Qualex Inc. and Sequoia Media Group, LC Services Agreement

Qualex Inc. and Sequoia Media Group, LC

Services Agreement

Date:  September 1, 2007

SECTION 1 – INTRODUCTION

Sequoia provides product authoring technology to its Customers that allows the creation of goods using user digital media and desires to use Qualex as its preferred fulfillment source for fulfilling Customer Product orders.

Qualex provides product fulfillment services for the digital imaging industry and desires to work with Sequoia to be its preferred fulfillment partner for the fulfilling Customer Product orders.

This Agreement relates to and governs only specifically identified customers of Sequoia for which the Parties agree Qualex will provide fulfillment services.  This Agreement does not govern customer relationships Qualex has independent of Sequoia which are governed pursuant to a separate “Distribution and Production License Agreement.”

SECTION 2 – DEFINITIONS

The following terms have the defined meanings for purposes of this Agreement.

2.1           “Agreement” means this Services Agreement entered into between the Parties.

2.2           “Confidential Information” means all information, documentation, materials, technology, intellectual property, and business and marketing plans and data belonging to a Disclosing Party, or to any third party who disclosed such information to the Disclosing Party in confidence, and which the Disclosing Party makes available to the Receiving Party in oral, written, electronic, or other format which is identified at the time of disclosure as confidential or at any time within 30 days of disclosure, or which the Receiving Party knows, or reasonably should know, would likely be considered confidential by the Disclosing Party, including but not limited to information relating or pertaining to the Disclosing Party’s business, projects, products, customers, trade secrets, business and marketing plans, financial information, or unpublished know-how, whether patented or un-patented.

2.3           “Customers” mean end-users to whom Products are sold by Sequoia directly or through third-party vendor relationships.

2.4           “Disclosing Party” means the party as defined in Section 8.1.

2.5           “Effective Date” means the date all Parties sign this Agreement.

2.6           “Fulfillment Equipment” means the hardware, software, and assembly equipment necessary to produce DVDs.

2.7           “Fulfillment System” means the system used by Qualex including the Fulfillment Equipment and Qualex facilities to produce Products.

2.8           “Indemnified Party” means the party as defined in Section 7.1.

2.10           “ICS” means interface control specifications as outlined in Exhibit B.

2.11           “Party” and “Parties” means the entities who are parties to this Agreement.

2.12           “Products” means multimedia presentations or print products produced by the Production Software and provided to Customers on DVD or on or through other acceptable digital media or the Internet.

2.13           “Production Software” means Sequoia’s proprietary software including computer programs, templates, and stock media for producing Products specified in this Agreement.

2.14           “Receiving Party” means the party as defined in Section 8.1.

2.15           “Services” means fulfillment Services provided by Qualex to produce Products for Customers.

2.16           “Service Fees” means payment to be made by Sequoia to Qualex for the production of Products by Qualex for Customers.

2.17           “Term” means August 1, 2007 through September 30, 2009, subject to extension from year-to-year upon written notice provided by either party to the other at least 60 days prior to the end of the then current term, and subject to early termination as provided herein.

SECTION 2 –SERVICES AND DEPLOYMENT

2.1            Services.   The Parties will jointly collaborate to deploy the necessary hardware, software, and fulfillment equipment as set forth in the Deployment Plan attached as Exhibit A to allow Qualex to begin fulfilling Products for and on behalf of Sequoia.

2.2            Collaboration.   The Parties will jointly collaborate on the ICS attached as Exhibit B to allow Sequoia to pass orders to Qualex for fulfillment.  If a revision to or new version of the ICS is developed, both parties will adjust the implementation to comply with the revised or new version within 30 days of its development.

2.3            Fulfillment Equipment.   Qualex will purchase the Fulfillment Equipment from Sequoia as set forth in Exhibit C to be able to fulfill DVD’s for Sequoia’s Customers.  Sequoia will provide technical support for the Fulfillment Equipment as specified in the service level agreement attached hereto as Exhibit D.

