Document:

DATE:	
              8/5/05

            

    

    

    
      	TO:	
              Michael
                S. Smith

            

    

    Infinite
      Group, Inc. (“Client”)

    Phone:
      585-654-5525

    Fax: 585-654-8594

    

    
      	FROM:	
              D.
                Michael Monk

            

    

    Phone: 713-863-8300

    Fax: 713-460-1369

    

    
      	Subject:	
              Account
                Modification

            

    

    

    Please
      find below our proposed revisions for IGI’s account with
      Amerisource.

     

    Fee:
      15%
      across-the-board reduction in IGI’s fees with Amerisource.

    

    Contract
      Term: None; we are committed to earning your business daily. IGI may terminate
      at any time by giving thirty days written notice of termination.

     

    You
      will
      continue to receive the same flexible and reliable funding and award-winning
      customer service.

    

    We
      greatly value you as a customer and are committed to providing a program that
      meets your needs and truly gives you the Freedom to Grow. We are appreciative
      of
      the dependable and professional relationship you have provided to us thus far,
      and we are grateful for the opportunity to serve your company. We hope and
      trust
      that these revisions will work to better satisfy your business needs.
      Acknowledge and return via fax to (713) 460-1369. Upon receipt, the
      modifications will take immediately on all future advances.

    

    Please
      do
      not hesitate to contact me directly if we can ever be of service.

    

    Sincerely,

     

    
      	 	 	 	 
	
              /s/
                D. Michael Monk

            	 	 	
            
	
              

              D.
                Michael Monk

            	 	 	
            
	
              Managing
                Director

            	 	 	
            

    

     

    
      	 	 	 
	 	
              Acknowledged
                and Accepted:

            
	 
 	 
 	 
 
	
            	
            	
              /s/
                Michael S. Smith

            
	 	
              

              Michael
                S. Smith

            
	 	
              PresidentSECOND
      AMENDMENT TO LEASE AGREEMENT

    

     

    THIS
      SECOND AMENDMENT TO LEASE AGREEMENT (the “Second Amendment”) is made and entered
      into by and between Bank of America, N.A. a national banking association (the
      “Landlord”) and Donald S. Robbins, an individual (the “Tenant”).

    WITNESSETH:

     

    WHEREAS,
      Landlord and Tenant entered into that certain Office Lease Agreement, dated
      as
      of November 20, 1998, further amended by that certain First Amendment to Lease
      Agreement, dated February 15, 2002, as same may be hereafter modified, extended
      renewed or amended (hereinafter collectively referred to as the “Lease”),
      wherein Landlord leased to Tenant approximately 999 rentable square feet (the
      “Premises”) located at North Tower, 500 North Shoreline, Suite 701, Corpus
      Christi, Texas, all as is more fully described in the Lease;

     

    WHEREAS,
      Landlord and Tenant desire to amend the Lease as set forth below.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants set forth herein, Ten
      Dollars ($10.00) and other good and valuable consideration, the receipt and
      sufficiency of which are hereby confessed and acknowledged, Landlord and Tenant
      agree to amend, and do hereby amend, the Lease as follows:

     

    1. Extension
      and Renewal.
      The
      following paragraphs replace any inconsistent provisions in the Lease pertaining
      to Term, Rent or Renewal.

     

    a. Lease
      Term.
      The
      Lease is hereby extended for an additional term commencing June 1, 2005 through
      May 31, 2008 (the “Second Renewal Term”).

     

    b. Second
      Renewal Term Base Rent.
      For the
      period of June 1, 2005 through may 31, 2006 the base rent shall be $1,080.59
      per
      month; for the period of June 1, 2006 through May 31, 2007, the base rent shall
      be $1,113.01 per month; and for the period of June 1, 2007 through May 31,
      2007,
      the base rent shall be $1,146.40. Tenant shall be required to make quarterly
      rent payments in advance, with the first payment for the months of June, July,
      and August due as of June 1, 2005, or upon execution of this Second Amendment,
      whichever comes later.

     

    c. Late
      Payment.
      Should
      Tenant fail to make payment the by the tenth (10th)
      of the
      month in which payment is due, a late payment notice letter will be sent to
      the
      Tenant within three days. Tenant will have a ten (10) day cure period in which
      to bring the account current. After that time, should the account remain in
      a
      delinquent status, the Tenant will receive a letter giving him notice to vacate
      the premises within thirty (30) days.

     

    d. Operating
      Expense Charges.
      Effective June 1, 2005, Articles 1.13, 2.2 and 2.3 of the Lease will be deleted
      and of no further force and effect.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e. Expansion/Relocation.
      Tenant
      shall have the right to expand into additional adjacent space, should it become
      available, or to relocate to a larger space within the building.

     

    f. Tenant
      Improvements.
      Tenant
      shall accept the Leased Premises “as is”.

     

    2. Miscellaneous.

     

    a. Counterparts.
      This
      Second Amendment may be executed in multiple counterparts, and each counterpart
      when fully executed and delivered shall constitute an original instrument,
      and
      all such multiple counterparts shall constitute but one and the same
      instrument.

     

    b. Entire
      Agreement.
      This
      Second Amendment sets forth all covenants, agreements and understandings between
      Landlord and Tenant with respect to the subject matter hereof, and there are
      no
      other covenants, conditions or understandings, either written or oral, between
      the parties hereto except as set forth in this Second Amendment.

     

    c. Full
      Force and Effect.
      Except
      as expressly amended hereby, all other terms and provisions of the Lease remain
      unchanged and continue to be in full force and effect.

     

    d. Conflicts.
      The
      terms of this Second Amendment shall control over any conflicts between the
      terms of the Lease and the terms of this Second Amendment.

     

    e. Successors
      and Assigns.
      This
      Second Amendment shall be binding upon and inure to the benefit of the parties
      hereto and their respective successors and assigns.

     

    f. Compliance
      with Warranties, No Default.
      The
      representations and warranties set forth in the Lease as amended hereby shall
      be
      true and correct with the same effects as if made on the date of this Second
      Amendment, and no uncured default under the Lease has occurred or is continuing
      on the date of this Second Amendment.

     

    EXECUTED
      AS OF THIS ____ day of ______________, 2005.

    

    

     

    LANDLORD:       TENANT

     

    BANK
      OF
      AMERICA, N.A.

     

    

     

    BY:
      _______________________                                          _____________________________

     

    Title:
      ______________________    

     

    Date:
      ______________________    Date:
      ________________________

     

     

     

    
      
        
        

      

      
        2PhotoChannel
      Services and Software Agreement

     

    This
      Services and Software Agreement (the “Agreement”)
      is
      made and entered into as of the Effective Date by and between PhotoChannel
      Networks Inc., (hereinafter
      called “PhotoChannel”),
      a
      corporation incorporated under the laws of the Province of British Columbia,
      Canada and having an address at Suite 506, 425 Carrall Street, Vancouver,
      British Columbia, Canada V6B 6E3,
      and CVS
      Pharmacy, Inc. (hereinafter called “CVS”),
      a
      Rhode Island corporation, on its own behalf and on behalf of its affiliated
      retail drugstore entities, with principal executive offices located at One
      CVS
      Drive, Woonsocket, Rhode Island 02895.

     

    By
      signing below, CVS and PhotoChannel agree to be bound by the terms of this
      Agreement.

    

    
      	
              Agreed
                to:

            	 	
              Agreed
                to:

            
	
              CVS
                Pharmacy, Inc.

               

              By:
                 Judy
                Sansone

              Title:
                 Vice
                President Consumer Healthcare,

                 
                Personal Care, Photo Imaging

               

            	 	
              PhotoChannel
                Networks Inc.

               

              By: Peter
                Fitzgerald

              Title:
                CEO

            

    

     

    
      	 	 	 
	
              Signature
                : /s/
                Judy Sansone 

            	 	
              Signature
                : /s/
                Peter Fitzgerald

            
	
              
                

              

            	 	
              
                

              

            
	
              
                Date
                  : June
                  5, 2006

              

            	 	
              Date
                : June
                29, 2006 

            

    

    
    

      

    
      
        
        

      

      
        Page
          1 of
          28

        
          

        

      

      
        
        

      

    

     

    Agreement
      Between CVS and PhotoChannel

     

    Table
      of Contents and Schedules

     

    This
      Agreement includes the following Sections, Appendix, Schedules, and
      Exhibits: 

     

    
      
        	Section	 	Title	 	
                Page
                  #

              
	
                1.0

              	 	
                Term

              	 	
                4

              
	
                2.0

              	 	
                Interpretation

              	 	
                4

              
	
                3.0

              	 	
                Implementation
                  Approach

              	 	
                5

              
	
                4.0

              	 	
                Transition
                  Period and Startup

              	 	
                5

              
	
                4.1

              	 	
                Transition
                  Period Stages

              	 	
                5

              
	
                4.2

              	 	
                Design
                  of the CVS.com Photo Center during the Transition Period

              	 	
                6

              
	
                5.0

              	 	
                Ongoing
                  Services

              	 	
                7

              
	
                6.0

              	 	
                Service
                  Levels

              	 	
                9

              
	
                7.0

              	 	
                Additional
                  Services

              	 	
                10

              
	
                8.0

              	 	
                Intentionally
                  Omitted

              	 	
                10

              
	
                9.0

              	 	
                Licensing
                  of the Systems

              	 	
                10

              
	
                10.0

              	 	
                Proprietary
                  Rights

              	 	
                11

              
	
                11.0

              	 	
                Most
                  Favored Consumer

              	 	
                12

              
	
                12.0

              	 	
                Audits

              	 	
                13

              
	
                13.0

              	 	
                Fees
                  and Payment

              	 	
                13

              
	
                13.1

              	 	
                Fees

              	 	
                13

              
	
                13.2

              	 	
                Proration

              	 	
                13

              
	
                13.3

              	 	
                Unused
                  Credits

              	 	
                13

              
	
                13.4

              	 	
                Suspension
                  of Payment

              	 	
                14

              
	
                14.0

              	 	
                Dispute
                  Resolution

              	 	
                14

              
	
                15.0

              	 	
                Source
                  Code Escrow

              	 	
                14

              
	
                16.0

              	 	
                Default
                  and Termination

              	 	
                15

              
	
                16.1

              	 	
                Termination
                  for Change of Control of PhotoChannel

              	 	
                15

              
	
                16.2

              	 	
                Insolvency
                  Defaults

              	 	
                15

              
	
                16.3

              	 	
                Other
                  Defaults

              	 	
                15

              
	
                16.4

              	 	
                Obligations
                  upon Termination

              	 	
                16

              
	
                16.5

              	 	
                Survival

              	 	
                16

              
	
                16.6

              	 	
                Other
                  Remedies

              	 	
                16

              
	
                17.0

              	 	
                Confidential
                  Information

              	 	
                16

              
	
                17.1

              	 	
                Confidential
                  Information between the Parties

              	 	
                16

              
	
                17.2

              	 	
                Confidentiality
                  of Member Content

              	 	
                17

              
	
                18.0

              	 	
                Indemnification

              	 	
                17

              
	
                19.0

              	 	
                Limitation
                  of Liability

              	 	
                18

              
	
                20.0

              	 	
                Warranties

              	 	
                18

              
	
                21.0

              	 	
                Insurance
                  and Risk of Loss

              	 	
                21

              
	
                21.1

              	 	
                PhotoChannel
                  Insurance

              	 	
                21

              
	
                21.2

              	 	
                Documentation

              	 	
                21

              
	
                21.3

              	 	
                Risk
                  of Loss

              	 	
                21

              
	
                21.4

              	 	
                No
                  Implied Limitation or Expansion

              	 	
                21

              
	
                22.0

              	 	
                General

              	 	
                21

              
	
                22.1

              	 	
                Assignment
                  and Binding Nature

              	 	
                21

              
	
                22.2

              	 	
                Entire
                  Agreement; Amendment; No Waiver

              	 	
                22

              
	
                22.3

              	 	
                Non
                  Exclusivity

              	 	
                22

              
	
                22.4

              	 	
                Expenses

              	 	
                22

              
	
                22.5

              	 	
                Subcontractors

              	 	
                22

              
	
                22.6

              	 	
                Relationship

              	 	
                22

              
	
                22.7

              	 	
                No
                  Third Party Beneficiary

              	 	
                22

              
	
                22.8

              	 	
                Successors
                  and Assigns

              	 	
                23

              
	
                22.9

              	 	
                Governing
                  Law; Severability

              	 	
                23

              
	
                22.10

              	 	
                Force
                  Majeure

              	 	
                23

              

      

    

     

    
      
        
        

      

      
        Page
          2 of
          28

        
          

        

      

      
        
        

      

    

    

      
        	
                22.11

              	 	
                Headings

              	 	
                23

              
	
                22.12

              	 	
                Public
                  Announcement

              	 	
                23

              
	
                22.13

              	 	
                Notifications
                  and Approvals

              	 	
                23

              
	
                22.14

              	 	
                References

              	 	
                24

              
	
                22.15

              	 	
                Taxes
                  on Services

              	 	
                24

              
	
                Appendix
                  A-1 - Glossary

              	 	
                25

              

