EXHIBIT 10.8
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Agreement for Product Distribution Services
THIS AGREEMENT (this "Agreement") is made between ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
("SmarterKids"), a Delaware corporation with a place of business at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and ▇.▇. ▇▇▇▇▇▇▇ Company ("▇▇▇▇▇▇▇"), a Massachusetts
corporation with a place of business at P.O. Box 859057, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇. This Agreement supersedes in its entirety the
Contract for Services and Term Sheet executed by SmarterKids and ▇▇▇▇▇▇▇ on
September 29, 1998.
Background
SmarterKids wishes to purchase certain educational product distribution,
logistics, warehouse storage, inventory management, and other order fulfillment
services in support of the retail operations at its ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ web site.
▇▇▇▇▇▇▇ wishes to provide and sell such services to SmarterKids.
Agreement
In consideration of their mutual representations, promises and obligations,
▇▇▇▇▇▇▇ and SmarterKids agree as follows:
Services to be Performed
1. Services. ▇▇▇▇▇▇▇ agrees to perform product distribution, transportation,
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warehouse storage, inventory management, and return services (collectively, the
"Services") for the benefit of SmarterKids as described in Exhibit ▇. ▇▇▇▇▇▇▇
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agrees to perform the Services for SmarterKids upon receipt of an order for one
or more Products (as defined below) sent by electronic data interchange ("EDI")
from SmarterKids or its authorized agents. ▇▇▇▇▇▇▇ agrees that the customer
data transmitted is the exclusive property of SmarterKids and such data will
only be used by ▇▇▇▇▇▇▇ to process SmarterKids' customer orders in conformance
with the requirements set forth in Exhibit A.
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▇▇▇▇▇▇▇ agrees that it shall distribute all SmarterKids products ("Products") in
strict conformity with all applicable SmarterKids product specifications and all
applicable laws and regulations. ▇▇▇▇▇▇▇ agrees that it shall make no change in
or deviate in any way from such specifications except pursuant to instructions
from SmarterKids as provided in this Agreement. ▇▇▇▇▇▇▇ agrees to meet or
exceed the performance milestones as set forth in Exhibit A.
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2. Additional Services. If ▇▇▇▇▇▇▇ is asked by SmarterKids to perform
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additional services not described in Exhibit A, then the parties agree to
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negotiate the specific scope of services and the fees for such services if
▇▇▇▇▇▇▇ is willing to provide such services. If the negotiation is successful,
the parties will execute an amendment to this Agreement before the new services
are furnished by ▇▇▇▇▇▇▇. The amendment will contain a detailed description of
the new services, the fees for the services, and any other information the
parties agree is relevant. ▇▇▇▇▇▇▇ agrees to provide the services in accordance
with the Agreement as amended.
3. Customers. ▇▇▇▇▇▇▇ agrees that customer data transmitted to ▇▇▇▇▇▇▇ is the
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exclusive property of SmarterKids. ▇▇▇▇▇▇▇ shall not use, distribute, publish,
license or transmit any customer data of SmarterKids except to perform the
Services. It is acknowledged that customers of SmarterKids may also be
customers of ▇▇▇▇▇▇▇ and that the fact that a ▇▇▇▇▇▇▇ customer is also a
SmarterKids customer shall not preclude ▇▇▇▇▇▇▇ from distributing, using,
publishing, licensing or transmitting information and data that ▇▇▇▇▇▇▇ has
independently procured from such a customer.
4. Product Specification. The documentation for each Product to be handled by
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▇▇▇▇▇▇▇ in conjunction with its provision of the Services is the product
specification ("Product Specification") for such Product. Each Product
Specification shall contain a detailed physical description and the SKU for the
relevant Product and may contain a list designating approved vendors for such
product and instructions relating to the finish packaging, packing and labeling
(including placement of trademark/trade names) for such Product. Product
Specifications for new Products not originally listed in this Agreement shall
become effective when agreed to in writing by SmarterKids and ▇▇▇▇▇▇▇. Minor
changes in Product Specifications may be effected by delivery to ▇▇▇▇▇▇▇ of a
written notice of such changes executed by an authorized employee of
SmarterKids. Effective upon receipt of such notice, the applicable Product
Specification shall include the changes described in such notice.
5. Transportation. Except as may be otherwise directed, each order will be
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shipped using either United Parcel Service ("UPS"), Federal Express ("FedEx") or
the United States Postal Service (USPS). ▇▇▇▇▇▇▇ shall use the shipping company
and level of delivery service specified by each Customer.
Prices for Services and Payment for Services
6. Payment for Services. For all Services SmarterKids contracts ▇▇▇▇▇▇▇ to
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perform that are performed by ▇▇▇▇▇▇▇ SmarterKids agrees to pay the amount
described in Exhibit ▇. ▇▇▇▇▇▇▇ will deliver invoices electronically to
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SmarterKids calculated in U.S. Dollars that set out the Products sold and
charges incurred during the preceding day. ▇▇▇▇▇▇▇'▇ invoice will segregate the
charges for shipping, handling, taxes and duties. SmarterKids will remit all
amounts properly due under such invoices within 15 business days of receipt of
such invoices. SmarterKids has the right to verify independently all amounts
charged by ▇▇▇▇▇▇▇, should it choose to do so.
7. Compensation. The compensation to be paid by SmarterKids to ▇▇▇▇▇▇▇ for the
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Services, along with a description of reimbursable expenses, is set forth in
Exhibit ▇. ▇▇▇▇▇▇▇'▇ compensation is based upon, and presumes that ▇▇▇▇▇▇▇ will
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satisfactorily accomplish, the Services as required by SmarterKids pursuant to
the performance standards set forth in Exhibit A.
