<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 2000.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _________ to _________
Commission file number: 000-27941
NETGATEWAY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0591719
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
300 OCEANGATE, 5TH FLOOR, LONG BEACH, CALIFORNIA 90802
(Address of principal executive offices) (Zip code)
(562) 308-0010
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of the registrant's common stock as of May
8, 2000: 17,660,543.
<PAGE>
When we refer in this Form 10-Q to "Netgateway," the "Company," "we,"
"our," and "us," we mean Netgateway, Inc., a Delaware corporation, together with
our subsidiaries and their respective predecessors.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Consolidated Balance Sheets at March 31, 2000 (unaudited) and at
June 30, 1999 ............................................................. 2
Unaudited Condensed Consolidated Statements of Operations for the three
and nine months ended March 31, 2000 and 1999 ............................. 3
Unaudited Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 2000 and 1999 ...................................... 4
Unaudited Condensed Consolidated Statement of Changes in Shareholders'
Equity for the nine months ended March 31, 2000 ........................... 5
Notes to the Unaudited Condensed Consolidated Financial Statements .......... 6
1
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2000 and June 30, 1999
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 8,739,972 569,472
Accounts receivable less allowance for doubtful accounts of $600
and $3,000 at March 31, 2000 and June 30, 1999, respectively 618,872 44,198
Unbilled receivables (note 6) 679,134 --
Note receivable (note 6) 450,000 --
Note receivable from officer -- 30,000
Debt issue costs -- 336,288
Prepaid offering costs -- 325,887
Deferred acquisition costs 361,628 --
Prepaid advertising 290,000 --
Prepaid expenses and other current assets 535,444 73,481
------------ ------------
Total current assets 11,675,050 1,379,326
Property and equipment, net 2,496,883 496,536
Intangible assets, net 1,323,556 1,562,635
Other assets 27,284 19,853
------------ ------------
$ 15,522,773 3,458,350
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of notes payable (note 4) $ -- 1,496,000
Convertible debentures (note 4) -- 200,000
Accounts payable 813,444 278,723
Accrued wages and benefits 1,233,125 278,741
Accrued interest -- 44,301
Accrued liabilities 987,900 543,632
Deferred revenue 115,529 67,694
Accrued contract losses -- 302,543
Current portion of notes payable to related parties -- 1,799
------------ ------------
Total current liabilities 3,149,998 3,213,433
Shareholders' equity (note 5):
Common stock, par value $.001 per share. Authorized
40,000,000 shares; issued and outstanding 17,508,327 and
9,912,304 at March 31, 2000 and June 30, 1999, respectively 17,508 9,913
Additional paid-in capital 55,950,432 15,639,160
Deferred compensation (744,172) (52,919)
Accumulated other comprehensive loss (4,396) (3,598)
Accumulated deficit (42,846,597) (15,347,639)
------------ ------------
Total shareholders' equity 12,372,775 244,917
Commitments and subsequent events
------------ ------------
Total liabilities and shareholders' equity $ 15,522,773 3,458,350
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue (note 3) $ 2,042,315 42,208 3,214,997 122,392
Cost of sales $ 508,464 33,525 1,399,025 102,489
------------ ------------ ------------ ------------
Gross profit 1,533,851 8,683 1,815,972 19,903
------------ ------------ ------------ ------------
Product development 2,342,665 257,589 4,104,599 911,236
Selling and marketing 1,356,764 306,974 3,093,634 333,437
General and administrative 1,993,223 1,976,326 16,873,064 6,514,569
Depreciation and amortization 294,708 97,321 608,621 144,702
------------ ------------ ------------ ------------
Total operating expenses 5,987,360 2,638,210 24,679,918 7,903,944
------------ ------------ ------------ ------------
Loss from operations (4,453,509) (2,629,527) (22,863,946) (7,884,041)
Loss on sale of equity securities -- -- -- 54,729
Interest (income) expense, net (133,040) 697,244 4,635,012 679,274
------------ ------------ ------------ ------------
Net loss before extraordinary item (4,320,469) (3,326,771) (27,498,958) (8,618,044)
Extraordinary gain on debt extinguishment -- -- -- 1,653,233
------------ ------------ ------------ ------------
Net loss $ (4,320,469) (3,326,771) (27,498,958) (6,964,811)
============ ============ ============ ============
Basic and diluted extraordinary
gain per share $ -- -- -- 0.19
============ ============ ============ ============
Basic and diluted loss per share $ (0.25) (0.37) (2.02) (0.80)
============ ============ ============ ============
Weighted average common shares outstanding -
basic and diluted 17,183,314 9,027,916 13,589,267 8,659,851
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
NET GATEWAY, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(27,498,958) (6,964,811)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 608,621 144,702
Common stock issued for services 3,402,313 902,100
Loss on sale of equity securities -- 54,729
Amortization of deferred compensation 466,147 89,260
Gain on extinguishment of debt -- (1,653,233)
Stock compensation paid by shareholders -- 400,000
Stock issued in exchange for cancellation of options 8,400,000 --
Amortization of debt issue costs 585,592 --
Amortization of debt discount 4,022,550 35,488
Interest expense on warrants issued as debt issue costs -- 668,904
Options and warrants issued for services 172,853 2,224,987
Provision for doubtful accounts -- 23,876
Write-off of note receivable -- 800,000
Changes in assets and liabilities:
Accounts receivable (574,674) (18,921)
Unbilled receivables (679,134) --
Other assets (494,385) 41,297
Accounts payable and accrued expenses 1,687,897 1,094,763
------------ ------------
Net cash used in operating activities (9,901,178) (2,156,859)
------------ ------------
Cash flows from investing activities:
Cash assumed in business acquisition -- 4,781
Loan for notes receivable (450,000) (800,000)
Repayment of notes receivable 30,000 50,000
Purchase of equity securities -- (100,733)
Proceeds from sale of equity securities -- 46,004
Purchase of property and equipment (2,369,888) (118,927)
------------ ------------
Net cash used in investing activities (2,789,888) (918,875)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 25,313,863 2,164,800
Proceeds from exercise of options and warrants 1,173,028 264,200
Proceeds from issuance of notes payable to related parties -- 100,000
Repayment of notes payable (6,633,500) --
Proceeds from issuance of notes payable and
convertible debentures 1,114,950 1,160,000
Cash paid for debt issue costs (104,178) --
Repayment of notes payable to related parties (1,799) (730,630)
------------ ------------
Net cash provided by financing activities 20,862,364 2,958,370
Effect of exchange rate changes on cash balances (798) (1,639)
------------ ------------
Net increase in cash 8,170,500 (119,003)
Cash at beginning of period 569,472 254,597
------------ ------------
Cash at end of period $ 8,739,972 135,594
============ ============
Supplemental schedule of noncash activities:
Acquisition of StoresOnline -- 1,021,429
Conversion of debt to common stock $ 200,000 762,500
Common stock issued for prepaid advertising 300,000 --
Capital contributed upon extinguishment of debt -- 200,000
Warrants issued to settle an obligation 53,534 --
Warrants issued for debt issue costs 145,876 746,076
Stock issued for debt issue costs -- 75,000
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
NETGATEWAY INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Common stock
--------------------------- Additional Deferred Comprehensive
Shares Amount paid-in capital Compensation Loss
------------ ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1999 9,912,304 $ 9,913 15,639,160 (52,919)
Common stock issued for prepaid advertising 50,000 50 299,950 -- --
Common stock issued for services 515,150 515 3,489,298 (87,500) --
Warrants issued to settle an obligation -- -- 53,534 -- --
Sale of common stock for cash, net 4,155,350 4,155 25,309,708 -- --
Warrants issued for debt issue costs -- -- 145,876 -- --
Shares issued for debenture conversion 80,000 80 199,920 -- --
Options granted for services -- -- 172,853 -- --
Stock option compensation -- -- 1,069,900 (1,069,900) --
Amortization of deferred compensation -- -- -- 466,147 --
Exercise of warrants 25,170 25 27,145 -- --
Cashless exercise of options and warrants 1,098,773 1,098 (1,098) -- --
Shares issued for cancellation of options 1,200,000 1,200 8,398,800 -- --
Shares issued for exercise of options 326,720 327 1,145,531 -- --
Shares issued upon conversion of
subsidiary common stock 144,860 145 (145) -- --
Comprehensive loss:
Net loss -- -- -- -- (27,498,958)
Foreign currency translation adjustment -- -- -- -- (798)
------------
(27,499,756)
============
Total comprehensive loss
------------ ------------ ------------ ------------
Balance at March 31, 2000 17,508,327 $ 17,508 55,950,432 (744,172)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Accumulated Comprehensive Shareholders'
Deficit Loss equity
------------ ------------- ---------------
<S> <C> <C> <C>
Balance at June 30, 1999 (15,347,639) (3,598) 244,917
Common stock issued for prepaid advertising -- -- 300,000
Common stock issued for services -- -- 3,402,313
Warrants issued to settle an obligation -- -- 53,534
Sale of common stock for cash, net -- -- 25,313,863
Warrants issued for debt issue costs -- -- 145,876
Shares issued for debenture conversion -- -- 200,000
Options granted for services -- -- 172,853
Stock option compensation -- -- --
Amortization of deferred compensation -- -- 466,147
Exercise of warrants -- -- 27,170
Cashless exercise of options and warrants -- -- --
Shares issued for cancellation of options -- -- 8,400,000
Shares issued for exercise of options -- -- 1,145,858
Shares issued upon conversion of subsidiary
common stock -- -- --
Comprehensive loss:
Net loss (27,498,958) -- (27,498,958)
Foreign currency translation adjustment -- (798) (798)
Total comprehensive loss
------------ ------- ------------
Balance at March 31, 2000 (42,846,597) (4,396) 12,372,775
============ ======= ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Description of Business
Netgateway, Inc. and subsidiaries ("Netgateway" or the "Company"), was
formed on March 4, 1998 as a Nevada corporation. Netgateway provides
eCommerce services designed to enable clients to extend their business to
the Internet to conduct commercial transactions between business
enterprises and between business enterprises and consumers. The hub of
Netgateway's eCommerce solution is its proprietary Internet Commerce
Center, which consists of the hardware, proprietary and licensed software,
and the related technical services necessary for Netgateway's clients to
transact eCommerce. Netgateway also designs and builds custom interfaces,
or spokes, to connect business clients to the Internet Commerce Center.
Netgateway's Internet Commerce Center permits a continuum of sophisticated
and technologically complex, or scalable, solutions ranging from a simple
Internet storefront advertising their products and taking orders through
e-mail to a highly complex system of secure client extranets allowing
vendors to interact and transact business-to-business eCommerce with one or
more specific customers.
Prior to October 1, 1999, the Company was a development stage enterprise as
defined in Statement of Financial Accounting Standards ("SFAS") No. 7.
Planned principal operations commenced and began producing significant
revenue on October 1, 1999, and accordingly, Netgateway is no longer
considered a development stage company.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) Revenue Recognition
Revenues from the design and development of Internet Web sites and
related consulting projects are recognized using the
percentage-of-completion method. Unbilled receivables represent time
and costs incurred on projects in progress in excess of amounts billed,
and are recorded as assets. Deferred revenue represents amounts billed
in excess of costs incurred, and is recorded as a liability. To the
extent costs incurred and anticipated costs to complete projects in
progress exceed anticipated billings, a loss is recognized in the
period such determination is made for the excess.
(c) Business Segments and Related Information
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (SFAS No. 131) establishes standards for the way
public business enterprises are to report information about operating
segments in annual financial statements and requires enterprises to
report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards
for related disclosure about products and services, geographic areas
and major customers. It replaces the "industry segment" concept of SFAS
No. 14, "Financial Reporting for Segments of a Business Enterprise,"
with a "management approach" concept as the basis for identifying
reportable segments. The Company has only one operating segment. The
Company formed its wholly-owned Canadian subsidiary, StoresOnline.com,
Ltd., in January 1999. Prior to that time, the Company only had
operations in the United States. All revenues during the three and nine
months ended March 31, 2000 and 1999 were generated in the United
States. Substantially all of the Company's long-lived assets were
located in the United States at March 31, 2000.
6
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(d) Investment Securities
The Company accounts for investment securities in accordance with
Financial Accounting Standards Board Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115). SFAS 115
requires investments to be classified based on management's intent in
one of the three categories: held-to-maturity securities,
available-for-sale securities and trading securities. Held-to-maturity
securities are recorded at amortized cost. Available-for-sale
securities are recorded at fair value with unrealized gains and losses
reported as a separate component of shareholders' equity and
comprehensive income (loss). Trading securities are recorded at market
value with unrealized gains and losses reported in operations. The
Company's investment securities have been classified as
available-for-sale.
(e) Foreign Currency Translation
The financial statements of the Company's Canadian subsidiary,
StoresOnline.com, Ltd. have been translated into U.S. dollars from its
functional currency in the accompanying consolidated financial
statements in accordance with Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." Balance sheet
accounts of StoresOnline.com, Ltd. are translated at period-end
exchange rates while income and expenses are translated at actual
exchange rates on the date of the transaction. Translation gains or
losses that related to StoresOnline.com, Ltd.'s net assets are shown as
a separate component of shareholders' equity and comprehensive income
(loss). There were no gains or losses resulting from realized foreign
currency transactions (transactions denominated in a currency other
than the entities' functional currency) during the three and nine
months ended March 31, 2000 and 1999.
(f) Loss Per Share
Basic earnings (loss) per share is computed by dividing net income
(loss) available to common shareholders by the weighted average number
of common shares outstanding during the period in accordance with SFAS
No. 128 "Earnings Per Share". Diluted earnings (loss) per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in
the earnings of the entity. Diluted earnings (loss) per share is
computed similarly to fully diluted earnings (loss) per share pursuant
to Accounting Principles Board (APB) Opinion No. 15. There were
2,933,407 options and 1,189,075 warrants to purchase shares of common
stock that were outstanding during the three and nine months ended
March 31, 2000 which were not included in the computation of diluted
loss per share because the impact would have been antidilutive. There
were 3,608,596 options and 1,468,300 warrants to purchase shares of
common stock that were outstanding during the three and nine months
ended March 31, 1999 which were not included in the computation of
diluted loss per share because the impact would have been antidilutive.
(g) Costs of Start-Up Activities
Pursuant to AICPA Statement of Position No. 98-5, "Reporting on the
Costs of Start-Up Activities," the Company expenses all the costs of
start-up activities as incurred.
7
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(h) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities at the balance sheet
date and the reporting of revenues and expenses during the reporting
periods to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates.
(i) Reclassifications
Certain amounts have been reclassified to conform with current year
presentation.
(j) Credit Concentration Risk
Revenue from one customer represented 49% and 31% of the Company's
revenues and from an additional customer, Galaxy Enterprises, Inc.,
(see Note 6) represented 33% and 21% of the Company's revenue for the
three months and nine months ended March 31, 2000, respectively.
(3) Change in Method of Accounting for Revenue
Effective October 1, 1999, the Company changed its method of accounting for
revenue from the completed contract method to the percentage-of-completion
method. The Company believes the percentage of completion method more accurately
reflects the current earnings process under the Company's contracts. The
percentage of completion method is preferable according to Statement of Position
81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts, issued by the American Institute of Certified Public
Accountants. The new method has been applied retroactively by restating the
Company's consolidated financial statements for prior periods in accordance with
Accounting Principles Board Opinion No. 20.
The impact of the accounting change was a decrease in net loss and loss per
share as follows:
<TABLE>
<CAPTION>
Net Loss Loss per Share
------------ ---------------
<S> <C> <C>
Three months ended March 31, 2000 $ 80,978 .005
Nine months ended March 31, 2000 665,279 .049
Three months ended March 31, 1999 8,433 .001
Nine months ended December 31, 1999 8,433 .001
</TABLE>
8
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
(4) Notes Payable and Convertible Debentures
In August and September 1999, the Company obtained bridge financing whereby 12%
senior notes payable and 357,850 shares of common stock were issued generating
proceeds of $2,744,290, net of $803,612 of issuance costs. The senior notes
payable are due the earlier of April 30, 2000 or upon the close of a public sale
of the Company's common stock. The Company also granted 149,375 warrants to
purchase an equivalent number of shares of common stock at an exercise price of
$10 per share as additional issuance costs. The warrants are exercisable for a
period of four years commencing May 18, 2000. The fair value of the warrants on
the dates of issuance was estimated to be $469,402 using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%;
risk-free interest rate of 5%; volatility of 100% and an expected life of 2
years. The net proceeds from the bridge financing were allocated to the senior
notes payable and common stock based on their relative fair values. Accordingly,
$957,450 was recorded as notes payable, $2,035,140 as equity, net of $555,313 of
stock issuance costs, and $248,299 as debt issuance costs.
In September 1999, the Company issued a 12% senior note payable of $500,000 and
50,000 shares of common stock valued at $350,000 stock, the proceeds of which
were received in October 1999. The note is due the earlier of April 30, 2000 or
upon the close of a public sale of the Company's common stock. In October 1999,
the Company issued a 12% senior note payable of $25,000 and 2,500 shares of
common stock valued at $17,500 generating net proceeds of $22,500. The note is
due the earlier of April 30, 2000 or upon the close of a public sale of the
Company's common stock. The Company also granted 1,250 warrants valued at
$3,349. The net proceeds were allocated to the senior notes payable and common
stock based on their relative fair value.
In November 1999, the Company repaid all of the $6,633,500 12% senior notes
payable. Upon repayment of the senior notes, the remaining debt discount balance
of $3,253,469 was recognized as interest expense.
In October and November 1999, $200,000 of convertible debentures were converted
into 80,000 shares of common stock.
(5) Shareholders' Equity
In July 1999, the Board of Directors adopted the 1999 Stock Option Plan for
Non-Executives (the "Plan"). An aggregate of 2,000,000 shares were reserved
for issuance under the Plan. Stockholder approval is necessary in order to
adopt a new plan. As stockholder approval had not been obtained prior to
March 31, 2000, all options granted are not considered outstanding and have
not been included in the preceding analysis. Management will seek stockholder
approval at a special meeting of the Company's stockholders on May 24, 2000.
Once stockholder approval is obtained, the additional options will be
effectively granted and the appropriate calculations to determine
compensation can be completed. During the nine months ended March 31, 2000,
the Company granted 1,803,482 options under the Plan at exercise prices
ranging from $3.50 to $12.50 per share. The Company also granted 535,714
options under the 1998 Executive Plan during the nine months ended March 31,
2000 at exercise prices ranging from $3.50 to $8.18 per share. The Company
also granted 123,916 options under the 1998 Employee Stock Option Plan during
the nine months ended March 31, 2000 at exercise prices ranging from $3.50 to
$4.19 per share.
In July 1999, the Company entered into a Cable Reseller and Mall agreement with
MediaOne of Colorado, Inc. (MediaOne) whereby the Company also issued to
MediaOne 50,000 shares of common stock and warrants to purchase 200,000 shares
of common stock. The exercise price of the warrants is dependent upon the market
price of the Company's common stock on the date that the warrants are earned
under certain performance criteria. As of December 31, 1999, the performance
criteria had not been met.
9
<PAGE>
NETGATEWAY, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
During the nine months ended March 31, 2000, the Company issued 515,150 shares
of common stock valued at $3,489,813 for services, of which 500,000 shares were
issued to the chief executive officer of the Company.
In October, the Company issued 969,810 shares of common stock upon the cashless
exercise of warrants, 100 shares of common stock upon the exercise of warrants
for $100, 1,200,000 shares of common stock valued at $8,400,000 to three
executives upon the cancellation of 1,980,000 options, and 80,000 shares of
common stock upon the conversion of $200,000 of convertible debentures. In
November 1999, the Company issued 270 shares of common stock upon the exercise
of warrants for $270.
In November and December 1999, the Company sold 3,795,000 shares of common stock
in a public offering generating net proceeds of $23,057,844. The Company also
granted 190,250 warrants as stock issuance costs.
In December 1999, January, February, and March 2000, the Company issued 86,544
10,586, 10,586, and 37,144 shares of common stock, respectively, upon the
conversion of common stock of its Storesonline.com subsidiary.
In January, February, and March 2000, the Company issued 128,963 shares of
common stock upon the cashless exercise of warrants and 24,800 shares of common
stock upon the exercise of warrants for $26,800.
In January, February, and March 2000, the Company issued 326,720 shares of
common stock upon the exercise of options under the Company's plans for
$1,145,858.
(6) Galaxy Acquisition
In March 1999, the Company signed a definitive agreement under which the Company
will acquire Galaxy Enterprises, Inc. ("Galaxy Enterprises") for total
consideration of approximately 3.9 million shares. Among other things, Galaxy
Enterprises, through its subsidiary Galaxy Mall, Inc., engages in the business
of selling electronic home pages, or "storefronts" on its Internet shopping
mall, and hosts those storefront sites on its Internet server. Galaxy
Enterprises also conducts Internet training seminars throughout the United
States for its customers and for others interested in extending their businesses
to the Internet.
In connection with the merger, on January 7, 2000, the Company advanced $300,000
in bridge financing to Galaxy Enterprises for working capital purposes and for
the payment of certain professional fees incurred by Galaxy Enterprises in
connection with the merger. On February 4, 2000, the Company advanced an
additional $150,000 to Galaxy Enterprises for working capital purposes and for
the payment of certain professional fees incurred by Galaxy Enterprises in
connection with the merger. Each loan is secured by a pledge of Galaxy
Enterprises common stock from John J. Poelman, the chief executive officer and
largest shareholder of Galaxy Enterprises. The notes bear interest at 9.5% and
are due and payable on the earlier of June 1, 2000 or the consummation date of
the merger.
Pending completion of the merger, the Company has entered into certain
transactions in the normal course of business with Galaxy Enterprises, Inc. Such
transactions are at negotiated prices and on arm's length terms comparable to
transactions with other customers of the Company. For the three months ended
March 31, 2000, Netgateway's sales to Galaxy Enterprises totaled $679,134.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT
The following "Management's Discussion and Analysis of Financial Condition
and Results of Operations" includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. This Act
provides a "safe harbor" for forward-looking statements to encourage companies
to provide prospective information about themselves so long as they identify
these statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
expected results. All statements other than statements of historical fact that
we make in this Form 10-Q are forward looking and include, but are not limited
to, statements as to: expectations regarding future revenue opportunities; the
completion of the Galaxy Enterprises, Inc. merger and related matters; the
development of the business-to-business eCommerce market and the future growth
of our customer base; future expense levels, including research and development
expenses, selling and marketing expenses and general and administrative
expenses, and amortization of goodwill and other tangibles; strategic
relationships and distribution relationships; future capital needs; the
emergence of new technologies; expansion of our sales and marketing forces;
investment in new product development and enhancements; expansion into new
markets; new distribution and customer acquisition models; acquisition of
complementary products, technologies and businesses; and future results of
operations or financial position.
Forward-looking statements reflecting our current expectations are
inherently uncertain. Our actual results may differ significantly from our
expectations. Factors that may cause such differences include, but are not
limited to, those discussed (i) under the heading "Risk Factors" in our
Registration Statement on Form S-1, as filed with the Securities and Exchange
Commission (the "SEC") on June 1, 1999, as amended by Amendment No. 1 filed with
the SEC on July 21, 1999, amended by Amendment No. 2 filed with the SEC on
October 14, 1999, amended by Amendment No. 3 filed with the SEC on November 12,
1999 and amended by Amendment No. 4 filed with the SEC on November 17, 1999
(Registration No. 333-79571), (ii) under the heading "Risk Factors" in our
Registration Statement on Form S-4, as filed with the SEC on May 5, 2000
(Registration No. 333-36360), and (iii) elsewhere in this quarterly report.
We undertake no obligation to publicly update any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our financial
statements and the related notes included elsewhere in this quarterly report.
GENERAL
We provide electronic commerce services designed to allow clients to extend
their business to the Internet to conduct commercial transactions between
business enterprises and
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between business enterprises and consumers. The hub of our electronic commerce
solution is our proprietary Internet Commerce Center, which consists of the
hardware, proprietary and licensed software, and the related technical services
necessary for our clients to transact eCommerce. We also design and build custom
interfaces, or spokes, to connect business clients to our Internet Commerce
Center. Our Internet Commerce Center provides our clients a continuum of
increasingly sophisticated and technologically complex solutions, ranging from a
simple internet storefront advertising their products and taking orders through
e-mail to a highly complex system of secure extranets allowing vendors to
interact and transact business-to-business eCommerce with one or more specific
customers.
Prior to October 1, 1999, we were a development stage enterprise as defined
in Statement of Financial Accounting Standards ("SFAS") No. 7. Planned principal
operations commenced and began producing significant revenue on October 1, 1999,
and accordingly, we are no longer considered a development stage company.
Effective October 1, 1999, we changed our method of accounting for revenue
from the completed contract method to the percentage-of-completion method. We
believe that the percentage-of-completion method more accurately reflects the
current earnings process under our contracts. The percentage of completion
method is preferable according to Statement of Position 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts, issued
by the American Institute of Certified Public Accountants. The new method has
been applied retroactively by restating our consolidated financial statements
for prior periods in accordance with Accounting Principles Board Opinion No. 20.
Commencing with the quarter ended March 31, 2000, we have elected to
classify all project development and customer support expenses as cost of sales
for all periods presented. All product development expenses are separately
disclosed in operating expenses. We believe this expense classification better
reflects the relationship between our revenue and expenses.
FLUCTUATIONS IN QUARTERLY RESULTS AND SEASONALITY
In view of the rapidly evolving nature of our business and its limited
operating history, we believe that period-to-period comparisons of our operating
results, including our gross profit and operating expenses as a percentage of
net sales, are not necessarily meaningful and should not be relied upon as an
indication of future performance.
We cannot predict the degree to which we will experience seasonality in our
business because of our limited operating history, and because we cannot
identify which companies, if any, we may acquire in the foreseeable future.
RESULTS OF OPERATIONS
REVENUE
Revenue includes revenues related to web site development and the design of
electronic storefronts, internet-based shopping mall development and design,
transaction processing and
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licensing fees for the licensing of our technology. Revenues for the three and
nine month periods ended March 31, 2000 increased to $2,042,315 and $3,214,997,
respectively, from $42,208 and $122,392 in the comparable prior periods. The
growth in our revenues was attributable primarily to the addition of new
customers to our Internet Commerce Center and to the licensing of our software
to certain customers. In addition, our average price for system development has
increased as the scope and technical requirements of our customers utilizing our
Internet Commerce Center has increased.
GROSS PROFIT
Gross profit is calculated as net sales less the cost of sales, which
consists of the cost of project development and customer support expenses. Gross
profit for the three and nine month periods ended March 31, 2000 increased to
$1,533,851 and $1,815,972, respectively, from $8,683 and $19,904 in the
comparable prior periods. Gross profit increased in absolute dollars over the
same periods in 1999, primarily reflecting our increased sales volume. Gross
margin percentages increased over the same periods due to the introduction of
our software licensing program, which has significantly higher margins than our
existing revenue base.
PRODUCT DEVELOPMENT
Product development expenses consist primarily of payroll and related
expenses for development, editorial, creative and systems personnel and
outside contractors. Product development expenses for the three and nine
month periods ended March 31, 2000 increased to $2,342,665 and $4,104,599,
respectively, from $257,589 and $911,236 in the comparable prior periods.
Product development expenses have increased as we continue to upgrade our
Internet Commerce Center. Our focus continues to be large corporate clients
in the business-to-business sector; accordingly, our increased product
development expenses are consistent with our need to meet the more complex
technical requirements of that customer base.
SELLING AND MARKETING
Selling and marketing expenses consist of payroll and related expenses for
sales and marketing and the cost of advertising, promotional and public
relations expenditures and related expenses for personnel engaged in sales and
marketing activities. Selling and marketing expenses for the three and nine
month periods ended March 31, 2000 increased to $1,356,764 and $3,093,634,
respectively, from $306,974 and $333,437 in the comparable prior periods. The
increases in selling and marketing expenses are primarily attributable to
increased payroll-related and other infrastructure costs as we expand and incur
additional costs related to the growth of our business.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist of payroll and related expenses
for executive, accounting and administrative personnel, professional fees and
other general corporate expenses. General and administrative expenses for the
three and nine month periods ended March 31, 2000 increased to $1,988,668 and
$16,862,109, respectively, from $1,976,326 and
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$6,514,569 in the comparable prior periods. The increase in general and
administrative expenses is attributable primarily to non-cash compensation
expense from common stock issued to executives in December 1999 valued at
$11,775,000. The increases in general and administrative expenses are also
attributable to increased payroll-related and other infrastructure costs as we
expand and incur additional costs related to the growth of our business.
INTEREST (INCOME) EXPENSE, NET
Interest expense consists primarily of amortization of debt issuance
costs and debt discount and interest in connection with our $1,000,000 of
Secured Convertible Debentures due December 31, 1999 (the "Convertible
Debentures"), and $6,633,500 of our Series A 12% Senior Notes (the "Senior
Notes"). The Senior Notes were issued in connection with our May through
October 1999 bridge financing private placements (the "Bridge Financing").