      

    

     

    
      	
              Schedules

            
	
              Schedule

            	 	
              Title

            
	
              A

            	 	
              Statement
                of Work

            
	
              B

            	 	
              Pricing

            
	
              C

            	 	
              Service
                Levels

            
	
              D

            	 	
              Software
                Specifications

            
	
              E

            	 	
              Third
                Party Software

            
	
              F

            	 	
              Sample
                Source Code Escrow Agreement

            
	
              G-Z

            	 	
              Intentionally
                Omitted

            

    

     

    
      
        
        

      

      
        Page
          3 of
          28

        
          

        

      

      
        
        

      

    

     

    WITNESSETH

     

    WHEREAS,
      CVS, directly and through its Affiliates, owns and operates a drug store chain
      that provides onsite and offsite imaging services to its consumers;

     

    AND
      WHEREAS PhotoChannel is the developer and owner of a proprietary Internet based
      digital imaging network solution providing for the storage and routing of
      digital images for the production of photographs and/or gifts, along with the
      monitoring of aforesaid solution, (the “System”
or
      “Systems”);

     

    AND
      WHEREAS PhotoChannel is entitled to license Systems and to provide branded
      versions of the Systems that, in addition to providing customizations and a
      distinctive graphical user interface, may also incorporate modifications and/or
      enhancements of the Systems;

     

    AND
      WHEREAS PhotoChannel provides installation, hosting and management services
      for
      Systems and branded versions thereof;

     

    AND
      WHEREAS CVS desires the development, installation, hosting and management of
      a
      branded version of the System for its Online Print Business (as such term is
      hereinafter defined) and PhotoChannel wishes to develop, install, host and
      manage this system (the “CVS.com
      Photo Center”);

     

    NOW
      THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the mutual
      covenants and agreements contained herein and other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

     

    
      	1.0	
              Term 

            

    

     

    
      	a.     	
              The
                initial term (the “Term”)
                of this Agreement will commence on February 1, 2006 (the “Effective
                Date”)
                and continue until January 31, 2009 (the “Expiration
                Date”),
                subject to earlier termination as provided in Section 16.0. If CVS
                provides PhotoChannel with ninety (90) days notice that it desires
                to
                renew this Agreement then the Term shall extend for a period of time
                determined by CVS of up to twelve (12) months (each such twelve (12)
                month
                period, a “Renewal
                Period”)
                at the terms and conditions, including pricing, in effect as of the
                Expiration Date or the end of the then current Renewal Period.
                

            

    

     

    
      	1.   
               	
              CVS
                shall be entitled to exercise its right to extend the Term for up
                to three
                (3) Renewal Periods under this
                Agreement.

            

    

     

    
      	2.   
               	
              If
                during the third Renewal Period the Parties are unable to reach agreement
                on the terms and conditions applicable to the renewal of this Agreement,
                this Agreement shall expire at the end of the third Renewal Period.
                

            

    

     

     

    
      	b.   
              	
              If
                CVS does not provide any written notice to PhotoChannel regarding
                the
                renewal of this Agreement, this Agreement shall expire on the Expiration
                Date.

            

    

     

    
      	2.0   
              	
              Interpretation

            

    

     

    
      	a.     
              	
              If
                there is a conflict among the terms in the various documents within
                this
                Agreement:

            

    

     

    
      	1.   
               	
              to
                the extent the conflicting provisions can reasonably be interpreted
                so
                that such provisions are consistent with each other, such consistent
                interpretation will prevail; and

            

    

     

    
      	2.   
               	
              to
                the extent Section 2.0(a)(1) does not apply, the Base Terms will
                prevail
                over a conflicting term in the
                Attachments.

            

    

     

    
      	b.     	
              CVS
                and PhotoChannel drafted and negotiated this Agreement jointly, and
                this
                Agreement will be construed neither against nor in favor of either,
                but
                rather in accordance with its fair
                meaning.

            

    

     

    
      
        
        

      

      
        Page
          4 of
          28

        
          

        

      

      
        
        

      

    

     

    
      	c.     	
              Nothing
                in this Agreement affects any statutory rights granted or provisions
                required, in either case, by mandatory statutory law that cannot
                be waived
                or limited by contract. If there is a conflict between the terms
                in this
                Agreement and mandatory statutory law, mandatory statutory law will
                prevail. 

            

    

     

    
      	3.0	
              Implementation
                Approach

            

    

     

    
      	a.     	
              PhotoChannel
                and CVS will use a staged approach to gradually implement the services
                and
                software. During the period starting on the Effective Date and ending
                on
                or around June 1, 2006 (the “Transition
                Period”),
                PhotoChannel shall deliver different sets of services and software
                as set
                forth in Section 4.0. Following the Transition Period, PhotoChannel
                shall
                provide the full set of Services as set forth in the attached Schedule
                A -
                Statement of Work, and the creation of the software systems as set
                forth
                in Schedule D - Software
                Specifications.

            

    

     

    
      	4.0	
              Transition
                Period and Startup

            

    

     

    
      	4.1	
              Transition
                Period Stages

            

    

     

    
      	a.     	
              PhotoChannel
                will provide, and CVS will pay for, the Transition Services as set
                forth
                in this Section 4.0. PhotoChannel will be responsible for all
                administrative or other related functions that enable delivery of
                the
                Transition Services.

            

    

     

    
      	1.   
               	
              Stage
                1 - Initial Set-Up.

            

    

     

    On
      or
      around February 1, 2006, the following functionality will be made available
      to
      approximately 5,400 CVS Stores:

     

    
      	(i) 
                	
              The
                photo image functions accessible through the CVS.com web site that
                had
                been available through the Kodak Picture Center web site will be
                made
                available through the CVS.com Photo Center web
                site.

            

    

     

    
      	(ii)  
               	
              All
                digital images will be routed from the Computer Facilities to
                either:

            

    

     

    
      	(1)  
               	
              Qualex
                for the off-site production of prints for in-store pickup;
                and/or

            

    

     

    
      	(2)  
               	
              PhotoTLC
                for the off-site production of photo gifts for in-store
                pickup.

            

    

     

    
      	(iii)  
               	
              Other
                new consumer enhancements will be implemented as directed by CVS
                (e.g.
                sharing, storage and membership
                features).

            

    

     

    
      	2.   
               	
              Stage
                2 - Test of Print at Store.

            

    

     

    On
      or
      around April 3, 2006, and subject to the testing requirement outlined in 4.2(c),
      the following additional functions and services will be made available such
      that:

     

    
      	(i)  
               	
              Consumers
                will have the added ability to choose home delivery of prints or
                photo
                gifts; and

            

    

     

    
      	(ii)   
              	
              Consumers
                will have the added ability to request online photofinishing of digital
                images at CVS stores in the Minnesota market (comprising approximately
                17
                Stores), and the photo prints produced in-store will be available
                for
                1-hour in-store pickup or for home delivery via Qualex;
                and

            

    

     

    
      	(iii)  
               	
              Consumers
                will have added ability to complete online payment transactions for
                orders
                and returns/refunds placed via the CVS.com Photo Center. PhotoChannel,
                using the Verisign API and CVS merchant information, shall authorize
                and
                settle all credit card transactions, collect appropriate sales taxes
                (as
                directed by CVS and complying with all CVS tax reporting formats),
                and
                utilize other CVS designees as appropriate;
                and

            

    

     

    
      	(iv)  
               	
              the
                System, including the Order Puller Software and Administrative Software
                shall have been installed (including training), validated and approved
                by
                CVS and be operational either for in-store printing (for Stores in
                the
                Minnesota market) or through Qualex and/or PhotoTLC or other parties
                as
                authorized by CVS; and

            

    

     

    
      
        
        

      

      
        Page
          5 of
          28

        
          

        

      

      
        
        

      

    

     

    
      	(v) 
                	
              the
                CVS.com Photo Center will be able to offer differentiated retail
                pricing
                based on the different order delivery methods (e.g. in-store printing
                vs.
                home delivery) or via promotions, at CVS’ sole
                discretion.

            

    

     

    
      	3.  
                	
              Stage
                3 - Expanded Test of Print at Store

            

    

     

    On
      or
      around May 1, 2006; the following additional functions and services will be
      made
      available such that:

     

    
      	(i) 
                	
              the
                functionality in Stage 2 shall also be expanded, at CVS’ discretion, to
                include Stores in the Michigan market, or additional Stores as directed
                by
                CVS. As of the Effective Date, CVS intends to add approximately 220
                additional Stores during Stage 3; 

            

    

     

    
      	4.   
               	
              Stage
                4 - Final Roll-Out of Print at
                Store

            

    

     

    On
      or
      around June 11, 2006; the following additional functions and services will
      be
      made available such that:

     

    
      	(i)  
               	
              the
                functionality in Stage 2 shall be made available to all Stores that
                have
                been connected for in-store printing by CVS;
                and

            

    

     

    
      	(ii)  
               	
              consumers
                using third party web sites with whom CVS has made agreements and
                identified to PhotoChannel (e.g. Sony), will have photofinishing
                options
                made available to them such that these customers will be able to
                order
                prints for on-site and ship to store printing options, for those
                print and
                gift products previously identified to PhotoChannel by CVS; and
                

            

    

     

    
      	(iii)  
               	
              the
                functionality of the CRM Marketing Campaign System as defined by
                the
                software specifications as set forth in Schedule D will be implemented
                and
                available for use; and

            

    

     

    
      	(iv)  
               	
              all
                other functionality as mutually agreed by both Parties will be made
                available.

            

    

     

    
      	4.2  	
              Design
                of the CVS.com Photo Center during the Transition
                Period

            

    

     

    
      	a.     	
              Timeline.

            

    

     

    PhotoChannel
      and CVS shall mutually develop and agree to a timeline for initiating the
      customization of the Branded Environment. PhotoChannel shall develop the CVS.com
      Photo Center in accordance with the timeline and specifications set forth by
      CVS
      prior to any implementation dates. PhotoChannel shall undertake its obligations
      under this Agreement as expeditiously as possible and with the intent of
      conforming to the specified timeline. 

     

    
      	b.     	
              Required
                Information and Materials. 

            

    

     

    CVS
      shall
      provide PhotoChannel the CVS Materials it wishes PhotoChannel to incorporate
      into the CVS.com Photo Center. CVS shall also provide PhotoChannel with any
      assistance and information PhotoChannel may reasonably require to complete
      the
      work set forth in the timeline.

     

    
      	c.     	
              Testing.

            

    

     

    
      	1.   
               	
              Upon
                PhotoChannel being reasonably satisfied that it has completed all
                work set
                out in the project timeline relating to the development of the final
                release, it shall thoroughly test such final release to ensure it
                fully
                complies with the applicable functional requirements and specifications
                (the “Pre-Installation
                Test”).
                The methodology, test data and criteria utilized in the Pre-Installation
                Test shall be subject to CVS’ prior written approval, such approval not to
                be unreasonably withheld. CVS shall have the option, but not the
                obligation, to participate in and/or be present during the conducting
                of
                the Pre-Installation Test, at CVS’ sole cost and expense. Should the
                testing reveal any deficiency, PhotoChannel shall use commercially
                reasonable efforts to forthwith remedy such deficiency and, upon
                having
                done so, PhotoChannel shall repeat its obligations under this Paragraph
                4.2(c) until the Pre-Installation Test has been successfully
                completed.

            

    

     

    
      
        
        

      

      
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      	2.   
               	
              Upon
                successful completion or deemed successful completion of the
                Pre-Installation Test, PhotoChannel shall forthwith install the CVS.com
                Photo Center on the Computer Facilities and, upon completion of said
                installation, shall conduct such testing to confirm that the CVS.com
                Photo
                Center is fully operational and operates at or beyond the Service
                Levels
                on said Computer Facilities (the “Post-Installation
                Test”).
                The methodology, test data and criteria utilized in the Post-Installation
                Test shall be subject to CVS’ prior written approval, and such approval
                not to be unreasonably withheld. CVS shall have the option, but not
                the
                obligation, to participate in and/or be present during the conducting
                of
                the Post-Installation Test, at CVS’ sole cost and expense. Should the
                testing reveal any deficiency, PhotoChannel shall use commercially
                reasonable efforts to forthwith remedy such deficiency and, upon
                having
                done so, PhotoChannel shall repeat its obligations under this Paragraph
                4.2(c)(2) until the Post-Installation Test has been successfully
                completed. 

            

    

     

    
      	d.     	
              Delivery.
                

            

    

     

    Upon
      successful completion of the Post-Installation Test, PhotoChannel shall deliver
      to CVS all Documentation that relates to the final release and all Code which
      relates to the CVS.com Photo Center as same is encompassed in the final
      release.

     

    
      	e.     	
              Accessibility
                to CVS.com Photo Center during Construction.

            

    

     

    During
      the term of this Agreement, CVS shall have full access to the latest version
      of
      the CVS.com Photo Center that is the then current System. The Preliminary System
      shall be made accessible to CVS through the world-wide-web and shall incorporate
      the security measures. PhotoChannel shall assume all costs and expenses relating
      to the installation, maintenance and operation of the Preliminary System.
      PhotoChannel shall take all reasonable measures to ensure that access to the
      Preliminary System (or any part thereof) is restricted to pre-authorised CVS
      representatives. Without any limitation to the foregoing, PhotoChannel will
      periodically monitor access to the Preliminary System during its development
      and
      will notify CVS if there appears to be any unauthorized access
      thereto.

