Sample Co-Branding Agreements by Erc Goldman

Private Label and Co-Branding Deals

by Eric Goldman, Esq.,

Cooley Godward LLP, Palo Alto, CA

Introduction

The Web has created a new way for information providers to interact with their users.  Because linking on the Web can create a network of sites that appear integrated and seamless to users, from the user’s perspective it is often unimportant which server they are accessing when moving around the Web.

As a result, relationships are being struck where one site (the “brander”) will place its branding on the content or functionality of another site (the “provider”), extending the perceived boundaries of the website.  These types of relationships can take a number of forms.  Sometimes the provider will have no branding on the pages it provides; this type of arrangement is called a “private label” deal.  More frequently, the provider and brander will each have their brands on the site; this type of arrangement is called a “co-branding” deal.  Although this article focuses on private label deals, much of the analysis applies to co-branding deals as well.

Co-branding relationships have become ubiquitous on the Internet, particularly with the emergence of the “portals” who have established networks of websites under a common branding.  For example, most of the features below the home pages of the search engines are co-branded pages operated by third parties.  A number of companies have emerged to provide services virtually exclusively on a co-branded basis, either through the portals or more generally.  Examples of such companies include WhoWhere?’s email service, iName’s email service and Vicinity’s map services.

While private label and the co-branding agreements raise a number of new issues on the Web, there are numerous existing analogies.  For example, most supermarkets and many other retail stores will carry goods manufactured by a third party but carrying the retail outlet’s brands.  This type of arrangement has historically been called a private label deal.  (Compare the classic Original Equipment Manufacturer (OEM) relationship, where the branding party sells the goods through a chain of distribution).

Private label and co-branding deals raise interesting issues in part because they expose a dichotomy between the business practices and the legal implications.  From a business perspective, the parties to the deal are often less concerned about whose servers content sits on—as long as the intended audience can reach the pages and branding is appropriate, the rest of the aspects of the relationship are just “details.”  However, as discussed in this Article, this decision may have a number of legal ramifications.

At the heart of the relationship, a private label deal is primarily a trademark license from the brander to the provider and an agreement for the provider to provide services and perhaps access to intellectual property to the world (or occasionally only to traffic generated by the provider).  In practice, this relatively simplistic description masks a number of complexities that must be addressed for the parties to achieve their objectives.

Why Do It?

There are a number of reasons for a brander to enter into a private label deal.  First, like any other outsourcing arrangement, the brander can take advantage of the provider’s expertise or economies of scale.  For example, the provider may be in the business of building and maintaining a database that the brander does not wish to try to replicate (i.e., it is cheaper to buy than to build).  Alternatively, the provider may have superior software tools, and the brander simply cannot cost-effectively or time-effectively develop competing tools.

Second, content is critical on the Internet.  A private label deal allows the brander to appear to have a larger website, or to have a more extensive set of features, than it really has.

There are also several advantages from the provider’s point of view.

First, a private label relationship takes the place of a licensing arrangement.  Rather than using its intellectual property in only one channel—its own website—the provider can “recycle” the content.  A private label arrangement allows the provider to establish parallel channels, thereby potentially getting multiple revenue streams from the same content or functionality instead of one.  Of course there is always the risk of channel conflict or cannibalization, but if the provider strikes relationships with different brands with access to significantly different types of consumers, this risk may be worth bearing.

For a perfect example of multi-channel recycling, consider the business practices of Vicinity <http://www.vicinity.com/>.  Vicinity provides a database of maps and related materials (such as driving instructions).  Vicinity has successfully private labeled its content to search engines, travel sites, yellow page directories, newspapers, retailers and others.  See<http://www.vicinity.com/vicinity/publisher_cust.html and http://www.vicinity.com/vicinity/corporate_cust.html>.  Each of these customers is presumably getting the same database, but the relationship stills makes sense because each site is—in users’ minds—adding valuable add-on content/services to its existing offerings.  This is true even though a user could go directly to Vicinity or elsewhere to get access to the same content.

Second, the provider can effectuate this “license” without actually having to provide a physical copy of its content.  This has numerous benefits for the provider, not the least of which is that the provider has fewer issues to worry about under intellectual property law.  For example, consider a publicly accessible database of facts, such as a directory of phone numbers.  These types of databases are currently subject to little if any protection under US intellectual property laws.  Databases of facts are unlikely to be covered by copyright, which does not protect facts; at best, the database will be subject to a thin compilation copyright, which may be easy to circumvent.  Because it will be made available to the public, the database cannot be treated as a trade secret. Therefore, historically the database owner’s only option was to license the database using a set of restrictions synthetically created by contract and lacking any intellectual property protection to act as a backstop or as a more powerful point of leverage in case of breach.

Further, because there are no intellectual property rights underlying the content, if the content escaped the control of a contract licensee, the licensor had no power to stop downstream recipients from further “infringement.”  As a result, the licensor’s asset was constantly in jeopardy.

Using private label deals, the provider can offer all of the benefits of the content without circulating a copy of the content to third parties.  Because the provider can provide access to a single copy of the database over the Web, the provider can much more easily and reliably use technology to control the content rather than contracts and law.

Additionally, by controlling the number of copies of the database circulating in the world, it is much easier to ensure that all copies of the database are “in sync” and current.  This can be a significant logistical consideration for complex, time-sensitive databases such as reservations databases.

A final benefit of these types of arrangements occurs in the co-branding context or when the provider is able to insert some branding on the brander’s pages.  By being exposed to new users, the provider may see increased traffic on its own site.

Making Money from the Relationship

There are two primary flows of revenues from the brander to the provider.  First, there are set-up and maintenance fees analogous to hosting fees.  Second, there can be a revenue share or other royalty-like relationship.

a.         Set-up and maintenance fees

The set-up and maintenance fees represent one of the first potential pitfalls for providers.  At its core, the set-up and maintenance of the pages is a hosting relationship.  Hosting relationships are notoriously difficult to make a profit from on a large scale.  Although frequently these set-up and maintenance costs are priced on a “package” basis, these services are effectively priced either on an hourly basis or on a cost-plus basis.  The provider needs to carefully circumscribe its obligations or to price the obligations at a high enough level, or the provider may find that set-up and maintenance creates a drag on profits from the relationship.

While it may sound obvious that set-up and maintenance costs be passed through to the brander, in practice many providers trivialize these costs (“oh, that won’t take much time to do!”).  As a result, a provider often offers services at no cost as an inducement to “get the upside” that presumably will flow from the royalty/revenue share.  Clearly this decision can be justified at times, but generally providing services upfront in anticipation of downstream royalties can have serious implications for cash flow, accounting profitability (i.e., costs are incurred before revenue is recognized), and business risk being taken on from the deal.

The provider also needs to be careful about deriving the bulk of the revenues from the set-up and maintenance costs without upside potential.  This clearly turns the provider into a web host, and as suggested earlier, web hosts have a very difficult time obtaining significant margins.  While web hosts can find profitable niches, this business model needs to be carefully considered.

b.         Revenue Sharing—Advertising

There are a number of ways to structure the royalty or revenue sharing relationship.  The most popular way is to sell banner advertisements on the branded pages and share revenues from those advertisements.  Banner advertisements, or similar advertiser-driven relationships, raise a few difficult issues.

First, there is the issue of who controls the advertising.  The brander may wish to control the advertising on the branded pages to ensure that the advertising messages are acceptable—the brander may not want competitors advertising on the site, and the brander may not want “objectionable” advertising placed on the site because of the potential dilution effect on the brander’s trademarks and branding.  Often (although not exclusively), the brander may also be the party with superior access to potential advertisers and therefore be in a better position to procure advertising.

The provider may wish to control advertising to ensure that maximum dollars are achieved.  This is critical, of course, because most providers expect to make their profits from the relationship from the revenue split, and as discussed above, often will make little or no money from the set-up and maintenance aspects despite incurring those upfront costs.

Although it may sound odd that a revenue split does not properly create an incentive for branders to maximize revenues from advertising, there are a number of reasons why branders may not do so.  First, if the brander has unsold page impression inventory on its site (and few—if any—sites do not), the brander may not need to obtain any advertising revenues from the branded pages.  Rather, if the branded pages enhance overall traffic to the brander’s site, then the brander in fact may be able to see increased revenues from the rest of its site.  In this situation, unless the provider gets a share of revenues generated from the brander’s site, the brander will not obtain a fair share of revenues merely by splitting the revenues from the branded pages.

Second, if the brander controls the advertising, the brander could place barter ads (i.e., advertisements that are given space freely in exchange for the brander’s banner advertisements being placed freely on the advertiser’s site) or its own banner advertisements in the inventory, again undercutting the provider’s expectation that revenues will be maximized from the branded pages.

There are a number of alternative solutions to these problems.  First, the provider can remain in control of the advertisement, subject to a rigorous set of standards provided by the brander or subject to brander’s veto power, which will not be unreasonably exercised.  Second, the parties can outsource the advertising to an advertising representative firm, effectively letting this “neutral” third party take some control over the problem.  Third, the brander can take control but guarantee the provider minimum payments (either per page-impression or per month). Fourth, the parties can exercise “joint” control, giving each party with veto power over the other party’s actions.  Finally, the provider can let the brander control and establish a business model that is not predicated on maximizing advertising revenues, such as the other revenue sharing models discussed below.

c.         Revenue Sharing—Transactions

An alternative business model is for the parties to sell goods or services on the branded pages, thereby letting the parties share the revenues flowing from these transactions.  Obviously, there are a limitless number of types of transactions that the parties might do.  For example, a growing number of companies are offering co-branded “affiliates” programs, whereby the provider will display a co-branded sales page to traffic generated by the brander.  For a set of examples, see Geoffrey Gussis, Drafting Vendor-Oriented Affiliate Agreements (April 27, 1998) <http://www.digidem.com/legal/afil/>.

d.         Revenue Sharing—Providing Traffic to Provider

A completely different business model can arise in a co-branding deal when the primary purpose of the branded pages is to transfer users from the brander’s site to the provider’s site. Typically, then, the co-branded pages will contain numerous links to the provider’s site, and often there will be some sort of “sample” or freebie to get the users to consider continuing their surfing to the provider’s site.

In this situation, the brander will want to share in the revenues the provider generates from these users.  The provider might generate revenues from users based on page impression-based advertising, which can be accounted for by tracking the users who come from the branded pages onto provider’s site and counting the number of page impressions generated by these users. Alternatively, the provider may offer transactions from its website, and the brander could share in those revenues.

In these situations, then, it may be the brander who is concerned about the provider’s incentives.  The brander will be letting the provider use its valuable trademarks, and perhaps more importantly, the brander will be losing its traffic to the provider’s site.  Therefore, the brander must ensure that adequate mechanisms are in place to compensate the brander.

In most of these cases, the brander will want to “tag” its users so that their incremental benefits to provider can be measured.  There are four primary ways to do this.  First, the parties can try to use IP address analysis, but this remains a crude science and is rarely helpful.

Second, the parties can use registration, whereby the users being transferred are forced to register.  These users can then be tracked by requiring subsequent log-ins, by issuing the users a digital certificate, or by loading a token into a cookie (discussed below).  Registration is rarely a good result because of user antipathy towards such impediments.

Third, the parties can load a token into the user’s cookie without registration.  This method is the least intrusive to users, but the brander should recognize that the cookie method is not foolproof.  First, users might refuse the token.  Second, the user might edit the cookie file.  Third, the user might switch browsers.  Fourth, the user may be using a browser that does not support cookies.  Finally, the parties need to decide if the token should expire per session or on some other basis, depending on whether the brander’s contribution is best measured by instant response or any response.  If the token expires per session, of course, the brander may lose some users who return to the provider’s site after the token has expired.