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8. Transportation. The prices that apply to the transportation of Products to
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Customers under this Agreement are listed in Exhibit C. Transportation Services
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performed by UPS, FedEx and the USPS as part of the Services furnished by
▇▇▇▇▇▇▇ are subject to the terms and
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conditions of the respective agreements between ▇▇▇▇▇▇▇ and each of these
delivery entities (each, a "Shipping Agreement" and collectively, the "Shipping
Agreements The terms of this Agreement shall govern any conflicts between it and
the Shipping Agreements.
Export and Import
9. Export Compliance. (a) Each party agrees that it will abide by all export
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laws and regulations of the United States with respect to the export of Products
and any technical information. Products shall not be supplied to a Customer in
any country if (i) the export of any such Product to such country is prohibited
by the laws of the United States of America, including the Export Regulations of
the Department of Commerce or the International Traffic in Arms Regulation of
the Department of State; (ii) the import of any such Product into such country
is prohibited by the laws of such country; or (iii) the proper import
certificate(s) required by the laws of such country for the lawful importation
of any such Product have not been obtained.
(b) ▇▇▇▇▇▇▇ agrees to execute and deliver in time any and all certifications,
representations, and other documents required under the laws and regulations of
the United States of America or as reasonably requested by SmarterKids.
10. Taxes and Duties. SmarterKids will reimburse all charges paid by ▇▇▇▇▇▇▇
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on behalf of SmarterKids in performance of storage, repair and shipment services
with respect to SmarterKids Products for customs duties, value-added taxes,
customs brokers' fees and related taxes assessed, excluding taxes based on the
income and property of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ will include all such charges on its
monthly invoice and SmarterKids will remit such sums properly due consistent
with the procedures set out in Payment for Services above. SmarterKids has the
right to verify independently any and all such charges.
Title; Risk of Loss; Insurance
11. Title, Risk of Loss, Right to Possession. SmarterKids will supply ▇▇▇▇▇▇▇
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with certain equipment, parts, materials and Products (collectively, the
"Inventory") to be used solely for the purposes of accomplishing the Services.
Title to and right to immediate possession of the SmarterKids Inventory supplied
by SmarterKids and in the possession of ▇▇▇▇▇▇▇ or its subcontractors shall be
and remain in SmarterKids at all times. ▇▇▇▇▇▇▇ reserves no property rights or
interest in such SmarterKids Inventory. SmarterKids will bear the risk of loss
of such property except for (i) loss due to inventory "shrinkage" greater than
1% in any single year (ii) causes within the control of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ agrees
to reimburse SmarterKids for the replacement cost of Inventory lost as described
in (i) or (ii) in the previous sentence. SmarterKids agrees not to hold ▇▇▇▇▇▇▇
responsible for Vendor concealed shortages. SmarterKids reserves the right to
remove the SmarterKids Inventory from ▇▇▇▇▇▇▇ upon reasonable notice.
12. Title to Tools, Equipment and Computer Programs. SmarterKids will provide
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▇▇▇▇▇▇▇, or authorize ▇▇▇▇▇▇▇ to purchase on SmarterKids' behalf, such tooling,
equipment and computer programs and services (i.e. a new accounting system) as
SmarterKids may specifically require ▇▇▇▇▇▇▇ to obtain in order to provide the
Services. Any sums expended by ▇▇▇▇▇▇▇ for such
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items shall be included on the invoice and reimbursed by SmarterKids. All such
tooling, equipment and computer programs and services shall be and remain the
sole property of SmarterKids. ▇▇▇▇▇▇▇ reserves no property rights or interest in
such tooling, equipment and computer programs and services. ▇▇▇▇▇▇▇ agrees that
it will not use any such tooling, equipment and computer programs and services
for any purpose other than the provision of Services for SmarterKids.
SmarterKids may obtain possession of any such tools, equipment and computer
programs and services at any time upon reasonable notice or at such time as
▇▇▇▇▇▇▇ is no longer using such tooling, equipment or computer programs and
services to provide the Services in accordance with this Agreement, or upon the
termination or expiration of the Agreement. Equipment and computer programs that
have not been provided by SmarterKids and that have not been purchased on
SmarterKids request may be used by ▇▇▇▇▇▇▇ for uses other than the Services and
will at all times remain the property of ▇▇▇▇▇▇▇.
13. Maintenance of Tools, Equipment and Computer Programs. ▇▇▇▇▇▇▇ agrees to
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maintain the tools, equipment and computer programs supplied by or procured for
SmarterKids for the stated life of each such item at no additional cost to
SmarterKids. SmarterKids agrees to cover the cost of any maintenance agreements
for the equipment and computer programs supplied or procured solely for the use
of SmarterKids.
14. Insurance. (a) SmarterKids Products stored by ▇▇▇▇▇▇▇ on behalf of
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SmarterKids are to be insured by SmarterKids.
(b) The parties shall maintain at their own expense adequate (i) comprehensive
general liability insurance that includes coverage for product liability, bodily
injury and property damage, (ii) worker's compensation insurance, and (iii)
automobile liability insurance policies that shall protect the other party from
claims for damages which may arise from the negligence or misconduct of the
insured party, its employees, agents and subcontractors. In no event shall
either party be insured for less than one million dollars for general liability
or automobile liability.
License to Perform Services; Trademarks; Confidential Information
15. License to Upgrade and Repair Products. SmarterKids grants to ▇▇▇▇▇▇▇ a
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non-exclusive license to use the Product Specifications and all related
SmarterKids proprietary and Confidential Information and know-how necessary to
perform Services pursuant to this Agreement. This license is non-transferable,
may be used only in connection with the provision of Services for SmarterKids,
and shall expire on the date on which ▇▇▇▇▇▇▇'▇ obligation to provide Services
expires or terminates under this Agreement.
