauty Section in Phase One and Phase Two will
be given generally the same treatment including visibility and persistence on
the Amazon.com Site as the top five most prominent Amazon.com Product Sections,
excluding any seasonal-based or one-time promotions involving one or more
Amazon.com Product Sections or as a result of Amazon.com Site changes for a
particular individual due to personalization of the Amazon.com Site by such
individual. The format and functionality of the Transition Page(s) will be
generally consistent with other pages of the Amazon.com Site, except that the
coloring, graphics, fonts, logos and similar "look and feel" aspects of the
Transition Page(s) will be generally consistent with similar characteristics of
the drugstore.com Site. All links, including a tab as used on the Amazon.com
Site as of the date hereof, and other navigation functions for the Amazon.com
Health and Beauty Section on the Amazon.com Home Page will link directly to a
Transition Page. The Transition Page(s) will contain hypertext links that will
allow users to navigate directly to pages on the drugstore.com Site. The
Parties will work together to determine the specific editorial and creative
content, personalization, placement, promotions, messaging, and category names
of the Transition Pages, ensuring consistency with the drugstore.com Site,
including editorial and creative content, personalization, placement,
promotions, messaging, and category names, pursuant to the implementation
procedures set forth in Section 4. Subject to the foregoing, other than with
respect to the Transition Pages, ACI will determine the content, appearance,
functionality and all other aspects of the Amazon.com Site (including the
Amazon.com Site Home Page) in its sole discretion.
2.2 Phase Two - Catalog Integration and Single Checkout. On or before
June 30, 2000, ACI in consultation with drugstore.com will determine the design
and development schedule for implementation of certain of the Amazon.com Site
Functionalities in order to enable Amazon.com customers to shop and pay for non-
prescription products available on the drugstore.com Site (along with shopping
and paying for all other products available on the Amazon.com Site) while
shopping on the Amazon.com Site. The Parties intend that with respect to this
Amazon.com Site Functionality, the shopping experience within the
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Amazon.com Health and Beauty Section will be consistent with the functionality
of the other Amazon.com Product Sections with respect to search and checkout,
while the general shopping experience within the Amazon.com Health and Beauty
Section will be generally the same as the shopping experience on the
drugstore.com Site and the coloring, graphics, logos, editorial, merchandising,
features and services and other "look and feel" aspects of the Amazon.com Health
and Beauty Section will remain generally the same as on the drugstore.com Site
(except with respect to checkout and search) or as otherwise agreed to by
drugstore.com, given the technical and production issues associated with the
search and checkout features ("Phase Two"). Customers who purchase products
through the Amazon.com Health and Beauty Section are customers of ACI,
Amazon.com and drugstore.com. drugstore.com will be solely responsible for all
order fulfillment and customer service for orders of products purchased from
drugstore.com through the Amazon.com Health and Beauty Section. ACI or its
Affiliates will provide drugstore.com with all order-related and customer-
related data necessary for drugstore.com to fulfill its order fulfillment and
customer service responsibilities as well as to recognize and transact with an
Amazon.com Heath and Beauty Section customer as a repeat customer on the
drugstore.com Site. Such information may include products ordered, name,
address, email address and credit card information of the purchaser and other
necessary information. drugstore.com shall be free to use such data and
communicate with such customers as it uses such data for, and as it communicates
with, its other customers. All revenues from sales of products or services in
the Amazon.com Health and Beauty Section, other than cross-promoted products
from other Amazon.com Product Sections, shall be drugstore.com revenues and
Amazon.com and ACI shall have no right to any revenue share or other fees,
except as set forth in Section 5.3. On or before December 31, 2000 and to the
extent commercially reasonable and technically feasible, ACI and drugstore.com
shall implement Phase Two in a manner that does not subject ACI, Amazon.com and
their Affiliates to federal, state or local regulations involving pharmacists,
over the counter drugs or homeopathic drugs and does not subject drugstore.com
to any additional regulation of such kind, and further does not create any
jurisdiction or authority for any governmental authority to impose material
additional obligations to collect sales tax, use tax or similar tax in
connection with any sales of products by ACI, Amazon.com, drugstore.com or their
Affiliates. The parties will agree to pursue in good faith ways to permit
customers to order prescription products through the Amazon.com Health and
Beauty Section in Phase Two, and cross-promote products from other Amazon.com
Product Sections.
2.3 Redesign of Amazon.com Site. Without limiting the generality of the
foregoing, nothing in this Agreement shall limit the ability of Amazon.com, ACI
or their Affiliates to re-design or modify the appearance and functionality of
the Amazon.com Site Home Page or Amazon.com Site from time to time, in their
sole discretion; provided, however, that in the event of such a redesign or
revision, the presentation of the Amazon.com Health and Beauty Section on the
Amazon.com Site Home Page and throughout the Amazon.com Site will continue to
receive generally the same treatment including visibility and persistence as the
top five most prominent Amazon.com Product Sections as set forth in Section 2.1.
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2.4 Certain drugstore.com Obligations. During the Term, drugstore.com
will (a) ensure that every page of the drugstore.com Site displayed to any user
who links to the drugstore.com Site from the Amazon.com Site displays prominent,
above-the-fold, graphical hypertext links to be designed by ACI in consultation
with drugstore.com, which, when clicked, return the user to the Amazon.com Site,
(b) ensure that substantially all products available through the drugstore.com
Site are available through the Amazon.com Health and Beauty Section, (c) ensure
that prices of products offered through the Amazon.com Health and Beauty Section
are equal to or lower than the prices for the same products on the drugstore.com
Site, and (d) ensure that promotions related to products offered through the
Amazon.com Health and Beauty Section (including, without limitation, discounts,
free products with a purchase and "points"), are equal or superior to any such
promotions generally offered by drugstore.com on the drugstore.com Site to the
extent technically and commercially feasible. Notwithstanding the functionality
necessary for a single checkout and catalog integration, drugstore.com will be
solely responsible for all order fulfillment and customer service for orders of
products from drugstore.com through the Amazon.com Health and Beauty Section.
2.5 No Framing. Neither Party will use or authorize or assist any third
party to use in connection with any links on its Site any framing techniques,
interstitial advertisements, pop-up windows, new consoles or other items or
techniques that would alter the appearance or presentation of the other party's
Site from that seen by users hand-entering the applicable URL into their
browser. Without limiting the generality of the foregoing, each Party
specifically acknowledges that it will not cause or permit any new browser
window to open upon any user's clicking on any link on its Site to the other
Party's Site.