Fourth, the provider can analyze users based on their referring URL. This can be done on a one-iteration basis (i.e., if the user is linking from the brander’s website), or users can be traced through the site by building custom URLs for these users that contains some information about the user or the brander in the URL.  For an example of how information about a person can be tracked by the URL from page to page, consider the URLs built based on searches in Altavista <http://altavista.digital.com/>.

Tagging, transferring and tracking users creates some difficult issues about “ownership” of those users, discussed below.

e.         Defining Net Revenues

In all cases of revenue sharing, the parties will need to define whether gross or net revenue is being shared.  Defining net revenue in this context is not much more difficult than in other contexts, but there are a few issues that need to be addressed.

In the case of advertising revenues, the key issue is how the advertising representative’s fee will be split.  Currently, advertising representatives are taking up to 50% of the revenues from the ads they are placing, so effectively this means the parties are in a three way split.  To avoid such heavy fees, the parties might let the party that directly sells the advertising (i.e., if the brander or provider can sell the advertising without relying on the advertising representative firm) keep a larger percentage of the revenues.  The parties will also want to deal with the issue of how unsold advertising is allocated, and if a party to the deal is permitted to use the unsold inventory for a fee.

In the case of transactions, it is usually fair to subtract sales or use tax, shipping costs and actual returns from net revenues.  Since almost all online sales will be made pursuant to a payment system, the parties should also consider how the payment system fees, such as credit card fees, will be treated.

Intellectual Property Ownership and Licenses

Because the parties are in a close relationship, the parties need to carefully consider a number of issues regarding ownership of various aspects of the branded pages.

a.         Owning “Customers”

It is very common for the parties to think about one party or the other “owning” customers.  Of course, customer lists are valid subject matter for trade secret protection, and in this context the parties could structure this aspect of the relationship as a trade secret license.  In fact, the confidential information is not just the list of customers, but all information gleaned about the customers—including their demographics, their psychographics and any information provided via registration.  The number of page impressions being delivered, the rate being charged advertisers and the number of transactions being consummated is also information that could harm one or both parties if released and therefore is extremely sensitive.  It may be that this information should be categorized as the confidential information of both parties and subject to use and disclosure restrictions on both parties.  At minimum, it is likely that this information should be the confidential information of one party.

Because the server logs will contain most of the information one would need to know to deduce proprietary customer information, the server logs must be made confidential information of at least one party.  Both parties presumably will want either access to the server logs, or an analysis of the server logs.

One particular use restriction to consider is the spamming of users to the extent that email addresses are collected.  Each party will most certainly not want this database of email addresses being available to competitors.  Furthermore, because of the negative connotations of spamming, and the associated ill-will directed at sites that collect email addresses that are used for spamming, each party may want to restrict the other party’s rights to send email to the addresses for any reason.

It makes little sense to address copyright rights in the database of information regarding customers, although sometimes the parties will be confused about this.

b.         Ownership of Site’s “Look and Feel”

To the extent that the parties will jointly design the look and feel of the branded site (which will incorporate existing branding from the brander), the parties will need to determine the ownership of this look and feel.  While there are some trademark aspects to the ownership of the look and feel, there are likely to be numerous elements of the look and feel which may receive copyright protection, and the entire look and feel could be subject to its own separate copyright.

Frequently the parties will initially intend that the parties “jointly” own all copyrightable elements.  Joint ownership of copyrights is usually a bad idea, because the joint owners will have numerous duties to each other that are not clearly defined under U.S. copyright law.  Once the joint ownership issues are analyzed, the parties rarely will conclude that it meets their needs.

If the parties do not want joint ownership, they should be careful to avoid their efforts being classified as “joint works of authorship” under U.S. copyright law.  The status of joint works of authorship can be easily destroyed in the parties’ contract by expressly saying that no joint works of authorship are intended.

In all cases, the parties need to define what will happen to the branded pages following termination of the relationship.  There are no standard resolutions to this matter, but usually a satisfactory resolution can be reached if discussed by the parties as part of the contract negotiations.

Finally, if the provider is developing some or all aspects of the look and feel, the provider usually will need a license to create a derivative work (perhaps only in the form of the compilation) of the brander’s materials.  If the provider will be the owner of the look and feel and if the provider needed a license to create the derivative work, such license will need to continue following termination if the provider is intended to have the right to use the derivative work thereafter.

c.         Trademarks

Trademark issues are critical to the success of the private label and co-branding deals.  Close attention is warranted to all aspects of the trademark issues.

The brander’s license to the provider of the brander’s trademarks raises few unique issues.  As in other situations, the brander must establish mechanisms to ensure quality control.  If there are personality or character rights involved, these require special attention.

The brander should consider to what extent the branded pages should permit the use of provider’s trademarks.  This is likely to be a material element of the business relationship and therefore is rarely overlooked.  However, there are a few special issues that can arise.  First, if the brander does not intend to allow the provider to use its trademarks on the page, does this further include a prohibition on “credits” or other acknowledgments of effort?

Second, the domain name raises its own issues.  If the brander wants to completely make the branded pages appear to be part of the brander’s site, the brander’s domain name must be used, and the provider should obtain a trademark license to use this domain name.  If the brander’s domain name is not used, the agreement has effectively become a co-branding agreement and the brander should assume that all users will realize that the provider is involved.  Occasionally the parties will procure a new domain name for the branded pages; the domain name should be treated as a trademark and its ownership addressed accordingly.

If provider’s trademarks are permitted on the branded pages, the brander needs to decide if combination marks can be formed.  In fact, often times combination marks are intended to be formed, and the parties must address the resultant rights and obligations.  In particular, the parties should consider who will have the right to register the combination marks and what rights the respective parties will have to use the combination marks following termination of the relationship.

Finally, franchise law is a theoretical but nettlesome issue in these relationships.  Each state has its own set of franchise laws, and franchisors usually must follow certain procedures before offering franchises in the state.  Furthermore, usually franchisees cannot be terminated except for cause, even if the agreement expires by its terms.  As a result of these unexpected and often unfortunate results, the party that would be characterized as a franchisor has strong incentives to avoid the application of franchise law.  The factors for determining whether a relationship is a franchise vary from state to state, but usually there are several elements, including a trademark license, an upfront fee, a marketing plan prescribed by the franchisor, and a “community of interest” in marketing the product.  Frequently the brander will meet a number of these factors, so care and consideration must be given to the structure of the relationship to destroy as many of the requirements for franchises as possible.  Unfortunately for branders, many aspects of franchise law cannot be waived contractually, so a statement by the provider expressly waiving the application of franchise law may not prove to be adequate protection.

The Service Aspect of the Relationship

Because the brander is effectively outsourcing a portion of the brander’s website to provider, the brander will want to impose all of the duties on the provider that the brander would impose on any web host.  In all cases, the goal is to provide a good experience for users so they will keep coming back.  While usually both parties interests are in alignment on this, the brander may have more at stake given that the user’s failure to have a good experience will be associated with brander’s trademarks and the brander will suffer that loss of good will in connection with the provider’s content or software.

First, the brander will want to ensure that the branded pages are available 24 hours a day, 7 days a week without interruption.  In particular, the brander will want to institute requirements to keep the branded pages from going offline due to a service interruption (such as a power interruption or the provider’s Internet connection failing).  Not only does this avoid angry users, but downtime may very well be costing the brander money from lost revenue splits or advertising.

Second, the brander will want some standards for the provider’s services.  If the provider is providing functionality (such as a chat engine or a search engine), the brander will want to ensure that the functionality works properly.  If the provider is providing access to content, the provider will want to ensure that the content is reasonably accurate and current.  In both cases the brander will want some protection from third party claims, such as infringement of third party intellectual property rights or misappropriation of rights of publicity or privacy.  The brander should also impose some parameters on the content added by the provider, and in particular prevent the provider from distributing viruses or other harmful code in connection with the provider’s content or software.

Third, the brander will want to impose requirements on the provider to keep latency times low.  This means that the provider will not only need adequate bandwidth connection to the Internet, but the provider will also need to provide upgrades to the routers and servers necessary to provide a fast connection.

Fourth, the brander will want to consider the security methods used by provider.  Among the potential concerns are changes made by hackers to the branded pages, spoof sites, and the storage of sensitive materials (such as databases of customers’ credit card numbers) behind adequately secured firewalls.

Fifth, the parties should address how customer support inquiries will be handled.  Also, time periods for responses to customer support inquiries may be appropriate.

Finally, the brander should consider its stance towards caching and indexing.  Both caching and indexing may make it difficult to destroy evidence of the branded page’s existence at the end of the relationship, and therefore the brander should consider if this is a problem and, if so, the best method of resolution.

Conclusion

We are evolving towards a more sophisticated level of deal-making on the Web.  In 1995 and 1996, many companies eager to get on the Web launched their sites with ambitious features and functions that prove costly and burdensome to maintain.  As these companies have gained more insights into their business, they have realized that outsourcing these obligations make economic sense.  At the same time, the seamless nature of the Web permits an outsourcing relationship to be virtually invisible to end users.  In some circumstances, large portions of the brander’s site will be outsourced; in other cases, the relationship will deal with just a small aspect of a larger project.  In the future, it is likely that parties will be both providers and branders in the same agreement.  In any case, it is likely that private label and co-branding deals will become ubiquitous on the Web and warrant careful consideration.

 

About the author: Eric Goldman (formerly Eric Schlachter) is an attorney practicing cyberspace law with Cooley Godward LLP, Palo Alto, CA.  He also is an adjunct professor of Cyberspace Law at Santa Clara University School of Law.  Cooley Godward’s web page is located at http://www.cooley.com, and Eric’s personal home page is located at http://eric_goldman.tripod.com. Eric can be reached at ericgoldman@onebox.com.

The original version of this article was presented at University of Texas’ 10th Annual Computer Law Conference: Communicating and Conducting Business On-Line in Austin, Texas on May 15, 1997, and was published in the Journal of Internet Law, August 1997 at 11.

 

Cooley Godward LLP

Sample Contract #1

Affiliate Agreement/Brander-Favorable

As discussed, affiliate agreements are agreements whereby the provider agrees to compensate branders for directing traffic to the provider’s site by giving them a cut of transactional revenues generated from the provider’s site.  Most of the affiliate agreements available on the Net are favorable to the provider, not the brander.  This agreement was drafted from the perspective of the brander.

This agreement contemplates that the brander may choose to brand the provider’s pages only by framing the pages, not by actually inserting the branding on the provider’s servers.  The frame could be a navigational frame, or it could be a more functional frame (including possibly containing advertising).

This agreement was set up to handle any of the common user tracking devices on a check-the-box basis.  Note that there are different provisions that apply depending on which tracking device is used.  Often clients do not know which tracking device will be used upfront, or are reluctant to discuss this with the attorney (“it’s a technical issue unimportant to you”), but this choice does make a difference from a drafting perspective.

Section 4 takes the position that the referring website (i.e., the affiliate) “owns” all user data collected from the referred traffic.  This is a reasonably aggressive approach for the affiliate to take, but as used in this contract it has been frequently successful.

MERCHANDISING AGREEMENT

THIS MERCHANDISING AGREEMENT (the “Agreement”) is made as of ______________, 19___ by and between AFFILIATE, INC., with its principal place of business at ___________ (“Affiliate”), and ________________, with its principal place of business at ______________________ (“Merchant”).

1.         The Standard Terms and Conditions are incorporated herein by reference.

2.         The following business terms shall apply:

The “Merchant Pages” are defined as the following URLs:                                                        

Percent of Net Revenues payable to Affiliate:                                                               

“Net Revenues” is defined as all gross revenues (including without limitation any shipping, handling or transaction fees) received by Merchant from Referrals for goods and services offered from the Merchant Pages, less: (a) any taxes collected on behalf of a government agency, (b) actual postage expenses, and (c) refunds (but not exchanges) actually refunded to Referrals.