16. Use of Trademarks. SmarterKids shall provide descriptions of the
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trademarks, trade names, insignia, symbols, decorative designs or packaging
designs (collectively, the "Trademarks") that are to be affixed to the Products
or to the packaging of such Products. ▇▇▇▇▇▇▇ agrees to affix the Trademarks in
strict conformity with the instructions and standards provided to it as those
instructions and standards are updated in writing by SmarterKids from time to
time. ▇▇▇▇▇▇▇ shall have a license to use the Trademarks only for such
purposes. However, nothing in this Agreement shall operate to confer on ▇▇▇▇▇▇▇
any right to use any
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Trademark for any purpose other than in connection with providing Services in
accordance with this Agreement without the prior consent of SmarterKids.
17. Title to Trademarks. All right, title and interest in the Trademarks, and
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all goodwill associated with their use, shall remain the property and inure to
the benefit of SmarterKids or its licensors.
18. Confidentiality. (a) "Confidential Information" means any product sales,
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pricing, strategy, performance and projection information, plan, design,
configuration, style or concept of any product, drawings, software, data,
prototypes, or other business and/or technical information related to products,
product plans, and service plans, any scientific, technical, merchandising,
production or management design, procedure, formula, discovery, invention, item
of information, concept, or improvement, the name of (and any data concerning)
any customer, supplier or distributor (and any tangible evidence, record or
representation of any of the foregoing) which is maintained in secrecy or
confidence by the disclosing party or by any person or entity affiliated with
the disclosing party, which might permit the disclosing party or its customers
to obtain a competitive advantage over competitors who do not have access
thereto or which is provided to the receiving party by the disclosing party
pursuant to this Agreement in reliance on the receiving party's agreements
contained in this Agreement. Without limiting the generality of the foregoing,
this Agreement, including, all exhibits and addenda, the terms of this
Agreement, and all SmarterKids product specifications and any document marked
SmarterKids "Confidential" or "Proprietary" shall constitute SmarterKids
Confidential Information. Also without limiting the generality of the
foregoing, any document marked ▇▇▇▇▇▇▇ "Confidential" or "Proprietary" shall
constitute ▇▇▇▇▇▇▇ Confidential Information.
Notwithstanding the foregoing, nothing herein shall apply to any information
that is known to the receiving party prior to disclosure by the disclosing
party, or that is lawfully obtained from any third party, that is or becomes
publicly available without restrictions, that is disclosed by the receiving
party with prior written permission of the disclosing party, or that is required
by law to be disclosed by the receiving party. Information shall be deemed
Confidential Information if it is in writing or other tangible form including,
without limitation, machine readable object code, if clearly marked as
proprietary by the disclosing party or, if disclosed orally or visually, such
disclosure is stated as confidential at the time of disclosure and is confirmed
as such in writing within 30 calendar days of any such oral or visual
disclosure.
(b) Each party agrees that it shall at all times hold confidential all
Confidential Information of the other party. Strict compliance of each party and
its respective agents, subcontractors and employees with all of the provisions
regarding Confidential Information is a material provision of this Agreement.
(c) Each party agrees that it shall not use any Confidential Information or any
derivative or variation of Confidential Information except to fulfill its
obligations under this Agreement and shall not disclose any Confidential
Information to any person or entity outside SmarterKids without prior written
permission of an authorized official of SmarterKids or ▇▇▇▇▇▇▇, as the case may
be. Each party shall give access to Confidential Information only to such of its
employees, agents, subcontractors or other persons as are engaged in fulfilling
its obligations
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under this Agreement. Each party agrees further that before giving access to
Confidential Information to any of its agents or subcontractors, such agents or
subcontractors shall be under an appropriate confidentiality agreement
prohibiting any use or disclosure of any of the Confidential Information except
in accordance with this Agreement. Each party also agrees that it shall restrict
disclosure of Confidential Information to its employees with a need to know who
are under appropriate binding agreements to maintain confidentiality and inform
all such employees of the obligations assumed here. Neither party shall copy any
document or other material containing or embodying Confidential Information
beyond that reasonably required for the effective and efficient performance of
Services without the prior written consent of the other party. This Agreement
shall not be construed to grant to either party any license or other rights in
Confidential Information other than those specifically provided for herein.
(d) No license to ▇▇▇▇▇▇▇ under any trademark, patent, copyright, or any other
intellectual property right is either granted or implied by the conveying of
SmarterKids Confidential Information to ▇▇▇▇▇▇▇. None of the Confidential
Information which may be disclosed by SmarterKids shall constitute any
representation, warranty, assurance, guarantee or inducement by SmarterKids of
any kind, and in particular, with respect to the non-infringement of trademarks,
patents, copyrights, or any other intellectual property rights, or other rights
of third persons.
(e) All Confidential Information shall remain the property of the disclosing
party and shall be returned to the disclosing party upon written request, upon
termination of this Agreement, or upon the receiving party's determination that
it no longer has a need for such Confidential Information.
(f) Each party agrees that all of its obligations undertaken regarding
Confidential Information shall survive and continue for a period of ten years
from the last date of receipt of Confidential Information.
(g) Each party acknowledges that money damages alone will not adequately
compensate the other party for the breach by the party or any of its employees,
agents, subcontractors or other persons as are engaged in furnishing Services,
of any of the covenants and agreements relating to the protection of
Confidential Information, and, therefore, agrees that in the event of the breach
or threatened breach of any such covenant or agreement, in addition to all other
remedies available at law, in equity, or otherwise, the other party shall be
entitled to injunctive relief compelling specific performance of, or other
compliance with, the terms of this Agreement.