Interest expense, net for the nine month period ended March 31, 2000,
increased to $4,635,012 from $679,274 in the comparable prior period. The
increase in interest expense for the nine month period is attributable
primarily to the amortization of promissory note discounts incurred in
conjunction with the Bridge Financing. The amortization of the debt discount
aggregated $4,356,934 during the nine month period ended March 31, 2000,
respectively. All of the Convertible Debentures were converted into common
stock as of December 31, 1999. The Senior Notes were repaid in full in
November 1999. The net interest income for the nine month period ended March
31, 2000 is attributable to interest earned on cash balances.
INCOME TAXES
We have not generated any taxable income to date and therefore have not
paid any federal income taxes since our inception except for minimum state tax.
Utilization of our net operating loss carry forwards, which begin to expire in
2013, may be subject to certain limitations under Section 382 of the Internal
Revenue Code of 1986, as amended.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had $8,739,972 in cash, an increase of
$8,170,500 from June 30, 1999.
Net cash used in operating activities was $9,901,178 for the nine month
period ended March 31, 2000. Net cash used in operations was primarily
attributable to $27,498,958 in net losses and increases in assets, partially
offset by non-cash charges as well as increases in accounts payable and accrued
expenses. Increases in assets included $574,674 in accounts receivable and
$679,134 in unbilled receivables resulting from the growth in our revenues
during the nine month period ended March 31, 2000. Non-cash charges include
$3,402,313 for common stock issued for services, $8,400,000 for stock issued for
cancellation of options and $4,022,550 from the amortization of debt discount.
Accounts payable and accrued expenses increased $1,687,897 and resulted
primarily from the accrual of wages and benefits and balances owed on
expenditures.
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Net cash used in investing activities was $2,789,888 for the nine month
period ended March 31, 2000 and consisted primarily of purchases of property and
equipment for the upgrade of our technological infrastructure.
Net cash provided by financing activities of $20,862,364 for the nine month
period ended March 31, 2000 resulted primarily from $1,114,950 in proceeds from
the issuance of Senior Notes and $25,313,863 in proceeds from the issuance of
common stock in connection with the Senior Notes and our secondary offering,
which we completed in November and December 1999. These proceeds were partially
offset by $6,633,500 used to repay the Bridge Financing loans in their entirety.
We believe that our existing capital resources are adequate to meet our
cash requirements for at least the next six months. We anticipate that we will
incur additional capital expenditures spending during the fourth quarter of our
fiscal year to continue upgrading our technological infrastructure.
RECENT EVENTS
In January 2000, we reached an agreement with Intermedia Partners
Southeast, an affiliate of AT&T Media Services, to launch a local electronic
shopping portal in Nashville, Tennessee. Under this agreement, we will design
and develop an Internet-based shopping mall, to be branded with Intermedia's
name, brand and image. We will also offer our storefront building and
maintenance services to Intermedia's branded collateral material and periodic
distribution and updating of advertising spots to promote the branded online
shopping mall and store building services.
In January 2000, we also entered into an agreement with PharMerica, a
subsidiary of Bergen Brunswig Corporation, and the nation's foremost provider of
professional, quality and cost effective pharmacy products and services to the
long-term care, assisted living, sub-acute and skilled nursing industries. Under
the agreement, we will design, develop, manage and host a patient prospecting
system, known as PMSIOnLine.com, in which sales professionals and claims
adjustors will input prospective patient referrals directly into a secured
browser session and submit these prospective patient referrals to PharMerica's
legacy systems for analysis and possible sales follow-up.
In March 1999, we executed a definitive agreement and plan of merger under
which we will acquire Galaxy Enterprises, Inc. ("Galaxy Enterprises") for total
consideration of approximately 3.9 million shares of our common stock. Among
other things, Galaxy Enterprises, through its subsidiary, Galaxy Mall, Inc.,
engages in the business of selling electronic home pages, or "storefronts," on
its Internet shopping mall, and hosts those storefront sites on its Internet
server. Galaxy Enterprises also conducts Internet training seminars throughout
the United States for its customers and for others interested in extending their
businesses to the Internet.
In connection with the merger, on January 7, 2000, we advanced $300,000 in
bridge financing to Galaxy Enterprises for working capital purposes and for the
payment of certain professional fees incurred by Galaxy Enterprises in
connection with the merger. On February 4,
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2000, we advanced an additional $150,000 to Galaxy Enterprises for working
capital purposes and for the payment of certain professional fees incurred by
Galaxy Enterprises in connection with the merger. Each loan is secured by a
pledge of Galaxy Enterprises common stock from John J. Poelman, the chief
executive officer and largest shareholder of Galaxy Enterprises. The notes bear
interest at 9.5% and are due and payable on the earlier of June 1, 2000 or the
consummation date of the merger.
In connection with the Galaxy Enterprises merger, and to ease the
transition of Netgateway and Galaxy Enterprises into the combined company from
the signing of the merger agreement until the effective time of the merger, we
entered into an electronic commerce services agreement with Galaxy Enterprises
dated as of March 1, 2000. This agreement provides that we will, among other
things, rebuild and update Galaxy Enterprises' GalaxyMall.com Web site to our
software. The services provided by us under this agreement will include the
conversion of all Galaxy Mall storefronts, enhancing the look and ease of use
and adding new features to the GalaxyMall.com Web site. In addition, we will
rebuild Galaxy Enterprise's search engine, Matchsite.com. The estimated payments
to be made by Galaxy Enterprises to us under this agreement include $600,000 for
rebuilding the GalaxyMall.com Web site, $75 for the conversion of each of the
approximately 3,200 storefronts on that site and $50,000 to rebuild the
MatchSite.com search engine. We will also be paid hosting fees of approximately
$2,000 per month.
In March 2000, we entered a systems integrator agreement with Complete
Business Solutions, Inc., a leading systems integrator and worldwide provider of
information technology services to large and mid-sized organizations. Under the
terms of the agreement, we will provide CBSI with access to the Internet
Commerce Center development environment. We will also allow CBSI to integrate
individual business-to-business customers of CBSI, primarily located in North
America and Mexico, into the Internet Commerce Center platform. We receive an
upfront fee from CBSI for each CBSI customer integrated into the Internet
Commerce Center. CBSI provides the integration services for each CBSI customer
and collects integration revenue from that customer. We share recurring fees for
hosting, transactions and advertising with CBSI. In April 2000, Netgateway
entered into an similar agreement with Complete Business Solutions, India, an
Indian subsidiary of CBSI. This agreement contains similar terms to those
described above and expands the customer reach available for licensing of the
Internet Commerce Center internationally to include Europe, Asia and South
America.
In April 2000, we reached an agreement with CableRep, Inc., an affiliate of
Cox Communications, to launch one or more electronic shopping portals in Cox
Communications cable television markets designated by Cox Communications.
Pursuant to this agreement, we will design and develop Internet-based shopping
malls, to be branded with Cox Communications' name, brand and image, and will
offer its storefront building and maintenance services to Cox Communications'
cable television subscribers. We will also be responsible for marketing support,
including development of Cox Communications' branded collateral material and
periodic distribution and updating of advertising spots to promote the branded
online shopping mall and storebuilding services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
None.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
10.1 Agreement and Plan of Merger dated as of March 10, 2000 by and
among Netgateway, Inc., Galaxy Acquisition Corp. and Galaxy
Enterprises, Inc.(1)
10.2 Voting Agreement dated as of March 10, 2000, by and among
Netgateway, Inc. and John J. Poelman(1)
10.3 Voting Agreement dated as of March 10, 2000, by and among
Netgateway, Inc. and Sue Ann Cochran(1)
10.4 Form of Affiliate Lock-Up Agreement(1)
10.5 Form of Employment Agreement(1)
10.6 Stock Option Agreement dated as of March 10, 2000, by and
among Netgateway, Inc. and John J. Poelman(1)
10.7 Pledge Agreement, dated as of January 7, 2000, between John J.
Poelman and the Company(2)
10.8 Promissory Note in the principal amount of $300,000, dated
January 7, 2000
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issued to Netgateway, Inc. (2)
10.9 Pledge Agreement, dated as of February 4, 2000, between John
J. Poelman and Netgateway, Inc.(2)
10.10 Promissory Note in the principal amount of $150,000, dated
February 4, 2000 issued to Netgateway, Inc.(2)
10.11 Employment Agreement, dated as of December 15, 1999, between
Jill Padwa and Netgateway, Inc.(2)
10.12 Letter of Intent, dated December 12, 1999 between Galaxy
Enterprises, Inc. and Netgateway, Inc.(2)
10.13 Affiliate Lock-up Agreement by and between Netgateway, Inc and
Darral Clarke dated March 10, 2000(3)
10.14 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Brandon B. Lewis dated March 10, 2000(3)
10.15 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and David Wise dated March 10, 2000(3)
10.16 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Frank C. Heyman dated March 10, 2000(3)
10.17 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and John J. Poelman dated March 10, 2000(3)
10.18 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Benjamin Roberts dated March 10, 2000(3)
10.19 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Robert Green dated March 10, 2000(3)
10.20 Electronic Commerce Services Agreement dated March 1, 2000
between Netgateway and Galaxy Enterprises, Inc. (3)
10.21 Statement of Work for Galaxy Mall and Store Conversion dated
March 1, 2000 between Netgateway and Galaxy Mall(3)
10.22[R] Systems Integrator Agreement dated as of March 6, 2000 between
Netgateway and Complete Business Solutions, Inc.
10.23[R] Systems Integrator Agreement dated as of April 4, 2000 between
Netgateway and Complete Business Solutions (India) Ltd.
10.24[R] Reseller and Mall Agreement dated as of April 18, 2000, among
CableRep, Inc., Netgateway and StoresOnline.com, Inc.
27 Financial Data Schedule
- -------------------------------
(1) Incorporated by reference from Netgateway's Report on Form 8-K filed on
March 21, 2000.
(2) Incorporated by reference from Netgateway's Quarterly Report on Form 10-Q
filed on February 15, 2000 for the quarter ended December 31, 1999.
(3) Incorporated by reference from Netgateway's Registration Statement on Form
S-4, as filed with the SEC on May 5, 2000 (Registration No. 333-36360).
Please note that certain confidential technical and commercial information has
been redacted from some of the exhibits attached to this Form 10-Q in order to
preserve the confidentiality of such information. All of the confidential
information which has been redacted is on file with the Securities and Exchange
Commission and may be obtained in accordance with the Freedom of Information
Act. Exhibits to this Form 10-Q which have had confidential information redacted
are indicated as follows on the exhibit list above: "[R]." Within the exhibits
to this Form 10-Q, redacted material is indicated by the following sign where
such redacted text would have appeared in the relevant exhibit: "[REDACTED]."
(b) Reports on Form 8-K
On March 21, 2000, the Company filed a report on Form 8-K relating to
its agreement to merge with Galaxy Enterprises, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETGATEWAY, INC.
Date: May 11, 2000 /s/ Roy W. Camblin III
--------------------------------
Name: Roy W. Camblin III
Chief Executive Officer
Date: May 11, 2000 /s/ Donald M. Corliss, Jr.
-------------------------------
Name: Donald M. Corliss, Jr.
Title: President and Chief
Operating Officer
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EXHIBIT INDEX
Exhibit No. Description
10.1 Agreement and Plan of Merger dated as of March 10, 2000 by and
among Netgateway, Inc., Galaxy Acquisition Corp. and Galaxy
Enterprises, Inc.(1)
10.2 Voting Agreement dated as of March 10, 2000, by and among
Netgateway, Inc. and John J. Poelman(1)
10.3 Voting Agreement dated as of March 10, 2000, by and among
Netgateway, Inc. and Sue Ann Cochran(1)
10.4 Form of Affiliate Lock-Up Agreement(1)
10.5 Form of Employment Agreement(1)
10.6 Stock Option Agreement dated as of March 10, 2000, by and
among Netgateway, Inc. and John J. Poelman(1)
10.7 Pledge Agreement, dated as of January 7, 2000, between John J.
Poelman and the Company(2)
10.8 Promissory Note in the principal amount of $300,000, dated
January 7, 2000 issued to Netgateway, Inc. (2)
10.9 Pledge Agreement, dated as of February 4, 2000, between John
J. Poelman and Netgateway, Inc.(2)
10.10 Promissory Note in the principal amount of $150,000, dated
February 4, 2000 issued to Netgateway, Inc.(2)
10.11 Employment Agreement, dated as of December 15, 1999, between
Jill Padwa and Netgateway, Inc.(2)
10.12 Letter of Intent, dated December 12, 1999 between Galaxy
Enterprises, Inc. and Netgateway, Inc.(2)
10.13 Affiliate Lock-up Agreement by and between Netgateway, Inc and
Darral Clarke dated March 10, 2000(3)
10.14 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Brandon B. Lewis dated March 10, 2000(3)
10.15 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and David Wise dated March 10, 2000(3)
10.16 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Frank C. Heyman dated March 10, 2000(3)
10.17 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and John J. Poelman dated March 10, 2000(3)
10.18 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Benjamin Roberts dated March 10, 2000(3)
10.19 Affiliate Lock-up Agreement by and between Netgateway, Inc.
and Robert Green dated March 10, 2000(3)
10.20 Electronic Commerce Services Agreement dated March 1, 2000
between Netgateway and Galaxy Enterprises, Inc. (3)
10.21 Statement of Work for Galaxy Mall and Store Conversion dated
March 1, 2000
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between Netgateway and Galaxy Mall(3)
10.22[R] Systems Integrator Agreement dated as of March 6, 2000 between
Netgateway and Complete Business Solutions, Inc.
10.23[R] Systems Integrator Agreement dated as of April 4, 2000 between
Netgateway and Complete Business Solutions (India) Ltd.
10.24[R] Reseller and Mall Agreement dated as of April 18, 2000, among
CableRep, Inc., Netgateway and StoresOnline.com, Inc.
27 Financial Data Schedule
- ------------------------------
(1) Incorporated by reference from Netgateway's Report on Form 8-K filed on
March 21, 2000.
(2) Incorporated by reference from Netgateway's Quarterly Report on Form 10-Q
filed on February 15, 2000 for the quarter ended December 31, 1999.
(3) Incorporated by reference from Netgateway's Registration Statement on Form
S-4, as filed with the SEC on May 5, 2000 (Registration No. 333-36360).
Please note that certain confidential technical and commercial information has
been redacted from some of the exhibits attached to this Form 10-Q in order to
preserve the confidentiality of such information. All of the confidential
information which has been redacted is on file with the Securities and Exchange
Commission and may be obtained in accordance with the Freedom of Information
Act. Exhibits to this Form 10-Q which have had confidential information redacted
are indicated as follows on the exhibit list above: "[R]." Within the exhibits
to this Form 10-Q, redacted material is indicated by the following sign where
such redacted text would have appeared in the relevant exhibit: "[REDACTED]."
21
<PAGE>
EXHIBIT 10.22
SYSTEMS INTEGRATOR AGREEMENT
THIS SYSTEMS INTEGRATOR AGREEMENT (this "Agreement") entered into as of
March 6, 2000, is between Complete Business Solutions, Inc. a Michigan
corporation ("Systems Integrator"), having its principal offices at 32605 West
Twelve Mile Road, Farmington Hills, MI 48334 and Netgateway, a Nevada
corporation ("Netgateway"), having its principal offices at 300 Oceangate, 5th
Floor, Long Beach, CA 90802.
RECITALS
WHEREAS, Netgateway owns and has the right to grant access to the
Netgateway Internet Commerce Center-TM- (the "Netgateway ICC");
WHEREAS, Systems Integrator desires to resell access to the Netgateway ICC
to end-user Subscribers (as defined below) and to provide all implementation and
integration services necessary for such Subscribers to access and use the
Netgateway ICC.
WHEREAS, Netgateway and Systems Integrator now wish to enter into this
Agreement, pursuant to which Netgateway shall provide access to and hosting of
the Netgateway ICC, and Systems Integrator will resell and provide
implementation and integration services in respect of the Netgateway ICC to
end-user Subscribers;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, Netgateway and
Systems Integrator hereby agree as follows:
1. APPOINTMENT AS RESELLER OF NETGATEWAY ICC
1.1 APPOINTMENT. Subject to the provisions of this Agreement, Netgateway
hereby appoints Systems Integrator as a non-exclusive reseller and distributor
to resell access to the Netgateway ICC to Subscribers and to provide any and all
implementation and integration services (the "eCommerce Services") necessary for
such Subscribers to access and use the Netgateway ICC. Systems Integrator
accepts such appointment and responsibility on the terms and conditions set
forth herein.
1.2 GRANTS. Subject to the other provisions of this Agreement:
(a) SERVICES RIGHTS. Netgateway hereby grants to Systems Integrator
the right to use the Netgateway ICC, including all software, systems and other
technology comprising the Netgateway ICC, solely in connection with the
provision of the eCommerce Services to Subscribers. Except as may otherwise be
provided in any Electronic Commerce Services Agreement between and among
Netgateway, Systems Integrator and a particular Subscriber, Netgateway shall be
responsible solely for providing access to the Netgateway ICC and hosting
Subscriber's Netgateway ICC website.
(b) ACCESS PROCEDURES. Netgateway shall, in its sole discretion,
establish procedures (the "Access Procedures") for access to and use of the
Netgateway ICC by Systems Integrator on behalf of Subscribers, which Access
Procedures shall be binding upon Systems Integrator. A copy of the Access
Procedures is annexed hereto as Exhibit B. Failure to comply with the Access
Procedures shall constitute a breach of this Agreement.
<PAGE>
(c) INTELLECTUAL PROPERTY RIGHTS. Any intellectual property rights
developed by Systems Integrator provider in connection with the grants under
this Agreement and the provision of the eCommerce Services (the "Intellectual
Property Rights") shall be owned by Netgateway, and Systems Integrator
irrevocably assigns to Netgateway all right, title and interest worldwide in and
to such Intellectual Property Rights. If Systems Integrator has any rights to
such Intellectual Property Rights that cannot be assigned to Netgateway, Systems
Integrator unconditionally and irrevocably waives the enforcement of such
rights, and all claims and causes of action of any kind against Netgateway with
respect to such rights, and agrees, at Netgateway's request and expense, to
consent to and join in any action to enforce such rights. If Systems Integrator
has any rights to such Intellectual Property Rights that cannot be assigned to
Netgateway or waived by Systems Integrator, Systems Integrator unconditionally
and irrevocably grants to Netgateway during the term of such rights, an
exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free
license, with rights to sublicense through multiple levels of sublicense, to
reproduce, create derivative works of, distribute, publicly perform and publicly
display by all means now known or later developed, such rights.
(d) USE OF TRADEMARKS. Subject to the provision of this Section
1.2(d), each of Netgateway and Systems Integrator grants to the other a
non-exclusive, limited license to use its name, trademarks and logos
(collectively, the "Trademarks" and singularly the "Netgateway Trademarks" and
the "Systems Integrator Trademarks") solely in advertising and printed
promotional materials for the Netgateway ICC and the eCommerce Services. Each
party acknowledges that use of the other parties' Trademarks will not create in
it, nor will it represent it has any right, title or interest in or to the other
parties' Trademarks. Each party acknowledges the other parties' exclusive
ownership of its own Trademarks and agrees not to do anything to impair or
dilute the other party's rights in its own Trademarks. Each party agrees to
display prominently the acknowledgment of the other party's trademark ownership
of any Trademark the first time it is used in any advertising or promotional
materials. Systems Integrator agrees to include the Netgateway Trademarks on all
copies, advertisements, brochures, manuals and other appropriate uses made in
the promotion, license or use of the Netgateway ICC or the eCommerce Services.
Each party agrees that the nature and quality of any products or services it
supplies in connection with the Trademarks shall conform to the standards set by
the owner of the Trademark. Each party agrees to cooperate with the other party
in facilitating the monitoring and control of the nature and quality of such
products and services.
1.3 MARKETING AND ACCESS. Systems Integrator shall promote, market and
distribute access to the Netgateway ICC, such access and the eCommerce Services
only to be provided to subscribers ("Subscribers") who enter into an Electronic
Commerce Services Agreement in the form attached hereto as Exhibit A. The
parties acknowledge that there may be certain potential conflicts between the
parties concerning potential Subscribers and who has the right to distribute
access to the Netgateway ICC to such Subscribers. The parties will negotiate in
good faith to resolve any such conflicts.
1.4 NETGATEWAY ICC ACCESS AND USE. Subject to the terms and conditions of
this Agreement and any Electronic Commerce Services Agreement entered into among
Netgateway, Systems Integrator and any Subscriber, Netgateway will provide to
Systems Integrator and Subscribers access to and use of the Netgateway ICC.
1.5 AVAILABILITY. The Netgateway ICC will be available to Systems
Integrator and Subscribers twenty-four (24) hours a day, seven (7) days a week.
Netgateway reserves the right upon reasonable notice to limit or curtail holiday
or weekend availability when necessary for system upgrades, adjustments,
maintenance or other operational considerations.
1.6 ENHANCEMENTS. General enhancements to the Netgateway ICC, as well as
new features that Netgateway incorporates into its standard electronic commerce
processing system, regardless of whether they are initiated by Netgateway or
developed by or at the request of Systems Integrator or any Subscriber, shall be
made available to Subscribers at no additional cost. All enhancements to the
Netgateway ICC, whether or not made by or at the request or suggestion of
Systems Integrator or any Subscriber, and any new features or services
introduced by Netgateway, shall remain the exclusive proprietary property of
Netgateway.
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1.7 SERVICES AND TRAINING. Systems Integrator shall have the sole
responsibility for providing the eCommerce Services to Subscribers and, except
for providing the training described in the next sentence, Netgateway shall have
no responsibility with respect to providing the eCommerce Services. Netgateway
shall provide to Systems Integrator's personnel such onsite training and other
assistance as Netgateway deems necessary to assure that Systems Integrator's
personnel are able to provide access and use of the Netgateway ICC by the
Subscribers. On-site training shall take place at such times and places as are
mutually agreeable to the parties hereto.
1.8 SUBSCRIBER DATA.
(a) CONFIDENTIALITY. Each party acknowledges that all records, data,
files and other input material relating to Subscriber are confidential and shall
take reasonable steps to protect the confidentiality of such records, data,
files and other materials. Each party will provide reasonable security
safeguards to limit access to Subscriber's files and records to Subscriber and
other authorized parties.
(b) PROTECTION OF SUBSCRIBER FILES. Each party will take reasonable
steps to protect against the loss or alteration of Subscribers' files, records
and data retained by such party. Each party will maintain backup file(s)
containing all the data, files and records related to Subscribers. Subscribers'
file(s), records and data shall, at no cost to Subscribers, be released to
Subscribers on an occurrence that renders either party unable to perform
hereunder, or upon the termination of this Agreement as provided herein.
However, upon any termination, Netgateway may, but is not obligated to, delete
archived data.
2. FEES AND BILLING.
2.1 ACCESS DEVELOPMENT FEES. Systems Integrator shall pay Netgateway an
"Access Development Fee" of [REDACTED] for each Subscriber that enters into an
Electronic Commerce Services Agreement. All Access Development Fees shall be due
and payable by Systems Integrator to Netgateway upon the execution of a
particular Electronic Commerce Services Agreement. Notwithstanding the
foregoing, Systems Integrator shall pay to Netgateway [REDACTED], which shall
entitle Systems Integrator to have all Access Development Fees waived with
respect to the first two Subscribers that enter into Electronic Commerce Service
Agreements with Systems Integrator and Netgateway, and which shall be payable on
the earlier of: (a) the date on which Systems Integrator enters into a binding
agreement with a Subscriber or (b) June 30, 2000.
2.2 SUBSCRIBER DEVELOPMENT FEES. Systems Integrator shall be entitled to
all development fees ("Subscriber Development Fees") received by Systems
Integrator from Subscribers pursuant to any Electronic Commerce Services
Agreements, except as otherwise agreed by Netgateway and Systems Integrator.
2.3 TRANSACTION FEES. Netgateway and Systems Integrator agree to share all
fees generated by a Subscriber's use of the Netgateway ICC (excluding the
Subscriber Development Fees) (the "Transaction Fees"), as set forth in the last
sentence hereof. Such Transaction Fees shall be paid initially by Subscribers to
Netgateway and shall include any hosting, per transaction, click-through,
affiliate and advertising fees paid by Subscribers pursuant to any Electronic
Commerce Services Agreement. Systems Integrator shall be entitled to [REDACTED]
of all Transaction Fees and Netgateway shall be entitled to [REDACTED] of all
Transaction Fees. Should Systems Integrator choose to increase the Access
Development Fee it pays Netgateway under paragraph 2.1 for a particular
Subscriber to [REDACTED] (prior to entering into any Electronic Commerce
Services Agreement), then Systems Integrator shall be entitled to [REDACTED] of
all Transaction Fees and Netgateway shall be entitled to [REDACTED] of all
Transaction Fees with respect to that Subscriber. Should Systems Integrator
choose to increase the Access Development Fee it pays Netgateway under paragraph
2.1 for a particular Subscriber to [REDACTED] (prior to entering into any
Electronic Commerce Services Agreement), then Systems Integrator shall
thereafter be entitled to [REDACTED] of all Transaction Fees and Netgateway
shall be entitled to [REDACTED] of all Transaction Fees with respect to that
Subscriber. All amounts due to Systems Integrator under this paragraph 2.3 shall
be payable within thirty days of Netgateway's receipt of such funds.
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2.4 CHANGES TO FEES AND CHARGES. Netgateway and Systems Integrator shall
each be entitled to modify the Transaction Fees and to institute new charges to
Subscribers, upon thirty (30) days prior notice to the other party to this
Agreement and to the affected Subscriber(s).
2.5 LATE PAYMENTS. Late payments hereunder will accrue interest at a rate
of one and half percent (1 1/2%) per month, or the highest rate allowed by
applicable law, whichever is lower.
2.6 TAXES, UTILITIES AND EXCLUSIONS. All fees and charges shall be
exclusive of any federal, state or local sales, use, excise, AD VALOREM or
personal property taxes levied, or any fines, forfeitures or penalties assessed
in connection therewith, as a result of this Agreement or the provision of the
eCommerce Services hereunder. Any such taxes which may be applicable shall be
paid by Systems Integrator or Subscriber, as applicable. Taxes chargeable
against the income or gross receipts of the parties hereto or assessed in
connection with the parties' employees (i.e., FICA, withholdings taxes and other
related payroll taxes) shall be payable solely by the party against which such
amounts are assessed.
2.7 BANDWIDTH. Netgateway shall provide burstible at 1 megabit per second
capacity bandwith for Subscribers' websites at no additional charge. Should
Subscribers need additional bandwidth, Netgateway will provide or make
arrangements to provide such additional bandwidth and invoice Subscribers for
such excess bandwidth and/or use beyond a 1 megabit per second burstible line.
Netgateway will provide traffic reports to Subscribers with respect to burstible
capacity. Netgateway shall not be responsible for providing connectivity to
Subscribers' offices.
3. SYSTEMS INTEGRATOR'S OBLIGATIONS.
3.1 COMPLIANCE WITH LAW AND RULES AND REGULATIONS. Systems Integrator
agrees that Systems Integrator will comply at all times with all applicable laws
and regulations (including but not limited to policies and laws related to
spamming, privacy (including any European privacy laws), obscenity or
defamation) and Netgateway's general rules and regulations relating to its
provision of eCommerce Services, currently included herein as Section 10, which
may be updated and provided by Netgateway to Systems Integrator from time to
time ("Rules and Regulations"). Systems Integrator acknowledges that Netgateway
exercises no control whatsoever over the content contained in or passing through
the Subscriber's web sites or malls, and that it is the sole responsibility of
Subscribers to ensure that the information they transmit and receive complies
with all applicable laws and regulations.
3.2 INTEGRATION; ACCESS AND SECURITY. Systems Integrator is obligated to
perform all implementation, development and integration work with respect to its
Subscribers and to provide any necessary ongoing maintenance or development work
in respect of Subscriber's website(s) for the term of any applicable Electronic
Commerce Services Agreement. Systems Integrator shall be fully responsible for
any charges, costs, expenses (other than those included in the eCommerce
Services), and third party claims that may result from its use of, or access to,
the Netgateway ICC, including, but not limited to, any unauthorized use. Systems
Integrator shall be responsible for obtaining and maintaining any equipment and
ancillary services needed to connect to, access or otherwise use the Netgateway
ICC, including, without limitation, modems, hardware, servers, software,
operating systems, networking, web servers, long distance and local telephone
services (collectively, "Equipment"). Systems Integrator shall be responsible
for ensuring that such Equipment is compatible with the Netgateway ICC (and, to
the extent applicable, the Software) and complies with all configurations and
specifications set forth in Netgateway's published policies then in effect.
