Document:

Exhibit
10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is
made as of June 15, 2003 between 1-800 CONTACTS, INC., a Utah corporation (the
“Company”), and David M. Saylor (the “Executive”).  This Agreement shall be deemed to be effective
as of June 15,  2003 (the “Effective
Date”).

 

In consideration
of the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

1.                                       Employment.  The Company shall employ Executive, and
Executive hereby accepts employment with the Company, upon the terms and
conditions set forth in this Agreement, for the period beginning on the
Effective Date and ending as provided in paragraph 4 hereof (the “Employment
Period”).

 

2.                                       Position
and Duties.

 

(a)                                  During
the Employment Period, Executive shall serve as the Vice President, Operations
and Project Manager of the Company and shall have the normal duties,
responsibilities and authority of such position.

 

(b)                                 Executive
shall report to the Company’s Chief Executive Officer and such other persons as
the board of directors (“the Board”) may direct from time to time, and
Executive shall devote his best efforts and his full business time and
attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company and its
Subsidiaries (as hereinafter defined). 
Executive shall perform his duties and responsibilities to the best of
his abilities in a diligent, trustworthy, businesslike and efficient manner.

 

(c)                                  For
purposes of this Agreement, “Subsidiaries” shall mean any corporation of
which the securities having a majority of the voting power in electing
directors are, at the time of determination, owned by the Company, directly or
through one of more Subsidiaries.

 

 

3.                                       Base
Salary and Benefits.

 

(a)                                  During
the first year of the Employment Period, Executive’s base salary shall be
$160,000 per annum (the “Base Salary”), which salary shall be payable in
regular installments in accordance with the Company’s general payroll practices
and shall be subject to customary withholding. 
Thereafter, the Base Salary shall be such higher rate as the Board may
designate from time to time.  As used in
this Agreement, the term “Base Salary” shall be deemed to include any such
increases as may be designated from time to time by corporate management.  During the Employment Period, Executive
shall be entitled to participate in all of the Company’s employee benefit
programs for which management employees of the Company and its Subsidiaries are
generally eligible (including the Company’s stock option program).

 

(b)                                 In
addition to the Base Salary, the Board will award an annual bonus of up to 10%
of the Executive’s Base Salary to Executive following the end of each fiscal
year during the Employment Period upon the Company achieving certain operating
targets as determined by the Board at the beginning of each fiscal year during
the Employment Period.  In addition to
the Base Salary and any bonuses payable to Executive pursuant to this
paragraph, Executive shall be entitled to the following benefits during the
Employment Period:

 

(i)                                     Reimbursement
for the cost of an annual physical examination by a physician of Executive’s
choice;

(ii)                                  A
maximum of fifteen days vacation each year with salary, subject to additional
vacation upon executive approval; and

(iii)                               Reimbursement
for travel, entertainment and other business expenses reasonably incurred by
Executive (including costs associated with the use of a mobile telephone); and

(iv)                              $500
per month car allowance; and

(v)                                 $400
per month house cleaning allowance; and

(vi)                              $1000
annual tax planning allowance; and

(vii)                           401 (k)
– Company will match 50% up to 6% deferral; and

(viii)                        Paid LTD;
and

(ix)                                Paid
Life Insurance (Supplemental Life Available); and

(x)                                   Paid
Medical Coverage for self, spouse and dependants; and

(xi)                                Dental
and Vision coverage available

 

4.                                   Termination.

 

(a) The Employment Period shall continue until earlier
of (i) the fourth anniversary of the Effective Date (the “Expiration Date”)
or (ii) Executive’s resignation, death or disability or other incapacity (as
determined by the Board in its good faith judgment) or until the Board
determines in its good faith judgment that termination of Executive’s
employment is in the best interests of the Company.  Notwithstanding the foregoing, the Employment Period shall be
automatically extended for an additional year unless either the Company or the
Executive delivers written notice to the other within 60 days of the Expiration
Date of its or his intention not to extend the Employment Period.  In

 

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the event of Executive’s
resignation of employment for any reason, (other than a breach by the Company
of paragraph 2(a)) or termination for Cause (as defined herein), Executive
shall not be entitled to receive his Base Salary or any fringe benefits for any
period after the termination of the Employment Period.  Upon any other termination of the Employment
Period, Executive shall be entitled to receive (i) his Base Salary and health
benefits for a period of 12 months thereafter, and (ii) following the end of
the fiscal year in which Executive’s employment would have been entitled if he
remained employed by the Company or its Subsidiaries for the entire fiscal year
(the “Bonus Amount”), (A) 50% of the Bonus Amount if such termination occurs in
the first six months of such fiscal year or (B) 100% of the Bonus Amount if such
termination occurs in the second six months of such fiscal year.

 

(b) For purposes of this Agreement, “Cause” shall mean (i) the willful and
continued failure by Executive to perform his duties of the position set forth
herein or his continued failure to perform duties reasonably requested or
reasonably prescribed by the Board, (ii) the engaging by Executive in conduct
which is materially monetarily injurious to the Company or any of its
Subsidiaries, (iii) gross negligence or willful misconduct by Executive in the
performance of his duties which results in, or causes, material monetary harm
to the Company or any of its Subsidiaries, or (iv) Executive’s commission of a
felony or other civil or criminal offense involving moral turpitude.  In the case of (i), (ii) and (iii) above,
finding of Cause for termination shall be made only after reasonable notice to
Executive and an opportunity for Executive, together with counsel (if requested
by executive), to be heard before the Board.

 

5.                                       Confidential
Information.  Executive acknowledges
that the information, observations, data, strategic and development plans,
financial condition, business plans, co-developer identities, business records,
customer lists, clients and suppliers, project records, market reports, employee
lists and business manuals, policies and procedures, information relating to
processes, technologies of theory and all other information which may be
disclosed or obtained by Executive while employed by the Company and its
Subsidiaries concerning the business or affairs of the Company or any other
Subsidiary (“Confidential Information”) are the property of the Company or such
Subsidiary.  Therefore, Executive agrees
that he shall not disclose to any unauthorized person or use for his own
purposes any Confidential Information without the prior written consent of the
Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result
of Executive’s acts or omissions. 
Executive shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and
other documents and data (and copies or reproductions thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of
the Company or any Subsidiary which he may then possess or have under his
control.

 

6.                                       Inventions
and Patents.  In accordance with UCA
§34-39-1 et. seq., Executive acknowledges that any invention or part thereof
conceived, developed, reduced to practice, or created by Executive which is:

(a) conceived, developed, reduced to practice, or
created by Executive:

(i) within the scope of
his employment;

 

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(ii) on Company’s or its
Subsidiaries’ time; or

(iii) with the aid, assistance, or use of any of
Company’s or its Subsidiaries’ property, equipment, facilities, supplies,
resources, or intellectual property;

(b) the result of any work, services, or duties
performed by Executive for Company or its Subsidiaries;

(c) related to the industry or trade of the Company or
its Subsidiaries; or

(d) related to the current or demonstrably anticipated
business, research, or development of the Company or its Subsidiaries is an
(“Employment invention”) and belongs to the Company or such Subsidiary.

(e) 
(“Intellectual property”) means any and all patents, trade secrets,
know-how, technology, confidential information, ideas, copyrights, trademarks,
and service marks and any and all rights, applications, and registrations
relating to them.

(f) Executive shall promptly disclose such Employment
invention to the Board and perform all actions reasonably requested by the
Board (whether during or after the Employment Period) to establish and confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).

 

7.                                       Non-Compete,
Non-Solicitation.

 

(a)                                  In
further consideration of the compensation to be paid to Executive hereunder,
Executive acknowledges that in the course of his employment with the Company he
shall become familiar with the Company’s trade secrets and with other
Confidential Information concerning the Company and its Subsidiaries and that
his services shall be of special, unique and extraordinary value to the Company
and its Subsidiaries.  Therefore,
Executive agrees that, during the Employment Period and for two years thereafter
(the “Noncompete Period”), he shall not, without the express written
consent of the Company, directly or indirectly own any interest in, manage,
control, participate in, consult with, render services for, or in any manner
engage in any business competing with the businesses of the Company or its
Subsidiaries, as such businesses exist or are in process on the date of the
termination of Executive’s employment, within any geographical area in which
the Company or its Subsidiaries engage or plan to engage in such businesses.  Nothing herein shall prohibit Executive from
being a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.

 

(b)                                 During
the Noncompete Period, Executive shall not directly or indirectly through
another entity (i) hire any person who was an employee of the Company or any
Subsidiary at any time during the three-month period prior to the expiration of
the Employment Period or (ii) induce or attempt to induce any customer,
supplier, licensee, licensor, franchisee or other business relation of the
Company or any Subsidiary to cease doing business with the Company or such
Subsidiary, or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any
Subsidiary (including, without limitation, making any negative statements or
communications about the Company or its Subsidiaries) which interference causes
material monetary damage to the Company or its Subsidiaries.

