STRATEGIC ALLIANCE AGREEMENT
This Strategic Alliance Agreement (this "Agreement") is made
this 23rd day of September, 1999, by and between Whole Foods
Market, Inc., a Texas corporation ("WFM"), and Real Goods Trading
Corporation, a California corporation ("RG").
WHEREAS, WFM and RG desire to collaborate for mutual brand
building and to promote each other's retail, Internet and/or
catalog channels of distribution;
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as set forth below.
1. DEFINITIONS. The following terms shall have
the following meanings:
"Annual Product Revenues" means the cumulative aggregate
Product Revenues from the commencement of WFM's fiscal year
through the date of determination in such fiscal year.
"GAAP" means generally accepted accounting principles.
"Product Revenues" means WFM's gross sales of RG Products
through the WFM Site, less returns, as computed in accordance
with GAAP consistently applied by WFM.
"RG Catalog" means the mail order catalogs distributed by RG
to current and prospective customers in the ordinary course of
RG's business.
"RG Domain Name" means the URL's designated by RG for the RG
Site from time to time.
"RG Marks" means the RG Domain Name and the RG logos,
servicemarks, and trademarks.
"RG Products" means all products (including sale items)
available from time to time in the RG Catalog, but excluding
cleaning products which are currently otherwise for sale on the
WFM Site.
"RG Site" means the current or future sites owned and
operated by RG through which RG Products are offered for sale
online.
"RG Stores" means the retail store locations operated by RG
at which it offers environmentally related products for sale to
consumers.
"WFM Domain Name" means the URL's designated by WFM for the
WFM Site from time to time.
"WFM Site" means the principal site owned and operated by
WFM through which WFM offers products and services for sale
online.
"WFM Store" means a natural foods supermarket owned and
operated by WFM.
2. E-COMMERCE.
2.1. SALE OF RG PRODUCTS. WFM will offer for sale on the
"Whole Planet" portion of the WFM Site all of the RG Products at
the same price that RG sells RG Products through the RG Catalog.
RG will provide WFM with SKU's, product information and graphics
for all RG Products so that WFM may insert same on the WFM Site.
All RG Products will be branded as "Real Goods" using the
appropriate RG Marks and shall be given at least equal prominence
with all comparable products offered for sale on the "Whole
Planet" portion of the WFM Site. WFM will be responsible for,
and shall have sole discretion with respect to, the appearance
and content of the WFM Site; provided, however, that the pages
featuring the RG Products shall be subject to the mutural
satisfaction of the parties.
2.2. ORDER FULFILLMENT. WFM will electronically transfer
customer orders placed through the WFM Site for RG Products to RG
at least once a day, seven days per week. In accordance with the
customer service and fulfillment standards listed on Exhibit A
hereto, RG will fulfill all orders for RG Products originating on
the WFM Site using its own box but with WFM packaging labels and
insert literature(furnished to RG at WFM's expense). RG may
insert its own literature or catalogs in these orders with WFM's
prior written approval (which may be withheld in WFM's sole
discretion notwithstanding Section 12(l) below). RG shall track
all shipping and handling charges incurred for the RG Products
and shall invoice such amounts to WFM on a monthly basis; and WFM
shall remit such amounts to RG within 30 days of invoice.
2.3. PRODUCT INFORMATION. RG will provide informational
content to WFM regarding the RG Products, as reasonably requested
by WFM.
2.4. CUSTOMER BILLING AND REVENUES. WFM will be
responsible for the billing of customers purchasing the RG
Products through the WFM Site, the collection of Product Revenues
from such customers, and the payment of all bank charges
associated therewith. No later than the 15th day after the end
of each fiscal period, WFM will remit to RG all of the Product
Revenues, less a deduction of the following sales commission:
11.5% of the first $2 million of Annual Product Revenues;
16.5% of the next $3 million of Annual Product Revenues;
19.0% of the next $5 million of Annual Product Revenues; and
21.5% of all amounts in excess of $10 million of Annual
Product Revenues.