Systems Integrator shall also be responsible for maintaining the security of the
Equipment, Subscribers' accounts, passwords (including, but not limited to,
administrative and user passwords) and files, and for all uses of Systems
Integrator or Subscriber accounts or the Equipment.
3.3 NO COMPETITIVE SERVICES. Systems Integrator may not at any time permit
the Netgateway ICC to be used for the provision of any services that compete
with any services provided by Netgateway, without Netgateway's prior written
consent.
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3.4 INSURANCE.
(a) MINIMUM LEVELS. Systems Integrator will keep in full force and
effect during the term of this Agreement: (i) comprehensive general liability
insurance in an amount not less than $5 million per occurrence for bodily injury
and property damage; (ii) employer's liability insurance in an amount not less
than $1 million per occurrence; and (iii) workers' compensation insurance in an
amount not less than that required by applicable law. Systems Integrator also
agrees that it will be solely responsible for ensuring that its agents
(including contractors and subcontractors) maintain, other insurance at levels
no less than those required by applicable law and customary in Systems
Integrator's industries.
(b) CERTIFICATES OF INSURANCE. Prior to the date hereof, Systems
Integrator will furnish Netgateway with certificates of insurance which evidence
the minimum levels of insurance set forth above, and will notify Netgateway in
writing in the event that any such insurance policies are cancelled.
(c) NAMING NETGATEWAY AS AN ADDITIONAL INSURED. Systems Integrator
agrees that prior to the date hereof, Systems Integrator will cause its
insurance provider(s) to name Netgateway as an additional insured and notify
Netgateway in writing of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 CONFIDENTIAL INFORMATION. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including,
without limitation, the Netgateway ICC and the terms and conditions of this
Agreement ("Confidential Information"). Confidential Information will include,
but not be limited to, each party's proprietary source, software and related
components and customer information. Each party agrees that it will not use in
any way, for its own account or the account of any third party, except as
expressly permitted by this Agreement, nor disclose to any third party (except
as required by law or to that party's attorneys, accountants and other advisors
as reasonably necessary), any of the other party's Confidential Information and
will take reasonable precautions to protect the confidentiality of such
information.
4.2 EXCEPTIONS. Information will not be deemed Confidential Information
hereunder if the receiving party can prove such information: (i) is known to the
receiving party prior to receipt from the disclosing party directly or
indirectly from a source other than one having an obligation of confidentiality
to the disclosing party; (ii) becomes known (independently of disclosure by the
disclosing party) to the receiving party directly or indirectly from a source
other than one having an obligation of confidentiality to the disclosing party;
or (iii) becomes publicly known or otherwise ceases to be secret or
confidential, except through a breach of this Agreement by the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 WARRANTIES BY SYSTEMS INTEGRATOR
(a) SYSTEMS INTEGRATOR. Systems Integrator represents and warrants
that:
(i) Systems Integrator's services, products, materials and
information provided to a Subscriber in connection with this Agreement as
well as Subscriber's use of the Netgateway ICC (collectively, "Systems
Integrator's Business") do not as of the date hereof, and will not during
the term of this Agreement, violate any applicable law or regulation.
(ii) Systems Integrator owns or has the right to use
all material used in the connection with the provision of the eCommerce
Services; and
(iii) the eCommerce Services will not (A) infringe or
misappropriate any copyright, patent, trademark, trade secret, or any other
proprietary rights of a third party; or (B) constitute false advertising,
unfair competition, defamation, an invasion of privacy or violate any right
of publicity.
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(b) RULES AND REGULATIONS. Systems Integrator has read the Rules and
Regulations (Section 10 below) and represents and warrants that Systems
Integrator and Systems Integrator's Business are currently in full compliance
with the Rules and Regulations, and will remain so at all times during the term
of this Agreement.
(c) BREACH OF WARRANTIES. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Netgateway will have the right
immediately in Netgateway's reasonable discretion, to suspend any further access
or use of the Netgateway ICC if deemed reasonably necessary by Netgateway to
prevent any harm to Netgateway or its business.
5.2 WARRANTIES AND DISCLAIMERS BY NETGATEWAY.
(a) NO OTHER WARRANTY. THE NETGATEWAY ICC IS PROVIDED ON AN "AS IS"
BASIS, AND SYSTEMS INTEGRATOR'S USE OF THE NETGATEWAY ICC IS AT ITS OWN RISK.
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NETGATEWAY DOES NOT MAKE, AND
HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND/OR IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM
A COURSE OF DEALING, USAGE, OR TRADE PRACTICE. NETGATEWAY DOES NOT WARRANT THAT
THE NETGATEWAY ICC WILL BE UNINTERRUPTED, ERROR-FREE OR COMPLETELY SECURE.
(b) DISCLAIMER OF ACTIONS CAUSED BY AND/OR UNDER THE CONTROL OF THIRD
PARTIES. NETGATEWAY DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM THE
NETGATEWAY ICC AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN LARGE
PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY THIRD
PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH A SUBSCRIBERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH NETGATEWAY WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, NETGATEWAY CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, NETGATEWAY DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR
RELATED TO SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 EXCLUSIONS. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, IN NO EVENT
WILL EITHER PARTY BE LIABLE TO ANY THIRD PARTY FOR ANY CLAIMS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR OTHERWISE, NOR FOR ANY LOST REVENUE, LOST PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA OR INTERRUPTION OR LOSS OF USE
OF SERVICE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.2 LIMITATIONS. NEITHER PARTY, NOR ITS AFFILIATES, EMPLOYEES, OFFICERS
AND AGENTS SHALL BE LIABLE TO ANY THIRD PARTY FOR ANY LOSS OR DAMAGE, WHETHER
DIRECT OR INDIRECT, RESULTING FROM DELAYS OR INTERRUPTIONS OF SERVICE DUE TO
MECHANICAL ELECTRICAL OR WIRE DEFECTS OR DIFFICULTIES, STORMS, STRIKES,
WALK-OUTS, EQUIPMENT OR SYSTEMS FAILURES, OR OTHER CAUSES OVER WHICH SUCH PARTY
OR ITS AFFILIATES, EMPLOYEES, OFFICERS, OR AGENTS AGAINST WHOM LIABILITY IS
SOUGHT, HAVE NO REASONABLE CONTROL, OR FOR LOSS OR DAMAGE, DIRECT OR INDIRECT,
RESULTING FROM INACCURACIES, ERRONEOUS STATEMENTS, ERRORS OF FACTS, OMISSIONS,
OR ERRORS IN THE TRANSMISSION OR DELIVERY OF NETGATEWAY ICC OR THE eCOMMERCE
SERVICES, OR ANY DATA PROVIDED AS A PART OF THE NETGATEWAY ICC OR THE eCOMMERCE
SERVICES PURSUANT TO THIS AGREEMENT, EXCEPT TO THE EXTENT CAUSED BY THE GROSS
NEGLIGENCE OR WILLFULL MISCONDUCT OF NETGATEWAY OR SYSTEMS INTEGRATOR, AS THE
CASE MAY BE. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR SPECIAL,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL LOSSES OR DAMAGES WHICH OTHER PARTIES OR
SUCH THIRD PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING INTO OR RELYING
ON THIS AGREEMENT OR UTILIZING THE NETGATEWAY ICC OR THE eCOMMERCE SERVICES,
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REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES OR WHETHER SUCH DAMAGES ARE CAUSED, IN WHOLE OR IN PART, BY THE
NEGLIGENCE OF SUCH PARTY.
6.3 MAXIMUM LIABILITY. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, EACH
PARTY'S MAXIMUM AGGREGATE LIABILITY TO THE OTHER PARTY RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT OF FEES
RECEIVED BY EACH PARTY HEREUNDER.
6.4 TIME FOR MAKING CLAIMS. ANY SUIT OR ACTION BY SYSTEMS INTEGRATOR
AGAINST NETGATEWAY OR, ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS EMPLOYEES,
SUCCESSORS OR ASSIGNS, BASED UPON ANY ACT OR OMISSION ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR SERVICES PERFORMED HEREUNDER, OR ANY ALLEGED BREACH
THEREOF, SHALL BE COMMENCED WITHIN TWO (2) YEARS OF THE FIRST OCCURRENCE GIVING
RISE TO SUCH CLAIM OR BE FOREVER BARRED. THIS PROVISION DOES NOT MODIFY OR
OTHERWISE AFFECT THE LIMITATION OF LIABILITY SET FORTH IN SECTION 6 OR ELSEWHERE
IN THIS AGREEMENT.
6.5 SYSTEMS INTEGRATOR'S INSURANCE. SYSTEMS INTEGRATOR AGREES THAT IT WILL
NOT PURSUE ANY CLAIMS AGAINST NETGATEWAY FOR ANY LIABILITY NETGATEWAY MAY HAVE
UNDER OR RELATING TO THIS AGREEMENT UNTIL SYSTEMS INTEGRATOR FIRST MAKES CLAIMS
AGAINST SYSTEMS INTEGRATOR'S INSURANCE PROVIDER(S) AND SUCH INSURANCE
PROVIDER(S) FINALLY RESOLVE(S) SUCH CLAIMS.
6.6 BASIS OF THE BARGAIN; FAILURE OF ESSENTIAL PURPOSE. EACH PARTY
ACKNOWLEDGES THAT THE OTHER HAS SET ITS PRICES AND ENTERED INTO THIS AGREEMENT
IN RELIANCE UPON THE LIMITATIONS OF LIABILITY AND THE DISCLAIMERS OF WARRANTIES
AND DAMAGES SET FORTH HEREIN, AND THAT THE SAME FORM AN ESSENTIAL BASIS OF THE
BARGAIN BETWEEN THE PARTIES. THE PARTIES AGREE THAT THE LIMITATIONS AND
EXCLUSIONS OF LIABILITY AND DISCLAIMERS SPECIFIED IN THIS AGREEMENT WILL SURVIVE
AND APPLY EVEN IF FOUND TO HAVE FAILED OF THEIR ESSENTIAL PURPOSE.
7. INDEMNIFICATION.
7.1 NETGATEWAY'S INDEMNIFICATION OF SYSTEMS INTEGRATOR. Netgateway will
indemnify, defend and hold Systems Integrator harmless from and against any and
all costs, liabilities, losses, and expenses (including, but not limited to,
reasonable attorneys' fees) (collectively, "Losses") resulting from any claim,
suit, action, or proceeding (each, an "Action") brought against Systems
Integrator alleging the infringement of any third party registered U.S.
copyright, trademark or patent issued as of the date hereof resulting from the
provision of access and use of the Netgateway ICC pursuant to this Agreement
(but excluding any infringement contributorily caused by Systems Integrator's
Business).
7.2 SYSTEMS INTEGRATOR'S INDEMNIFICATION OF NETGATEWAY. Systems Integrator
will indemnify, defend and hold Netgateway, its affiliates and customers
harmless from and against any and all Losses resulting from or arising out of
(a) Systems Integrator's breach of any provision of this Agreement or (b) any
Action brought against Netgateway, its directors, employees, affiliates or
Subscribers alleging with respect to Systems Integrator's Business or the
provision of the eCommerce Services: (i) infringement or misappropriation of any
intellectual property rights; (ii) defamation, libel, slander, obscenity,
pornography, or violation of the rights of privacy or publicity; (iii) spamming,
or any other offensive, harassing or illegal conduct or violation of the Rules
and Regulations; (iv) any violation of any other applicable law or regulation;
or (v) any claims, warranties or representations made by Systems Integrator or
Systems Integrator's employees or agents that differ from the warranty provided
by Netgateway in the Electronic Commerce Services Agreements.
7.3 NOTICE. Each party will provide the other party, prompt written notice
of the existence of any indemnifiable event under paragraph 7 of which it
becomes aware, and an opportunity to participate in the defense thereof.
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8. DISPUTE RESOLUTION.
8.1 PROCEDURES. It is the intent of the parties that all disputes arising
under this Agreement be resolved expeditiously, amicably and at the level within
each party's organization that is most knowledgeable about the disputed issue.
The parties understand and agree that the procedures outlined in this paragraph
8 are not intended to supplant the routine handling of inquiries and complaints
through informal contact with customer service representatives or other
designated personnel of the parties. Accordingly, for purposes of the procedures
set forth in this paragraph, a "dispute" is a disagreement that the parties have
been unable to resolve by the normal and routine channels ordinarily used for
such matters. Before any dispute arising under this Agreement, other than as
provided in paragraph 8.5 below, may be submitted to arbitration, the parties
shall first follow the informal and escalating procedures set forth below.
(a) The complaining party's representative will notify the other
party's representative in writing of the dispute, and the non-complaining party
will exercise good faith efforts to resolve the matter as expeditiously as
possible.
(b) In the event that such matter remains unresolved thirty (30) days
after the delivery of the complainant party's written notice, a senior
representative of each party shall meet or confer within ten (10) business days
of a request for such a meeting or conference by either party to resolve such
matter.
(c) In the event that the meeting or conference specified in
(b) above does not resolve such matter, the senior officer of each party shall
meet or confer within ten (10) business days of the request for such a meeting
or conference by either party to discuss and agree upon a mutually satisfactory
resolution of such matter.
(d) If the parties are unable to reach a resolution of the dispute
after following the above procedure, or if either party fails to participate
when requested, the parties may proceed in accordance with paragraph 8.2 below.
8.2 BINDING ARBITRATION. Except as provided in paragraph 8.5 below, any
dispute arising under this Agreement shall, after utilizing the procedures in
paragraph 8.1, be resolved by final and binding arbitration in Los Angeles,
California, before a single arbitrator selected by, and in accordance with the
rules of commercial arbitration of, the American Arbitration Association or as
otherwise provided in paragraph 11.6. Each party shall bear its own costs in the
arbitration, including attorneys' fees, and each party shall bear one-half of
the cost of the arbitrator.
8.3 ARBITRATOR'S AUTHORITY. The arbitrator shall have the authority to
award such damages as are not prohibited by this Agreement and may, in addition
and in a proper case, declare rights and order specific performance, but only in
accordance with the terms of this Agreement.
8.4 ENFORCEMENT OF ARBITRATOR'S AWARD. Any party may apply to a court of
general jurisdiction to enforce a arbitrator's award, and if enforcement is
ordered, the party against which the order is issued shall pay the costs and
expenses of the other party in obtaining such order, including responsible
attorneys' fees.
8.5 ACCESS TO COURTS. Notwithstanding the provisions of paragraphs 8.1 and
8.2 above, any action by Netgateway to enforce its rights under paragraph 10.3
of this Agreement or to enjoin any infringement of the same by Systems
Integrator may, at Netgateway's election, be commenced in the state or federal
courts of Los Angeles, California, and Systems Integrator consents to personal
jurisdiction and venue in such courts for such actions.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement will be effective on the date first above written
and will terminate three (3) years ("Initial Term") from the date hereof, unless
earlier terminated according to the provisions of paragraph
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9.2. This Agreement will automatically renew for one additional term of three
(3) years unless a party hereto elects not to so renew and notifies the other
party in writing of such election by a date, which is six (6) months prior to
the lapse of the Initial Term.
9.2 TERMINATION. Either party will have the right to terminate this
Agreement if: (i) the other party breaches any material term or condition of
this Agreement and fails to cure such breach within thirty (30) days after
receipt of written notice of the same, except in the case of failure to pay
fees, which must be cured within five (5) days after receipt of written notice
from the other party; (ii) the other party becomes the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors; or (iii)
the other party becomes the subject of an involuntary petition in bankruptcy or
any involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, and such petition or proceeding is not
dismissed within sixty (60) days of filing.
9.3 NO LIABILITY FOR TERMINATION. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
9.4 EFFECT OF TERMINATION. Except as set forth in paragraph 9.5, upon the
effective date of the expiration or termination of this Agreement: (a)
Netgateway will immediately cease providing Systems Integrator with access to
the Netgateway ICC; (b) Systems Integrator shall immediately cease providing
eCommerce Services to its Subscribers hereunder; (c) any and all payment
obligations of Systems Integrator or Netgateway under this Agreement will become
due and payable immediately; and (d) within thirty (30) days after such
expiration or termination, each party will return all Confidential Information
of the other party in its possession at the time of expiration or termination
and will not make or retain any copies of such Confidential Information, except
as required to comply with any applicable legal or accounting record keeping
requirement.
9.5 TRANSITION SERVICES. In the event of any non-renewal of this Agreement
or any termination of this Agreement for any reason, the following provisions
("Transition Services") shall apply:
(a) Upon Netgateway's request, Systems Integrator shall continue to
perform its obligations hereunder with respect to the provision of eCommerce
Services for each Subscriber for the duration of the term of the then-current
Electronic Commerce Services Agreement for such Subscriber, in accordance with
the terms of such Agreement; PROVIDED, HOWEVER, that, as required under this
Agreement, Netgateway shall continue to pay Systems Integrator for the provision
of any such Services associated with each Subscriber for the duration of the
term of the then-current applicable Electronic Commerce Services Agreement and
the grants made by Netgateway pursuant to paragraph 1.2 hereunder survive during
such period to the extent necessary to provide such Transition Services;
(b) Systems Integrator shall cooperate fully with Netgateway in
effecting the orderly transfer of the eCommerce Services and related materials
to one or more third parties as directed by Netgateway, and Netgateway shall pay
Systems Integrator any reasonable fees or expenses incurred by it in connection
with such cooperation; and
(c) Upon Netgateway's request, Systems Integrator shall return to
Netgateway, or deliver to one or more third parties, as directed by Netgateway,
all copies of any documentation, Confidential Information, and all other
materials and items belonging to Netgateway or its suppliers.
9.6 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: paragraphs 3, 4, 5, 6, 7, 8, 9, 10 and 11.
10. USE OF eCOMMERCE SERVICES - RULES AND REGULATIONS.
10.1 PROPRIETARY SYSTEMS. Systems Integrator acknowledges that all of the
software systems and components utilized by Netgateway in the Netgateway ICC,
including all enhancements thereto and the Intellectual Property Rights (as
defined in Section 1.2(c)), and all screens and formats used in connection
therewith are and shall be the exclusive proprietary property of Netgateway, and
Systems Integrator shall not
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publish, disclose, display, provide access to or otherwise make available any
Netgateway software or products thereof, or any screens, formats, reports or
printouts used, provided, produced or supplied from or in connection therewith,
to any person or entity other than an employee of Systems Integrator without the
prior written consent of, and on terms acceptable to Netgateway, which consent
shall not be unreasonably withheld; PROVIDED, HOWEVER, that Systems Integrator
may disclose to a governmental or regulatory agency or to customers of Systems
Integrator any information expressly prepared and acknowledge in writing by
Netgateway as having been prepared for disclosure to such governmental or
regulatory agency or to such customers. Except as provided in Sections 1.2(d)
and 11.3, neither party shall disclose Systems Integrator's provision of
eCommerce Services in any advertising or promotional materials without the prior
written consent to such use, and approval of such materials, by the other. In
addition, this is a contract for access to the Netgateway ICC and the software
comprising the Netgateway ICC will be installed, accessed and maintained only by
or for Netgateway and no license is granted to Systems Integrator with respect
thereto. Systems Integrator will not, directly or indirectly, reverse engineer,
decompile, disassemble or otherwise attempt to discover the source code, object
code or underlying structure, ideas or algorithms of the Netgateway ICC or any
software, documentation or data related thereto ("Software"); modify, translate,
or create derivative works based on the Netgateway ICC or any Software; or copy,
rent, lease, distribute, pledge, assign, or otherwise transfer or encumber
rights to the Netgateway ICC or any Software; or, except as contemplated herein,
use the Netgateway ICC or any Software for timesharing or service bureau
purposes or otherwise for the benefit of a third party; or remove any
proprietary notices or labels.
10.2 USE OF SERVICES PERSONAL TO SYSTEMS INTEGRATOR. Systems Integrator
agrees that it will use and provide access to the Netgateway ICC only in
connection with the provision of eCommerce Services to its Subscribers, and it
will not, without the express written permission of Netgateway, sell, lease or
otherwise provide or make available the Netgateway ICC to any third party.
10.3 SURVIVAL OF OBLIGATIONS. The obligations of this paragraph 10 shall
survive termination of this Agreement. Systems Integrator understands that the
unauthorized publication or disclosure of any of Netgateway' software or copies
thereof, or the unauthorized use of the Netgateway ICC would cause irreparable
harm to Netgateway for which there is no adequate remedy at law. Systems
Integrator therefore agrees that in the event of such unauthorized disclosure or
use, Netgateway may, at its discretion and at Systems Integrator's expense,
terminate this Agreement, obtain immediate injunctive relief in a court of
competent jurisdiction, or take such other steps as it deems necessary to
protect its rights. If Netgateway, in its reasonable, good faith judgment,
determines that there is a material risk of such unauthorized disclosure or use,
it may demand immediate assurances, satisfactory to Netgateway, that there will
be no such unauthorized disclosure or use. In the absence of such assurance,
Netgateway may immediately terminate this Agreement and take such other steps as
it deems necessary. The rights of Netgateway hereunder are in addition to any
other remedies provided by law.
11. MISCELLANEOUS PROVISIONS.
11.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
11.2 NO LEASE. This Agreement is not intended to and will not constitute a
lease of any real or personal property. Systems Integrator acknowledges and
agrees that (i) it has been granted only the right to use the Netgateway ICC and
any equipment provided by Netgateway in connection with the provision of the
eCommerce Services in accordance with this Agreement, (ii) Systems Integrator
has not been granted any real property interest in the Netgateway ICC, and (iii)
Systems Integrator has no rights under this Agreement as a tenant or otherwise
under any real property or landlord/tenant laws, regulations or ordinances.
11.3 MARKETING. Systems Integrator agrees that Netgateway may refer to
Systems Integrator by trade name and trademark, and may briefly describe Systems
Integrator's Business in Netgateway's marketing materials and web site. Systems
Integrator hereby grants Netgateway a license to use any Systems Integrator
trade names and trademarks solely in connection with the rights granted to
Netgateway pursuant to this paragraph 11.3.
Page 10 of 16
<PAGE>
11.4 GOVERNMENT REGULATIONS. Systems Integrator will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Systems Integrator operates or does business.
11.5 NON-SOLICITATION. During the period beginning on the date hereof and
ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, each party agrees that it will not, and
will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by the other party during
such period.
11.6 GOVERNING LAW; SEVERABILITY; WAIVER. This Agreement is made under
and will be governed by and construed in accordance with the laws of the State
of California (without regard to that body of law controlling conflicts of law)
and specifically excluding from application to this Agreement that law known as
the United Nations Convention on the International Sale of Goods. In the event
any provision of this Agreement is held by a tribunal of competent jurisdiction
to be contrary to the law, the remaining provisions of this Agreement will
remain in full force and effect. The waiver of any breach or default of this
Agreement will not constitute a waiver of any subsequent breach or default, and
will not act to amend or negate the rights of the waiving party.
11.7 ASSIGNMENT; NOTICES. Systems Integrator may not assign its rights or
delegate its duties under this Agreement either in whole or in part without the
prior written consent of Netgateway, except that Systems Integrator may assign
this Agreement in whole as part of a corporate reorganization, consolidation,
merger, or sale of substantially all of its assets. Any attempted assignment or
delegation without such consent will be void. Netgateway may assign this
Agreement in whole or part. This Agreement will bind and inure to the benefit of
each party's successors and permitted assigns. Any notice or communication
required or permitted to be given hereunder may be delivered by hand, deposited
with an overnight courier, sent by confirmed facsimile, or mailed by registered
or certified mail, return receipt requested, postage prepaid, in each case to
the address of the receiving party indicated on the signature page hereof, or at
such other address as may hereafter be furnished in writing by either party
hereto to the other. Such notice will be deemed to have been given as of the
date it is delivered, mailed or sent, whichever is earlier.
11.8 RELATIONSHIP OF PARTIES. Netgateway and Systems Integrator are
independent contractors and this Agreement will not establish any relationship
of partnership, joint venture, employment, franchise or agency between
Netgateway and Systems Integrator. Neither Netgateway nor Systems Integrator
will have the power to bind the other or incur obligations on the other's behalf
without the other's prior written consent, except as otherwise expressly
provided herein.
11.9 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Page 11 of 16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date and year first above written.
SYSTEMS INTEGRATOR
By: /s/ Karen Fast
----------------------------------------
Name: Karen Fast
----------------------------
Its: Executive Vice President
----------------------------
Address for Notices:
1600 N.W. Compton Drive
Suite 210
Beaverton, OR 97006
NETGATEWAY
By: /s/ Roy W. Camblin III
----------------------------------------
Name: Roy W. Camblin III
----------------------------
Its: Chief Executive Officer
----------------------------
Address for Notices:
300 Oceangate, Suite 500
Long Beach, CA 90802
Attention: General Counsel
Page 12 of 16
<PAGE>
EXHIBIT "A"
NETGATEWAY
ELECTRONIC COMMERCE SERVICES AGREEMENT
THIS ELECTRONIC COMMERCE SERVICES AGREEMENT (this "AGREEMENT") is made
effective as of the Acceptance Date set forth in the initial eCommerce Services
Order Form (___________, 2000) accepted by Netgateway, a Nevada corporation
("NETGATEWAY"), and the subscriber identified below ("SUBSCRIBER").
PARTIES:
SUBSCRIBER NAME:
ADDRESS:
PHONE:
FAX:
NETGATEWAY
300 Oceangate, Suite 500
Long Beach, CA 90802
Phone: (562) 308-0010
Fax: (562) 308-0021
1. ELECTRONIC COMMERCE SERVICES.
1.1 eCOMMERCE SERVICES. Subject to the terms and conditions of this
Agreement, during the term of this Agreement, Netgateway will, through the
Netgateway Internet Commerce Center-TM- (the "NETGATEWAY ICC") provide to
Subscriber the services described in the eCommerce Services Order Form(s) (the
"eCOMMERCE SERVICES ORDER FORM(S)") accepted by Netgateway, or substantially
similar services if such substantially similar services would provide Subscriber
with substantially similar benefits (the "eCOMMERCE SERVICES"). All such
eCommerce Services Order Forms will be incorporated herein by this reference as
of the Acceptance Date set forth in each such form. Netgateway and Subscriber
have mutually agreed or will mutually agree upon the detailed final
specifications (the "SPECIFICATIONS") for the eCommerce Services and the
development timeline therefor, all of which are or will be set forth on the
attached initial eCommerce Services Order Form, marked Exhibit "A", and by this
reference made a part hereof.
1.2 AVAILABILITY. eCommerce Services will be available to Subscriber for
inquiry and order entry functions twenty-four (24) hours a day, seven (7) days a
week. Netgateway reserves the right upon reasonable notice to Subscriber to
limit or curtail holiday or weekend availability when necessary for system
upgrades, adjustments, maintenance, or other operational considerations.
1.3 ENHANCEMENTS. General enhancements to existing eCommerce Services
provided hereunder, as well as new features that Netgateway incorporates into
its standard commerce processing system, regardless of whether they are
initiated by Netgateway or developed at the request of Subscriber or other
subscribers, shall be made available to Subscriber at no additional cost. Any
new features or services that may be developed by Netgateway during the term of
this Agreement that Netgateway intends to offer to subscribers on a limited or
optional basis may, at Netgateway' option, and subject to Subscriber's
acceptance, be made available to Subscriber at Netgateway's then-current prices
for such new features or services. Enhancements to existing eCommerce Services
requested by Subscriber that benefit only Subscriber at the time such
enhancements are put into service shall be billed to Subscriber at Netgateway's
standard rates for programming. All enhancements to the eCommerce Services, and
any new features or services introduced by Netgateway, shall remain the
exclusive proprietary property of Netgateway.
1.4 TRAINING. At no cost to Subscriber, Netgateway shall provide such onsite
training and other assistance, as Netgateway deems necessary to assure that
Subscriber's personnel are able to make effective use of the eCommerce Services.
Onsite training shall take place at such times and places as are mutually
agreeable to the parties hereto.
1.5 SUBSCRIBER DATA.
(a) SUBSCRIBER DATA. Subscriber will timely supply Netgateway, in a form
acceptable to Netgateway, with all data necessary for Netgateway to perform the
ongoing services to be provided hereunder. It is the sole responsibility of
Subscriber to insure the completeness and accuracy of such data.
(b) CONFIDENTIALITY. NETGATEWAY ACKNOWLEDGES THAT ALL RECORDS, DATA, FILES
AND OTHER INPUT MATERIAL RELATING TO SUBSCRIBER ARE CONFIDENTIAL AND SHALL TAKE
REASONABLE STEPS TO PROTECT THE CONFIDENTIALITY OF SUCH RECORDS, DATA, FILES AND
OTHER MATERIALS. NETGATEWAY WILL PROVIDE REASONABLE SECURITY SAFEGUARDS TO LIMIT
ACCESS TO SUBSCRIBER'S FILES AND RECORDS TO SUBSCRIBER AND OTHER AUTHORIZED
PARTIES.