     

    
      	f.     	
              Fees
                for the CVS.com Photo Center during Construction.
                

            

    

     

    During
      the Transition Period, all development and customization of the CVS.com Photo
      Center will be included in the Fees outlined in Schedule B - Pricing. All costs
      for development and customization will be the responsibility of PhotoChannel,
      including labor for development and customization, travel costs, costs to
      develop and create documentation, training, telecommunications, and all other
      expenses related to the customization during the Transition Period.

     

    
      	g.     	
              Software
                Failures 

            

    

     

    At
      all
      times after initial construction of the CVS.com Photo Center, PhotoChannel
      will
      be responsible for continued operation of the CVS.com Photo Center software.
      If
      errors are found with the software, either during testing or thereafter,
      PhotoChannel shall attempt to repair or modify the software to a fully
      functional state. If the Software remains non-compliant with the Software
      warranty, as set forth in Section 20.0, after two (2) attempts by PhotoChannel
      to remedy, then CVS shall have the option to have PhotoChannel (i) replace
      or
      repair the relevant software that was not as warranted at no additional charge
      to CVS, or (ii) refund the amounts paid by CVS for the software in question
      related to Enhancements. 

     

    
      	5.0  	
              Ongoing
                Services

            

    

    
       

      
        	a.     	
                PhotoChannel
                  will provide, and CVS will pay for, the Services as set forth in
                  this
                  Agreement and the attached Schedule A - Statement of Work. PhotoChannel
                  will provide the Services and be responsible for all administrative
                  or
                  other related functions that enable delivery of the
                  Services.

              

      

       

    

    
      
        
        

      

      
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      	b.     	
              Use
                of the CVS.com Photo Center

            

    

     

    PhotoChannel
      hereby agrees to provide CVS and such Printers and Producers authorized by
      CVS
      from time to time, with remote access to the CVS.com Photo Center and the
      Computer Facilities and to provide CVS, Printers and Producers with the use
      of
      the CVS.com Photo Center on a remote access basis. All access to and use of
      the
      CVS.com Photo Center and the Computer Facilities shall be through the
      world-wide-web unless the parties mutually agree otherwise. 

     

    
      	c.     	
              Remote
                Access Devices. 

            

    

     

    CVS
      shall
      be responsible, at its expense, for all communication equipment and all services
      necessary to enable CVS Stores and CVS locations to obtain Internet access.
      PhotoChannel shall be responsible, at its expense, for the installation,
      maintenance and operation of all network communications at the Computer
      Facilities and associated image transmittal to the Store devices, Printers
      and
      Producers. 

     

    
      	d.     	
              Compatibility
                with Operating Configurations. 

            

    

     

    
      	1.   
               	
              Lab
                Operating Systems.
                PhotoChannel shall ensure that the Software is fully operational
                with the
                commercial MS Windows XP operating system software and application
                platforms used by CVS on the print-at-store PC. PhotoChannel shall
                maintain the Software to remain compatible with operating system
                updates,
                fixes, and patches as implemented by CVS. CVS shall be responsible
                for the
                timely delivery to PhotoChannel of any changes to the operating
                systems.

            

    

     

    
      	2.   
               	
              Additional
                Operating Systems.
                PhotoChannel shall ensure that the Software is fully operational
                with new
                operating systems, provided that no more than two (2) operating systems
                (e.g. Vista, Linux), or no more than two operating system versions
                (e.g.
                Windows XP, Vista), are supported at any one
                time.

            

    

     

    
      	3.  
                	
              Interaction
                with Third Party Organizations.
                

            

    

     

    
      	(i)  
                	
              CVS
                reserves the right to add and cancel, at any time, services from
                Printers
                or Producers that process output (e.g. photo images) for CVS. In
                addition,
                CVS may add or cancel at any time services from Third Party Content
                Providers that generate orders for CVS or other Third Parties with
                whom
                CVS has authorized interaction with the CVS.com Photo Site or the
                Systems.

            

    

     

    
      	(ii)   
               	
              At
                CVS’ request, PhotoChannel shall configure the Systems and, to the extent
                necessary, the Computer Facilities, so as to permit delivery by the
                CVS.com Photo Center to any new Printer or Producer, provided that
                vendor
                APIs are made available by such Printers and Producers. As of the
                Effective Date, PhotoChannel will support up to four (4) separate
                Printers, and up to four (4) separate Producers, each utilizing custom
                vendor APIs. In addition, CVS may add up to two (2) additional Printers
                and/or two (2) additional Producers in each subsequent year, provided
                that
                there exists no more than seven (7) Printers or seven (7) Producers
                in
                total. For Printers and Producers that utilize the PhotoChannel API,
                CVS
                may have an unlimited number of such vendors that utilize the PhotoChannel
                API.

            

    

     

    
      	(iii)   
               	
              At
                CVS’ request, PhotoChannel shall configure the Systems and, to the extent
                necessary, the Computer Facilities, so as to allow interaction and
                delivery of images (or content) to the CVS.com Photo Center from
                any new
                Third Party Content Provider. PhotoChannel shall interface with Third
                Party Content Providers, provided that vendor APIs are made available
                to
                PhotoChannel. As of the Effective Date, PhotoChannel will support
                up to
                six (6) separate Third Party Content Providers, each utilizing custom
                vendor APIs. In addition, CVS may add up to three (3) additional
                Third
                Party Content Providers each subsequent year. For Third Party Content
                Providers or other Third Parties that utilize the PhotoChannel API,
                CVS
                may have an unlimited number of such vendors that utilize the PhotoChannel
                API.

            

    

     

    
      
        
        

      

      
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          8 of
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      	(iv)   
               	
              Cancellation.
                At
                CVS written request, PhotoChannel shall configure the Systems and,
                to the
                extent necessary, the Computer Facilities, so as to stop interaction
                of
                the Systems to a specific Third Party
                organization.

            

    

     

    
      	4.   
               	
              Base
                Builds.
                CVS shall use reasonable efforts to minimize the number of base build
                variants for the print-at-store PC, including efforts to synchronize
                any
                build variants for compatibility. CVS will notify PhotoChannel of
                changes
                in the base build fifteen (15) days prior to any release of a new,
                or
                modified, build for the print-at-store
                PC.

            

    

     

    
      	5.   
               	
              Equipment
                Types.
                PhotoChannel shall ensure that the Software and print-at-store PC
                is fully
                operational with the Equipment, lab configurations, and print routing
                preferences required by CVS including proper functionality with all
                Minilabs, Kiosks, Equipment operating systems, printing devices,
                and
                related peripherals (e.g. CD burners, network equipment), provided
                that
                vendor APIs are made available for such Equipment. From time to time
                throughout the Term, CVS may add new Equipment to existing (or new)
                photo
                lab locations. CVS will work with PhotoChannel prior to the launch
                of any
                new equipment to provide any required information needed to ensure
                compatibility.

            

    

     

    
      	6.   
               	
              Other
                PC Applications.
                As reasonably requested by CVS, PhotoChannel will work with other
                Third
                Party vendors to support multiple applications running on the
                print-at-store PC. To the extent possible, PhotoChannel will work
                with
                other third parties designated by CVS to resolve any application
                conflicts. The parties will mutually agree upon any major software
                modifications or other System changes to allow the functioning of
                multiple
                applications on the print-at-store
                PC.

            

    

     

    
      	e.     	
              Software
                Tools.

            

    

     

    
      	1.   
               	
              Third
                Party Software. PhotoChannel agrees that any and all Third Party
                Software
                to be bundled into or used with the CVS.com Photo Center after the
                Effective Date must be approved in writing by CVS in advance, such
                approval not to be unreasonably
                withheld.

            

    

     

    
      	2.   
               	
              Reporting
                Tools. PhotoChannel shall provide to CVS, at no charge, such reporting
                tools, for the CVS.com Photo Center (and for the use, operation and
                administration thereof and for the Online Print Business conducted
                thereon) as CVS may reasonably
                request.

            

    

     

    
      	f.     	
              Once
                PhotoChannel takes responsibility for its portion of the Ongoing
                Services,
                CVS shall:

            

    

     

    
      	1.  
                	
              cooperate
                with PhotoChannel and its personnel to ensure that the On-Going Services
                are delivered and rendered in an efficient manner;
                

            

    

     

    
      	2.   
               	
              notify
                PhotoChannel promptly of all inquiries or complaints received with
                respect
                to the On-Going Services; and

            

    

     

    
      	3.   
               	
              cooperate
                with PhotoChannel and its personnel to increase efficiency, maximize
                uptime, and optimize the On-Going Services by implementing appropriate
                training modules, operational processes, and other procedures that
                CVS, in
                its sole discretion, believes will benefit both
                parties.

            

    

     

    
      	6.0  	
              Service
                Levels

            

    

     

    
      	a.     	
              PhotoChannel
                shall perform the Services in accordance with the Service Levels
                set forth
                in Schedule C - Service Levels.

            

    

     

    
      	b.     	
              Service
                Level Credits.

            

    

     

    In
      the
      event of a failure to provide the Services in accordance with the applicable
      Service Levels, PhotoChannel shall pay the Service Level Credits identified
      in
      and according to the provisions set forth in Schedule C. Such Service Level
      Credits shall not limit CVS’ right to recover, in accordance with this
      Agreement, any damages incurred by CVS as a result of such failure; provided
      that any such damages otherwise payable by PhotoChannel shall be reduced by
      the
      amount of such Service Level Credits paid or credited to CVS. 

     

    
      
        
        

      

      
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      	7.0  	
              Additional
                Services

            

    

     

    
      	a.     	
              Out-of-Scope
                Functions

            

    

     

    During
      the Term, CVS may request PhotoChannel to conduct New Services, including
      out-of-scope System enhancements. Upon receipt of such a request from CVS,
      PhotoChannel shall provide CVS with a written proposal in respect of such New
      Service within thirty (30) days of receipt of such request. 

     

    
      	b.     	
              Additional
                Entities and Business Units 

            

    

     

    
      	1.   
               	
              CVS
                reserves the right to add new Affiliates and business units of CVS
                to this
                Agreement at any time, including all associated
                Stores.

            

    

     

    
      	2.   
               	
              If
                CVS enters into a transaction, or series of transactions, with a
                Third
                Party such that CVS acquires more than one-hundred (100) stores from
                the
                Third Party (the “Acquired
                Stores”),
                then the Parties agree that they will meet no later than thirty (30)
                days
                after the closing of such transaction to determine, in good faith,
                if the
                acquisition warrants renegotiation of the terms of this Agreement,
                given a
                full and fair consideration of all relevant factors. Unless and until
                the
                Parties renegotiate the terms of this Agreement due to such an
                acquisition, the newly acquired stores will be serviced under the
                terms of
                this Agreement, and this Agreement will remain in full force and
                effect,
                unless:

            

    

     

    
      	(i)   
               	
              the
                Acquired Stores are already operating under a pre-existing agreement
                with
                PhotoChannel for web-based photo support, at which time CVS will
                have the
                option to have the Acquired Stores serviced under the pre-existing
                agreement, or under the terms and conditions of this Agreement, at
                CVS’
                sole discretion; or

            

    

     

    
      	(ii)    
              	
              the
                Acquired Stores are operating under a pre-existing agreement with
                any
                other service provider for web-based photo support, then upon expiration
                of such pre-existing agreement, the relevant Acquired Stores will
                be
                serviced by PhotoChannel; or

            

    

     

    
      	(iii)  
                	
              the
                Acquired Stores are providing web-based photo support utilizing internal
                resources, in which case CVS may continue to utilize such resources
                to
                support the Acquired Stores, or transfer services to PhotoChannel,
                at CVS’
                sole discretion.

            

    

     

    
      	8.0  	
              Intentionally
                Omitted

            

    

     

    
      	9.0  	
              Licensing
                of the Systems

            

    

     

    
      	a.     	
              Software
                Licenses

            

    

     

    
      	1.  
                	
              For
                the Term of this Agreement, PhotoChannel hereby grants to CVS a worldwide,
                non-exclusive, transferable license to use the Systems (including
                without
                limitation all Enhancements, updates, and maintenance updates relating
                thereto, whether owned by CVS or otherwise), the right to grant
                sublicenses to Producers and/or Printers in conjunction with CVS’ Online
                Print Business, and to allow others to use the Systems, as same relates
                to
                CVS’ or such other Persons use of the CVS.com Photo Center website and/or
                CVS’ Online Print Business. This license also includes a worldwide,
                non-exclusive, transferable license to use the
                following:

            

    

     

    
      	(i)  
                	
              the
                PhotoChannel Administrative Software;
                and

            

    

     

    
      	(ii)  
               	
              the
                PhotoChannel Order Puller Software;
                and

            

    

     

    
      
        
        

      

      
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          10
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      	(iii)  
                	
              any
                PhotoChannel CRM Marketing Campaign System used to customize marketing
                emails to potential customers or Members, including any other collection,
                storage, or analysis of customer
                information.

