EXHIBIT 10.10
 
Execution Copy
 
DISTRIBUTION AGREEMENT
 
(Initial Product Launch)
 
THIS DISTRIBUTION AND LICENSE AGREEMENT (“Agreement”) is made and entered into
as of the 12th day of August, 2011 (the “Effective Date”), by and between HzO,
Inc., a Delaware corporation (“HzO”), and ZAGG Incorporated, a Nevada
corporation (“Distributor”). HzO and Distributor may be referred to individually
as a “Party” and collectively as the “Parties.”
 
RECITALS:
 
A. HzO and Distributor are parties to that certain Amended and Restated
Marketing and Distribution Agreement, dated August 12, 2011 (the “Marketing
Agreement”). This Agreement sets forth rights and obligations of the Parties
which are in addition to and supplement the rights and obligations of the
Parties under the terms of the Marketing Agreement.
 
B. HzO is engaged in the business of creating and marketing hydrophobic coatings
for mobile and other electronic devices in order to protect such devices against
water and moisture damage. HzO desires to treat certain handheld electronic
devices identified on Exhibit A with HzO’s WaterBlockTM surface treatment (the
“Products”) and to sell the Products to Distributor in accordance with this
Agreement
 
C. Distributor is engaged in the business of, among other things, marketing and
distributing multiple protective products for consumer electronic and hand-held
devices.
 
D. In connection with that certain Stock Purchase Agreement among HzO,
Distributor and certain other investors, dated August 12, 2011(the “Stock
Purchase Agreement”), HzO desires to engage Distributor to market and sell the
Products in quantities set forth on Exhibit A in order to fulfill the
requirement of a successful retail launch of certain mobile electronic devices
which have been treated with HzO’s WaterBlockTM surface treatment.
 
E. Distributor desires, on the terms and conditions hereinafter set forth, to
purchase the Products in quantities set forth on Exhibit A, all of which shall
have been treated with HzO’s WaterBlockTM surface treatment, from HzO and to act
as an exclusive distributor of the Products in the Territory in quantities set
forth on Exhibit A through Distributor’s existing channels of distribution,
including via Distributor’s website and mall carts.
 
F.  
HzO is willing to grant to Distributor a distribution license as outlined
herein. AGREEMENTS:

 
In consideration of the mutual covenants and agreements contained herein, the
sufficiency of which is hereby acknowledged, the parties agree as follows:
 
 
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1. General Definitions.
 
1.1“Affiliate” means with respect to an entity, any other entity which is
controlled by, controls or is under common control of the entity. For this
purpose, the word “control” means the direct or indirect ownership of more than
fifty (50%) percent of the voting equity of such entity.
 
1.2“Confidential Information” has the meaning set forth in Section 8.1 below.
 
1.3“Documentation” means the documentation prepared in connection with the
Products as of the Effective Date, including functional and design
specifications, test reports, and consumer-facing documentation.
 
1.4“Fiscal Quarter” means HzO’s fiscal quarters, as currently calculated, during
each year of the Term.
 
1.5“HzO Technology” means any technology in or elements of the Products or
Documentation in which HzO owns the Intellectual Property.
 
1.6“HzO Trademarks” means the trademark and trade name HzO and the HzO logo,
HzOinside and WaterBlockTM attached as Exhibit B.
 
1.7“Intellectual Property” means any and all now known or hereafter known
tangible and intangible: (a) rights associated with works of authorship
throughout the world, including but not limited to, copyrights and moral rights;
(b) trademarks and trade name rights and similar rights; (c) trade secret
rights; (d) patents, patent rights, designs, and other intellectual and
industrial property rights (of every kind and nature throughout the world and
however designated) whether arising by operation of law, contract, license, or
otherwise; and (e) all registrations, initial applications, renewals,
extensions, continuations, divisions, or reissues of the foregoing now or
hereafter in force.
 
1.8“Marketing Agreement” has the meaning set forth in the Recitals, above.
 
1.9“Net Sales” means the net sales revenue of Products by Distributor and its
Affiliates, as reflected in its consolidated financial statements, calculated in
accordance with U.S. GAAP, in accordance with Distributor’s standard accounting
policies, which may include deductions for sales returns, sales allowances, and
other similar deductions.
 
1.10 “Products” has the meaning set forth in the Recitals, above. “Products”
shall also include any additional products that the Parties agree in writing to
add as Products under the terms of this Agreement.
 
1.11 “Standard Cost” means Distributor’s direct costs for Products sold by
Distributor and its Affiliates, in accordance with Distributor’s standard
accounting policies.
 
1.12 “Standard Margin” means Net Sales less Standard Cost.
 
