1
EXHIBIT 10.37
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement ("Agreement") is entered into and
made effective as of this 8th day of December, 1999 ("Effective Date") by and
between XXXX.XXX, INC. ("Xxxx.xxx"), a Delaware corporation, with its principal
offices located at 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000 and SALT H2O
HEADQUARTERS, INC. ("Salt H2O"), a Minnesota Corporation, with its principal
offices at 000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxx, XX 00000 (each a "party" and
collectively the "parties").
RECITALS
WHEREAS, Xxxx.xxx owns and operates the Xxxx.xxx Website (as defined
below) which markets and sells pet related goods to consumers; and
WHEREAS, Salt H2O is a supplier of fish and other animals for the pet
industry; and
WHEREAS, Xxxx.xxx and Salt H2O desire to establish a relationship
whereby Xxxx.xxx will become the exclusive direct consumer Internet distributor
of certain animals supplied by Salt H2O.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth, the parties agree as follows:
AGREEMENT
1. Definitions. For purposes of this Agreement, the following terms shall have
the following meanings whenever initially capitalized:
"Xxxx.xxx Website" shall mean a site or sites on the Internet, including
without limitation the World Wide Web, established and operated by Xxxx.xxx,
including without limitation the site currently located at xxxx://xxx.xxxx.xxx.
"Animal" shall mean any animal supplied by Salt H2O packaged alone or
together with any other product in accordance with this Agreement. The parties
agree that the definition of "Animals" shall initially be restricted to
saltwater fish, invertebrates and live rocks.
"Customer" shall mean any person or entity that acquires an Animal from
the Xxxx.xxx Website for its own personal use and not for resale or
distribution.
"Internet Market" shall mean the marketing and sale of products and
services over the Internet along with the direct consumer distribution of such
products and services.
"Xxxx.xxx Marks" shall mean any trademark, service xxxx, logo or other
indicia owned by Xxxx.xxx.
"Pets E-commerce Company" shall mean any website or other online service
or entity that markets, sells or allows Customers to purchase Animals over the
Internet. For purposes of this Agreement, "Pets E-Commerce Company" does not
include Salt H2O's existing customers as of the Effective Date set forth in
Exhibit A and other wholesale customers and aquarium maintenance companies
serviced by Salt H2O unless such customer or company is acquired by a Pets
E-commerce Company.
"Probationary Period" shall mean the period of sixty (60) days after the
date which Salt H2O begins to fulfill orders for Animals placed by Customers on
the Xxxx.xxx Website during which time Xxxx.xxx will evaluate whether Salt H2O
can satisfy the requirements of Xxxx.xxx, including without limitation the
timely sourcing, picking, packing and shipping of Animals.
1
2
2. Exclusive Distribution.
2.1 Appointment. Salt H2O hereby appoints Xxxx.xxx and Xxxx.xxx agrees
to become the exclusive worldwide distributor of all Animals supplied by Salt
H2O including the exclusive right and license to source, supply, package,
market, distribute, fulfill orders and sublicense the same for the Internet
Market.
2.2 Non-Competition. Salt H2O including its officers, directors and
employees shall not, directly or indirectly, whether as principal, agent,
officer, director, employee, investor, consultant, stockholder, or otherwise,
alone or in association with any other person invest in, provide services for,
carry on, manage, operate or become engaged in, or otherwise take part in a Pet
E-Commerce Company.
2.3 Audit. During the Term of this Agreement and for two years
thereafter, Salt H2O shall maintain complete and accurate business and
accounting records, sufficient to substantiate its compliance under this
Agreement. Xxxx.xxx may, at its expense, audit the applicable records in order
to verify Salt H2O's compliance under this Agreement. Audits may be made from
time to time upon reasonable notice from Xxxx.xxx during the Term of the
Agreement and for two (2) years thereafter. If the audit report indicates that
Salt H2O has not complied with this Agreement, Xxxx.xxx shall be entitled to
terminate this Agreement for cause pursuant to Section 10.3 and Salt H2O shall
refund to Xxxx.xxx the portion of the consideration set forth in Section 3
prorated over the Term of this Agreement for the period of noncompliance.