(c) PROTECTION OF SUBSCRIBER FILES. Netgateway will take reasonable steps to
protect against the loss or alteration of Subscriber's files, records and data
retained by Netgateway, but Subscriber recognizes that events beyond the control
of Netgateway may cause such loss or alteration. Netgateway will maintain backup
file(s) containing all the data, files and records related to Subscriber.
Subscriber's file(s), records and data shall, at no cost to Subscriber, be
released to Subscriber on an occurrence that renders Netgateway unable to
perform hereunder, or upon the termination of this Agreement as provided herein.
(d) OWNERSHIP OF DATA. Netgateway acknowledges that all records, data, files
and other input material relating to Subscriber and its customers are the
exclusive property of the Subscriber.
2. FEES AND BILLING.
2.1 FEES. Subscriber will pay all fees and amounts in accordance with the
eCommerce Services Order Forms.
2.2 BILLING COMMENCEMENT. Billing for eCommerce Services indicated in the
eCommerce Services Order Forms, if any, other than the initial development fee,
shall commence on the indicated in the eCommerce Services Order Forms (the
"OPERATIONAL DATE"). The initial development fee will be due and payable in
accordance with the terms of the eCommerce Services Order Form. In the event
that Subscriber orders other eCommerce Services in addition to those listed in
the initial eCommerce Services Order Form, billing for such services shall
commence on the date Netgateway first provides such additional eCommerce
Services to Subscriber or as otherwise agreed to by Subscriber and Netgateway in
the applicable eCommerce Services Order Form.
2.3 BILLING AND PAYMENT TERMS. Netgateway shall invoice Subscriber monthly in
advance of the provision of eCommerce Services, and payment of such fees will be
due within thirty (30) days of the date of each Netgateway invoice. All payments
will be made in U.S. dollars. Late payments hereunder will accrue interest at a
rate of one and one-half percent (1 1/2%) per month, or the highest rate allowed
by applicable law, whichever is lower. If, in its reasonable judgment Netgateway
determines that Subscriber is not creditworthy or is otherwise not financially
secure, Netgateway may, upon prior written notice to Subscriber, modify the
payment terms to require full payment before the provision of eCommerce Services
or other assurances to secure Subscriber's payment obligations hereunder.
2.4 TAXES, UTILITIES AND EXCLUSIONS. All charges shall be exclusive of any
federal, state or local sales, use, excise, AD VALOREM or personal property
taxes levied, or any fines, forfeitures or penalties assessed in connection
therewith, as a result of this Agreement or the installation or use of eCommerce
Services hereunder. Any such taxes that may be applicable will be paid by
Subscriber or by Netgateway for Subscriber's account, in which case Subscriber
shall reimburse Netgateway for amounts so paid. Netgateway shall provide
burstible at one (1) megabit per second capacity bandwith for Subscriber's
website at no additional charge. Should Subscriber need additional bandwidth,
Netgateway will provide or make arrangements to provide such additional
bandwidth and invoice Subscriber for such excess bandwidth and/or use beyond a
one (1) megabit per second burstible line. Netgateway will provide traffic
reports to Subscriber with respect to burstible capacity. Netgateway is not
responsible for providing connectivity to Subscriber's offices.
3. SUBSCRIBER'S OBLIGATIONS.
3.1 COMPLIANCE WITH LAW AND RULES AND REGULATIONS. Subscriber agrees that
Subscriber will comply at all times with all applicable laws and regulations and
Netgateway's general rules and regulations relating to its provision of
eCommerce Services, currently included herein as Section 10, which may be
updated and provided by Netgateway to Subscriber from time to time ("RULES AND
REGULATIONS"). Subscriber acknowledges that Netgateway exercises no control
whatsoever over the content contained in or passing through the Subscriber's web
site or mall ("eCOMMERCE CENTERS"), and that it is the sole responsibility of
Subscriber to ensure that the information it transmits and receives complies
with all applicable laws and regulations.
3.2 ACCESS AND SECURITY. Subscriber will be fully responsible for any
charges, costs, expenses (other than those included in the eCommerce Services),
and third party claims that may result from its use of, or access to, the
Netgateway Internet Commerce Center-TM- or the eCommerce Centers, including, but
not limited to, any unauthorized use or any access devices provided by
Netgateway hereunder.
3.3 NO COMPETITIVE SERVICES. Subscriber may not at any time permit any
eCommerce Services to be utilized for the provision of any services that compete
with any Netgateway services, without Netgateway's prior written consent.
Page 13 of 16
<PAGE>
3.4 INSURANCE.
(a) MINIMUM LEVELS. Subscriber will keep in full force and effect during the
term of this Agreement: (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Subscriber also agrees that it
will be solely responsible for ensuring that its agents (including contractors
and subcontractors) maintain, other insurance at levels no less than those
required by applicable law and customary in Subscriber's industries.
(b) CERTIFICATES OF INSURANCE. Prior to the Operational Date, Subscriber will
furnish Netgateway with certificates of insurance which evidence the minimum
levels of insurance set forth above, and will notify Netgateway in writing in
the event that any such insurance policies are cancelled.
(c) NAMING NETGATEWAY AS AN ADDITIONAL INSURED. Subscriber agrees that prior
to the Operational Date, Subscriber will cause its insurance provider(s) to name
Netgateway as an additional insured and notify Netgateway in writing of the
effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 CONFIDENTIAL INFORMATION. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("CONFIDENTIAL INFORMATION").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 EXCEPTIONS. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 WARRANTIES BY SUBSCRIBER.
(a) SUBSCRIBER'S BUSINESS. Subscriber represents and warrants that:
(i) Subscriber's services, products, materials, data, and information
used by Subscriber in connection with this Agreement as well as Subscriber's and
its permitted customers' and users' use of the eCommerce Services (collectively,
"SUBSCRIBER'S BUSINESS") does not as of the Operational Date, and will not
during the term of this Agreement, operate in any manner that would violate any
applicable law or regulation.
(ii) Subscriber owns or has the right to use all material contained in
the Subscriber's web site, including all text, graphics, sound, video,
programming, scripts, and applets; and
(iii) The use, reproduction, distribution, and transmission of the web
site, or any information or materials contained in it does not (A) infringe or
misappropriate any copyright, patent, trademark, trade secret, or any other
proprietary rights of a third party; or (B) constitute false advertising, unfair
competition, defamation, an invasion of privacy, or violate a right of
publicity.
(b) RULES AND REGULATIONS. Subscriber has read the Rules and Regulations
(Section 10 below) and represents and warrants that Subscriber and Subscriber's
Business are currently in full compliance with the Rules and Regulations, and
will remain so at all times during the term of this Agreement.
(c) BREACH OF WARRANTIES. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Netgateway will have the right
immediately in Netgateway's reasonable discretion, to suspend any related
eCommerce Services if deemed reasonably necessary by Netgateway to prevent any
harm to Netgateway or its business.
5.2 WARRANTIES AND DISCLAIMERS BY NETGATEWAY.
(a) NO OTHER WARRANTY. THE eCOMMERCE SERVICES ARE PROVIDED ON AN "AS IS"
BASIS, AND SUBSCRIBER'S USE OF THE eCOMMERCE SERVICES IS AT ITS OWN RISK.
NETGATEWAY DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND/OR
IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
NETGATEWAY DOES NOT WARRANT THAT THE eCOMMERCE SERVICES WILL BE UNINTERRUPTED,
ERROR-FREE, OR COMPLETELY SECURE.
(b) DISCLAIMER OF ACTIONS CAUSED BY AND/OR UNDER THE CONTROL OF THIRD
PARTIES. NETGATEWAY DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM
NETGATEWAY'S INTERNET COMMERCE CENTER AND OTHER PORTIONS OF THE INTERNET. SUCH
FLOW DEPENDS IN LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR
CONTROLLED BY THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE
THIRD PARTIES CAN PRODUCE SITUATIONS IN WHICH NETGATEWAY'S SUBSCRIBERS'
CONNECTIONS TO THE INTERNET (OR PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED.
ALTHOUGH NETGATEWAY WILL USE COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT
DEEMS APPROPRIATE TO REMEDY AND AVOID SUCH EVENTS, NETGATEWAY CANNOT GUARANTEE
THAT THEY WILL NOT OCCUR. ACCORDINGLY, NETGATEWAY DISCLAIMS ANY AND ALL
LIABILITY RESULTING FROM OR RELATED TO SUCH EVENTS.
LIMITATIONS OF LIABILITY.
6.1 EXCLUSIONS. IN NO EVENT WILL NETGATEWAY BE LIABLE TO ANY THIRD PARTY FOR
ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, SUBSCRIBER'S BUSINESS OR
OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS, REPLACEMENT GOODS, LOSS OF
TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR SUBSCRIBER'S
BUSINESS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.2 LIMITATIONS. NETGATEWAY, ITS AFFILIATES, EMPLOYEES, OFFICERS AND AGENTS
SHALL NOT BE LIABLE TO SUBSCRIBER OR TO ANY THIRD PARTY FOR ANY LOSS OR DAMAGE,
WHETHER DIRECT OR INDIRECT, RESULTING FROM DELAYS OR INTERRUPTIONS OF SERVICE
DUE TO MECHANICAL ELECTRICAL OR WIRE DEFECTS OR DIFFICULTIES, STORMS, STRIKES,
WALK-OUTS, EQUIPMENT OR SYSTEMS FAILURES, OR OTHER CAUSES OVER WHICH NETGATEWAY,
ITS AFFILIATES, EMPLOYEES, OFFICERS, OR AGENTS AGAINST WHOM LIABILITY IS SOUGHT,
HAVE NO REASONABLE CONTROL, OR FOR LOSS OR DAMAGE, DIRECT OR INDIRECT, RESULTING
FROM INACCURACIES, ERRONEOUS STATEMENTS, ERRORS OF FACTS, OMISSIONS, OR ERRORS
IN THE TRANSMISSION OR DELIVERY OF eCOMMERCE SERVICES, OR ANY DATA PROVIDED AS A
PART OF THE eCOMMERCE SERVICES PURSUANT TO THIS AGREEMENT, EXCEPT TO THE EXTENT
CAUSED BY THE GROSS NEGLIGENCE OR WILLFULL MISCONDUCT OF NETGATEWAY. IN
ADDITION, IN NO EVENT SHALL NETGATEWAY BE LIABLE TO SUBSCRIBER OR TO ANY THIRD
PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL LOSSES OR DAMAGES
WHICH SUBSCRIBER OR SUCH THIRD PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF
ENTERING INTO OR RELYING ON THIS AGREEMENT OR UTILIZING THE NETGATEWAY eCOMMERCE
SERVICES, REGARDLESS OF WHETHER NETGATEWAY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES OR WHETHER SUCH DAMAGES ARE CAUSED, IN WHOLE OR IN PART, BY THE
NEGLIGENCE OF NETGATEWAY.
6.3 MAXIMUM LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, NETGATEWAY'S MAXIMUM AGGREGATE LIABILITY TO SUBSCRIBER RELATED TO OR
IN CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
SUBSCRIBER TO NETGATEWAY HEREUNDER FOR THE PERIOD CONSISTING OF THE PRIOR THREE
(3) FULL CALENDAR MONTHS.
6.4 TIME FOR MAKING CLAIMS. ANY SUIT OR ACTION BY SUBSCRIBER AGAINST
NETGATEWAY, ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS EMPLOYEES, SUCCESSORS OR
ASSIGNS, BASED UPON ANY ACT OR OMISSION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR SERVICES PERFORMED HEREUNDER, OR ANY ALLEGED BREACH THEREOF, SHALL
BE COMMENCED WITHIN TWO (2) YEARS OF THE FIRST OCCURRENCE GIVING RISE TO SUCH
CLAIM OR BE FOREVER BARRED. THIS PROVISION DOES NOT MODIFY OR OTHERWISE AFFECT
THE LIMITATION OF NETGATEWAY'S LIABILITY SET FORTH IN SECTION 6 OR ELSEWHERE IN
THIS AGREEMENT.
6.5 SUBSCRIBER'S INSURANCE. Subscriber agrees that it will not pursue any
claims against Netgateway for any liability Netgateway may have under or
relating to this Agreement until Subscriber first makes claims against
Subscriber's insurance provider(s) and such insurance provider(s) finally
resolve(s) such claims.
6.6 BASIS OF THE BARGAIN; FAILURE OF ESSENTIAL PURPOSE. Subscriber
acknowledges that Netgateway has set its prices and entered into this Agreement
in reliance upon the limitations of liability and the disclaimers of warranties
and damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. INDEMNIFICATION.
7.1 NETGATEWAY'S INDEMNIFICATION OF SUBSCRIBER. Netgateway will indemnify,
defend and hold Subscriber harmless from and against any and all costs,
liabilities, losses, and expenses (including, but not limited to, reasonable
attorneys' fees) (collectively, "LOSSES") resulting from any claim, suit,
action, or proceeding (each, an "ACTION") brought against Subscriber alleging
the infringement of any third party registered U.S. copyright or issued U.S.
patent resulting from the provision of eCommerce Services pursuant to this
Agreement (but excluding any infringement contributorily caused by Subscriber's
Business).
7.2 SUBSCRIBER'S INDEMNIFICATION OF NETGATEWAY. Subscriber will indemnify,
defend and hold Netgateway, its affiliates and customers harmless from and
against any and all Losses resulting from or arising out of Subscriber's breach
of any provision of this Agreement or any Action brought against Netgateway, its
directors, employees, affiliates or Subscribers alleging with respect to the
Subscriber's Business: (a) infringement or misappropriation of any intellectual
property rights; (b) defamation, libel,
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<PAGE>
slander, obscenity, pornography or violation of the rights of privacy or
publicity; (c) spamming, or any other offensive, harassing or illegal conduct or
violation of the Rules and Regulations; or (d) any violation of any other
applicable law or regulation.
7.3 NOTICE. Each party will provide the other party, prompt written notice of
the existence of any Loss or Action described in this Section 7 of which it
becomes aware, and an opportunity to participate in the defense thereof.
8. DISPUTE RESOLUTION.
8.1 PROCEDURES. It is the intent of the parties that all disputes arising
under this Agreement be resolved expeditiously, amicably, and at the level
within each party's organization that is most knowledgeable about the disputed
issue. The parties understand and agree that the procedures outlined in this
Section 8 are not intended to supplant the routine handling of inquiries and
complaints through informal contact with customer service representatives or
other designated personnel of the parties. Accordingly, for purposes of the
procedures set forth in this Section 8, "DISPUTE" means a disagreement that the
parties have been unable to resolve by the normal and routine channels
ordinarily used for such matters. Before any dispute arising under this
Agreement, other than as provided in Section 8.5 below, may be submitted to
arbitration, the parties shall first follow the informal and escalating
procedures set forth below.
(a) The complaining party's representative will notify the other party's
representative in writing of the dispute, and the non-complaining party will
exercise good faith efforts to resolve the matter as expeditiously as possible.
(b) In the event that such matter remains unresolved thirty (30) days after
the delivery of the complainant party's written notice, a senior representative
of each party shall meet or confer within ten (10) business days of a request
for such a meeting or conference by either party to resolve such matter.
(c) In the event that the meeting or conference specified in (b) above does
not resolve such matter, the senior officer of each party shall meet or confer
within ten (10) business days of the request for such a meeting or conference by
either party to discuss and agree upon a mutually satisfactory resolution of
such matter.
(d) If the parties are unable to reach a resolution of the dispute after
following the above procedure, or if either party fails to participate when
requested, the parties may proceed in accordance with Section 8.2 below.
8.2 BINDING ARBITRATION. Except as provided in Section 8.5 below, any dispute
arising under this Agreement shall, after utilizing the procedures in Section
8.1, be resolved by final and binding arbitration in Los Angeles, California,
before a single arbitrator selected by, and in accordance with the rules of
commercial arbitration of, the American Arbitration Association or as otherwise
provided in Section 11.6. Each party shall bear its own costs in the
arbitration, including attorneys' fees, and each party shall bear one-half of
the cost of the arbitrator.
8.3 ARBITRATOR'S AUTHORITY. The arbitrator shall have the authority to award
such damages as are not prohibited by this Agreement and may, in addition and in
a proper case, declare rights and order specific performance, but only in
accordance with the terms of this Agreement.
8.4 ENFORCEMENT OF ARBITRATOR'S AWARD. Any Party may apply to a court of
general jurisdiction to enforce a arbitrator's award, and if enforcement is
ordered, the party against which the order is issued shall pay the costs and
expenses of the other party in obtaining such order, including responsible
attorneys' fees.
8.5 ACCESS TO COURTS. Notwithstanding the provisions of Sections 8.1 and 8.2
above, any action by Netgateway to enforce its rights under Section 10.3 of this
Agreement or to enjoin any infringement of the same by Subscriber may, at
Netgateway election, be commenced in the state of federal courts of Los Angeles,
California, and Subscriber consents to personal jurisdiction and venue in such
courts for such actions.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement will be effective on the Acceptance Date and will
terminate three (3) years ("INITIAL TERM") after such date, unless earlier
terminated according to the provisions of this Section 9. This Agreement will
automatically renew for an additional term of three (3) years unless a party
hereto elects not to so renew and notifies the other party in writing of such
election by a date, which is six (6) months prior to the lapse of the Initial
Term.
9.2 TERMINATION. Either party will have the right to terminate this Agreement
if: (i) the other party breaches any material term or condition of this
Agreement and fails to cure such breach within thirty (30) days after receipt of
written notice of the same, except in the case of failure to pay fees, which
must be cured within five (5) days after receipt of written notice from
Netgateway; (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors; or (iii) the other
party becomes the subject of an involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
9.3 NO LIABILITY FOR TERMINATION. Neither party will be liable to the other
for any termination or expiration of this Agreement in accordance with its
terms.
9.4 EFFECT OF TERMINATION. Upon the effective date of expiration or
termination of this Agreement: (a) Netgateway will immediately cease providing
the eCommerce Services; (b) any and all payment obligations of Subscriber under
this Agreement will become due immediately; and (c) within thirty (30) days
after such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information except as required to comply with any applicable legal or accounting
record keeping requirement.
9.5 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8, 9, 10, 11.3, 11.4,
11.5 and 11.6.
10. USE OF eCOMMERCE SERVICES - RULES AND REGULATIONS.
10.1 PROPRIETARY SYSTEMS. Subscriber acknowledges that the software systems
utilized by Netgateway in the provision of eCommerce Services hereunder,
including all enhancements thereto, and all screens and formats used in
connection therewith are the exclusive proprietary property of Netgateway, and
Subscriber shall not publish, disclose, display, provide access to or otherwise
make available any Netgateway eCommerce software or products thereof, or any
screens, formats, reports or printouts used, provided, produced or supplied from
or in connection therewith, to any person or entity other than an employee of
Subscriber without the prior written consent of, and on terms acceptable to
Netgateway, which consent shall not be unreasonably withheld; provided, however,
that Subscriber may disclose to a governmental or regulatory agency or to
customers of Subscriber any information expressly prepared and acknowledge in
writing by Netgateway as having been prepared for disclosure to such
governmental or regulatory agency or to such customers.
10.2 USE OF SERVICES PERSONAL TO SUBSCRIBER. Subscriber agrees that it will
use the services provided hereunder only in connection with its eCommerce
business, and it will not, without the express written permission of Netgateway,
sell, lease, or otherwise provide or make available eCommerce Services to any
third party.
10.3 SURVIVAL OF OBLIGATIONS. The obligations of this Section 10 shall
survive termination of this Agreement. Subscriber understands that the
unauthorized publication or disclosure of any of Netgateway' software or copies
thereof, or the unauthorized use of eCommerce Services would cause irreparable
harm to Netgateway for which there is no adequate remedy at law. Subscriber
therefore agrees that in the event of such unauthorized disclosure or use,
Netgateway may, at its discretion and at Subscriber's expense, terminate this
Agreement, obtain immediate injunctive relief in a court of competent
jurisdiction, or take such other steps as it deems necessary to protect its
rights. If Netgateway, in its reasonable, good faith judgement, determines that
there is a material risk of such unauthorized disclosure or use, it may demand
immediate assurances, satisfactory to Netgateway, that there will be no such
unauthorized disclosure or use. In the absence of such assurance, Netgateway may
immediately terminate this Agreement and take such other steps as it deems
necessary. The rights of Netgateway hereunder are in addition to any other
remedies provided by law or in equity.
11. MISCELLANEOUS PROVISIONS.
11.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
11.2 NO LEASE. This Agreement is a services agreement and is not intended to
and will not constitute a lease of any real or personal property. Subscriber
acknowledges and agrees that (i) it has been granted only a license to use the
Netgateway ICC and any equipment provided by Netgateway in accordance with this
Agreement, (ii) Subscriber has not been granted any real property interest in
the Netgateway ICC, and (iii) Subscriber has no rights as a tenant or otherwise
under any real property or landlord/tenant laws, regulations, or ordinances.
11.3 MARKETING; PROMOTIONAL MATERIALS; PRESS RELEASES.
(a) Subscriber shall not disclose Subscriber's use of eCommerce Services in
any advertising or promotional materials or any public disclosure without the
prior written consent to such use, and approval of such disclosure, by
Netgateway. Subscriber agrees that Netgateway and its affiliates may refer to
Subscriber by any of Subscriber's trade names, trademarks and other identifiable
marks, and may briefly describe Subscriber's Business and the nature of any
services provided by Netgateway to Subscriber, in Netgateway's and its
affiliates' marketing materials, press releases and web sites.
(b) Netgateway (or its parent company, Netgateway, Inc.) shall have the right
to inform its customers and the public via press release that Netgateway has
entered into this Agreement or any eCommerce Services Order Form, as applicable,
with Subscriber; provided, however, that any such press release or public
statement shall not be issued without the prior written approval of Subscriber,
which approval shall not be unreasonably withheld; and provided, further, that
Subscriber shall notify Netgateway of its decision to approve, or not approve,
such a release or statement within three (3) business days after receiving a
request for approval from Netgateway or will thereafter have automatically been
deemed to have approved such release or statement by virtue of having not
informed Netgateway of Subscriber's decision within such period. The provisions
of this Section 11.3(b) shall apply only to announcements and press releases
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<PAGE>
relating to Netgateway and Subscriber entering into this Agreement and any
eCommerce Services Order Forms, and shall not apply to other announcements or
press releases of a more general nature which may include references to
Subscriber, Subscriber's Business or the nature of any services provided by
Netgateway to Subscriber, as permitted by Section 11.3(a) hereof.
(c) Subscriber hereby grants Netgateway and its affiliates a license to use
any Subscriber trade names, trademarks and other identifiable marks solely in
connection with the rights granted to Netgateway and its affiliates pursuant to
this Section 11.3. The provisions of this Section 11.3 shall apply separately to
this Agreement and each eCommerce Services Order Form entered into between
Netgateway and Subscriber.
11.4 GOVERNMENT REGULATIONS. Subscriber will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this Agreement without
first complying with all export control laws and regulations which may be
imposed by the U.S. Government and any country or organization of nations within
whose jurisdiction Subscriber operates or does business.
11.5 NON-SOLICITATION. During the period beginning on the Operational Date
and ending on the first anniversary of the termination or expiration of this
Agreement (including any extensions hereof) in accordance with its terms,
Subscriber agrees that it will not, and will ensure that its affiliates do not,
directly or indirectly, solicit or attempt to solicit for employment any persons
employed by Netgateway or its affiliates during such period.
11.6 GOVERNING LAW; SEVERABILITY; WAIVER. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (without regard to that body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
11.7 ASSIGNMENT; NOTICES. Subscriber may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Netgateway, except that Subscriber may assign this Agreement
in whole as part of a corporate reorganization, consolidation, merger, or sale
of substantially all of its assets. Any attempted assignment or delegation
without such consent will be void. Netgateway may assign this Agreement in whole
or part. This Agreement will bind and inure to the benefit of each party's
successors and permitted assigns. Any notice or communication required or
permitted to be given hereunder shall be in writing to the applicable address or
facsimile number provided on the first page of this Agreement or to such other
address or facsimile number as may hereafter be furnished in writing by either
party hereto to the other, and shall be deemed duly delivered: (i) upon
delivery, if delivered by hand or by overnight courier; (ii) upon confirmation
of a facsimile transmission or (iii) three (3) business days after mailed by
registered or certified U.S. mail, return receipt requested, postage prepaid.
11.8 RELATIONSHIP OF PARTIES. Netgateway and Subscriber are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Netgateway
and Subscriber. Neither Netgateway nor Subscriber will have the power to bind
the other or incur obligations on the other's behalf without the other's prior
written consent, except as otherwise expressly provided herein.
11.9 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, including all documents
incorporated herein by reference, constitutes the complete and exclusive
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces any and all prior or contemporaneous discussions,
negotiations, understandings and agreements, written and oral, regarding such
subject matter. This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together shall constitute
one and the same instrument.
Subscriber's and Netgateway's authorized representatives have read the foregoing
and all documents incorporated therein and agree and accept such terms effective
as of the date first above written.
SUBSCRIBER
Signature: ______________________________________
Print Name: ______________________________________
Title: ______________________________________
NETGATEWAY
Signature: ______________________________________
Print Name: ______________________________________
Title: ______________________________________
Page 16 of 16
<PAGE>
EXHIBIT "A"
NETGATEWAY
ECOMMERCE SERVICES ORDER FORM
Subscriber Name:
Form Date:
FORM NO.: 001
GENERAL INFORMATION:
1. By submitting this eCommerce Services Order Form ("FORM") to
Netgateway, Subscriber hereby places an order for the eCommerce
Services described herein pursuant to the terms and conditions of this
Form and the Electronic Commerce Services Agreement between Subscriber
and Netgateway (the "ECS AGREEMENT"). It is expressly acknowledged by
the parties hereto that the terms and conditions of the ECS Agreement
specifically apply to this Form.
2. Netgateway will provide the eCommerce Services pursuant to the terms
and conditions of the ECS Agreement, which incorporates this Form. The
terms of this Form supersede, and by accepting this Form, Netgateway
hereby rejects, any conflicting or additional terms provided by
Subscriber in connection with Netgateway's provision of the eCommerce
Services. If there is a conflict between this Form and any other Form
provided by Subscriber and accepted by Netgateway, the Form with the
latest date will control.
3. Netgateway will not be bound by or required to provide eCommerce
Services pursuant to this Form or the ECS Agreement until each is
signed by an authorized representative of Netgateway.
TERMS AND CONDITIONS:
1. PROJECT SPECIFICATIONS. A Statement of Work setting forth project
specifications and a description of the eCommerce Services to be
provided (the "Statement of Work") is attached hereto as Schedule 1 and
incorporated herein by this reference. The Statement of Work may be
supplemented by written functional specifications, which specifications
shall be executed by Subscriber and Netgateway in writing and attached
to the Statement of Work, and shall become a part of this Form as if
fully set forth herein. In the event of a discrepancy or inconsistency
between the Statement of Work and any such functional specifications,
the most recently executed functional specifications shall control.
2. DEVELOPMENT TIMELINE. Development of the eCommerce Services shall be
completed in accordance with the terms of the Statement of Work.
3. DEVELOPMENT FEES; ADDITIONAL FEES. The development fees for the
eCommerce Services shall be as set forth on the Statement of Work, and
shall be payable in accordance with the terms set forth thereon.
Additional fees, including without limitation, monthly hosting fees,
content update fees and
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<PAGE>
enhancement fees, shall be as set forth on the Statement of Work,
and shall be paid in accordance with Netgateway's customary trade
credit terms.
SUBSCRIBER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ECOMMERCE SERVICES
ORDER FORM.
Submitted By: Operational Date:
----------------------- --------------------
(AUTHORIZED SIGNATURE)
Print Name:
-----------------------
Title:
-----------------------
NETGATEWAY ACCEPTANCE
- -------------------------------- Acceptance Date:
(AUTHORIZED SIGNATURE) ---------------------
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<PAGE>
EXHIBIT 10.23
SYSTEMS INTEGRATOR AGREEMENT
THIS SYSTEMS INTEGRATOR AGREEMENT (this "Agreement") entered into as of
4th day of April, 2000, is between Complete Business Solutions (India)
Limited, a company incorporated under the Companies Act, 1956, of India,
("Systems Integrator"), having its registered office at Unit 13, Block 2, SDF
Buildings, Madras Export Processing Zone, Chennai 600 045, India, and
Netgateway, a Nevada corporation ("Netgateway"), having its principal offices
at 300 Oceangate, 5th Floor, Long Beach, CA 90802.
RECITALS
WHEREAS, Netgateway owns and has the right to grant access to the
Netgateway Internet Commerce Center-TM- (the "Netgateway ICC");
WHEREAS, Systems Integrator desires to resell access to the Netgateway ICC
to end-user Subscribers (as defined below) and to provide all implementation and
integration services necessary for such Subscribers to access and use the
Netgateway ICC.
