Wholesale Agreement

Craftworks NW

Wholesale Purchase Agreement

This Wholesale Purchase Agreement (“Agreement”) is valid between Craftworks NW, and its wholesale website users, referred to as (“User”, or “Users”). A Washington State Limited Liability Corporation with its principal place of business located at the address set forth under its name on the signature page of this Agreement (“Supplier”).

Background Information

Statement of Agreement

Supplier and User hereby agree as follows:

• 1. Appointment of User. User hereby appoints Supplier as a non-exclusive, authorized distributor of the Products in the United States of America, its territories and possessions, and User hereby accepts that appointment on the terms and subject to the conditions described in this Agreement. As an authorized distributor, User may purchase such quantities of the Products as User deems necessary or appropriate to fill its customers’ orders from time to time, subject to the order cutback procedures described below. User shall not be required to provide any particular level of promotion or marketing activities with respect to or on behalf of any of the Products and shall not be prohibited from providing customized promotional or marketing services with respect to any other products on or behalf of other suppliers. Notwithstanding anything in this Agreement to the contrary, User is under no requirement, or obligation to purchase any products, goods, or services from the Supplier.
• 2. Orders for the Products. User shall transmit orders for the Products to Supplier through its websites, or, in some instances, at the discretion of the Supplier, through direct invoicing. All of User’s orders for the Products are subject to acceptance and approval by Supplier, in accordance with the terms of the Agreement. User shall have no obligation to accept automatic shipments of any Product.

If any of the Products are in limited supply or otherwise unavailable in the quantities requested by User, Supplier may elect to cutback User’s order for such Product and-instead allocate such limited supply availability among User and Supplier’s other wholesaler customers in a commercially reasonable manner that does not place User at a competitive disadvantage. User acknowledges and agrees that User shall have no claim or remedy against Supplier, in connection with any such allocation by Supplier.

• 3. Terms of Sale and Shipment. Supplier shall sell the Products to User at Supplier’s published wholesale prices (“WAC”) in effect on the date the User’s orders. Published pricing does not include service charges for additional services, such as laser engraving, or color printing. Supplier shall give User notice at least one full business day prior to the effective date of an increase in WAC for any Product; provided, however, that any orders submitted by User after receiving notice of a WAC increase will be at the increased WAC. Supplier shall deliver the Products F.O.B. to those distribution centers specified in User’s orders or to such other locations as may be agreed upon by the parties in the case of drop shipment orders, in either such case, freight prepaid. Title and risk of loss to the Products shall remain with Supplier until shipment is received at the specified destination. If User requests special routing of a shipment which results in a higher transportation cost than would be incurred as a result of the routing selected by Supplier, then the extra cost incurred by Supplier shall be added to Supplier’s invoice. User shall report any damage, defect, loss in transit, or other shipping errors promptly following User’s discovery of the same. Any chargebacks (which are reductions in User’s purchase price based on prices contractually established directly between Supplier and User’s customers), rebates or promotional incentives shall be based on Supplier’s published wholesale price, without reduction for cash or off-invoice discounts, and shall be based on all purchases by User, unless otherwise agreed upon by the parties. All wholesale prices provided by Supplier are exclusive of taxes and each of the respective parties shall pay all applicable taxes, tariffs, duties or assessments other than taxes imposed on inventories of Products held by User as assessed by taxing entities to the respective parties and arising out of the transactions contemplated under this Agreement.

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• 4. Payment Terms. Unless otherwise mutually agreed by the parties, all orders for the Products shall be invoiced by Supplier on the date ordered. User shall pay Supplier’s invoices for Products in accordance with the due dates specified therein. In the event that a due date fall son a Saturday, Sunday or a federal holiday, User may make payment on the next business day and still be entitled to the cash discount. Notwithstanding the foregoing, User shall not be required to remit payment to Supplier during any period of time in which Supplier carries a commercially unreasonable debt balance with User (i.e., the total undisputed amount Supplier owes to User as the result of chargebacks, product returns or any other transaction involving the Products exceeds the undisputed amounts User owes to Supplier for invoiced Product purchases). Releasing payment for delivery to Supplier, whether through electronic means or the mail, constitutes making payment. If Supplier establishes so-called “credit limits” for User’s purchases, Supplier shall (a) promptly following the establishment of such limits and in any event not less than ten (10) business days prior to cutting back orders or otherwise acting upon such limits, give User notice of the establishment of such limits, and (b) consult in good faith with User as to the appropriateness of such limits in light of User’s overall creditworthiness, sales growth rate, and other relevant factors.