            

    

     

    
      	2.   
               	
              The
                Software Specifications for these Systems are described in the attached
                Schedule D (Software
                Specifications).

            

    

     

    
      	b.     	
              CVS
                Materials. 

            

    

     

    CVS
      hereby grants to PhotoChannel a non-exclusive, non-transferable license to
      use
      the CVS Materials strictly for the purposes of performing its obligations under
      this Agreement. Notwithstanding the foregoing, nothing in this Section shall
      provide PhotoChannel with the right to use the CVS Marks; provided, however,
      that PhotoChannel shall be permitted to make reproductions of the CVS Marks
      solely for the purposes of performing its obligations under this Agreement.
      PhotoChannel hereby acknowledges that it is acting as CVS’ agent in operating
      the CVS.com Photo Center and further acknowledges that said operation of the
      CVS.com Photo Center will be for the sole benefit of CVS and shall not be
      interpreted as granting to it any license (implied or otherwise) to use any
      of
      the CVS Marks except as same is expressly set forth in Section
      9.0(c).

     

    
      	c.     	
              CVS
                Marks.

            

    

     

    
      	1.  
                	
              License.
                

            

    

     

    CVS
      hereby grants to PhotoChannel a revocable, non-exclusive, non-transferable
      license to use the CVS Marks that are displayed on such section(s) of the
      CVS.com Photo Center. For greater certainty, CVS may revoke this license in
      its
      sole discretion.

     

    
      	2.   
               	
              Restrictions.
                

            

    

     

    Any
      use
      of the relevant CVS Marks provided in this Section shall be subject to CVS’
requirements with respect to usage by a Third Party of the CVS Marks and such
      other restrictions as CVS may impose from time to time and, in all cases, shall
      be subject to CVS’ prior written approval.

     

    
      	10.0  	
              Proprietary
                Rights

            

    

     

    
      	a.     	
              PhotoChannel
                Rights. 

            

    

     

    With
      the
      exception of any CVS Materials and/or Branded Environment embodied therein,
      PhotoChannel shall retain all rights in and to the Systems, the PhotoChannel
      Administrative Software and the PhotoChannel Order Puller Software and shall
      have exclusive rights in the Enhancements (except as provided for in this
      Section 10.0, the Maintenance Updates (except as provided for in this Section
      10.0 and the Updates (except as provided for in this Section 10.0). CVS
      acknowledges PhotoChannel’s exclusive right, title and interest in and to the
      Systems and acknowledges that nothing herein shall be construed to accord to
      CVS
      any rights in the Systems, except as expressly provided herein.

     

    
      	b.     	
              Rights
                to CVS Materials. 

            

    

     

    CVS
      shall
      have and/or retain all rights in and to the CVS Materials and/or the Branded
      Environment embodied therein, including any and all of the Intellectual Property
      Rights embodied therein or represented thereby. PhotoChannel acknowledges CVS’
exclusive right, title and interest in and to the CVS Materials and the Branded
      Environment and acknowledges that nothing herein shall be construed to accord to
      PhotoChannel any rights in any of the CVS Materials and/or the Branded
      Environment except as expressly provided herein. Without any limitation to
      the
      foregoing, PhotoChannel acknowledges that any proprietary rights arising through
      the operation of the CVS.com Photo Center shall automatically vest in CVS.
      Without any limitation to the foregoing, PhotoChannel hereby acknowledges that
      any use of the CVS Marks on the CVS.com Photo Center and the goodwill symbolized
      by and connected with such use of the CVS Marks will inure solely to the benefit
      of CVS (or its licensors). To the extent CVS requires PhotoChannel to
      participate in the creation and/or modifications of CVS Materials and/or Branded
      Environment, PhotoChannel shall obtain from any of its employees, subcontractors
      and/or employees of any such subcontractors it may employ to perform such work,
      prior to the commencement of any such work, an assignment from each such
      employee and/or subcontractor in favor of CVS assigning all Intellectual
      Property Rights arising from or embodied in such work as well as a waiver of
      any
      moral rights each such employee may hold with respect to their work, all in
      a
      form satisfactory to CVS. PhotoChannel shall remit all such assignments and
      waivers to CVS forthwith upon their execution.

     

    
      
        
        

      

      
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          11
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      	c.     	
              Rights
                to Intellectual Property

            

    

     

    PhotoChannel
      and its Affiliates grant to CVS a fully-paid, non-exclusive, Intellectual
      Property Rights license, to the extent such rights are derived from CVS' sole
      contribution hereunder, or from its joint contribution with PhotoChannel or
      its
      Affiliates, or are already in the public domain (e.g., a non patented feature
      published or operating on a website), to make, have made, use, sell, import,
      export, or otherwise distribute processes or products. Such license shall not
      include any rights to practice under PhotoChannel or its Affiliates' background
      intellectual property rights derived outside this Agreement.

     

    
      	d.     	
              Rights
                to System Content. 

            

    

     

    All
      System Content shall be the exclusive property of CVS and CVS shall hold any
      and
      all of the Intellectual Property Rights embodied therein or represented
      thereby.

     

    
      	e.     	
              Rights
                to Enhancements

            

    

     

    CVS
      shall
      have the exclusive right to any patent (including without limitation the
      exclusive right to file a patent application) relating to any invention embodied
      in:

     

    
      	1.   
               	
              any
                Enhancement it may request be created during the term of this Agreement,
                but only to the extent that PhotoChannel had not already independently
                developed and/or established verifiable plans to develop such invention
                within one year prior to CVS’ request;
                and

            

    

     

    
      	2.   
               	
              any
                Maintenance Update or Update, but only to the extent it or its employees,
                agents, subcontractors and/or Affiliates have communicated the particulars
                of such invention to PhotoChannel and only to the extent that PhotoChannel
                had not already independently developed and/or established verifiable
                plans to develop such invention within one year prior to CVS’
                request.

            

    

     

    For
      the
      purposes of this section, ‘verifiable plans’ means existing source code,
      prototypes, patent filings, detailed specification documents or other
      documentation that can be proven, in conjunction with, Third Party’s to have
      existed prior to CVS’ request.

     

    
      	f.     	
              Rights
                to Member Data and System Content 

            

    

     

    All
      System Content shall be the exclusive property of CVS and CVS shall hold any
      and
      all of the Intellectual Property Rights embodied therein or represented thereby.
      PhotoChannel acknowledges CVS’ exclusive right, title and interest in and to the
      System Content and acknowledges that nothing herein shall be construed to accord
      to PhotoChannel any rights to use this information for any other purpose than
      order fulfillment.

     

    
      	11.0  	
              Most
                Favored Consumer

            

    

     

    PhotoChannel
      represents that the fees and charges contained herein do not exceed those
      imposed to any of its other customers with respect to projects of similar or
      smaller size and scope. If, during the term of this Agreement, PhotoChannel
      accepts lower fees or charges for any such services with respect to other
      for-profit customers, PhotoChannel shall forthwith notify CVS of same and shall
      remit as a credit to CVS the differences between the amount of any payments
      made
      by CVS on or after the date such lower fees and charges were made or accepted
      (as the case may be) by PhotoChannel. The parties hereby agree that all future
      fees and charges payable hereunder shall thereafter be reduced so as to match
      said lower fees and charges.

     

    
      
        
        

      

      
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          12
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      	12.0  	
              Audits

            

    

     

    
      	a.     	
              Financial
                Audit

            

    

     

    
      	1.   
               	
              For
                purposes of validating fees and charges made and paid for under this
                Agreement, CVS shall have the right to inspect PhotoChannel time
                cards, or
                any other documents that reveal time spent by PhotoChannel personnel
                on
                services provided on a time and materials basis or any costs incurred
                hereunder for which it is seeking reimbursement under the terms hereof.
                CVS shall also be entitled to verify all financial records or other
                documents used by PhotoChannel to calculate any fees or costs which
                are
                payable by CVS hereunder (such inspection and review, a “Financial
                Audit”).
                PhotoChannel shall make available such documents during normal hours
                of
                business, and for at least two (2) years following the termination
                or
                expiration of this Agreement. Any costs relating to the foregoing
                shall be
                borne exclusively by CVS unless such inspection reveals a material
                deficiency (which, for purposes of this Section, shall mean a discrepancy
                greater than five percent (5%) in said records which has resulted
                in an
                overpayment by CVS of such fees or expenses hereunder, in which case
                any
                such costs shall be borne exclusively by PhotoChannel.
                PhotoChannel shall forthwith remit any overpayment to
                CVS.

            

    

     

    
      	2.   
               	
              PhotoChannel
                shall use its best efforts to forthwith remedy any default, deficiency
                or
                non-compliance with its obligations or covenants hereunder revealed
                by any
                Financial Audit.

            

    

     

    
      	b.     	
              Performance
                Audit

            

    

     

    
      	1.  
                	
              Upon
                reasonable prior notice to PhotoChannel, CVS and/or its designated
                representative may conduct a performance audit of the Computer Facilities
                or of any premises and/or facilities where the CVS.com Photo Center
                and/or
                Monitoring System is installed and/or operated and/or where any System
                Content, CVS Materials, or Confidential Information is stored or
                processed
                (including, without limitation, any embodiments thereof), so as to
                ensure
                PhotoChannel’s compliance with the terms of this Agreement and so as to
                evaluate PhotoChannel’s performance with respect thereto (such inspection
                and review, a “Performance
                Audit”).
                PhotoChannel will provide to CVS and/or its designated representative
                all
                support services and access to facilities reasonably necessary in
                connection with the Performance Audit at a level at least equal to
                the
                level of support services and access to facilities available to the
                internal staff of PhotoChannel.

            

    

     

    
      	2.  
                	
              PhotoChannel
                shall use commercially reasonable efforts to forthwith remedy any
                default,
                deficiency or non-compliance with its obligations or covenants hereunder
                revealed by any Performance Audit.

            

    

     

    
      	13.0  	
              Fees
                and Payment

            

    

     

    
      	13.1  	
              Fees 

            

    

     

    
      	a.     	
              In
                consideration of PhotoChannel providing the Services and Software,
                CVS
                shall pay to PhotoChannel the Fees in accordance with Schedule B
                -
                Pricing. 

            

    

     

    
      	b.     	
              PhotoChannel,
                or PhotoChannel’s designee, shall invoice CVS for the Services in
                accordance with Schedule B. 

            

    

     

    
      	c.     	
              Except
                as expressly set forth in this Agreement (including Schedule B),
                all costs
                and expenses relating to the Services are included in the
                Fees.

            

    

     

    
      	13.2  	
              Proration 

            

    

     

    All
      periodic Fees or charges under this Agreement are to be computed on a calendar
      month basis and shall be prorated on a per diem basis for any partial month.
      

    
       

      
        	13.3  	
                Unused
                  Credits 

              

      

       

      Any
        unused credits against future payments owed to either Party by the other
        pursuant to this Agreement shall be paid to the applicable Party within thirty
        (30) days of the earlier of the expiration or termination of this
        Agreement.

       

    

    
      
        
        

      

      
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          13
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      	13.4  	
              Suspension
                of Payment 

            

    

     

    CVS
      may
      withhold any payment it is required to make hereunder if PhotoChannel commits
      a
      material breach of this Agreement which has not been remedied to the full
      satisfaction of CVS provided that CVS has given notice in writing to
      PhotoChannel of the alleged material breach.

     

    
      	14.0  	
              Dispute
                Resolution

            

    

     

    
      	a.     	
              If
                the Parties have a dispute regarding the Services, they will attempt
                in
                good faith to resolve the dispute under the dispute resolution process
                described in this Section 14.0. 

            

    

     

    
      	b.     	
              Any
                dispute regarding the Services shall be considered in person or by
                telephone by the PhotoChannel account manager and an appropriate
                individual at CVS within ten (10) Business Days of receipt of a notice
                from either Party specifying the nature of the dispute. If such
                individuals are unable to resolve any such dispute during such meeting
                or
                telephone conversation, then either Party may request an additional
                meeting between managerial personnel of each Party at any reasonable
                time
                and place within twenty (20) days of such notice, and each Party
                shall
                make good faith efforts to cause such manager to be available for
                such
                meeting (which may be in person or by telephone).
                

            

    

     

    
      	c.     	
              Nothing
                in this Section 14.0 shall limit either Party’s ability to pursue any
                other rights and remedies at any time before, during, or after the
                occurrence of any meeting arising
                hereunder.

            

    

     

    
      	d.     	
              In
                the event of a dispute between PhotoChannel and
                CVS:

            

    

     

    
      	1.  
                	
              PhotoChannel
                shall continue to so perform its obligations in accordance with this
                Agreement in good faith during the resolution of such dispute; and
                

            

    

     

    
      	2.   
               	
              CVS
                shall continue to perform its obligations in accordance with this
                Agreement in good faith during the resolution of such
                dispute.

            

    

     

    
      	15.0  	
              Source
                Code Escrow

            

    

     

    
      	1.   
               	
              Delivery
                of Source Code. 