WHEREAS, Netgateway and Systems Integrator now wish to enter into this
Agreement, pursuant to which Netgateway shall provide access to and hosting of
the Netgateway ICC, and Systems Integrator will resell and provide
implementation and integration services in respect of the Netgateway ICC to
end-user Subscribers;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, Netgateway and
Systems Integrator hereby agree as follows:
1. APPOINTMENT AS RESELLER OF NETGATEWAY ICC
1.1 APPOINTMENT. Subject to the provisions of this Agreement, Netgateway
hereby appoints Systems Integrator as a non-exclusive reseller and distributor
to resell access to the Netgateway ICC to Subscribers and to provide any and all
implementation and integration services (the "eCommerce Services") necessary for
such Subscribers to access and use the Netgateway ICC. Systems Integrator
accepts such appointment and responsibility on the terms and conditions set
forth herein.
1.2 GRANTS. Subject to the other provisions of this Agreement:
(a) SERVICES RIGHTS. Netgateway hereby grants to Systems Integrator
the right to use the Netgateway ICC, including all software, systems and other
technology comprising the Netgateway ICC, solely in connection with the
provision of the eCommerce Services to Subscribers. Except as may otherwise be
provided in any Electronic Commerce Services Agreement between and among
Netgateway, Systems Integrator and a particular Subscriber, Netgateway shall be
responsible solely for providing access to the Netgateway ICC and hosting
Subscriber's Netgateway ICC website.
(b) ACCESS PROCEDURES. Netgateway shall, in its sole discretion,
establish procedures (the "Access Procedures") for access to and use of the
Netgateway ICC by Systems Integrator on behalf of Subscribers, which Access
Procedures shall be binding upon Systems Integrator. A copy of the Access
Procedures is annexed hereto as Exhibit B. Failure to comply with the Access
Procedures shall constitute a breach of this Agreement.
<PAGE>
(c) INTELLECTUAL PROPERTY RIGHTS. Any intellectual property rights
developed by Systems Integrator provider in connection with the grants under
this Agreement and the provision of the eCommerce Services (the "Intellectual
Property Rights") shall be owned by Netgateway, and Systems Integrator
irrevocably assigns to Netgateway all right, title and interest worldwide in and
to such Intellectual Property Rights. If Systems Integrator has any rights to
such Intellectual Property Rights that cannot be assigned to Netgateway, Systems
Integrator unconditionally and irrevocably waives the enforcement of such
rights, and all claims and causes of action of any kind against Netgateway with
respect to such rights, and agrees, at Netgateway's request and expense, to
consent to and join in any action to enforce such rights. If Systems Integrator
has any rights to such Intellectual Property Rights that cannot be assigned to
Netgateway or waived by Systems Integrator, Systems Integrator unconditionally
and irrevocably grants to Netgateway during the term of such rights, an
exclusive, irrevocable, perpetual, worldwide, fully paid and royalty-free
license, with rights to sublicense through multiple levels of sublicense, to
reproduce, create derivative works of, distribute, publicly perform and publicly
display by all means now known or later developed, such rights. For purposes of
this Agreement, "Intellectual Property Rights" shall not include any business
techniques, methods or procedures utilized by Systems Integrator in it business
operations prior to the date hereof, but shall include all deliverables
delivered by Systems Integrator hereunder in the provision of eCommerce
Services.
(d) USE OF TRADEMARKS. Subject to the provision of this Section
1.2(d), each of Netgateway and Systems Integrator grants to the other a
non-exclusive, limited license to use its name, trademarks and logos
(collectively, the "Trademarks" and singularly the "Netgateway Trademarks" and
the "Systems Integrator Trademarks") solely in advertising and printed
promotional materials for the Netgateway ICC and the eCommerce Services. Each
party acknowledges that use of the other parties' Trademarks will not create in
it, nor will it represent it has any right, title or interest in or to the other
parties' Trademarks. Each party acknowledges the other parties' exclusive
ownership of its own Trademarks and agrees not to do anything to impair or
dilute the other party's rights in its own Trademarks. Each party agrees to
display prominently the acknowledgment of the other party's trademark ownership
of any Trademark the first time it is used in any advertising or promotional
materials. Systems Integrator agrees to include the Netgateway Trademarks on all
copies, advertisements, brochures, manuals and other appropriate uses made in
the promotion, license or use of the Netgateway ICC or the eCommerce Services.
Each party agrees that the nature and quality of any products or services it
supplies in connection with the Trademarks shall conform to the standards set by
the owner of the Trademark. Each party agrees to cooperate with the other party
in facilitating the monitoring and control of the nature and quality of such
products and services.
1.3 MARKETING AND ACCESS. Systems Integrator shall promote, market and
distribute access to the Netgateway ICC, such access and the eCommerce Services
only to be provided to subscribers ("Subscribers") who enter into an Electronic
Commerce Services Agreement in the form attached hereto as Exhibit A. The
parties acknowledge that there may be certain potential conflicts between the
parties concerning potential Subscribers and who has the right to distribute
access to the Netgateway ICC to such Subscribers. The parties will negotiate in
good faith to resolve any such conflicts.
1.4 NETGATEWAY ICC ACCESS AND USE. Subject to the terms and conditions of
this Agreement and any Electronic Commerce Services Agreement entered into among
Netgateway, Systems Integrator and any Subscriber, Netgateway will provide to
Systems Integrator and Subscribers access to and use of the Netgateway ICC.
1.5 AVAILABILITY. The Netgateway ICC will be available to Systems
Integrator and Subscribers twenty-four (24) hours a day, seven (7) days a week.
Netgateway reserves the right upon reasonable notice to limit or curtail holiday
or weekend availability when necessary for system upgrades, adjustments,
maintenance or other operational considerations.
1.6 ENHANCEMENTS. General enhancements to the Netgateway ICC, as well as
new features that Netgateway incorporates into its standard electronic commerce
processing system, regardless of whether they are initiated by Netgateway or
developed by or at the request of Systems Integrator or any Subscriber, shall be
made available to Subscribers at no additional cost. All enhancements to the
Netgateway ICC, whether or not made by
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<PAGE>
or at the request or suggestion of Systems Integrator or any Subscriber, and any
new features or services introduced by Netgateway, shall remain the exclusive
proprietary property of Netgateway.
1.7 SERVICES AND TRAINING. Systems Integrator shall have the sole
responsibility for providing the eCommerce Services to Subscribers and, except
for providing the training described in the next sentence, Netgateway shall have
no responsibility with respect to providing the eCommerce Services. Netgateway
shall provide to Systems Integrator's personnel such onsite training and other
assistance as Netgateway deems necessary to assure that Systems Integrator's
personnel are able to provide access and use of the Netgateway ICC by the
Subscribers. On-site training shall take place at such times and places as are
mutually agreeable to the parties hereto.
1.8 SUBSCRIBER DATA.
(a) CONFIDENTIALITY. Each party acknowledges that all records, data,
files and other input material relating to Subscriber are confidential and shall
take reasonable steps to protect the confidentiality of such records, data,
files and other materials. Each party will provide reasonable security
safeguards to limit access to Subscriber's files and records to Subscriber and
other authorized parties.
(b) PROTECTION OF SUBSCRIBER FILES. Each party will take reasonable
steps to protect against the loss or alteration of Subscribers' files, records
and data retained by such party. Each party will maintain backup file(s)
containing all the data, files and records related to Subscribers. Subscribers'
file(s), records and data shall, at no cost to Subscribers, be released to
Subscribers on an occurrence that renders either party unable to perform
hereunder, or upon the termination of this Agreement as provided herein.
However, upon any termination, Netgateway may, but is not obligated to, delete
archived data.
2. FEES AND BILLING.
2.1 ACCESS DEVELOPMENT FEES. Systems Integrator shall pay Netgateway an
"Access Development Fee" of [REDACTED] for each Subscriber that enters into an
Electronic Commerce Services Agreement. All Access Development Fees shall be due
and payable by Systems Integrator to Netgateway upon the execution of a
particular Electronic Commerce Services Agreement. Notwithstanding the
foregoing, Systems Integrator shall pay to Netgateway [REDACTED], which shall
entitle Systems Integrator to have all Access Development Fees waived with
respect to the first two Subscribers that enter into Electronic Commerce Service
Agreements with Systems Integrator and Netgateway, and which shall be payable on
the earlier of: (a) the date on which Systems Integrator enters into a binding
agreement with a Subscriber or (b) December 31, 2000.
2.2 SUBSCRIBER DEVELOPMENT FEES. Systems Integrator shall be entitled to
all development fees ("Subscriber Development Fees") received by Systems
Integrator from Subscribers pursuant to any Electronic Commerce Services
Agreements, except as otherwise agreed by Netgateway and Systems Integrator.
2.3 TRANSACTION FEES. Netgateway and Systems Integrator agree to share all
fees generated by a Subscriber's use of the Netgateway ICC (excluding the
Subscriber Development Fees) (the "Transaction Fees"), as set forth in the last
sentence hereof. Such Transaction Fees shall be paid initially by Subscribers to
Netgateway and shall include any hosting, per transaction, click-through,
affiliate and advertising fees paid by Subscribers pursuant to any Electronic
Commerce Services Agreement. Systems Integrator shall be entitled to [REDACTED]
of all Transaction Fees and Netgateway shall be entitled to [REDACTED] of all
Transaction Fees. Should Systems Integrator choose to increase the Access
Development Fee it pays Netgateway under paragraph 2.1 for a particular
Subscriber to [REDACTED] (prior to entering into any Electronic Commerce
Services Agreement), then Systems Integrator shall be entitled to [REDACTED] of
all Transaction Fees and Netgateway shall be entitled to [REDACTED] of all
Transaction Fees with respect to that Subscriber. Should Systems Integrator
choose to increase the Access Development Fee it pays Netgateway under paragraph
2.1 for a particular Subscriber to [REDACTED] (prior to entering into any
Electronic Commerce Services Agreement), then Systems Integrator shall
thereafter be entitled to [REDACTED] of all Transaction Fees and Netgateway
shall be entitled to
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<PAGE>
[REDACTED] of all Transaction Fees with respect to that Subscriber. All amounts
due to Systems Integrator under this paragraph 2.3 shall be payable within
thirty days of Netgateway's receipt of such funds.
2.4 CHANGES TO FEES AND CHARGES. Netgateway and Systems Integrator shall
each be entitled to modify the Transaction Fees and to institute new charges to
Subscribers, upon thirty (30) days prior notice to the other party to this
Agreement and to the affected Subscriber(s).
2.5 LATE PAYMENTS. Late payments hereunder will accrue interest at a rate
of one and half percent (1 1/2%) per month, or the highest rate allowed by
applicable law, whichever is lower.
2.6 TAXES, UTILITIES AND EXCLUSIONS. All fees and charges shall be
exclusive of any federal, state or local sales, use, excise, AD VALOREM or
personal property taxes levied, or any fines, forfeitures or penalties assessed
in connection therewith, as a result of this Agreement or the provision of the
eCommerce Services hereunder. Any such taxes which may be applicable shall be
paid by Systems Integrator or Subscriber, as applicable. Taxes chargeable
against the income or gross receipts of the parties hereto or assessed in
connection with the parties' employees (i.e., FICA, withholdings taxes and other
related payroll taxes) shall be payable solely by the party against which such
amounts are assessed.
2.7 BANDWIDTH. Netgateway shall provide burstible at 1 megabit per second
capacity bandwith for Subscribers' websites at no additional charge. Should
Subscribers need additional bandwidth, Netgateway will provide or make
arrangements to provide such additional bandwidth and invoice Subscribers for
such excess bandwidth and/or use beyond a 1 megabit per second burstible line.
Netgateway will provide traffic reports to Subscribers with respect to burstible
capacity. Netgateway shall not be responsible for providing connectivity to
Subscribers' offices.
3. SYSTEMS INTEGRATOR'S OBLIGATIONS.
3.1 COMPLIANCE WITH LAW AND RULES AND REGULATIONS. Systems Integrator
agrees that Systems Integrator will comply at all times with all applicable laws
and regulations (including but not limited to policies and laws related to
spamming, privacy (including any European privacy laws), obscenity or
defamation) and Netgateway's general rules and regulations relating to its
provision of eCommerce Services, currently included herein as Section 10, which
may be updated and provided by Netgateway to Systems Integrator from time to
time ("Rules and Regulations"). Systems Integrator acknowledges that Netgateway
exercises no control whatsoever over the content contained in or passing through
the Subscriber's web sites or malls, and that it is the sole responsibility of
Subscribers to ensure that the information they transmit and receive complies
with all applicable laws and regulations.
3.2 INTEGRATION; ACCESS AND SECURITY. Systems Integrator is obligated to
perform all implementation, development and integration work with respect to its
Subscribers and to provide any necessary ongoing maintenance or development work
in respect of Subscriber's website(s) for the term of any applicable Electronic
Commerce Services Agreement. Systems Integrator shall be fully responsible for
any charges, costs, expenses (other than those included in the eCommerce
Services), and third party claims that may result from its use of, or access to,
the Netgateway ICC in connection with the integration services to be rendered
under this Agreement, including, but not limited to, any unauthorized use of the
Netgateway ICC in respect of the provision of such services. Systems Integrator
shall be responsible for obtaining and maintaining any equipment and ancillary
services needed to connect to, access or otherwise use the Netgateway ICC,
including, without limitation, modems, hardware, servers, software, operating
systems, networking, web servers, long distance and local telephone services
(collectively, "Equipment"). Systems Integrator shall be responsible for
ensuring that such Equipment is compatible with the Netgateway ICC (and, to the
extent applicable, the Software) and complies with all configurations and
specifications set forth in Netgateway's published policies then in effect.
Systems Integrator shall also be responsible for maintaining the security of the
Equipment, Subscribers' accounts, passwords (including, but not limited to,
administrative and user passwords) and files, and for all uses of Systems
Integrator or Subscriber accounts or the Equipment.
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3.3 NO COMPETITIVE SERVICES. Systems Integrator may not at any time permit
the Netgateway ICC to be used for the provision of any services that compete
with any services provided by Netgateway, without Netgateway's prior written
consent.
3.4 INSURANCE.
(a) MINIMUM LEVELS. Systems Integrator will keep in full force and
effect during the term of this Agreement comprehensive general liability and
such other business insurance policies necessary to fully insure the integration
services to be provided by Systems Integrator hereunder, on such terms as may be
customary under applicable Indian law. Systems Integrator also agrees that it
will be solely responsible for ensuring that its agents (including contractors
and subcontractors) maintain insurance at levels no less than those required by
applicable law and customary in Systems Integrator's industries.
(b) CERTIFICATES OF INSURANCe. Prior to the date hereof, Systems
Integrator will furnish Netgateway with certificates of insurance which evidence
the minimum levels of insurance set forth above, and will notify Netgateway in
writing in the event that any such insurance policies are cancelled.
(C) NAMING NETGATEWAY AS AN ADDITIONAL INSURED. Systems Integrator
agrees to use reasonable commercial efforts under applicable Indian law to cause
its insurance provider(s) to name Netgateway as an additional insured and notify
Netgateway in writing of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 CONFIDENTIAL INFORMATION. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including,
without limitation, the Netgateway ICC and the terms and conditions of this
Agreement ("Confidential Information"). Confidential Information will include,
but not be limited to, each party's proprietary source, software and related
components and customer information. Each party agrees that it will not use in
any way, for its own account or the account of any third party, except as
expressly permitted by this Agreement, nor disclose to any third party (except
as required by law or to that party's attorneys, accountants and other advisors
as reasonably necessary), any of the other party's Confidential Information and
will take reasonable precautions to protect the confidentiality of such
information.
4.2 EXCEPTIONS. Information will not be deemed Confidential Information
hereunder if the receiving party can prove such information: (i) is known to the
receiving party prior to receipt from the disclosing party directly or
indirectly from a source other than one having an obligation of confidentiality
to the disclosing party; (ii) becomes known (independently of disclosure by the
disclosing party) to the receiving party directly or indirectly from a source
other than one having an obligation of confidentiality to the disclosing party;
or (iii) becomes publicly known or otherwise ceases to be secret or
confidential, except through a breach of this Agreement by the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 WARRANTIES BY SYSTEMS INTEGRATOR
(a) SYSTEMS INTEGRATOR. Systems Integrator represents and warrants
that:
(i) Systems Integrator's services, products, materials and
information provided to a Subscriber in connection with this Agreement as
well as Subscriber's use of the Netgateway ICC (collectively, "Systems
Integrator's Business") do not as of the date hereof, and will not during
the term of this Agreement, violate any applicable law or regulation.
(ii) Systems Integrator owns or has the right to use
all material used in the connection with the provision of the eCommerce
Services; and
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(iii) the eCommerce Services will not (A) infringe or
misappropriate any copyright, patent, trademark, trade secret, or any other
proprietary rights of a third party; or (B) constitute false advertising,
unfair competition, defamation, an invasion of privacy or violate any right
of publicity.
(b) RULES AND REGULATIONS. Systems Integrator has read the Rules and
Regulations (Section 10 below) and represents and warrants that Systems
Integrator and Systems Integrator's Business are currently in full compliance
with the Rules and Regulations, and will remain so at all times during the term
of this Agreement.
(c) BREACH OF WARRANTIES. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Netgateway will have the right
immediately in Netgateway's reasonable discretion, to suspend any further access
or use of the Netgateway ICC if deemed reasonably necessary by Netgateway to
prevent any harm to Netgateway or its business.
5.2 WARRANTIES AND DISCLAIMERS BY NETGATEWAY.
(a) NO OTHER WARRANTY. THE NETGATEWAY ICC IS PROVIDED ON AN "AS IS"
BASIS, AND SYSTEMS INTEGRATOR'S USE OF THE NETGATEWAY ICC IS AT ITS OWN RISK.
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NETGATEWAY DOES NOT MAKE, AND
HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND/OR IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM
A COURSE OF DEALING, USAGE, OR TRADE PRACTICE. NETGATEWAY DOES NOT WARRANT THAT
THE NETGATEWAY ICC WILL BE UNINTERRUPTED, ERROR-FREE OR COMPLETELY SECURE.
(b) DISCLAIMER OF ACTIONS CAUSED BY AND/OR UNDER THE CONTROL OF THIRD
PARTIES. NETGATEWAY DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM THE
NETGATEWAY ICC AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN LARGE
PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY THIRD
PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH A SUBSCRIBERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH NETGATEWAY WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, NETGATEWAY CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, NETGATEWAY DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR
RELATED TO SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 EXCLUSIONS. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, IN NO EVENT
WILL EITHER PARTY BE LIABLE TO ANY THIRD PARTY FOR ANY CLAIMS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR OTHERWISE, NOR FOR ANY LOST REVENUE, LOST PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA OR INTERRUPTION OR LOSS OF USE
OF SERVICE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.2 LIMITATIONS. NEITHER PARTY, NOR ITS AFFILIATES, EMPLOYEES, OFFICERS
AND AGENTS SHALL BE LIABLE TO ANY THIRD PARTY FOR ANY LOSS OR DAMAGE, WHETHER
DIRECT OR INDIRECT, RESULTING FROM DELAYS OR INTERRUPTIONS OF SERVICE DUE TO
MECHANICAL ELECTRICAL OR WIRE DEFECTS OR DIFFICULTIES, STORMS, STRIKES,
WALK-OUTS, EQUIPMENT OR SYSTEMS FAILURES, OR OTHER CAUSES OVER WHICH SUCH PARTY
OR ITS AFFILIATES, EMPLOYEES, OFFICERS, OR AGENTS AGAINST WHOM LIABILITY IS
SOUGHT, HAVE NO REASONABLE CONTROL, OR FOR LOSS OR DAMAGE, DIRECT OR INDIRECT,
RESULTING FROM INACCURACIES, ERRONEOUS STATEMENTS, ERRORS OF FACTS, OMISSIONS,
OR ERRORS IN THE TRANSMISSION OR DELIVERY OF NETGATEWAY ICC OR THE ECOMMERCE
SERVICES, OR ANY DATA PROVIDED AS A PART OF THE NETGATEWAY ICC OR THE ECOMMERCE
SERVICES PURSUANT TO THIS AGREEMENT, EXCEPT TO THE EXTENT CAUSED BY THE GROSS
NEGLIGENCE OR WILLFULL MISCONDUCT OF NETGATEWAY OR SYSTEMS INTEGRATOR, AS THE
CASE MAY BE. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE
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OTHER PARTY OR TO ANY THIRD PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL LOSSES OR DAMAGES WHICH OTHER PARTIES OR SUCH THIRD PARTY MAY
INCUR OR EXPERIENCE ON ACCOUNT OF ENTERING INTO OR RELYING ON THIS AGREEMENT OR
UTILIZING THE NETGATEWAY ICC OR THE ECOMMERCE SERVICES, REGARDLESS OF WHETHER
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR WHETHER SUCH
DAMAGES ARE CAUSED, IN WHOLE OR IN PART, BY THE NEGLIGENCE OF SUCH PARTY.
6.3 MAXIMUM LIABILITY. EXCEPT FOR ANY BREACH OF SECTIONS 4, 7 OR 10, EACH
PARTY'S MAXIMUM AGGREGATE LIABILITY TO THE OTHER PARTY RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT OF FEES
RECEIVED BY EACH PARTY HEREUNDER.
6.4 TIME FOR MAKING CLAIMS. ANY SUIT OR ACTION BY SYSTEMS INTEGRATOR
AGAINST NETGATEWAY OR, ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS EMPLOYEES,
SUCCESSORS OR ASSIGNS, BASED UPON ANY ACT OR OMISSION ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR SERVICES PERFORMED HEREUNDER, OR ANY ALLEGED BREACH
THEREOF, SHALL BE COMMENCED WITHIN THREE (3) YEARS OF THE FIRST OCCURRENCE
GIVING RISE TO SUCH CLAIM OR BE FOREVER BARRED. THIS PROVISION DOES NOT MODIFY
OR OTHERWISE AFFECT THE LIMITATION OF LIABILITY SET FORTH IN SECTION 6 OR
ELSEWHERE IN THIS AGREEMENT.
6.5 SYSTEMS INTEGRATOR'S INSURANCE. SYSTEMS INTEGRATOR AGREES THAT IT WILL
NOT PURSUE ANY CLAIMS AGAINST NETGATEWAY FOR ANY LIABILITY NETGATEWAY MAY HAVE
UNDER OR RELATING TO THIS AGREEMENT UNTIL SYSTEMS INTEGRATOR FIRST MAKES CLAIMS
AGAINST SYSTEMS INTEGRATOR'S INSURANCE PROVIDER(S) AND SUCH INSURANCE
PROVIDER(S) FINALLY RESOLVE(S) SUCH CLAIMS.
6.6 BASIS OF THE BARGAIN; Failure of Essential Purpose. EACH PARTY
ACKNOWLEDGES THAT THE OTHER HAS SET ITS PRICES AND ENTERED INTO THIS AGREEMENT
IN RELIANCE UPON THE LIMITATIONS OF LIABILITY AND THE DISCLAIMERS OF WARRANTIES
AND DAMAGES SET FORTH HEREIN, AND THAT THE SAME FORM AN ESSENTIAL BASIS OF THE
BARGAIN BETWEEN THE PARTIES. THE PARTIES AGREE THAT THE LIMITATIONS AND
EXCLUSIONS OF LIABILITY AND DISCLAIMERS SPECIFIED IN THIS AGREEMENT WILL SURVIVE
AND APPLY EVEN IF FOUND TO HAVE FAILED OF THEIR ESSENTIAL PURPOSE.
7. INDEMNIFICATION.
7.1 NETGATEWAY'S INDEMNIFICATION OF SYSTEMS INTEGRATOR. Netgateway will
indemnify, defend and hold Systems Integrator harmless from and against any and
all costs, liabilities, losses, and expenses (including, but not limited to,
reasonable attorneys' fees) (collectively, "Losses") resulting from any claim,
suit, action, or proceeding (each, an "Action") brought against Systems
Integrator alleging the infringement of any third party registered U.S.
copyright, trademark or patent issued as of the date hereof resulting from the
provision of access and use of the Netgateway ICC pursuant to this Agreement
(but excluding any infringement contributorily caused by Systems Integrator's
Business).
7.2 SYSTEMS INTEGRATOR'S INDEMNIFICATION OF NETGATEWAY. Systems
Integrator will indemnify, defend and hold Netgateway, its affiliates
and customers harmless from and against any and all Losses resulting from or
arising out of (a) Systems Integrator's breach of any provision of this
Agreement or (b) any Action brought against Netgateway, its directors,
employees, affiliates or Subscribers alleging with respect to Systems
Integrator's Business or the provision of the eCommerce Services: (i)
infringement or misappropriation of any intellectual property rights; (ii)
defamation, libel, slander, obscenity, pornography, or violation of the
rights of privacy or publicity; (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and Regulations;
(iv) any violation of any other applicable law or regulation; or (v) any
claims, warranties or representations made by Systems Integrator or Systems
Integrator's employees or agents that differ from the warranty provided by
Netgateway in the Electronic Commerce Services Agreements.
7.3 NOTICE. Each party will provide the other party, prompt written notice
of the existence of any indemnifiable event under paragraph 7 of which it
becomes aware, and an opportunity to participate in the defense thereof.
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8. Dispute Resolution.
8.1 PROCEDURES. It is the intent of the parties that all disputes arising
under this Agreement be resolved expeditiously, amicably and at the level within
each party's organization that is most knowledgeable about the disputed issue.
The parties understand and agree that the procedures outlined in this paragraph
8 are not intended to supplant the routine handling of inquiries and complaints
through informal contact with customer service representatives or other
designated personnel of the parties. Accordingly, for purposes of the procedures
set forth in this paragraph, a "dispute" is a disagreement that the parties have
been unable to resolve by the normal and routine channels ordinarily used for
such matters. Before any dispute arising under this Agreement, other than as
provided in paragraph 8.5 below, may be submitted to arbitration, the parties
shall first follow the informal and escalating procedures set forth below.
(a) The complaining party's representative will notify the
other party's representative in writing of the dispute, and the non-complaining
party will exercise good faith efforts to resolve the matter as expeditiously as
possible.
(b) In the event that such matter remains unresolved thirty (30) days
after the delivery of the complainant party's written notice, a senior
representative of each party shall meet or confer within ten (10) business days
of a request for such a meeting or conference by either party to resolve such
matter.
(c) In the event that the meeting or conference specified in (b) above
does not resolve such matter, the senior officer of each party shall meet or
confer within ten (10) business days of the request for such a meeting or
conference by either party to discuss and agree upon a mutually satisfactory
resolution of such matter.
(d) If the parties are unable to reach a resolution of the dispute
after following the above procedure, or if either party fails to participate
when requested, the parties may proceed in accordance with paragraph 8.2 below.
8.2 BINDING ARBITRATION. Except as provided in paragraph 8.5 below, any
dispute arising under this Agreement shall, after utilizing the procedures in
paragraph 8.1, be resolved by final and biding arbitration in Los Angeles,
California, before a single arbitrator selected by, and in accordance with the
rules of commercial arbitration of, the American Arbitration Association or as
otherwise provided in paragraph 11.6. Each party shall bear its own costs in the
arbitration, including attorneys' fees, and each party shall bear one-half of
the cost of the arbitrator.
8.3 ARBITRATOR'S AUTHORITY. The arbitrator shall have the authority to
award such damages as are not prohibited by this Agreement and may, in addition
and in a proper case, declare rights and order specific performance, but only in
accordance with the terms of this Agreement.
8.4 ENFORCEMENT OF ARBITRATOR'S AWARD. Any party may apply to a court of
general jurisdiction to enforce a arbitrator's award, and if enforcement is
ordered, the party against which the order is issued shall pay the costs and
expenses of the other party in obtaining such order, including responsible
attorneys' fees.
8.5 ACCESS TO COURTS. Notwithstanding the provisions of paragraphs 8.1 and
8.2 above, any action by Netgateway to enforce its rights under paragraph 10.3
of this Agreement or to enjoin any infringement of the same by Systems
Integrator may, at Netgateway's election, be commenced in the state or federal
courts of Los Angeles, California, and Systems Integrator consents to personal
jurisdiction and venue in such courts for such actions.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement will be effective on the date first above written
and will terminate three (3) years ("Initial Term") from the date hereof, unless
earlier terminated according to the provisions of paragraph This Agreement will
automatically renew for one additional term of three (3) years unless a party
hereto elects not
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to so renew and notifies the other party in writing of such election by a date,
which is six (6) months prior to the lapse of the Initial Term.
9.2 TERMINATION. Either party will have the right to terminate this
Agreement if: (i) for any reason or no reason, upon thirty (30) days' written
notice to the other party; (ii) the other party breaches any material term or
condition of this Agreement and fails to cure such breach within thirty (30)
days after receipt of written notice of the same, except in the case of failure
to pay fees, which must be cured within five (5) days after receipt of written
notice from the other party; (iii) the other party becomes the subject of a
voluntary petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation or composition for the benefit of
creditors; or (iv) the other party becomes the subject of an involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, and such
petition or proceeding is not dismissed within sixty (60) days of filing.