3. Consideration. In consideration of these exclusive distribution and
fulfillment rights, Xxxx.xxx will pay Salt H2O the sum of [*] in accordance with
the following schedule: Upon execution of this Agreement, Xxxx.xxx shall pay
Salt H2O [*] which shall be refunded to Xxxx.xxx if Xxxx.xxx terminates this
Agreement during the Probationary Period. Thereafter, Xxxx.xxx shall pay Salt
H2O in equal quarterly installments of [*] over the Term of this Agreement
commencing after the Probationary Period during which time Xxxx.xxx will
evaluate whether Salt H2O can satisfy the requirements of Xxxx.xxx, including
without limitation the timely sourcing, picking, packing and shipping of
Animals.
4. Salt H2O Obligations.
4.1 Distribution and Packaging. Salt H2O agrees to fulfill orders for
and deliver the Animals to Customers ordered through the Xxxx.xxx Website in
accordance with this Agreement no later than March 1, 2000 unless another date
is mutually agreed by both parties. Salt H2O must (i) pick, pack and ship
Animals; and (ii) send electronic confirmations of such orders to Xxxx.xxx, all
within twenty four (24) hours of the placement of an order (excluding weekend
days) by a Customer on the Xxxx.xxx Website.
4.2 Live Arrival Date and Fill Rate. Salt H2O shall guarantee the live
arrival of Animals and a minimum of a five (5) day survival after such arrival
or will refund to Customer the purchase price of such Animals provided that the
total annual cost of any replacement Animals does not exceed five percent (5%)
of the total cost of Animals supplied by Salt H2O pursuant to this Agreement.
Salt H2O shall also ensure that the initial fill rate for fish will be at least
92.5%.
4.3 Proprietary Rights and Legends. Salt H2O shall include any Xxxx.xxx
Marks, copyright notices and any other proprietary rights legends specified by
Xxxx.xxx on at least two (2) sides of all packaging of Animals, or in any other
manner specified by Xxxx.xxx. Salt H2O shall not remove or alter any proprietary
rights notice placed in or on the packaging of Animals by Xxxx.xxx. Salt H2O
acknowledges that the Xxxx.xxx Marks are owned solely and exclusively by
Xxxx.xxx, and agrees to use the Marks only in the form and manner and with
appropriate legends as prescribed by Xxxx.xxx. Salt H2O agrees not to use any
other trademark or service xxxx in connection with its delivery of the Animals,
and may not private label the packaging of Animals or any portion thereof, or
include any Salt H2O or third party trademark, copyright or any proprietary
rights legends on the packaging of Animals or any portion thereof without prior
written approval of Xxxx.xxx.
*CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
3
4.4 Availability List. Salt H2O shall provide Xxxx.xxx a database of
species including common and scientific names and compatibility list which must
be downloaded into Xxxx.xxx inventory system on a regular basis to be mutually
determined by the parties. Should there be a discrepancy between the product
availability lists of Salt H2O and Xxxx.xxx, Salt H2O's list shall be the
conclusive list for purposes of Section 4.2.
4.5 Special Offers to Customers. Salt H2O shall provide Customers weekly
"specials" in addition to special groupings of fish, live rock and coral as
"special packs."
4.6 Authorized Fulfillment. All fulfillment of Animals made hereunder
will include only Animals for which Salt H2O is authorized to fulfill orders.
Salt H2O is not authorized to make, and shall not make, any other warranties,
representations, or promises on Xxxx.xxx's behalf.
4.7 Seasonal Adjustments. Salt H2O shall use its best efforts to timely
supply Animals in accordance with this Agreement based on a standard of
commercial reasonability, which means that the supply obligation shall include
consideration of the seasonal nature of certain products as well as other market
and supply factors beyond the control of Salt H2O.
