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EXHIBIT 10.29
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of October 20, 1997, is between Garden
Botanika, Inc. ("Garden Botanika") and Hunter Packaging Ltd. ("Hunter").
Garden Botanika sells a high-quality retail product line under the
trademark "Garden Botanika." Garden Botanika owns or has rights (i) to certain
formulations and graphics for such products and (ii) the Garden Botanika
Trademarks listed on Schedule A, as well as owning valuable goodwill associated
with, and which stems from, the Garden Botanika Trademarks. Garden Botanika and
Hunter desire to make certain arrangements under which Garden Botanika will
license Hunter the right to manufacture and sell certain of its products (the
"Garden Botanika Products") to the Westin Hotel Company.
It is therefore agreed as follows:
1. Appointment of Hunter as Distributor.
Subject to the terms and conditions of this Agreement, including without
limitation the restrictions of Section 2 below, Garden Botanika hereby appoints
Hunter as a distributor to the Westin Hotel Company (the "Westin") of the Garden
Botanika Products listed or to be listed on Schedule B, which may be amended by
the parties from time to time, as approved by Garden Botanika for manufacture
and sale by Hunter in accordance with this Agreement.
2. Restrictions on Hunter.
(a) During the term of this Agreement, Hunter shall not take any of the
following actions:
(i) sell any of the Garden Botanika Products under any trademark
other than the Garden Botanika Trademarks or use the same formula for
any other product;
(ii) use any of Garden Botanika's designs, packaging, labeling or
formulas on any other product other than in the manufacture and sale of
the Garden Botanika Products as permitted herein;
(iii) sell any of the Garden Botanika Products to anyone other
than the Westin;
(iv) use the name Garden Botanika in its company name, the name
of a division or any other name under which Hunter conducts its business
or otherwise use any names, marks or symbols of Garden Botanika,
including but not limited to the Garden Botanika Trademarks or any
names, marks or symbols which are similar thereto or which might tend to
confuse, deceive or mislead purchasers or prospective purchasers. The
words "names, marks or symbols" as used in this section include, but
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are not limited to, corporate and private names, trademarks, symbols,
designations, indicia, slogans, other means of identifying products of
Garden Botanika or Hunter; or
(v) distribute or sell Garden Botanika Products in a form of
packaging other than that specifically approved by Garden Botanika for
such products.
3. Manufacture.
Garden Botanika hereby grants to Hunter the right to manufacture Garden
Botanika Products or to have such Garden Botanika Products manufactured for
Hunter solely for the purpose of supplying the Westin. Upon request, Garden
Botanika shall promptly furnish Hunter with the formulations and specifications
of the Garden Botanika Products to be manufactured and the specifications for
the packaging required for such Garden Botanika Products, except that Garden
Botanika reserves the right to withhold the formulations and specifications of
any specific Garden Botanika Product that it does not approve for manufacture
and sale by Hunter in accordance with this Agreement. Hunter shall supply Garden
Botanika with samples of the formulations of the Garden Botanika Products so
produced, including packaging and labels, in order that Garden Botanika may
determine that such products reasonably conform to its formulations and
specifications. Hunter or its manufacturer may produce such number of the
approved Garden Botanika Products as may be necessary or appropriate to effect
the distribution provided for in this Agreement. Hunter agrees that such
formulations and specifications are the sole property of Garden Botanika and
agrees to maintain said formulations and specifications in the strictest of
confidence and to exert its best efforts to safeguard said formulations and
specifications for the exclusive benefit of Garden Botanika.
4. Trademark, Etc.
(a) Grant of License. Garden Botanika hereby grants to Hunter the right,
during the term of this Agreement, to use the Garden Botanika Trademarks and the
packaging, formulations and specifications furnished to Hunter by Garden
Botanika in the manufacture, labeling and selling of the Garden Botanika
Products, solely in accordance with the provisions of this Agreement, with the
right to sublicense a manufacturer or manufacturers, (such sublicensee to have
the right only to manufacture Garden Botanika Products for sale to Hunter). The
Garden Botanika Trademarks may be used by Hunter only on or in connection with
the Garden Botanika Products. If requested by Garden Botanika, signs, labels,
packaging materials, advertisements, product coverings and other written
materials bearing the Garden Botanika Trademarks shall display either the "R" or
the "TM" notice of trademark registration, depending on which notice of
trademark registration Garden Botanika instructs Hunter to display. The Garden
Botanika Trademarks shall be applied in compliance with all applicable laws and
regulations and as Garden Botanika may reasonably request. Hunter recognizes
that Garden Botanika has all rights, title and interest in and to the Garden
Botanika Trademarks, including the goodwill of the business symbolized thereby,
and Hunter shall at any time, whether during or after the term of this
Agreement, execute any documents reasonably requested by Garden Botanika to
confirm its ownership rights. Hunter further agrees to use the
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Garden Botanika Trademarks only in conformance with the trademark guidelines and
standards furnished to Hunter by Garden Botanika.