 

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8.                                       Enforcement.  If, at the time of enforcement of
paragraph 5, 6, 7 or 8 of this Agreement, a court holds that the
restrictions stated herein are unreasonable under circumstances then existing,
the parties hereto agree that the maximum period, scope or geographical area
reasonable under such circumstances shall be substituted for the stated period,
scope or area. Because Executive’s services are unique and because Executive
has access to Confidential Information and Work Product, the parties hereto
agree that money damages would not be an adequate remedy for any breach of this
Agreement.  Therefore, in the event a
breach or threatened breach of this Agreement, the Company or its successors or
assigns may, in addition to other rights and remedies existing in their favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce, or prevent any violations of,
the provisions hereof (without posting a bond or other security).  In addition, in the event of an alleged
breach or violation by Executive of paragraph 7, the Noncompete Period shall be
tolled until such breach or violation has been duly cured.  Executive agrees that the restrictions
contained in paragraph 7 are reasonable.

 

9.                                       Other
Businesses.  As long as Executive is
employed by the Company or any of its Subsidiaries, Executive agrees that he
will not, except with the express written consent of the Board, become engaged
in, or render services for, any business other than the business of the
Company, any of its Subsidiaries or any corporation or partnership in which the
Company or any of its Subsidiaries have an equity interest; provided, that Executive
may devote a de minimis portion of his time to engaging in, or rendering
services for, any such business if such activities do not in any material way
interfere with the performance by Executive of his obligations hereunder and
such activities do not  in any way
materially and adversely affect the Company. 
Executive shall notify the Company prior to engaging in any such
activities.  Nothing contained in this
paragraph 9 shall limit the provisions of paragraph 7 above.

 

10.                                 Executive’s
Representations.  Executive hereby
represents and warrants to the Company that (i) the execution, delivery and
performance of this Agreement by Executive do not and shall not conflict with,
breach, violate or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by which he is
bound, (ii) Executive is not a party to or bound by any employment
agreement, noncompete agreement or confidentiality agreement with any other
person or entity and (iii) upon the execution and delivery of this Agreement by
the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms.  Executive hereby acknowledges and represents that he fully
understands the terms and conditions contained herein.

 

11.                                 Survival.  Paragraphs 5, 6, and 7 and
paragraphs 11 through 19 shall survive and continue in full force in
accordance with their terms notwithstanding any termination of the Employment
Period.

 

12.                                 Notices.  Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed by
first class mail, return receipt requested, to the recipient at the address
below indicated:

 

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  Notices to Executive:

  
	
   

  
	
  David M. Saylor

  
	
  21960 N. Harbor Road

  
	
  Barrington, IL 60010

  
	
   

  
	
  Notices to the Company:

  
	
   

  
	
  1-800 CONTACTS, INC.

  
	
  13751 Wadsworth Park Drive, Suite D-140

  
	
  Draper, Utah 
  84020

  
	
  Attn:  Board
  of Directors

  
	
   

  
	
  with a copy to:

  
	
   

  
	
  Kirkland & Ellis

  
	
  200 E. Randolph Drive

  
	
  Chicago, Illinois 
  60601

  
	
  Attn:  Dennis
  M. Myers

  

 

or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the sending
party.  Any notice under this Agreement
shall be deemed to have been given when so delivered or mailed.

 

13.                                 Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement shall
be reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

14.                                 Complete
Agreement.  This Agreement, those
documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.

 

15.                                 No
Strict Construction.  The language
used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any party.

 

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16.                                 Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

 

17.                                 Successors
and Assigns.  This Agreement is
intended to bind and inure to the benefit of and be enforceable by Executive,
the Company and their respective heirs, successors and assigns, except that
Executive may not assign his rights or delegate his obligations hereunder
without the prior written consent of the Company.

 

18.                                 Choice of
Law.  All issues
and questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the State of Utah,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Utah or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Utah.

 

19.                                 Amendment
and Waiver.  The provisions of this
Agreement may be amended or waived only with the prior written consent of the
Company and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.

 

*    *   
*    *    *

 

 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

 

 

	
   

  	
  1-800 CONTACTS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Jonathan C. Coon

  
	
   

  	
   

  	
  Its: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  David M. Saylor

  
					

 

7Exhibit 10.1

 

Web Site License Agreement

 

Parties:                                       This
Web Site License Agreement (“Agreement”) is made this 8th day of July, 2003
(“Effective Date”) by and between Taymark, Inc., 4875 White Bear Parkway, White
Bear Lake MN 55110 (“Taymark”) and iParty Corp., 1457 VFW Parkway, West
Roxbury, MA 02132 (“iParty”).

 

Recitals:                              Taymark
has developed and operates a proprietary method of doing business that includes
computer software, a goods catalogue for products and an HTML template whereby
customers can order party related products over the World Wide Web portion of
the Internet (the “System”).

 

iParty is in the business of selling party related goods to retail
customers through both retail stores and an Internet Web site, both of which
operate under the iParty® brand name.

 

iParty desires to license to Taymark the rights to use and have the
benefit of iParty’s brand name, goodwill, Web Site content and functions, and
other intellectual property in connection with the sale of party goods to
retail customers through a Web site to be accessed through the URL
www.iParty.com.

 

Now Therefore, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Taymark and iParty agree as follows:

 

Definitions:

 

a.                                       “Licensed
Intellectual Property” shall mean iParty’s proprietary rights, including
without limitation, trade marks, trade secrets, copyrights, know how, and
patents, in and to the items set forth on Schedule 1 hereto. “Licensed
Intellectual Property” shall not include the System, any items, materials,
data, descriptions or elements which are 
in the public domain, come into the public domain hereafter or were
known by or used by Taymark prior to the date hereof.

 

b.                                       “Licensed
Mark” shall refer to the marks “iParty” and “iParty.com” and any variations
or derivatives thereof that iParty may from time to time develop or use,
together with the goodwill associated therewith.

 

c.                                       “the
Web Site” shall mean the Internet Web site operated by Taymark pursuant to
the terms and conditions of the Agreement that offers party goods for retail
sale in connection with the Licensed Mark.

 

d.                                       “Customers”
shall mean retail consumers of party goods who use and/or purchase party goods
through the Web Site.

 

e.                                       “Customer
Data” shall mean personally identifying data collected from Customers.

 

f.                                         “Privacy
Policy” shall mean the iParty’s privacy policy, a copy of which is attached
hereto as Exhibit A and amended to conform to this agreement including section
1.4

 

 

g.                                      “Goods”
shall mean the party goods offered for sale by Taymark through the Web Site.

 

h.                                      “Goods
Catalogue” shall mean the total catalogue of Goods offered for sale by
Taymark through the Web Site, as it may change from time to time.

 

i.                                         “Transition
Period” shall mean the period of time between the date that a valid and
effective notice is received by one party from the other that this Agreement
will terminate, not be renewed, or otherwise expire, and the actual date that
this Agreement terminates or otherwise expires.

 

1.                                      Web Site License.

 

1.1                               License.  During the effective term of this Agreement, iParty
grants Taymark a license, subject to the terms and conditions set forth herein,
to use the Licensed Intellectual Property in connection with the operation of
the Web Site offering party goods for sale to Customers over the Internet.  This license includes the right to use,
reproduce, prepare derivative works of, distribute, perform and display the
content provided by iParty as part of the Web Site, as appropriate in
association with offering Customers access to the Web Site and the Goods.
iParty grants to Taymark a non-exclusive right to use the Licensed Intellectual
Property solely in connection with the operation of the Web Site, advertising
therefore and performance of its duties hereunder. iParty grants to Taymark an
exclusive right to use the name “iParty.com” and the URL “www.iParty.com” in
connection with the operation of the Web Site, and performance of its duties
hereunder.

 

1.2                               Use of Licensed Marks.  Taymark
shall comply with all reasonable conditions set forth in writing from time to
time by iParty with respect to the style, appearance and manner of use of the
Licensed Marks, provided that iParty shall not require modifications in
Taymark’s use of the Licensed Marks more frequently than once per year and
shall pay all external costs associated with such modifications.  In addition, a notice or notices acceptable
to iParty shall be used on the Web Site and/or related materials, including but
not limited to, promotional materials and advertising bearing the Licensed
Marks, to identify the licensed use under this Agreement and the proprietary
rights of iParty.  Such notice shall
read “the [iParty] name and mark are used under license.”  Taymark shall provide iParty with samples of
proposed uses of the Licensed Marks not less than fifteen (15) days prior to
the first instance of any public use of the Licensed Marks on the Web Site or
related materials, including advertising and promotional materials, for review
by iParty.  The proposed uses of the
Licensed Marks shall be deemed approved unless iParty notifies Taymark of its
objections in writing within fifteen (15) days of receipt of such samples.  Representative specimens showing the use of
the Licensed Marks and related materials shall be provided by Taymark to iParty
from time to time upon iParty’s reasonable request.