2.5. TAXES. WFM will be responsible for, and will
indemnify and hold RG harmless from, payment of all taxes (other
than taxes based on RG's income), fees, duties and other
governmental charges, and any related penalties and interest,
arising from the payment of amounts owed by WFM in respect of
sales of the RG Products through the WFM Site. WFM will provide
RG with official receipts issued by the appropriate taxing
authority, or such other evidence as RG may reasonably request,
to establish that such taxes have been paid.
2.6. CUSTOMER FILES. The customer file information of
persons who purchase RG Products through the WFM Site shall be
the joint property of WFM and RG, and as such, each party shall
have access to such information. In connection with the sharing
of customer file information, WFM and RG shall develop, adopt and
publish a mutually acceptable, shared customer privacy policy.
3. CO-LOCATION OF RG STORES. During the term of this
Agreement, WFM and RG shall devote their reasonable best efforts
to identify prospective sites for the co-location of RG Stores
next to existing and/or future WFM Stores for their mutual
benefit, up to a maximum of 20 such co-located RG stores during
such term, unless otherwise agreed. RG is currently siting an RG
Store next to WFM's Los Gatos, California store and is working
jointly to site an RG Store next to WFM's West Los Angeles store
by mid-November 1999. In the event a site has been identified
for the co-location of an RG Store and WFM Store and RG agrees to
proceed with the co-location of such Center, WFM shall lead the
real estate negotiations related to these proposed sites for the
Centers on behalf of RG; and WFM shall provide RG with periodic
updates regarding such negotiations. WFM shall use its
reasonable best efforts to negotiate the lowest possible lease
rate for the proposed Centers, and if possible, secure a lease
rate equal to or less than the lease rate for the co-located WFM
Store. Nothing contained herein shall require WFM to provide any
guarantee, letter of credit or similar financial arrangement on
behalf of RG, nor shall WFM be required to offer any financial
concession to a lessor in consideration of the lessor's agreement
to co-locate an RG Store, nor shall WFM be required to contribute
financially to the construction, opening or operation of the RG
Store. Nothing contained herein shall require RG to execute a
lease which it determines, in its sole discretion, to be
unsatisfactory. RG has advised WFM that it desires to
concentrate initially on co-location opportunities in the Western
United States, and due to such geographic concentration, RG
understands that the goal of 20 co-locations may fail to be
obtained.
4. KIOSK PROGRAM. WFM and RG will use their reasonable
best efforts to establish "kiosks" in five of the more successful
WFM Stores. Each "kiosk" (designed, maintained and operated by
WFM) would constitute approximately 100 square feet of selling
space and feature RG Products, educational information and
catalog/web access. It is presently intended that RG will supply
RG Products to WFM on a wholesale basis, and WFM would offer such
products at the same price that RG sells such products at the RG
Stores. If the test provides at least a 40% blended gross profit
for WFM and is otherwise successful, the parties intend to use
their reasonable best efforts to establish kiosks in 100 WFM
Stores over a five year period. Upon the termination of this
Agreement, WFM shall not materially discount the price of the RG
Products or otherwise jeopardize the goodwill of the RG brand;
and RG, at its option, may elect to repurchase from WFM all RG
Products which are unsold and remaining in inventory as of the
date of termination at WFM's wholesale cost, plus shipping.
5. Potential New Ventures. WFM and RG will continue to
explore and discuss the feasibility of additional alliances, such
as (i) marketing Amrion products through the RG catalog, website
and RG Stores, (ii) establishing mutual links between the WFM
Site and RG Site, (iii) establishing mutual chat rooms on the WFM
Site and RG Site discussing issues of value to cultural creatives
(such as renewable energy and genetically altered foods) and (iv)
co-branding certain RG products.