            

    

     

    Upon
      the
      request of CVS, at CVS’ sole discretion, PhotoChannel shall enter into a
      Software Escrow Agreement, and upon so doing (or on such later date as CVS
      may
      specify in its sole discretion), PhotoChannel shall deliver a Software Escrow
      Package to the escrow agent.
      Should
      CVS obtain the Software Escrow Package, as same is provided in the Software
      Escrow Agreement, PhotoChannel shall no longer be entitled to receive any fees
      under the terms of this Agreement. The foregoing shall be in addition to any
      other rights and remedies that may be available to CVS. 

     

    
      	2.  
                	
              The
                Software Escrow Agreement shall be in a form substantially similar
                to the
                sample escrow agreement attached hereto as Schedule F, or in another
                form
                as mutually agreed by the Parties.

            

    

     

    
      	3.  
                	
              Escrow
                Fees and Expenses. 

            

    

     

    
      	(i)  
                	
              All
                fees and expenses charged by the escrow agent shall be borne by CVS.
                

            

    

     

    
      	(ii)  
                	
              PhotoChannel
                will provide, at its sole cost, all labor and materials reasonably
                required to initially escrow the software and/or subsequently update
                the
                escrow of the software.

            

    

     

    
      
        
        

      

      
        Page
          14
          of 28

        
          

        

      

      
        
        

      

    

     

    
      	4.  
                	
              Source
                Code License. 

            

    

     

    The
      Source Code Escrow Agreement shall provide, inter
      alia,
      that:

     

    
      	(i) 
                	
              upon
                PhotoChannel being adjudged bankrupt or upon a receiver being appointed
                for PhotoChannel or upon PhotoChannel ceasing to carry on business,
                CVS
                shall have the right (but not the obligation) to obtain the Software
                Escrow Package;

            

    

     

    
      	(ii)  
               	
              subject
                to the occurrence of Section 15.4.(i), should CVS elect to obtain
                the
                Software Escrow Package, PhotoChannel shall grant to CVS a perpetual,
                irrevocable, transferable, non-exclusive, worldwide license to use
                and
                modify the Software Escrow Package, including without limitation
                all
                source code for the Software, and to use and modify object code versions
                derived from any such source code or derived from the modified source
                code; and

            

    

     

    
      	(iii)   
               	
              if
                CVS elects to obtain the Software Escrow Package, as provided for
                under
                Section 15.4.(ii), PhotoChannel shall be entitled to receive a one
                time
                license fee of $10.

            

    

     

    
      	16.0  	
              Default
                and Termination

            

    

     

    
      	16.1  	
              Termination
                for Change of Control of
                PhotoChannel

            

    

     

    In
      the
      event of a Change of Control of PhotoChannel, CVS may terminate this Agreement
      by giving PhotoChannel notice of the termination at least one hundred twenty
      (120) days prior to the termination date specified in the notice, provided
      such
      notice is given within ninety (90) days of the occurrence of the Change of
      Control of PhotoChannel. 

     

    
      	16.2  	
              Insolvency
                Defaults. 

            

    

     

    Each
      Party shall have the right to terminate this Agreement immediately, or convert
      this Agreement to a month-to-month term, terminable upon thirty (30) days’
notice, upon delivering to the other Party written notice of such termination
      or
      conversion of the term in the event that the other Party:

     

    
      	a.     	
              becomes
                insolvent, requests its creditors for a moratorium, enters into an
                assignment for the benefit of creditors with its creditors or suffers
                the
                appointment of a temporary or permanent receiver, trustee or custodian
                for
                all or a substantial part of its assets that is not discharged within
                thirty (30) days; or

            

    

     

    
      	b.     	
              fails
                to make payment of its debts as they fall due; or
                

            

    

     

    
      	c.     	
              makes
                a general assignment for the benefit of its creditors or a proposal
                or
                arrangement under any Bankruptcy
                and Insolvency Act,
                including but not limited to a voluntary petition for relief under
                Title
                II of the United States Code, as amended from time to time, or if
                a
                petition is filed against the other party under any Bankruptcy
                and Insolvency Act,
                if the other party is declared or adjudicated bankrupt, if a liquidator,
                trustee in bankruptcy, custodian, receiver, receiver and manager
                or any
                other officer with similar powers shall be appointed, either privately
                or
                judicially, of or for the other party or if the other party shall
                commit
                an act of bankruptcy or propose a compromise, arrangement or otherwise
                have recourse to any law for the protection of debtors;
                or

            

    

     

    
      	d.     	
              commences
                any other proceeding under any reorganization, arrangement, adjustment
                of
                debt, relief of debtors, dissolution, insolvency or liquidation or
                similar
                law of any jurisdiction whether now or hereafter in effect relating
                to it
                or any such proceeding is commenced against either party which is
                not
                dismissed for a period of sixty (60) days.

            

    

     

    
      	16.3  	
              Other
                Defaults 

            

    

     

    
      	a.     	
              Monetary
                Defaults. 

            

    

     

    If
      either
      Party fails to pay any undisputed amount due hereunder when such shall become
      due and payable, and such amount remains unpaid for forty-five (45) days after
      the other Party sends written notice thereof, then the notifying Party may
      terminate this Agreement at any time thereafter upon notice to the other
      Party.

     

    
      
        
        

      

      
        Page
          15
          of 28

        
          

        

      

      
        
        

      

    

     

    
      	b.     	
              Non-Monetary
                Defaults. 

            

    

     

    CVS
      may
      terminate this Agreement for failure by PhotoChannel to materially perform
      or
      adhere to any of its obligations under this Agreement by notifying PhotoChannel
      of such default and shall allow PhotoChannel sixty (60) days within which to
      cure such default. If a default is not cured within this sixty (60) day period,
      CVS may terminate this Agreement at any time thereafter upon notice to
      PhotoChannel. 

     

    
      	16.4  	
              Obligations
                upon Termination. 

            

    

     

    
      	a.     	
              Notwithstanding
                the expiration or other termination of this Agreement, neither
                PhotoChannel nor CVS shall be released from any obligation that accrued
                prior to the date of such expiration or termination, including, the
                obligations of CVS to pay PhotoChannel undisputed amounts for any
                and all
                obligations incurred under this
                Agreement.

            

    

     

    
      	b.     	
              If
                CVS
                requires PhotoChannel’s continued support as of the expiration or
                termination of this Agreement, CVS
                may request an extension of the Services from PhotoChannel for up
                to nine
                (9) months. Such extension of the Services will be as mutually agreed
                by
                the Parties and not be unreasonably withheld by
                PhotoChannel.

            

    

     

    
      	c.     	
              With
                the exception of the licenses contemplated under Section 15.4, upon
                termination or expiration of this Agreement, all software licenses
                granted
                hereunder shall forthwith terminate and any use of the subject matter
                of
                said licenses shall forthwith
                cease.

            

    

     

    
      	d.     	
              Upon
                termination or expiration of this Agreement, each Party shall immediately
                return to the other Party all of their respective Confidential Information
                and shall pay any amounts then outstanding which are not in dispute.
                For
                the avoidance of doubt, upon termination or expiration of this Agreement,
                PhotoChannel shall return to CVS all Member Content and Member
                Information.

            

    

     

    
      	16.5  	
              Survival. 

            

    

     

    
      	a.     	
              The
                obligations, covenants, representations and/or warranties set forth
                below
                shall survive expiration or termination of this
                Agreement:

            

    

     

    
      	1.   
               	
              Proprietary
                Rights as set forth in Section 10.0;

            

    

     

    
      	2.  
                	
              Confidential
                Information as set forth in Section
                17.0;

            

    

     

    
      	3.  
                	
              Source
                Code Escrow as set forth in Section
                15.0;

            

    

     

    
      	4.   
               	
              Survival
                as set forth in this Section 16.5;
                and

            

    

     

    
      	5.   
               	
              Audit
                Rights for a period of two (2) years as set forth in Section
                12.0.

            

    

     

    
      	16.6  	
              Other
                Remedies. 

            

    

     

    The
      remedies described herein are not exclusive and, in addition to the remedies
      granted herein, the Parties shall have all other rights and remedies available
      at law or in equity.

     

    
      	17.0  	
              Confidential
                Information 

            

    

     

    
      	17.1  	
              Confidential
                Information between the
                Parties

            

    

     

    
      	a.     	
              Each
                Party agrees that it will keep in confidence all Confidential Information
                (defined below) of the other Party, and that it will not directly
                or
                indirectly disclose to any Third Party any Confidential Information
                it
                receives from the other Party. 

            

    

     

    
      	b.     	
              Each
                Party agrees to use reasonable care to protect each of the other
                Party’s
                Confidential Information, and in no event use less than the same
                degree of
                care to protect the other Party’s Confidential Information as it would
                employ with respect to its own information of like importance which
                it
                desires to keep confidential. 

            

    

     

    
      	c.     	
              For
                purposes of this Section 17.0, "Confidential
                Information"
                means:

            

    

     

    
      
        
        

      

      
        Page
          16
          of 28

        
          

        

      

      
        
        

      

    

     

    
      	1.  
                	
              any
                information disclosed by a Party that , in the case of information
                disclosed in a tangible written form, the disclosing Party designates
                or
                otherwise marks in writing as being confidential when disclosed or
                that a
                reasonable person would consider to be confidential even in the absence
                of
                a “Confidential” or similar marking;
                and

            

    

     

    
      	2.  
                	
              any
                information disclosed by a Party orally or in another non-tangible
                form
                that is reduced to writing and marked “Confidential” or that a reasonable
                person would consider to be confidential even in the absence of a
                “Confidential” or similar marking or reduction to writing;
                and

            

    

     

    
      	3.   
               	
              all
                the terms and conditions of this Agreement.

            

    

     

    
      	d.     	
              Confidential
                Information shall not include information that a Party can
                demonstrate

            

    

     

    
      	1.     	
              was
                already lawfully known to or independently developed by the receiving
                Party prior to disclosure by the disclosing Party;
                or

            

    

     

    
      	2.     	
              is
                or becomes generally known to the public (other than by disclosure
                by the
                receiving Party) or is made available by the disclosing Party to
                any Third
                Party without any restriction on disclosure;

            

    

     

    
      	3.     	
              is
                independently developed by the receiving Party; or
                

            

    

     

    
      	4.     	
              was
                lawfully obtained by the receiving Party from any Third Party.
                

            

    

     

    
      	e.     	
              In
                the event a Party is compelled to disclose the Confidential Information
                of
                the other Party by court order, the compelled Party will provide
                prior
                written notice to the disclosing Party so that the disclosing Party
                may,
                if it chooses, seek a protective order, and the compelled Party will
                reasonably assist the disclosing Party in seeking and obtaining such
                a
                protective order, at the expense of the disclosing Party.
                

            

    

     

    
      	f.     	
              Each
                Party’s Confidential Information shall remain the property of that Party.
                Nothing contained in this Section 17.0 shall be construed as granting
                to
                or conferring on a Party, expressly or impliedly, any rights or license
                to
                the Confidential Information of the other Party, and any such obligation
                or grant shall only be as expressly provided pursuant to this Agreement
                or
                as otherwise agreed in writing by the
                Parties.

            

    

     

    
      	17.2  	
              Confidentiality
                of Member Content 

            

    

     

    PhotoChannel
      acknowledges that Member Content may constitute confidential, personal and/or
      proprietary information of respective Members. PhotoChannel agrees to hold
      such
      material and information in the strictest of confidence and not to make any
      use
      or copies thereof other than for the performance of this Agreement. PhotoChannel
      further agrees not to record and/or collect any information from any Person
      who
      accesses the CVS.com Photo Center (including without limitation the conducting
      of any data matching and/or data mining) or solicit any such Person except
      as
      expressly provided hereunder and except as expressly directed by
      CVS.

     

    
      	18.0  	
              Indemnification

            

    

     

    
      	a.     	
              Indemnity
                by CVS

            

    

     

    CVS
      shall
      indemnify PhotoChannel and its Affiliates and their officers, directors,
      employees and agents from, and defend and hold such parties harmless from and
      against, any Losses suffered, incurred or sustained by such parties or to which
      such parties become subject, resulting from, arising out of or relating to
      the
      following:

     

    
      	1.     	
              the
                inaccuracy, untruthfulness, breach or alleged breach of any
                representation, warranty or covenant made by CVS under this
                Agreement;

            

    

     

    
      	2.     	
              personal
                injury (including death) or property loss or damage resulting from
                CVS’ or
                CVS agents’ acts or omissions;

            

    

     

    
      	3.     	
              the
                negligence or willful misconduct of CVS;
                and

            

    

     

    
      
        
        

      

      
        Page
          17
          of 28

        
          

        

      

      
        
        

      

       

    

    
      	4.     	
              the
                failure of CVS to comply with any applicable
                law.