2.4            Order Transfer and Fulfillment.   The ICS shall be designed to collect order information for the Products in the format specified in the ICS and to provide Qualex with all order information together with the applicable digital files or digital images.  In addition to any other requirements set forth in the ICS or this Agreement, all orders transmitted to Qualex for fulfillment will contain:  (i) the total retail price of the Products specified in the order; (ii) the customer specified address to which Qualex is to ship the Products, which address shall be within the fifty states of the United States and the District of Columbia; and (iii) the specified mode of shipment.  Qualex will make available to Sequoia order status feedback in accordance with the ICS.  Sequoia or its Customer shall collect all amounts due for Products.  Qualex shall have no obligation to collect any amounts due from the customer.

2.5            New Products.   If any of the Products or any new products that Sequoia desires to offer to its Customers require Qualex to develop and implement new or modified supply relationships, production processes, and shipment procedures, Qualex shall provide Sequoia with a written proposal for such work, which proposal shall include: (i) a description of the services, functions and responsibilities Qualex anticipates performing in connection with such work; (ii) a description of any additional obligations of Sequoia required for Qualex to perform such work; (iii) a schedule for commencing and completing such work; (iv) Qualex’s prospective fees for such work; (v) any new service levels applicable to such work; and (vi) such other information as requested by Sequoia.  New Products or initiatives must be mutually agreed to and documented by an executed amendment to this Agreement.

2.6            Inspection Right.   Sequoia has the right to inspect the Products at anytime upon reasonable notice to Qualex subject to the documented Product specification and fulfillment procedures required by this Agreement.  Sequoia may stop the processing and production of the Products at any time upon reasonable notice to Qualex for the purposes of changing the Product specifications, the Product packaging, or the processing and production steps for the Products at the direction of any Customer, subject to the payment obligations set forth in Section 2.5 for new Products and procedures.

SECTION 3 – QUALEX OBLIGATIONS AND RESPONSIBILITIES

The obligations of Qualex with regard to the this Agreement include the following:

3.1            Receiving Orders.   Qualex agrees to receive and accept electronic orders and images from Sequoia in a format and in a manner specified in the ICS.  All costs associated with Vendor’s ability to adapt to SMG’s formatting specifications will be borne by Qualex.  Qualex will provide fulfillment services only with respect to digital files that have been provided in compliance with the ICS and shall have no responsibility for digital files lost in transit.  If an order is rejected due to a failure of the order to comply with ICS, Qualex will provide Sequoia with notification of such rejection.  Qualex shall have no responsibility for archiving or storing digital files transmitted to it by Sequoia and may delete all such digital files from the Qualex infrastructure upon shipment of the associated Product(s).

3.2            Security.   Qualex agrees to abide by Sequoia’s policies and procedures regarding security of Sequoia’s equipment and software at Qualex facilities.

3.3            Branding and Identifiers.   Products produced by Qualex for Customers shall not be branded in any manner with the Qualex or Kodak brand unless expressly agreed otherwise in writing for specific Customers.  Shipping packages will have a label displaying the Sequoia or Customer information, including any the customer name address, and logo as provided by Sequoia with the order.  Marketing materials or stuffers requiring insertion into orders produced by Qualex must be provided by Sequoia.  Qualex will charge a per order fee for the insertion of marketing materials or stuffers as agreed upon by the parties.  Qualex will not reference any Customer as a Qualex customer for Sequoia Product Fulfillment without Sequoia’s express written consent.

3.4            Harmful Material.   Qualex will not be obligated to process or ship any version of any image or digital file that Qualex reasonably deems to be harmful, obscene, illegal or infringing.  If Qualex discovers that a consumer has submitted a digital video file or an image that Qualex deems to be harmful, obscene, illegal or infringing, Qualex will inform Sequoia of all orders related thereto and may notify the appropriate government authorities about such orders.  Qualex has no responsibility to notify the consumer that the order will not be processed.