2.6 Technical Standards; Customer Service. The Parties will at all times
comply with the technical, site and customer service requirements as mutually
agreed upon by the parties within 45 days of the Closing and to be added as
Exhibit A, and comply with the privacy policies as set forth in Exhibit B.
Without limiting the generality of the foregoing, drugstore.com will at all
times conduct its dealings with customers who link to the drugstore.com Site
from the Amazon.com Site in a professional and courteous manner which reflects
favorably upon ACI and its Affiliates and the Amazon.com Site and will in any
event ensure that (a) the drugstore.com Site is at all times at least generally
comparable in quality, ease of use and performance to the Amazon.com Site; and
(b) the customer service provided to users of the drugstore.com Site is of no
lesser quality, timeliness and responsiveness than that provided to users of the
Amazon.com Site, so long as ACI or Amazon.com has delivered all relevant
customer and order information in a timely and reliable manner.
2.7 Referral Information. drugstore.com will not disclose any personally
identifying information regarding users of the Amazon.com Site to any third
party, or use or permit any third party to use such information to target
communications specifically to users of the Amazon.com Site without ACI's prior
written consent, provided, however, that nothing in the foregoing shall prohibit
drugstore.com from contacting its own customers generally, so long as such
contacts are not specifically and intentionally directed at customers who have
linked to the drugstore.com Site from the Amazon.com Site.
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Section 3. Promotional Activities
3.1 Press Releases. Both Parties will issue mutually agreeable press
releases describing the nature of their relationship upon or shortly after (a)
the execution of this Agreement, disclosing that drugstore.com shall be the
exclusive provider of Drugstore Products and Beauty Products on the Amazon.com
Site, the Term, the Annual Fees and the purchase of drugstore.com common stock
by Amazon.com pursuant to the Purchase Agreement, and (b) the Launch Date.
Neither Party will issue any other press releases, make any other disclosures
regarding this Agreement or its terms or the relationship between the parties
except that either Party may speak in public regarding disclosures set forth in
(a) above, or use the other party's Trademarks (except as permitted by Section
6), without the other party's prior written consent, except that a Party may,
without the other Party's prior consent, distribute or issue public relations
materials or press releases that contain a description of the relationship of
the Parties, provided that such description has been approved in advance by the
Parties. Disclosure of this Agreement of the transactions contemplated herein
required by applicable law or the transactions contemplated herein shall be
governed solely by Section 11.2.
3.2 Advertising.
3.2.1 Amazon Customer Base. During the Term, ACI will exert reasonable
commercial efforts to introduce the Amazon.com Health and Beauty Section to the
Amazon.com customer base. For each Year of the Term, ACI will deliver
advertising materials for the Amazon.com Health and Beauty Section to the
Amazon.com customer base via electronic mail and product shipments to Amazon.com
customers as the Parties shall mutually agree.
ACI shall make commercially reasonable efforts to deliver these electronic
mail and product shipments ratably over each year, unless otherwise agreed to by
drugstore.com. Each such advertisement shall include a promotional offer, the
specific nature of which shall be agreed upon by the Parties, but the final
determination of which shall rest with drugstore.com so long as the promotion
shall be deemed reasonably attractive to an Amazon.com customer. During Phase
One, such electronic mail and product shipments shall contain no promotions
other than for drugstore.com unless otherwise directed by drugstore.com. During
Phase Two, such electronic mail shall contain no promotions other than for the
Amazon.com Health and Beauty Section; provided that the drugstore.com brand
shall be at least as prominent as any Amazon.com brand included in all such
promotions. During Phase Two, if the parties determine that the conversion
rates for product shipment promotions containing Amazon.com Health and Beauty
Section promotions are materially lower than conversion rates for product
shipment promotions containing drugstore.com promotions, the parties agree to
mutually determine whether all remaining product shipment promotions contain no
promotions other than for drugstore.com. drugstore.com shall design, produce,
and pay for all materials to be included in such emails and product shipments,
provided such design is subject to the reasonable prior approval of ACI. If
drugstore.com and ACI agree that ACI shall handle design or production,
drugstore.com shall reimburse ACI for its reasonable costs; provided that
Amazon.com shall not charge drugstore.com for any internal costs associated with
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segregating and delivering such emails or product shipments. ACI will invoice
drugstore.com on a monthly basis for the costs incurred by ACI, and
drugstore.com will pay ACI the invoiced sums within thirty (30) days after
receipt of the applicable invoice.
3.2.2 Other Continuing Marketing Efforts. ACI will make commercially
reasonable efforts to include the Amazon.com Health and Beauty Section in
placements on the Amazon.com Site consistent including in terms of visibility of
and persistence, with placements of the other top five most prominent Amazon.com
Product Sections to the extent technically feasible, including cross-sell
prompts, reminders on order confirmation and checkout pages, daily specials on
the Amazon.com Home Page and other pages on the Amazon.com Site, placements on
search results pages and other programmatic techniques used by Amazon.com to
promote Amazon.com Product Stores. In addition, if and when ACI produces
catalogs for multiple Amazon.com Product Sections, ACI will advertise the
Amazon.com Health and Beauty Section through such catalogs in a manner generally
consistent with the promotion of other Amazon.com Product Sections through such
catalogs.
3.2.3 Advertising Budget. For each Year during the Term, ACI will commit
to an incremental funds budget of one million dollars ($1,000,000) that is
incremental to Amazon.com's other marketing efforts for general advertising
through traditional media outlets specifically promoting the Amazon.com Health
and Beauty Section. Such funds will be used to cover actual payments to third
parties for the advertising placements and production costs. ACI will determine
the nature, timing and content of which shall be determined by ACI in its sole
discretion, subject to the reasonable prior review and approval of
drugstore.com, which will not be unreasonably withheld.
3.2.4 Competitive Advertising. Neither Amazon.com nor ACI shall post or
serve, or permit to be posted or served, on any page of the Amazon.com Site
(excluding any mechanisms, areas or services on or through which independent
third parties may sell products or services through the Amazon.com Site
(including, without limitation, the existing "Auctions", "zShops",
"Sothebys.amazon.com" and "Amazon.com Advantage" areas and services of the
Amazon.com Site, and any successors or replacements thereto), any advertising
banner, promotional button, promotion link or other advertising or promotional
placement or materials related to any competitor of drugstore.com.
drugstore.com will not post, or permit to be posted or served, on any page of
the drugstore.com Site displayed to any user who links to the drugstore.com Site
from the Amazon.com Health and Beauty Section, any advertising banner,
promotional button, promotion link or other advertising or promotional placement
or materials related to any competitor of Amazon.com, ACI or their Affiliates.