            

    

     

    
      	b.     	
              Indemnity
                by PhotoChannel

            

    

     

    PhotoChannel
      shall indemnify CVS and its Affiliates and their respective officers, directors,
      employees and agents from, and defend and hold such parties harmless from and
      against, any Losses suffered, incurred or sustained by such parties or to which
      such parties become subject, resulting from, arising out of or relating to
      the
      following:

     

    
      	1.     	
              any
                breach or alleged breach by PhotoChannel of any warranty set out
                in
                Section 20.0;

            

    

     

    
      	2.     	
              any
                breach of any of PhotoChannel’s obligations or covenants contained in this
                Agreement; 

            

    

     

    
      	3.     	
              the
                inaccuracy, incorrectness or untruthfulness of any of PhotoChannel’s
                representations contained herein or contained in any document or
                certificate given in order to carry out the transactions contemplated
                hereby;

            

    

     

    
      	4.     	
              any
                duties or obligations of PhotoChannel or PhotoChannel agents in respect
                of
                a Third Party or any subcontractor of PhotoChannel in connection
                with this
                Agreement;

            

    

     

    
      	5.     	
              personal
                injury (including death) or property loss or damage resulting from
                PhotoChannel’s or PhotoChannel agents’ acts or omissions;
                

            

    

     

    
      	6.     	
              the
                negligence or willful misconduct of PhotoChannel;
                and

            

    

     

    
      	7.     	
              the
                failure of PhotoChannel to comply with any applicable
                law.

            

    

     

    
      	19.0  	
              Limitation
                of Liability 

            

    

     

    
      	a.     	
              Consequential
                Damages

            

    

     

    IN
      NO
      EVENT WILL EITHER
      PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
      SPECIAL, OR EXEMPLARY DAMAGES EVEN IF ADVISED OF THE POSSIBILITY OF SUCH
      DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF REVENUE OR PROFIT OR GOODWILL,
      DOWNTIME COSTS, LOSS OF USE OF THE EQUIPMENT, LOSS OF DATA, THE COST OF
      SUBSTITUTE EQUIPMENT, FACILITIES, OR SERVICES, OR CLAIMS FROM THIRD PARTIES
      FOR
      SUCH DAMAGES.

     

    
      	b.     	
              Exclusions

            

    

     

    Section
      19.0(a) shall not apply to (1) breaches of Section 17.0 - Confidential
      Information or (2) liability resulting from the gross negligence or willful
      misconduct of a Party.

     

    
      	20.0  	
              Warranties

            

    

     

    
      	a.     	
              Authorization
                and Enforceability

            

    

     

    
      	1.     	
              PhotoChannel
                and CVS represent and warrant to the other
                that:

            

    

     

    
      	(i)     	
              each
                has all requisite corporate power and authority to execute, deliver
                and
                perform its obligations under this Agreement;

            

    

     

    
      	(ii)     	
              its
                signing of this Agreement has been duly authorized by all requisite
                corporate actions; and 

            

    

     

    
      	(iii)     	
              this
                Agreement is a valid and binding obligation, enforceable against
                it in
                accordance with its terms (assuming the due authorization, execution,
                and
                delivery by the other Party).

            

    

     

    
      	b.     	
              No
                Waiver or Limitation. 

            

    

     

    
      
        
        

      

      
        Page
          18
          of 28

        
          

        

      

      
        
        

      

    

     

    For
      greater certainty, the participation of CVS in any testing or the failure of
      CVS
      to participate in any testing provided under the terms hereof and/or the
      conducting of any due diligence and/or investigations by CVS (including without
      limitation any Performance Audit) shall not:

     

    
      	1.     	
              relieve
                PhotoChannel from any of its obligations, covenants, representations,
                warranties and indemnities
                hereunder;

            

    

     

    
      	2.     	
              reduce
                the scope of any of PhotoChannel’s obligations, covenants,
                representations, warranties and indemnities hereunder;
                or

            

    

     

    
      	3.     	
              relieve
                PhotoChannel from any liability it may otherwise incur under the
                terms
                hereof.

            

    

     

    
      	c.     	
              Representations
                and Warranties by PhotoChannel

            

    

     

    
      	1.     	
              Services

            

    

     

    PhotoChannel
      represents and warrants to CVS that the Services shall be performed in a good
      and workmanlike manner. 

     

    
      	2.     	
              Applicable
                Laws. 

            

    

     

    PhotoChannel
      covenants and warrants that in performing its obligations hereunder it shall
      comply with all applicable laws.

     

    
      	3.     	
              Representation
                - Facilities. 

            

    

     

    PhotoChannel
      hereby represents and warrants that it has and will continue to have access
      to
      necessary systems, equipment and facilities to perform its duties and
      obligations under this Agreement. 

     

    
      	4.     	
              No
                Infringement. 

            

    

     

    PhotoChannel
      hereby represents and warrants that it holds the right to license the System,
      the PhotoChannel Administrative Software and the PhotoChannel Order Puller
      Software and all other software, documents or other materials to be used or
      provided under the terms of this Agreement in the manner and to the extent
      contemplated hereunder. PhotoChannel further represents and warrants that the
      System, the PhotoChannel Administrative Software and the PhotoChannel Order
      Puller Software, do not and will not infringe any Intellectual Property Right,
      contractual right, trade secret or other proprietary right of any Third
      Party.

     

    
      	5.     	
              Third
                Party Software. 

            

    

     

    PhotoChannel
      hereby represents and warrants that the software listed in Schedule E (Third
      Party Software) is the only Third Party Software used in conjunction with the
      CVS.com Photo Center or used in conjunction with the rendering of services
      hereunder. PhotoChannel further represents and warrants that the licenses
      governing the use of Third Party Software are and will remain in good standing.
      Without any limitation to the foregoing, PhotoChannel hereby represents and
      warrants that the performance of PhotoChannel’s obligations hereunder is and
      shall remain in conformity with the rights afforded to and the obligations
      imposed upon PhotoChannel under the terms of said licenses.

     

    
      	6.     	
              Successful
                Integration. 

            

    

     

    PhotoChannel
      warrants that the System, the CVS.com Photo Center, the PhotoChannel
      Administrative Software and the PhotoChannel Order Puller Software will be
      capable of being fully and successfully integrated and be fully functional
      with
      one another.

     

    
      	7.     	
              Conformity
                with Specifications. 

            

    

     

    PhotoChannel
      hereby warrants that the software, programs and computer systems developed,
      customized and/or enhanced under this Agreement, including without limitation
      the Branded System, the PhotoChannel Administrative Software and the
      PhotoChannel Order Puller Software will function properly and will function
      in
      all material respects in accordance with their respective functional
      requirements and specifications. Without any limitation to the foregoing, the
      Branded System, the PhotoChannel Administrative Software and the PhotoChannel
      Order Puller Software, the Enhancements, the Updates, Maintenance Updates,
      Code,
      Documentation, and all other work and/or materials developed or provided by
      PhotoChannel hereunder shall be conceptualized, developed and/or prepared or
      have been conceptualized, developed and/or prepared according to the highest
      industry standards.

     

    
      
        
        

      

      
        Page
          19
          of 28

        
          

        

      

      
        
        

      

    

     

    
      	8.     	
              Virii,
                Trojans, backdoors, etc. 

            

    

     

    PhotoChannel
      hereby warrants that the software, programs and computer systems developed,
      customized, enhanced and/or provided under this Agreement, including without
      limitation the Branded System, the PhotoChannel Administrative Software and
      the
      PhotoChannel Order Puller Software:

     

    
      	(i)     	
              do
                not and will not contain any viruses, trojan horses, backdoors, Easter
                eggs, time bombs, worms, traps or other similar disabling mechanisms
                which
                are intentionally designed to disable, erase, destroy, damage or
                adversely
                affect said software, programs and computer systems or reduce or
                otherwise
                limit their effectiveness; 

            

    

     

    
      	(ii)     	
              do
                not and will not contain any invisible text, hidden text, hidden
                information, hidden graphics or other hidden materials;
                and

            

    

     

    
      	(iii)     	
              do
                not and will not contain any data collection tools, data matching
                tools or
                data mining tools other than those indicated in the functional
                requirements and specifications.

            

    

     

    
      	9.     	
              Security.
                

            

    

     

    PhotoChannel
      hereby warrants that the Security Measures meet and shall continue to meet
      industry accepted measures to prevent unauthorized access, communication,
      alteration and/or destruction of the Branded System and any Confidential
      Information and/or System Content contained thereon. Without any limitation
      to
      the foregoing, PhotoChannel hereby warrants that the Security Measures are
      sufficient, as generally accepted in the industry (including without limitation
      forthwith implementing the most recent updates for any security or virus
      protection software as they become available and/or upgrading any software
      and/or hardware which is no longer supported and/or otherwise becomes outdated
      or ineffective), to prevent, inter
      alia:

     

    
      	(i)     	
              any
                unauthorized access to the System (including without limitation any
                circumvention of the Access Restrictions and/or Security
                Measures);

            

    

     

    
      	(ii)     	
              any
                unauthorized alteration, destruction, communication or reproduction
                of
                personal information and/or Confidential
                Information;

            

    

     

    
      	(iii)     	
              any
                unauthorized alteration, destruction, communication or reproduction
                of any
                System Content; and/or

            

    

     

    
      	(iv)     	
              any
                viruses, trojan horses, worms, traps or other similar disabling mechanisms
                which are intentionally designed to disable, erase, destroy, damage
                or
                adversely affect the Software and/or the System or reduce or otherwise
                limit their effectiveness.

            

    

     

    
      	10.     	
              Remedial
                Actions.

            

    

     

    In
      the
      event of a failure of the Systems or any Enhancement, Update, Maintenance Update
      or other software provided hereunder, PhotoChannel shall, at its sole expense,
      use commercially reasonable efforts to remedy and rectify said failure. The
      foregoing shall not release PhotoChannel from any of its obligations under
      this
      Agreement nor will it limit any of the rights and remedies available to CVS
      which may arise in contract or at law as a result of any such
      failure.

     

    
      	11.     	
              THE
                WARRANTIES PROVIDED IN THIS AGREEMENT ARE THE ONLY WARRANTIES PROVIDED
                BY
                PHOTOCHANNEL, AND THEY ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
                OR
                IMPLIED, INCLUDING WARRANTIES FOR MERCHANTABILITY AND FITNESS FOR
                A
                PARTICULAR PURPOSE. 

            

    

     

    
      
        
        

      

      
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          20
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      	21.0  	
              Insurance
                and Risk of Loss

            

    

     

    
      	21.1  	
              PhotoChannel
                Insurance

            

    

     

    
      	a.     	
              During
                the Term PhotoChannel shall obtain and maintain at its own expense
                insurance of the type and in the amounts set forth below:
                

            

    

     

    
      	1.     	
              statutory
                workers’ compensation, or equivalent, in accordance with all applicable
                statutory requirements;

            

    

     

    
      	2.     	
              commercial
                general liability (including contractual liability insurance) with
                a
                combined single limit of not less than $3,000,000 per occurrence;
                

            

    

     

    
      	3.     	
              comprehensive
                automobile liability covering all vehicles that PhotoChannel owns,
                hires
                or leases in an amount not less than $1,000,000 per occurrence (combined
                single limit for bodily injury and property damage);
                and

            

    

     

    
      	4.     	
              PhotoChannel's
                insurance policies shall be underwritten by an insurance company
                that
                carries an A- or better rating from A.M. Best. Each policy shall
                provide
                that (i) CVS Corporation and it’s Subsidiary and Affiliates shall be named
                as an additional insured, (ii) not less than thirty (30) days' prior,
                written notice shall be given to CVS in the event of any alteration
                or
                terms of such policy or of the cancellation or non-renewal thereof,
                and
                (iii) such insurance will be primary insurance with respect to CVS
                Corporation and its Subsidiaries and Affiliates. PhotoChannel shall
                furnish CVS with a certificate of insurance evidencing coverage,
                and a
                certificate of insurance as evidence of renewal at least 30 days
                prior to
                expiration of each policy. The amount of such required insurance
                coverage
                under this section shall not limit PhotoChannel’s obligations under this
                contract.

            

    

     

    
      	21.2  	
              Documentation

            

    

     

    If
      requested, PhotoChannel shall cause its insurers to issue and to provide to
      CVS
      certificates of insurance evidencing that the coverage and policy endorsements
      required under this Agreement are maintained in force and that not less than
      thirty (30) days written notice shall be given to CVS prior to any reduction
      in
      coverage, cancellation or non-renewal of the policies. PhotoChannel shall assure
      that its subcontractors, if any, maintain insurance coverage as specified in
      this Section or are endorsed as additional insured on all required PhotoChannel
      coverage.

     

    
      	21.3  	
              Risk
                of Loss

            

    

     

    Each
      Party shall be responsible for risk of loss of, and damage to, any equipment,
      software or other materials in its possession or under its control, unless
      the
      loss of damage to equipment, software or other materials is caused by the other
      Party or its agents.

     

    
      	21.4  	
              No
                Implied Limitation or Expansion 

            

    

     

    The
      obligation of PhotoChannel to provide the insurance specified herein shall
      not
      limit or expand in any way any obligation or liability
      of
      PhotoChannel provided elsewhere in this Agreement nor shall the insurance
      coverage provided herein override CVS' indemnification obligations. Further,
      any
      rights afforded CVS under such insurance shall be subject to any of the defenses
      of limitations set forth herein. Accordingly, no insurance proceeds shall be
      payable to CVS without PhotoChannel's prior written consent which shall not
      be
      unreasonably withheld. 