1.13“Stock Purchase Agreement” has the meaning set forth in the Recitals, above.
 
1.14 “Term” has the meaning set forth in Section 9.1 below.
 
1.15“Territory” means all countries in the world in which Distributor markets,
sells or distributes, directly or indirectly, Distributor’s own products.
 
 
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2.Grant of Rights.
 
2.1 Grant of Rights. HzO hereby grants Distributor an exclusive right to
purchase the Products from HzO and to use, market, import, offer to sell,
distribute or have distributed (including through multiple tiers of
distribution) and sell the Products in the Territory at retail (the
“Aftermarket”). Distributor may sub-license the foregoing rights and licenses to
its Affiliates, as long as they shall remain Affiliates of Distributor.
Distributor agrees that Distributor will be responsible and liable under the
terms of this Agreement for any breach, action or omission by an Affiliate to
the same extent as if Distributor itself had taken such action or made such
omission.
 
2.2 Appointment of Distributors. Distributor may exercise its marketing,
distribution and selling rights under this Agreement both directly and through
its Affiliates, distributors and resellers.
 
2.3 Scope of Exclusivity. During any period that Distributor’s rights hereunder
are exclusive, HzO shall not market, sell or distribute the Products in the
Aftermarket in the Territory. The exclusivity of Distributor’s appointment shall
not prevent HzO licensing or selling HzO Technology to any original equipment
manufacturer (“OEM”) of products for application of HzO Technology to such
products in the OEM market.
 
2.4 Termination Right. After the initial 3 month period of sales of Products by
Distributor, HzO and Distributor will meet and discuss in good faith the results
of the initial launch, including Product sales volume, unit pricing, customer
feedback, warranty claims, actual financial and sales results versus proforma.
The Parties will negotiate in good faith any changes in the terms of this
Agreement as may be commercially reasonable in light of the results for the
initial Product launch.
 
3. Proprietary Rights; Non-Competition/Freedom to Operate.
 
3.1HzO Intellectual Property. Distributor acknowledges and agrees that the HzO
Technology used in the Products and Documentation prepared by or for HzO in its
current form as of the date of this Agreement, are proprietary to HzO and all
related Intellectual Property rights will at all times remain with HzO. As
between Distributor and HzO, HzO shall own any Intellectual Property in any
modifications to the HzO Technology used in the Products. HzO reserves all
rights not specifically granted in this Agreement.
 
3.2 Third Party Infringements. Each Party will promptly notify the other of any
infringements by third parties of rights in the HzO Technology used in the
Products, the HzO Trademarks, or related materials that come to such Party’s
attention, but shall have no liability to the other Party for a failure to do
so. HzO shall have the sole right, but not the obligation, to bring any action
for infringement of its Intellectual Property and/or the Trademarks.
 
3.3 Non-Competition/Freedom to Operate. At all times during which Distributor
has the exclusive right to distribute the Products, Distributor will not, except
as expressly described herein in respect of the Products, carry on any business
or activity (whether directly or indirectly, as a partner, shareholder, owner,
principal, agent, director, Affiliate, advisor or consultant), which is intended
to design, manufacture, market, sell or distribute any product with technology
or features substantially similar to the HzO Technology utilized in any one of
the Products. Except as set forth in the previous sentence, each of Distributor
and HzO shall have the unrestricted right to develop new or competing products
to the Products or to other products under development or on either Party’s
current or future product roadmap.
 
3.4 Engineering Changes. HzO shall maintain exclusive rights to control the
manner in which Products are treated with HzO’s surface treatments. Distributor
may suggest engineering or technical changes to the HzO Technology to be
utilized in Products and to the Documentation, which HzO will reasonably
consider.
 
 
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4. Distributor’s Responsibilities. Distributor shall have the following
obligations and responsibilities under this Agreement:
 
4.1 Efforts to Sell. Distributor will use reasonable best efforts to market,
distribute and sell the Products in the Territory, consistent with its general
marketing, distribution and sales practices for comparable products, as they may
change over time.
 
4.2 Compliance with Laws. Distributor shall obtain any necessary governmental
licenses or approvals for distribution and sale of the Products by it or its
Affiliates in the Territory, to the extent not previously obtained by HzO.
Distributor shall be responsible for and shall obtain and/or comply with all
governmental laws and regulations applicable to the export, import and
distribution of the Products by or on behalf of Distributor or its Affiliates in
each country within the Territory where Distributor distributes the Products,
non-compliance with which would have a material adverse effect upon HzO.
 
4.3 Service and Support. Distributor shall have responsibility for and shall
provide, and ensure that third parties appointed by Distributor provide, initial
customer and consumer support for Products sold by or through Distributor.
 