3.2.5 Other Advertising. Neither ACI nor Amazon.com shall place any
third party advertising on the Transition Pages or within the Amazon.com Health
and Beauty Section without drugstore.com's prior consent.
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Section 4. Implementation
4.1 Account Managers. Each Party will assign an account manager (which
manager shall be subject to change from time to time by the assigning Party upon
written notice to the other Party) to oversee the performance of such Party's
obligations under this Agreement and to facilitate coordination of the Parties'
performance of their respective obligations (including, without limitation, the
creation and maintenance of the Transition Pages, the integration of the
Amazon.com Site Functionality with the drugstore.com Site, and the advertising
activities contemplated in Section 3). The account managers will meet at least
once every three (3) months during the Term to review the implementation of this
Agreement and to explore methods for improving performance.
4.2 Cooperation. During the Term, the Parties will cooperate in good
faith and use commercially reasonable efforts to (a) provide a positive customer
experience between the Amazon.com Health and Beauty Section and the
drugstore.com Site, (b) maximize conversion rates and sales from or through the
Amazon.com Health and Beauty Section, and (c) review opportunities for cross-
marketing each Party's products.
4.3 Dedicated Personnel. Each Party will dedicate during the Term the
appropriate resources and personnel to produce and promote the Amazon.com Health
and Beauty Section. Each Party's designated employees will be subject to change
from time to time by such Party in its sole discretion upon notice to the other
Party.
4.4 Traffic Data. Throughout the Term as is reasonably available, on a
monthly basis, each Party will provide the other Party all relevant data
requested from time to time by the such Party concerning behavior on the
drugstore.com Site and the Amazon.com Health and Beauty Section, as the case may
be. The Parties will hold such data in confidence and will not use it except in
connection with their marketing efforts, or otherwise in accordance with such
reasonable guidelines as the Parties may agree upon. Notwithstanding anything
contained in this Section 4.4, neither Party will be required to deliver to the
other Party any user data in violation of its then-existing, generally
applicable policies regarding the protection of user information with respect to
the drugstore.com Site or the Amazon.com Site or in contravention of any
applicable law or regulation.
4.5 Dispute Resolution. In all discussions and activities relating to
this Agreement, ACI and drugstore.com will cooperate in good faith to accomplish
the objectives specified in this Agreement. If any dispute arises relating to
either Parties' rights or obligations under this Agreement, and the Parties are
unable to resolve the dispute in the ordinary course of business, ACI and
drugstore.com will use good-faith efforts to resolve the matter in accordance
with this Section 4.5. Within three (3) days following the written request of
either Party (which will describe the nature of the dispute and other relevant
information), the Parties' account managers pursuant to Section 4.1 will meet to
resolve the dispute at a mutually convenient time and place. If the account
managers are unable to resolve the dispute within two (2) days following their
initial meeting, they will refer the matter to the Parties' divisional
executives who are responsible for the administration of this Agreement, along
with a written statement (or statements) describing the nature of the
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dispute and other relevant information. Within three (3) days following the
referral of the matter to the Parties' divisional executives, the divisional
executives will meet to resolve the dispute at a mutually convenient time and
place. Additional representatives of the parties (but not their accounting
managers) may be present at the meeting. If the divisional executives are unable
to resolve the dispute within two (2) days following their initial meeting, they
will refer the matter to the Parties' General Counsels, along with a written
statement (or statements) describing the nature of the dispute and other
relevant information. Within three (3) days following the referral of the matter
to the Parties' General Counsels, the General Counsels will meet to resolve the
dispute at a mutually convenient time and place. Additional representatives of
the parties (but not their account managers or divisional executives) may be
present at the meeting. If the General Counsels are unable to resolve the
dispute, either Party shall be free to pursue any remedy it shall have at law or
in equity. Any resolution reached under this Section 4.5 will be reduced to
writing and signed by the Parties. During any dispute resolution procedure
conducted under this Section 4.5, the Parties will diligently perform all
obligations hereunder that are not directly related to the dispute.
Section 5. Compensation
5.1 General. Except as expressly provided for elsewhere in this
Agreement, each Party will be responsible for all costs and expenses incurred by
such Party in performing its obligations under this Agreement.
5.2 Setup Fee. Upon the Closing, drugstore.com shall pay to ACI a non-
refundable set-up fee in the amount of three million dollars ($3,000,000),
representing compensation for engineering work performed.
5.3 Annual Fees. During the Term, drugstore.com will pay ACI annual fees
in the amounts set forth below ("Annual Fees"):
Year 1: $27,000,000.00
Year 2: $35,000,000.00
Year 3: $40,000,000.00
Subject to Section 10.5.2, drugstore.com will pay each of the Annual Fees
set forth above in four (4) equal installments due at the end of each
consecutive three month period of the Term following the Launch Date ("Quarterly
Payments").
5.4 Prepayment. At the Closing, drugstore.com will pay to ACI
$27,000,000.00 via wire transfer, which payment will represent prepayment of the
first four Quarterly Payments due under Section 5.3, such that after such
prepayment drugstore.com shall have no obligation to make Quarterly Payments
until the fifth Quarterly Payment becomes due at the end of the fifth quarter of
the Term following the Launch Date.
5.5 Year 3 Equity Option. The parties acknowledge that, at the sole
discretion of ACI, but with drugstore.com's approval, drugstore.com shall issue
at the second anniversary of the Launch to Amazon.com shares of common stock of
drugstore.com with a
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then-current fair market value equal to the Annual Fee owed for Year 3 in lieu
of such Annual Fee.
5.6 Overdue Payments. Payments called for by this Section 5 that are not
received within fifteen (15) days of receipt of an invoice after the end of the
period for which payment is due will bear interest at a rate equal to the lesser
of one and one-half percent (1-1/2%) per month or the maximum legal rate
permitted under the controlling law. Payment of such interest shall not cure or
excuse any breach of any underlying payment obligation.
5.7 Allocation of Payments. The parties acknowledge and agree that the
Annual Fees shall be allocated as consideration for advertising services and
intangible rights granted by ACI to drugstore.com hereunder, including the
proprietary rights granted to drugstore.com under Section 6, as set forth on
Exhibit C.