A “Referral” is defined as (check one):              ___ Option #1: a person who has Merchant’s token in their cookie.  Merchant shall place the token in the cookie each time such person comes to the Merchant Pages from a Affiliate page (unless the person already has an active token).  The token shall expire (check one):

___  at the end of the user’s session

___  [___] days from initial placement

___  never

___ Option #2: a person who accesses the Merchant Pages

___ Option #3: a person whose URL includes the search argument “________.” Merchant shall include the search argument “XXX” (a) when a person comes to the Merchant Pages from a Affiliate page, or (b) when the referring URL includes the search argument “_________” (i.e., as the user moves around in the Merchant Pages)

Length of time following termination that Affiliate shall receive a percent of Net Revenues:         

The Merchant Pages shall be (check one):         ___ Option A: framed by Affiliate’s frames

___ Option B: framed by Affiliate’s frames and co-branded with Affiliate’s logos/trademarks

Location/position of the link from Affiliate’s Marketplace to the Merchant Pages:

                                                                                                                                               

Number of page impressions Affiliate will deliver per month:                                                     

Such pages will be of (choose one):

___      banner ads delivered by Merchant

___      Merchant’s trademarks and logos

___      both banner ads and trademarks/logos

Location of such page impressions:                                                                                           

3.         The following special terms apply (describe):

                                                                                                                                               

                                                                                                                                               

AFFILIATE: 

 

MERCHANT:
By: __________________________________  By: _________________________________
Title: _________________________________ Title: ________________________________

 

STANDARD TERMS AND CONDITIONS

1.         PAYMENT.

1.1       Payment.  Through the period of time specified in the Agreement, Merchant shall pay to Affiliate the percent of Net Revenues specified in the Agreement.  Within 15 days after each calendar month, Merchant shall provide a report to Affiliate detailing the computation of Net Revenues.  Payment shall accompany each monthly report.  All payments to Affiliate exclude, and Merchant shall be responsible for, any sales, use or other taxes (other than taxes based on the paying party’s net income) associated with such payments or the underlying transactions in this Agreement.  Overdue payments shall accrue interest, at the lesser of 1½% per month or the maximum allowable interest under applicable law, from due date until paid, and Merchant shall pay Affiliate’s cost of collection (including reasonable attorneys’ fees).

1.2       Audit Rights.  Merchant shall keep for 3 years proper records and books of account relating to its activities hereunder.  Once every 12 months, Affiliate or its designee may inspect such records to verify reports.  Any such inspection will be conducted in a manner that does not unreasonably interfere with Merchant’s business activities.  Merchant shall immediately make any overdue payments disclosed by the audit plus interest as described below.  Such inspection shall be at Affiliate’s expense; however, if the audit reveals overdue payments in excess of 5% of the payments owed to date, Merchant shall immediately pay the cost of such audit, and Affiliate may conduct another audit during the same 12 month period.

2.         MARKETING. 

2.1       Affiliate’s Marketing. Affiliate shall display Merchant’s logo (with a corresponding link to a Merchant Page) in Affiliate’s Marketplace Section in the location described in the Agreement.

2.2       Framing.  Affiliate in its sole discretion may frame the Merchant Pages, and any consideration Affiliate derives from such frames shall be solely Affiliate’s.

2.3       Co-Branding.  This Section 2.3 applies only if Option B was selected.  In such case, the parties shall mutually agree upon the look and feel of any co-branded Merchant Pages, specifying the location of all Affiliate branding.  Merchant may not use Affiliate’s branding until such agreement has been reached.  Thereafter, Merchant shall not change any co-branded Merchant Pages (a) in a way that would degrade, detract from or interfere with Affiliate’s branding, or (b) to introduce any new third party branding on such Merchant Pages.

2.4       Restrictions on the Merchant Pages.  This Section 2.4 applies only if Option #2 was selected.  In such case, Merchant shall not: (a) provide any hypertext links to a page outside of the Merchant Pages, (b) display banner advertising or similar advertising or sponsorships on the Merchant Pages, or (c) feature or promote any way for Referrals to procure goods or services from a venue outside of the Merchant Pages (by way of example, this would include 800 numbers).  Without limiting other remedies, if Merchant violates the foregoing sentence, all gross revenues attributable to goods or services procured from these places outside of the Merchant Pages shall be deemed part of Net Revenues, as well as any consideration received by Merchant from a third party for placement of the ad, sponsorship, link or other promotion.

3.         LICENSES AND QUALITY.

3.1       Grant.  Merchant hereby grants to Affiliate a non-exclusive, nonsublicenseable license to use the Merchant trademarks and logos identified by Merchant in links to and advertisements and promotions for the Merchant Pages.  In the event that the parties select Option B, Affiliate hereby grants to Merchant a non-exclusive, nonsublicenseable license to use, on the Merchant Pages, Affiliate trademarks and logos identified by Affiliate.

3.2       Restrictions.  The trademark owner may terminate the foregoing license if, in its sole discretion, the licensee’s use of the marks does not conform to the owner’s standards; alternatively, the owner may specify that certain pages of the licensee’s website may not contain the marks.  Title to and ownership of the owner’s marks shall remain with the owner.  The licensee shall use the marks exactly in the form provided and in conformance with any trademark usage policies.  The licensee shall not form any combination marks with the other party’s marks.  The licensee shall not take any action inconsistent with the owner’s ownership of the marks and any benefits accruing from use of such trademarks shall automatically vest in the owner.

3.3       Quality Standards.  Merchant shall provide the goods and services offered from the Merchant Pages, and any related customer and technical support, on a quality level substantially equivalent to the quality offered by Merchant’s online competitors.  Merchant shall clearly state, and shall follow the stated, warranty and refund policies.  Furthermore, Merchant shall treat Referrals on a non-discriminatory basis.

4.         INFORMATION ABOUT REFERRALS.  Merchant shall not disclose to any third parties any information or data collected from or about Referrals (including both voluntarily-disclosed information and any information Merchant gleans about Referrals from their access or use of the Merchant Pages), nor may Merchant use such information for any purpose other than as necessary to deliver purchased goods or services to Referrals.  Merchant shall use at least industry-standard methods to protect the security of such Referral-related information.

5.         DISCLAIMER OF WARRANTIES.  EACH PARTY PROVIDES ALL MATERIALS AND SERVICES TO THE OTHER PARTY “AS IS.” EACH PARTY DISCLAIMS ALL WARRANTIES AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  Each party acknowledges that it has not entered into this Agreement in reliance upon any warranty or representation except those specifically set forth herein.

6.         TERM AND TERMINATION.  This Agreement shall continue until terminated.  This Agreement may be terminated: (a) if a material breach is not cured within 5 days of notice, (b) within 30 days for any reason or no reason, or (c) as described in Section 9.3.  Upon termination, all licenses hereunder shall terminate.  Sections 1, 4, 5, 6, 7, 8 and 9 shall survive termination. After termination, each party shall remove the other party’s content from their website, and each party shall use commercially reasonable efforts to remove all references to the other party’s marks, as used under this Agreement, from any site that caches, indexes or links to such party’s site.

7.         LIMITATION ON LIABILITY.  EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT, NEITHER PARTY SHALL BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS (HOWEVER ARISING, INCLUDING NEGLIGENCE) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT, A FAILURE TO PAY ROYALTIES, OR AN INDEMNITY CLAIM, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY IN AN AMOUNT GREATER THAN THE AMOUNTS ACTUALLY PAID BY MERCHANT TO AFFILIATE HEREUNDER.

8.         INDEMNITY.  Each party (the “Indemnifying Party”) shall indemnify the other party (the “Indemnified Party”) against any and all claims, losses, costs and expenses, including reasonable attorneys’ fees, which the Indemnified Party may incur as a result of claims in any form by third parties arising from: (a) the Indemnifying Party’s acts, omissions or misrepresentations to the extent that the Indemnified Party is deemed a principal of the Indemnifying Party, or (b) the violation of any third party proprietary right by the Indemnifying Party’s domain name, software or any content provided by the Indemnifying Party for use on the Indemnified Party’s servers.  In addition, Merchant shall indemnify Affiliate against any and all claims, losses, costs and expenses, including reasonable attorneys’ fees, which Affiliate may incur as a result of claims in any form by third parties arising from (x) any goods or services offered on the Merchant Page or (y) Merchant’s breach of Section 9.5.  The Indemnified Party shall (i) give the Indemnifying Party notice of the relevant claim, (ii) cooperate with the Indemnifying Party, at the Indemnifying Party’s expense, in the defense of such claim, and (iii) give the Indemnifying Party the right to control the defense and settlement of any such claim, except that the Indemnifying Party shall not enter into any settlement that affects the Indemnified Party’s rights or interest without the Indemnified Party’s prior written approval.  The Indemnified Party shall have the right to participate in the defense at its expense.

9.         GENERAL PROVISIONS.

9.1       Governing Law.  This Agreement will be governed and construed in accord­ance with the laws of the State of California without giving effect to conflict of laws principles.  Both parties submit to jurisdiction in California and further agree that any cause of action arising under this Agreement shall be brought in a court in California.

9.2       Severability; Headings.  If any provi­sion herein is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way.  Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section.

9.3       Force Majeure.  If performance hereunder is prevented, restricted or interfered with by any act or condition whatsoever beyond the reasonable control of a party, the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference.  Each party acknowledges that the operation of the other party’s website and services may be interfered with by numerous factors outside of a party’s control.  However, if for any reason (including a force majeure) the Merchant Pages are not available for more than 4 hours in any one 24 hour period or 97% in any one month, Affiliate may terminate this Agreement.

9.4       Independent Contractors.  The parties are independent contractors, and no agency, partnership, joint venture, employee-employer or franchisor-franchisee relationship is intended or created by this Agreement.  Neither party shall make any warranties or representations on behalf of the other party.

9.5       Compliance with Laws.  At its own expense, Merchant shall comply with all applicable laws, regulations, rules, ordinances and orders regarding its activities related to this Agreement, including without limitation those applicable to the marketing or sale of the goods or services offered from the Merchant Pages.

9.6       Notice.  Any notices hereunder shall be given to the appropriate party at the address specified above or at such other address as the party shall specify in writing.  Notice shall be deemed given: upon personal delivery; if sent by fax, upon confirmation of receipt; or if sent by certified or registered mail, postage prepaid, 5 days after the date of mailing.

9.7       Entire Agreement; Waiver.  This Agreement sets forth the entire understanding and agreement of the parties, and supersedes any and all oral or written agreements or understandings between the parties, as to the subject matter of this Agreement.  It may be changed only by a writing signed by both parties.  The waiver of a breach of any provision of this Agreement will not operate or be interpreted as a waiver of any other or subsequent breach.

 

Cooley Godward LLP

Sample Contract #2

Co-Branding Agreement/Brander Favorable

This contract was designed for a brander who will be seeking either content or functionality from a third party provider under its branding.  As with sample contract #1, this agreement contemplates either framing or actual co-branding from the provider’s servers.

Unlike sample contract #1, this contract contemplates that revenue will be generated from the sale of advertising.  Further, the contract was designed so that either party could be in control of advertising, so all possible payment oriented provisions are mutual or neutral.  In particular, consider point B(5), which allocates rights and responsibilities if the party in control of advertising fails to sell 100% of the inventory (a common problem!).

As with sample contract #1, the contract takes the position that information regarding users sent to provider by brander is “owned” by brander.

FRAMING AND CO-BRANDING AGREEMENT

THIS FRAMING AND CO-BRANDING AGREEMENT (the “Agreement”) is made as of ______________, 19___ by and between BRANDER, INC., with its principal place of business at _________________ (“Brander”), and ________________, with its principal place of business at ______________________ (“Provider”).

A.        The Standard Terms and Conditions are incorporated herein by reference.

B.         The following business terms shall apply:

(1)        The Provider Pages are defined as the pages available from the following URL: ______________________________.