(b) Quality of Products.
(1) All Garden Botanika Products manufactured by or for Hunter
shall be manufactured (i) strictly in accordance with the formulations and
manufacturing standards furnished to Hunter by Garden Botanika, and (ii)
utilizing only ingredients and packaging components which are approved by Garden
Botanika and obtained from suppliers approved by Garden Botanika.
(2) Hunter shall furnish to Garden Botanika, and shall cause its
manufacturers to furnish to Garden Botanika, "batch" samples of the each of the
formulated Garden Botanika Products for its testing and approval. Hunter also
agrees to perform microbiological testing on all batches of Garden Botanika
Products in a manner customary in the industry and as reasonably requested by
Garden Botanika and to periodically submit copies of its test documentation to
Garden Botanika. Garden Botanika shall receive advance notice of production
schedules and, upon three business days' notice, have the right to be present
and audit the manufacturing process.
(c) Similar Trademarks. During the term of this Agreement and for a
period of five (5) years thereafter, Hunter shall not use for any product
similar to any of the Garden Botanika Products any trademark, trade name,
symbol, trade dress, label or package bearing any resemblance to the Garden
Botanika Trademarks or any of the packaging or labels used by
Hunter on the Garden Botanika Products.
5. Royalties and Expenses.
(a) In consideration of the rights granted to Hunter by Garden Botanika,
Hunter shall pay to Garden Botanika a royalty of two percent (2%) of Hunter's
"gross sales" of all Garden Botanika Products. Hunter shall pay the royalty
within thirty (30) days after shipment of the Garden Botanika Products. For the
purposes of this Agreement, "gross sales" shall mean the total sales of the
Garden Botanika Products, less freight and returns, but without any deduction
for commissions or selling expenses; provided, further, that such gross sales
and royalty may be calculated in accordance with the attached Schedule C, as may
be amended from time to time. The parties recognize and agree that freight
charges may be deducted from total sales in amounts actually occurred or as a
reasonable percentage of total sales, in accordance with Hunter's standard
procedures and subject to Garden Botanika's right of audit in Section 6. Payment
of royalties for gross sales in any one month shall be on standard terms of net
30 days as of the end of the month in which such sales occurred.
(b) In further consideration of the rights granted to Hunter by Garden
Botanika, Hunter agrees in good faith not to shift fees and costs required by
the Westin to Garden Botanika and to cooperate with Garden Botanika in decisions
concerning their mutual benefit, including, if appropriate and with Hunter's
prior consent, the allocation and payment of
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reasonable expenses required to be paid by the Westin in connection with
Hunter's provision of Garden Botanika's amenities program.
(c) Payments not postmarked by the due date shall be accompanied by an
additional interest amount equal to 1-1/2% for each 30 days past due or portion
thereof.
6. Reports; Right of Audit.
(a) During the term of this Agreement, Hunter shall furnish Garden
Botanika with the following items at the times specified below:
(i) Hunter shall send Garden Botanika a statement with each
royalty check showing the gross invoice value of all Garden Botanika
Products shipped under this Agreement during the royalty period and the
calculation of the royalties to be paid for such period; and
(ii) Within ninety (90) days after the end of each calendar year,
Hunter shall send to Garden Botanika a statement certified by Hunter's
independent public accountants, verifying its gross sales of Garden
Botanika Products during such year, a reconciliation to the amount
actually paid and payment for any remaining balance due for year.
(b) Hunter shall permit Garden Botanika, at Garden Botanika's expense,
upon at least three (3) business days prior notice, to examine its relevant
books and records during its regular business hours for the purpose of verifying
the statements given by Hunter to Garden Botanika pursuant to this Section 6 and
Hunter's compliance with Section 5, including, if applicable, the reasonableness
of the percentage applied to total sales for deducting freight costs. If such
examination discloses that the gross sales reported by Hunter for any payment
period are understated by any amount, or if the percentage applied to total
sales for deducting freight costs results in an overstatement of freight costs
by more than five percent (5%), Hunter shall pay Garden Botanika the full amount
of the resulting underpayment of royalties, if any, plus the costs actually
incurred by Garden Botanika for the examination.