 

1.3                               Ownership of Intellectual Property.  Nothing
in this Agreement shall be construed to create ownership rights on the part of
either party to any of the intellectual property belonging to the other party,
any derivative works created there from, any variations thereof or
modifications thereto.  All such
intellectual property shall be and remain the exclusive property of its
respective owner.

 

1.4                               Customer
Data.  iParty shall own all information and data related to
Customers that is collected in connection with Customers’ activities through
the Web Site, regardless of the nature of the information and data, or where
such information and data is maintained (“Customer Data”). iParty grants to
Taymark a non-assignable, non-transferable, non-exclusive right and license to
use Customer Data solely in connection with the operation of the Web Site and
fulfilling its obligations under this Agreement, and for no other purposes
whatsoever.  iParty specifically retains
all right, title and interest in and to such Customer Data, except for the
limited license rights granted hereunder. Upon request, Taymark shall promptly
and accurately provide iParty (in a format and manner mutually agreed to by

 

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the parties) all Customer Data collected through the Web Site with
respect to Customers who visit, browse and make purchases on the Web Site,
provided that Taymark shall be under no obligation to independently verify the
accuracy of the Customer inputted information it collects.  During the Term, Taymark shall maintain
Customer Data for as long as commercially necessary to perform its obligations
under this Agreement and meet its internal business needs and requirements in
accordance with its standard record retention policies.  Upon termination of this Agreement, Taymark
shall promptly turn over to iParty all copies of Customer Data, except that
Taymark may retain Customer Data necessary to maintain the record keeping
requirements of paragraph 1.7, below and as may be required to be kept in
accordance with normal business practices. 
The term “Customer Data” shall
not include information about persons gathered from sources other than the Web
Site, even though such persons may also be customers of the Web Site.

 

1.5                               Additional License.  In
addition to the license rights set forth in Section 1.1, above, iParty
grants Taymark a non-exclusive, non-assignable, non-transferable, License to
use certain of the Licensed Intellectual Property, expressly limited to those
items of intellectual property set forth on Schedule II hereto, solely in
connection with the operation of other internet web sites owned and operated by
Taymark.  The license granted in this
Section 1.5 shall survive the termination or expiration of this Agreement
unless this Agreement is terminated pursuant to Section 7.3 hereof due to
the default or material breach of Taymark.

 

1.6                               Royalties.  Taymark
shall pay all Royalties due to iParty by either electronic funds transfer to an
account designated by iParty or by delivering a check to iParty, in either
event, no later than the twenty-first (21st) day of each calendar
month for sales of Goods made through the Web Site (and the telephone order number
posted on the Web Site) the preceding month. Taymark will also at the same time
provide iParty with a summary report of all sales and related activity for the
preceding month.  “Royalties” are equal
to Net Sales multiplied by fifteen (15%) percent. For purposes of this
provision, “Net Sales” means the actual amounts collected from Customers
placing orders via the Web Site (and the telephone order number posted on the
Web Site) reduced by the amount of any taxes, shipping or handling charges,
rush charges, refunds, credits, and allowances.

 

1.7                               Taymark’s
Records.  During the term of this Agreement, Taymark shall keep
and maintain in accordance with its normal business practices at its primary
U.S. place of business books and records of all business transacted by Taymark
in connection with the Web Site and the Licensed Marks for such period as
required to permit iParty’s review under this Section 1.7.  Taymark’s accounting records of sales,
shipment and returns of Goods sold in connection with the Web Site and the
Licensed Marks shall be maintained in such a manner that Taymark can generate
reports and records of such sales, separate from Taymark’s accounting records
relating to other items distributed or sold by Taymark.  iParty, or its duly authorized agents or
representatives who shall be members of a nationally recognized firm of
certified public accountants, shall have the right at its own expense,
exercisable once in any twelve (12) month period, to inspect said books and
records at Taymark’s premises during regular business hours, provided that
iParty shall give to Taymark at least thirty (30) days’ prior notice of its
intention to do so, and provided further that iParty’s inspection rights may
relate to periods up to two (2) years prior to the date of such
examination.  All individuals to who may
have access to Taymark’s books and records must sign a confidentiality
agreement on Taymark’s standard form.

 

2.                                      Web Site
Functionality and Operation.

 

2.1                               Look
and Feel.  The parties
agree that the Web Site operated by Taymark shall, to the extent that it is
commercially and technically feasible to do so, incorporate the appearance,
features and functionalities of the iParty.com Web Site presently operated by
iParty.  At a minimum, the Web Site will
include the functionalities and features set forth on Schedule III.

 

2.2                               Privacy
and Security.  Taymark will maintain the privacy of Customers and
Customer identifying information, in accordance with the Privacy Policy adopted
by iParty and presently used by it in connection with its operation of the
iParty.com Web Site and modified to conform to with the requirements of
paragraph 1.4 of this agreement. Taymark will post a copy of the Privacy Policy
on the Web Site, which approval will not be

 

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unreasonably withheld.  All
changes to the Privacy Policy must be approved by iParty in writing prior to
their implementation.  Taymark shall
undertake commercially reasonable security measures to prevent unauthorized
access to, and use of, and maintain the security, confidentiality and integrity
of, the Web Site.  Such measures shall
include, at a minimum and without limitation: (a) firewall protection; and (b)
maintenance of independent archival and backup copies of the main pages.  Taymark shall also be required to utilize
Secure Socket Layer (“SSL”) encryption when processing orders and accepting
Customers’ personal and credit card information and shall apply for and obtain
an SSL certificate from Verisign or another mutually acceptable established
encryption key vendor .  Taymark will
also operate the Web Site in compliance with the requirements of the Children’s
Online Privacy Protection Act.  Taymark
will implement and follow the policies and procedures set forth in the Privacy
and Security Statement issued by Taymark and James Tower.

 

2.3                               Hosting.  During
the Term of this Agreement, Taymark shall host the Web Site through a Web
hosting company of Taymark’s choosing.

 

2.4                               Exclusivity.  Taymark
may use the Licensed Intellectual Property only for the purposes set forth in
this Agreement to permit Customers to browse the Web Site and to place orders
with Taymark for fulfillment by Taymark and otherwise as set forth in
Section 1.5 hereof.  In no event
shall Taymark be permitted to use the Licensed Intellectual Property for any
other purpose.

 

2.5                               iParty’s
Additional Content.  Taymark will include an “Investor Relations”
HTML link on the Web Site home page. 
The Investor Relations link will link to a Web page providing iParty’s
corporate and investor relations information. 
iParty, or a third-party designated by iParty, will host and provide the
content for the “Investor Relations” page and will be responsible for
maintaining and updating the information contained on it.  Subject to Taymark’s approval, which may not
be unreasonably withheld, iParty may link other materials to the Web Site and
link to the Web Site from existing and future Web sites owned or controlled by
iParty, or its affiliates.  Taymark will
include a store locations page on the Web Site that will contain the locations,
hours of operations, and the telephone numbers for iParty’s stores.  iParty will provide the content for this
page and will be responsible for updating it.

 

2.6                               E-Mail
and URL Hosting.  During the term of this Agreement, iParty will
continue to host the “iParty.com” URL on a domain server (the “iParty Server”)
of its choice.  iParty will cause hits
to the iParty.com domain to be directed away from the iParty Server to an
Internet Protocol address associated with the Web Site and designated by
iParty.  Subject to the terms and
conditions of this Agreement, and the license granted herein, Taymark may
configure the Web Site so that Web Site content is displayed within a Web page
frame showing the www.iParty.com URL and located on the iParty Server.  During the term of this Agreement, iParty
will maintain e-mail service associated with the iParty.com URL through a POP3
or equivalent server.  iParty shall
configure the POP3 server so that e-mail to the customercare@iParty.com;
gurus@iParty.com; remove@iParty.com; and privacy@iParty.com addresses, will be
forwarded to a POP3 server designated and accessed by Taymark.

 

2.7.                            Availability
of Web Site.  Taymark shall use commercially reasonable efforts
to maintain availability of the Web site twenty-four (24) hours a day, seven
(7) days a week, throughout the term of hereof.  Taymark shall use commercially reasonable efforts to process and
complete orders placed by Customers on the Web Site..