19. No Other Rights Granted. This Agreement shall not be construed to grant
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any license or other rights in any Confidential Information or Trademarks, other
than those specifically provided for herein.
20. Each party agrees that without the consent of the other party, it shall not
directly or indirectly solicit for employment (other than general public
advertisement) any of the current employees of the other party so long as they
are employed by the other party during the term of the Agreement and continuing
for a period of one year after termination of the Agreement.
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Term and Termination
21. Term. The initial term of this Agreement commenced on October 8, 1999(the
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"Effective Date") and shall expire on January 31, 2002, unless earlier
terminated in accordance with the provisions of this Agreement. Either party
may terminate this Agreement without cause by providing the other party with at
least six (6) months prior written notice.
22. Termination. (a) Either party may immediately terminate this Agreement
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without cost or liability except as set forth below by notice in writing sent as
set forth below, if the other party enters into liquidation, or makes
assignments for the benefit of creditors or has an administrative receiver
appointed over any or all of its assets or suffers any similar action in
consequence of debt such as being declared bankrupt or otherwise is unable to
pay its debts as they fall due.
(b) Either party may terminate this Agreement immediately without cost or
liability except as set forth below by notice in writing sent as set forth below
if the other party or any of its employees, subcontractors or agents has
breached any of the terms of this Agreement concerning the protection of
Confidential Information.
(c) Either party may terminate this Agreement without cost or liability except
as set forth below if the other party commits any material breach of the terms
of this Agreement if the other party fails to remedy that breach within ten (10)
business days of having received a notice in writing of the breach.
23. Termination Charges. If the Agreement is terminated or expires, SmarterKids
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shall pay to ▇▇▇▇▇▇▇:
(a) any unpaid balance due for Services properly performed through the date
expiration or termination is effective; and
(b) all reasonable costs, mutually determined between SmarterKids and ▇▇▇▇▇▇▇,
associated with relocating SmarterKids property to a location determined by
SmarterKids.
(c) ▇▇▇▇▇▇▇ shall use all reasonable efforts to mitigate SmarterKids' costs
described above.
Warranty, Limitation of Liability, Indemnification
24. Warranty. (a) ▇▇▇▇▇▇▇ warrants that as of the date this Agreement is
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entered into: (i) it has the right to enter into this Agreement; (ii) all
necessary actions, corporate and otherwise, have been taken to authorize the
execution and delivery of this Agreement and the same is the valid and binding
obligation of ▇▇▇▇▇▇▇; (iii) all licenses, assents and approvals necessary to
provide the Services and carry out all of the transactions contemplated in this
Agreement have been obtained by ▇▇▇▇▇▇▇; (iv) it has the experience, technical
and physical capacity to fulfill its obligations under this Agreement; and (v)
that the Services will be performed in a good and workmanlike manner.
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(b) ▇▇▇▇▇▇▇ warrants that as of the date this Agreement is entered into: (i) it
has and shall pass to SmarterKids good title to Products free and clear of all
liens and encumbrances; (ii) it shall pass to SmarterKids good title to special
tools and equipment procured for SmarterKids free and clear of all liens and
encumbrances; and (iii) no claim or action is pending or threatened against
▇▇▇▇▇▇▇ or, to ▇▇▇▇▇▇▇'▇ knowledge, against any licensor, supplier or
subcontractor of ▇▇▇▇▇▇▇, that would adversely affect the ability of ▇▇▇▇▇▇▇ to
furnish the Services.
(c) SmarterKids warrants that as of the date this Agreement is entered into: (i)
it has the right to enter into this Agreement; and (ii) all necessary actions,
corporate and otherwise, have been taken to authorize the execution and delivery
of this Agreement and the same is the valid and binding obligation of
SmarterKids.
25. Limitation of Liability. (a) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
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THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES
WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES RESULTING FROM USE OR
MALFUNCTION OF THE PRODUCTS, LOSS OF DATA, LOSS OF SALES, REVENUES OR PROFITS,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, EXCEPT
AS EXPRESSLY PROVIDED IN THIS AGREEMENT.
(b) The liability of ▇▇▇▇▇▇▇ to SmarterKids for any loss of or damage to any
material of SmarterKids howsoever caused while in transit, during handling and
while in storage shall be limited to the actual cost of such material.
26. Indemnification. (a) SmarterKids agrees to indemnify and hold ▇▇▇▇▇▇▇
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harmless against any claims, demands, costs and liabilities, including all
reasonable attorneys fees, brought by a third party arising out of or resulting
from this Agreement, provided that any such claim (i) is attributable to bodily
injury or death or to injury to or destruction of physical property (other than
the Products) or (ii) is caused by a negligent representation, act or omission
of, or the misconduct of, SmarterKids or its employees, agents or
subcontractors, including without limitation the performance or failure to
perform under this Agreement. Notwithstanding the foregoing, SmarterKids agrees
to indemnify and hold ▇▇▇▇▇▇▇ harmless against any claims, demands, costs and
liabilities, including all reasonable attorneys fees, brought by a third party
arising out of the use of the Products. This obligation of SmarterKids shall
exist only if ▇▇▇▇▇▇▇ (i) gives SmarterKids prompt written notice of any such
claim, (ii) grants SmarterKids control of the defense and settlement of such
claim, and (iii) assists fully in the defense if SmarterKids pays the out-of-
pocket costs of such defense. SmarterKids shall have no liability for any
settlement or compromise made without its prior written consent.