     

    
      	22.0  	
              General

            

    

     

    
      	22.1  	
              Assignment
                and Binding Nature

            

    

     

    
      	a.     	
              Neither
                Party may assign its rights or obligations under this Agreement,
                without
                the prior written Consent of the other Party, except that either
                Party may
                assign its rights and obligations under this Agreement pursuant to
                a
                Change in Control of such Party, subject to the limitations in paragraph
                1
                below. The assigning Party shall provide the other Party with written
                notice of any assignment hereunder within three Business Days after
                the
                effective date of such assignment. 

            

    

     

    
      
        
        

      

      
        Page
          21
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      	1.     	
              Assignment
                of this Agreement by way of Change of Control of PhotoChannel will
                require
                the written Consent of CVS. If CVS does not provide written Consent
                pursuant to this section, CVS shall have the right to terminate the
                Agreement upon Change of Control of PhotoChannel by providing written
                notice within ninety (90) days of notification of the Change of Control
                event, as per Section 16.1.

            

    

     

    
      	2.     	
              Any
                attempted assignment that does not comply with this Section is
                void.

            

    

     

    
      	22.2  	
              Entire
                Agreement; Amendment; No
                Waiver

            

    

     

    This
      Agreement shall supersede any other prior or contemporaneous agreements,
      representations, warranties and understandings relating to the subject matter
      hereof and contains the entire agreement between the Parties with respect to
      the
      subject matter hereof. No amendment, modification, termination or waiver of
      any
      provision of this Agreement, nor consent to any departure therefrom, shall
      in
      any event be effective unless the same shall be in writing and signed by a
      duly
      authorized representative of each Party. Any waiver or consent shall be
      effective only in the specific instance and for the specific purpose for which
      it is given. 

     

    
      	22.3  	
              Non
                Exclusivity

            

    

     

    Nothing
      herein shall be construed to provide PhotoChannel with exclusive rights with
      respect to the development and/or supply of any of the products and Services
      contemplated hereunder.

     

    
      	22.4  	
              Expenses 

            

    

     

    Except
      as
      otherwise provided in this Agreement each of the parties hereto will pay its
      own
      legal, accounting expenses, travel, telecommunications and other expenses
      relating to the rendering of professional services.

     

    
      	22.5  	
              Subcontractors.

            

    

     

    With
      respect to subcontracting, CVS and PhotoChannel agree that:

     

    
      	a.     	
              prior
                to any material subcontracting of any of the Services (greater than
                $150,000 per year in annual payments to the proposed Subcontractor),
                PhotoChannel shall notify CVS of the proposed Subcontractor and associated
                activity;

            

    

     

    
      	b.     	
              unless
                CVS otherwise consents, and such consent shall not be unreasonably
                withheld, CVS shall have the option to renegotiate the terms of this
                Agreement if any subsequent reduction in Service Levels attributed
                to such
                Subcontractor is evident within six (6) months of the Subcontractor
                commencing service delivery;

            

    

     

    
      	c.     	
              no
                subcontracting shall release PhotoChannel from its responsibility
                for its
                obligations under this Agreement. PhotoChannel shall be responsible
                for
                ensuring that each of its Subcontractors and Affiliates comply with
                the
                terms of this Agreement. PhotoChannel shall be responsible for all
                payments to its Subcontractors; and

            

    

     

    
      	d.     	
              PhotoChannel
                shall promptly pay all undisputed charges due for services, materials,
                equipment and labor used by PhotoChannel in providing the Services
                and
                PhotoChannel shall keep CVS’ premises free of all
                liens.

            

    

     

    
      	22.6  	
              Relationship. 

            

    

     

    Nothing
      in this Agreement shall be deemed or construed to constitute or create a
      partnership, joint venture, franchise or agency relationship between the
      Parties. The Parties agree to conduct their respective businesses to prevent
      any
      such relations from being implied.

     

    
      	22.7  	
              No
                Third Party Beneficiary. 

            

    

     

    No
      individual or entity shall be considered a Third Party beneficiary of this
      Agreement, including but not limited to any employees of either Party or any
      Third Party. 

     

    
      
        
        

      

      
        Page
          22
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      	22.8  	
              Successors
                and Assigns. 

            

    

     

    This
      Agreement, subject to the terms and conditions hereof, shall be binding upon
      and
      inure to the benefit of the Parties and their respective successors and
      permitted assigns. 

     

    
      	22.9  	
              Governing
                Law; Severability. 

            

    

     

    
      	a.     	
              This
                Agreement shall be governed by and construed in accordance with the
                substantive laws of State of New York, excluding its conflict of
                laws
                principles.

            

    

     

    
      	b.     	
              Any
                term or provision hereof that may be invalid or unenforceable under
                the
                laws of any state or other jurisdiction shall not affect the validity
                or
                enforceability of this Agreement and its remaining terms and provision
                and
                such invalid or unenforceable term or provision shall be deemed not
                to be
                part of this Agreement.

            

    

     

    
      	22.10  	
              Force
                Majeure. 

            

    

     

    
      	a.     	
              No
                Party shall be responsible for any failure to perform any of its
                obligations (other than payment obligations) under this Agreement
                where
                and to the extent that such failure or delay is caused, directly
                or
                indirectly, by fire, flood, earthquake, elements of nature or acts
                of God,
                acts of war, terrorism, riots, civil disorders, rebellions or revolutions
                in the North America, sabotage, strikes, lockouts or labor difficulties
                or
                any other similar cause beyond the reasonable control of such Party
                (each,
                a “Force
                Majeure Event”).
                

            

    

     

    
      	b.     	
              Upon
                the occurrence of a Force Majeure Event, the non-performing Party
                shall be
                excused from any further performance of those of its obligations
                pursuant
                to this Agreement affected by the Force Majeure Event for as long
                as (a)
                such Force Majeure Event continues and (b) such Party continues to
                use
                best efforts to recommence performance whenever and to whatever extent
                possible without delay. 

            

    

     

    
      	c.     	
              In
                the event PhotoChannel fails to provide the Services in accordance
                with
                this Agreement due to the occurrence of a Force Majeure Event or
                any other
                disaster, the Fees shall be adjusted in a manner such that CVS is
                not
                responsible for the payment of Fees for those Services that PhotoChannel
                fails to provide. Additionally, if such reduction in service lasts
                longer
                than thirty (30) days, CVS shall have the right to contract with
                Third
                Parties to perform the affected Services, at CVS’ expense, until
                PhotoChannel can restore such
                Services.

            

    

     

    
      	22.11  	
              Headings.

            

    

     

    Headings
      in this Agreement are included herein for convenience or reference only and
      shall not constitute a part of this Agreement for any other purpose. 

     

    
      	22.12  	
              Public
                Announcement. 

            

    

     

    No
      Party
      shall make any public announcement concerning this Agreement or the relationship
      established hereby without the prior written Consent of the other Party
      hereto.

     

    
      	22.13  	
              Notifications
                and Approvals

            

    

     

    
      	a.     	
              PhotoChannel
                and CVS
                may communicate with each other by electronic means. Such communication
                is
                acceptable as a signed writing to the extent permissible under applicable
                law. An identification code (called a User ID) contained in an electronic
                document will be deemed sufficient to verify the sender's identity
                and the
                document's authenticity.

            

    

    
       

      
        
        

      

      
        Page
          23
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        	b.     	
                All
                  notices hereunder shall be in writing and shall be delivered personally,
                  by overnight courier, by certified mail postage pre-paid, or by
                  facsimile
                  transmission with confirmed answer-back, and shall be deemed received
                  in
                  the case of personal delivery or overnight courier, when delivered,
                  in the
                  case of mailing, on the receipt of delivery confirmation, and in
                  the case
                  of facsimile transmission, upon receipt of answer-back confirmation.
                  All
                  notices hereunder shall be sent to the following
                  addressees:

              

      

       

    

    
      	
              If
                to PhotoChannel:

            	 	
              Chief
                Financial Officer

              PhotoChannel
                Networks Inc.

              Suite
                506, 

              425
                Carrall Street, 

              Vancouver,
                British Columbia, Canada V6B 6E3

              Telephone:
                (604) 893-8955 Ext. 224

              Fax:
                (604) 893-8966

            
	 	 	 
	
              If
                to CVS:

            	 	
              General
                Counsel

              CVS
                Pharmacy, Inc.

              1
                CVS Drive

              Woonsocket,
                Rhode Island 02895 

              Fax
                401-765-7887

            
	 	 	 
	 	 	
              With
                a copy to:

              Director
                - Photo Operations

              CVS
                Pharmacy, Inc.

              1
                CVS Drive

              Woonsocket,
                Rhode Island 02895 

            

    

     

    
      	c.     	
              PhotoChannel
                or CVS
                may change its address, phone and facsimile numbers for notification
                purposes by giving the other prior written notice of the new information
                and its effective date.

            

    

     

    
      	22.14  	
              References 

            

    

     

    Neither
      Party nor any of its employees, agents or sub-contractors shall (i) use the
      other Party’s name or any photo or visual or audio facsimiles of the other
      Party’s facilities or employees for any purpose (ii) reveal any details
      regarding the Services provided pursuant hereto to any Third Party, unless
      prior
      written Consent of the other Party has been obtained, except as required by
      law,
      in response to requests of a governmental authority, or to enforce its rights
      under this Agreement. 

     

    
      	22.15  	
              Taxes
                on Services 

            

    

     

    
      	a.     	
              CVS
                will pay all: 

            

    

     

    
      	1.     	
              applicable
                taxes (such as sales (including sales tax on services), use, gross
                receipts, excise, occupation, and other transaction-based taxes),
                duties,
                levies, and fees on PhotoChannel's charges;  

            

    

     

    
      	2.     	
              personal
                property, sales, value-added, and use taxes on CVS'
                personal property;

            

    

     

    
      	3.     	
              telecommunication
                taxes for network access (for example, lines) and services leased
                or
                contracted for by CVS; and

            

    

     

    
      	4.     	
              taxes,
                assessments, and other levies on CVS'
                owned, leased, rented, or purchased real
                property.

            

    

     

    
      	b.     	
              CVS
                and PhotoChannel agree to cooperate reasonably with the other to
                determine
                CVS'
                tax liability on PhotoChannel's
                charges.

            

    

     

    
      	c.     	
              PhotoChannel's
                invoices will state applicable taxes owed by CVS,
                if any, by tax jurisdiction.

            

    

     

    
      	d.     	
              PhotoChannel
                and CVS
                will provide and make available to the other any resale certificates,
                tax
                exemption certificates, information regarding out-of-state sales
                or use of
                equipment, materials or services, direct pay certificates and other
                exemption certificates.

            

    

     

    
      
        
        

      

      
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          24
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    Appendix
      A-1 - Glossary

     

    Acquired
      Stores - has
      the
      meaning set forth in Section 7.0 (b)(2).

     

    Administrative
      Software
      - means
      the Monitoring System and customer service tools used to monitor, manage, and
      manipulate customer photo image orders or other software used to assist customer
      support.

     

    Affiliate
      - means,
      with respect to any Party, any entity directly, or indirectly through one or
      more intermediaries, controlling, controlled by or under common control with
      such Party, whether by ownership or control of voting securities, by contract
      or
      otherwise.

     

    Agreement
      - means
      this Service and Support Agreement between PhotoChannel and CVS, all
      Attachments, and the Appendix.

     

    Allocation
      Percentage
      - means
      a percentage applied to each SLA and used in the Service Level Credit
      calculation.

     

    Appendix
      - means
      this Appendix A-1 entitled “Glossary.”

     

    At
      Risk Amount - has
      the
      meaning set forth in Section 6.0 of Schedule C - Service Level
      Agreements.

     

    Attachments
      - means
      the Schedules and Exhibits, collectively.

     

    Base
      Terms
      - means
      the Agreement and the Appendix, and excludes the Attachments.

     

    Branded
      System - means
      the
      CVS proprietary branded website used in conjunction with the System, including
      without limitation, the CVS.com Photo Center and use of any features or
      functionality offered by the System via the CVS website.

     

    Branded
      Environment -
      means
      the structure, organisation, presentation, layout, look and feel and aesthetical
      elements of the CVS.com
      Photo Center,
      including without limitation all menus, toolbars, screen layout, popup pages,
      forms, frames, buttons, checkboxes, and other forms or methods of presentation
      and organisation contained on the CVS.com
      Photo Center.

     

    Bulk
      Emails - means
      all
      broadcast emails regularly sent to all Members of the CVS.com Photo Center
      who
      opt-in for email based communications. For the clarification of doubt, Bulk
      Emails do not include System Event Emails. 

     

    Business
      Day
      - means
      any Monday, Tuesday, Wednesday, Thursday, or Friday except U.S. postal
      holidays.

     

    Change
      of Control -
      means the
      transfer of all or substantially all of the assets of a Party (either in a
      single transaction or series of related transactions); the transfer of more
      than
      50% of the voting equity interests of a Party (either in a single transaction
      or
      series of related transactions); or, in the case of PhotoChannel only, the
      sale
      or disposition of all or substantially all of the assets used by PhotoChannel
      to
      provide services under this Agreement.