Section 6. Proprietary Rights
6.1 Ownership.
6.1.1 ACI. As between the Parties, ACI reserves all right, title and
interest in and to the "ACI-Furnished Items," as defined below, the "ACI-Owned
Developments," as defined below and the Amazon.com Site, along with all
Intellectual Property Rights associated with any of the foregoing and no title
to or ownership of any of the foregoing is transferred or, except as expressly
set forth in Section 6.2, licensed to drugstore.com or any other person or
entity. drugstore.com hereby assigns to ACI all right, title and interest that
it may have or acquire in and to such items and all associated Intellectual
Property Rights, and drugstore.com shall take, at ACI's expense, any actions
(including, without limitation, execution and delivery of affidavits and other
documents) reasonably requested by ACI to effect, perfect or confirm ACI's or
its designee's right, title and interest therein. As used herein, ACI-Furnished
Item" means any Technology or Trademark of ACI, Amazon.com or their Affiliates,
as the case may be, that (a) is owned or controlled (e.g., by license or
otherwise) by ACI, Amazon.com or their Affiliates, as the case may be, (b) is
furnished by ACI for use in connection with the activities contemplated by this
Agreement, and (c) was developed or in existence prior to the date of this
Agreement or is at any time developed by or for ACI, Amazon.com or their
Affiliates independent of the activities contemplated by this Agreement. The
ACI-Furnished Items include, without limitation, the Amazon.com Site
Functionality. As used herein, "ACI-Owned Development" means any Technology
(including, without limitation, any adaptation, modification, improvement or
derivative work of any ACI-Furnished Item or any drugstore.com-Furnished Item)
that is developed (as permitted by this Agreement) by either Party or jointly by
the Parties specifically for use solely on the Amazon.com Site or in the
Amazon.com Heath and Beauty Section in connection with the activities
contemplated by this Agreement; provided, however, that the ACI-Owned
Developments do not include, without limitation, any drugstore.com-Furnished
Items, as defined below. The ACI-Owned Developments will also include, without
limitation, all adaptations, modifications, improvements or derivative works of
the Amazon.com Site Functionality that are developed (as permitted by this
Agreement) by either Party or jointly by the Parties unless such item is so
developed specifically to link or
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communicate between the Amazon.com Site and the drugstore.com Site. At the
termination of the Agreement, drugstore.com will return all ACI-Furnished Items
to ACI and drugstore.com shall have no further rights thereto.
6.1.2 drugstore.com. As between the Parties, drugstore.com reserves
all right, title and interest in and to the "drugstore.com-Furnished Items," as
defined below, the "drugstore.com-Owned Developments," as defined below, and the
drugstore.com Site., along with all Intellectual Property Rights associated with
any of the foregoing and no title to or ownership of any of the foregoing is
transferred or, except as expressly set forth in Section 6.3, licensed to ACI or
any other person or entity. ACI hereby assigns and agrees to assign to
drugstore.com all right, title and interest to such items and all associated
Intellectual Property Rights, and ACI shall take, at drugstore.com's expense,
any actions (including, without limitation, execution and delivery of affidavits
and other documents) reasonably requested by drugstore.com to effect, perfect or
confirm drugstore.com's or its designee's right, title and interest therein. As
used herein, "drugstore.com-Furnished Item" means any Technology or Trademark of
drugstore.com that (a) is owned or controlled (e.g., by license or otherwise) by
drugstore.com or its Affiliates, as the case may be, (b) is furnished by
drugstore.com for use in connection with the activities contemplated by this
Agreement, and (c) was developed or in existence prior to the date of this
Agreement or is at any time developed by or for drugstore.com independent of the
activities contemplated by this Agreement. "drugstore.com-Owned Development"
means any Technology (including, without limitation, any adaptation,
modification, improvement or derivative work of any ACI-Furnished Item or any
drugstore.com-Furnished Item) that is developed (as permitted by this Agreement)
by either Party or jointly by the Parties specifically for use solely on the
drugstore.com Site in connection with the activities contemplated by this
Agreement; provided, however, that the drugstore.com-Owned Developments will not
include, without limitation, any ACI-Furnished Item or any adaptation,
modification, improvement or derivative work of the Amazon.com Site
Functionality that is developed by either Party or jointly by the Parties. At
the termination of the Agreement, ACI shall return all drugstore.com-Furnished
Items to drugstore.com and ACI shall have no further rights thereto.
6.1.3 Joint. ACI and drugstore.com shall each have an equal and
undivided ownership interest in and to the Joint Developments, as defined below,
and all associated Intellectual Property Rights, with no duty on the part of
either Party to account to the other Party with respect to its use and
exploitation of the same. Without limiting the generality of the foregoing,
either Party may: (a) make, manufacture, assemble, produce, market, sell,
distribute, transfer, use, license and otherwise commercially and non-
commercially exploit and deal with the Joint Developments; provided, that
neither party shall seek or obtain any registration of any Intellectual Property
Rights associated with the Joint Developments without the other Party's prior
written consent, (b) make, manufacture, assemble, produce, market, sell,
distribute, transfer, use, license, seek and obtain registrations of
Intellectual Property Rights (subject to paragraph (a) above) and otherwise
commercially and non-commercially exploit and deal with any derivative works of
the Joint Developments independently created by or for such Party, whether or
not competitive with any items created by or for the other party; and (c)
authorize any third party to take any action described in (a) or (b) above.
Each Party shall take, at the other Party's expense, any actions (including,
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without limitation, execution and delivery of affidavits and other documents)
reasonably requested by the other Party to effect, perfect or confirm the other
Party's or its designee's right, title and interest any Joint Developments. As
used herein, "Joint Development" means any Technology that is developed (as
permitted by this Agreement) by either Party or jointly by the Parties
specifically (a) to link or communicate between the Amazon.com Site and the
drugstore.com Site or (b) for use on both the Amazon.com Site and the
drugstore.com Site in connection with the activities contemplated by this
Agreement; provided, however, that the Joint Developments will not include,
without limitation, any ACI-Furnished Items, any drugstore.com Furnished Items
or any adaptation, modification, improvement or derivative work of the
Amazon.com Site Functionality or of the drugstore.com Site Functionality that is
developed (as permitted by this Agreement) by either Party or jointly by the
Parties unless such item is so developed specifically to link or communicate
between the Amazon.com Site and the drugstore.com Site.