3.5            Service Levels.   Qualex will comply with the following service level commitments in addition to the service levels set forth in Exhibit E and any others set forth in this Agreement or any Exhibit hereto:

(a)            Uptime and Downtime Reporting

(i)           Qualex shall maintain a 98.5% uptime for the Qualex Fulfillment System that receives orders as measured by calendar quarter excluding scheduled downtime.  Scheduled downtime shall occur between 10 AM and 1 PM, EST, on Sundays.  In the event that the uptime commitment is not met: (a) it will not be a grounds for termination except where the uptime is less than 98.5% for more than two consecutive calendar quarters; and (b) Qualex will investigate the cause of the failure and taken reasonable steps to address the cause, including if necessary, by adding additional resources or redundant systems.  The foregoing sets forth the sole remedies for a failure to meet the uptime commitment set forth in this sub-section.  Downtime directly related to Fulfillment Equipment supplied by and serviced by Sequoia shall not be counted against Qualex’s uptime calculation.

(ii)           Qualex will use commercially reasonable efforts to notify the Sequoia designated contact within 60 minutes of any known and verified unscheduled downtime of the Qualex Fulfillment System (apart from scheduled downtime) and will work continuously and update the status to Sequoia periodically as new information becomes available until the Qualex Fulfillment System is back up.  Qualex will notify the Sequoia designated contact within 60 minutes when the Qualex Fulfillment System is restored.

(iii)           Components of the Qualex fulfillment operation, where technically feasible and commercially reasonable, shall be redundant and fault tolerant for both Qualex’s and the Sequoia’s operations.

(b)            Network Operations.   Prior to or within 30 days of the initial availability of fulfillment by Qualex, the Parties will meet to review operation plans, including procedures for detecting, reporting, and troubleshooting errors in the fulfillment system.

(i)           Qualex will provide technical support to Sequoia with respect to order inquires.  Qualex will designate a customer support manager who shall be responsible for all co-ordination on consumer orders between Qualex and Sequoia, and a specific monitored e-mail address for use by Sequoia.  Qualex technical support will be available during the hours of 9:00 a.m. to 5:00 p.m. (local time) from Monday to Friday, excluding Qualex’s company holidays.  This support will be provided through telephone, e-mail and other appropriate means of communication.

(ii)           Qualex will make all commercially reasonable efforts to resolve Severity 1 issues, as this term is defined below, prior to the end of the next business day following receipt of the request. Qualex will make all commercially reasonable efforts to resolve Severity 2 issues in a timely manner. Qualex will consider Severity 3 issues as part of its ongoing programming improvements and Service functionality development.

(iii)           Qualex shall provide a principal point of contact for the communication of bugs and errors to Sequoia and for the receipt of bug and error fixes work around and updates, if any.

3.2            Shipping.   Qualex will fulfill and ship products to all accounts of Sequoia via Sequoia selected carrier and method including, but not limited to, UPS, FedEx, DHL, US Mail or other identified shippers and such carriers applicable methods such as ground, next day, two day, priority, etc.  All shipping costs will be the responsibility of Sequoia. Vendor shall meet or exceed the turn around times outlined in the service level requirements specified in Exhibit E, and shall report to Sequoia all tracking information and dates of product shipment as required by Sequoia.

SECTION 4 – SEQUOIA OBLIGATIONS AND RESPONSIBILITIES

The obligations of Sequoia with regard to this Agreement include the following:

4.1            Technical Support.   Sequoia will provide technical support to Qualex’s with respect to the Production Software and Fulfillment Equipment.  Qualex’s technical support personnel who receive this support from Sequoia must be knowledgeable and technically competent.  This technical support will be available during the hours of 9:00 a.m. to 5:00 p.m. (Mountain Standard Time) from Monday to Friday, excluding Sequoia’s company holidays.  This support will be provided through telephone, e-mail and other appropriate means of communication.  (See Exhibit D for Sequoia’s service level agreement.)

4.2            Copyright.   All Products created with the Production Software are and remain the copyrighted works of Sequoia, with all rights reserved, and the right to reproduce, duplicate and retain original copyrighted Products belongs exclusively to Sequoia.