6. Notice of Other Alliances. Each party agrees to (i)
inform the other in advance of entering into similar arrangements
with companies that the other party would reasonably deem to be
competitive and (ii) consider issues which such party might
reasonably raise. Notwithstanding the foregoing, each party
reserves all rights to continue with its respective e-commerce
affiliate programs (including, with respect to WFM, a potential
strategic alliance with Gaiam; it being understood that WFM will
keep RG informed as to the status of negotiations regarding such
alliance).
7. License of Marks. RG hereby grants to WFM (for use on
the WFM Site and WFM store kiosks, each as contemplated herein,
and, with RG's consent, on other materials and for other uses) a
limited, non-exclusive, license to reproduce and display the RG
Marks during the term of this Agreement, and for such additional
period after termination as is necessary to wind-down the
parties' obligations under Section 11. WFM will use the RG Marks
exactly in the form provided. WFM hereby admits and recognizes
RG's exclusive ownership of the RG Marks and shall not challenge
the validity of or attempt to register any of the RG Marks or its
interest therein as a licensee, nor will it adopt any derivative
or confusingly similar names, brands or marks or create any
combination marks with the RG Marks. WFM shall place a (r) or
(tm) (as appropriate) with all uses and/or applications of the RG
Marks and as reasonably requested by RG.
8. Confidentiality. All tangible technical or business
information disclosed by one party to the other party and marked
as proprietary ("Confidential Information") shall be deemed to
the property of the disclosing party and shall be returned upon
request. The receiving party shall: (i) hold Confidential
Information in confidence after any termination of this
Agreement; (ii) restrict disclosure of Confidential Information
solely to its employees and employees of its affiliated companies
with a need to know; (iii) use a reasonable degree of care (in no
event less than the same degree of care as it uses for its own
proprietary information) to prevent the unauthorized disclosure,
use or publication of Confidential Information; and (iv) only use
Confidential Information for the purposes contemplated under this
Agreement. The receiving party shall have no obligation to
preserve the confidentiality of any information which: (i) was
previously known to the receiving party or any of its affiliated
companies free of any confidentiality obligation; (ii) is
disclosed to third parties by the disclosing party without
restrictions; (iii) becomes publicly available except as a result
of a breach of this Agreement; (iv) was not identified as
confidential or proprietary; or (v) is independently developed by
the receiving party. Within ten days after the termination or
expiration of this Agreement, each party shall (i) return all
Confidential Information received from the other party or destroy
such Confidential Information, if any, and (ii) provide the other
party with a signed statement from an officer certifying that it
has complied with the foregoing obligations.
9. Mutual Indemnification.
(a) Each party (each, an "Indemnifying Party") shall and
hereby agrees to defend, indemnify and hold harmless the other
party and each of its officers, directors, employees and agents
(each, an "Indemnitee") against and in respect of any loss, debt,
liability, damage, obligation, claim, demand, judgment or
settlement of any nature or kind, known or unknown, liquidated or
unliquidated, including without limitation all reasonable costs
and expenses incurred (legal, accounting or
otherwise)(collectively, "Damages") arising out of, resulting
from or based upon any pending or threatened claim, action,
proceeding or suit by any third party (a "Claim") based upon any
breach of any representation, warranty, undertaking or other
obligation of such Indemnifying Party under this Agreement.
(b) RG shall and hereby agrees to defend, indemnify and
hold harmless WFM against and in respect of any Damages arising
out of a Claim based upon any alleged defect or breach of
warranty of merchantability or fitness of any RG Product.
(c) The Indemnifying Party shall defend any action or suit
brought against the Indemnitee for any loss, cost, claim,
liability, damage or expense including reasonable attorney's fees
relating to or arising out of the performance of this Agreement.
The Indemnitee shall notify the Indemnifying Party promptly, in
writing, of any written claims, lawsuits or demands for which the
indemnified party alleges that the Indemnifying Party is
responsible under this Section 9. The Indemnitee shall
cooperate in every reasonable matter with the defense or
settlement of such claim, demand, or lawsuit. The Indemnifying
Party shall not be liable under this Section 9 for settlement by
the Indemnitee of any claim, demand or lawsuit unless the
Indemnifying Party has approved the settlement in advance or
unless the Indemnifying Party has approved the settlement in
advance or unless defense of the claim, demand or lawsuit has
been tendered to the Indemnifying Party in writing and the
Indemnifying Party has failed promptly to undertake the defense.