6.2 ACI License. ACI hereby grants to drugstore.com, during the Term, a
non-exclusive, non-transferable license to use the ACI-Furnished Items and ACI-
Owned Developments supplied by ACI as is reasonably necessary to perform its
obligations under this Agreement; provided, however, that drugstore.com shall
not use Trademarks of ACI, Amazon.com or their Affiliates, including in any
advertising, without ACI's prior written consent, unless such use conforms to a
written Trademark use policy previously furnished by ACI to drugstore.com. All
goodwill arising out of any use of any of ACI's, Amazon.com's or their
Affiliate's Trademarks by, through or under drugstore.com will inure solely to
the benefit of ACI, Amazon.com or such Affiliate, as the case may be.
6.3 drugstore.com License. drugstore.com hereby grants to ACI, during the
Term, a non-exclusive, non-transferable license to use the drugstore.com-
Furnished Items and drugstore.com Owned-Developments as is reasonably necessary
to perform its obligations under this Agreement; provided, however, that ACI
shall not use drugstore.com's Trademarks, including in any advertising, without
the drugstore.com's prior written consent, unless such use conforms to a written
trademark use policy previously furnished by drugstore.com to ACI. All goodwill
arising out of any use of any of drugstore.com's marks by, through or under ACI
will inure solely to the benefit of drugstore.com.
6.4 Non-Disparagement. Neither drugstore.com nor ACI or Amazon.com will
use the other Party's Trademarks in a manner that disparages the other Party or
its products or services, or portrays the other Party or its products or
services in a false, competitively adverse or poor light. Each of drugstore.com
and ACI and Amazon.com will comply with the other Party's requests as to the use
of the other Party's Trademarks and will avoid knowingly taking any action that
diminishes the value of such marks.
Section 7. Representations; Indemnification
7.1 Representations. Each party represents and warrants to the other
that: (a) it has the full corporate right, power and authority to enter into
this Agreement and perform its obligations hereunder; (b) its performance of
this Agreement, and the other party's exercise of such other party's rights
under this Agreement, will not conflict with or result in a breach
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or violation of any of the terms or provisions or constitute a default under any
agreement by which it is bound; (c) when executed and delivered, this Agreement
will constitute its legal, valid and binding obligation enforceable against it
in accordance with its terms; and (d) it will comply with all applicable laws,
regulations and orders of any governmental authority of competent jurisdiction
in its performance of this Agreement.
7.2 Indemnity. ACI and drugstore.com (as applicable, the "Indemnifying
Party") will each defend, indemnify and hold harmless the other Party (the
"Indemnified Party") and its Affiliates (and their respective employees,
directors and representatives) from and against any and all claims, costs,
losses, damages, judgments and expenses (including reasonable attorneys' fees)
arising out of any third party claim or action, to the extent it is based on (a)
the operation or content of the Indemnifying Party's Site (other than any items
or materials supplied by the Indemnified Party), (b) any actual or alleged
breach of the Indemnifying Party's representations or warranties set forth in
Section 7.1 above, or (c) any actual or alleged infringement of any Intellectual
Property Rights by any materials provided by the Indemnifying Party to the
Indemnified Party for its use under this Agreement. Subject to Section 7.3, the
Indemnifying Party will pay any award against the Indemnified Party and its
Affiliates (and their respective employees, directors or representatives) and
any costs and attorneys' fees reasonably incurred by them resulting from any
such claim or action. drugstore.com will defend, indemnify and hold harmless
the ACI and its Affiliates (and their respective employees, directors and
representatives) from and against any and all claims, costs, losses, damages,
judgments and expenses (including reasonable attorneys' fees) arising out of any
third party claim or action based on the offer, marketing (unless directed by
ACI or Amazon.com and drugstore.com has notified ACI that drugstore.com objects
to such marketing) or sale of any products or services on the Amazon.com Health
and Beauty Site. ACI will defend, indemnify and hold harmless drugstore.com and
its Affiliates (and their respective employees, directors and representatives)
from and against any and all claims, costs, losses, damages, judgments and
expenses (including reasonable attorneys' fees) arising out of any third party
claim or action based on the offer, marketing or sale of any products or
services on the Amazon.com Product Sections other than the Amazon.com Health and
Beauty Section.
7.3 Procedure. In connection with any claim or action described in this
Section 7, the Indemnified Party will (a) give the Indemnifying Party prompt
written notice of the claim, (b) cooperate with the Indemnifying Party (at the
Indemnifying Party's expense) in connection with the defense and settlement of
the claim, and (c) permit the Indemnifying Party to control the defense and
settlement of the claim, provided that the Indemnifying Party may not settle the
claim without the Indemnified Party's prior written consent (which will not be
unreasonably withheld). Further, the Indemnified Party (at its cost) may
participate in the defense and settlement of the claim with counsel of its own
choosing. If the Indemnifying Party chooses not to defend the claim, the
Indemnifying Party may control the defense and settlement of the claim.
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Section 8. Disclaimers, Limitations and Reservations
8.1 DISCLAIMER OF WARRANTIES. EXCEPT AS PROVIDED IN SECTION 7.1 ABOVE,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY WAIVES AND DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES REGARDING THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING (WITHOUT LIMITATION) ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OR IMPLIED
WARRANTIES ARISING OUT OF COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF
TRADE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING (A) THE AMOUNT
OF SALES REVENUES THAT MAY OCCUR DURING THE TERM, AND (B) ANY ECONOMIC OR OTHER
BENEFIT THAT THE MIGHT OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT (OTHER
THAN THE SPECIFIC SUMS TO BE PAID PURSUANT TO THIS AGREEMENT).
8.2 No Consequential Damages. EXCEPT TO THE EXTENT AWARDED TO A THIRD
PARTY IN A JUDGMENT AGAINST WHICH A PARTY IS ENTITLED TO INDEMNIFICATION
PURSUANT TO SECTION 7, OR TO THE EXTENT ARISING OUT OF ANY BREACH OF SECTION
11.2, NEITHER PARTY WILL BE LIABLE (WHETHER IN CONTRACT, WARRANTY, TORT
(INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE), PRODUCT LIABILITY OR OTHER THEORY),
TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR COST OF COVER OR FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION DAMAGES FOR LOSS OF PROFIT, BUSINESS OR DATA) ARISING OUT OF THIS
AGREEMENT.
8.3 Responsibility for Web Sites. Subject to the express terms of this
Agreement, each Party will remain solely responsible for, and retains sole
control over, the programming, content and conduct of transactions on its Site.