If User notifies Supplier that Supplier is carrying a debt balance, Supplier shall remit payments for such amounts to User by check or wire transfer until such time that User notifies Supplier that the debt balance has been eliminated; provided, however, that prior to requesting payment, User and Supplier will work together to eliminate the Debt Balance through other means, including but not limited to, purchasing additional inventory, in order to eliminate and/or reduce the negative financial impact to Supplier.

Supplier shall, promptly following User’s requests made from time to time during the term of this Agreement, provide User with Supplier’s most recent year-end consolidated financial statements and quarterly year-to-date updates to such financial statements.

User retains the right to withhold payments, setoff amounts owed to Supplier against amounts owed to User, request a chargeback advance and/or cease its purchase relationship with Supplier based upon (a) User not receiving payment for amounts owed to it under this Agreement, or (b) Other credit considerations deemed relevant by User. With respect to User’s right of set-oft User and its affiliates, parent or related entities, collectively or individually, may exercise a right of set-off against any and all amounts due Supplier, without in any way limiting its rights under law or in equity. For purposes of this provision, User, its affiliates, parent and related entities dial be deemed to be a single creditor.

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• 5. Inventory. Supplier, at its discretion, shall retain enough physical inventory of material and stock to facilitate the duties of the Supplier, but is not obligated to carry any specified amount, or quantity of any product. Inventory deemed to be “In Stock” by the Supplier is understood to mean that there is enough stock on hand in the Supplier’s network of Wholesalers and Distributors (referred to as (“Network”), that it would reasonably expect to fulfill orders and purchases placed by the User in a reasonable timeframe. In the event that an order has placed by the User, and there is not enough stock on hand, or in the Supplier’s Network to fulfill the order immediately, the User will be notified, and be presented with fulfillment options, to include cancelation and refund of the affected order(s).

• 6. Returned Goods and Recalls. Products that have been customized, or altered in any way, shall be ineligible for refund/cancelation. If an order has been ordered to include customization work, and the User places a cancelation request after production of the order has begun, the User shall be responsible for all associated charges for the part of the order that was customized. For standard wholesale product orders, User shall have the right to return Products to Supplier for credit, or refund, and Supplier shall process and provide appropriate credit to User with respect to all Product returns, all in accordance with this Section 6 and the Supplier’s returned goods policy (“Returned Goods Policy”) in effect at the time of the return. User shall notify Supplier of its intent to return such Products to obtain return authorizations from Supplier. Such authorization shall not be unreasonably withheld by Supplier. Except as provided otherwise in this Agreement, Products that are on clearance due to supply no longer being made available, or canceled, are not eligible for return or credit. User may return specific Products without limit, without regard to the remaining dating and without authorization under the following circumstances: (a) (non-customized) Products during the 90-day period following their introduction; (b) Products discontinued by Supplier to the extent the then-current Product inventory is not sold within 30 days of discontinuation; (c) Products that experience decreased market demand due to circumstances beyond User’s control; and (d) all Products immediately upon termination of this Agreement between Supplier and User. Should any of the circumstances specified in subsections (a)-(d) of this Section 6 occur, Supplier shall have the option to issue an additional 10 days of dating in which User may return the Product. Third-party return companies shall be recognized as legitimate processors. These return guidelines shall be in effect for all Products originally purchased by User from Supplier, exclusive only of specialty or promotional program purchases specifically exempted by mutual written consent of the parties.