4.4 Product Claims. Distributor will be solely responsible for any
representations or claims made by it regarding the Products.
 
5. HzO’s Responsibilities.
 
5.1Customer Service and Support. HzO shall provide all customer and consumer
support in respect of matters which are not resolved via Distributor’s initial
support. HzO shall provide all engineering and technical support for HzO
Technology utilized in the Products sold by or through Distributor and shall use
commercially reasonable efforts to resolve customer or consumer concerns or
inquiries relating to HzO Technology or its application to the Products.
 
5.2Compliance with Laws. HzO will be responsible for packaging and labeling the
Products as required by the laws of the country where Distributor distributes
the Products.
 
5.3Product Claims. HzO will be solely responsible for any representations or
claims made by it regarding the HzO Technology and its application to the
Products, other than those contained in Distributor’s promotional literature or
matters in respect of which Distributor provides representations, warranties,
covenants or indemnification to HzO hereunder.
 
 
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6. Pricing and Payment Terms.
 
6.1HzO Product Price to Distributor. HzO shall sell Products to Distributor at
its Cost. For purposes of this Agreement, “Cost” shall mean an administrative
cost of $1.00 per unit plus charges and costs necessarily incurred and paid by
HzO to: (a) acquire the mobile devices described in Exhibit A, (b) apply the HzO
Technology to the Products, (c) obtain repair and/or replacement insurance for
the Products and (d) deliver the Products. Distributor shall pay HzO for
Products net thirty (30) days of receipt of invoice.
 
6.2 Product Margin Share. Distributor shall also pay HzO a margin share of fifty
percent (50%) of Standard Margin for each Product sold, and not returned for a
refund, by Distributor or its Affiliates to third parties in the Territory;
provided that margin share shall be calculated on the aggregate Standard Margin
for sales (i) by Distributor to its Affiliates and (ii) from Distributor and/or
its Affiliates to third parties. For avoidance of doubt, if there is Standard
Margin of $10 on a transaction between Distributor and one of its Affiliates and
Standard Margin on $10 on a transaction between the Affiliate and a third party,
Distributor would pay HzO 50% of the aggregate Standard Margin on $20. Product
returned by customers of the Distributor and replaced with another product are
subject to payment of the margin share of the Standard Margin to HzO.
 
6.3 Payments and Reports. Payments due under Section 6.2 shall be made monthly
by Distributor based on sales in the preceding calendar month. Within thirty
(30) days after the end of a calendar month, Distributor shall deliver to HzO a
written report setting forth, in reasonable detail, the total net Products sold
by it to its customers in such quarter, with a calculation of Standard Margin
and resulting amounts owed to HzO. Unless Distributor is notified by HzO of any
discrepancy within five (5) days of receipt, such report will be deemed to be an
invoice for Distributor for the aggregate amount due and Distributor shall pay
HzO net ten (10) days of receipt of invoice.
 
6.4 Product Pricing. Distributor shall determine the price for the Products to
be sold by it in its sole discretion. In the event that Standard Margin on the
sale of any Product is less than zero, Distributor shall absorb such loss, and
HzO shall not be obliged to pay any amount to Distributor with respect to any
sales of Products where Standard Margin is less than zero.
 
6.5 Costs. Except as set forth in this Section 6, each Party shall bear its own
costs associated with its business and activities under this Agreement.
 
6.6 Taxes. Distributor shall be responsible for all sales, use, excise, value
added, duties and other taxes, governmental duties or assessments, arising out
of this Agreement, other than taxes on HzO’s net income.
 
7. HzO Trademark License.
 
7.1 License Grant. Subject to the terms of this Section, HzO grants Distributor
a nonexclusive, royalty-free license to use the HzO Trademarks in connection
with marketing, advertising and selling the Products. Distributor shall comply
with HzO’s policies and guidelines for use of the HzO Trademarks, as they may be
revised from time to time, and shall comply with proper legal standards for
trademark usage. Distributor agrees to cooperate reasonably in any efforts by
HzO to register the HzO Trademarks. All such registrations shall be in HzO’s
name.
 
7.2 Restrictions. Distributor agrees it will (i) not alter or change the HzO
Trademarks or any trademark notices provided by HzO without HzO’s consent; or
(ii) use the HzO Trademarks in connection with any other product or service not
supplied or authorized by HzO.
 
7.3 Quality Assurance. Distributor acknowledges that the good will and value of
the HzO Trademarks and HzO’s name and goodwill may be adversely affected unless
the Products meet reasonable quality standards, including those quality
standards set forth in Section 4.2 above. Distributor agrees to take reasonable
steps to cure any material quality deficiencies.
 