In the event that either Party receives from a third party a bona fide claim of
infringement with a reasonable basis concerning any advertising materials or
other content supplied by the other Party, such Party may remove such materials
or content supplied by the other party from its Web Site at its sole discretion,
pending receipt of a non-infringing replacement materials or content or
satisfactory resolution of such claim, and any such removal shall not constitute
a breach of this Agreement, provided that such Party first notified the other
Party of such claim, made commercial reasonable efforts to discuss such claim
with the other Party, and the Parties did not resolve whether materials or
content should be removed within five days of such notice.
Section 9. Exclusivity.
9.1 Amazon.com Site.
9.1.1 ACI and Amazon.com New Product Sections. During the Term,
neither ACI nor Amazon.com will create or maintain a new Amazon.com Product
Section
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that offers, markets and sells Drugstore Products or Beauty Products, provided,
however that ACI or Amazon.com may offer Drugstore Products and Beauty Products,
excluding with respect to any party other than Amazon.com, prescription
products, in existing or new ACI Product Sections as long as the annual gross
revenue derived from such products does not exceed 15% of the combined annual
gross revenue derived from sales of all products and services offered by the ACI
Product Sections offering such products (excluding the Amazon.com Health and
Beauty Section).
9.2 Amazon.com Health and Beauty Section.
9.2.1 Non-Drugstore Products and Non-Beauty Products. drugstore.com
will not offer for sale from or through the Amazon.com Health and Beauty Section
any products or services that do not constitute a Drugstore Product or a Beauty
Product; provided, however, that drugstore.com may sell such products and
services from or through the Amazon.com Health and Beauty Section so long as the
annual gross revenue derived from the sales of such products and services do not
exceed fifteen percent (15%) of the annual gross revenue derived from the sale
of all products and services offered from or through the Amazon.com Health and
Beauty Section.
9.2.2 Permitted Sales. The Parties may agree from time to time in
writing to offer products or services through the Amazon.com Health and Beauty
Section that do not constitute a Drugstore Product or a Beauty Product,
including cross-promotions of products sold in other Amazon.com Product
Sections, in which case sales of such mutually agreeable products and services
will not be subject to the limitations of Section 9.2.1.
9.3 drugstore.com Site. drugstore.com may not offer for sale from or
through the drugstore.com Site any product or service that does not constitute a
Drugstore Product or a Beauty Product; provided, however, that drugstore.com may
offer such products or services so long as annual gross revenues from sale of
such products and services does not exceed fifteen percent (15%) of the annual
gross revenues derived from sales of all products and services offered from or
through the drugstore.com Site.
9.4 Records; Audit. Each Party will, during the Term and for a period of
one (1) year thereafter, maintain complete and accurate books and records
sufficient to verify its compliance or non-compliance with the provisions of
this Section 9. Each Party (the "Audited Party") will, upon at least thirty
(30) days' prior written request by the other Party (the "Auditing Party"),
allow an independent certified public accounting firm selected by the Auditing
Party and reasonably acceptable to the Audited Party to audit such books and
records at the Audited Party's premises to the extent necessary to verify the
Audited Party's compliance or non-compliance with the provisions of this Section
9; provided, that: (a) any such audit is conducted during normal business hours
and in a manner designed to not unreasonably interfere with the Audited Party's
ordinary business operations; (b) audits may not occur more frequently than once
every twelve (12) months; and (c) each such audit may only cover the period
commencing after the period covered by the last audit conducted pursuant to this
Section, if any. The Auditing Party agrees that any information learned or
disclosed by its auditor in connection with such audit is Confidential
Information of the
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Audited Party. If any such audit reveals any material non-compliance with the
provisions of this Section 9 by the Audited Party, the Audited Party shall,
within ten (10) days of its receipt of an invoice therefor, reimburse the
Auditing Party for all reasonable out-of-pocket fees and expenses incurred by
the Auditing Party in connection with the applicable audit.
Section 10. Term and Termination
10.1 Term. The Term of this Agreement will commence on the date of the
Closing, and unless earlier terminated as provided elsewhere in this Agreement,
will end automatically upon the three (3) year anniversary of the Launch Date.
10.2 Termination for Breach. Without limiting any other rights or
remedies (including, without limitation, any right to seek damages and other
monetary relief and ACI's rights under Section 10.3) that either Party may have
in law or otherwise, either Party may terminate this Agreement if the other
Party materially breaches its obligations hereunder, provided that (a) the non-
breaching Party sends written notice to the breaching Party describing the
breach, and (b) the breaching Party does not cure the breach within thirty (30)
days following its receipt of such notice.
10.3 ACI Termination. In the event that: (a) drugstore.com at any time
engages in any criminal conduct, fraud or other behavior that ACI reasonably
determines is harming or is likely to materially harm the goodwill or reputation
of ACI, Amazon.com or the Amazon.com Site; (b) drugstore.com has consistently
failed to abide by ACI's reasonable requests with respect to the establishment
of technical and customer service requirements or with respect to the
implementation of Phase Two in accordance with the terms of this Agreement and
ACI reasonably determines such failure is causing material harm to Amazon.com
and its customers; or (d) drugstore.com becomes insolvent, admits in writing its
inability to pay debts as they mature, institutes or has instituted against it
any bankruptcy, reorganization, debt arrangement, assignment for the benefit of
creditors, or other proceeding under any bankruptcy or insolvency law or
dissolution, receivership, or liquidation proceeding (and, if such proceeding is
instituted against it, such proceeding is not dismissed within sixty (60) days),
the same shall be deemed a material breach of this Agreement pursuant to Section
10.2, but which is not susceptible to cure, and ACI shall be entitled to
terminate this Agreement upon written notice to drugstore.com.
10.4 drugstore.com Termination. In the event that: (a) ACI or Amazon.com
at any time engages in any criminal conduct, fraud or other behavior that
drugstore.com reasonably determines is harming or is likely to materially harm
the goodwill or reputation of drugstore.com or the drugstore.com Site; (b)
Amazon.com or ACI has consistently failed to abide by drugstore's reasonable
requests with respect to the establishment of the same technical and customer
service requirements Amazon.com requires of drugstore.com or with respect to the
implementation of Phase Two in accordance with the terms of this Agreement and
drugstore.com reasonable determines that such failure is causing material harm
to drugstore.com and its customers, or (c) Amazon.com becomes insolvent, admits
in writing its inability to pay debts as they mature, institutes or has
instituted against it any bankruptcy, reorganization, debt arrangement,
assignment for the benefit of creditors, or other proceeding
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under any bankruptcy or insolvency law or dissolution, receivership, or
liquidation proceeding (and, if such proceeding is instituted against it, such
proceeding is not dismissed within sixty (60) days), the same shall be deemed a
material breach of this Agreement pursuant to Section 10.2, but which is not
susceptible to cure, and drugstore.com shall be entitled to terminate this
Agreement upon written notice to ACI.