     

    Charges
      - has
      the meaning set forth in Section 1.0 of Schedule B - Pricing.

     

    Computer
      Facilities -
      means
      the computer hardware including related system software and peripheral devices
      and any addition to, and replacements and upgrades thereto, operated by or
      on
      behalf of PhotoChannel, located at 5-3777 Kingsway, Burnaby, B.C. , Canada
      V5H
      3Z7 or such other location as the parties may mutually agree.

     

    Code
      -
      means
      any computer programming/formatting code (including without any limitation
      to
      the foregoing, HTML, Java, XML, CSS, JSP and javascript), any files necessary
      to
      make image maps function and any server code necessary to make forms, frames,
      buttons, check-boxes and the like function.

     

    Confidential
      Information
      - has
      the meaning set forth in Section 17.0.

     

    Consent
      - means
      the
      consent of the other Party to this Agreement, which consent shall not be
      unreasonably withheld.

     

    Consumer
      or
Consumers
      - shall
      mean any end user of the CVS.com Photo Site, whether such end user is a Member
      or not.

     

    CVS
      - has
      the
      meaning set forth in the introduction on the first page of this
      Agreement.

     

    CVS.com
      Photo Center - has
      the
      meaning set forth in the introduction on the fourth page of this
      Agreement.

     

    
      
        
        

      

      
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          25
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    CVS
      Materials
      - means
      those materials provided by CVS to PhotoChannel or created by PhotoChannel
      (or
      its subcontractors) for the purposes of creating the CVS.com
      Photo Center and/or the
      Branded System, including without limitation, all pictures, images, drawings,
      text, formatted text (including without limitation HTTP pages) audio-visual
      materials, sounds, music, animation, symbols, representations, logos and other
      materials. For greater certainty, the CVS Materials include the CVS
      Marks.

     

    CVS
      Marks -
      means
      those trade-marks owned by or licensed to CVS or its Affiliates which CVS in
      its
      sole discretion decides to incorporate to the CVS.com
      Photo Center.

     

    Documentation
      -
      shall
      mean all system manuals and user instructions, including without limitation
      all
      online help files, frequently asked questions and tutorials (whether in hard
      copy or electronic format and regardless of media) explaining the use,
      operation, support and technical aspects of the Branded System, the PhotoChannel
      Administrative Software, the Order Puller Software or any portion or component
      thereof, including any updates, revisions, or enhancements thereof.

     

    Editing
      Features -
      means
      such creation and editing processes applied to or incorporating Photos or
      Modified Photos which may be available through the Branded System.

     

    Enhancements
      -
      means
      all on-going changes implemented by PhotoChannel to the Systems, whether
      requested by CVS or otherwise, including all functionality upgrades or
      additions, patches, updates, or other general enhancements required for proper
      functioning of the Systems.

     

    Effective
      Date
      - has
      the meaning set forth in Section 1.0.

     

    Exhibit
      - means
      the exhibit, if any, expressly referenced in and attached to a
      Schedule.

     

    Expiration
      Date
      - has
      the meaning set forth in Section 1.0.

     

    Fees
      - shall
      mean all charges and prices set forth in Schedule B - Pricing for the
      Services.

     

    Financial
      Audit
      - has
      the meaning set forth in Section 12.0(a).

     

    Force
      Majeure Event
      - has
      the meaning set forth in Section 22.10(a).

     

    Guest
      -
      means
      any Person, whether a Member or not, who has been authorised by a Member to
      access one or more of such Member’s Online Albums.

     

    Initial
      Term
      - has
      the meaning set forth in Section 1.0.

     

    Kiosk
      - means
      any collection of stand-alone in-store photo stations, printers, and/or scanners
      grouped into a cabinet or other freestanding form, used to process photos by
      CVS
      customers.

     

    Lab
      System Software - means
      the
      web-based software system which permits management and/or processing of Print
      Transactions and or Gift Transactions through the Branded System.

     

    Losses
      - means
      any and all damages, fines, penalties, deficiencies, losses, liabilities
      (including settlements entered into in accordance with Section 18.0), and
      expenses (including interest, court costs, reasonable fees and expenses of
      attorneys, accountants and other experts and professionals or other reasonable
      fees and expenses of litigation or other proceedings).

     

    Maintenance Update
      -
      has the
      meaning described in the Service Responsibility Matrix of Schedule
      A.

     

    Modified
      Photo -
      means a
      Photo which has been modified using any of the Editing Features.

     

    Monitoring
      System
      - means
      the software solution permitting authorized representatives of the Parties
      to
      monitor the uptime of the Order Processing Systems.

     

    New
      Service - has
      the
      meaning set forth in Section 4.0 of Schedule B - Pricing.

     

    Member
      - means
      any Person using the System, registered or not, for which any data is
      collected.

     

    Member
      Content -
      means
      the Member Information and the Online Album(s) (including without limitation
      all
      Photos and Modified Photos comprising same) of a Member.

     

    Member
      Information -
      means
      the information collected from a Member when said Member applies for an account
      on the Branded System (as same may be subsequently modified from time to time)
      and all information relating to said Member’s account.

     

    Online Album
      -
      means a
      collection of Photos and Modified Photos associated to a Member and stored
      on
      the Computer Facilities accessible through the Branded System.

     

    Online
      Print Business
      - mean
      the online photography business conducted through www.cvs.com.

     

    
      
        
        

      

      
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          26
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    Order
      Processing Systems - means
      the
      computer hardware, including related system software and peripheral devices
      and
      any addition to and replacements and upgrades thereto, contained in a single
      physical premise.

     

    Order
      Puller Software
      - means
      software that is installed on the Order Processing Systems, which communicates
      automatically, at set intervals, with the Branded System determining if orders
      have been placed and pulling available orders to the Order Processing Systems
      and which includes the Order Routing System. 

     

    Order
      Routing System
      - means
      the back-end system that performs image routing, image rendering, storage,
      and
      which interfaces with other Systems as required (e.g. Branded System, Order
      Puller Software, Administrative Tools).

     

    Parties
      - means
      PhotoChannel and CVS, collectively.

     

    Party
      - means
      either PhotoChannel or CVS, alternatively.

     

    Performance
      Audit
      - has
      the meaning set forth in Section 12.0(b).

     

    Person
      -
      shall be
      broadly interpreted and shall include any individual, partnership, limited
      partnership, corporation, joint venture, association, joint stock company,
      trust, unincorporated organisation, or a government or an agency
      thereof.

     

    Photo
      -
      means a
      digital image as may be uploaded by a Member to said Member’s Online
      Album

     

    PhotoChannel
      - has
      the
      meaning set forth in the introduction on the first page of this
      Agreement.

     

    Pre-Installation
      Test - has
      the
      meaning set forth in Section 4.2(c)1.

     

    Post
      Installation Test - has
      the
      meaning set forth in Section 4.2(c)2.

     

    Print
      Transaction - means
      the
      sequential occurrence of each of the following:

     

    
      	1.  	
              the
                submission of a valid print order by a Member or a
                Guest;

            

    

     

    
      	2.  	
              the
                successful processing of said print order by the Branded
                System;

            

    

     

    
      	3.  	
              the
                successful distribution of the print order to the Printer or Producer
                or
                both; 

            

    

     

    
      	4.  	
              the
                successful notification by the Printer to the Branded System of the
                completion of the respective order;
                and

            

    

     

    
      	5.  	
              the
                successful notification of the respective Member or Guest by the
                Branded
                System of completion of the respective
                order.

            

    

     

    Printer
      or
      Printers
      -
      means
      those
      photo development labs CVS may specify from time to time in its sole discretion,
      and also includes the CVS Printers (e.g. Qualex). The term “Printer”
shall
      mean any one of them.

     

    Producers
      -
means
      those producers of customized photo merchandise, or other customized output,
      as
      CVS may designate from time to time in its sole discretion (e.g. PhotoTLC).
      The
      term “Producer”
shall
      mean any one of them.

     

    Project
      - has
      the
      meaning set forth in Section 4.0 of Schedule B - Pricing.

     

    Retail
      Support - means
      the
      diagnosing and troubleshooting of in-store issues which prevent or impede order
      fulfillment. Technical assistance may be either onsite or telephonic. Retail
      support has three levels as follows:

     

    
      	1.  	
              Level
                1 Retail Support: Telephonic problem resolution, provided by CVS
                or its’
                designee. Problems not resolved by Level 1 are escalated to Level
                2.

            

    

     

    
      	2.  	
              Level
                2 Retail Support: Telephonic problem resolution, provided by Photo
                Channel, primarily related to software support, and described in
                Item A-32
                of Schedule A.

            

    

     

    
      	3.  	
              Level
                3 Retail Support: Onsite Software problem resolution, including support
                of
                the Systems, to be provided by PhotoChannel. Onsite Hardware problem
                resolution, to be provided by the appropriate CVS
                designee.

            

    

     

    Renewal
      Period
      - has
      the meaning set forth in Section 1.0.

     

    Schedule
      - means
      any attachment expressly referenced in and attached to this Agreement, excluding
      the Appendix. A Schedule includes the Exhibits expressly referenced in and
      attached to a Schedule.

     

    Fees
      - means
      the
      fees set forth in Section 2.0 of Schedule B - Pricing.

     

    
      
        
        

      

      
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          27
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    Service
      Level Credit
      - shall
      mean a credit payable to CVS should PhotoChannel fail to achieve the Service
      Levels, and computed in accordance with the formulas set forth in Section 6.0
      of
      Schedule C - Service Levels.

     

    Service
      Level
      or
      SLA
      - means
      the service delivery criteria established for certain of the Services, as set
      forth in Section 7.0 of Schedule C - Service Levels.

     

    Service
      Responsibility Matrix - has
      the
      meaning set forth in the Section 2.0 of Schedule A - Statement of
      Work.

     

    Services
      - the
      services, functions and responsibilities described in this Agreement for online
      photo support including the services, functions and responsibilities described
      in Schedule A, but excluding any such services, functions, responsibilities
      and
      Projects expressly designated as the responsibility of CVS.

     

    Severity
      Code
      - means
      the severity designation assigned to a problem call, as further defined in
      the
      Service Responsibility Matrix of Schedule A - Statement of Work.

     

    SLA Audit
      Period - has
      the
      meaning set forth in Section 3.0 of Schedule C - Service Level
      Agreements.

     

    SLA
      Performance Report
      - has
      the meaning set forth in Section 3.0 of Schedule C - Service Level
      Agreements.

     

    Software
      - has
      the meaning and description as provided for in Schedule D - Software
      Specifications.

     

    Software
      Escrow Agreement -
      means an
      agreement which allows CVS to obtain the source code of the Systems, and other
      materials if required, under special circumstances including the insolvency
      of
      PhotoChannel, as described in Schedule F - Sample Software Escrow
      Agreement.

     

    Software
      Escrow Package -
      has the
      meaning and description as provided for in Schedule F - Sample Software Escrow
      Agreement.

     

    Store
      - means
      a retail store location owned or operated by CVS as of the Effective Date where
      CVS provides on-site photo finishing services.

     

    Subcontractor
      - means
      a
      contractor, or vendor, or agent, or consultant selected and retained by
      PhotoChannel.

     

    System
      - has
      the
      meaning set forth in the introduction on the fourth page of this
      Agreement.

     

    System
      Content -
      means
      all data generated through the customisation, installation, operation,
      administration, maintenance and use of the CVS.com
      Photo Center
      and/or
      the Branded System and all data at any time stored on and all data received
      or
      processed by the Computer Facilities through use of the CVS.com
      Photo Center
      and/or
      the Branded System (including without any limitation all Member Content, System
      Logs and Transaction Records) (including all such data which has been backed
      up).

     

    System
      Event Emails - means
      those emails which are triggered by an event or business rule related to
      activities, or lack thereof, on any Member account. Examples of System Event
      Emails include account sign up welcome, order confirmation, order ready for
      pickup, abandoned shopping cart or storage term expiration.

     

    Term
      - means
      collectively the Initial Term and the Renewal Term (if the Renewal Term is
      applicable).

     

    Third
      Party
      or
Third
      Parties
      - means
      any entity or person other than PhotoChannel and CVS and their respective
      Affiliates, directors, officers, and employees.

     

    Third
      Party Content Provider -
      any
      third party, authorized by CVS, providing images, or other content to the
      Systems, via any programmatic method including internet or via other software
      interfaces. Third Party Content Providers may include Sony Image Station,
      Picasa, AOL, Kodak Gallery, Corel, personal websites or ‘blogs’, classmates.com,
      or other providers capable of interacting with the Systems, For the avoidance
      of
      doubt, Third Party Content Providers do not include direct uploads from end
      users or Consumers.

     

    Time
      and Materials Fees
      - has
      the meaning set forth in the Section 2.0(h) of Schedule B -
      Pricing.

     

    Transition
      Period
      - has
      the meaning set forth in the Section 3.0.

     

    Transition
      Services
      - means
      the services and software as set forth in Section 4.0 to be completed during
      the
      Transition Period.

     

    
      
        
        

      

      
        Page
          28
          of 28

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