7.4 Ownership. Distributor acknowledges that HzO owns all interest in and all
valid registrations in the HzO Trademarks. Distributor shall do nothing
inconsistent with HzO’s ownership of the Trademarks, including attacking the
validity of the Trademarks or HzO’s title thereto. All goodwill accrued through
use of the HzO Trademarks by Distributor, its agents and employees shall inure
to the benefit of HzO. Nothing in this Agreement shall give Distributor any
right, title or interest in the HzO Trademarks other than the right to use them
in accordance with this Agreement.
 
 
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8.Confidential Information.
 
8.1 Definition. “Confidential Information” means the substantive terms of this
Agreement, unique or proprietary technology, trade secrets, business plans or
schedules, customer lists and data, any written materials marked as confidential
and other materials or information which reasonably should be understood by the
Receiving Party to be confidential. Confidential Information does not include
information that the party who received such information (the “Receiving Party”)
from the other party (the “Disclosing Party”) can prove: (i) was or later
becomes generally available to the public without fault of the Receiving Party;
(ii) was rightfully in the Receiving Party’s possession prior to its disclosure
by the Disclosing Party; (iii) is independently developed by the Receiving Party
without the use of any Confidential Information of the Disclosing Party; or (iv)
is obtained by Receiving Party without obligation of confidentiality from a
third party who has the right to disclose it.
 
8.2 Use and Disclosure. The Receiving Party shall not disclose to any person or
use for any purpose, except as expressly permitted by this Agreement, any
Confidential Information of the Disclosing Party. The Receiving Party may
disclose Confidential Information only to its employees and independent
contractors who need to know such information, and who are required to keep such
information confidential. The Receiving Party shall give the Disclosing Party’s
Confidential Information at least the same level of protection as it gives its
own Confidential Information of similar nature, but not less than a reasonable
level of protection. The Receiving Party shall maintain Confidential Information
in a safe and secure place and shall not copy Confidential Information except to
the extent necessary for the purposes of this Agreement. Confidentiality
obligations shall survive for so long as is permitted by California law. It
shall not be a violation of this Agreement if Confidential Information is
required to be disclosed by law or judicial order, provided that prior written
notice of such required disclosure is given to the Disclosing Party as soon as
practicable in order to give the Disclosing Party the chance to object to the
disclosure or to seek a protective order.
 
8.3 Injunctive Relief. Each party acknowledges that the other party’s
Confidential Information is highly valuable to the other party, that any breach
of its obligations under this Agreement with respect to confidentiality will
severely damage the other party, the extent of which damage would be difficult
to ascertain and, therefore, that other party shall be entitled to, among other
remedies, immediate temporary and permanent injunctive relief (without bond) and
other equitable relief for any such breach from a court or authority of
competent jurisdiction.
 
9. Term and Termination.
 
9.1Term. The initial term of this Agreement begins upon the Effective Date and
shall continue for three (3) years, subject to prior termination rights as
provided below. At the end of such initial term, this Agreement shall
automatically renew for additional one (1) year terms, unless either Party
notifies the other, at least sixty (60) days prior to the end of the
then-current term, that it wishes to terminate the Agreement. The initial term
and all renewal terms are referred to herein as the “Term.”
 
9.2 Termination for Cause. Either Party may terminate this Agreement if the
other Party breaches any material covenant or undertaking contained herein, and
the breach is not cured within the thirty (30) days following written notice
thereof from the other Party.
 
9.3 Termination for HzO Liquidity Event. HzO may terminate this Agreement in the
event of any HzO Liquidity Event after giving Distributor sixty (60) days’
written notice of such termination. For the purposes of this Agreement, “HzO
Liquidity Event” shall mean the occurrence of any of the following: (a) any
liquidation, dissolution, or winding up of HzO, (b) the closing of a transaction
or series of related transactions in which HzO is merged or consolidated into
another entity in which the shareholders of HzO as of the date hereof own less
than a majority in voting power of the securities of the surviving corporation
or any parent thereof or (c) the sale, license or disposal of all or
substantially all of HzO’s assets.
 
9.4 Termination for Distributor Liquidity Event or Management Change. HzO may
terminate this Agreement in the event of any Distributor Liquidity Event after
giving Distributor sixty (60) days’ written notice of such termination. For the
purposes of this Agreement, “Distributor Liquidity Event” shall mean the
occurrence of any of the following: (a) any liquidation, dissolution, or winding
up of Distributor, (b) the closing of a transaction or series of
related transactions in which Distributor is merged or consolidated into another
entity in which the shareholders of Distributor as at the date hereof own less
than a majority in voting power of the securities of the surviving corporation
or any parent thereof, (c) the sale, license or disposal of all or substantially
all of Distributor’s assets, or (d) the Section 16 officers of Distributor,
Robert Pedersen and Brandon O’Brien, cease to be subject to the requirements of
that section.
 