9.3 NO LIABILITY FOR TERMINATION. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with
its terms.
9.4 EFFECT OF TERMINATION. Except as set forth in paragraph 9.5, upon the
effective date of the expiration or termination of this Agreement: (a)
Netgateway will immediately cease providing Systems Integrator with access to
the Netgateway ICC for new Subscribers; (b) Systems Integrator shall immediately
cease providing eCommerce Services to its Subscribers hereunder; (c) any and all
payment obligations of Systems Integrator or Netgateway under this Agreement
will become due and payable immediately; and (d) within thirty (30) days after
such expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of expiration or
termination and will not make or retain any copies of such Confidential
Information, except as required to comply with any applicable legal or
accounting record keeping requirement.
9.5 TRANSITION SERVICES. In the event of any non-renewal of this Agreement
or any termination of this Agreement for any reason, the following provisions
("Transition Services") shall apply:
(a) Upon Netgateway's request, Systems Integrator shall continue to
perform its obligations hereunder with respect to the provision of eCommerce
Services for each Subscriber for the duration of the term of the then-current
Electronic Commerce Services Agreement for such Subscriber, in accordance with
the terms of such Agreement; PROVIDED, HOWEVER, that, as required under this
Agreement, Netgateway shall continue to pay Systems Integrator for the provision
of any such Services associated with each Subscriber for the duration of the
term of the then-current applicable Electronic Commerce Services Agreement and
the grants made by Netgateway pursuant to paragraph 1.2 hereunder survive during
such period to the extent necessary to provide such Transition Services;
(b) Systems Integrator shall cooperate fully with Netgateway in
effecting the orderly transfer of the eCommerce Services and related materials
to one or more third parties as directed by Netgateway, and Netgateway shall pay
Systems Integrator any reasonable fees or expenses incurred by it in connection
with such cooperation; and
(c) Upon Netgateway's request, Systems Integrator shall return to
Netgateway, or deliver to one or more third parties, as directed by Netgateway,
all copies of any documentation, Confidential Information, and all other
materials and items belonging to Netgateway or its suppliers.
9.6 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: paragraphs 3, 4, 5, 6, 7, 8, 9, 10 and 11.
10. USE OF ECOMMERCE SERVICES - RULES AND REGULATIONS.
10.1 PROPRIETARY SYSTEMS. Systems Integrator acknowledges that all of the
software systems and components utilized by Netgateway in the Netgateway ICC,
including all enhancements thereto and the Intellectual Property Rights (as
defined in Section 1.2(c)), and all screens and formats used in connection
therewith are and shall be the exclusive proprietary property of Netgateway, and
Systems Integrator shall not
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publish, disclose, display, provide access to or otherwise make available any
Netgateway software or products thereof, or any screens, formats, reports or
printouts used, provided, produced or supplied from or in connection therewith,
to any person or entity other than an employee of Systems Integrator without the
prior written consent of, and on terms acceptable to Netgateway, which consent
shall not be unreasonably withheld; PROVIDED, HOWEVER, that Systems Integrator
may disclose to a governmental or regulatory agency or to customers of Systems
Integrator any information expressly prepared and acknowledge in writing by
Netgateway as having been prepared for disclosure to such governmental or
regulatory agency or to such customers. Except as provided in Sections 1.2(d)
and 11.3, neither party shall disclose Systems Integrator's provision of
eCommerce Services in any advertising or promotional materials without the prior
written consent to such use, and approval of such materials, by the other. In
addition, this is a contract for access to the Netgateway ICC and the software
comprising the Netgateway ICC will be installed, accessed and maintained only by
or for Netgateway and no license is granted to Systems Integrator with respect
thereto. Systems Integrator will not, directly or indirectly, reverse engineer,
decompile, disassemble or otherwise attempt to discover the source code, object
code or underlying structure, ideas or algorithms of the Netgateway ICC or any
software, documentation or data related thereto ("Software"); modify, translate,
or create derivative works based on the Netgateway ICC or any Software; or copy,
rent, lease, distribute, pledge, assign, or otherwise transfer or encumber
rights to the Netgateway ICC or any Software; or, except as contemplated herein,
use the Netgateway ICC or any Software for timesharing or service bureau
purposes or otherwise for the benefit of a third party; or remove any
proprietary notices or labels.
10.2 USE OF SERVICES PERSONAL TO SYSTEMS INTEGRATOR. Systems Integrator
agrees that it will use and provide access to the Netgateway ICC only in
connection with the provision of eCommerce Services to its Subscribers, and it
will not, without the express written permission of Netgateway, sell, lease or
otherwise provide or make available the Netgateway ICC to any third party.
10.3 SURVIVAL OF OBLIGATIONS. The obligations of this paragraph 10 shall
survive termination of this Agreement. Systems Integrator understands that
the unauthorized publication or disclosure of any of Netgateway' software
or copies thereof, or the unauthorized use of the Netgateway ICC would
cause irreparable harm to Netgateway for which there is no adequate
remedy at law. Systems Integrator therefore agrees that in the event of
such unauthorized disclosure or use, Netgateway may, at its discretion and
at Systems Integrator's expense, terminate this Agreement, obtain immediate
injunctive relief in a court of competent jurisdiction, or take such other
steps as it deems necessary to protect its rights. If Netgateway, in its
reasonable, good faith judgment, determines that there is a material risk
of such unauthorized disclosure or use, it may demand immediate assurances,
satisfactory to Netgateway, that there will be no such unauthorized
disclosure or use. In the absence of such assurance, Netgateway may
immediately terminate this Agreement and take such other steps as it deems
necessary. The rights of Netgateway hereunder are in addition to any other
remedies provided by law.
11. MISCELLANEOUS PROVISIONS.
11.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
11.2 NO LEASE. This Agreement is not intended to and will not constitute a
lease of any real or personal property. Systems Integrator acknowledges and
agrees that (i) it has been granted only the right to use the Netgateway ICC and
any equipment provided by Netgateway in connection with the provision of the
eCommerce Services in accordance with this Agreement, (ii) Systems Integrator
has not been granted any real property interest in the Netgateway ICC, and (iii)
Systems Integrator has no rights under this Agreement as a tenant or otherwise
under any real property or landlord/tenant laws, regulations or ordinances.
11.3 MARKETING. Systems Integrator agrees that Netgateway may refer to
Systems Integrator by trade name and trademark, and may briefly describe Systems
Integrator's Business in Netgateway's marketing materials and web site. Systems
Integrator hereby grants Netgateway a license to use any Systems Integrator
trade names and trademarks solely in connection with the rights granted to
Netgateway pursuant to this paragraph 11.3.
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11.4 GOVERNMENT REGULATIONS. Systems Integrator will not export,
re-export, transfer, or make available, whether directly or indirectly,
any regulated item or information to anyone outside the U.S. in connection
with this Agreement without first complying with all export control laws
and regulations which may be imposed by the U.S. Government and any country
or organization of nations within whose jurisdiction Systems Integrator
operates or does business.
11.5 NON-SOLICITATION. During the period beginning on the date hereof and
ending on the first anniversary of the termination or expiration of this
Agreement in accordance with its terms, each party agrees that it will not, and
will ensure that its affiliates do not, directly or indirectly, solicit or
attempt to solicit for employment any persons employed by the other party during
such period.
11.6 GOVERNING LAW; SEVERABILITY; WAIVER. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (without regard to that body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
11.7 ASSIGNMENT; NOTICES. Systems Integrator may not assign its rights or
delegate its duties under this Agreement either in whole or in part without the
prior written consent of Netgateway, except that Systems Integrator may assign
this Agreement in whole as part of a corporate reorganization, consolidation,
merger, or sale of substantially all of its assets. Any attempted assignment or
delegation without such consent will be void. Netgateway may assign this
Agreement in whole or part. This Agreement will bind and inure to the benefit of
each party's successors and permitted assigns. Any notice or communication
required or permitted to be given hereunder may be delivered by hand, deposited
with an overnight courier, sent by confirmed facsimile, or mailed by registered
or certified mail, return receipt requested, postage prepaid, in each case to
the address of the receiving party indicated on the signature page hereof, or at
such other address as may hereafter be furnished in writing by either party
hereto to the other. Such notice will be deemed to have been given as of the
date it is delivered, mailed or sent, whichever is earlier.
11.8 RELATIONSHIP OF PARTIES. Netgateway and Systems Integrator are
independent contractors and this Agreement will not establish any
relationship of partnership, joint venture, employment, franchise or
agency between Netgateway and Systems Integrator. Neither Netgateway nor
Systems Integrator will have the power to bind the other or incur
obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
11.9 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date and year first above written.
SYSTEMS INTEGRATOR
By: /s/ K. SUBRAHMANIAM
---------------------
Name: K. Subrahmaniam
Its: Executive Vice President- Operations
Address for Notices:
Unit 13, Block 2, SDF Buildings
Madras Export Processing Zone
Chennai 600 045, India
NETGATEWAY
By: /s/ ROY W. CAMBLIN III
------------------------
Name: Roy W. Camblin III
Its: Chief Executive Officer
Address for Notices:
300 Oceangate, Suite 500
Long Beach, CA 90802
Attention: General Counsel
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Exhibit "A"
NETGATEWAY
ELECTRONIC DATA CENTERCOMMERCE SERVICES AGREEMENT
THIS ELECTRONIC DATA CENTERCOMMERCE SERVICES AGREEMENT (this
"AGREEMENT") is made effective as of the Acceptance Date set forth in the
initial eCommerce Services Order Form ( , 2000) accepted by
Netgateway, a Nevada corporation ("NETGATEWAY"), and the subscriber
identified below ("SUBSCRIBER").
PARTIES:
SUBSCRIBER NAME: ______________________________
ADDRESS: ______________________________
______________________________
PHONE: ______________________________
FAX: ______________________________
NETGATEWAY, INC.
300 Oceangate, Suite 500
Long Beach, CA 90802
Phone: (562) 308-0010
Fax: (562) 308-0021
1. ELECTRONIC DATA CENTERCOMMERCE SERVICES.
1.1 ECOMMERCE SERVICES. Subject to the terms and conditions of this
Agreement, during the term of this Agreement, Netgateway will, through the
Netgateway Internet Commerce Center-TM- (the "NETGATEWAY ICC") provide to
Subscriber the services described in the eCommerce Services Order Form(s) (the
"ECOMMERCE SERVICES ORDER FORM(S)") accepted by Netgateway, or substantially
similar services if such substantially similar services would provide Subscriber
with substantially similar benefits (the "ECOMMERCE SERVICES"). All such
eCommerce Services Order Forms will be incorporated herein by this reference as
of the Acceptance Date set forth in each such form. Netgateway and Subscriber
have mutually agreed or will mutually agree upon the detailed final
specifications (the "SPECIFICATIONS") for the eCommerce Services and the
development timeline therefor, all of which are or will be set forth on the
attached initial eCommerce Services Order Form, marked Exhibit "A", and by this
reference made a part hereof.
1.2 AVAILABILITY. ECommerce Services will be available to Subscriber for
inquiry and order entry functions twenty-four (24) hours a day, seven (7) days a
week. Netgateway reserves the right upon reasonable notice to Subscriber to
limit or curtail holiday or weekend availability when necessary for system
upgrades, adjustments, maintenance, or other operational considerations.
1.3 ENHANCEMENTS. General enhancements to existing eCommerce Services
provided hereunder, as well as new features that Netgateway incorporates into
its standard commerce processing system, regardless of whether they are
initiated by Netgateway or developed at the request of Subscriber or other
subscribers, shall be made available to Subscriber at no additional cost. Any
new features or services that may be developed by Netgateway during the term of
this Agreement that Netgateway intends to offer to subscribers on a limited or
optional basis may, at Netgateway' option, and subject to Subscriber's'
acceptance, be made available to Subscriber at Netgateway's then-current prices
for such new features or services. Enhancements to existing eCommerce Services
requested by Subscriber that benefit only sSubscriber at the time such
enhancements are put into service shall be billed to Subscriber at Netgateway's
standard rates for programming. All enhancements to the eCommerce Services, and
any new features or services introduced by Netgateway, shall remain the
exclusive proprietary property of Netgateway.
1.4 TRAINING. At no cost to subscriberSubscriber, Netgateway shall provide
such onsite training and other assistance, as Netgateway deems necessary to
assure that Subscriber's personnel are able to make effective use of the
eCommerce Services. On-site training shall take place at such times and places
as are mutually agreeable to the parties hereto.
1.5 SUBSCRIBER DATA.
(a) SUBSCRIBER DATA. Subscriber will timely supply Netgateway, in a form
acceptable to Netgateway, with all data necessary for Netgateway to perform the
ongoing services to be provided hereunder. It is the sole responsibility of
Subscriber to insure the completeness and accuracy of such data.
(b) CONFIDENTIALITY. NETGATEWAY ACKNOWLEDGES THAT ALL RECORDS, DATA, FILES
AND OTHER INPUT MATERIAL RELATING TO SUBSCRIBER ARE CONFIDENTIAL AND SHALL TAKE
REASONABLE STEPS TO PROTECT THE CONFIDENTIALITY OF SUCH RECORDS, DATA, FILES AND
OTHER MATERIALS. NETGATEWAY WILL PROVIDE REASONABLE SECURITY SAFEGUARDS TO LIMIT
ACCESS TO SUBSCRIBER'S FILES AND RECORDS TO SUBSCRIBER AND OTHER AUTHORIZED
PARTIES.
(c) PROTECTION OF SUBSCRIBER Files. Netgateway will take reasonable steps to
protect against the loss or alteration of Subscriber's files, records and data
retained by Netgateway, but Subscriber recognizes that events beyond the control
of Netgateway may cause such loss or alteration. Netgateway will maintain backup
file(s) containing all the data, files and records related to Subscriber.
Subscriber's file(s), records and data shall, at no cost to Subscriber, be
released to Subscriber on an occurrence that renders Netgateway unable to
perform hereunder, or upon the termination of this Agreement as provided herein.
(d) OWNERSHIP OF DATA. Netgateway acknowledges that all records, data, files
and other input material relating to Subscriber and its customers are the
exclusive property of the Subscriber.
2. FEES AND BILLING.
2.1 FEES. Subscriber will pay all fees and amounts in accordance with the
eCommerce Services Order Forms.
2.2 BILLING COMMENCEMENT. Billing for eData CenterCommerce Services indicated
in the eCommerce Services Order Forms, if any, other than the initial
development fee, shall commence on the indicated in the eCommerce Services Order
Forms (the "OPERATIONAL DATE"). The initial development fee will be due and
payable upon the full execution of this Agreementin accordance with the terms of
the eCommerce Services Order Form. In the event that Subscriber orders other
eData CenterCommerce Services in addition to those listed in the initial
eCommerce Services Order Form, billing for such services shall commence on the
date Netgateway first provides such additional eData CenterCommerce Services to
Subscriber or as otherwise agreed to by Subscriber and Netgateway in the
applicable eCommerce Services Order Form.
2.3 BILLING AND PAYMENT TERMS. Netgateway shall invoice Subscriber monthly in
advance of the provision of Internet eCommerce Services, and payment of such
fees will be due within thirty (30) days of the date of each Netgateway invoice.
All payments will be made in U.S. dollars. Late payments hereunder will accrue
interest at a rate of one and one-half percent (1 1/2%) per month, or the
highest rate allowed by applicable law, whichever is lower. If, in its
reasonable judgment Netgateway determines that Subscriber is not creditworthy or
is otherwise not financially secure, Netgateway may, upon prior written notice
to Subscriber, modify the payment terms to require full payment before the
provision of eCommerce Services or other assurances to secure Subscriber's
payment obligations hereunder.
2.4 TAXES, UTILITIES AND EXCLUSIONS. All charges shall be exclusive of any
federal, state or local sales, use, excise, AD VALOREM or personal property
taxes levied, or any fines, forfeitures or penalties assessed in connection
therewith, as a result of this Agreement or the installation or use of eCommerce
Services hereunder. Any such taxes, that may be applicable will be paid by
Subscriber or by Netgateway for Subscriber's account, in which case Subscriber
shall reimburse Netgateway for amounts so paid. Netgateway shall provide
burstible at one (1) megabit per second capacity bandwith for Subscriber's
website at no additional charge. Should Subscriber need additional bandwidth,
Netgateway will provide or make arrangements to provide such additional
bandwidth and invoice Subscriber for such excess bandwidth and/or use beyond a
one (1) megabit per second burstible line. Netgateway will provide traffic
reports to Subscriber with respect to burstible capacity. Netgateway is not
responsible for providing connectivity to Subscriber's offices.
3. SUBSCRIBER'S OBLIGATIONS.
3.1 COMPLIANCE WITH LAW AND RULES AND REGULATIONS. Subscriber agrees that
Subscriber will comply at all times with all applicable laws and regulations and
Netgateway's general rules and regulations relating to its provision of eData
CenterCommerce Services, currently included herein as Section 10, which may be
updated and provided by Netgateway to Subscriber from time to time ("RULES AND
REGULATIONS"). Subscriber acknowledges that Netgateway exercises no control
whatsoever over the content contained in or passing through the Subscriber's web
site or mall ("EeCommerce Centers"), and that it is the sole responsibility of
Subscriber to ensure that the information it transmits and receives complies
with all applicable laws and regulations.
3.2 ACCESS AND SECURITY. Subscriber will be fully responsible for any
charges, costs, expenses (other than those included in the eData CenterCommerce
Services), and third party claims that may result from its use of, or access to,
the Netgateway Internet Data CenterCommerce Center(TM) or the eCommerce Centers,
including, but not limited to, any unauthorized use or any access devices
provided by Netgateway hereunder.
3.3 NO COMPETITIVE SERVICES. Subscriber may not at any time permit any
eCommerce Services to be utilized for the provision of any services that compete
with any Netgateway services, without Netgateway's prior written consent.
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3.4 INSURANCE.
(a) MINIMUM LEVELS. Subscriber will keep in full force and effect during the
term of this Agreement: (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence; and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Subscriber also agrees that it
will be solely responsible for ensuring that its agents (including contractors
and subcontractors) maintain, other insurance at levels no less than those
required by applicable law and customary in Subscriber's industries.
(b) CERTIFICATES OF INSURANCE. Prior to the Operational Date, Subscriber will
furnish Netgateway with certificates of insurance which evidence the minimum
levels of insurance set forth above, and will notify Netgateway in writing in
the event that any such insurance policies are cancelled.
(c) NAMING NETGATEWAY AS AN ADDITIONAL INSURED. Subscriber agrees that prior
to the Operational Date, Subscriber will cause its insurance provider(s) to name
Netgateway as an additional insured and notify Netgateway in writing of the
effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 CONFIDENTIAL INFORMATION. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, technology, and products, including
the terms and conditions of this Agreement ("CONFIDENTIAL INFORMATION").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 EXCEPTIONS. Information will not be deemed Confidential Information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 WARRANTIES BY SUBSCRIBER.
(a) SUBSCRIBER'S BUSINESS. Subscriber represents and warrants that:
(i) Subscriber's services, products, materials, data, and information
used by Subscriber in connection with this Agreement as well as Subscriber's and
its permitted customers' and users' use of the eData CenterCommerce Services
(collectively, "SUBSCRIBER'S BUSINESS") does not as of the Operational Date, and
will not during the term of this Agreement, operate in any manner that would
violate any applicable law or regulation.
(ii) Subscriber owns or has the right to use all material contained in
the Subscriber's web site, including all text, graphics, sound, video,
programming, scripts, and applets; and
(iii) The use, reproduction, distribution, and transmission of the web
site, or any information or materials contained in it does not (A) infringe or
misappropriate any copyright, patent, trademark, trade secret, or any other
proprietary rights of a third party; or (B) constitute false advertising, unfair
competition, defamation, an invasion of privacy, or violate a right of
publicity.
(b) RULES AND REGULATIONS. Subscriber has read the Rules and Regulations
(Section 10 below) and represents and warrants that Subscriber and Subscriber's
Business are currently in full compliance with the Rules and Regulations, and
will remain so at all times during the term of this Agreement.
(c) BREACH OF WARRANTIES. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Netgateway will have the right
immediately in Netgateway's reasonable discretion, to suspend any related eData
CenterCommerce Services if deemed reasonably necessary by Netgateway to prevent
any harm to Netgateway or its business.
5.2 WARRANTIES AND DISCLAIMERS BY NETGATEWAY.
(a) NO OTHER WARRANTY. THE EDATA CENTERCOMMERCE SERVICES ARE PROVIDED ON AN
"AS IS" BASIS, AND SUBSCRIBER'S USE OF THE EDATA CENTERCOMMERCE SERVICES IS AT
ITS OWN RISK. NETGATEWAY DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER
EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.
NETGATEWAY DOES NOT WARRANT THAT THE EDATA CENTERCOMMERCE SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
(b) DISCLAIMER OF ACTIONS CAUSED BY AND/OR UNDER THE CONTROL OF THIRD
PARTIES. NETGATEWAY DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM
NETGATEWAY'S INTERNET DATA CENTERCOMMERCE CENTER AND OTHER PORTIONS OF THE
INTERNET. SUCH FLOW DEPENDS IN LARGE PART ON THE PERFORMANCE OF INTERNET
SERVICES PROVIDED OR CONTROLLED BY THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS
CAUSED BY THESE THIRD PARTIES CAN PRODUCE SITUATIONS IN WHICH NETGATEWAY'S
SUBSCRIBERS' CONNECTIONS TO THE INTERNET (OR PORTIONS THEREOF) MAY BE IMPAIRED
OR DISRUPTED. ALTHOUGH NETGATEWAY WILL USE COMMERCIALLY REASONABLE EFFORTS TO
TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY AND AVOID SUCH EVENTS, NETGATEWAY
CANNOT GUARANTEE THAT THEY WILL NOT OCCUR. ACCORDINGLY, NETGATEWAY DISCLAIMS ANY
AND ALL LIABILITY RESULTING FROM OR RELATED TO SUCH EVENTS.
LIMITATIONS OF LIABILITY.
6.1 EXCLUSIONS. IN NO EVENT WILL NETGATEWAY BE LIABLE TO ANY THIRD PARTY FOR
ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, SUBSCRIBER'S BUSINESS OR
OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS, REPLACEMENT GOODS, LOSS OF
TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR SUBSCRIBER'S
BUSINESS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.2 LIMITATIONS. NETGATEWAY, ITS AFFILIATES, EMPLOYEES, OFFICERS AND AGENTS
SHALL NOT BE LIABLE TO SUBSCRIBER OR TO ANY THIRD PARTY FOR ANY LOSS OR DAMAGE,
WHETHER DIRECT OR INDIRECT, RESULTING FROM DELAYS OR INTERRUPTIONS OF SERVICE
DUE TO MECHANICAL ELECTRICAL OR WIRE DEFECTS OR DIFFICULTIES, STORMS, STRIKES,
WALK-OUTS, EQUIPMENT OR SYSTEMS FAILURES, OR OTHER CAUSES OVER WHICH NETGATEWAY,
ITS AFFILIATES, EMPLOYEES, OFFICERS, OR AGENTS AGAINST WHOM LIABILITY IS SOUGHT,
HAVE NO REASONABLE CONTROL, OR FOR LOSS OR DAMAGE, DIRECT OR INDIRECT, RESULTING
FROM INACCURACIES, ERRONEOUS STATEMENTS, ERRORS OF FACTS, OMISSIONS, OR ERRORS
IN THE TRANSMISSION OR DELIVERY OF ECOMMERCE SERVICES, OR ANY DATA PROVIDED AS A
PART OF THE ECOMMERCE SERVICES PURSUANT TO THIS AGREEMENT, EXCEPT TO THE EXTENT
CAUSED BY THE GROSS NEGLIGENCE OR WILLFULL MISCONDUCT OF NETGATEWAY. IN
ADDITION, IN NO EVENT SHALL NETGATEWAY BE LIABLE TO SUBSCRIBER OR TO ANY THIRD
PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL LOSSES OR DAMAGES
WHICH SUBSCRIBER OR SUCH THIRD PARTY MAY INCUR OR EXPERIENCE ON ACCOUNT OF
ENTERING INTO OR RELYING ON THIS AGREEMENT OR UTILIZING THE NETGATEWAY ECOMMERCE
SERVICES, REGARDLESS OF WHETHER NETGATEWAY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES OR WHETHER SUCH DAMAGES ARE CAUSED, IN WHOLE OR IN PART, BY THE
NEGLIGENCE OF NETGATEWAY.
6.3 MAXIMUM LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, NETGATEWAY'S MAXIMUM AGGREGATE LIABILITY TO SUBSCRIBER RELATED TO OR
IN CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
SUBSCRIBER TO NETGATEWAY HEREUNDER FOR THE PERIOD CONSISTING OF THE PRIOR THREE
(3) FULL CALENDAR MONTHS.
6.4 TIME FOR MAKING CLAIMS. ANY SUIT OR ACTION BY SUBSCRIBER AGAINST
NETGATEWAY, ITS AFFILIATES, OFFICERS, DIRECTORS, AGENTS EMPLOYEES, SUCCESSORS OR
ASSIGNS, BASED UPON ANY ACT OR OMISSION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR SERVICES PERFORMED HEREUNDER, OR ANY ALLEGED BREACH THEREOF, SHALL
BE COMMENCED WITHIN TWO (2) YEARS OF THE FIRST OCCURRENCE GIVING RISE TO SUCH
CLAIM OR BE FOREVER BARRED. THIS PROVISION DOES NOT MODIFY OR OTHERWISE AFFECT
THE LIMITATION OF NETGATEWAY'S LIABILITY SET FORTH IN SECTION 6 OR ELSEWHERE IN
THIS AGREEMENT.
6.5 SUBSCRIBER'S INSURANCE. Subscriber agrees that it will not pursue any
claims against Netgateway for any liability Netgateway may have under or
relating to this Agreement until Subscriber first makes claims against
Subscriber's insurance provider(s) and such insurance provider(s) finally
resolve(s) such claims.
6.6 BASIS OF THE BARGAIN; FAILURE OF ESSENTIAL PURPOSE. Subscriber
acknowledges that Netgateway has set its prices and entered into this Agreement
in reliance upon the limitations of liability and the disclaimers of warranties
and damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
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7. INDEMNIFICATION.
7.1 NETGATEWAY'S INDEMNIFICATION OF SUBSCRIBER. Netgateway will indemnify,
defend and hold Subscriber harmless from and against any and all costs,
liabilities, losses, and expenses (including, but not limited to, reasonable
attorneys' fees) (collectively, "LOSSES") resulting from any claim, suit,
action, or proceeding (each, an "ACTION") brought against Subscriber alleging
the infringement of any third party registered U.S. copyright or issued U.S.
patent resulting from the provision of eData CenterCommerce Services pursuant to
this Agreement (but excluding any infringement contributorily caused by
Subscriber's Business).
7.2 SUBSCRIBER'S INDEMNIFICATION OF NETGATEWAY. Subscriber will indemnify,
defend and hold Netgateway, its affiliates and customers harmless from and
against any and all Losses resulting from or arising out of Subscriber's breach
of any provision of this Agreement or any Action brought by or against
Netgateway, its directors, employees, affiliates or Subscribers alleging with
respect to the Subscriber's Business: (a) infringement or misappropriation of
any intellectual property rights; (b) defamation, libel, slander, obscenity,
pornography, or violation of the rights of privacy or publicity; (c) spamming,
or any other offensive, harassing or illegal conduct or violation of the Rules
and Regulations; or, (d) any violation of any other applicable law or
regulation.
7.3 NOTICE. Each party will provide the other party, prompt written notice of
the existence of any such eventLoss or Action described in this Section 7 of
which it becomes aware, and an opportunity to participate in the defense
thereof.
8. DISPUTE RESOLUTION.
8.1 PROCEDURES. It is the intent of the parties that all disputes arising
under this Agreement be resolved expeditiously, amicably, and at the level
within each party's organization that is most knowledgeable about the disputed
issue. The parties understand and agree that the procedures outlined in this
Paragraph Section 8 are not intended to supplant the routine handling of
inquiries and complaints through informal contact with customer service
representatives or other designated personnel of the parties. Accordingly, for
purposes of the procedures set forth in this paragraphSection 8, "DISPUTE" means
a disagreement that the parties have been unable to resolve by the normal and
routine channels ordinarily used for such matters. Before any dispute arising
under this Agreement, other than as provided in paragraph Section 8.5 below, may
be submitted to arbitration, the parties shall first follow the informal and
escalating procedures set forth below.
(a) The complaining party's representative will notify the other party's
representative in writing of the dispute, and the non-complaining party will
exercise good faith efforts to resolve the matter as expeditiously as possible.
(b) In the event that such matter remains unresolved thirty (30) days after
the delivery of the complainant party's written notice, a senior representative
of each party shall meet or confer within ten (10) business days of a request
for such a meeting or conference by either party to resolve such matter.