(2)        The Provider Pages shall be:

___ Option A: framed by Brander’s frames

___ Option B: both framed by Brander’s frames and co-branded with Brander’s Marks

___ Option C: co-branded with Brander’s Marks

(3)        Brander shall promote the Provider Pages in the following ways:

                                                                                                                                               

(4)        The parties shall respectively have the right to sell the following percentages of available inventory of Advertisements:

Provider: _______%                Brander: ________%

(5)        In the event that a party does not sell all of the inventory that it has the right to sell, the unsold inventory shall be allocated as follows (CHECK ONE):

___ The other party shall have the sole right to control such unsold inventory and may place house, barter or paid Advertisements as it sees fit without any split of Net Revenues for such inventory.

___ The other party shall have the sole right to control such unsold inventory and may place house, barter or paid Advertisements as it sees fit but will split any Net Revenues for such inventory.

___ The other party shall use commercially reasonable efforts to sell paid Advertisements for such inventory; but if there is remaining unsold inventory after using such efforts, it may place house or barter Advertisements in such unsold inventory without any further obligation to the other party.

___ The parties will share the unsold inventory (i.e., for each house or barter Advertisement placed by Brander, one house or barter Advertisement may be placed by Provider).

(6)        “Net Revenues” is defined as all monetary consideration actually received by party for Advertisements displayed to Referrals in conjunction with the Provider Pages less: (a) agency discounts actually payable (if any); (b) frequency discounts actually payable (if any); (c) advertising sales representative commissions (not to exceed 15%); (d) ad serving fees actually payable (if any); and (e) any sales or use taxes (not directly paid by advertisers to the applicable taxing authority) attributable to such advertisements and promotional links.

(7)        The parties shall pay the following percentages of Net Revenues to each other:

Provider shall pay ___% of its Net Revenues to Brander.

Brander shall pay ___% of its Net Revenues to Provider.

___ If the box is checked, then notwithstanding the foregoing, Provider shall pay to Brander the greater of the above percent of Net Revenues and $_____ per Advertisement impression.

(8)        “Referral” is defined as (check one):

___      Option #1: a person who has Provider’s token in their cookie.  Provider shall place a token in the cookie each time such person comes to the Provider Pages from a Brander page (unless the person already has an active token for Brander).  The token shall expire (check one):

___      at the end of the user’s session

___      [___] days from initial placement

___      never

___      Option #2: a person who accesses the Provider Pages

___      Option #3: a person whose URL includes the search argument “XXX.” Provider shall include the search argument “XXX” (a) when a person comes to the Provider Pages from a Brander page, or (b) when the referring URL includes the search argument “XXX” (i.e., as the user moves around in the Provider Pages)

(9)        The following special terms apply (describe):

                                                                                                                                               

                                                                                                                                               

BRANDER: 

 

PROVIDER:
By: __________________________________  By: _________________________________
Title: _________________________________ Title: ________________________________

 

STANDARD TERMS AND CONDITIONS

1.         DEFINITIONS.

1.1       “Advertisement” means any promotion of a product or service on the Provider Pages (other than the promotion of Brander or Provider as permitted by this Agreement or that is generated in Brander’s frame) for which the parties receive monetary consideration.

1.2       “Provider’s Marks” means the Provider’s domain name and the Provider logos and trademarks provided by Provider to Brander under this Agreement.

1.3       “Brander’s Marks” means the domain name and Brander’s logos and trademarks provided by Brander to Provider under this Agreement.

2.         PAYMENT.

2.1       Advertisements.  If Provider is given the right to sell Advertisements, it shall use best efforts to procure paying Advertisements for its percentage of inventory.  In addition, to the extent that Provider is given the right to sell a percentage of inventory, Provider shall require advertisers to submit Advertisements to Brander or, at Brander’s request, Brander’s ad server. Potential advertisers may be required to sign Brander’s or its ad server’s standard form of insertion order before being allowed to place Advertisements on the Provider Pages.

2.2       Reporting.  If a party is obligated to pay a percentage of Net Revenues to the other party, the obligated party shall deliver a report showing the computation of Net Revenues within 10 days following the end of each calendar month.  Payment shall accompany such report.

2.3       Cross Subsidization.  In order to ensure that Net Revenues are not manipulated, neither party may charge for Advertisements on a cross-subsidized basis or price Advertisements bundled with any other product or service; if a party breaches the foregoing, the revenue used to compute Net Revenues shall be deemed, as applicable, to include: (i) the price of the bundle, or (ii) the revenues received for the Advertisements plus the revenues received for the product or service with which the Advertisements were cross-subsidized.

2.4       Taxes.  All fees and payments stated herein exclude, and the party receiving payment shall pay, any sales, use, property, license, value added, withholding, excise or similar tax, federal, state or local, related to the parties’ performance of its obligations or exercise of its rights under this Agreement and any related duties, tariffs, imposts and similar charges, exclusive of taxes based on the paying party’s net income.

2.5       Audit Rights.  A party obligated to pay Net Revenues hereunder shall keep for 3 years proper records and books of account relating to its activities hereunder.  Once every 12 months, the party receiving payment or its designee may inspect such records to verify reports.  Any such inspection will be conducted in a manner that does not unreasonably interfere with the inspected party’s business activities.  The inspected party shall immediately make any overdue payments disclosed by the audit plus applicable interest.  Such inspection shall be at the inspecting party’s expense; however, if the audit reveals overdue payments in excess of 5% of the payments owed to date, the inspected party shall immediately pay the cost of such audit, and the inspecting party may conduct another audit during the same 12 month period.

3.         MARKETING.

3.1       Framing.  This Section 3.1 applies only if Options A or C were selected.  Brander in its sole discretion may frame the Provider Pages, and any consideration Brander derives from such frames shall be solely Brander’s.

3.2       Co-Branding.  This Section 3.2 applies only if Options B or C were selected.  In such case, the parties shall mutually agree upon the look and feel of any Provider Pages, specifying the location of all Brander branding.  Provider may not use Brander’s branding until such agreement has been reached.  Thereafter, Provider shall not change any Provider Pages (a) in a way that would degrade, detract from or interfere with Brander’s branding, or (b) to introduce any new third party branding on such Provider Pages.

4.         LICENSES AND QUALITY.

4.1       Grant.  Provider hereby grants to Brander a non-exclusive, nonsublicenseable license to use the Provider’s Marks in links to and advertisements and promotions for the Provider Pages.  In the event that the parties select Options B or C, Brander hereby grants to Provider a non-exclusive, nonsublicenseable license to use, on the Provider Pages, Brander’s Marks.

4.2       Restrictions.  The trademark owner may terminate the foregoing license if, in its sole discretion, the licensee’s use of the marks does not conform to the owner’s standards; alternatively, the owner may specify that certain pages of the licensee’s website may not contain the marks.  Title to and ownership of the owner’s marks shall remain with the owner.  The licensee shall use the marks exactly in the form provided and in conformance with any trademark usage policies.  The licensee shall not form any combination marks with the other party’s marks.  The licensee shall not take any action inconsistent with the owner’s ownership of the marks and any benefits accruing from use of such trademarks shall automatically vest in the owner.

4.3       Quality Standards.  Provider shall provide information from the Provider Pages that is as accurate as other comparable websites.  Provider shall not provide any information from the Provider Pages that is inconsistent with the labeling, categorization, advertising and (if applicable) rating of the Provider Pages.

5.         INFORMATION ABOUT REFERRALS.  Provider shall not disclose to any third parties any information or data collected from or about Referrals (including both voluntarily-disclosed information and any information Provider gleans about Referrals from their access or use of the Provider Pages), nor may Provider use such information for any purpose other than as necessary to deliver purchased goods or services to Referrals.  Provider shall use at least industry-standard methods to protect the security of such Referral-related information.

6.         DISCLAIMER OF WARRANTIES.  EACH PARTY PROVIDES ALL MATERIALS AND SERVICES TO THE OTHER PARTY “AS IS.” EACH PARTY DISCLAIMS ALL WARRANTIES AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.  Each party acknowledges that it has not entered into this Agreement in reliance upon any warranty or representation except those specifically set forth herein.

7.         TERM AND TERMINATION.  This Agreement shall continue until terminated.  This Agreement may be terminated: (a) if a material breach is not cured within 5 days of notice, (b) within 30 days for any reason or no reason, or (c) as described in Section 9.3.  Upon termination, all licenses hereunder shall terminate.  Sections 1, 4, 5, 6, 7, 8, 9 and 10 shall survive termination.  After termination, each party shall remove the other party’s content from their website, and each party shall use commercially reasonable efforts to remove all references to the other party’s marks, as used under this Agreement, from any site that caches, indexes or links to such party’s site.

8.         LIMITATION ON LIABILITY.  EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT, NEITHER PARTY SHALL BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS (HOWEVER ARISING, INCLUDING NEGLIGENCE) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

EXCEPT IN THE EVENT OF A BREACH OF A LICENSE GRANT, A FAILURE TO PAY ROYALTIES, OR AN INDEMNITY CLAIM, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY IN AN AMOUNT GREATER THAN THE AMOUNTS ACTUALLY PAID BY PROVIDER TO BRANDER HEREUNDER.

9.         INDEMNITY.  Each party (the “Indemnifying Party”) shall indemnify the other party (the “Indemnified Party”) against any and all claims, losses, costs and expenses, including reasonable attorneys’ fees, which the Indemnified Party may incur as a result of claims in any form by third parties arising from: (a) the Indemnifying Party’s acts, omissions or misrepresentations to the extent that the Indemnified Party is deemed a principal of the Indemnifying Party, or (b) the violation of any third party proprietary right by the Indemnifying Party’s domain name, software or any content provided by the Indemnifying Party for use on the Indemnified Party’s servers.  In addition, Provider shall indemnify Brander against any and all claims, losses, costs and expenses, including reasonable attorneys’ fees, which Brander may incur as a result of claims in any form by third parties arising from (x) the content on the Provider Pages, or (y) Provider’s breach of Section 10.5.  The Indemnified Party shall (i) give the Indemnifying Party notice of the relevant claim, (ii) cooperate with the Indemnifying Party, at the Indemnifying Party’s expense, in the defense of such claim, and (iii) give the Indemnifying Party the right to control the defense and settlement of any such claim, except that the Indemnifying Party shall not enter into any settlement that affects the Indemnified Party’s rights or interest without the Indemnified Party’s prior written approval.  The Indemnified Party shall have the right to participate in the defense at its expense.

10.       GENERAL PROVISIONS.

10.1     Governing Law.  This Agreement will be governed and construed in accord­ance with the laws of the State of California without giving effect to conflict of laws principles.  Both parties submit to jurisdiction in California and further agree that any cause of action arising under this Agreement shall be brought in a court in California.

10.2     Severability; Headings.  If any provi­sion herein is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way.  Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section.

10.3     Force Majeure.  If performance hereunder is prevented, restricted or interfered with by any act or condition whatsoever beyond the reasonable control of a party, the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference.  Each party acknowledges that the operation of the other party’s website and services may be interfered with by numerous factors outside of a party’s control.  However, if for any reason (including a force majeure) the Provider Pages are not available for more than 4 hours in any one 24 hour period or 97% in any one month, Brander may terminate this Agreement.

10.4     Independent Contractors.  The parties are independent contractors, and no agency, partnership, joint venture, employee-employer or franchisor-franchisee relationship is intended or created by this Agreement.  Neither party shall make any warranties or representations on behalf of the other party.

10.5     Compliance with Laws.  At its own expense, Provider shall comply with all applicable laws, regulations, rules, ordinances and orders regarding its activities related to this Agreement.

10.6     Notice.  Any notices hereunder shall be given to the appropriate party at the address specified above or at such other address as the party shall specify in writing.  Notice shall be deemed given: upon personal delivery; if sent by fax, upon confirmation of receipt; or if sent by certified or registered mail, postage prepaid, 5 days after the date of mailing.