9.5 Effect of Termination. Upon termination of this Agreement for any reason,
Distributor shall discontinue its distribution of the Products, and terminate
all relationships and agreements with dealers and others that related to the
distribution and sale of the Products. Upon termination of this Agreement,
Distributor shall cease all use of the HzO Trademarks (except as reasonably
necessary or appropriate in exercise of the sell-off rights above) and shall
return to the other party or destroy all copies of the other party’s
Confidential Information, except that each party may retain one copy of the
other party’s Confidential Information for archival purposes. Notwithstanding
the foregoing, Distributor may, for a period of two (2) months from the date of
termination, continue to distribute the Products as necessary to fulfill orders
received by Distributor and binding commitments made by Distributor prior to the
date of HzO’s notice of termination and to dispose of Distributor’s inventory of
Products. In addition to where it is so stated, it is agreed that Sections 3, 8,
9, 10.3, 11 and13 shall survive termination of this Agreement.
 
 
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10. Representations, Warranties and Covenants.
 
10.1 Representations, Warranties and Covenants of Distributor. Distributor
represents, warrants and covenants that it has the right to enter into this
Agreement and perform in accordance with the terms of this Agreement, and such
actions do not violate any third party agreement or other obligation by which
Distributor is bound.
 
10.2 Representations, Warranties and Covenants of HzO. HzO represents, warrants
and covenants as follows:
 
10.2.1 HzO has the right to enter into this Agreement and perform in accordance
with the terms of this Agreement, and such actions do not violate any third
party agreement or other obligation by which HzO is bound.
 
10.2.2 As of the Effective Date, HzO has not received notice from any
governmental entity, customer or distributor within the Territory, nor does it
have reason to believe: (a) that the Products or the HzO Trademarks infringe the
Intellectual Property Rights of a third party, (b) that the Products have
defects in design, components or manufacturing that would constitute an epidemic
condition or give rise to a product recall, or (c) that its claims or
Documentation regarding the Products are misleading in any material respect.
 
10.3 Limitations of Warranties. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO ITS PRODUCTS, SERVICES,
DOCUMENTS, OR OTHER MATERIALS, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR
PURPOSE.
 
11.Indemnification.
 
11.1 Indemnification. Each party agrees to indemnify, defend and hold the other
party harmless from and against any and all unrelated third party claims,
liabilities, judgments, costs, damages and expenses (including reasonable
attorneys’ fees) arising out of any unrelated third party claim relating to (a)
any breach of such party’s obligations, warranties, covenants or representations
in this Agreement, or (b) the HzO Technology, infringing or misappropriating a
third party’s Intellectual Property.
 
11.2 Indemnification Procedure. With respect to any third party claims falling
within the scope of this indemnification obligation, (i) each party agrees to
promptly notify the other of any claim or lawsuit for which it believes it is
entitled to be indemnified; (b) the indemnifying party shall assume, at its sole
expense, the defense of such claim or lawsuit; (c) the party being indemnified
shall have the right to participate in the defense of any such claim or lawsuit
with separate counsel, at its sole expense; and (d) the indemnified party shall
provide the indemnifying party with the assistance, information and authority
reasonably necessary to settle or defend against the third party claim, at the
indemnifying party’s expense, but the indemnifying party may not settle any
claim or action on behalf of the indemnified party with first obtaining the
indemnified party’s written permission, which shall not be unreasonably
withheld.
 
11.3 Infringement Cure. If a material component of the Product is finally held
or believed by the indemnifying party to infringe or its distribution is
enjoined, the indemnifying party will use reasonable efforts to obtain a license
or grant of rights under the rights that have been infringed, modify the Product
so it is non-infringing or provide a substitute Product or component thereof
that is non-infringing, or if the foregoing are not commercially reasonable or
the indemnifying party fails to so cure the problems, either party may terminate
the license and distribution rights for the infringing Product upon written
notice to the other party. Neither party shall be liable for infringement based
on modification of the Product by any other party (excluding such party’s own
Affiliates or agents), or the combination or use of the Product with any other
product, equipment, or process not furnished by such party, if use of the
Product alone and in its unmodified form would not have been an infringement.
 
11.4 Limitation of Warranties. THIS SECTION STATES THE PARTIES’ ENTIRE
OBLIGATION WITH RESPECT TO ANY CLAIM FOR INFRINGEMENT OR MISAPPROPRIATION OF ANY
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
 
 
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12. Limitations of Damages.
 