 

2.8                               Approval
by iParty.  iParty shall have the right to exercise its
commercially reasonable approval of the concept for the Web Site and all
content to be included on the Web Site by Taymark.  The layout, design and content of the Web Site shall initially be
provided to iParty prior to the anticipated launch of the Web Site and,
thereafter, prior to posting on the Web Site. 
Changes to the overall look and feel, features or functions of the Web
Site shall require iParty’s express prior written approval.  Provided, however, that Taymark may update
the content of the site from time to time to reflect new Goods offerings,
sales, promotions and other marketing efforts of Taymark without such prior
written approval from iParty.  Taymark
shall not permit the site to contain any pornographic, obscene or offensive
material or content that reflects negatively on the Licensed Marks.

 

4

 

2.9                               Taymark
may modify the Web Site as required by applicable law if Taymark, in its
reasonable discretion, determines such modifications are necessary.

 

3.                                      Prices and
Goods Catalogue.

 

3.1                               Retail
Prices.  The Web Site will be configured to include Taymark’s
online Goods Catalogue and Taymark’s retail price to the Customers for the
goods.  Taymark will endeavor to
establish prices for the Goods that are, on an overall basis, competitive with
the usual and customary retail price for Goods charged by other internet based
retail party goods businesses, excluding any sale or promotional items.

 

3.2                               Goods
Catalogue. Taymark reserves the right, in its sole discretion and without
incurring any liability to iParty or Customers, to:  (a) alter the specifications for any products in the Goods
Catalogue; (b) discontinue the manufacture or availability of any products in the
Goods Catalogue; (c) discontinue the development of any new product, whether or
not such product has been announced publicly or is included in the Goods
Catalogue; or (d) commence the manufacture and sale of new products having
features which make any product in the Goods Catalogue wholly or partially
obsolete, whether or not iParty is granted any distribution rights in respect
of such new products.  Notwithstanding
the above, Taymark shall provide iParty with notice of such decisions and shall
fill all accepted purchase orders from the Customers for any such altered or
discontinued products of which manufacturing and commercial deliveries have
commenced.  Taymark shall provide iParty
with a report identifying all of the items contained in the Goods Catalogue on
a quarterly basis.  iParty shall have
the right to review and inspect the products from the Goods Catalogue offered
on the Web Site to Customers once in any calendar quarter.  The purpose of this review and inspection is
to allow iParty to ensure that the quality and selection of products offered on
the Web Site do not damage the Licensed Marks or the goodwill associated
therewith.  As part of this review,
iParty shall have the right to have products removed from the selection of
products offered on the Web Site. iParty shall have the right to request that
products be added to the Goods Catalogue, including without limitation products
sourced through third party vendors, and Taymark will reasonably consider al
such requests.  If iParty requests that certain
products be added to the Goods Catalogue and Taymark declines to do so, iParty
may guarantee in writing a commercially reasonable amount of sales for those
products, purchase; the inventory for Taymark or take such other steps as it
may find appropriate.  In that event,
Taymark may add such products to the Goods Catalogue if it believes it is
commercially reasonable to do so.

 

3.3                               Inventory.  Taymark
will maintain inventory in such amounts as Taymark in its sole discretion deems
appropriate.  In the event iParty
believes inventory levels of products are inadequate, iParty may notify Taymark
and the parties will meet and attempt to resolve any differences.

 

3.4                               Promotions.  Taymark
may from time to time promote the Web Site to Customer by means of us such
promotions and advertising campaigns as the parties may mutually agree. iParty
shall have the right, without payment to Taymark, to produce and distribute
promotional brochures or inserts, point of sale displays or other advertising
materials displaying the Web Site name, including in conjunction with
iParty’s retail stores. All such promotional brochures or inserts, point of
sale displays or other advertising materials which describe any Goods on the
Web Site, offer discounts, free shipping, kickers, or anything of value and
which display the Web Site name must be approved in writing by Taymark before
they are displayed or distributed to the public.  Taymark shall have the right to refuse to honor any such promotions
that are not approved in writing in advance by Taymark.

 

3.5                               Advertising.  Neither
party shall have the right to place banner or other advertising, including
“pop-up windows” on the Web Site without the other party’s written consent,
which consent may be withheld at the sole discretion of that party. In the
event the parties agree to place any advertising on the Web Site, the parties
shall also agree on the division of revenues.

 

4.                                      Customer
Transactions.

 

4.1                               Ordering.  Taymark
shall collect all data necessary to process and fulfill Customer orders
received through the Web Site.  The Web
Site will contain a telephone number that Customers may use to place orders.
The parties agree that orders received by Taymark through that telephone line
shall be

 

5

 

deemed to be received through the Web Site and treated the same as
orders received through Web Site.

 

4.2                               Shipment
of Goods.  Taymark shall ship each order which Taymark accepts as
specified by the respective Customer to  the Customer’s
designated point of delivery submitted with the order. Taymark may only deliver
to addresses within the United States, U. S Virgin Islands, and Canada. Taymark
will also ship to APO and FPO addresses. Taymark will use commercially
reasonable efforts to fill and ship orders in a timely fashion or in the time
frame indicated by the Web Site. Taymark may reject orders with incomplete
order information, incomplete shipping information or for shipment outside the
United States, U. S Virgin Islands, and Canada.

 

4.3                               Fulfillment.  Taymark
will use commercially reasonable efforts to: (a) maintain sufficient inventory
to fulfill Customer orders; and (b) meet the following shipping goals set forth
below:

 

4.3.1                     Standard.  ”Standard
Orders” means Orders shipped domestically and internationally via carriers
other than overnight carriers and two-day carriers.  Provided that Taymark has received credit approval by 12:00 noon
Central Time on the day of receipt of a Standard Order, Taymark will ship such
Standard Order no later than 7:00 p.m., Central Time, the second Business Day
following receipt by Taymark of credit approval for such Standard Order.
Standard Orders for which credit approval is received after 12:00 Noon, Central
Time on any Business Day, or at any time on any day which is not a Business
Day, will be shipped no later than 7:00 p.m., Central Time the third Business
Day following receipt of credit approval.

 

4.3.2                     Priority.  ”Priority
Orders” means Orders shipped domestically or internationally via overnight or
two-day carrier.  Priority Orders for
which credit approval has been received by Taymark on any Business Day before
12:00 Noon, Central Time will be shipped on the same day.  Priority Orders for which credit approval is
received after 12:00 Noon, Central Time on any Business Day, or at any time on
any day which is not a Business Day, will be shipped on the following Business
Day.  Taymark may charge added shipping
and handling charges for such Priority Orders.

 

5.                                      Customer
Service and Returns.

 

5.1                               Customer
service and returns will be processed through the Web Site by linking to a page
which Taymark will identify as the “Customer Service Contact”.  iParty shall notify Taymark as soon as
possible after receipt of products by iParty or its Customer of any complaint
whatsoever iParty or its Customer may have concerning such products. Customer
Returns will be handled in accordance with return policy set forth on Schedule
B.

 

6.                                      Taxation.

 

6.1                               Taymark
shall collect sales taxes within such jurisdictions as Taymark has a legal
obligation to do so.  iParty and the
respective Customer may be liable for sales, use or other taxes which are not
collected by Taymark.  Each party shall
indemnify, defend and hold the other party harmless with respect to any claims
arising from the indemnifying party’s failure to collect, report or pay sales,
use, or other taxes, in accordance with applicable tax laws and regulations.

 

7.                                      Term and
Termination.

 

7.1                               The
term of this Agreement is two years from the Effective Date and shall renew on
a yearly basis unless either party provides notice of non-renewal to the other
in writing more than one hundred eighty 
(180) days before the end of any term.

 

7.2                               Either
party may terminate this Agreement upon 180 days notice without cause.

 

7.3                               Either
party may immediately terminate this Agreement for cause at any time upon
written notice to the other Party in the event of the occurrence of one or more
of the following events: (i) if a petition under any foreign, state, or United
States bankruptcy act, receivership statute, or the like, as they now exist, or
as they may be amended, is filed by the other party; or (ii) if such a petition
is filed by any third party, or an application for a receiver of the other
party is made by anyone, and such petition or application is not resolved
favorably by such party within 90 days; or (iii) the other party materially
breaches any of its representations, warranties, obligations or agreements
hereunder, and such breach, if capable of being cured, is not cured within 60
days following receipt of written notice of such breach from the non-breaching
party.

 

6

 

7.4                               Transition
Period.  During
the Transition Period, Taymark will continue to accept and fill Customer orders
out of its regular inventory.  If
Licensee reasonably expects that it will not be able to meet Customer demand
for certain Goods from its inventory during the Transition Period, then
Licensee shall provide Licensor with a description of such Goods.  iParty may offer to guarantee in writing a
commercially reasonable amount of sales for those Goods, purchase the Goods for
Taymark, or take such other steps as it may find appropriate. Taymark may
accept such offer if it believes it is commercially reasonable to do so. During
the Transition Period, Taymark shall cooperate with iParty with respect to the
transfer and return the Licensed Intellectual Property to iParty or its
designee; the transfer of the www.iParty.com URL to Taymark; and the
establishment by iParty or its designee of a successor Web site located at the
URL with a minimum of disruption and inconvenience to Customers.