10.7     Entire Agreement; Waiver.  This Agreement sets forth the entire understanding and agreement of the parties, and supersedes any and all oral or written agreements or understandings between the parties, as to the subject matter of this Agreement.  It may be changed only by a writing signed by both parties.  The waiver of a breach of any provision of this Agreement will not operate or be interpreted as a waiver of any other or subsequent breach.

 

Cooley Godward LLP

Sample Contract #3

Co-Branding Agreement/Brander Favorable

Unlike sample contracts #1 and #2, which were relatively “loose” in controlling the provider, sample contract #3 contemplates a much closer relationship between brander and provider’s site. As a result, this contract is much more rigorous in its control over the provider on most dimensions—especially in control over the development and look and feel of the pages.

In this scenario, the brander always wanted sole control over advertising sales; thus, this assumption was “hard-wired” into the contract.

Also, Exhibit F contemplates that the brander might decide to shift hosting to its own servers.

CO-BRANDING AGREEMENT

THIS CO-BRANDING AGREEMENT (the “Agreement”) is made as of _________ ____, 199____ (the “Effective Date”), by and between BRANDER, INC., a Delaware corporation having a principal place of business at ____________ (“Brander”), and _______________, a ____________ corporation having its principal place of business at _________________ (“Provider”).

WHEREAS, Brander provides news, information and other content in various media to end users via several sites on the World Wide Web (the “Web”) and other electronic media;

WHEREAS, Provider supplies information or data via the Web; and

WHEREAS, Provider desires to supply, and Brander desires to procure, Provider’s information or data via a set of Web pages branded in accordance with Brander’s specifications.

NOW THEREFORE, the parties hereby agree as follows:

1.         DEFINITIONS.  The following terms shall have the following meanings:

1.1       “Advertisements” means advertisements and sponsorships to be placed on the Branded Pages.

1.2       “Branded Pages” means the pages accessible via the Domain Name that incorporate and integrate the Provider Content and the Brander Content.

1.3       “Branded Page Specifications” means the specifications for the structure, layout, function and “look and feel” of the Branded Pages.  The initial version of these specifications is set forth in Exhibit A.

1.4       “Development Schedule” means the milestone and deliverable schedule for development and creation of the Branded Pages as set forth in Exhibit B.

1.5       “Domain Name” means the URL designated by Brander from time to time.  The initial URL is specified in Exhibit A.

1.6       “Provider Content” means the text, pictures, graphics, sound, video, other data and computer software to be provided by Provider hereunder, as set forth in Exhibit C, as such materials may be modified from time to time.

1.7       “Marks” means the Domain Name and the Brander logos and trademarks to be provided to Provider in accordance with this Agreement.

1.8       “Promotional Links” means links to any third party websites for which Brander receives monetary consideration.

1.9       “Server Logs” means the logs, identifying information for Users and records of User activities conducted on or in the Branded Pages, as described in more detail in Exhibit D.

1.10     “Shadow Site” means the password protected site where Branded Pages are made available for Brander’s review and testing prior to being made publicly available.

1.11     “User” means any person who accesses or attempts to access the Branded Pages.

1.12     “Brander Content” means the materials provided by or created by or on behalf of Brander (such as the Marks, an HTML template for the “look and feel” of the Branded Pages, files, data and formulae) for incorporation into the Branded Pages in accordance with the Branded Page Specifications.

2.         DEVELOPMENT OF BRANDED PAGES.

2.1       Development Obligations.  Provider shall develop and create the Branded Pages in accordance with the Branded Page Specifications and the Development Schedule.  Provider shall deliver to Brander each of the deliverables by the milestone date set forth in the Development Schedule; provided, however, that in the event that Provider’s delivery is delayed primarily as a result of Brander’s act or omission (such as a failure to deliver the Brander Content in accordance with the Development Schedule), Provider shall be entitled to a day-for-day extension of the applicable milestone date.

2.2       Shadow Site.  Provider shall make available completed Branded Pages to Brander on the Shadow Site prior to making the Branded Pages publicly available.  Provider shall not make any Branded Pages publicly available without Brander’s prior written approval.

2.3       Acceptance.  Brander shall have the right to accept any deliverable or reject such deliverable if, in Brander’s reasonable judgment, the deliverable is not in accordance with the Branded Page Specifications or otherwise fails to meet Brander’s requirements.  If Brander rejects such deliverable, it will provide Provider with written instructions specifying the necessary corrections, which Provider shall make within 10 business days.  Brander shall have the right to accept or reject the corrected deliverable as set forth above, and the parties shall continue the process set forth in this Section 2.3 until Brander accepts the deliverable.  If Brander does not notify Provider in writing of rejection of a deliverable within 10 days of receipt of any deliverable, such deliverable shall be deemed accepted.

3.         HOSTING, MAINTENANCE AND CONNECTIVITY FOR THE BRANDED PAGES.

3.1       Hosting of the Branded Pages.  Provider shall store and maintain the Branded Pages (other than Advertisements) on server(s) located on Provider’s premises; provided, however, that Brander may specify some or all Branded Pages that it would like to host on its servers, in which event the parties shall use commercially reasonable efforts to effectuate a transfer of such pages within 15 days of Brander’s notice.  Following the transfer, the terms of Exhibit F shall apply to the Branded Pages being hosted by Brander.  Advertisements shall be stored and maintained on Brander’s (or its suppliers’) server(s).  Throughout the term of this Agreement, the Branded Pages will be transmitted to Users in accordance with the Branded Page Specifications and Exhibit E.

3.2       Provider Content.  Provider shall make the Provider Content available to Users accessing the Branded Pages in accordance with the Branded Page Specifications and Exhibit E. Provider will be solely responsible for creating, managing, editing, reviewing, deleting and otherwise controlling the Provider Content.  Notwithstanding the foregoing, Provider shall immediately remove from the Branded Pages any Provider Content that Brander, in its sole discretion, requests to be removed.

3.3       Updates to the Branded Pages.  Brander shall at all times have control regarding the “look and feel” of the Branded Pages, and may modify, or request modifications, to the Branded Pages as follows:

(a)        Provider shall provide Brander with access to the Shadow Site to permit Brander to modify the Brander Content as incorporated in the Branded Pages.  Brander shall comply with all reasonable security requirements provided by Provider to Brander in connection with such access and modifications.  Upon written notice from Brander, Provider shall make the modified Branded Pages on the Shadow Site publicly available at the Domain Name.

(b)        Brander may request that Provider modify the design of the Branded Pages.  Provider shall, at its sole expense, use commercially reasonable efforts to modify the design of the Branded Pages in accordance with Brander’s requests within 3 business days of receipt of Brander’s written request.  For modifications that would be commercially unreasonable to make within 3 business days, the parties shall in good faith agree on a reasonable schedule for completion of such modifications.  No modifications to the Branded Pages may be made by Provider without Brander’s prior written consent, and no modifications shall be made available to the public until posted to the Shadow Site and approved in writing by Brander.

3.4       Server Logs.  Nightly at 5 p.m. Pacific Time, and at such other times as Brander shall reasonably request, Provider at its expense shall deliver to Brander in electronic form the Server Logs in accordance with Exhibit D.

3.5       Support.  All User customer or technical support inquiries shall be directed to an email address specified by Brander, and Brander shall handle all associated first-line customer and technical support for Users.  Provider shall provide technical support to Brander’s technical support personnel in accordance with Exhibit E.

3.6       Branded Page Maintenance and Connectivity Requirements.  Provider shall provide error correction, maintenance and connectivity services for the Branded Pages in accordance with Exhibit E.

4.         ADVERTISING; PAYMENTS.

4.1       Advertisements and Promotional Links.

(a)        Brander shall be exclusively responsible for procuring for and placing all Advertisements on the Branded Pages.  Brander may, in its sole discretion, accept or reject proposed Advertisements.

(b)        Provider understands and agrees that the Branded Pages will contain hypertext links to non-Branded Pages as specified by Brander in its sole discretion from time to time, including without limitation Promotional Links.

4.2       Revenue Split.  Brander shall pay to Provider __________ of Net Revenues derived from Advertisements and Promotional Links on the Branded Pages.  “Net Revenues” is defined as all monetary consideration actually received by Brander attributable to Advertisements and Promotional Links on the Branded Pages less: (a) agency discounts actually payable (if any); (b) frequency discounts actually payable (if any); (c) amounts payable by Brander to third party distributors pursuant to an “OEM”-style relationship, (d) advertising sales representative commissions (not to exceed 15%); and (e) any sales or use taxes (not directly paid by advertisers to the applicable taxing authority) attributable to such Advertisements and Promotional Links.

4.3       Reports and Payment.  Within 45 days following the end of each calendar quarter, Brander shall render to Provider a statement showing in reasonable detail the computation of Net Revenues.  Such statement shall be accompanied by payment of the amounts then due.

4.4       Taxes.  All fees and payments stated herein exclude, and Provider shall pay, any sales, use, property, license, value added, withholding, excise or similar tax, federal, state or local, related to the parties’ performance of its obligations or exercise of its rights under this Agreement and any related duties, tariffs, imposts and similar charges, exclusive of taxes based on Brander’s net income.

4.5       Records.  Each party shall keep reasonable records in connection with its respective performance under this Agreement (including without limitation, records in relation to advertising and payment in Brander’s case, and in relation to the compilation of the Server Logs in Provider’s case), and shall permit the other party reasonable access to such records at such other party’s expense upon reasonable notice.

5.         PROPRIETARY RIGHTS AND LICENSE.

5.1       License Grant by Brander.  Brander hereby grants to Provider a non-exclusive, worldwide license to: (a) use the Marks on the Branded Pages; (b) reproduce the Brander Content and modify it only to the extent necessary to create Branded Pages that are in accordance with the Branded Page Specifications; and (c) reproduce, distribute, publicly perform, publicly display and digitally perform the Branded Pages via the Web on and from server(s) located on Provider’s premises.  Provider shall have no right to sublicense the foregoing rights (including without limitation to Web hosts or ISPs) or reuse the Brander Content without Brander’s prior written consent.  Any rights not expressly granted by Brander to Provider are reserved by Brander, and all implied licenses are disclaimed.  Provider shall not exceed the scope of the licenses granted hereunder.

5.2       Ownership of Marks, Brander Content and Branded Pages.  All right, title and interest in and to the Marks, the Brander Content and the Branded Pages (other than the Provider Content) (including without limitation all rights therein under copyright, trademark, trade secret and similar laws) shall remain with Brander or its licensors and/or suppliers.  To the extent that Provider makes any modifications to the Marks and/or the Brander Content in connection with its performance hereunder, such modifications shall be deemed works-made-for-hire specially commissioned by Brander under the U.S. Copyright Act of 1976, 17 U.S.C. Section 101, et seq., as amended.  To the extent that any such modifications are deemed not to be works-made-for-hire by a court of competent jurisdiction, Provider hereby irrevocably assigns all right, title and interest in and to such modifications to Brander.  In the event that any such modifications cannot be assigned, Provider hereby grants to Brander an exclusive, irrevocable, perpetual, worldwide, sublicenseable (through multiple tiers of sublicensees), royalty-free license to use, reproduce, distribute, create derivative works of, publicly perform, publicly display and digitally perform such modifications in any media now known or hereafter known.  Provider shall secure agreements with its employees and independent contractors sufficient to provide the foregoing rights to Brander.

5.3       Ownership of Provider Content.  All right, title and interest in and to the Provider Content (including without limitation all rights therein under copyright, trademark, trade secret and similar laws) shall remain with Provider or its licensors and/or suppliers.