12.1 IN NO EVENT SHALL HzO OR DISTRIBUTOR BE LIABLE FOR, AND EACH PARTY
COVENANTS NOT TO BRING ANY CLAIM FOR, SPECIAL, CONSEQUENTIAL OR INDIRECT DAMAGES
(INCLUDING EXEMPLARY OR PUNITIVE DAMAGES), WHETHER OR NOT SUCH DAMAGES WERE
FORESEEABLE OR THE PARTY WAS SPECIFICALLY ADVISED CONCERNING THE POSSIBILITY OF
SUCH DAMAGES. THE FOREGOING LIMITATIONS SHALL NOT APPLY TO THE PARTIES’
INDEMNIFICATION OBLIGATIONS OR TO A PARTY’S BREACH OF CONFIDENTIALITY
OBLIGATIONS, VIOLATION OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, FRAUD
OR INTENTIONAL MISCONDUCT.
 
12.2 EXCEPT FOR A PARTY’S FRAUD, INTENTIONAL MISCONDUCT, BREACH OF
CONFIDENTIALITY OR FOR VIOLATION OF THE OTHER PARTY’S INTELLECTUAL PROPERTY
RIGHTS AND REGARDLESS WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE OR OTHERWISE, IN NO EVENT SHALL EITHER PARTY’S AGGREGATE LIABILITY
UNDER, ARISING FROM, OR IN ANY WAY RELATED TO, THIS AGREEMENT FROM ALL CAUSES OF
ACTION OF ANY KIND, INCLUDING CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY, BREACH OF WARRANTY, INDEMNITY, MISREPRESENTATION, OR OTHERWISE
EXCEED, INDIVIDUALLY OR IN THE AGGREGATE, TEN MILLION UNITED STATES DOLLARS
(US$10,000,000).
 
12.3 EACH PARTY ACKNOWLEDGES AND AGREES THAT THE MUTUAL LIMITATIONS OF LIABILITY
CONTAINED IN THIS SECTION 12 REFLECT THE ALLOCATION OF RISK SET FORTH IN THIS
AGREEMENT AND THAT EACH PARTY WOULD NOT ENTER INTO THIS AGREEMENT WITHOUT THESE
LIMITATIONS ON LIABILITY.
 
13. Miscellaneous.
 
13.1 Entire Agreement; Amendment. The complete and exclusive statement of the
agreement between the Parties relating to this subject matter shall consist of
this Agreement. Any prior discussions or understandings relating to this subject
matter are superseded by the terms of this Agreement. In the event of any
conflict between the terms of this Agreement and the Marketing Agreement or the
Stock Purchase Agreement, the terms of this Agreement shall control. This
Agreement may not be amended except by a written document signed by an
authorized representative of both parties.
 
13.2 No Waiver. The waiver by either party of any default or breach of this
Agreement by any Party, or any obligation hereunder, shall be ineffective unless
in writing. No failure by any Party to exercise any right under this Agreement
or to insist upon strict compliance of the Agreement by the other Party shall
constitute a waiver of the right subsequently to exercise such right to insist
upon strict compliance.
 
13.3 Choice of Law. This Agreement shall be exclusively governed by and
construed in accordance with the laws of the state of Utah, without regard to
conflicts of laws provisions and excluding the United Nations Convention on
Contracts for the International Sale of Goods. If any dispute arises concerning
this Agreement, the state and federal courts located in Salt Lake City, Utah,
shall have exclusive jurisdiction and venue over such dispute. Each Party hereby
consents to the personal jurisdiction of such courts. The prevailing Party shall
be entitled to an award of its costs and reasonable attorneys’ fees in any such
action.
 
13.4 Force Majeure. Neither Party shall be liable for any failure or delay in
performing hereunder, if such failure or delay is due to war, strike, government
requirements, acts of nature, acts or omissions of carriers, or other cause(s)
beyond its reasonable control; provided, however, that if a Party’s performance
of any material obligation is reasonably expected to be delayed more than three
(3) months due to any such cause, the other Party may terminate this Agreement
upon thirty (30) days’ prior written notice.
 
13.5 Severability. If any provision of this Agreement, in whole or in part, is
held to be invalid, illegal or unenforceable by a court or authority of
competent jurisdiction, such provision shall be modified by such court or
authority to the minimum extent necessary to make it valid, legal and
enforceable. If the provision cannot be so modified, it shall be severed and all
other provisions of this Agreement shall remain in full force and effect. If a
provision is held illegal, invalid or unenforceable, the Parties also agree to
negotiate reasonably and in good faith to modify this Agreement with a new
provision that approximates the intent and purpose of the original provision as
closely as possible, without being illegal or unenforceable.
 