(b) ▇▇▇▇▇▇▇ agrees to indemnify and hold SmarterKids harmless against any
claims, demands, costs and liabilities, including all reasonable attorneys fees,
brought by a third party arising out of or resulting from this Agreement,
provided that any such claim (i) is attributable to bodily injury or death or to
injury to or destruction of physical property (other than the Products) or (ii)
is caused by a negligent representation, act or omission or the misconduct of
▇▇▇▇▇▇▇ or its employees, agents or subcontractors, including without limitation
the performance or failure to perform under this Agreement. This obligation of
▇▇▇▇▇▇▇ shall exist only if SmarterKids (i)
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gives ▇▇▇▇▇▇▇ prompt written notice of any such claim, (ii) grants ▇▇▇▇▇▇▇
control of the defense and settlement of such claim, and (iii) assists fully in
the defense if ▇▇▇▇▇▇▇ pays the out-of-pocket costs of such defense. ▇▇▇▇▇▇▇
shall have no liability for any settlement or compromise made without its prior
written consent.
General Provisions
27. Right to Survey. ▇▇▇▇▇▇▇ agrees that upon notice of one (1) business day,
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SmarterKids shall be allowed to review the ▇▇▇▇▇▇▇ facilities, operations, and
procedures. The review shall be for the purpose of determining compliance with
the requirements of this Agreement and shall be restricted to the areas involved
in the performance of Services on behalf of SmarterKids. From time to time
SmarterKids' suppliers and vendors may request the right to inspect such
facilities and operations for the purpose of qualification. ▇▇▇▇▇▇▇ agrees to
permit such SmarterKids surveys with five (5) business days prior notice,
subject to the survey being restricted to the work performed on behalf of
SmarterKids.
28. Location of Operations. ▇▇▇▇▇▇▇ shall distribute all Products from its
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facility in Braintree, Massachusetts unless SmarterKids authorizes Hammett in
writing to distribute Products from or through another location. In the event
the Braintree facility becomes unable at any time to distribute Products in
accordance with the time schedules and other requirements of this Agreement,
▇▇▇▇▇▇▇ agrees to have in place the ability to transfer open Product Services
orders on an expedited basis to a facility designated by SmarterKids.
29. Reporting Requirements. ▇▇▇▇▇▇▇ agrees to produce the operations reports
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described in Exhibit A at the required intervals and to comply with all
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reasonable requests by SmarterKids for any other reports with respect to the
Services within a reasonable time period.
30. Notices. All notices shall be by personal delivery, by facsimile or by
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another form of recorded communication to the parties as follows:
If to ▇▇▇▇▇▇▇:
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▇.▇. ▇▇▇▇▇▇▇ Company
P.O. Box 859057,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
If to SmarterKids:
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▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Any notices given shall be deemed to have been received as follows: if sent by
facsimile or other form of recorded communication, when transmitted; if sent by
registered or certified first
-9-
class mail, on the date of delivery as shown on the return receipt; if sent by
Federal Express overnight delivery services or by personal delivery, on the date
delivered. Either party may change its notice address by written notice to the
other.
31. Independent Contractor. This Agreement shall not constitute ▇▇▇▇▇▇▇ the
----------------------
agent or legal representative of SmarterKids for any purpose and ▇▇▇▇▇▇▇ shall
not hold itself out as an agent of SmarterKids other than as expressly provided.
This Agreement creates no relationship of joint venturers, partners, associates,
employment or principal and agent between the parties, except as expressly
stated, and both parties are acting as independent contractors. Neither party
shall have the right to exercise any control or direction over the operations,
activities, employees or agents of the other party in connection with this
Agreement. ▇▇▇▇▇▇▇ is not granted any right or authority to, and shall not
attempt to, assume or create any obligation or responsibility for or on behalf
of SmarterKids. ▇▇▇▇▇▇▇ shall have no authority to bind SmarterKids to any
contract, whether of employment or otherwise, and ▇▇▇▇▇▇▇ shall bear all of its
own expenses for its operations, including, without limitation, the compensation
of its employees and sales people and the maintenance of its offices, service,
warehouse and transportation facilities. ▇▇▇▇▇▇▇ shall be solely responsible
for its own employees and sales people and for their omissions, acts and the
things done by them.
32. Waiver. The waiver by either party of a breach of, or a default under, any
------
provision of this Agreement by the other party shall not be construed as a
waiver of any succeeding breach of the same or any other provision, nor shall
any delay or omission on the part of either party to exercise or avail itself of
any right, power, or privilege that it has or may have under this Agreement
operate as a waiver or any right, power, or privilege by such party.
33. Applicable Law. This Agreement shall be governed by and should be
--------------
interpreted and construed in accordance with the laws of The Commonwealth of
Massachusetts, exclusive of its conflict of law principles.
34. Publicity. Except as otherwise set forth in this Agreement, neither party
---------
shall use the other party's name, trademark, tradename, service ▇▇▇▇ or logos
(whether registered or not), in any manner whatsoever without the other party's
prior written consent. The parties agree to cooperate in the joint display of
their respective identifying marks on the ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ web site and in the
release of a jointly approved press release if one is to be made after the
signing of this Agreement. Should SmarterKids propose to register its capital
stock pursuant to the Securities Act of 1933, as amended or become a reporting
company under the Securities and Exchange Act of 1934, ▇▇▇▇▇▇▇ agrees that
SmarterKids may file this Agreement with the Securities and Exchange Commission
and describe this Agreement and the relationship between the parties in any
filing required by the Securities and Exchange Commission.
35. Rights Cumulative. The rights and remedies accorded to the parties in this
-----------------
Agreement are cumulative and in addition to those provided by law, and may be
exercised separately, concurrently, or successively.
36. Force Majeure. (a) "Force Majeure" shall include all acts or events
-------------
beyond the control of the parties, such as but not limited to, strikes,
lockouts, labor disturbances, accidents to
-10-
equipment, policies or restrictions of governments including restrictions on
export, import or other licenses, floods, earthquakes, fire, or other
catastrophes, war (whether declared or not), riots, weather conditions,
communication line failures, or civil disturbances, or any other contingency
whatsoever beyond the control of either party, existing on or after the
Effective Date of this Agreement, which prevents totally or partially the
fulfillment of the obligations of either party.