5.4       Quality Control and Use Restrictions.  Provider shall use the Marks exactly in conformance with Brander’s trademark usage policies as communicated to Provider from time to time.  Brander may immediately terminate Provider’s license to use the Marks if Brander reasonably believes that such use dilutes, tarnishes or blurs the value of the Marks.  Provider shall place a ® or Ô (as appropriate) with the Marks as requested by Brander.  Provider acknowledges that Provider’s use of the Marks will not create in it, nor will it represent it has, any right, title or interest in or to the Marks other than the license granted by Brander above.  Provider will not challenge the validity of or attempt to register any of the Marks or its interest therein as a licensee, nor will it adopt any derivative or confusingly similar names, brands or marks or create any combination marks with the Marks.  Provider acknowledges Brander’s and its affiliates’ ownership and exclusive right to use the Marks and agrees that all goodwill arising as a result of the use of the Marks shall inure to the benefit of Brander and its affiliates.

5.5       Provider Branding.  The Branded Pages will include branding by Provider as set forth in the Branded Page Specifications.

5.6       Limited Promotional Use.  Provider hereby grants a non-exclusive, worldwide license to Brander to use, reproduce, distribute, create derivative works of, publicly perform, publicly display and digitally perform the Provider Content solely in connection with reasonable promotional activities by Brander in connection with Brander’s websites.

5.7       Non-Exclusivity.  Nothing in this Agreement shall be deemed or construed to prohibit: (a) Provider from providing the Provider Content (or similar material) to any third party, or (b) Brander from procuring material similar in nature to the Provider Content from any third party.

5.8       Execution of Documents.  Each party agrees to execute such documents and take such other actions as are reasonably necessary to effectuate the provisions of this Section 5 at the other party’s request and sole expense.  In the event either party refuses or is unable to take such action, such party hereby irrevocably appoints the other party as such party’s agent-in-fact for the purposes of taking such action, which appointment is coupled with an interest.

6.         WARRANTIES.

6.1       Performance.  Provider represents and warrants that, upon acceptance of the Branded Pages by Brander and at all times thereafter during the term of this Agreement, the Branded Pages shall operate in accordance with the Branded Page Specifications and Exhibit E.

6.2       No Viruses, etc.  Provider represents and warrants that the Provider Content does not and will not contain, nor shall Provider distribute in connection with the Branded Pages, any viruses, trojan horses, worms, time bombs, cancelbots or other programs containing computer programming routines that are intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate a User’s system, data or personal information.

6.3       Accuracy.  Provider represents and warrants that the Provider Content shall not contain a higher number of, or more serious, errors than would be expected by a reasonable commercial user of the type of information or data provided by Provider.

6.4       No Other Warranties.  EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 6, EACH PARTY DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS, EXPRESS, IMPLIED AND STATUTORY, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.

7.         INDEMNITY.

7.1       Indemnity by Brander.  Brander shall indemnify and hold harmless Provider against all claims, losses, damages, liabilities, costs and expenses, including reasonable attorneys’ fees, to the extent that such claims arise out of the infringement by the Marks or the Brander Content of any third party copyright, trademark or trade secret (except to the extent any such claim arises out of any modifications to the Marks or the Brander Content made by Provider).

7.2       Provider’s Indemnity.  Except with respect to circumstances where Brander will indemnify Provider pursuant to Section 7.1, Provider shall indemnify and hold harmless Brander and its affiliates and suppliers against all claims, losses, damages, liabilities, costs and expenses, including reasonable attorneys’ fees, which Brander and its affiliates and suppliers may incur as a result of Provider’s breach of this Agreement, any claims relating to the Provider Content or the Branded Pages, or Provider’s other acts, omissions or misrepresentations.

7.3       Mechanics of Indemnity.  The party seeking indemnification (the “Indemnified Party”) shall: (a) give the proposed indemnifier (the “Indemnifying Party”) notice of the relevant claim, (b) cooperate with the Indemnifying Party, at the Indemnifying party’s expense, in the defense of such claim, and (c) give the Indemnifying Party the right to control the defense and settlement of any such claim, except that the Indemnifying Party shall not enter into any settlement that affects the Indemnified Party’s rights or interest without the Indemnified Party’s prior written approval.  The Indemnified Party shall have the right to participate in the defense at its expense.

8.         LIMITATION OF LIABILITY.  EXCEPT WITH RESPECT TO ANY LIABILITY OF EITHER PARTY TO THE OTHER PARTY ARISING UNDER SECTIONS 5, 7 OR 10 HEREUNDER:  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR LOSS OF PROFITS, REVENUES OR DATA, OR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; NOR SHALL EITHER PARTY’S LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNTS ACTUALLY PAID BY BRANDER TO PROVIDER HEREUNDER.

9.         TERM AND TERMINATION.

9.1       Term.  This Agreement shall expire _________ months following the first date on which Branded Pages are available to Users, but this Agreement shall automatically renew for additional 3 month terms unless and until one party provides written notice of termination to the other party at least 60 days prior to the expiration of the then applicable term.

9.2       Termination.  Either party may terminate this Agreement upon the other party’s material breach if such breach continues for 30 days after written notice.  Upon the effective date of expiration or termination, all licenses hereunder shall terminate immediately.  After expiration or termination, each party shall use reasonable efforts to remove any representations of or references to the Branded Pages from publicly accessible caches, indexes, archives or search engines.  Sections 5.2, 5.3, 5.4, 5.7, 5.8, 7, 8, 9, 10 and 11 shall survive expiration or termination of this Agreement.

10.       CONFIDENTIALITY.

10.1     Confidential Information.  During the term of this Agreement, each party may come into possession of the other party’s Confidential Information.  For the purposes of this Agreement, “Confidential Information” means any information which the party disclosing the information (the “Discloser”) designates as confidential or which the party receiving the information (the “Receiver”) knows or has reason to know is confidential to the Discloser.  Without limiting the foregoing, Brander’s Confidential Information includes: any passwords for the Shadow Site, the Server Logs and all information contained therein, all information provided by Users to Provider in connection with use of the Branded Pages, the Branded Page Specifications and the Brander Content.  Confidential Information does not include information which is: (a) already known by the Receiver at time of disclosure; (b) is or becomes, through no act or fault of Receiver, publicly known; (c) received by Receiver from a third party without a restriction on disclosure or use; (d) independently developed by Receiver without reference to Discloser’s Confidential Information; or (e) required to be disclosed by a court or governmental agency pursuant to a statute, regulation or valid order.

10.2     Restrictions.  The Receiver shall hold the Discloser’s Confidential Information in confidence and shall not disclose the Discloser’s Confidential Information to third parties nor use the Discloser’s Confidential Information for any purpose other than as permitted in this Agreement.  Without limiting the foregoing, Provider shall not initiate contact with any Users, or use in any manner whatsoever any Brander Confidential Information relating to Users or the Server Logs, without Brander’s prior written consent.

10.3     Return of Confidential Information.  Upon termination or expiration of this Agreement for any reason, Receiver shall return or destroy all copies of Discloser’s Confidential Information in its possession or control at Discloser’s direction.

11.       GENERAL PROVISIONS.

11.1     Governing Law.  This Agreement will be governed and construed in accordance with the laws of the State of California without giving effect to its conflict of laws principles.  Any suit hereunder shall be brought exclusively in the federal or state courts of San Francisco County, California, and both parties consent to the jurisdiction thereof.

11.2     Compliance with Laws.  At its own expense, Provider shall comply with all applicable laws, regulations, rules, ordinances and orders regarding its activities related to this Agreement.

11.3     Publicity.  Neither party shall issue a press release regarding this relationship without the other party’s prior written approval.  Neither party shall disclose the terms of this Agreement to any third party, except as required by law or to potential investors or merger parties under standard confidentiality restrictions.

11.4     Severability; Headings.  If any provision of this Agreement is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way.  The parties agree to replace any invalid provision with a valid provision which most closely approximates the intent and economic effect of the invalid provision.  Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section, or in any way affect this Agreement.

11.5     Independent Contractors.  The parties to this Agreement are independent contractors, and no agency, partnership, franchise, joint venture or employee-employer relationship is intended or created by this Agreement.  Neither party may take any actions which are binding on the other party.  Without limiting the foregoing, Provider shall not make any representations or warranties to third parties on behalf of Brander.

11.6     Notice.  Any notices required or permitted hereunder shall be given to the appropriate party at the address specified above or at such other address as the party shall specify in writing.  Unless otherwise specified, such notice shall be deemed given: upon personal delivery; if sent by fax, upon confirmation of receipt; or if sent by certified or registered mail, postage prepaid, three (3) days after the date of mailing.  Acceptance or approvals pursuant to Sections 2.2, 2.3 or 3.3 may be made by e-mail to an address to be designated by Provider.

11.7     Entire Agreement; Waiver.  This Agreement and the Exhibits attached hereto set forth the entire understanding and agreement of the parties, and supersede any and all prior or contemporaneous oral or written agreements or understandings between the parties, as to the subject matter of this Agreement.  In the event of any conflict between the Agreement and an Exhibit, the terms of the Exhibit shall control.  Except as provided herein, this Agreement may be changed only by a writing signed by both parties.  Waiver by either party of a breach of any provision contained herein must be in writing, and no such waiver shall be construed as a waiver of any succeeding breach of such provision or a waiver of the provision itself.

11.8     Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be deemed to be one instrument.

BRANDER: 

 

PROVIDER:
By: __________________________________  By: _________________________________
Title: _________________________________ Title: ________________________________

 

EXHIBIT A

BRANDED PAGE SPECIFICATIONS

 

EXHIBIT B

DESCRIPTION OF PROVIDER CONTENT

  

EXHIBIT C

DEVELOPMENT SCHEDULE

EXHIBIT D

SERVER LOGS

The Server Logs shall be delivered to Brander in accordance with the following:

1.         For every hit by a User, the Server Log shall contain in separate fields delimited by vertical bars:  (a) a unique hit identification number (“ID”), (b) User ID, (c) session ID, (d) date/time, (e) URL, (f) remote address, (g) remote host, (h) HTTP user agent string, (i) referrer host, and (j) referrer URL.

2.         If applicable, for every transaction by a User, the Server Log shall contain in separate fields:  (a) transaction ID, (b) User ID, (c) date/time, and (e) other information as reasonably requested by Brander.

3.         If applicable, for every change of status of a User (e.g., becoming a Brander member), the Server Log shall contain in separate fields:  (a) date/time, (b) User ID, (c) change type, and (d) User information to be determined.

 

EXHIBIT E

BRANDED PAGE MAINTENANCE AND CONNECTIVITY REQUIREMENTS

ERROR CORRECTION.  In the event that the Branded Pages do not work properly or contain errors, Provider shall perform as follows:

 

Severity Level

 

Description

 

Resolution

1

One or more Users are unable to access the Branded Pages or Branded Pages are producing incorrect results

Errors should be resolved within 4 hours of notice

2

Branded Pages are otherwise not functioning properly in accordance with Branded Page Specifications

Errors should be resolved within 24 hours of notice

3

Cosmetic or formatting errors

Errors should be resolved within 7 days of notice

 

Provider will monitor the Branded Pages continuously, and will correct errors as set forth above if detected by Provider without notice from Brander.  In the event Provider is unable to correct an error in accordance with the applicable time frame set forth above, Provider will notify ________________ (or such other individual designated from time to time) at Brander and will work on a 24×7 basis to correct such error.

UPTIME.  The branded pages will be publicly available to users a minimum of _____% of the time during any 30 day period.  Provider agrees that, at all times during the agreement, there will be no period of interruption in user accessibility of the branded pages that exceeds ___ continuous hours.  The foregoing shall apply regardless of the cause of the interruption in service, even if the interruption in service was beyond the control of provider.

RESPONSE TIME.  The mean server response time during any ___ hour period for user accesses (measured by at least 10 random measurements by brander) to the branded pages shall not exceed:

-___ seconds for visible site response.

-___ seconds for appearance of pages.

-___ seconds for all data transfer (excluding Java).