The Indemnitee may participate in the defense of the matter, with
counsel of the choosing of the Indemnitee, at the cost of the
Indemnitee.
10. Press Releases. Neither party shall issue a press
release regarding this relationship without the other party's
prior written approval. Neither party shall disclose the terms
of this Agreement to any third party, except the legal,
accounting and fiduciary advisors to such party, unless (a)
required by law, (b) the other party provides prior written
approval, or (c) such third party executes and delivers a
confidentiality/nondisclosure agreement in a form mutually agreed
upon by the parties.
11. Term; Termination.
(a) Unless sooner terminated under the provisions of this
Agreement, this Agreement shall remain in effect for three years
from the date hereof. No later than the end of the second
anniversary, WFM and RG shall mutually determine whether to
further extend the term of this Agreement (thus affording the
parties sufficient time to prepare for the termination of this
Agreement otherwise scheduled for the third anniversary of the
date hereof).
(b) Either party may terminate this Agreement immediately
on written notice to the other party if the other party commits a
material breach or is in material default of any warranty,
representation or other material provision hereof, which breach
or failure is incapable of cure or which, being capable of cure,
has not been cured within 30 calendar days after receipt of
written notice of such breach or failure or such additional cure
period as the notifying party may authorize in writing, provided
that the exercise of such right of termination shall be in
addition to, and not in lieu of, any other remedies the
terminating party may have by virtue of such breach. Further,
each party shall have the right to terminate this Agreement if
(i) such party is reasonably able to demonstrate to the other
that the formula in Section 2.4 is resulting in a continuing
operating loss (as determined in accordance with GAAP as
consistently applied by the party demonstrating such loss) to
such party, (ii) such party negotiates in good faith for a period
of 60 days with the other to modify the financial provisions of
this Agreement and (iii) such negotiations have not resulted in a
satisfactory amendment of this Agreement.
12. General.
(a) Governing Law. This Agreement will be governed and
construed in accordance with the laws of the State of Colorado
without giving effect to principles of conflicts of laws.
(b) Arbitration. Any controversy or dispute among the
parties arising in connection with this Agreement shall be
submitted to a panel of three arbitrators and finally settled by
arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association. Each of the disputing
parties shall appoint one arbitrator, and these two arbitrators
shall independently select a third arbitrator. Arbitration shall
take place in Denver, Colorado, or such other location as the
arbitrators may select. The prevailing party in such arbitration
shall be entitled to the award of all costs and attorneys' fees
in connection with such action. Any award for monetary damages
resulting from nonpayment of sums due hereunder shall bear
interest from the date on which such sums were originally due and
payable. Judgment upon the award rendered may be entered in any
court having jurisdiction or application may be made to such
court for judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) Amendment. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties
against which enforcement of the amendment, modification or
supplement is sought.
(d) Force Majeure. Any party's delay in the performance of
any duties or obligations under this Agreement (except the
payment of money owed) will not be considered a breach of this
Agreement if such delay is caused by a labor dispute, shortage of
materials, fire, earthquake, flood or any other event beyond the
control of the party, provided that the party uses reasonable
efforts, under the circumstances, (i) to notify the other party
of the circumstances causing the delay and (ii) to resume
performance as soon as possible.
(e) Notices. Any notices given under this Agreement shall
be in writing and shall be delivered to the addresses set forth
below the signatures of the parties or at such other address as
the party shall specify in writing. Notices shall be deemed
effectively given: (i)upon the next business day after being sent
overnight by a major U.S. express document courier; or (ii) upon
receipt of confirmation following transmission by a facsimile
machine.