7. Confidentiality.
Each party acknowledges that during the term of this Agreement, it may
have access to or become acquainted with various trade secrets and confidential
proprietary information of the other, including, but not limited to, the
formulations, specifications, marketing plans and new product ideas relating to
the Garden Botanika Products which they furnish to each other or which are
discussed by either party. Neither party shall use the trade secrets or
proprietary information obtained from the other party for any purpose other than
for the sale of the Garden Botanika Products in accordance with this Agreement.
Neither party shall disclose any such trade secrets or proprietary information
to anyone except their respective employees, subcontractors or their successors
and assigns who in their judgment have a need to know the information in order
for each party to carry out this Agreement. Each of Hunter and Garden
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Botanika shall use its best efforts to prevent any further disclosure by its
employees or subcontractors, including obtaining confidentiality agreements from
them.
8. Term of Agreement.
Unless sooner terminated in accordance with the provisions of Section 9,
the term of this Agreement shall commence on the date first above written and
shall continue in full force and effect for the period from December 1, 1997 to
December 31, 2001 and, thereafter, may be terminated by Garden Botanika by
providing Hunter with ninety (90) days' written notice; provided, however, that
this Agreement shall terminate automatically in the event Hunter is no longer
retained by the Westin for the purchase of Garden Botanika Products.
9. Termination.
In addition to any other rights that Garden Botanika may have under this
Agreement, Garden Botanika may terminate this Agreement, as follows:
(a) without prior written notice or legal action by Garden Botanika:
(i) if Hunter makes any assignment of assets or business for the
benefit of creditors, or if a trustee or receiver is appointed to
administer or conduct its business or affairs, or if it enters into any
proceeding in bankruptcy, reorganization or arrangement, or if it enters
into any other proceeding under any law for the relief of creditors;
provided, however, that if any matter covered by this Section 9 (a) is
affected without being voluntarily initiated by Hunter, Hunter shall
have a period of sixty (60) days to cause such matter to be terminated,
and if the matter is terminated within the sixty (60) day period, no
termination of rights shall result under this section, or
(ii) if Hunter commits a material breach of Section 4(b)(1)
relating to quality control; provided that "material breach" is
understood to include (x) material deviations in the quality of products
or packaging and (y) deviations in a material amount of products, or
products with packaging, that do not meet quality standards that, in the
case of each of (x) and (y) are shipped for sale and are not recalled
and removed from distribution), as well as (z) repeated failures to meet
quality standards in accordance with subparagraph (c) below;
(b) if Hunter commits a breach of any of the terms or condition of this
Agreement, by giving Hunter at least ninety (90) days notice of termination and
an opportunity to cure (which notice shall set forth with specificity the
alleged breach) except in the case of subparagraphs 9 (i) through (ii) below, as
to which the notice and cure period shall not be applicable:
(i) Hunter fails to comply with the confidentiality provisions
contained in Section 7; or
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(ii) Hunter fails to comply with the provisions of Section 4 (a)
or (c) relating to Garden Botanika Trademarks; and
(c) subject to Paragraph (a) (ii) (z) above, if Hunter commits a breach
of Section 4(b)(1) relating to quality control, by giving Hunter at least
fourteen (14) days notice of termination and an opportunity to cure, so long as
it is understood that the meaning of "cure" is to include that any products, or
products with packaging, that do not meet quality standards are recalled and
removed from distribution and no such further products are shipped until such
cure is effectively made.
Upon termination or expiration of this Agreement, Hunter shall not be
entitled to termination payments, compensations, reimbursement or damages on
account of any loss of prospective profits on anticipated sales or on account of
expenditures, including for advertising, promotion or for manufacturing
facilities, investments, leases, or other commitments relating to the business
of Hunter, including without limitation, damages claimed by reason of Hunter'
reliance on further continuance of this Agreement. The termination of this
Agreement shall not discharge either party from its obligation to pay any sums
due to the other party hereunder.
10. Relationship of Parties.
The relationship between Garden Botanika and Hunter under this Agreement
is solely that of licensor and licensee. Hunter is not the agent of Garden
Botanika for any purpose and has no right to bind Garden Botanika nor shall
Hunter hold itself out as having any such authority.