 
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13.6 Notices. All notices between the parties shall be in writing and shall be
sent by certified or registered mail or commercial delivery service, with
provisions for a receipt, or by facsimile to the following addresses, or such
other address a Party may specify by written notice:
 
HzO:
 
HzO, Inc.
3855 So. 500 W., Suite R Salt Lake City, UT 84115 Attention: Chief Executive
Officer
 
With a mandatory copy to:
 
Durham Jones & Pinegar
111 East Broadway, Suite 900 Salt Lake City, UT 84111 Attention: Jeffrey M.
Jones
 
DISTRIBUTOR:
 
ZAGG Incorporated
3855 So. 500 W., Suite C Salt Lake City, UT 84115 Attention: Chief Executive
Officer
 
With a mandatory copy to:
 
ZAGG Incorporated
3855 So. 500 W., Suite J Salt Lake City, UT 84115 Attention: General Counsel
 
13.7 Assignment; Binding Effect. Neither Party may not sublicense or assign its
rights or delegate its duties or obligations under this Agreement (excepting the
limited rights permitted to be sublicensed to Distributor’s distributors)
without prior written consent of the other Party, which shall not be
unreasonably withheld, except that HzO shall have the right to assign this
Agreement, without consent of Distributor, to any successor to its business in
the event of a Liquidity Event. This Agreement is binding upon and inures to the
benefit of the Parties and their respective successors, representatives and
permitted assigns.
 
13.8 Independent Contractors; No Representations. The Parties are independent
contractors, and neither Party shall have any right or authority to make any
representations or warranties on the other Party’s behalf, or to assume or
create any obligations or responsibilities, express or implied, on behalf of the
other Party, or to bind the other Party in any way. Neither Party is an agent,
employee or legal representative of the other Party.
 
13.9 No Agency, Franchise, Partnership or Other Relationship. This Agreement
shall not be construed to create an agency, employer/employee relationship,
franchisor/franchisee relationship, joint venture relationship or partnership
between the Parties. The Parties expressly agree that no franchise or
partnership laws are intended to or shall apply to this Agreement or to the
relationship of the Parties.
 
13.10 Publicity / Press Releases. HzO may not issue a press release or refer to
Distributor publicly without Distributor’s prior written consent, which may not
be unreasonably withheld. Distributor may not issue a press release or refer to
HzO publicly without HzO’s prior written consent, which may not be unreasonably
withheld. The foregoing excludes any disclosure required under applicable law or
regulation, including Securities and Exchange Commission regulation, or by any
other 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 disclosure prior to issuing the press release or making the
public disclosure.
 
13.11 Execution in Counterparts. This Agreement, including any amendment, waiver
or modification hereto, may be executed by original, facsimile or electronic
signature in counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument. Delivery of an
executed counterpart of a signature page by fax, e­mail or other electronic
delivery or signature method shall be as effective as physical delivery of a
manually executed counterpart.
 
13.12 Headings. Section and subsection headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
 
13.13 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
 
[SIGNATURE PAGE FOLLOWS]
 
 
9

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IN WITNESS WHEREOF, the parties hereto have executed this Distribution Agreement
on and as of the day and year first above written.
 

  HZO, INC.,     a Delaware corporation                [sigexhibit1010.jpg]    
     

 

 
ZAGG INCORPORATED,
    a Nevada corporation          
 
By:
/s/        Name: Robert Pedersen II       Title: President          

 
 
10

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties hereto have executed this Distribution Agreement
on and as of the day and year first above written.
 

  HZO, INC.,     a Delaware corporation          
 
By:
/s/        Name: Paul Clayson       Title: President and CEO          

 

 
ZAGG INCORPORATED,
    a Nevada corporation          
 
 
[sig21010.jpg]                          

 
 
 
11

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EXHIBIT A
 
Products and Quantities
 
The following devices will be sold during the initial three month launch of
sales of HzO WaterBlock devices. During the third month of sales in the in
initial three month sales launch, HzO and ZAGG will review sales, warranty, and
logistics information developed during the launch period and determine sales
volumes, pricing and devices sold for subsequent months.
 