(b) A party affected by an event of Force Majeure shall be released without any
liability on its part from the performance of its obligations under this
Agreement, but only to the extent and only for the period that its performance
of such obligations is prevented by circumstances of Force Majeure and provided
that such party shall have given notice to the other party. Such notice shall
include a description of the nature of the event of Force Majeure, its cause and
its possible consequences. The party claiming circumstances of Force Majeure
shall promptly notify the other party of the termination of the event. The
period of Force Majeure shall be deemed to commence on the date that the event
of Force Majeure first occurs.
(c) Should the period of Force Majeure continue for more than one month, either
party may terminate this Agreement as provided in this Agreement upon giving
written notice.
(d) During the period that the performance by one of the parties of its
obligations under this Agreement has been suspended by an event of Force
Majeure, the other party may likewise suspend the performance of all or part of
its obligations under this Agreement.
37. Assignment. Neither this Agreement nor any right or obligation created by
----------
it shall be assigned or delegated by either party, voluntarily or by operation
of law, without the prior written consent of the other party, which consent may
not be unreasonably withheld. Any attempted assignment shall be deemed null and
void. An attempted assignment shall be deemed to occur in the event of a sale
or transfer of substantially all of the assets of, or a majority interest in,
the voting shares of that party to, or the merger or consolidation with or into,
any other entity.
38. Severability. If any one or more of the provisions of this Agreement for
------------
any reason shall be held to be invalid, illegal, or unenforceable in any
respect, such provision shall not affect any other provision, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never existed, except in those instances where removal or elimination of such
invalid, illegal, or unenforceable provisions would result in a failure of
consideration.
39. Survival. Notwithstanding anything else in this Agreement all rights and
--------
obligations of the parties, specifically including but not limited to those set
forth in "Limitation of Liability", "Indemnification", "Warranties" and
"Confidentiality", and any other terms which by the specific language or by
reasonable implication are to continue beyond the term of this Agreement shall
survive the expiration or termination of this Agreement for a period of three
years after SmarterKids' final payment is made under this Agreement, or as
expressly provided in this Agreement.
40. Complete Agreement. This Agreement, including the exhibits hereto,
------------------
constitutes the entire Agreement between the parties pertaining to the subject
matter of this Agreement. This
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Agreement supersedes and cancels all prior agreements and understandings,
written or oral, between the parties with respect to the subject matter. This
Agreement may not be changed in any way except by an instrument in writing
signed by both parties. No representations or statements of any kind made by any
representative of SmarterKids which are not stated in this Agreement shall be
binding on SmarterKids. No representations or statements of any kind made by any
representative of ▇▇▇▇▇▇▇ which are not stated in this Agreement shall be
binding on ▇▇▇▇▇▇▇. No course of dealing or course of performance shall be
relevant to explain or supplement any term expressed in this contract.
-12-
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement under seal.
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. ▇.▇. ▇▇▇▇▇▇▇ Company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------- ------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President & CEO Title: Chief Executive Officer
Date: October 8, 1999 Date: October 8, 1999
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EXHIBIT A - SCOPE OF SERVICES AND PROCESS FLOW
▇▇▇▇▇▇▇ agrees to provide the Services to SmarterKids in compliance with the
following:
1. Order Fulfillment. It is agreed that ▇▇▇▇▇▇▇ will make every effort to
-----------------
process, ship and complete each order received before 2:00 P.M. on the same day
such order is received. ▇▇▇▇▇▇▇ will process, ship and complete each order
received after 2:00 PM on the same day the order is received if possible, or on
the following day if necessary. A Product order is considered "completed" when
(i) the Product(s) are shipped to the Customer and (ii) all Product order
transaction records have been received correctly and completely by SmarterKids
according to the following schedule:
--------------------------------------------------------------------------------
DATABASE FILE INFORMATION SCHEDULE
--------------------------------------------------------------------------------
Ordering and Shipment: Within 2 hours of Product
order shipment
. UPS Tracking Info Transmittal File
. Order Control Header Transmittal File - all
records through C record types
. Order Detail Line Transmittal File - all
records through C record types
--------------------------------------------------------------------------------
Customer Billing: Within 36 hours of Product
order shipment
. Billing Transmittal File
. Billing Detail Transmittal File
--------------------------------------------------------------------------------
Order Fulfillment Standards.
All product orders are to be shipped in a white branded "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇"
corrugated carton. Plain ▇▇▇▇▇ boxes may be substituted as necessary, as long
as "▇▇▇▇▇▇▇▇▇.▇▇▇" packing tape is used to secure the cartons.
The carton will contain the products ordered, promotional items, newsletters and
any other item specified by SmarterKids.
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▇▇▇▇▇▇▇ will plan to fulfill orders according to the forecasts provided to
▇▇▇▇▇▇▇ according to paragraph 15 of this Exhibit A.
2. ▇▇▇▇▇▇▇ also agrees to assist SmarterKids in integrating SmarterKids'
information systems with ▇▇▇▇▇▇▇'▇ such that the following capabilities are in
place and functioning by [October 15, 1999]:
. encryption/decryption of data transmittals;
. a process to validate data transfers and to monitor, discover and
correct failed data transmissions;
. a process to prevent duplicate orders;
. protection of the integrity and security of all data and associated
systems with respect to Y2K and other potential security issues;
. installation of a gateway server on the ▇▇▇▇▇▇▇ network; and
. the capability to remotely access information including, but not
limited to, purchase orders, inventory and Customer order related
information. Accessed through a SK supplied server outside of the
▇▇▇▇▇▇▇ firewall.