10.5 Effect of Termination.
10.5.1 General. Upon termination of this Agreement, each Party in
receipt, possession or control of the other Party's intellectual or proprietary
property, information and materials (including any Confidential Information)
pursuant to this Agreement must return to the other Party (or at the other
Party's written request, destroy) such property, information and materials.
Except as provided in Section 10.5.2, drugstore.com will promptly upon any
termination of this Agreement pay to ACI a prorated portion of the Quarterly
Payment due for the quarter in which termination is effective. Sections 5
through 8, 10 and 11 (together with all other provisions that reasonably may be
interpreted as surviving termination or expiration of this Agreement) will
survive the termination or expiration of this Agreement.
10.5.2 Liquidated Damages for Breach. Upon termination by ACI for
drugstore.com's breach pursuant to Section 10.2, drugstore.com will immediately
pay ACI, as liquidated damages, and not as a penalty, such amount as mutually
agreed by the Parties. Upon termination by drugstore.com for ACI's breach
pursuant to Section 10.2, ACI will immediately pay, as liquidated damages, and
not as a penalty, such amount as mutually agreed by the Parties. THE PARTIES
ACKNOWLEDGE THAT ACTUAL DAMAGES IN THE EVENT OF ANY MATERIAL BREACH OF THIS
AGREEMENT BY A PARTY WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE;
THEREFORE, THE PARTIES ACKNOWLEDGE THAT THE LIQUIDATED DAMAGES SPECIFIED IN THIS
SECTION 10.5.2 HAVE BEEN AGREED UPON, AFTER NEGOTIATION, AS (A) THE PARTIES'
REASONABLE ESTIMATE OF JUST COMPENSATION FOR THE DAMAGES THE NON-BREACHING PARTY
WOULD SUFFER AND INCUR BY REASON OF ANY SUCH BREACHES AND (B) TOGETHER WITH
TERMINATION OF THIS AGREEMENT, A PARTY'S EXCLUSIVE REMEDY AGAINST THE PARTY
BREACHING THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHTS OR
BENEFITS OF ANY LAW, RULE OR REGULATION, NOW OR HEREAFTER EXISTING, THAT WOULD,
IN THE EVENT OF SUCH PARTY'S MATERIAL BREACH OF THIS AGREEMENT (1) ALLOW SUCH
PARTY TO CLAIM THAT THE LIQUIDATED DAMAGES SPECIFIED IN THIS SECTION 10.5.2 ARE
UNREASONABLE IN AMOUNT OR CONSTITUTE A PENALTY OR (2) REQUIRE ACI TO PROVE
ACTUAL LOSS IN ORDER TO COLLECT THE FULL AMOUNT OF LIQUIDATED DAMAGES.
10.5.3 Construction by Court. To the extent that any court of
competent jurisdiction determines that any provision of this Section 10.5.2 is
for any reason unlawful, invalid, in violation of public policy or otherwise
enforceable in whole or in part, such provision shall be narrowed in scope to
the extent necessary to make the same lawful, valid
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and enforceable while as nearly as possible reflecting the intent of the parties
as expressed in this Agreement.
Section 11. Miscellaneous
11.1 Independent Contractors. The Parties are entering this Agreement as
independent contractors, and this Agreement will not be construed to create a
partnership, joint venture or employment relationship between them. Neither
Party will represent itself to be an employee or agent of the other or enter
into any agreement or legally binding commitment or statement on the other's
behalf of or in the other's name.
11.2 Nondisclosure. Each Party will protect the Confidential Information
of the other Party from misappropriation and unauthorized use or disclosure, and
at a minimum, will take precautions at least as great as those taken to protect
its own confidential information of a similar nature. Without limiting the
foregoing, the Receiving Party will: (a) use such Confidential Information
solely for the purposes for which it has been disclosed; and (b) disclose such
Confidential Information only to those of its employees, agents, consultants,
and others who have a need to know the same for the purpose of performing this
Agreement and who are informed of and agree to a duty of nondisclosure. The
Receiving Party may also disclose Confidential Information of the Disclosing
Party to the extent necessary to comply with applicable law or legal process,
provided that the Receiving Party uses reasonable efforts to give the Disclosing
Party prompt advance notice thereof. Upon request of the other Party, or in any
event upon any termination or expiration of the Term, each Party shall return to
the other all materials, in any medium, which contain, embody, reflect or
reference all or any part of any Confidential Information of the other Party.
Neither Party shall issue any press release or other public announcement
regarding, or otherwise disclose, this Agreement or the transactions
contemplated herein, or make any filing of this Agreement or other agreements
relating to the transactions contemplated herein, without the consent of the
other; provided, however, that if a party is required by applicable law to
provide public disclosure of this Agreement or the transactions contemplated
herein, such party shall use all reasonable efforts to coordinate the disclosure
with the other party before issuance, including, but not limited to the
submission to the Securities and Commission (and any other applicable regulatory
or judicial authority) of an application for confidential treatment of certain
terms (which terms shall be agreed upon by the Parties) of this Agreement. Each
party shall provide to the other for review a copy of any proposed disclosure of
this Agreement or its terms and any application for confidential treatment prior
to any such disclosure or application is made and the parties shall work
together to mutually approve such disclosure or application.
11.3 Compliance with Laws. In its performance of this Agreement, each
Party will comply with all applicable laws, regulations, orders and other
requirements, now or hereafter in effect, of governmental authorities having
jurisdiction. Except as expressly provided herein, each Party will be
responsible for all costs and expenses incurred by it in connection with the
negotiation, execution and performance of this Agreement.
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11.4 Tax Treatment.