 

7.5                               Return
of Licensed Intellectual Property.  Except as otherwise set forth in Section 1.5 hereof, Taymark shall
return all Licensed Intellectual Property, and all tangible embodiments
thereof, to iParty upon the expiration or other termination of this Agreement
and Taymark shall have no further rights of use thereof.

 

7.6                               No
Further Compensation.  In the event either party terminates this
Agreement in accordance with the terms hereof, the parties hereby agree that,
without prejudice to any other remedies which either party may have in respect
of any breach of this Agreement, neither party shall be entitled to any
compensation, reimbursement or like payment from the other solely as a result
of such termination.

 

8.                                      Confidential
Information.

 

8.1                               “Confidential
Information”  means all non-public
information and ideas, including, but not limited to, information regarding a
party’s business, financial condition, operations, products, services or
finances, disclosed by such party (either orally or in writing) to the other
party.  Taymark and iParty may have
previously exchanged and may exchange certain Confidential Information relating
to the development and implementation of the Web Site, the design thereof, and
any modification thereof.  It is the
intention of Taymark and iParty that this information shall be used by the
other party solely for the purpose of implementing and operating the Web Site
and for no other purpose.  Each party
shall endeavor to designate any information or ideas it communicates to the
other party which it, in good faith, believes constitutes “Confidential
Information” by marking it as Confidential. Such designation is for informational
purposes only and the designation, or lack thereof, is not determinative of the
confidential nature of the information.

 

8.2                               Non-Disclosure.  No
party and no representative of a party shall disclose to any other person or
use the Confidential Information without the prior written consent of the other
party.  In addition, without the prior
written consent of the other party, no party and no representative of a party
shall disclose to any other person the fact that Confidential Information has
been made available.

 

8.3                               Return
of Confidential Information.  In the event that this Agreement is
terminated or otherwise expires, no party and no representative of a party
shall use, for any purpose, any of the Confidential Information now or
hereafter received or obtained from the other party or its Representatives. All
Confidential Information (and all copies, summaries, and notes or the contents
or parts thereof) shall be returned  to the disclosing party within thirty (30)
days of such termination or expiration and shall not be retained by the other
party or its representatives in any form or for any reason.

 

8.4                               Exclusions.  A
party or its representative may retain, disclose or otherwise use Confidential
Information to the extent that such Confidential Information (a) shall
have been made public other than through acts of, or attributable to, such
party or its Representatives in violation of this Agreement; (b) is
required to be disclosed by law; or (c) has been independently developed
by such party or its Representatives without violating any obligations under
this Agreement.  If any governmental
agency or any third party shall seek in any way to discover or otherwise gain
access to, or production of (“Discovery”) any Confidential Information or any
other data or records of one party that may be in the possession of the other
party, the other party shall immediately notify the first party and shall, at
the first party’s written request and at the first party’s expense, oppose such
Discovery, and cooperate with the first party in the first party’s efforts to
preclude,

 

7

 

quash, limit or impose protective orders or similar restrictions on
such Discovery.

 

9.                                      iParty’s
Warranties.

 

9.1                               iParty
has sufficient right, title and interest in and to the Content to enter into
and perform this Agreement and to grant the license rights granted to Taymark.
“Content” shall mean the Licensed Intellectual Property, and all other
materials provided by iParty for inclusion in the Web Site.

 

9.2                               iParty represents and
warrants that the Licensed Intellectual Property, the Content and any
additional content posted on the Web Site by or at iParty’s direction does
not:  (I) violate or infringe any
trademark, trade dress, or copyright; (II) constitute a libel or defamation of
or an invasion of the rights of privacy or publicity of any person, firm or
corporation or violate any other right, title or interest of any other person,
firm or corporation; (III) violate any law or regulation; or (IV) contain
materially false, inaccurate or misleading information.

 

10.                               Taymark’s
Warranties.

 

10.1                        Taymark represents and warrants that the
System and any materials (other than the Licensed Intellectual Property,
Content or additional content provided by iParty) used in connection with the
operation of the Web Site or posted on the Web Site by or at Taymark’s
direction does not:  (I) violate or
infringe any trademark, trade dress, or copyright; (II) constitute a libel or
defamation of, or an invasion of the rights of privacy or publicity of any
person, firm or corporation or violate any other right, title or interest of
any other person, firm or corporation; (III) violate any law or regulation; or
(IV) contain materially false, inaccurate or misleading information.

 

11.                               Indemnification.

 

11.1                        iParty Indemnification.  iParty
shall indemnify, defend, and hold harmless Taymark, its parent, divisions,
subsidiaries, affiliates, directors, officers, employees and agents, and defend
any action brought against the same with respect to any claim, demand, cause of
action, debt or liability, including reasonable attorneys’ fees, to the extent
that the same is based upon a claim that: (i) if true, would constitute a
breach of any of iParty’s representations, warranties, or obligations
hereunder; (ii) arises out of the negligence or willful misconduct of iParty;
(iii) any of the Content, or additional content posted on the Web Site at the
request of iParty or the Licensed Intellectual Property, or any portion
thereof, infringes or violates any patents, copyrights, trade names, trade
secrets, licenses, or other proprietary rights of any third party.

 

11.2                        Taymark
Indemnification.  Taymark shall indemnify, defend, and hold
harmless iParty, its parent, divisions, subsidiaries, affiliates, directors,
officers, employees and agents, and defend any action brought against the same
with respect to any claim, demand, cause of action, debt or liability,
including reasonable attorneys’ fees, to the extent that the same is based upon
a claim that: (i) if true, would constitute a breach of any of Taymark’s
representations, warranties, or obligations hereunder; (ii) arises out of the
negligence or willful misconduct of Taymark; (iii) arises out of or in any way
relates to any of the Products, or the use thereof, sold to Customers through
the Web Site; and (iv) the operation or content of the Web Site or any portion
thereof, or the System or any portion thereof, but in any event excluding the
Licensed Intellectual Property, Content and any additional content provided by
iParty, infringes or violates any patents, copyrights, trade names, trade
secrets, licenses, or other proprietary rights of any third party.

 

11.3                        Insurance.  In
furtherance of Taymark’s covenants contained in the preceding subparagraph,
each party agrees to carry general commercial liability insurance with a
minimum limit of liability of at least Five Million Dollars ($5,000,000) per
occurrence and the other party shall be named as an additional insured party
therein.  A certificate evidencing the
existence of such insurance policy shall be delivered within thirty (30) days
of the execution of this Agreement.

 

12.                               Limitations
on Liability.

 

12.1                        IN NO
EVENT SHALL EITHER PARTY OR THEIR RESPECTIVE DIRECTORS, OFFICERS, PARENT COMPANIES,
AND AFFILIATES, LICENSEES AND SUPPLIERS, BE LIABLE FOR ANY LOST DATA OR
CONTENT, LOST PROFITS, BUSINESS INTERRUPTIONS OR FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL, EXEMPLARY OR

 

8

 

PUNITIVE DAMAGE ARISING OUT OF OR RELATING TO THIS AGREEMENT, EVEN IF
ADVISED TO THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING THE FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

 

13.                               General
Provisions.

 

13.1                        Force
Majeure.  In the event that either party is unable to perform any
of its obligations under this Agreement or to enjoy any of its benefits because
of any event beyond the control of the affected party including, but not
limited to, natural disaster, acts of God, actions or decrees of governmental
bodies or failure of communication lines, but excluding employee strikes or a
shortage of supplies or personnel (an “Event”), the party who has been so
affected shall promptly give written notice to the other party and shall use
its best efforts to resume performance. 
Upon receipt of such notice, all obligations under this agreement shall
be immediately suspended for the duration of such Force Majeure Event.

 

13.2                        Notice.  All
notices, demands, requests or other communications required or permitted under
this Agreement will be deemed given when (i) delivered personally; (ii) five
(5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iii) one (1) business day after deposit with a
commercial overnight carrier, with written verification of receipt, unless
otherwise indicated in this Agreement. 
Taymark may provide notice of price adjustments by e-mail or by U.S.
mail and any such notice shall be effective as of the date specified therein.

 

13.3                        Waiver.  Waiver
of any breach, or failure to enforce any term of this Agreement shall not be
deemed a waiver of any breach or right to enforce which may thereafter
occur.  No waiver shall be valid against
any party hereto unless made in writing and signed by the party against whom
enforcement of such waiver is sought and then only to the extent expressly
specified herein.

 

13.4                        Severability.  In
the event any one or more of the provisions of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable, the remaining
provisions of this Agreement shall be unimpaired and the parties will
substitute a new enforceable provision of like economic intent and effect.