11. Force Majeure.
Neither party shall be responsible for any failure or delay in the
performance of acts contemplated by this Agreement due to circumstances beyond
its control, including, without limitation, acts of God, fires, floods, wars,
labor disputes or embargoes.
12. Infringement.
(a) If any action is known to Hunter to be threatened or brought against
Garden Botanika and/or Hunter based, in whole or in part, on the terms and
provisions of this Agreement or the Garden Botanika Trademarks, Hunter shall
promptly notify Garden Botanika, and Garden Botanika shall respond to such
threat or defend such action in any manner and on any terms Garden Botanika
shall, in its sole discretion, deem appropriate. Garden Botanika shall bear all
attorneys' fees and costs of any response or action relating to the matters
described in Section 12 (a) and (b) hereof, and Hunter shall cooperate fully
with Garden Botanika in connection with any such response or action.
(b) In the event that any infringement of the Garden Botanika Trademarks
comes to the attention of Hunter, then Hunter shall promptly notify Garden
Botanika of such infringement. Garden Botanika shall be entitled in its sole
discretion to take whatever steps it
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deems necessary to stop such infringement and/or recover damages therefor.
Hunter will fully cooperate and assist Garden Botanika in any such prosecution
of such action. Any damages recovered in any such action shall be applied as
follows: first, to reimbursement of Garden Botanika for costs and expenses
incurred in connection therewith; and second, divided proportionately between
the parties in accordance with the relative damages suffered by each.
13. Indemnity.
(a) Hunter shall indemnify and hold Garden Botanika harmless from and
against any claim, suit, loss, liability, damage or expense, including
attorneys' fees and costs, that may be sustained or incurred by Garden Botanika
as a result of or in connection with the breach of any representation, warranty
or covenant made by Hunter in this Agreement.
(b) Garden Botanika assumes no liability to Hunter or any of its
sublicensees or other third parties with respect to claims of any nature arising
from defects in the Garden Botanika Products manufactured or sold by Hunter or
its sublicensees under the Garden Botanika Trademarks, with the exception of
products manufactured by Garden Botanika. Hunter shall indemnify and hold Garden
Botanika harmless from and against any claim, suit, loss, liability, damage or
expense, including reasonable attorneys' fees and costs, that may be sustained
or incurred through claims of third parties against Garden Botanika arising out
of, or in connection with Hunter, manufacture, distribution, sale or other
disposition of the Garden Botanika Products, except (i) any claim that the use
of the Garden Botanika Trademarks or the manufacture, use or sale of the Garden
Botanika Products infringes upon any patent, trademark, trade secret or other
proprietary right, or misappropriates any trade secret of any third party, or
(ii) insofar as any such claims may arise from (a) any products manufactured by
Garden Botanika, (b) any breach of this Agreement by Garden Botanika, (c) any
invalidity or defect in the title of Garden Botanika to the Garden Botanika
Trademarks or the packaging, formulations or specifications furnished to Hunter
by Garden Botanika hereunder, not caused by any act or default of Hunter, or (d)
the instructions given to Hunter by Garden Botanika, provided such instructions
have been properly carried out by Hunter.
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the law of Washington applicable to agreements made and to be
performed in Washington. In the event any dispute arising hereunder cannot be
resolved by mutual agreement, any legal action thereafter prosecuted or
initiated under this Agreement shall be brought in the Superior Court of King
County, State of Washington. The parties to this Agreement waive any other
choice of law, jurisdiction or venue rights which they might otherwise have.
(b) Notices. Any notice or other communications under this Agreement
shall be in writing and shall be considered given when mailed by registered
mail, return receipt requested, to the parties at the following addresses (or at
such other address as a party may specify by notice to the other):
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Garden Botanika
8624 154th Avenue N.E.
Redmond, Washington 98052
Hunter Packaging Ltd.
2380 South Service Road
Oakville, Ontario
Canada L6L 5M9
(c) Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
(d) Complete Agreement. This Agreement contains a complete statement of
all the arrangements between the parties and cannot be changed or terminated
orally.
(e) Headings. The headings in this Agreement are solely for convenience
of reference and shall not affect its interpretation.
GARDEN BOTANIKA, INC.
By: /s/ MICHAEL W. LUCE
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Its: President
HUNTER PACKAGING LTD.
By: /s/ JOHN D. HUNTER
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Its: President
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