4.8 Service and Returns for Customers. Salt H2O shall be solely
responsible for complying with Xxxx.xxx's current customer service and warranty
provisions as set forth at xxxx://xxx.xxxx.xxx/xxxxxx/xxxxxx_xxxxxxxxxx.xxxx and
which may be amended from time to time by Xxxx.xxx.
4.9 Compliance With Applicable Laws. Salt H2O shall ensure that its
fulfillment and delivery of Animals complies with any and all applicable state,
federal and local laws and regulations.
5. Pricing. The price of Animals, including without limitation the costs of
picking, packing, boxing, shipping and all materials including hot and cold
packs is set forth in Exhibit B subject to change by mutual agreement by the
parties provided that the current and future prices offered to Xxxx.xxx will be
no greater than the lowest price offered to Salt H2O's other customers at such
time, regardless of volume. Salt H2O will provide Xxxx.xxx sixty (60) days
written notice of all price increases (with the exception of fuel surcharges),
which will apply to purchase orders received after such period. Any price
decreases will apply to all purchase orders and unshipped orders as of the date
of such price decrease.
6. Technicians. At Xxxx.xxx's expense, Salt H2O shall initially hire two (2)
technicians to provide customer service to Customers at Salt H2O's premises.
Should Xxxx.xxx deem necessary, Salt H2O agrees to hire additional technicians
at Xxxx.xxx's sole discretion and expense. Such technicians shall be the
employees of Xxxx.xxx and report to the Director of Customer Service at
Xxxx.xxx.
7. Confidentiality. Both parties expressly undertake to retain in confidence the
terms and conditions of this Agreement, any attached Exhibits and all
information and know-how transmitted by either party and make no use of such
information and know-how except under the terms and during the existence of this
Agreement. Both parties shall guarantee and ensure its employees' compliance
with this paragraph. Both parties' obligations under this paragraph shall
survive any termination of this Agreement and shall extend to the earlier of
such time as the information is in the public domain or five (5) years following
the termination of this Agreement. This Section shall not prohibit the parties
from disclosing such information as is specifically required by any Federal or
state authorities. Notwithstanding the foregoing, either party may disclose
confidential information in accordance with any judicial or other governmental
order or request, provided that such party shall immediately notify the other
party in writing upon its receipt of such order or request and shall assist the
other party as is reasonable in seeking any protective order or its equivalent
or in limiting the scope of disclosure of any Confidential Information.
3
4
8. Indemnification.
8.1 By Salt X0X. Xxxx X0X shall, at its own expense, indemnify, defend
and hold harmless Xxxx.xxx, against any third-party claim, suit, action, or
other proceeding brought against Xxxx.xxx, to the extent that such claim, suit,
action or other proceeding is based on or arises from: (i) any material breach
of Salt H2O's obligations, promises, representations, warranties or agreements
hereunder or (ii) the fulfillment or delivery of Animals; provided, however,
that: (a) Xxxx.xxx provides Salt H2O with prompt notice of any such claim; (b)
Xxxx.xxx permits Salt H2O to assume and control the defense and settlement of
such action, with counsel chosen by Salt H2O; (c) Xxxx.xxx does not enter into
any settlement or compromise of any such claim without Salt H2O's prior written
consent; and (d) Xxxx.xxx cooperates with Salt H2O in such defense, at Salt
H2O's expense.
8.2 By Xxxx.xxx. Xxxx.xxx shall, at its own expense, indemnify, defend
and hold harmless Salt H2O, against any third-party claim, suit, action, or
other proceeding brought against Salt H2O, to the extent that such claim, suit,
action or other proceeding is based on or arises from any material breach of
Xxxx.xxx's obligations, promises, representations, warranties or agreements
hereunder; provided, however, that: (a) Salt H2O provides Xxxx.xxx with prompt
notice of any such claim; (b) Salt H2O permits Xxxx.xxx to assume and control
the defense and settlement of such action, with counsel chosen by Xxxx.xxx; (c)
Salt H2O does not enter into any settlement or compromise of any such claim
without Xxxx.xxx's prior written consent; and (d) Salt H2O cooperates with
Xxxx.xxx in such defense, at Xxxx.xxx's expense.