11.4.1 The Parties acknowledge and agree that this Agreement and the
transactions contemplated hereby are not intended to create any jurisdiction or
authority for any governmental authority to impose any obligation to collect any
sales tax, use tax or similar tax in connection with any sales of products by
either Party or Amazon.com. Accordingly, both Parties, and Amazon.com, agree
to take such action as the other Party may reasonably request (including,
without limitation, execution of affidavits and other documents) to avoid or
curtail the imposition, by reason of this Agreement or the transactions
contemplated hereby, of any such obligation on a Party or Amazon.com, or the
establishment of a nexus for tax purposes sufficient to grant any jurisdiction
the authority to levy any sales tax, use tax or similar tax on sales of products
by a Party or Amazon.com.
11.4.2 Each Party will pay, collect, remit and otherwise be
responsible for such taxes as may be imposed upon such Party with respect to any
product sales, compensation, royalties or transactions under this Agreement.
11.5 Insurance. drugstore.com and Amazon.com will at their expense obtain
and maintain such policy or policies of insurance as is commercially reasonable
for the transactions and business contemplated by this Agreement. Upon request
from a Party, the other Party will furnish to certificates of insurance and such
other documentation relating to such policies reasonably requested.
11.6 Notices. Any notice or other communication under this Agreement
given by either Party to the other Party will be in writing and must be sent to
the intended recipient by registered letter, receipted commercial courier, or
electronically receipted facsimile transmission (acknowledged in like manner by
the intended recipient) at its address specified below its signature at the end
of this Agreement, and in the case of ACI, with a copy to ACI, c/o Amazon.com,
Inc., 1200 12th Avenue South, Suite 1200, Seattle, WA 98144, USA, Facsimile:
206.266.7010, Attn: General Counsel; provided, that no notice of termination of
this Agreement shall be deemed properly given unless sent by registered mail to
such address(es) and to the attention of such officer(s). Either Party may from
time to time change such address or individual by giving the other Party notice
of such change in accordance with this Section 11.4.
11.7 Assignment. drugstore.com may not assign or delegate this Agreement
or any of its rights or obligations hereunder, whether voluntarily,
involuntarily, by operation of law or otherwise, without ACI's prior written
consent not to be unreasonably withheld, except to a wholly-owned subsidiary
that agrees in writing to be bound by all the terms and conditions of this
Agreement or to a corporation resulting from a Change in Control of
drugstore.com that in ACI's reasonable judgment is not a competitor, provided,
however, that if, after consummation of such Change in Control, ACI determines
in its reasonable judgment that such corporation has become a competitor, ACI
may terminate the Agreement. ACI may assign this Agreement to (a) any
corporation resulting from any merger, consolidation, or other reorganization
involving ACI, (b) any of its Affiliates, or (c) any person or entity to which
it transfers all or substantially all of its assets; provided that the assignee
agrees in
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writing to be bound by all the terms and conditions of this Agreement. Subject
to the foregoing, this Agreement will be binding on and enforceable by the
Parties and their respective successors and permitted assigns.
11.8 Nonwaiver. To be effective, any waiver by a Party of any of its
rights or the other Party's obligations under this Agreement must be made in a
writing signed by the Party to be charged with the waiver. No failure or
forbearance by either Party to insist upon or enforce performance by the other
Party of any of the provisions of this Agreement or to exercise any rights or
remedies under this Agreement or otherwise at law or in equity shall be
construed as a waiver or relinquishment to any extent of such Party's right to
assert or rely upon any such provision, right, or remedy in that or any other
instance; rather the same shall be and remain in full force and effect.
11.9 Counterparts; Transmitted Copies. This Agreement may be executed in
any number of counterparts, each of which will be deemed an original, but all of
which taken together will constitute but one and the same instrument. To
expedite the process of entering into this Agreement, the parties acknowledge
that Transmitted Copies of the Agreement shall be equivalent to original
documents until such time (if any) as original documents are completely executed
and delivered. "Transmitted Copies" shall mean copies which are reproduced or
transmitted via facsimile, or another process of complete and accurate
reproduction and transmission.
11.10 Headings. The headings of sections and subsections of this
Agreement are for convenience of reference only and are not intended to
restrict, affect or otherwise influence the interpretation or construction of
any provision of this Agreement.
11.11 Choice of Law. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Washington, without
reference to its choice of law rules.
11.12 Venue. Each Party hereby irrevocably consents to exclusive personal
jurisdiction and venue in the state and federal courts located in King County,
Washington, with respect to any claim arising out of or related to this
Agreement and each Party agrees not to commence or prosecute any such Claim
other than in the aforementioned courts.
11.13 Conflict with Existing Agreements. To extent a direct conflict
exists during the Term between this Agreement and the Amended and Restated
Technology License and Advertising Agreement, dated August 10, 1998, between
drugstore.com, Amazon.com and Amazon.com D, Inc. (the "Technology License
Agreement"), this Agreement shall supercede the Technology License Agreement;
provided, however, that no license granted by either party to the other in the
Technology License Agreement is superceded. To the extent a conflict exists
during the Term between this Agreement and the Marketing Agreement, between
drugstore.com and Amazon.com (the "Marketing Agreement"), this Agreement shall
supercede the Marketing Agreement. The parties hereby agree that the reference
to "a substantial and sustained marketing efforts" in the Marketing Agreement
shall be deemed met by Section 3 with respect to both Parties.
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<PAGE>
11.14 Entire Agreement. This Agreement (a) represents the entire
agreement between the Parties with respect to the subject matter hereof and
supersedes any previous or contemporaneous oral or written agreements regarding
such subject matter and (b) may be amended or modified only by a written
instrument signed by a duly authorized agent of each Party. No breach of this
Agreement by either Party shall affect the rights or obligations of either Party
under any other Agreement between the Parties; rather, the same will remain in
full force and effect.
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<PAGE>
ACI drugstore.com:
--- -------------
Amazon.com Commerce Services, Inc. drugstore.com, inc.
By:_________________________________ By:_________________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
Notice Address: Notice Address:
ACI drugstore.com, inc.
c/o Amazon.com, Inc. 13920 S.E. Eastgate Way, Suite 300
1200 12th Avenue South, Suite 1200 Bellevue, WA 98005
Seattle, WA 98144 Facsimile: 425.372.3808
Facsimile: 206.266.7010
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<PAGE>
Exhibit A
SITE, TECHNICAL AND CUSTOMER SERVICE STANDARDS
[To Come]
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<PAGE>
EXHIBIT B
PRIVACY POLICY
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<PAGE>
EXHIBIT C
ALLOCATION OF PAYMENTS
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Year Advertising Services Intangible Assets
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1 $ 900,000 $29,100,000
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2 $1,050,000 $33,950,000
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3 $1,200,000 $38,800,000
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