3. Inventory Levels. ▇▇▇▇▇▇▇ agrees to monitor inventory levels and to
-----------------
handle all incoming delivery of inventory items from vendors in a prompt and
professional manner and to have all vendor deliveries processed and on the
warehouse shelves within 24 hours of receipt. All Product replenishment orders
requested by SmarterKids will be placed by ▇▇▇▇▇▇▇ as written within 24 hours of
such request. All new Product item and new vendor requests will be processed by
▇▇▇▇▇▇▇ within 48 hours of such request. The Product inventory will be owned by
SmarterKids, but processed by ▇▇▇▇▇▇▇. The costs of all packing materials,
including the proprietary SmarterKids-labeled packing cartons, packing slips,
and shipping labels, warehousing, warehouse labor and all other order
fulfillment costs will be borne by ▇▇▇▇▇▇▇ in conjunction with rendering the
Services and will not be billed to SmarterKids. The only exception is gift wrap
bags. Since there is a direct relationship between front-end promotions and
product demand, SmarterKids will provide ▇▇▇▇▇▇▇ a detailed schedule of, and no
less than two weeks advance notice of, all web site promotions, product
specials, bundling, pricing strategy, timing and features to allow for quality
product service and support.
4. Continuous Process Improvement. ▇▇▇▇▇▇▇ agrees to promptly assist
------------------------------
SmarterKids with modifying data formats and processes to support new process
improvement features, such as gift wrapping, shipping orders to multiple
addresses, processing backorders and providing real-time inventory levels at the
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Web site.
5. Approved Vendors. (a) ▇▇▇▇▇▇▇ shall purchase all Products for use in
----------------
the provision of Services from a vendor in the list of vendors approved from
time to time by SmarterKids ("Approved Vendor List" or "AVL") and no other
unless otherwise authorized in writing by an authorized employee of SmarterKids.
The Approved Vendor List will be provided in the Product Specification for each
Product and shall update such list as necessary.
-15-
(b) Although it is SmarterKids' general policy to maintain a consistent Approved
Vendor List for each Product, ▇▇▇▇▇▇▇ may request that substitutions be made.
Any request by ▇▇▇▇▇▇▇ for such a substitution must include:
. one complete, original copy of the manufacturer's specification.
. estimated cost reduction/increase per Product directly attributable to the
change.
SmarterKids reserves the right to accept or reject any such request in its sole
discretion.
6. Advance Notice and Receipt (re: Initial Provisioning and Replenishment
----------------------------------------------------------------------
Stock). SmarterKids will advise ▇▇▇▇▇▇▇ in advance of the impending arrival of
------
Products at the ▇▇▇▇▇▇▇ warehouse by facsimile at least one (1) business day
before arrival. Upon arrival of the initial provisioning or replenishment
stocks at the warehouse, the shipment will be inspected by ▇▇▇▇▇▇▇ for exterior
shipping damage and to ensure that the packing lists correspond to the physical
receipt. Any discrepancies will be recorded and SmarterKids will be advised.
Any affected inventory will be held in quarantine for up to five (5) business
days pending receipt of further instructions from SmarterKids as to its
disposition. Unless otherwise agreed, such inventory will be returned to the
Product vendor or distributor after five (5) business days.
7. Inventory Management. Product will be stored on the shelves in SmarterKids'
--------------------
storage bays in the warehouse. Within the ▇▇▇▇▇▇▇ inventory management system,
inventory will be secured by SmarterKids/warehouse code. A physical inventory
control will be maintained by conducting regular cycle counts to cover one
hundred percent (100%) of the inventory twice annually. A weekly status report
will be provided to SmarterKids. SmarterKids may at request that ▇▇▇▇▇▇▇
perform a complete physical inventory at reasonably convenient times for
▇▇▇▇▇▇▇.
8. Physical Pick of Order. The ▇▇▇▇▇▇▇ inventory management system will
----------------------
generate a pick list for the warehouse team to pick/pack and dispatch orders
(refer to "Orders" below). ▇▇▇▇▇▇▇ will record the picked consignments and will
advise SmarterKids accordingly. All picks will be double checked as part of the
warehouse quality control procedure.
9. Documentation. All necessary paperwork (i.e. notes, address labels) will be
-------------
produced for correct delivery. A shipping audit procedure will act as a further
check to insure that the correct Product(s) and correct number of cartons have
been dispatched.
10. Orders. (a) SmarterKids will transmit order data by EDI to ▇▇▇▇▇▇▇. Each
------
party is responsible to pay its own charges relating to EDI.
(b) All orders will be received into the ▇▇▇▇▇▇▇ information system for
processing and generation of the order pick log. Orders will print in the
▇▇▇▇▇▇▇ warehouse and the appropriate Product will be picked and shipped along
with a packing slip. At the end of each month, ▇▇▇▇▇▇▇ will provide a report to
SmarterKids summarizing the order fulfillment percentage ▇▇▇▇▇▇▇ achieves in
conjunction with its performance of the Services.
-16-
(c) Undeliverable Products and Products returned by Customers to ▇▇▇▇▇▇▇ shall
be inspected, repackaged if necessary and then placed in stock in the ▇▇▇▇▇▇▇
warehouse for use in fulfilling future Customer orders for such Product.
11. Unique Equipment. SmarterKids will furnish and/or authorize ▇▇▇▇▇▇▇ to
----------------
purchase necessary tools, training materials, equipment and technical program
information available in sufficient quantities to meet SmarterKids' unique
demands of ▇▇▇▇▇▇▇'▇ order fulfillment service personnel. This will include any
unique equipment required to supply Services on behalf of SmarterKids. ▇▇▇▇▇▇▇
bears the responsibility to ensure that its service personnel have the training
and expertise to effectively use any such unique tools provided by SmarterKids.