 

13.5                        Applicable
Law.  This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes thereto, shall be governed by and
construed in accordance with the laws of the State of Minnesota without
reference to conflict of law principles.

 

13.6                        U.N.
Convention.  The United Nations Convention on Contracts
for the International Sale of Goods shall not apply to this Agreement.

 

13.7                        Compliance with Laws.  Each Party shall comply with all
applicable international, national, state, regional and local laws and
regulations, and industry customs in conducting business and performing its
obligations hereunder.

 

13.8                        Assignment.  Neither
party shall have the right to assign this Agreement without the prior written
consent of the other party.  The
transfer of a majority of the capital stock or substantially all of the assets
of a party or a change in actual control of a party shall be deemed an
assignment for the purposes of this section and any purported assignment
without the other party’s consent shall be void and shall be a breach of this
Agreement. A party shall not unreasonably withhold consent to an assignment
provided that the assignee meets the non-assigning party’s standards for credit
worthiness, business acumen, reputation, morality and all other factors deemed
relevant by the non-assigning party. The potential assigning party and the
potential assignee shall provide the non-assigning party all information
reasonably requested by it relevant to its determination.

 

13.9                        Initial
Attempt to Resolve Dispute.  In the event of any dispute
or disagreement between the parties either in interpreting any provision of
this Agreement or about the performance of either party, then upon the written
request of either party, each of the parties will appoint a designated
representative to resolve such dispute or disagreement. The designated
representatives will discuss the problem and negotiate in good faith in an
effort to resolve the dispute without any formal proceeding. During the course
of such negotiation(s), all reasonable requests made by one party to the other
for information, including copies of relevant documents, shall be 

 

9

 

honored. The specific format for such discussions will be left to the
discretion of the designated representatives. 
If the designated representatives are unable to resolve the dispute
within 30 days after their first meeting, either party may seek mediation and
arbitration of the dispute as set forth in Section 13.10 below.

 

13.10                 Mediation
and Arbitration of Dispute.  Except for the right of either party
to apply to a court of competent jurisdiction for a temporary restraining
order, preliminary injunction or any other equitable relief to preserve the
status quo or prevent irreparable harm pending the selection and confirmation
of a panel of arbitrators, any dispute arising under this Agreement that cannot
be resolved as set forth in Section 13.9 above shall be resolved through a
mediation-arbitration approach. The parties agree to first try to resolve the
dispute informally with the help of a mutually agreed-upon third party
mediator. If it proves impossible to arrive at a mutually satisfactory solution
through mediation, the parties agree to submit their dispute to binding
arbitration in Minneapolis Minnesota in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, except as modified
herein.  The arbitration may be
conducted by one impartial arbitrator by mutual agreement or by three
arbitrators if the parties are unable to agree on a single arbitrator within 30
days of first demand for arbitration. All arbitrators are to be selected from a
panel provided by the American Arbitration Association.  Upon request of a party, the arbitrators
shall have the authority to permit discovery to the extent they deem
appropriate. A court reporter shall record the arbitration hearing and the
reporter’s transcript shall be the official transcript of the proceeding. The
arbitrators shall have no power to add or detract from the agreements of the
parties and may not make any ruling or award that does not conform to the terms
and conditions of this Agreement. The arbitrators shall have the authority to
grant injunctive relief in a form substantially similar to that which would
otherwise be granted by a court of law. The arbitrators shall have no authority
to award punitive damages or any other damages not measured by the prevailing
party’s actual damages. The arbitrators shall specify the basis for any damage
award and the types of damages awarded. The decision of the arbitrators shall
be final and binding on the parties and may be entered and enforced in any
court of competent jurisdiction by either party.  The prevailing party in the arbitration proceedings shall be
awarded reasonable attorneys’ fees, expert witness costs and expenses, and all
other costs and expenses incurred directly or indirectly in connection with the
proceedings, unless the arbitrators shall for good cause determine
otherwise.  Neither party nor the
arbitrators may disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties or except as
required by law, regulations promulgated thereunder, reporting requirements of
and to the Securities and Exchange Commission, or court order.

 

13.11                 Further
Assurances.  Each of the parties hereto agrees to take or cause
to be taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents, and will obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Agreement.

 

13.12                 Section Headings.  Section headings
contained in this Agreement are inserted for convenience or reference only and
shall not in any way limit or affect the meaning, construction or scope of any
of the provisions hereof.

 

13.13                 Counterparts.  This
Agreement may be executed in several counterparts, each of which shall be
deemed to be an original, and all of which, when taken together, shall
constitute one and the same instrument.

 

13.14                 Relationship
of the Parties.  The relationship of the parties hereunder shall
be that of independent contractors. 
Nothing herein shall be construed to constitute a partnership between or
joint venture of the parties, nor shall either party be deemed the agent of the
other or have the right to bind the other in any way without the prior written
consent of the other.

 

13.15                 No
Third-Party Beneficiaries.  This agreement is solely for the
benefit of the parties and their respective successors and permitted assigns,
and no other person has any right, benefit, priority or interest under, or
because of the existence of, this agreement.

 

13.16                 Jurisdiction.  Subject
the provisions of Section 13.10; all disputes arising out of or relating
to

 

10

 

this Agreement shall be submitted to the non-exclusive jurisdiction of
the state and federal courts in the State of Minnesota, and each party
irrevocably consents to such personal jurisdiction and waives all objections
thereto.

 

13.17                 Survival of
Provisions.  In the event of any termination of this
Agreement, the following provisions of this Agreement, Sections 1.3-1.7, 7.5,
7.6, 8.1-8.4, 13 and such other provision and Section that may be
specified in the Agreement, are intended to continue and survive and shall so
continue and survive beyond the termination of this Agreement.

 

13.18                 Additional
Agreement.  Contemporaneous with the execution of this Agreement,
the parties hereto have entered into an Exclusive Sales Representative
Agreement, (the “Exclusive Sales Representative Agreement”) a copy of which is
attached hereto as Exhibit C.

 

13.19                 Entire
Agreement.  This Agreement and the Exhibits and Schedules
attached hereto, constitute the entire understanding and contract between the
parties and supersedes any and all prior or contemporaneous oral and written
communications regarding the subject matter, all of which communications are
merged herein.  It is expressly understood
and agreed that no employee, agent or other representative of Taymark has any
authority to bind Taymark as to any statement, representation, warranty or
other expression unless the statement, representation, warranty or other
expression is specifically included within the express terms of this
Agreement.  This Agreement shall not be
modified, amended or in any way altered except by an instrument in writing
signed by both of the parties.

 

IN WITNESS WHEREOF,
this Agreement has been executed by or on behalf of each of the parties hereto
as of the day and year first above written.

 

	
  Taymark, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jonathan Staruck

  	
   

  
	
   

  	
   

  
	
  Its:

  	
  General Manager

  	
   

  
	
   

  	
   

  
	
  iParty Corp.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Patrick Farrell

  	
   

  
	
   

  	
   

  
	
  Its:

  	
  President

  	
   

  

 

11

 

Exhibit A

PRIVACY POLICY

 

iParty.com is strongly committed to
protecting the privacy of our customers, though we make every effort to
preserve user privacy, we may need to disclose personal information when
required by law wherein we have a good-faith belief that such action is
necessary to comply with a current judicial proceeding, a court order or legal
process served on our Web site.

 

If you have questions or concerns regarding
this statement, you should first contact us at customercare@iparty.comat:

 

4875 White Bear Parkway

White Bear Lake, MN 55110

or you can reach us by telephone at 800-447-2789

Is it safe to make
online purchases from iParty.com?
Yes. We have
made data security a priority. When a purchase is made or when personal
information is provided to us, we use Secure Sockets Layer (SSL) technology to
ensure that your information is encrypted. This means that no one else can read
it while it is being transmitted over the Internet. SSL is regarded as the
industry standard among encryption technologies. It is among the best software
available today for secure commerce transactions.

 

What do you do with
my information?
Simply put,
we use your information to serve you better. iParty is committed to quality
customer experience. For customers who make a purchase at iParty.com, we record
which pages you visited and any other information volunteered during the
ordering and registration process. All of this information is kept
confidential. We aggregate this data anonymously to analyze how people use our
site and to learn how we can improve their shopping experience. We may also use
the information we collect to notify you about important functionality changes
to the Web site, new iParty services and special offers we think you’ll find
valuable. This may also include special offers, information on upcoming retail
store promotions and other marketing related information for the iParty.com Web
site, retail stores and/or on behalf of our carefully selected promotional
partners. For customers only browsing iParty.com, our site automatically
recognizes your Internet service provider, but cannot identify you as an
individual.