9. Representation and Warranties; Limitation of Liability.
9.1 Mutual Representations and Warranties. Each party to this Agreement
represents and warrants to the other party that: (a) such party has the full
corporate right, power and authority to enter into this Agreement and to perform
the acts required of it hereunder; (b) the execution of this Agreement by such
party, and the performance by such party of its obligations and duties
hereunder, do not and will not violate any agreement to which such party is a
party or by which it is otherwise bound; (c) when executed and delivered by such
party, this Agreement will constitute the legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms; and (d)
such party acknowledges that the other party makes no representations,
warranties or agreements related to the subject matter hereof that are not
expressly provided for in this Agreement.
9.2 UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY
DAMAGES, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
ARISING FROM ANY PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS
OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
10. Term and Termination.
10.1 Term. This Agreement shall take effect on the Effective Date and
will continue in effect for [*] from the date Salt H2O commences performance of
its obligations hereunder ("Term") and may be renewed by Xxxx.xxx, in its sole
discretion, for an additional [*].
10.2 Termination Without Cause. Xxxx.xxx shall have the right to
terminate this Agreement at any time during the Probationary Period without
cause or if Salt H2O is unable to perform any of its obligations under this
Agreement by March 1, 2000. Salt H2O shall refund to Xxxx.xxx all payments made
to Salt H2O during the Probationary Period and neither party shall be
responsible to the other for any other costs or damages.
10.3 Termination with Cause. Notwithstanding this section, either party
may terminate this Agreement immediately upon notice, if the other party: (i)
becomes insolvent; (ii) files a petition in bankruptcy; or (iii) breaches any of
its material obligations under this Agreement in any material respect, which
breach is not remedied within fourteen (14) days following written notice to
such breaching party.
*CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
5
10.4 Effect of Termination. Upon termination of this Agreement for any
reason, (a) Salt H2O will immediately cease fulfillment of the Animals, (b) Salt
H2O will return to Xxxx.xxx any of Xxxx.xxx's confidential information in the
possession of or under the control of Salt H2O, (c) all licenses granted herein
shall terminate and (d) Sections 7, 8, 9, 10 and 11 shall survive in accordance
with their terms.
11. General Provisions.
11.1 Arbitration. Any dispute, claim or controversy of any kind arising
in connection with, or relating to, this Agreement, except for a dispute, claim
or controversy arising under Section 7, shall be resolved exclusively by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect, by three (3) arbitrators appointed in
accordance with said rules. Judgment on the award rendered by the arbitrators
may be entered into any court of competent jurisdiction.
11.2 Delay in Performance. If as a result of fire, casualty, act of God,
riot, war, labor dispute, government regulation, or decree of any court or any
other event beyond the control of Salt H2O or Xxxx.xxx, either of the parties
shall be unable to perform its obligations hereunder, such inability shall not
constitute a breach of this Agreement, and such obligations shall be performed
as soon as the cause of the inability ceases or is removed; provided that if
such an event as set forth in this Section 11.2 extends for a period in excess
of ninety (90) days, the other party shall be entitled to terminate this
Agreement pursuant to Section 10.3.
11.3 Expenses. Each party shall be responsible for its own legal,
accounting and other fees and expenses related to this Agreement. Each party
shall indemnify and hold harmless the other party from any claim for broker's or
finder's fees arising from this Agreement by any person claiming to have been
engaged by such party.
11.4 No Partnership or Agency. Xxxx.xxx and Salt H2O will remain
independent contractors and not agents or employees of one another and nothing
in this Agreement shall be construed to create or constitute an
employer-employee relationship, partnership, joint venture, franchise, agency,
or contract of employment between Xxxx.xxx and Xxxx X0X.