(c) In the event that the meeting or conference specified in (b) above does
not resolve such matter, the senior officer of each party shall meet or confer
within ten (10) business days of the request for such a meeting or conference by
either party to discuss and agree upon a mutually satisfactory resolution of
such matter.
(d) If the parties are unable to reach a resolution of the dispute after
following the above procedure, or if either party fails to participate when
requested, the parties may proceed in accordance with paragraph Section 8.2
below.
8.2 BINDING ARBITRATION. Except as provided in paragraph Section 8.5 below,
any dispute arising under this Agreement shall, after utilizing the procedures
in paragraph Section 8.1, be resolved by final and binding arbitration in Los
Angeles, California, before a single arbitrator selected by, and in accordance
with the rules of commercial arbitration of, the American Arbitration
Association or as otherwise provided in Paragraph Section 11.6. Each party shall
bear its own costs in the arbitration, including attorneys' fees, and each party
shall bear one-half of the cost of the arbitrator.
8.3 ARBITRATOR'S AUTHORITY. The arbitrator shall have the authority to award
such damages as are not prohibited by this Agreement and may, in addition and in
a proper case, declare rights and order specific performance, but only in
accordance with the terms of this Agreement.
8.4 ENFORCEMENT OF ARBITRATOR'S AWARD. Any Party may apply to a court of
general jurisdiction to enforce a arbitrator's award, and if enforcement is
ordered, the party against which the order is issued shall pay the costs and
expenses of the other party in obtaining such order, including responsible
attorneys' fees.
8.5 ACCESS TO COURTS. Notwithstanding the provisions of paragraphs Sections
8.1 and 8.2 above, any action by Netgateway to enforce its rights under
Paragraphs Section 10.3 of this Agreement or to enjoin any infringement of the
same by Subscriber may, at Netgateway election, be commenced in the state of
federal courts of Los Angeles, California, and Subscriber consents to personal
jurisdiction and venue in such courts for such actions.
9. TERM AND TERMINATION.
9.1 TERM. This Agreement will be effective on the Acceptance Date and will
terminate three (3) years ("INITIAL TERM") after such date, unless earlier
terminated according to the provisions of this Section 9. This Agreement will
automatically renew for an additional term of three (3) years unless a party
hereto elects not to so renew and notifies the other party in writing of such
election by a date, which is six (6) months prior to the lapse of the Initial
Term.
9.2 TERMINATION. Either party will have the right to terminate this Agreement
if: (i) the other party breaches any material term or condition of this
Agreement and fails to cure such breach within thirty (30) days after receipt of
written notice of the same, except in the case of failure to pay fees, which
must be cured within five (5) days after receipt of written notice from
Netgateway; (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation, or composition for the benefit of creditors; or (iii) the other
party becomes the subject of an involuntary petition in bankruptcy or any
involuntary proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
9.3 NO LIABILITY FOR TERMINATION. Neither party will be liable to the other
for any termination or expiration of this Agreement in accordance with its
terms.
9.4 EFFECT OF TERMINATION. Upon the effective date of expiration or
termination of this Agreement: (a) Netgateway will immediately cease providing
the eData CenterCommerce Services; (b) any and all payment obligations of
Subscriber under this Agreement will become due immediately; and (c) within
thirty (30) days after such expiration or termination, each party will return
all Confidential Information of the other party in its possession at the time of
expiration or termination and will not make or retain any copies of such
Confidential Information except as required to comply with any applicable legal
or accounting record keeping requirement.
9.5 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8, 9 and , 10, 11.3,
11.4, 11.5 and 11.6.
10. USE OF ECOMMERCE SERVICES - RULES AND REGULATIONS.
10.1 PROPRIETARY SYSTEMS. Subscriber acknowledges that the software systems
utilized by Netgateway in the provision of eCommerce Services hereunder,
including all enhancements thereto, and all screens and formats used in
connection therewith are the exclusive proprietary property of Netgateway, and
Subscriber shall not publish, disclose, display, provide access to or otherwise
make available any Netgateway eCommerce software or products thereof, or any
screens, formats, reports or printouts used, provided, produced or supplied from
or in connection therewith, to any person or entity other than an employee of
Subscriber without the prior written consent of, and on terms acceptable to
Netgateway, which consent shall not be unreasonably withheld; provided, however,
that Subscriber may disclose to a governmental or regulatory agency or to
customers of Subscriber any information expressly prepared and acknowledge in
writing by Netgateway as having been prepared for disclosure to such
governmental or regulatory agency or to such customers. Neither party shall
disclose Subscriber's use of eCommerce Services in any advertising or
promotional materials without the prior written consent to such use, and
approval of such materials, by the other.
10.2 USE OF SERVICES PERSONAL TO SUBSCRIBER. Subscriber agrees that it will
use the services provided hereunder only in connection with its eCommerce
business, and it will not, without the express written permission of Netgateway,
sell, lease, or otherwise provide or make available eCommerce Services to any
third party.
10.3 SURVIVAL OF OBLIGATIONS. The obligations of this paragraph Section 10
shall survive termination of this Agreement. Subscriber understands that the
unauthorized publication or disclosure of any of Netgateway' software or copies
thereof, or the unauthorized use of eCommerce Services would cause irreparable
harm to Netgateway for which there is no adequate remedy at law. Subscriber
therefore agrees that in the event of such unauthorized disclosure or use,
Netgateway may, at its discretion and at Subscriber's expense, terminate this
Agreement, obtain immediate injunctive relief in a court of competent
jurisdiction, or take such other steps as it deems necessary to protect its
rights. If Netgateway, in its reasonable, good faith judgement, determines that
there is a material risk of such unauthorized disclosure or use, it may demand
immediate assurances, satisfactory to Netgateway, that there will be no such
unauthorized disclosure or use. In the absence of such assurance, Netgateway may
immediately terminate this Agreement and take such other steps as it deems
necessary. The rights of Netgateway hereunder are in addition to any other
remedies provided by law or in equity.
11. MISCELLANEOUS PROVISIONS.
11.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
11.2 NO LEASE. This Agreement is a services agreement and is not intended to
and will not constitute a lease of any real or personal property. Subscriber
acknowledges and agrees that (i) it has been granted only a license to use the
Netgateway ICC and any equipment provided by Netgateway in accordance with this
Agreement, (ii) Subscriber
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has not been granted any real property interest in the Netgateway ICC, and (iii)
Subscriber has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances.
11.3 MARKETING; PROMOTIONAL MATERIALS; PRESS RELEASES.
(a) Subscriber shall not disclose Subscriber's use of eCommerce Services in
any advertising or promotional materials or any public disclosure without the
prior written consent to such use, and approval of such disclosure, by
Netgateway. Subscriber agrees that Netgateway and its affiliates may refer to
Subscriber by any of Subscriber's trade names, and trademarks and other
identifiable marks, and may briefly describe Subscriber's Business and the
nature of any services provided by Netgateway to Subscriber, in Netgateway's and
its affiliates' marketing materials, press releases and web sites.
(b) Netgateway (or its parent company, Netgateway, Inc.) shall have the right
to inform its customers and the public via press release that Netgateway has
entered into this Agreement or any eCommerce Services Order Form, as applicable,
with Subscriber; provided, however, that any such press release or public
statement shall not be issued without the prior written approval of Subscriber,
which approval shall not be unreasonably withheld; and provided, further, that
Subscriber shall notify Netgateway of its decision to approve, or not approve,
such a release or statement within three (3) business days after receiving a
request for approval from Netgateway or will thereafter have automatically been
deemed to have approved such release or statement by virtue of having not
informed Netgateway of Subscriber's decision within such period. The provisions
of this Section 11.3(b) shall apply only to announcements and press releases
relating to Netgateway and Subscriber entering into this Agreement and any
eCommerce Services Order Forms, and shall not apply to other announcements or
press releases of a more general nature which may include references to
Subscriber, Subscriber's Business or the nature of any services provided by
Netgateway to Subscriber, as permitted by Section 11.3(a) hereof.
(c) Subscriber hereby grants Netgateway and its affiliates a license to use
any Subscriber trade names and , trademarks and other identifiable marks solely
in connection with the rights granted to Netgateway and its affiliates pursuant
to this Section 11.3. The provisions of this Section 11.3 shall apply separately
to this Agreement and each eCommerce Services Order Form entered into between
Netgateway and Subscriber.
11.4 GOVERNMENT REGULATIONS. Subscriber will not export, re-export, transfer,
or make available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this Agreement without
first complying with all export control laws and regulations which may be
imposed by the U.S. Government and any country or organization of nations within
whose jurisdiction Subscriber operates or does business.
11.5 NON-SOLICITATION. During the period beginning on the Operational Datea
and ending on the first anniversary of the termination or expiration of this
Agreement (including any extensions hereof) in accordance with its terms,
Subscriber agrees that it will not, and will ensure that its affiliates do not,
directly or indirectly, solicit or attempt to solicit for employment any persons
employed by Netgateway or its affiliates during such period.
11.6 GOVERNING LAW; SEVERABILITY; WAIVER. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (without regard to that body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. In the event any
provision of this Agreement is held by a tribunal of competent jurisdiction to
be contrary to the law, the remaining provisions of this Agreement will remain
in full force and effect. The waiver of any breach or default of this Agreement
will not constitute a waiver of any subsequent breach or default, and will not
act to amend or negate the rights of the waiving party.
11.7 ASSIGNMENT; NOTICES. Subscriber may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Netgateway, except that Subscriber may assign this Agreement
in whole as part of a corporate reorganization, consolidation, merger, or sale
of substantially all of its assets. Any attempted assignment or delegation
without such consent will be void. Netgateway may assign this Agreement in whole
or part. This Agreement will bind and inure to the benefit of each party's
successors and permitted assigns. Any notice or communication required or
permitted to be given hereunder shall be in writing to the applicable address or
facsimile number provided on the first page of this Agreement or to such other
address or facsimile number as may hereafter be furnished in writing by either
party hereto to the other, and shall be deemed duly delivered: (i) upon
delivery, if delivered by hand, deposited with or by an overnight courier; (ii)
upon confirmation of a facsimile transmission or (iii) , sent by confirmed
facsimile,three (3) business days after or mailed by registered or certified
U.S. mail, return receipt requested, postage prepaid., in each case to the
address of the receiving party indicated on the signature page hereof, or at
such other address as may hereafter be furnished in writing by either party
hereto to the other. Such notice will be deemed to have been given as of the
date it is delivered, mailed or sent, whichever is earlier.
11.8 RELATIONSHIP OF PARTIES. Netgateway and Subscriber are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Netgateway
and Subscriber. Neither Netgateway nor Subscriber will have the power to bind
the other or incur obligations on the other's behalf without the other's prior
written consent, except as otherwise expressly provided herein.
11.9 ENTIRE AGREEMENT; COUNTERPARTS. This Agreement, including all documents
incorporated herein by reference, constitutes the complete and exclusive
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces any and all prior or contemporaneous discussions,
negotiations, understandings and agreements, written and oral, regarding such
subject matter. This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together shall constitute
one and the same instrument.
Subscriber's and Netgateway's authorized representatives have read the
foregoing and all documents incorporated therein and agree and accept such
terms effective as of the date first above written.
SUBSCRIBER
Signature: ________________________ Signature: ________________________
Print Name: ________________________ Print Name: ________________________
Title: ________________________
NETGATEWAY
Signature: ________________________ Signature: ________________________
Print Name: ________________________ Print Name: ________________________
Title: ________________________
Page 16 of 16
<PAGE>
EXHIBIT "A"
NETGATEWAY
ECOMMERCE SERVICES ORDER FORM
Subscriber Name:
Form Date:
FORM NO.: 001
GENERAL INFORMATION:
1. By submitting this eCommerce Services Order Form ("FORM") to
Netgateway, Subscriber hereby places an order for the eCommerce
Services described herein pursuant to the terms and conditions of this
Form and the Electronic Commerce Services Agreement between Subscriber
and Netgateway (the "ECS AGREEMENT"). It is expressly acknowledged by
the parties hereto that the terms and conditions of the ECS Agreement
specifically apply to this Form.
2. Netgateway will provide the eCommerce Services pursuant to the
terms and conditions of the ECS Agreement, which incorporates this
Form. The terms of this Form supersede, and by accepting this
Form, Netgateway hereby rejects, any conflicting or additional
terms provided by Subscriber in connection with Netgateway's
provision of the eCommerce Services. If there is a conflict
between this Form and any other Form provided by Subscriber and
accepted by Netgateway, the Form with the latest date will control.
3. Netgateway will not be bound by or required to provide eCommerce
Services pursuant to this Form or the ECS Agreement until each is
signed by an authorized representative of Netgateway.
TERMS AND CONDITIONS:
1. PROJECT SPECIFICATIONS. A Statement of Work setting forth
project specifications and a description of the eCommerce
Services to be provided (the "Statement of Work") is attached
hereto as Schedule 1 and incorporated herein by this reference.
The Statement of Work may be supplemented by written functional
specifications, which specifications shall be executed by Subscriber
and Netgateway in writing and attached to the Statement of Work,
and shall become a part of this Form as if fully set forth herein.
In the event of a discrepancy or inconsistency between the Statement
of Work and any such functional specifications, the most recently
executed functional specifications shall control.
2. DEVELOPMENT TIMELINE. Development of the eCommerce Services shall be
completed in accordance with the terms of the Statement of Work.
3. DEVELOPMENT FEES; ADDITIONAL FEES. The development fees for the
eCommerce Services shall be as set forth on the Statement of Work, and
shall be payable in accordance with the terms set forth thereon.
Additional fees, including without limitation, monthly hosting fees,
content update fees and enhancement fees, shall be as set forth on the
Statement of Work, and shall be paid in accordance with Netgateway's
customary trade credit terms.
Page 1
<PAGE>
SUBSCRIBER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ECOMMERCE
SERVICES ORDER FORM.
Submitted By: ________________________ Operational Date: __________________
(Authorized Signature)
Print Name: _________________________
Title: ______________________________
NETGATEWAY ACCEPTANCE
---------------------
_____________________________________ Acceptance Date: __________________
(AUTHORIZED SIGNATURE)
Page 2
<PAGE>
EXHIBIT 10.24
STORESONLINE.COM
CABLE RESELLER AND MALL AGREEMENT
CABLEREP, INC.
THIS CABLE RESELLER AND MALL AGREEMENT (the "AGREEMENT") is made and entered
into as of the date set forth on the Addendum attached hereto and by this
reference made a part hereof (the "ADDENDUM"), between and among
STORESONLINE.COM, INC., a California corporation, and NETGATEWAY, a Nevada
corporation, on the one hand (collectively, "STORESONLINE"), and the Reseller
identified on the Addendum, on the other hand ("RESELLER").
R E C I T A L S
A. Reseller is an established business entity, engaged in the business of
marketing spot advertising time on cable television networks.
B. StoresOnline is a provider of turnkey electronic commerce services which:
(i) develops, manages, maintains and hosts online electronic shopping malls and
(ii) owns, operates and maintains an Internet storefront-building services
package comprised of certain services delivered through StoresOnline's
proprietary software, the standard features of which are more particularly
described on the Addendum (collectively, the "SERVICES").
C. The Services are delivered through the Internet and may be made available
through a private, branded electronic exchange to be developed for Reseller.
D. StoresOnline desires to: (i) sell and license the Services to Reseller
for Reseller's resale and sublicense to end-user customers or, with the written
permission of StoresOnline, to other resellers and (ii) develop, manage,
maintain and host one or more on-line malls to be branded around Reseller's
name, brand and image (each, a "MALL" and collectively, the "MALLS").
E. Reseller desires to purchase and license the Services for resale to
end-user customers and shall use its unique resources to promote the Services as
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, on the basis of the foregoing recitals, and in consideration
of the mutual promises contained herein, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto covenant and agree as follows:
1. SERVICES.
a. SCOPE OF AGREEMENT. This Agreement covers (i) the purchase,
licensing, promotion and sale of the Services and (ii) the design and
development of the Malls, all in accordance with the terms and conditions set
forth herein and on the Addendum.
b. LICENSE GRANT; SALE OF SERVICES. StoresOnline grants to Reseller,
subject to the terms and conditions of this Agreement, the non-exclusive right
and license to resell and sublicense (in the case of software products), the
Services to Reseller's end-user customers or, with the written permission of
StoresOnline, to other resellers. In the case of software products, Reseller
acknowledges that such software is and will remain proprietary to StoresOnline,
is copyrighted and that Reseller acquires no right, title or interest in or to
any such software by this Agreement. Reseller agrees to sublicense the Services
hereunder pursuant to the Standard License Agreement Terms set forth on Exhibit
A hereto, and to cause each of its end-user customers or other resellers to
sublicense the Services pursuant to such terms, which terms, in the case of a
reseller, shall be accepted upon store set-up and, in the case of an end-user
customer, shall be accepted as part of the storefront registration process
described below. This Agreement sets forth a non-exclusive relationship between
the parties. Nothing contained in this Agreement shall be deemed to prevent
either party from entering into similar agreements or arrangements with third
parties; provided, however, that StoresOnline agrees that, during the Term (as
defined below) hereof, it shall not enter into similar agreements or
arrangements with parties primarily engaged in the business of broadcast
television, broadcast radio, newspaper or magazine business in Reseller's
markets where Services have been previously launched pursuant to this Agreement
without Reseller's prior written consent, and/or in Reseller's markets
designated by Reseller as "Upcoming Launches" on Exhibit "B" hereto (as amended
by Reseller as of the end of each quarter during the Term) without first
offering to Reseller a right of first refusal to enter into such an arrangement
in the same market. The offer to Reseller shall contain the terms and conditions
offered by StoresOnline to the other party. Reseller must exercise its right of
first refusal within ten (10) days of its receipt of StoresOnline's notice or
Reseller's right of first refusal with respect to that market shall be waived;
or (iii) enter into an agreement with another company primarily engaged in the
cable television business containing more favorable terms than those contained
herein, without first notifying Reseller of such intent and offering Reseller
the same or better terms and conditions. For purposes of this Section 1.b,
"Upcoming Launch" shall mean a Reseller market where Reseller has committed to
launching the Services within ninety (90) days of designating such market as an
upcoming launch.
c. PROPRIETARY RIGHTS. The parties hereto expressly agree that the
Uniform Resource Locator ("URL") addresses for any Malls developed hereunder
shall be registered in the name, and shall be the property, of Reseller.
Notwithstanding the foregoing, it is expressly agreed that the ownership and all
right, title and interest in and to the Services, the software and components
comprising the Services, and any trademark, trade name, patent or copyright
relating to the Services is and will remain vested solely in StoresOnline;
PROVIDED, HOWEVER, that as permitted by this Agreement, Reseller may use any
existing or future trademark, trade name, patent or copyright relating to the
Malls and/or the Services, such use to be limited to promoting, selling,
installing or maintaining the Malls and/or the Services; and PROVIDED, FURTHER,
that as contemplated by this Agreement, the Services may be branded around
Reseller's name, brand and image. Reseller shall use commercially reasonable
efforts during the term of this Agreement to protect StoresOnline's trademarks,
trade names, patents and copyrights, but shall not be required to instigate
legal action against third parties for any infringement thereof. Reseller shall
notify StoresOnline of any infringement as soon as practicable after becoming
aware of any such infringement. Reseller shall not use, directly or indirectly,
in whole or in part, StoresOnline's name or any other trade name or trademark
that is owned or used by StoresOnline in connection with any product other than
StoresOnline's products, without the prior written consent of StoresOnline,
which shall not unreasonably be withheld or delayed.
d. RESELLER BRANDING. It is expressly understood and agreed that the
ownership and all right, title and interest in and to any branded name for one
or more of the Malls developed hereunder, trademark, trade name, patent or
copyright owned by Reseller or any end-user customer hereunder is and will
remain vested solely in Reseller or such end-user customer, as applicable;
PROVIDED, HOWEVER, that as contemplated by this Agreement, StoresOnline may use
any existing or future trademark, trade name, patent or copyright owned by
Reseller or such end-user customers, such use to be limited to developing,
managing, maintaining and hosting the Malls and/or the Services.
e. MALL DEVELOPMENT. StoresOnline shall develop, manage, maintain and
host the Malls in accordance with the terms and conditions set forth herein and
on the Addendum. Reseller agrees and understands that the storefronts of its
end-user customers may be placed in one or more electronic malls developed
and/or operated by StoresOnline (in addition to the Malls).
f. DEPLOYMENT. The parties hereto shall launch the first Mall(s) and
begin promotion thereof by May 1, 2000. The parties shall launch the Mall(s) and
begin promotion thereof into additional homes at such time as Reseller deems
appropriate.
2. TERM OF AGREEMENT. The term of this Agreement shall commence as of the
date hereof and continue for an initial one (1) year term. Such term shall
thereafter be extended for successive one-year terms, unless either party shall
give the other notice of its intent to terminate the Agreement not less than
sixty (60) days prior to the expiration of the applicable term. The initial term
and any renewal terms are collectively referred to as the "TERM".
a. Notwithstanding the foregoing, this Agreement may be terminated in
accordance with the provisions of Section 10.
b. Termination of this Agreement shall not relieve either party of any
obligations incurred prior to termination, including outstanding delivery and
payment obligations and other contractual commitments herein or mutually agreed
to from time to time by the parties in writing. The obligations set forth in
Sections 3d, 6b, 8, 10a, 12c, 12e, 12f and 12h are expressly intended to survive
termination of this Agreement. Upon termination of this Agreement, each party
(i) shall promptly return to the other party all Proprietary Information (as
hereinafter defined) as provided in Section 12e hereof; (ii) render a final
accounting to the other party of all amounts due and owing hereunder, and any
requisite payments in connection therewith, within ninety (90) days of such
<PAGE>
termination; and (iii) shall cooperate with and provide reasonable assistance to
the other party during a transition period of ninety (90) days.
3. PRICES AND TAXES.
a. PRICES FOR SERVICES. Pursuant to the terms of this Agreement,
StoresOnline shall be entitled to receive from Reseller: (i) the one-time Store
Set-up Fee set forth on the Addendum for each of Reseller's end-user customers
which establishes a storefront pursuant hereto; and (ii) the applicable Monthly
Base Wholesale Price for Services set forth on the Addendum for each active
storefront designated as such by Reseller.
b. PRICE ADJUSTMENTS FOR SERVICES. The prices for the Services set forth
on the Addendum (other than the Retail Prices which are set by Reseller) shall
remain effective during the initial one year term of the Agreement. They shall
be subject to renegotiation only upon renewal of the initial one-year term of
the Agreement; provided, however, that StoresOnline agrees that the renegotiated
one-time Store Set-up Fee shall not exceed [REDACTED] per storefront and the
renegotiated Monthly Base Wholesale Price for Services shall not exceed
[REDACTED] respectively, per storefront, based upon the number of products
included in such storefronts (as set forth on the Addendum).
c. RETAIL PRICES FOR SERVICES. Reseller shall fix the Retail Price(s)
to be charged for the Services (which Retail Prices may exceed the Monthly Base
Wholesale Price for such Services in such amount as shall be determined by
Reseller in its sole discretion).
d. PRICES FOR MALL DEVELOPMENT; MALL REVENUE SPLIT. All prices for Mall
design, development and operation provided hereunder shall be as set forth on
the Addendum.
e. TAXES. All prices for any services or products supplied hereunder are
exclusive of any federal, state or local sales, use, excise, AD VALOREM or
personal property taxes levied, or any fines, forfeitures or penalties assessed
in connection therewith, as a result of this Agreement or the installation or
use of services or products hereunder (collectively, but exclusive of taxes
based upon StoresOnline's income, "TAXES"). Reseller or Reseller's customers, as
applicable, shall pay any and all such Taxes, or StoresOnline may pay such Taxes
for Reseller's account or Reseller's customers' account, in which case Reseller
shall be obligated to reimburse StoresOnline for amounts so paid. Any such Taxes
which are charged to or payable by StoresOnline will be invoiced to and paid by
Reseller in the manner set forth in Section 6 below. In the event that Reseller
directly invoices its customers pursuant to Section 6b hereof, Reseller shall be
solely responsible for the collection and payment of any such Taxes.
4. PROMOTION. StoresOnline shall produce two thirty-second television
commercials promoting the Malls and the Services that shall be aired only after
receiving the prior written consent of Reseller, which consent shall not be
unreasonably withheld or delayed. Reseller, at its sole expense, shall cablecast
the commercials produced by Storesonline a combined minimum of five hundred
times per broadcast month, per broadcast market, in each broadcast market where
the Malls have been launched, and shall continue to cablecast such commercials
for the Term. In the event that Reseller elects to create additional commercials
to promote the Malls and Services, Reseller shall do so at it sole expense and
shall receive StoresOnline's written approval of such commercials, which
approval shall not be unreasonably withheld or delayed. StoresOnline shall
indemnify Reseller in accordance with the terms of Section 8f below for any
claims, damages or causes of action arising from television commercials produced
by StoresOnline.
5. CUSTOMER ACCOUNTS.
a. CUSTOMER ACCOUNT REGISTRATION PROCESS. The Services provided
hereunder include an online or non-electronic registration process that
Reseller's customers will use to establish storefront accounts with StoresOnline
(the "Accounts"). In order to establish an Account, Reseller's customers must
complete the registration process in accordance with the terms set forth by
StoresOnline. The general terms and conditions for the use of Accounts shall be
posted from time to time on the Mall sites, or in the event that StoresOnline
establishes an electronic exchange for Reseller, such information will be posted
on Reseller's exchange. The terms and conditions as posted shall, in all events
and at all times, be binding upon the Reseller's customers who establish
Accounts. The terms and conditions governing such Accounts may be amended from
time to time by StoresOnline in its sole discretion upon no less than forty five
(45) days' written notice to Reseller.
b. CONTINUATION OF CUSTOMER ACCOUNTS. Continuation of each customer
Account is subject to the timely payment of the monthly fees associated with
such Accounts, and failure to do so shall constitute grounds for StoresOnline to
cancel and terminate an Account upon thirty (30) days' written notice and
opportunity to cure within such notice period.
c. USE OF CUSTOMER INFORMATION. The parties hereto agree that the
use of end-user customer and shopper data by either party shall be prohibited
without the mutual consent of both parties. The manipulation, collection or
evaluation of any such data shall be for the internal use and purposes of the
parties only. In no event shall such information be resold, leased or otherwise
transferred to any third parties. Upon termination of this Agreement, the
parties shall cooperate in the use or disposal of all such information. This
provision and the restrictions contained herein shall survive termination of
this Agreement. At all times, StoresOnline will have posted in a readily
accessible area of the site a privacy policy that contains such provisions as
StoresOnline and Reseller shall mutually agree and that is binding upon both
StoresOnline and Reseller.
6. BILLING AND PAYMENT TERMS.
a. [RESERVED].
b. DIRECT RESELLER BILLING FOR SERVICES. Reseller shall invoice its
customers directly for the Services provided hereunder. Reseller shall remit
directly to StoresOnline on a monthly basis all applicable Store Set-up fees and
the Monthly Wholesale Retail Price for each active storefront in the Malls as
determined by Reseller. All such fees shall be paid net 30 days after the last
day of the applicable month, together with a statement setting forth the total
amount collected, the amounts payable to StoresOnline and the total amount
remitted.
c. [RESERVED].
d. BILLING FOR MALL RELATED CHARGES; ADVERTISING AND RELATED REVENUES.
All revenues generated from the Malls (including advertising and related
revenues) which are required to be divided between StoresOnline and Reseller
pursuant to Section 3d hereof shall be invoiced and collected by StoresOnline.
StoresOnline shall thereafter forward all amounts due, if any, to Reseller (net
30 days) at the address provided on the signature page hereto, together with a
statement setting forth the total amount collected, the amounts payable to
Reseller and the total amount remitted. Notwithstanding the foregoing, in the
event that Reseller shall collect any such Mall Revenues covered by this Section
6d, Reseller shall thereafter forward all amounts due, if any, to StoresOnline
(net 30 days) at the address provided on the signature page hereto, together
with a statement setting forth the total amount collected, the amounts payable
to Reseller and the total amount remitted.
7. REAL TIME PAYMENT PROCESSING. In the event that a customer wishes to
use the StoresOnline real-time credit card payment processing option, such
customer must establish a customer account with an FDIC network bank and must
open an account with a participating credit-card processor.