SECURITY.  Provider shall use all commercially reasonable efforts to prevent unauthorized access to the shadow site and to prevent unauthorized changes from being made to the branded pages.  These efforts should include, without limitation:

*          All Branded Pages shall be behind a strict firewall at the router and on servers configured to break connections from unauthorized hosts that manage to get through the firewall (i.e. Provider’s servers should only be listening on port 80, and Provider’s border router should block all traffic to any other port.  Any other port that needs to be listening must be TCPwrapped).

*          Brander shall be immediately notified of any security incidents, regardless of whether the incident affected or could have potentially affected Brander Content.

*          Provider’s network will not have (nor will it need) direct, trusted access to Brander’s internal network.

BREACH OF PROVISIONS.  Notwithstanding anything to the contrary herein, if Provider fails to comply with paragraph 1-3 more than once during any 3 month period, or if Provider fails to comply with paragraph 4 more than once during the life of the Agreement, Brander shall have the right to terminate this Agreement for cause immediately without a cure period.

 

EXHIBIT F 

PROVISIONS FOR BRANDER’S HOSTING OF BRANDED PAGES

The following provisions shall apply in the event that Brander elects to host Branded Pages from Brander’s servers.

1.         In addition to other licenses granted in the main agreement, Provider hereby grants to Brander a non-exclusive, worldwide license to: (a) reproduce, distribute, publicly perform, publicly display and digitally perform the Branded Pages via the Web; (b) modify and create derivative works of the Provider Content as necessary to implement the Branded Pages and as Brander deems necessary or desirable to protect against potential liability; and (c) sublicense the foregoing rights to Brander’s host or ISP.

2.         Provider will electronically deliver updates and changes to the Provider Content being hosted by Brander: (a) within [TIME PERIOD] of Provider’s update or change to such Provider Content, or (b) within [TIME PERIOD] of Brander’s request.

3.         Exhibit E will not apply to the Branded Pages being hosted by Brander, and Provider shall not be responsible for any nonconformances of the Branded Pages to the Branded Page Specifications attributable to Wired’s hosting thereof.

 

Cooley Godward LLP

Sample Contract #4

Email Outsourcing Agreement/Provider-Favorable

Unlike sample contracts #1-3, this agreement is intended to be provider-favorable.  This contract was designed for a web-based email service provider who would offer the functionality of its software and servers on a co-branded basis, either to users of other websites who were directed to the provider’s servers or to corporations or ISPs who outsourced their email services.

In comparison to the other contracts, this contract “says” much by silence.  Therefore, for example, this contract says nothing about user data.  Since the provider has all of this data, silence works in favor of the provider.  Note also that the contract says almost nothing in the way of service standards or performance standards, which in most cases should be objectionable to branders.

Here, the provider took the position that the user agreement with email users would be based on provider’s form.  Branders might object to this since this dilutes the value of the relationship with the users.

EMAIL OUTSOURCING AGREEMENT 

THIS EMAIL OUTSOURCING AGREEMENT is made as of _________, 199___ (the “Effective Date”) by and between PROVIDER, INC., a Delaware corporation having a principal place of business at ______________ (“Provider”), and _______________, a ____________ corporation having its principal place of business at _____________ (“Customer”).

A.        The Standard Terms and Conditions are incorporated herein by reference.

B.        This Agreement is for (CHECK ONLY ONE):

___ SMTP/POP3 Only

___ SMTP/POP3 and Web-based Email

___ Web-based Email only

C.        The following terms shall apply:

1.         Fees.  Customer shall pay the following fees:

Initial Set-Up Fee: $__________, payable on invoice and overdue 30 days thereafter.

Per Month Hosting Fee: $_______ per month, payable in advance on or before the first of each calendar month.

Per-Email Fee: $______ per recipient of email sent from all Accounts, due and payable monthly within 10 days of Provider’ delivery of a report specifying the number of emails recipients during the previous month.

Per-User Fee: $_____ per User who had an Account during all or a portion of a month, due and payable monthly within 10 days of Provider’ delivery of a report specifying the number of Users within the previous month.  Customer shall pay for a minimum of _____ Users per month.

2.         Advertising. 

(a)        Control.  The parties shall respectively have the right to sell the following percentage of available inventory of banner Advertising:

Customer: _______%              Provider: ________%

If Customer is given the right to sell Advertising, it shall use best efforts to procure paying Advertising for its percentage of inventory.  In addition, to the extent that Customer is given the right to sell a percentage of inventory, Customer shall require advertisers to submit Advertising to Provider or, at Provider’ request, Provider’ advertising server.  Potential advertisers may be required to sign Provider’ and/or its advertising server’s standard form of insertion order before being allowed to place Advertising on the Email Pages.

(b)        Revenue Split.  In addition to any fees required pursuant to Section C(1) above, the parties shall pay the following percents of Net Advertising Revenue to each other:

Customer shall pay ___% of its Net Advertising Revenue to Provider.

Provider shall pay ___% of its Net Advertising Revenue to Customer.

___ If the box is checked, then notwithstanding the foregoing, Customer shall pay to Provider the greater of the above percent of Net Advertising Revenue and $_____ per Advertising impression.

(c)        Reporting.  If a party is obligated to pay a percent of Net Advertising Revenue to the other party, the obligated party shall deliver a report showing the computation of Net Advertising Revenues within 10 days following the end of each calendar month.  Payment shall accompany such report.

(d)        Cross Subsidization.  In order to ensure that Net Advertising Revenue is not manipulated, neither party may charge for Advertising on a cross-subsidized basis or price Advertising bundled with any other product or service; if a party breaches the foregoing, the revenue used to compute Net Advertising Revenue shall be deemed, as applicable, to include: (i) the price of the bundle, or (ii) the revenues received for the Advertising plus the revenues received for the product or service which the Advertising was cross-subsidized with.

(e)        Unsold Inventory.  In the event that a party does not sell all of the inventory that it has the right to sell, the unsold inventory shall be allocated as follows (CHECK ONE):

___ The other party shall have the sole right to control such unsold inventory and may place house, barter or paid Advertising as it sees fit without any split of Net Advertising Revenue for such inventory.

___ The other party shall have the sole right to control such unsold inventory and may place house, barter or paid Advertising as it sees fit but will split any Net Advertising Revenue for such inventory.

___ The other party shall use commercially reasonable efforts to sell paid Advertising for such inventory; but if there is remaining unsold inventory after using such efforts, it may place house or barter Advertising in such unsold inventory without any further obligation to the other party.

___ The parties will share the unsold inventory (i.e., for each house or barter advertisement placed by Provider, one house or barter advertisement may be placed by Customer).

3.         Promotion of the Email Pages.  Customer shall undertake the following efforts to encourage Users to use the Service: ____________________.

4.         Tag Line.  All emails sent from Accounts will have inserted at the end of the email the tag line “Powered by Provider/www.Provider.com” or such other statement approved by Customer (approval not to be unreasonably withheld).

PROVIDER:

 

CUSTOMER:By: __________________________________

By: _________________________________Title: _________________________________Title: ________________________________

 

STANDARD TERMS AND CONDITIONS

1.         DEFINITIONS.

1.1       “Account” means a User’s email account.

1.2       “Advertising” means any promotion of a product or service (other than the promotion of Provider or Customer, outside of the banner ad space, as permitted by the Software) provided on or delivered in connection with Email Pages other than in the header or text of an email message sent directly to Accounts.

1.3       “Customer Content” means the text, pictures, graphics, sound, video, other data and computer software provided by Customer to Provider (or its servers) pursuant to this Agreement, including without limitation the Domain Name and any trademarks associated with Customer Content.

1.4       “Domain Name” means the domain name(s) specified by Customer under which the Service shall be delivered.

1.5       “Email Pages” mean the HTTP pages delivered to Users by Provider in the course of their use of their Accounts or the screen views of Accounts within an SMTP-compatible client.

1.6       “Net Advertising Revenue” means the actual amounts received by a party for the sale of Advertising on the Email Pages less sales, use or similar taxes attributable to the sale of Advertising and third party agency fees actually paid.

1.7       “Service” means Provider’ standard email outsourcing services as implemented for Customer.

1.8       “Software” means the server software used by Provider to operate the Service.

1.9       “User” means an individual user of the Service.

2.         OPERATION OF THE SERVICE.

2.1       Expense Allocation.  At its own expense, Provider shall be responsible for the hardware, Software and Internet connection required to operate the Service.  At its own expense, Customer shall be responsible for all client software and Internet connection required to reach the servers operating the Service.

2.2       Software.  The Service shall be operated using the then-current version of the Software.  Provider may modify the Software from time to time in its sole discretion.

2.3       Customization of Service.  The Software permits Customer to customize certain aspects of the Service, including customizing portions of the Email Pages’ user interface with Customer Content.  Within the parameters of the Software, as may be modified from time to time, Customer shall have sole control over the selection of options for those aspects.  If Customer does not customize an option, the Software shall default to Provider’ standard default for such option.

2.4       Domain Name.  The Service shall be provided under the Domain Name.  Customer shall provide technical assistance to Provider to implement the use of the Domain Name on Provider’ servers.

2.5       Customer’s Direct Mail to Accounts.  Customer shall not send an unreasonable number of emails to Accounts and shall do so in accordance with Provider’ reasonable requests. Provider may require Customer to use a system utility to deliver its own bulk email to Accounts.  All direct mail sent by Customer to Users shall be for the benefit of Customer only and shall not be for the benefit of any third parties (nor shall it promote in any way any third party goods or services).  Customer shall not authorize a third party to send bulk direct email to Users.

2.6       Maintenance.  Provider shall use reasonable efforts to schedule down times for off-peak periods.

2.7       Volume Restrictions.  Customer acknowledges that the pricing provided on the first page of this Agreement reflects certain assumptions about User volume usage.  Therefore, Customer acknowledges that Users will be restricted in the number of emails they can send (including the number of recipients per email) and the amount of server storage their emails can use.  Provider, at its sole option, may deploy automatic word and “spam” filters that may terminate emails sent to or by Accounts without delivering them.

2.8       Account Control.  Using a system utility that is part of the Software, Customer may control the creation and deletion of Accounts and manage changes of Account information (such as changes to username or password).  However, Provider may make any changes to Accounts it deems necessary or appropriate for the functioning of the Service.

2.9       Provider’ Communication with Users.  Customer or its ISPs shall not interfere with Provider’ communications with Users.

2.10     SMTP/POP3 Accounts.  With respect to SMTP/POP3 Accounts, the Service will only operate if Customer provides Users with an SMTP-compatible client.

2.11     Customer Service.  With respect to SMTP/POP3 Accounts, Customer shall have first line responsibility for dealing with User support inquiries.  Otherwise, Provider shall have first line responsibility for dealing with User support inquiries, which Provider may handle in any manner it deems commercially reasonable.

3.         ACCOUNTS. 

3.1       User Agreement.  Prior to being able to use the Service, all Users are required to click through Provider’ then current standard form of user agreement, which Provider may amend from time to time in its sole discretion.  The current form is attached hereto as Exhibit A.  Without limiting any other remedies, Provider may terminate an Account if the User breaches Provider’ user agreement.

3.2       Restrictions on Accounts.  Accounts are available only to adults who are at least 18 years old.  With respect to SMTP/POP3 Accounts, Customer shall use reasonable efforts to confirm that all Users are 18 years or older before permitting them to have an Account.  Only 1 natural person is permitted to operate or access an Account, and all passwords associated with an Account shall be deemed Provider’ trade secret and may not be disclosed to any third parties or used for any purpose other than for User to access his or her Account for lawful purposes. Provider at its sole option may impose a charge to reissue lost passwords.

3.3       Server Control.  Provider is not responsible for Users’ content, and Provider acts as a passive conduit for their online distribution and publication of their information.  However, Provider may take any action Provider deems reasonable or appropriate with respect to any Customer Content or User content Provider believes may create liability for Provider or any third party.