11.5 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
reference to the conflicts of laws provisions thereof.
11.6 Entire Agreement. This Agreement and all attached Exhibits
constitute the entire agreement between Xxxx.xxx and Salt H2O, and supersedes
and terminates any and all prior agreements or contracts, written or oral,
entered into between the parties relating to the subject matter hereof. Any
representations, promises, or conditions in connection therewith not in writing
signed by both parties shall not be binding upon either party. This Agreement
shall control any provisions in purchase orders which are inconsistent with this
Agreement.
11.7 Assignment. This Agreement may be assigned by Xxxx.xxx in
connection with the sale or merger of all or substantially all of the assets or
equity of Xxxx.xxx. This Agreement may not be assigned by Salt H2O without the
prior written consent of Xxxx.xxx.
11.8 Notices. All notices required or contemplated by this Agreement
shall be in writing, delivered by U.S. certified mail (return receipt
requested), or via overnight courier (e.g., Federal Express, or DHL), and
addressed as follows:
If to Xxxx.xxx: Xxxx.xxx, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxx
If to Salt H2O: Salt H2O Headquarters, Inc.
5
6
000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Such notices shall be deemed given three (3) business days after being
deposited in the United States mail or one business day after being delivered
with an overnight carrier.
11.9 Partial Invalidity. Should any of this Agreement be held to be
void, invalid, or inoperative, the remaining provisions of this Agreement shall
not be affected and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
Effective Date written above. This Agreement is not binding until executed by
Xxxx.xxx.
XXXX.XXX ("XXXX.XXX") SALT H2O HEADQUARTERS ("SALT H2O")
By: /s/ X. X. Xxxxxxxxxx By: /s/ Xxxx Xxxxxxx, President
-------------------------------- ---------------------------------
X. X. Xxxxxxxxxx Xxxx Xxxxxxx
----------------------------------- ------------------------------------
Name (please print) Name (please print)
CEO President
----------------------------------- ------------------------------------
Title Title
12/9/99 12/8/99
----------------------------------- ------------------------------------
Date Date
6
7
Exhibit A
List of Existing Pets E-Commerce Companies
xxx.xxxxxxxxx.xxx
xxx.xxxxxxxxxxxxxxx.xxx
7
8
Exhibit B
Pricing
Xxxx.xxx livestock prices are standard list price less 5% unless otehrwise
agreed upon.
Xxxx.xxx shipping prices are listed below
Box Dimension Box Charges Shipping Charges
------------- ----------- ----------------
Small [*] [*]
Medium [*] [*]
Large [*] [*]
Extra Large [*] [*]
All shipping rates are for priority overnight shipping with FedEx.
All prices subject to change per the agreement.
Live rock has no box charge and shipping is on a per lb. basis.
*CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
9
AMENDMENT TO
EXCLUSIVE DISTRIBUTION AGREEMENT
This Amendment (the "Amendment") to the Exclusive Distribution Agreement
is entered into and made effective as of this 28th day of April, 2000
("Effective Date") by and between XXXX.XXX, INC. ("Xxxx.xxx"), a Delaware
corporation, with its principal offices located at 000 Xxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, XX 00000 and SALT H2O HEADQUARTERS, INC. ("Salt H2O"), a Minnesota
Corporation, with its principal offices at 000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxx, XX
00000 (each a "party" and collectively the "parties").