(f) No Assignment. Neither party can assign its rights or
delegate its obligations to any third party (other than a
wholly-owned or majority-owned direct or indirect subsidiary of
such party), without the prior written consent of the other party
in its sole discretion. Any assignment or delegation in
violation of this Section shall be void and of no effect. No
assignment or delegation pursuant to this Section will expand the
rights or obligations of the parties.
(g) Severability; Waiver. If any provision of this
Agreement is held to be invalid or unenforceable for any reason,
the remaining provisions will continue in full force and effect
without being impaired or invalidated in any way. The parties
agree to replace any invalid provision with a valid provision
which most closely approximates the intent and economic effect of
the invalid provision. The waiver by any party of a breach of
any provision of this Agreement will not operate or be
interpreted as a waiver of any other or subsequent breach.
(h) Headings. Headings used in this Agreement are for
reference purposes only and in no way define, limit, construe or
describe the scope, intent, or extent of the section or in any
way affect this Agreement.
(i) Independent Contractors; No Agency. The parties to
this Agreement are independent contractors, and no agency,
partnership, joint venture, or employee-employer is intended or
created by this Agreement. Neither party is the agent of the
other, and neither party shall have the power to obligate or bind
the other party. Personnel supplied by each party shall work
exclusively for that party, and shall not, for any purpose, be
considered employees or agents of the other party, and each party
assumes full responsibility for the acts of personnel supplied by
it while performing services hereunder and, with regard to any
personnel supplied by it, each party shall be solely responsible
for their supervision, direction and control, compensation,
benefits, and taxes. Any rights not expressly granted by WFM or
RG to the other hereunder are expressly reserved by each of WFM
and RG.
(j) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and
all of which shall be taken together and deemed to be one
instrument.
(k) Entire Agreement. This Agreement, including the
Exhibits attached hereto, sets forth the entire understanding and
agreement between the parties regarding the subject matter of
this Agreement, and supersedes any and all oral or written
agreements or understandings between the parties as to that
subject matter. It may changed only by a writing signed by both
parties. Neither party is relying upon any warranties,
representations, assurances, or inducements not expressly set
forth herein.
(l) Covenant of Fair Dealing. Each of the parties hereto
covenants to deal fairly and in good faith with the other party
in respect of all matters described herein.
In Witness Whereof, each of the parties hereto have executed
this Agreement as of the date first written above.
Whole Foods Market, Inc.
By: [S]GLENDA FLANAGAN
Glenda Flanagan
Address:
601 North Lamar Blvd., Suite 300
Austin, Texas 78703
Attn: Chief Financial Officer
Fax: 512-477-1069
Real Goods Trading Corporation
By:[S]JOHN SCHAEFFER
John Schaeffer
Address:
3140 Airway Drive
Santa Rosa, California 95403
Attention: President
Fax: 707-744-2104
Exhibit A
Fulfillment/Customer Service Standards
Fulfillment
1. 90% of orders must be picked, packed and shipped within
standard.
2. Orders for goods kept in RG inventory must be picked packed
and shipped by the end of the business day following the
placement of the order.
3. Orders for inventory shipped from other facilities will be
shipped in compliance with promises made to customers on the
web site. These may vary from product to product.
4. 100% count verification and 10-15% detailed spot checking of
orders or 100% electronic product verification during pick
process.
5. 95% or better complete order (final fill) rate.
6. Letter of apology for incomplete orders.
7. Backorder standards to be developed by mutual agreement.
8. Returns processed within two business days of receipt.
9. 24-hour order processing.
Customer Service
1. Customer service available seven days per week (6:30a -
9:00p M-F; 8:00a - 5:00p Sat/Sun).
2. 80% of calls answered in less than 20 seconds by a live
operator. No busy signals. Less than 4.0% abandonment.
3. 3-hour maximum response to customer e-mails during customer
service hours.
4. "Sorry for your trouble" gift certificate or other incentive
for customers who experience system problems.