Month 1
 
Devices to be Sold
Quantity/Sales Target
Apple iPod Shuffle
350
Apple iPod Nano
650

 
Month 2
 
Devices to be Sold
Quantity/Sales Target
Apple iPod Shuffle
1000
Apple iPod Touch
500
Apple iPod Nano
1000

 
Month 3
 
Devices to be Sold
Quantity/Sales Target
Apple iPod Shuffle
1500
Apple iPod Touch
1000
Apple iPod Nano
1500
Other MP3 Player to be determined
1000

 
 
12

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EXHIBIT B
 
HzO Trademarks
 
Trademark
Country
Appl. No.
Filing Date
Reg. No.
Reg. Date
Assignee
DON’T FEAR THE PUDDLE
UNFILED
         
HZO
US
77/956,003
3/10/2010
   
HZO, Inc.
HZO
AU
1386751
9/30/2010
1386751
5/19/2011
HZO, Inc.
HZO
BR
830.798.870
830.798.889
830.798.897
830.798.900
10/8/2010
10/8/2010
10/8/2010
10/8/2010
   
HZO, Inc.
HZO, Inc.
HZO, Inc.
HZO, Inc.
HZO
CA
1,498,148
10/1/2010
   
HZO, Inc.
HZO
CN
8881448
8881449
8881450
11/25/2010
11/25/2010
11/25/2010
   
HZO, Inc.
HZO, Inc.
HZO, Inc.
HZO
CO
10160571
10160573
10160576
12/21/2010
12/21/2010
12/21/2010
   
HZO, Inc.
HZO, Inc.
HZO, Inc.
HZO
EP
9416223
10/1/2010
009416223
3/1/2011
HZO, Inc.
HZO
HK
301734138
10/12/2010
301734138
3/30/2011
HZO, Inc.
HZO
IN
2034291
10/7/2010
   
HZO, Inc.
HZO
JP
76514/2010
9/30/2010
5393858
2/20/2011
HZO, Inc.
HZO
KR
2010-50922
10/4/2010
   
HZO, Inc.
HZO
MX
1137179
1137180
1137181
11/24/2010
11/24/2010
11/24/2010
1208476
1208477
1208478
3/24/2011
3/24/2011
3/24/2011
HZO, Inc.
HZO, Inc.
HZO, Inc.
HZO
ZA
2010/21909-11
9/30/2010
   
HZO, Inc.
HZO INSIDE
UNFILED
         
WATER BEWARE
UNFILED
         
WATER BLOCK
US
77/956,018
3/10/2010
   
HZO, Inc.
WATER BLOCKED
UNFILED
            [ex1010logo1.jpg]
UNFILED
            [ex1010logo2.jpg]
UNFILED
            [ex1010logo3.jpg]
UNFILED
         

 
 
 
13

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EXHIBIT C
HzO Patent Applications
 

   
Application or
     
Country
Title
Patent No.
Filing Date
Issue
Assignee
       
Date
 
US
METAL AND
61/124/797
10/23/2007
Expired
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
         
USING A DUAL
         
COATING
       
US
ELECTRONIC
61/124/798
10/23/2007
Expired
HzO, Inc.
 
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
US
ELECTRONIC
61/124/802
09/05/2007
Expired
HzO, Inc.
 
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
US
METHOD AND
12/104,080
04/16/2008
Pending
HzO, Inc.
 
APPARATUS TO
         
COAT OBJECTS
         
WITH PARYLENE
         
AND BORON
         
NITRIDE
       
US
METHOD AND
12/104,152
04/16/2008
Pending
HzO, Inc.
 
APPARATUS TO
         
COAT OBJECTS
         
WITH PARYLENE
         
AND BORON
         
NITRIDE
       
                      WO
METAL AND
PCT/US2009/00
03/05/2009
Expired
HzO, Inc.
 
ELECTRONIC
1410
       
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
 
       

 
 
 
14

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US
METAL AND
12/988,103
10/15/2010
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
TW
METAL AND
98107080
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
AU
METAL AND
2009258264
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
CA
METAL AND
Not yet assigned
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
CN
METAL AND
2009801224986
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
EP
METAL AND
09762789.7
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
         
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       
IN
METAL AND
4282/KOLNP/20
03/05/2009
Pending
HzO, Inc.
 
ELECTRONIC
10
       
DEVICE COATING
         
PROCESS FOR
         
MARINE USE AND
         
OTHER
         
ENVIRONMENTS
       

 
 
 
15

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KR METAL AND 10-2010- 03/05/2009 Pending HzO, Inc.   ELECTRONIC 7025728        
DEVICE COATING           PROCESS FOR           MARINE USE AND           OTHER  
        ENVIRONMENTS         RU METAL AND 2010146453 03/05/2009 Pending HzO,
Inc.   ELECTRONIC           DEVICE COATING           PROCESS FOR          
MARINE USE AND           OTHER           ENVIRONMENTS                    

 
 
 
16