• 7. Contract Administration and Chargeback Procedures. User shall recognize and administer those contracts between Supplier and customers of User pursuant to which Supplier and such customers have established prices at which the customers may purchase certain Products (each, a “Supplier Contract” and, collectively, “Supplier Contracts”), subject to the continued validity of Supplier Contracts in accordance with applicable law and to User’s right to suspend such recognition as provided herein. User’s Standard Policy on Chargebacks (the “Chargeback Policy”) in effect at the time of the chargeback shall govern the administration of Supplier Contracts under this Agreement. A copy of the Chargeback Policy in effect as of the Effective Date is attached hereto as Attachment 1 to this Agreement and incorporated herein. The Chargeback Policy may be amended, by User from time to time. If there is a dispute regarding Supplier Contracts administration and chargeback procedures that can not be resolved in a timely manner, User reserves the right to suspend the recognition and administration Of such contracts until there is a mutually agreed upon resolution of the dispute.4

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• 9. Confidential Information. During the course of operating under this Agreement, each party, its respective agents, employees and representatives (collectively, the “receiving party”) may receive or have access to confidential materials and information of the other party (the “disclosing party”). All such materials and information (including but not limited to information regarding Products, pipeline, operations, methods, strategies, formulas, price lists, discount programs, incentives, rebates, records of unit movement of Products, shipping and warehousing, and confidential proprietary information from third parties), are collectively referred to herein as “Confidential Information” and constitute the property of the disclosing party. Confidential Information does not include, and the receiving party shall have no obligation hereunder with respect to, information that (a) was known to the receiving party before receipt, directly or indirectly, from the disclosing party; (b) is lawfully obtained, by the receiving party, from a third party who is under no obligation of confidentiality; (c) is or becomes publicly available other than as a fault of the receiving party; or (d) is developed by the receiving party independent of the Confidential Information disclosed by the disclosing party. During the term of this Agreement and for a period of 3 years thereafter the receiving party shall not use or disclose to third persons any such Confidential Information without the disclosing party’s prior written consent, excepting those (a) disclosures made on a confidential basis to and use by the affiliates, directors, officers, employees, and agents of the receiving party who have a reasonable need to know such information in connection with the receiving party’s performance of this Agreement, (b) disclosures which are required by law, as reasonably determined by the receiving party or its legal counsel, or are made on a confidential basis to the receiving party’s attorneys, accountants, and other professional advisors in connection with matters relating to this Agreement, and (c) routine disclosures by Supplier in the normal course of business of aggregated warehouse withdrawals, sales and other data to IMS, DDD or other similar organizations. The existence of this Agreement and its terms and conditions are hereby designated as confidential and, notwithstanding anything in this Section to the contrary, shall be treated as Confidential Information subject to the obligations of the immediately preceding sentence for the term of this Agreement and for a period of 3 years thereafter.

• 10. Representations, Warranties and Indemnification. Supplier hereby represents and warrants that, at the time of delivery to User’s destinations designated in User’s orders the Products are and shall be manufactured and delivered to User in conformity with applicable state and federal laws, rules, and regulations.

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EXCEPT FOR THE FOREGOING WARRANTY, SUPPLIER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR OTHERWISE, AND SPECIFICALLY DISCLAIMS (i) ANY WARRANTY OR

MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO PRODUCTS, AND (ii) ANY LIABILITY WITH RESPECT TO ANY PRODUCTS THAT, AFTER DELIVERY TO USER, USER HAS ALTERED, MODIFIED OR TAMPERED WITH, SUBJECT TO MISUSE, NEGLIGENCE OR OTHERWISE DAMAGED, OR HAVE BEEN STORED, HANDLED, OR USED IN A MANNER CONTRARY TO APPLICABLE LAWS OR REGULATIONS OR SUPPLIER’S DIRECTION.