 

What are cookies and
how are they used?
To optimize
your shopping experience we use a common Web browser feature called a cookie.
Cookies are small files that your Web browser places on your computer’s hard
drive. Some of them expire after a set period of time. Others expire as soon as
you close your browser. Cookies help us keep track of items you order and
ensure that your order is shipped to you and not to someone else. We also use
cookies to recognize you as a prior customer and to retrieve certain
information previously provided by you, so that you do not need to re-enter
this information every time you shop with us. Personal information you provide
to iParty is stored safely behind firewalls using state-of-the-art technology.

 

What are log files?
Are they safe?
Log files are
data files where user information is stored. All of this information is kept
confidential. Any information you choose to provide is stored safely in log
files behind firewalls using state-of-the-art technology. We never share, sell
or exchange personal information about our customers with third parties.

 

What is co-branding?
Co-branding
is a way for a Web site to bring other Web sites with complementary content to
the attention of its users. Co-branding is often executed by framing, which is
a method of dividing browser windows. Framing allows us to display the iParty
look and feel while allowing you to browse another site at the same time. It’s
important to note that while you may see the iParty frame, any information you
provide to a co-branding partner is not covered by our privacy policy. Be sure
to check the privacy statements of any third-party Web sites for information
about their use of cookies and personal information they may collect
independently.

 

What information do
you collect on the Special Offers page?
On the
Special Offers page, we ask for your name and address so that we may mail you
special offers and

 

12

 

promotions. There is space for you to give us
additional contact information as well as demographic information, but only
your name and address are required to receive any mail from iParty. An email
address is required if you wish to receive email offers and iParty.com
newsletters.

 

All information that you provide in the “Tell
Us About Yourself” section is used only by iParty to better define our product
selection and special offers.

 

Will you sell or
exchange my information with a third party?
iParty does
not sell or exchange names, or any other information about our customer, with
third parties. Occasionally, we may send special offers to our customers on
behalf of our promotional partners, but we do not sell or exchange this
information with any of our partners. We may also call you about an order you
have placed online, but we do not use or sell numbers for telemarketing
purposes.

 

What about links to
other sites?
Some pages on
our Web site contain links to other Web sites and occasionally, we may send a
special offer email newsletter with links to our promotional partners’ Web
site. We are careful to link only to reputable companies. The iParty privacy
policy does not extend to third parties. Be sure to check the privacy
statements of any third-party Web sites for information about their use of
cookies and personal information they may collect.

 

How will I know when
iParty.com changes its privacy policy?
Our privacy
policy is regularly reviewed to make sure we continue to serve the privacy
interests of our customers. We reserve the right to change and update the
privacy policy and these changes will be posted on our Web site. If we make a
change to how we collect, store or share personally identifiable information we
will update the Web site privacy policy accordingly. We encourage you to visit
this page from time to time to ensure you are aware of our any changes we may
have made.

 

Notification of
Changes
If at some
point there is a change to how we collect, store, or share personally
identifiable information, we will notify you by email of the material changes.
At that time you may choose to opt out of our new policies by sending a message
to an email address that will be provided at that time. You may also visit this
privacy statement for any changes to our policies.

 

How can I update my
account information?
You can email
us at customercare@iparty.comor write to

4875 White Bear Parkway

White Bear Lake, MN 55110

or you can reach us by telephone at 800-447-2789

 

Please take me off
your mailing list.

If, for any reason, you would like to be taken off our email list, please email
customercare@iparty.com.

If you would like to be taken off our print mailing list, please write to

4875 White Bear Parkway

White Bear Lake, MN 55110

or you can reach us by telephone at 800-447-2789

 

13

 

Exhibit B

 

Within
30 days of receipt of your order, you may return for a full refund any unopened
merchandise in new condition with its original packaging and accessories.
Merchandise purchased on iParty.com may only be returned through the returns
department and will not be accepted at iParty Retail Stores.

 

Simply
follow these instructions:

 

1.               Wrap
the package securely with original packaging material.

 

2.               Include
the packing slip. Let us know which items you are returning and why.

 

3.               Be
sure we have your name, address, phone number and email address. Please add any
missing information.

 

4.               For
your protection, please send your package via UPS or Insured Parcel Post. This
protects you in case your package is damaged or lost in transit. Send to:

 

iParty.com  

Returns Dept. 

4875 White Bear Parkway 

White Bear Lake, MN 55110

 

14

 

Exhibit C

 

Agreement

 

THIS AGREEMENT is entered into this 8th
day, of July, 2003, by and between Taymark, Inc., 4875 White Bear Parkway,
White Bear Lake MN 55110 (“Company”) and iParty Corp, 1457 VFW Parkway, West
Roxbury, MA  02132 (“Representative”).

 

WHEREAS, the Company is in the business of
operating private labeled internet web sites for the purpose of taking and
fulfilling orders for party related products (the “Service”); and

 

WHEREAS, Representative and Company are
parties to a Web Site License Agreement dated July 8, 2003 (the iParty.com
Agreement); and,

 

WHEREAS Representative, is well known in the
party products industry and wishes to act as the Company’s representative to
solicit new customers for the Service.

 

NOW, THEREFORE, the parties agree as follows:

 

1 .                                    Engagement.  The Company hereby appoints Representative to act: (a) as
the Company’s exclusive sales representative for soliciting Paper Warehouse,
Inc. and Party America Corporation (the “Exclusive Customers”) contract with
Company for the Service; and (b) as the Company’s non-exclusive sales
representative for soliciting all other entities engaged in the party products
business to contract with the Company for the Service (“Customers”).  The Representative accepts this appointment
and engagement pursuant to the terms and conditions of this Agreement.

 

2.                                       Exclusivity. During the first twelve months following execution of this
agreement, the Company will not solicit the Exclusive Customers, nor will it
grant to any other individual or entity the right to serve as a representative
of the Company to solicit the Exclusive Customers to contract with the Company
for the Service.  Upon lapse of such
twelve month period, Representative shall no longer have any exclusive
customers but may continue to solicit all Customers, including the former
Exclusive Customers, on a non-exclusive basis.

 

3.                                       Term of Agreement.  The term of this Agreement shall
commence as of the date hereof and shall continue for a period of one (1) year,
unless sooner terminated.  If this
Agreement is not terminated, it shall be automatically renewed for successive
one year periods.  No renewal term of
this Agreement shall be construed as being of indefinite duration, but rather
as being for successive one-year terms. 
Either party may determine not to renew this Agreement by providing the
other party with written notice thereof at least 90 days prior to the end of
its term or any renewal thereof.

 

4.                                       Activities of
Representative.  During the term of this Agreement, Representative shall
represent the Company in soliciting
sales of the Service. Representative shall introduce representatives of
Exclusive Customers and other Customers to Company.  If the Company and a Customer or an Exclusive Customer enter into
an agreement within six months of such introduction whereby Company makes the
Service available to a such Customer or Exclusive Customer, Representative
shall be entitled to a commissions on sales to patron of such Customers or
exclusive Customers as set forth in paragraph 5.  Representative may also be

 

15

 

entitled to a commission on
sales if Company and Representative agree in writing that Representative’s
efforts were the procuring cause of the contractual arrangement between Company
and Customer.  Representative shall not,
during the term of this Agreement, sell, offer for sale or otherwise represent
any service, which competes with the Service in the sale of party related
products through the Internet. 
Representative acknowledges that the Company may solicit Customers
(including former Exclusive Customers after the expiration of the exclusivity
period in this Agreement) to contract with Company for the Service and
Representative shall not be entitled to any commission on sales to such
Customers. Representative agrees at all times during the term of this Agreement
and any renewals hereof, to use commercially reasonable efforts to market,
promote and support the Service. Representative’s activities on behalf of the
Company shall be limited to soliciting Customers for the Service.

 

5.                                       Compensation of Representative.  As consideration for the services
described herein and following the execution of the agreement between the
company and an Exclusive Customer or Customer, the Company agrees to pay
Representative a monthly commission as set forth herein.  Company shall pay Commissions to
Representative by the last day of each calendar month for sales made to patrons
of Customers or Exclusive Customers (Patrons) the preceding month.  “Commissions” are equal to Net Sales
multiplied by five (5%) percent.  For
purposes of this provision, “Net Sales” means the actual amounts collected from
Patrons placing orders reduced by the amount of any taxes, shipping or handling
charges, rush charges, refunds, credits, and allowances.  In the event the agreement with the Customer
or Exclusive Customer call for sales to be made using the site established
pursuant to the iParty.com Agreement, Representative shall not be entitled to
any commissions on such sales as provided in the Addendum to the Iparty.com
Agreement and the commissions payable under this paragraph shall be all
compensation due to Representative from Company.