4.         PAYMENT  TERMS.

4.1       Taxes.  All fees and percentages described in this Agreement are stated without deduction for, and party receiving the payment shall be responsible for, any sales, use or other taxes (other than taxes based on the paying party’s net income) associated with the payment or the underlying transaction in this Agreement giving rise to the payment.

4.2       Audit Rights.  If a party is obligated to make payments hereunder, it shall keep for 3 years proper records and books of account relating to its computation of the payment amount.  Once every 12 months, the other party or its designee may inspect such records to verify the reports it received.  Any such inspection will be conducted in a manner that does not unreasonably interfere with the inspected party’s business activities.  The inspected party shall immediately make any overdue payments disclosed by the audit.  Such inspection shall be at the inspecting party’s expense; however, if the audit reveals overdue payments in excess of 5% of the payments owed to date, the inspected party shall immediately pay the cost of such audit, and the inspecting party may conduct another audit during the same 12 month period.

4.3       Interest.  Overdue payments shall accrue interest, at the lesser of 1½% per month or the maximum allowable interest under applicable law, from due date until paid, and the owing party shall pay the owed party’s cost of collection (including reasonable attorneys’ fees).

5.         LICENSES.

5.1       License to Provider.  Customer hereby grants to Provider a worldwide, nonexclusive, royalty-free license to use, reproduce, distribute, create derivative works of (only to the extent that the Email Pages are deemed to be a derivative work), publicly perform, publicly display and digitally perform: (a) Customer Content on the Email Pages, (b) Customer’s Advertising in connection with the Email Pages to the extent that Provider or its designee is serving such Advertising, and (c) Customer’s Domain Name in connection with allowing Users to send email through the Service.

5.2       Customer Content.  Customer shall not provide any Customer Content to Provider (or its servers) that: (a) infringes on any third party’s copyright, patent, trademark, trade secret or other proprietary rights or rights of publicity or privacy; (b) violates any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control); (c) is defamatory, trade libelous, unlawfully threatening or unlawfully harassing; (d) is obscene or pornographic or contains child pornography; (e) violates any laws regarding unfair competition, antidiscrimination or false advertising, or (f) contains any viruses, trojan horses, worms, time bombs, cancelbots or other computer programming routines that are intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data or personal information.

6.         NO WARRANTY.  PROVIDER PROVIDES THE SERVICE “AS IS.”  PROVIDER DISCLAIMS ALL WARRANTIES AND CONDITIONS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF TITLE, NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Provider does not guarantee continuous, uninterrupted or secure Accounts, and Provider is not liable if Customer or its Users is unable to access the Account.  Each party acknowledges that it has not entered into this Agreement in reliance upon any warranty or representation except those specifically set forth herein.

7.         TERMINATION.

7.1       Term.  This Agreement shall expire _________ following the Effective Date, but this Agreement shall automatically renew for additional ____________ terms unless and until one party provides written notice of termination to the other party at least 30 days prior to the expiration of the then applicable term.

7.2       Termination for Breach.  Either party may terminate this Agreement upon the other party’s material breach of this Agreement if such breach continues for 30 days after written notice.

7.3       Effect of Termination. Provider’ sole and exclusive obligation following termination shall be to deliver a complete electronic copy of all User content promptly and to promptly remove all Customer Content from Provider’ servers.  Customer understands that representations of Customer Content may exist on servers outside of Provider’ control.  In addition, sections 1, 2.9, 4, 6, 7.3, 8, 9 and 10 and the obligation to pay any unpaid fees owed under this Agreement shall survive termination.

8.         LIMITATION OF LIABILITY.  IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT (HOWEVER ARISING, INCLUDING NEGLIGENCE).

CUSTOMER’S LIABILITY TO PROVIDER, AND PROVIDER’ LIABILITY TO CUSTOMER, USERS OR ANY THIRD PARTIES, IS IN EACH CASE LIMITED TO THE FEES PAID BY CUSTOMER TO PROVIDER UNDER THIS AGREEMENT IN THE 12 MONTHS PRIOR TO THE ACTION GIVING RISE TO LIABILITY.

9.         INDEMNITY.  Each party (the “Indemnifying Party”) shall indemnify the other party (the “Indemnified Party”) against any and all claims, losses, costs and expenses, including reasonable attorneys’ fees, which the Indemnified Party may incur as a result of claims in any form by third parties arising from the Indemnifying Party’s acts, omissions or misrepresentations to the extent that the Indemnified Party is deemed a principal of the Indemnifying Party.  In addition, Customer shall indemnify Provider against all claims, losses, liabilities, damages, costs and expenses, including reasonable attorneys’ fees, which Provider may incur as a result of claims in any form by third parties arising from (i) Users’ use of Accounts, (ii) Customer’s website, or (iii) intellectual property infringement claims related to the Domain Name or Customer Content.  The Indemnified Party shall (a) give the Indemnifying Party notice of the relevant claim, (b) cooperate with the Indemnifying Party, at the Indemnifying Party’s expense, in the defense of such claim, and (c) give the Indemnifying Party the right to control the defense and settlement of any such claim, except that the Indemnifying Party shall not enter into any settlement that affects the Indemnified Party’s rights or interest without the Indemnified Party’s prior written approval.  The Indemnified Party shall have the right to participate in the defense at its expense.

10.       GENERAL PROVISIONS.

10.1     Governing Law.  This Agreement shall be governed in all respects by the laws of the State of California as such laws are applied to agreements entered into and to be performed entirely within California between California residents.  Both parties submit to jurisdiction in California and further agree that any cause of action arising under this Agreement shall be brought in a court in _________, California.  The parties expressly exclude the application of the 1980 United Nations Convention on the International Sale of Goods (if applicable).

10.2     Severability; Headings.  If any provi­sion herein is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way.  Headings are for reference purposes only and in no way define, limit, construe or describe the scope or extent of such section.

10.3     Force Majeure.  If performance hereunder is prevented, restricted or interfered with by any act or condition whatsoever beyond the reasonable control of a party, the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference.  Each party acknowledges that the operation of Provider’ servers and the provision of the Service may be interfered with by numerous factors outside of Provider’ control.

10.4     Independent Contractors.  The parties are independent contractors, and no agency, partnership, joint venture, employee-employer or franchisor-franchisee relationship is intended or created by this Agreement.  Neither party shall make any warranties or representations on behalf of the other party.

10.5     Notice.  Any notices hereunder shall be given to the appropriate party at the address specified above or at such other address as the party shall specify in writing.  Notice shall be deemed given: upon personal delivery; if sent by fax, upon confirmation of receipt; or if sent by certified mail, postage prepaid, 3 days after the date of mailing.

10.6     Assignment and Subcontracting.  Neither party may assign its rights or delegate its duties under this Agreement without the prior written approval of the other party, except that either party may assign all its rights and delegate all its obligations as part of a merger, reorganization or sale of all or substantially all its assets.  Any attempted assignment in violation of the foregoing shall be void and of no effect.  Subject to the foregoing, this Agreement is binding on the parties and their successors and assigns.  Provider may subcontract all or a portion of its duties hereunder.

10.7     Entire Agreement; Waiver.  This Agreement sets forth the entire understanding and agreement of the parties, and supersedes any and all oral or written agreements or understandings between the parties, as to the subject matter of this Agreement.  This Agreement shall control over any conflicting provisions of any purchase order or other business form, and such conflicting provisions are expressly rejected.  It may be changed only by a writing signed by both parties.  The waiver of a breach of any provision of this Agreement will not operate or be interpreted as a waiver of any other or subsequent breach.

EXHIBIT A

EMAIL TERMS AND CONDITIONS

1.         Accounts are available only to adults who are at least 18 years old.  By accepting this Agreement, you certify to us and all others that you are an adult.

2.         You may not transfer or share your Account with anyone.  You may not disclose your password to any third parties.

3.         We may terminate your Account immediately if you breach this Agreement or if we are unable to verify or authenticate any information you provide to us.  In addition, your Account may be suspended if Provider is not paid.  Following termination of your Account, we may remove some or all of your content from our servers or elect to retain it, at our sole option.

4.         Although privacy issues are very important to us, given the current regulatory and technical environment you should not have an expectation of privacy in your Account.  By way of example (without limiting the foregoing), we may be forced to disclose email to the government or third parties under certain circumstances, or third parties may unlawfully intercept your private communications.  We cannot ensure that all private email or information associated with your Account will remain private.

5.         You shall not deploy any devices that inhibit the delivery of banner advertisements (such as ad filters).

6.         YOUR ACCOUNT IS PROVIDED “AS IS” AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED.  We and our suppliers do not guarantee continuous, uninterrupted or secure Accounts.  Some states do not allow the disclaimer of implied warranties, so the foregoing disclaimer may not apply to you.  This warranty gives you specific legal rights and you may also have other legal rights which vary from state to state.

7.         IN NO EVENT SHALL WE OR OUR SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT (HOWEVER ARISING, INCLUDING NEGLIGENCE).  OUR LIABILITY, AND THE LIABILITY OF OUR SUPPLIERS, TO YOU OR ANY THIRD PARTIES IS LIMITED TO $50.  Some states do not allow the limitation of liability, so the foregoing limitation may not apply to you.

8.         Through your Account, we provide you with unfiltered access to other people’s content.  We cannot, nor do we try to, control the content that you will receive.  By its very nature, other people’s content may be offensive, harmful or inaccurate, and in some cases content will be mislabeled or deceptively labeled.  We expect that you will use caution—and common sense—when using your Account.  Furthermore, you shall comply with all applicable laws regarding your access to your Account.

9.         The content you distribute or request to receive (directly or indirectly) through your Account: (a) shall not infringe any third party’s copyright, patent, trademark, trade secret or other proprietary rights or rights of publicity or privacy; (b) shall not violate any law, statute, ordinance or regulation (including without limitation the laws and regulations governing export control, unfair competition, antidiscrimination or false advertising); (c) shall not be defamatory, trade libelous, unlawfully threatening or unlawfully harassing; (d) shall not be obscene or contain child pornography or, if otherwise pornographic or indecent, shall be distributed only to people legally permitted to receive such content; and (e) shall not contain any viruses, trojan horses, worms, time bombs, cancelbots or other computer programming routines that are intended to damage, detrimentally interfere with, surreptitiously intercept or expropriate any system, data or personal information.  You may not distribute unsolicited commercial messages (“spam”) through your Account or take any other action which imposes an unreasonable or disproportionately large load on our infrastructure.  At our option and without further notice, we may use anti-spam technologies, such as automatic word and spam filters, that may terminate your messages without delivering them or prevent messages from reaching you.

10.       We and our suppliers reserve the right to take any action we deem reasonable or appropriate with respect to your content if such content may create liability for us or any third party.

11.       From time to time, we may make our database of user information (including email addresses) available to other parties for promotions of and solicitations for their goods or services that may be of interest to the Provider community.  By accepting this Agreement, you expressly consent to such use and disclosure of personally identifiable information.

12.       We may automatically amend this Agreement at any time by sending the amended terms to your Account or other email address.  You will accept these amended terms if you continue to use your Account after such amended terms have been sent to you.  Otherwise, this Agreement may not be amended except in a writing signed by both parties.

13.       This Agreement shall be governed in all respects by the laws of the State of California as such laws are applied to agreements entered into and to be performed entirely within California between California residents.  Both parties submit to jurisdiction in California and further agree that any cause of action arising under this Agreement shall be brought in a court in ________, California.   If any provision herein is invalid or unenforceable, such provision shall be struck and the remaining provisions shall be enforced.  Our failure to act with respect to a breach by you or others does not waive our right to act with respect to subsequent or similar breaches.  This Agreement sets forth the entire understanding and agreement between us with respect to the subject matter hereof.

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