Supplier shall defend, indemnify, and hold harmless User and its affiliates, subsidiaries, directors, officers, employees and representatives from and against any and all third party claims, liabilities, losses, damages, costs, and expenses (including without limitation reasonable attorneys’ fees) arising directly or indirectly out of: (a) the breech of any representation or warranty set forth in this Section; (b) the fraud, intentional misconduct, omission or negligence of Supplier; (c) the manufacture, marketing, testing, shipping, sale, possession or use of the Products (occluding any claim, liability, loss, damage, cost or expense shown to be attributable to User’s intentional misconduct or negligence in handling such Products); (d) “class of trade” pricing, if any maintained by, Supplier from and after the effective date of this Agreement, including without limitation those arising out of User’s administration of Supplier Contracts; and (e) any intellectual property infringement actions (including patent, trademark, service mark, copyright trade dress, trade secret and other proprietary rights) brought by a third party in connection with User’s distribution of Products hereunder. The warranty and indemnification provisions of this Section shall survive any termination or expiration of this Agreement.

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User shall defend, indemnify, and held harmless Supplier and its affiliates, subsidiaries, directors, officers, employees and representatives from and against any Claims, to the extent arising directly or indirectly out of (a) User’s breach of this Agreement, or (b) the fraud, intentional misconduct or negligent act or omission of User; provided that User shall have no duty to indemnify, defend or hold harmless under this paragraph to the extent that Supplier, its affiliates, subsidiaries, directors, employees or representatives caused or contributed to the Claims or to the extent that Supplier is obligated to indemnify User under the preceding paragraphs.

NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT, PUNITIVE, CONSEQUENTIAL OR SPECIAL DAMAGES, INCLUDING DAMAGES FOR LOSS OF PROFITS, LOSS OF REVENUE OR LOSSES BY REASON OF COST OF CAPITAL, ARISING FROM OR RELATING TO ANY PERFORMANCE OR LACK OF PERFORMANCE UNDER THIS AGREEMENT, EVEN IF SUCH DAMAGES WERE FORESEEABLE OR A PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND REGARDLESS OF WHETHER A CLAIM IS BASED ON CONTRACT, TORT, OR VIOLATION OF ANY APPLICABLE LEGAL OR EQUITABLE PRINCIPLE.

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• 12. Term and Termination. The term of this Agreement shall commence on the Effective Date and continue to be in effect, as long as the User orders product through the Supplier. This Agreement may also be terminated (a) at any time by the User; (b) by the Supplier, in the event that required identifying information that is requested by the Supplier as a part of its application process is not provided by the User, or cannot be validated by the Supplier; (c) by either party in the event of the institution (whether voluntarily or involuntarily) of bankruptcy, insolvency, liquidation or similar proceedings by or against the other party or the assignment of the other party’s assets for the benefit of creditors; or (d) by either party for any reason or without reason at any time, without prior written notice.

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• 15. Audit and Inspection. During the term of this Agreement, Supplier shall retain the right to audit the account information provided by the User to the Supplier, as a condition of its application to Supplier services, as a User. Audits and inspections performed pursuant to this Section shall be performed by any of: (a) bona fide, permanent employees of the party conducting such audit or inspection; (b) auditors from independent accounting firms of national recognition; or (c) such other such party, determined to fulfill the duties of representative of the Supplier. Orders that were placed by the User during a period where required business documentation, including permits, certifications, and licenses are found to have been expired shall be subject to Fulfillment Hold, or Cancelation by the Supplier, without prior written notice. Supplier will make an attempt to notify the User, and request compliant, or updated documentation, but the User shall retain sole responsibility for providing the Supplier with up to date documentation, licenses, and permits.

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• 16. Relationship of the Parties. The parties to this Agreement are independent contractors. Nothing in this Agreement shall be construed as creating any other relationship, whether of employer and employee, partners, joint venturers, agents or otherwise.