 

6.                                       Role of Representative.  Representative’s sole relationship
with the Company is that of an independent contractor, according to the terms
and provisions of this Agreement.  Only
the Company shall have authority to enter into agreements with Customers or
Exclusive Customers.  The Company shall
not make available to Representative or its employees the fringe benefits
available to employees of the Company, such as health insurance, life
insurance, disability insurance, vacation pay or sick pay.  Representative shall be responsible for its
own worker’s compensation, FICA, unemployment insurance, withholding taxes, etc
for its employees.

 

7.                                       Insurance.  The Representative shall, at its sole cost and expense,
obtain and maintain Comprehensive General Liability insurance with respect to
all aspects of the Representative’s business and operations, with a minimum
liability limit of One Million Dollars ($1,000,000.00).  Such insurance shall be issued by an
insurance company or companies legally authorized to transact business in the
State of Minnesota.  All policies of and
for such insurance shall name the Company as an additional insured thereunder
and shall provide for at least thirty (30) days prior written notice, by
certified mail, return receipt requested, to the Company before cancellation,
termination, non-renewal or amendment thereto. 
At the request of the Company, the Representative shall provide the
Company such documentation as shall be necessary to evidence the existence of
such insurance.

 

16

 

8.                                       Name and Office.  The Representative shall conduct business in its own name
and shall maintain such offices as shall be necessary to the performance of the
Representative’s obligations under this Agreement.

 

9.                                       Expenses.  Representative shall be responsible for all of its own
expenses, including without limitation, advertisement, travel, entertainment,
mail, public relations and other expenses not explicitly agreed to be
reimbursed herein.

 

10.                                 Termination.

 

(a)                                  For Cause. This Agreement may be terminated for any of the following reasons, each
of which shall be deemed a termination “for cause:”

 

(i)                                     Upon the bankruptcy or insolvency of
Representative, or the assignment for the benefit of creditors or similar
disposition of the assets of Representative’s business;

 

(ii)                                  The abandonment of the business by the
Representative;

 

(iii)                               A conviction or a plea
of guilty or no contest to a charge of violating any law relating to
Representative’s business, or the conviction or a plea of guilty or no contest
to a charge of violating a felony which involves moral turpitude;

 

(iv)                              The commission of any act
by Representative which materially impairs the goodwill associated with the
Company or the Company’s trademarks, trade names, service marks, logo types or
other commercial symbol;

 

(v)                                 The failure of
Representative to meet the minimum sales performance criteria established on
Exhibit B attached hereto and incorporated herein (the “Minimum Performance
Criteria”); or

 

(vi)                              Company ceases to provide the Service or the
iParty.Com Agreement is terminated;

 

(vii)                           Breach of any provision of
this Agreement and failure to cure such breach within 60 days of written notice
of such breach.

 

(b)                                 Procedure for Termination for Cause.  Any termination pursuant to
Paragraph 11 (a) shall be effective immediately upon the delivery of written
notice thereof the Representative; provided, however, that such termination
shall not be effective until and unless all applicable federal or state laws,
rules or regulations shall have been complied with. No past, present or future
act, or failure to act, by the Company shall be, or be deemed to be, a waiver
or modification of the Company’s right to terminate this Agreement hereunder.

 

(c)                                  Without Cause. Either party may terminate this Agreement for any reason upon
furnishing the other party a written termination notice at least 90 days in
advance of the termination date.

 

17

 

11.                                 Nondisclosure of Confidential Information.

 

(a)                                  Nondisclosure.  Representative
acknowledges that he, she, or it shall have access to certain aspects of
Confidential Information (as hereinafter defined) of the Company. Unless
granted written permission by the Company, Representative agrees not to
directly or indirectly use or disclose Confidential Information for so long as
said information retains the characteristics of Confidential Information as
defined herein.

 

(b)                                 Confidential Information.  For purposes of this Agreement,
Confidential Information shall mean all information or compilations of
information that derive independent economic value for not being generally
known or readily ascertainable by proper means, or which the Company considers
confidential. Confidential Information includes, but is not limited to, trade
secrets, customer lists, customer incentive or promotion plans, business records,
price lists, business strategies, sales techniques, marketing plans, management
systems and procedures, computer programs, and the results of research and
development whether complete or in progress.

 

(c)                                  Documents and Tangible Items.  All documents and tangible items
provided to Representative by the Company for use in connection with this
Agreement, which documents in any way discuss or incorporate Confidential
Information, are the property of the Company and shall be promptly returned to
the Company upon termination of this Agreement, or upon request of the Company,
together with all copies, reportings, abstracts, notes or reproductions of any
kind made from or relating to the documents and tangible items or the
information they contain.

 

12.                                 Injunctive Relief.  Representative agrees that any
breach of Paragraph 11 of this Agreement would confer irreparable harm on the
Company, which irreparable harm may not be compensable entirely with monetary
damages.  Representative agrees that
injunctive relief is an appropriate remedy for breach of those provisions of
this Agreement.  Such injunctive relief
shall be in addition to and not a limitation of any monetary relief or other
remedies or rights to which the Company is or may be entitled to in law, in
equity, or otherwise.

 

13.                                 Miscellaneous Provisions.

 

(a)                                  Modifications. 
Except for the iParty.com Agreement referred to herein, this Agreement
supersedes all prior agreements and understandings between the parties, and it
may not be changed or terminated orally.  No amendment, modification, termination or attempted waiver of any
of the provisions hereof shall be valid unless in writing signed by both
parties hereto.

 

(b)                                 Notices. 
All notices or other communications including Termination Notices, from
either of the parties hereto to the other shall be in writing and shall be
considered to be duly delivered or served three business days following the
date when sent by first class, certified mail, return receipt requested,
postage prepaid to the party at its address as set forth at the beginning of
this agreement or to such other address as such party may hereafter designate
by written notice to the other party, or when received if sent by some other
method.

 

18

 

(c)                                  Severability of Provisions.  Should
any provision of this Agreement be unenforceable under then applicable law, or
be declared invalid through arbitration or by a court of competent jurisdiction
for any reason, such provision, or invalidity thereof, shall not affect the
validity of any remaining provision of this Agreement which shall remain in
full force and effect as if this Agreement had been executed with the invalid
unenforceable provision eliminated.

 

(d)                                 Counterparts.  This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.

 

(e)                                  Survival of Terms and Conditions.  The
terms and conditions of this Agreement shall survive the expiration or termination
of this Agreement to the full extent necessary for their enforcement and for
the protection of the party for whose benefit they operate.

 

(f)                                    Effect of Headings.  The
subject headings of the paragraphs of this Agreement are included for purposes
of convenience only and shall not effect the construction or interpretation of
any of its provisions.

 

(g)                                 Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota.  Any and all causes of
action, claims, suits or demands arising from or related to the terms of this
Agreement or the relationship of the Company and the Representative hereunder
shall be brought in federal or state courts located in the State of Minnesota.  The Representative hereby consents and
submits to the jurisdiction of said courts and agrees that service of process
may be made by publication, by registered or certified mail, or in any manner
provided under Minnesota or applicable Federal law.

 

(h)                                 Assignment.  Representative may not assign
its interest under this Agreement without the express written consent of the
Company.

 

IN WITNESS WHEREOF, the parties have executed
this Agreement the day and year first above written.

 

	
  COMPANY: Taymark, Inc.

  	
  REPRESENTATIVE: iParty
  Corp.

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY: 

  	
   

  	
   

  	
  BY:

  	
   

  
	
  Johathon Staruck,
  General Manager

  	
  Name:  Patrick
  Farrell, President

  
					

 

19

 

Schedule I

Licensed Intellectual Property

 

	
  Marks

  	
   

  	
  U.S.
  Registration or

  Serial No.’s

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  IPARTY.COM

  	
   

  	
  2649801 and

  76139874

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  IPARTY

  	
   

  	
  756946649

  	
   

  

 

Web Page Content

 

Articles

Party Tips

Product Descriptions

Basic Shop

Gateways

Site layout, design and navigation know-how

Site look and feel

 

Web Page Software

 

Database Structure

Product Hierarchy

 

20

 

Schedule II

 

Intellectual Property –
Additional License

 

Web Page Content

 

Product Descriptions

Basic Shop

Site Layout, design and navigation know-how

 

Web Page Software

 

Database Structure

Product Hierarchy

 

21

 

Schedule III

 

Web Site Functionalities and Features

 

a.                                       Site
Functionality

 

Site Layout

Drop down menus

Right nav – Shop a la carte

Cross selling

Gateways – Halloween, Parrot Head

Basic Shop

 

b.                                      Services
on Site

 

Browse and order goods

Browse content

Sign up for Special offers

Store Info

Track orders

Enter coupon codes

Jobs section

Investor relation section

Send email to CustomerCare@

Gurus@

Corporate@

Privacy@

Jobs@

Remove@

Link to Margaritaville.com

 

22

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