WHEREAS, the parties entered into an Exclusive Distribution Agreement
(the "Agreement") which has an effective date of December 8, 1999, and
WHEREAS, the parties wish to amend the Agreement as provided herein.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Section 4.1 of the Agreement is amended to read in its entirety as follows:
Distribution and Packaging. Salt H2O agrees to fulfill orders for and
deliver the Animals to Customers ordered through the Xxxx.xxx Website in
accordance with this Agreement no later than March 1, 2000 unless another date
is mutually agreed by both parties. Salt H2O must (i) begin to pick, pack and
ship Animals no earlier than 12:00 CST and ship the last order of each day
before 7:00 PM CST; and (ii) send electronic confirmations of such orders to
Xxxx.xxx, all within twelve (12) hours of the placement of an order (excluding
weekend days) by a Customer on the Xxxx.xxx Website except that during limited
periods of excessively high order and related activity, the parties may extend
the twelve (12) hour requirement. Salt H2O shall package the Animals in
accordance with the packaging guidelines as set forth in Exhibit 1.
2. Section 4.2 of the Agreement is amended to read in its entirety as follows:
Live Arrival Date and Fill Rate. Salt H2O shall guarantee the live
arrival of Animals and a minimum of a five (5) day survival after such arrival
or will refund to Customer the cost of such Animal paid by such Customer
provided that the total annual cost of any replacement Animals does not exceed
five percent (5%) of the total cost, to be reviewed on a monthly basis, of
Animals supplied by Salt H2O pursuant to this Agreement. Salt H2O shall also
ensure that the initial fill rate for fish will be at least 92.5%.
3. Section 4.4 of the Agreement is amended to read in its entirety as follows:
Availability List and Catalog. Salt H2O shall provide to Xxxx.xxx (i) a
database of species including common and scientific names and a compatibility
list which must be downloaded into the Xxxx.xxx inventory system on a regular
basis to be mutually determined by the parties; (ii) an
10
electronic version of Salt H2O's complete catalog on daily basis at a mutually
agreeable time; and (iii) hourly updates to such catalog.. Should there be a
discrepancy between the product availability lists of Salt H2O and Xxxx.xxx,
Salt H2O's list shall be the conclusive list for purposes of Section 4.2.
4. Section 4.8 of the Agreement is amended to read in its entirety as follows:
Service and Returns for Customers. Salt H2O shall be solely responsible
for complying with Xxxx.xxx's current customer service and warranty provisions
as set forth at xxxx://xxx.xxxx.xxx/xxxxxx/xxxxxx_xxxxxxxxxx.xxxx and which may
be amended from time to time by Xxxx.xxx. In addition and at Xxxx.xxx's expense,
Salt H2O will arrange for the return of all undelivered Animals to Salt H2O for
next day morning delivery via Federal Express or other comparable carrier
service.
5. Section 4.10 is added to the Agreement to read in its entirety as follows:
"Salt H2O has provided product photographs to Xxxx.xxx for its sales and
use in distribution and hereby grants to Xxxx.xxx the nonexclusive worldwide
right and license for such use. Xxxx.xxx agrees that all such photographs
provided to it by Salt H2O shall be returned to Salt H2O upon termination of the
Agreement."
6. Section 9.3 is added to the Agreement to read in its entirety as follows:
"With respect to potential animal losses occurring during the period of
product shipment where such losses are attributable to a common carrier, such
animal losses shall not be the responsibility of Salt H2O."
7. Section 5.1 is added to the Agreement to read in its entirety as follows:
"All payments for Animals will be made to Salt H2O within fifteen (15)
days of the close of each week's shipments."
2
11
IN WITNESS WHEREOF, the parties have entered into this Amendment on the
Effective Date written above. This Amendment is not binding until executed by
Xxxx.xxx.
XXXX.XXX ("XXXX.XXX") SALT H2O HEADQUARTERS ("SALT H2O")
By: /s/ XXXXX XXXXXXXXXX By: /s/ XXXX XXXXXXX
-------------------------------- ---------------------------------
Xxxxx Xxxxxxxxxx Xxxx Xxxxxxx
----------------------------------- ------------------------------------
Name (please print) Name (please print)
CEO President
----------------------------------- ------------------------------------
Title Title
4/28/00 4/28/00
----------------------------------- ------------------------------------
Date Date
3