• 17. Notices. All notices pursuant to this Agreement (each a “Notice”) shall be in writing and shall refer specifically to this Agreement. Notices shall be given by personal delivery, delivery by a nationally-recognized overnight courier, fax, e-mail or first class mail (certified or registered, postage prepaid), sent to the respective address(es) set forth below or to such other address(es) as Supplier or User may specify as its notice address by notice given in accordance with this Section. Except as may otherwise be provided in this Agreement, Notices are deemed to be given as follows: (a) when personally delivered, upon receipt as indicated/by the date on the signed receipt, (b) when faxed, upon receipt by the sender of a transmission report generated by the transmitting machine indicating that the fax was sent in its entirety, (c) when sent by e-mail, on the date sent so tong as the e-mail was sent by 5:30 p.m. Eastern time (transmissions after 5:30 p.m. Eastern time will be deemed to have been given the following day) and the sender does not receive a delivery error (i.e., a “bounced” Message), (d) when sent, by a nationally-recognized overnight courier (e.g., UPS, FedEx) on the date designated, by the sender for delivery when sent, (e) when sent by first class certified or registered mail, three days after the sender mails them.

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• 18. Governing Law. This Agreement shall be interpreted in accordance with, and governed by, the laws of the State of Washington, without regard to its conflict of laws principles.

• 19. Severability. The invalidity of all or part of any provision of this Agreement shall not affect the validity of any other provision of this Agreement or the remaining portion of the applicable provision.

• 20. Force Majeure. Neither party shall be liable for delay in delivery or nonperformance, in whole or in part, nor shall the did party have the right to terminate this Agreement where delivery or performance has been affected by a condition of force majeure unless such delivery or performance is delayed for thirty (30) days or more. For purposes of this Agreement, force Majeure means a condition which results from causes beyond a party’s reasonable control, including, but not limited to acts of God, acts of the other party, shortages, fires, labor disputes, strikes, floods, epidemics, quarantines, war, riot, delay in transportation, compliance with any applicable governmental regulation or order, whether or not it later proves to be invalid, or inability to obtain labor, materials or manufacturing facilities. If either party is affected by a force majeure event, such party shall promptly, but not later than ten (10) days of its occurrence, give notice to the other party stating the nature of the event, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is reasonably required and the non-performing party shall use its best efforts to remedy its inability to perform.

• 21. Entire Agreement. With the exception of any existing agreements, this Agreement constitutes the entire agreement between the parties and supersedes all prior contracts, agreements and understandings between the parties, whether written or oral, with regard to the subject matter hereof (that being the purchase by User from Supplier of Products for redistribution) and supersedes all prior or contemporaneous discussions, negotiations representations, warranties, and agreements relating thereto. This Agreement may not be amended, except by a writing signed by authorized representatives of the parties hereto. No waiver of any right or remedy under this Agreement shall be effective unless it is in a writing signed by an authorized representative of the party to be charged therewith. The failure of Service Provider or Customer at any time to require performance of the other of any provision of this Agreement shall in no way affect its right thereafter to require performance of the other of such provision, nor shall such failure be held to be a waiver of any succeeding breach of such provision or a Waiver of such provision itself.

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• 22. Assignment. Neither party may assign this Agreement to any third party without the prior written consent of the other party. Notwithstanding the forgoing no consent is needed in connection with a merger, acquisition, the sale of all or substantially all of the assets, or in connection with the grant of a security interest herein to a financial institution.

• 23. Publicity. Supplier shall not use User’s name, or any abbreviation thereof, or any User logo, or any adaptation thereof, in any advertising or trade displays, or for any other commercial purpose, without User’s prior written consent. Neither party shall, make any press release or other public announcement regarding this Agreement without the other party’s express prior written consent, except as re under applicable law or by any governmental agency, in which case the party required to make the press release or public disclosure shall use commercially reasonable efforts to obtain the approval of the other party as to the form, nature and extent of the press release or public announcement prior to issuance. Without limiting the generality of the foregoing and notwithstanding anything to the contrary, User shall provide Supplier with a written copy of any such press release or other public announcement no less than seventy two (72) hours prior to the intended issuance of such release or announcement.

• 24. Statute of Frauds. All transmissions made pursuant to this Agreement shall be deemed by the parties to be the same its written communication for all purposes, and for all applications of law and statutes, including but not limited to, the Statute of Frauds under the Uniform Commercial Code of the governing law specified above.

• 25. Limitation of Liability. EXCEPT AS RELATED TO ANY DUTIES PURSUANT TO THE INDEMNIFICATION AND INSURANCE PROVISIONS HEREIN, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF IT IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.