8. DISCLAIMER OF WARRANTIES AND LIMITATIONS OF LIABILITY.
a. DISCLAIMER OF WARRANTY. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE
ARE NO, AND STORESONLINE EXPRESSLY DENIES, REJECTS AND DISCLAIMS ANY WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES OF THE
CORRECTNESS, ACCURACY, PRECISION, TIMELINESS OR COMPLETENESS OF ANY INFORMATION
OR SERVICES PROVIDED HEREUNDER.
b. LIMITATION OF LIABILITY. NEITHER PARTY, NOR ITS DIRECTORS, OFFICERS,
AFFILIATES, EMPLOYEES AND AGENTS SHALL BE LIABLE TO THE OTHER PARTY OR TO ANY
THIRD PARTY FOR ANY LOSS OR DAMAGE, WHETHER DIRECT OR INDIRECT, TO THE EXTENT
THAT SUCH LOSS OR DAMAGE RESULTS FROM DELAYS OR INTERRUPTIONS OF SERVICE DUE TO
MECHANICAL ELECTRICAL OR WIRE DEFECTS OR DIFFICULTIES, STORMS, STRIKES,
WALK-OUTS, EQUIPMENT OR SYSTEMS FAILURES, OR OTHER CAUSES OVER WHICH THE
ORIGINAL PARTY , ITS DIRECTORS, OFFICERS, AFFILIATES, EMPLOYEES OR AGENTS
AGAINST WHOM LIABILITY IS SOUGHT, HAS NO REASONABLE CONTROL, OR FOR LOSS OR
DAMAGE, DIRECT OR INDIRECT, TO THE EXTENT THAT SUCH LOSS OR DAMAGE RESULTS FROM
INACCURACIES, ERRONEOUS STATEMENTS, ERRORS OF FACTS, OMISSIONS OR ERRORS IN THE
TRANSMISSION OR DELIVERY OF THE SERVICES, OR ANY DATA PROVIDED AS A PART OF THE
SERVICES PURSUANT TO THIS AGREEMENT, EXCEPT TO THE EXTENT CAUSED BY THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ORIGINAL PARTY. IN ALL CASES ARISING
FROM EVENTS OCCURRING DURING THE TERM, WHETHER BASED UPON TORT, CONTRACT,
WARRANTY, INDEMNITY, CONTRIBUTION OR OTHERWISE, DAMAGES SHALL BE LIMITED TO, AND
EACH PARTY AGREES NOT TO MAKE ANY CLAIM OR CLAIMS EXCEEDING TWENTY-FIVE THOUSAND
DOLLARS ($25,000.00), REGARDLESS OF HOW MANY CLAIMS SUCH PARTY MAY HAVE;
PROVIDED, HOWEVER, THAT THE DOLLAR LIMITATION SET FORTH IN THIS SENTENCE SHALL
NOT APPLY TO MONIES DUE TO RESELLER IN CONNECTION WITH ANY OF THE ACCOUNTS
ESTABLISHED
2
<PAGE>
PURSUANT TO THIS AGREEMENT NOR TO CLAIMS FOR INDEMNIFICATION PURSUANT TO SECTION
8e. IN ADDITION, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
TO ANY THIRD PARTY FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES WHICH THE OTHER PARTY OR SUCH THIRD PARTY MAY INCUR OR EXPERIENCE ON
ACCOUNT OF ENTERING INTO OR RELYING ON THIS AGREEMENT OR UTILIZING THE SERVICES,
REGARDLESS OF WHETHER THE ORIGINAL PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
c. TIME FOR MAKING CLAIMS. ANY SUIT OR ACTION BY RESELLER AGAINST
STORESONLINE, ITS DIRECTORS, OFFICERS, AFFILIATES, EMPLOYEES, AGENTS, SUCCESSORS
OR ASSIGNS, BASED UPON ANY ACT OR OMISSION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR SERVICES PERFORMED HEREUNDER, OR ANY ALLEGED BREACH THEREOF, SHALL
BE COMMENCED WITHIN TWO (2) YEARS OF THE MANIFESTATION OF THE FIRST OCCURRENCE
GIVING RISE TO SUCH CLAIM OR BE FOREVER BARRED. THIS PROVISION DOES NOT MODIFY
OR OTHERWISE AFFECT THE LIMITATION OF STORESONLINE'S LIABILITY SET FORTH IN THIS
SECTION 8 OR ELSEWHERE IN THIS AGREEMENT.
d. DISCLAIMER. THE WARRANTIES AND CONDITIONS SET FORTH HEREIN AND THE
OBLIGATIONS AND LIABILITIES OF STORESONLINE HEREUNDER ARE IN LIEU OF, AND
RESELLER HEREBY WAIVES, ALL EXPRESS AND IMPLIED WARRANTIES AND CONDITIONS,
INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT. IN NO EVENT SHALL STORESONLINE'S
LIABILITY FOR ANY CLAIM ASSERTED BASED ON A VIOLATION OF WARRANTY OR CONDITION
EXCEED THE AMOUNT PAID BY RESELLER TO STORESONLINE FOR THE AFFECTED ITEM OF
SERVICES.
e. INFRINGEMENT. StoresOnline shall indemnify and hold Reseller harmless
from and against any claims by third parties pertaining to the infringement of
U.S. copyrights, trademarks or patents arising out of Reseller's use of any of
computer programs or software products utilized by StoreOnline to provide the
Services as authorized hereunder, provided that such computer programs or
software products have not been altered, revised or modified by Reseller in a
manner that causes the alleged infringement, and further provided that: (i)
Reseller promptly notifies StoresOnline in writing of such claim; (ii)
StoresOnline shall have sole control of the defense of any action on such claim
and of all negotiations for its settlement or compromise; (iii) Reseller
cooperates with StoresOnline in every reasonable way to facilitate the
settlement or defense of such claim; and (iv) should such Services become or, in
StoresOnline's opinion, be likely to become, the subject of an infringement
claim, Reseller shall permit StoresOnline, at StoresOnline's expense, to (1)
procure for Reseller the right to continue using such Services, or (2) replace
or modify the same to become functionally equivalent yet non-infringing, or (3)
upon the failure of (1) and (2) above, terminate, without penalty, Reseller's
use of the affected Services, in which event StoresOnline shall refund to
Reseller on a pro-rata basis any prepaid amounts related thereto.
Notwithstanding the foregoing, StoresOnline shall not be liable to indemnify
Reseller for any claims of infringement by third parties arising solely out of
the contents of the Malls or any of the third party merchants' storefronts
contained therein provided by Reseller or any of its end-user customers.
f. INDEMNIFICATION. Each party, its directors, officers, affiliates,
employees and agents shall indemnify and hold harmless the other party, its
directors, officers, affiliates, employees and agents, from and against any and
all third party claims of up to an aggregate amount of twenty-five thousand
dollars ($25,000) for any loss or damage resulting or arising solely from
circumstances or events reasonably within the control of the indemnifying party;
PROVIDED, HOWEVER, that the claim limitation set forth in the preceding sentence
shall not apply to monies due to the indemnified party (for claims other than
indemnification claims under this Section 8f) pursuant to the terms of this
Agreement.
9. AUDIT RIGHTS. Upon ten (10) days prior written notice, each party shall
be entitled, at its own expense and during normal business hours, to review and
audit the books and records of the other party related to this Agreement at the
corporate offices of such other party; PROVIDED, HOWEVER, that neither party
shall not be entitled to exercise its audit right under this Section 9 during
the first six (6) months of the Term or any more than once every six (6) months
during the term of this Agreement. Any claim against the audited party for
additional payments must be made in writing within sixty (60) days of the
auditing party's completion of the audit, or such party shall forever and
conclusively have waived its right (whether known or unknown) to collect any
shortfalls from the audited party for the period audited. All information
obtained pursuant to any audit shall be deemed to be Confidential Information
and shall be treated as such by the auditing party.
10. DEFAULT.
a. RESELLER'S DEFAULT. The failure by Reseller to make any payment
required hereunder or a material breach by Reseller of its obligations hereunder
shall constitute an event of default by Reseller. Upon the occurrence of an
event of default, StoresOnline shall provide Reseller with written notice
specifying the nature of such default. If Reseller has not cured such default
within thirty (30) days after receipt of such notice, StoresOnline may, at its
sole discretion, terminate this Agreement and/or seek any other available
remedies available at law or in equity; PROVIDED, HOWEVER, that the cancellation
of this Agreement shall not prevent Reseller from reselling the Services (and
sublicensing the software component thereof) previously paid for by Reseller and
sublicenses previously granted by Reseller pursuant hereto shall not be affected
by such termination.
b. STORESONLINE'S DEFAULT. The failure by StoresOnline to make any
payment required hereunder or a material breach by StoresOnline of its
obligations hereunder shall constitute an event of default by StoresOnline. Upon
the occurrence of an event of default by StoresOnline, Reseller shall provide
StoresOnline with written notice specifying the nature of such default. If
StoresOnline fails to cure such default within sixty (60) days after receipt of
such notice, Reseller may, at its sole option, terminate this Agreement and/or
seek any other available remedies available at law or in equity.
c. INSOLVENCY. The commencement of any proceeding (voluntary or
involuntary) in bankruptcy or insolvency by or against either party hereto, or
the appointment (with or without the party's consent) of an assignee for the
benefit of creditors or a receiver with respect to either party hereto shall
constitute an event of default hereunder, and the non-defaulting party may elect
to terminate this Agreement immediately.
11. DISPUTE RESOLUTION.
a. It is the intent of the parties that all disputes arising under this
Agreement be resolved expeditiously, amicably, and at the level within each
party's organization that is most knowledgeable about the disputed issue. The
parties understand and agree that the procedures outlined in this Section 11 are
not intended to supplant the routine handling of inquiries and complaints
through informal contact with customer service representatives or other
designated personnel of the parties. Accordingly, for purposes of the procedures
set forth in this Section 11, a "DISPUTE" is a disagreement that the parties
have been unable to resolve by the normal and routine channels ordinarily used
for such matters. Before any dispute arising under this Agreement, other than as
provided in Section 11e below, may be submitted to arbitration, the parties
shall first follow the informal and escalating procedures set forth below.
(1) The complaining party will notify the other party in writing of
the dispute, and the non-complaining party will exercise good faith efforts to
resolve the matter as expeditiously as possible.
(2) In the event that such matter remains unresolved for thirty (30)
days after the delivery of the complaining party's written notice, a senior
representative of each party shall meet or confer within ten (10) business days
of a request for such a meeting or conference by either party to resolve such
matter.
(3) In the event that the meeting or conference specified in (2)
above does not resolve such matter, the senior officer of each party shall meet
or confer within ten (10) business days of the request for such a meeting or
conference by either party to discuss and agree upon a mutually satisfactory
resolution of such matter.
(4) If the parties are unable to reach a resolution of the dispute
after following the above procedure, or if either party fails to participate
when requested, the parties may proceed in accordance with Section 11b below.
b. Except as provided in Section 11e below, any dispute arising under
this Agreement shall, after utilizing the procedures in Section 11a above, be
resolved by final and binding arbitration in Long Beach, California, before a
single arbitrator selected by, and in accordance with, the rules of commercial
arbitration of the American Arbitration Association. Each party shall bear its
own costs in the arbitration, including attorneys' fees, and each party shall
bear one-half of the cost of the arbitrator.
c. The arbitrator shall have the authority to award such damages as are
not prohibited by this Agreement and may, in addition and in a proper case,
declare rights and order specific performance, but only in accordance with the
terms of this Agreement.
3
<PAGE>
d. Either party may apply to a court of general jurisdiction to enforce
an arbitrator's award, and if enforcement is ordered, the party against which
the order is issued shall pay the costs and expenses of the other party in
obtaining such order, including reasonable attorneys' fees.
e. Notwithstanding the provisions of Sections 11a and 11b above, any
action by StoresOnline to enforce its rights under Section 12e of this Agreement
or to enjoin any infringement of the same by Reseller may, at StoresOnline's
election, be commenced in the state or federal courts of California, and
Reseller consents to personal jurisdiction and venue in such courts for such
actions.
12. GENERAL.
a. ENTIRE AGREEMENT; AMENDMENT; SEVERABILITY. This Agreement constitutes
the entire agreement between StoresOnline and Reseller and supersedes all
previous understandings, negotiations and proposals, whether written or oral.
This Agreement may not be altered, amended or modified except by an instrument
in writing signed by duly authorized representatives of each party. In the event
that any one or more provisions contained in this Agreement should for any
reason be held to be unenforceable in any respect, such unenforceability shall
not affect any other provisions hereof, and this Agreement shall be construed as
if such unenforceable provision had not been contained herein.
b. FORCE MAJEURE. Notwithstanding anything contained herein to the
contrary, neither party shall be liable to the other for delays or failures to
perform an obligation to the other hereunder if such delay or failure to perform
is due to any act of God, acts of civil or military authority, labor disputes,
fire, riots, civil commotion's, sabotage, war, embargo, blockage, floods,
epidemics, delays in transportation, inability beyond StoresOnline's reasonable
control to obtain necessary labor, materials or manufacturing facilities, or
when due to governmental restrictions, including the inability of StoresOnline
to obtain appropriate U.S. export license approval or the subsequent suspension
of same. In the event of any such delay or failure, the parties shall have an
additional period of time equal to the time lost by reason of the foregoing in
which to perform hereunder.
c. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, without regard to principles of choice of
law.
d. ASSIGNMENT. Reseller shall not assign this Agreement or any rights
hereunder without the prior written consent of StoresOnline, which consent shall
not be unreasonably withheld. StoresOnline may assign this Agreement to a
subsidiary or affiliate corporation.
e. DISCLOSURE OF INFORMATION. Each party hereto acknowledges that, in
the course of meeting its obligations under this Agreement, it will obtain
information relating to the other party, which is of a confidential and
proprietary nature ("PROPRIETARY INFORMATION"). Such Proprietary Information may
include, but is not limited to, trade secrets, know-how, inventions, techniques,
processes, programs, schematics, data, customer lists, personally identifiable
and aggregate customer information, financial information, and sales and
marketing plans.
Each party shall at all times during the term of this Agreement and for
three years after its termination, keep in confidence and trust from any person
or entity, all Proprietary Information of the other party and shall not disclose
or use such Proprietary Information without the prior written consent of the
party which owns such Proprietary Information, unless compelled to disclose such
Proprietary Information by judicial or administrative process (including,
without limitation, in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of governmental or regulatory
authorities) or by other requirements of law. In the event that a party is
compelled to disclose Proprietary Information by judicial or administrative
process, it will notify the other party immediately in order to provide the
other party the opportunity to contest such disclosure. Upon termination of this
Agreement, each party shall promptly return to the other party all Proprietary
Information under its control and all copies thereof.
Neither party shall disclose the specific terms of this Agreement to any
third parties except as may be mutually agreed or as required by law or the
order of a court of competent jurisdiction.
The above limitations on disclosure of Proprietary Information shall not
apply to information which becomes publicly available through no act of the
disclosing party, is released by the owning party in writing with no
restrictions, is lawfully obtained by the disclosing party without breach of
this Agreement from third parties without obligations of confidentiality, is
previously known by the disclosing party without similar restrictions as shown
by documents in its possession prior to disclosure or is independently developed
by the disclosing party.
f. COMPLIANCE WITH LAW. Reseller shall comply with all applicable law
the violation of which would have a material adverse effect on StoresOnline or
its business, including, without limitation, the export control laws of the
United States of America and prevailing regulations which may be issued from
time to time by the United States Department of Commerce and any export control
regulations of the United States and those countries involved in transactions
concerning the exporting, importing and re-exporting of Services purchased under
application of these terms and conditions. Reseller shall also comply with the
United States Foreign Corrupt Practices Act and shall indemnify StoresOnline
from violations of such act by Reseller. This provision shall survive any
termination or expiration of the Agreement.
g. EXERCISE OF REMEDIES. Any delay or omission by either party to
exercise any right or remedy under this Agreement shall not be construed to be a
waiver of any such right or remedy or any other right or remedy hereunder.
h. LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES DUE TO FAILURE TO
PERFORM ITS OBLIGATIONS HEREUNDER.
i. HEADINGS. Headings contained in this Agreement are for convenience
only, are not a part of this Agreement, and do not in anyway interpret, limit or
amplify the scope, extent or intent of this Agreement or any of the provisions
hereof.
j. REGULATORY APPROVAL. Reseller warrants that the Services and the
Malls, when utilized with its own products, will comply with all applicable
industry and governmental standards and requirements. StoresOnline assumes no
responsibility or liability for these governmental and regulatory standards or
requirements, which liability and responsibility is assumed entirely by
Reseller. Upon request, StoresOnline will provide copies of regulatory approvals
to Reseller.
k. STORESONLINE BRANDING. StoresOnline shall have the right to place a
"POWERED BY NETGATEWAY" or "POWERED BY STORESONLINE" byline in a prominent
mutually agreed upon location on each storefront site and on each Mall site.
l. PUBLICITY. StoresOnline (or its parent company, Netgateway, Inc.)
shall have the right to inform its customers and the public that StoresOnline
has entered into this Agreement with Reseller; provided, however, that any such
press release or public statement shall not be issued without the prior written
approval of Reseller, which approval shall not be unreasonably withheld; and
provided, further, that Reseller shall notify StoresOnline of its decision to
approve, or not approve, such a release or statement within two (2) business
days after receiving a request for approval from StoresOnline or will thereafter
have automatically been deemed to have approved such release or statement by
virtue of having not informed StoresOnline of Reseller's decision within such
period. Each party may use the other's name, an identifiable mark or the name of
its customers in marketing the Services and the development of the Malls and may
link to each other's websites only with the prior written approval of the other
party, but neither party will perform any actions which will harm the other's or
its customers name and reputation.
m. NOTICES. Any notice required in connection with this Agreement
shall be given in writing and shall be deemed effective upon personal delivery
or three business days after deposit in the United States mail, registered or
certified, postage prepaid and addressed to the party entitled to such notice at
the address indicated below such party's signature line on this Agreement or at
such other address as such party may designate by ten (10) days' advance written
notice to the other party. All facsimile notices shall be confirmed by written
notice mailed, as provided above, within five (5) days of the date of the
facsimile is sent. Once confirmed, the notice shall be effective as of the date
of the facsimile.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date set forth herein.
STORESONLINE.COM, INC., A CALIFORNIA CORPORATION
By /s/ Donald M. Corliss, Jr.
--------------------------
Name: Donald M. Corliss, Jr.
Its: Authorized Agent
NETGATEWAY, A NEVADA CORPORATION
By /s/ Donald M. Corliss, Jr.
--------------------------
Name: Donald M. Corliss, Jr.
Its: President
Address for Notices:
300 Oceangate, Suite 500
Long Beach, CA 90802
Telephone: (562) 308-0010
Facsimile: (562) 308 0021
CABLEREP, INC.
By /s/ William Farina
--------------------------
Name: William Farina
Its: Vice President of Advertising Sales
Address for Notices: Debbie Mullin
Director of New Business Development
CableRep, Inc.
Address: 1400 Lake Hearn Drive
Atlanta, GA 30319
Telephone: (800) 241-1084
Facsimile:
E-mail Address:
StoresOnline Sales Representative: Alex Chaffetz
5
<PAGE>
ADDENDUM
NAME OF RESELLER: CABLEREP, INC.
TYPE ENTITY: CORPORATION
DATE OF AGREEMENT: APRIL 18, 2000
DESCRIPTION OF RESELLER'S BUSINESS: MARKETING SPOT ADVERTISING TIME ON CABLE
TELEVISION NETWORKS.
STOREFRONT SERVICES -- STANDARD
FEATURE SET
CATALOGS
- -- International Currencies
- -- Weight Units: Kilograms, Grams, Pounds and Ounces
- -- Sending Methods: Internet, Fax/Mail and Phone
- -- Faxed Internet Orders
- -- Payment Methods: VISA, MasterCard, American Express, Discover and JCB
- -- Custom Payment Methods
- -- Standard Shipping Destinations: United States, Canadian Provinces and
World Countries
- -- Custom Shipping Destinations
- -- Multiple Shipping Methods and Regions
- -- Shipping Formula Variables: Quantities Ordered, Weight and Subtotal
- -- Shipping Formula Functions: Minimum, Maximum and Range
- -- Custom Tax Rates
- -- Custom Survey Questions: Long Answer, Short Answer, Multiple Choice and
Single Choice
- -- Custom Subtotal Items: Fixed, User Enterable and Optional
- -- Users and Passwords
CATEGORIES
- -- Unlimited Categories
- -- Full Description
- -- Image
PRODUCTS
- -- Base Item Number
- -- Description; Full Description
- -- Image
- -- Price
- -- Sale Price
- -- Unique Sale Price for Each Catalogue
- -- Non-Taxable Products
- -- Weight
- -- Category
- -- Multiple Product Options (i.e., Color, Size)
- -- Multiple Product Option Items (i.e., Red, Green, Blue)
- -- Custom Item Numbers based on Options
- -- Custom Pricing based on Options
- -- Option Conflicts
- -- Quantity Discounts
- -- Links to Related Items
- -- Links to other URL's
- -- Preview product pages
- -- Generated HTML code to copy and paste into existing sites
- -- Graphical pricing for easy integration into existing sites
- -- Import product information from a test-delimited file
ORDERS
- -- E-mail notification of new orders
- -- Order Status
- -- Waybill Number and Shipper
- -- Custom Notes
- -- End-user Order Tracking
- -- Export Order Information
STORESONLINE POINT OF SALE
- -- Multiple Merchant Numbers
- -- Automatic authorization of orders sent over the Internet
- -- Manual Authorizations
- -- Credits
- -- Automatic Settlement
- -- Freeze and Thaw Transactions
STORESONLINE HOSTING
- -- Home Page Builder
- -- Unique URL
- -- 10 MB Free
- -- Virtual hosting of existing domain names
- -- Professionally designed templates
- -- Customize your own templates
STORESONLINE SEARCH
- -- Full Text Search Engine
- -- Full Word Listing
- -- Phrase or Boolean Searching
- -- Re-index your site anytime
- -- Integrate into existing sites
PRICING FOR STOREFRONT SERVICES:
UP TO 100 PRODUCTS:
MONTHLY BASE WHOLESALE PRICE: [REDACTED]
101 TO 300 PRODUCTS:
MONTHLY BASE WHOLESALE PRICE: [REDACTED]
301 TO 1000 PRODUCTS:
MONTHLY BASE WHOLESALE PRICE: [REDACTED]
ONE TIME STORE SET-UP FEE:
UP TO 100 PRODUCTS
MONTHLY BASE WHOLESALE PRICE [REDACTED]
ADDITIONAL SERVICES BEYOND THE STANDARD STORESONLINE PACKAGE, SUCH AS
CUSTOM STOREFRONT DESIGN WORK, MAINTENANCE AND ADDITIONAL PRODUCT LISTINGS,
MAY BE SOLD DIRECTLY TO MERCHANTS AT STORESONLINE'S STANDARD HOURLY RATES
FOR SUCH WORK AND SUCH REVENUE SHALL BE [REDACTED].
6
<PAGE>
MALL SITE DEVELOPMENT AND PRICING
1. MALL DEVELOPMENT.
(a) StoresOnline shall develop, manage, maintain and host the Malls,
which shall be branded around the Reseller name, brand and image. The Malls
shall include an appropriate URL address, four to eight featured products from
various Reseller and third party advertisers, additional Reseller and
non-Reseller advertiser stores and products catalogued with text references, and
links to top tier eTailer sites (e.g., Amazon.com). The Malls shall also include
an appropriate search engine, commerce functionality, banner and other
appropriate advertising space, and such other features as both parties shall
reasonably direct. The Malls shall be available in each cable market where
Reseller has launched the sale of the Services pursuant to this Agreement. The
first Mall(s) shall be accessible and fully functional by May 1, 2000 or such
earlier date as may be mutually agreed by the parties.
(b) Additional Malls may be launched pursuant to this Agreement upon
Reseller's written notice to StoresOnline of its intention to launch a Mall in a
particular broadcast/cable market. Each additional Mall shall be operational
within fourteen (14) business days of StoresOnline's receipt of a written notice
of launch by Reseller. Customer storefronts developed pursuant to this Agreement
shall be operational within fourteen (14) business days of StoresOnline's
receipt from a storefront customer of a completed storefront application(s) and
any other information required to complete such storefront, including, without
limitation, information related to custom development services required by such
customer.
2. MALL PRICING; STOREFRONT PRICING.
(a) [REDACTED]
(b) Reseller shall be entitled to all revenue generated by the
storefront Services and all associated television advertising revenue sold;
PROVIDED, HOWEVER, that StoresOnline shall be entitled to: (a) a one-time Store
Setup Fee of [REDACTED] for each storefront completed pursuant to this
Agreement; and (b) the Monthly Base Wholesale Price for each active Reseller
storefront designated as such by Reseller, which amounts shall be payable in
accordance with the terms of this Agreement. Additional services beyond the
standard StoresOnline package, such as custom storefront design work,
maintenance and additional product listings, may be sold directly to merchants
at StoresOnline's standard hourly rates for such work and such revenue generated
by the additional services [REDACTED]
3. MALL REVENUES.
(a) In addition to the Service revenues generated from the sale of
storefronts and monthly store revenues, the parties anticipate that the Malls
shall generate multiple revenue streams ("MALL REVENUES"). All Net Mall Revenues
shall be divided on [REDACTED] basis between StoresOnline and the Reseller. The
parties hereto shall mutually agree to pricing for any Mall Revenues generated
directly by either party, and such Net Mall Revenues shall be [REDACTED] between
the two parties. For purposes of this provision, "NET MALL REVENUE" shall mean
gross Mall Revenues received from all existing and future revenue streams
generated by the Malls less any contractual fees, commissions and other charges
due from StoresOnline to third parties in connection with the generation of such
Mall Revenues, including, but not limited to, commission fees for banner
advertising placements and affiliate sales programs.
(b) Under the terms of this Agreement, additional Mall Revenues may
also be derived by aggregating distribution across multiple malls in the
StoresOnline mall network (including the Malls)(collectively, "MALL NETWORK
REVENUES"). StoresOnline shall be entitled to an aggregated [REDACTED] of all
properly documented Net Mall Network Revenues, and Reseller shall be entitled
to a pro rata share of the remaining [REDACTED] of all such Net Mall Network
Revenues [REDACTED] For purposes of this provision, "NET MALL NETWORK
REVENUES" shall mean gross Mall Network Revenues less any contractual fees,
commissions and other charges due from StoresOnline to third parties in
connection with the generation of such Mall Network Revenues, including, but
not limited to, commission fees for banner advertising placements and
affiliate sales programs.
4. PROMOTION. StoresOnline shall produce two thirty-second
television commercials promoting the Malls and the Services. Reseller, at its
sole expense, shall cablecast the commercials produced by StoresOnline a
combined minimum of five hundred times per broadcast month, per broadcast
market, in each broadcast market where the Malls are fully functional, and shall
continue to cablecast such commercials for the term of this Agreement. In the
event that Reseller elects to create additional commercials to promote the Malls
and Services, Reseller shall do so at its own expense and shall receive
StoresOnline's written approval of such commercials, which approval shall not be
unreasonably withheld.
5. MISCELLANEOUS. Reseller acknowledges and agrees that
StoresOnline intends to market independently the Services through various other
cable television companies and, subject to the limitations of Section 1b of the
Cable Reseller and Mall Agreement between StoresOnline and Reseller, other
reseller relationships in which Reseller shall have no participation.
7
<PAGE>
EXHIBIT A
STANDARD LICENSE AGREEMENT TERMS
1. LICENSE. This License allows you to use any software associated with
the provision of the Services.
2. RESTRICTIONs. You may not use, copy, modify or transfer the program,
or any copy, modification or merged portion, in whole or in part, except as
expressly provided for in this License. If you transfer possession of any copy,
modification or merged portion of the program to another party, your License is
automatically terminated.
3. TERM. The License is effective until terminated. You may terminate
it at any other time by notifying Reseller of your intent to do so. The License
will also terminate upon the occurrence of certain events set forth elsewhere in
this Agreement. Upon such termination, you agree to destroy the program together
with all copies, modifications and merged portions in any form.
4. EXPORT LAW ASSURANCES. You agree that neither the pogrom nor any
direct product thereof is being or will be shipped, transferred or re-exported,
directly or indirectly, into any country prohibited by the US Export
Administration Act and the regulations thereunder or will be used for any
purpose prohibited by the Act.
5. LIMITED WARRANTY. The program is provided "AS IS" without warranty
of any kind, either expressed or implied, including, but not limited to, the
implied warranties of merchantability and fitness for a particular purpose.
The full text of the warranty is provided in the user manual
6. LIMITED LIABILITY. In no event will StoresOnline or Reseller be
liable to you for any damages, including any lost profits, lost savings or other
incidental or consequential damages arising out of the use or inability to use
such program even if StoresOnline or Reseller has been advised of the
possibility of such damages, or for any claim by any other party.
7. GENERAL. If you are a Government end-user, this License conveys only
"RESTRICTED RIGHTS," and in its use, disclosure and duplication are subject to
Federal Acquisition Regulations, subparagraph (c)(1)(11) 52.227-7013. (See U.S.
Government End-User provisions in manual.) This License will be construed under
the laws of the State of California, except for that body of law dealing with
conflicts of law. If any provision of the License shall be held by a court of
competent jurisdiction to be contrary to law, that provisions shall be enforced
to the maximum extent permissible, and the remaining provisions of this License
shall remain in full force and effect.
8
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