SmarterKids will pay for equipment once title has been assigned to SmarterKids.
SmarterKids also agrees to pay for all maintenance contracts, repairs and
supplies.
12. Inventory Levels. SmarterKids will order inventory items, set order levels
----------------
and supply ▇▇▇▇▇▇▇ with a ▇▇▇▇ of Materials and periodic updates to same..
Should Product models change, SmarterKids and ▇▇▇▇▇▇▇ will mutually agree to
either exhaust existing inventory prior to ordering the new Product model, or to
purge inventory of outdated Products and return them to vendors, subject to
SmarterKids' reimbursement of restocking charges assessed by such vendor(s).
Payments to vendors for inventory will be made by ▇▇▇▇▇▇▇ and funded by
SmarterKids via a disbursement account to be established in conjunction with the
aforementioned System Automation requirements.
13. ▇▇▇▇ of Materials. SmarterKids will provide ▇▇▇▇▇▇▇ with the following
-----------------
information for each Product to be stocked.
. SmarterKids part number
. Description
. Product Name
. Quarterly forecast for every three months
. SmarterKids' standard cost (if such exists)
14. Scrap. ▇▇▇▇▇▇▇ shall be solely responsible for the proper and lawful
-----
handling and disposal of scrap material generated by ▇▇▇▇▇▇▇ during the
performance of Services. ▇▇▇▇▇▇▇ is responsible for complying with all
applicable laws governing the transport, handling, recycling or disposal of any
and all scrap material.
15. Forecasts. Product sales forecasts shall be provided by SmarterKids to
---------
▇▇▇▇▇▇▇ for all SmarterKids Products with respect to which ▇▇▇▇▇▇▇ is expected
to provide Services as follows:
(a) Order Forecast - At a minimum of once per quarter.
(b) SKU Forecast - At a minimum of once per quarter.
(c) Existing Products - At a minimum of once per quarter.
(d) New or Added Products - Forecasts provided with requests for Services
support.
(e) New Service Delivery Method - Forecast provided with request for
Services support.
SmarterKids will also provide ▇▇▇▇▇▇▇ with revised forecast updates to coincide
with any changes in SmarterKids' service or sales strategy.
-17-
16. Product Sales Volume Reporting. To assist ▇▇▇▇▇▇▇ in estimating the volume
------------------------------
of work to be performed and to enable it to provide adequate facilities and
personnel for contracted Services, SmarterKids shall provide ▇▇▇▇▇▇▇ with the
historical and projected Product sales volume for each Product.
17. Order Fulfillment. For each order received by ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ shall
-----------------
provide the following set of Services:
Receive EDI data from SmarterKids (i.e. from ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ web site). Deduct
order from inventory, produce packing slip, produce picking label. Pick order
from inventory. Pack order. Ship order via customer-selected shipping vendor.
Supply SmarterKids updated inventory information every two hours. Supply
SmarterKids a complete inventory update each weekday at 7:00 am. Supply
SmarterKids shipping records, process records, completed records and invoicing
records as specified in Item 1 of this Exhibit A.
18. Adjustment to Changes. ▇▇▇▇▇▇▇ agrees to maintain the capability to
---------------------
rapidly increase and/or decrease capacity as required to adjust for changes in
Product sales rates consistent with the forecasts provided by SmarterKids.
19. Special Safety Procedures. If either SmarterKids or ▇▇▇▇▇▇▇ identifies an
-------------------------
engineering change that must be implemented for reasons of safety (a "Safety
Change"), the parties agree to cooperate so as to accomplish such Safety Change
as soon as possible after discovery. Once such a Safety Change is discovered,
the parties agree that no affected Product shall be shipped until such Safety
Change has been implemented. The parties further agree to cooperate in the
implementation of such Safety Change with respect to each Product shipped prior
to discovery of the hazard. In this regard, ▇▇▇▇▇▇▇ agrees to implement
retrofitting Service, as appropriate. SmarterKids and ▇▇▇▇▇▇▇ shall agree on a
case by case basis on appropriate charges for the implementation of a Safety
Change.
20. Required Reports:
-----------------
(a) Activity Summaries. ▇▇▇▇▇▇▇ agrees to provide to SmarterKids monthly
-------------------
summaries of activity at the order fulfillment facility. These summaries must
be available in [ASCII format], and they must contain:
. Quantity and type of Products ordered by Customers
. Quantity and type of Products delivered
. Number of returns received
(b) Operational Reports. ▇▇▇▇▇▇▇ will furnish operational reports to
-------------------
SmarterKids each week which track the order fulfillment turn-around time within
the order fulfillment cycle.
(c) Inventory Usage Reports. ▇▇▇▇▇▇▇ will furnish weekly inventory usage
-----------------------
reports. Invoice and shipping logs will be furnished with each invoice
with stock status list(s) and packing list(s).
-18-
21. Packaging and Labeling. ▇▇▇▇▇▇▇ will furnish all the necessary packaging
----------------------
and labeling. Products and parts shall be packaged and labeled in accordance
with standard commercial practices for domestic or international shipment.
Products sent directly to Customers shall be shipped and documented with the
same packaging and documentation as would be used by SmarterKids in the case of
Products shipped directly by it to its Customers. ▇▇▇▇▇▇▇ shall include with
each shipment a list of contents, to allow for review of contents upon receipt.
Products shipped under this Agreement must be shipped by ▇▇▇▇▇▇▇ in packaging
suitable for reshipment without additional packaging and such packaging shall at
least conform to minimum acceptable industry standards. Products must be
labeled with the SmarterKids part number. Any labeling other than standard
commercial practices required by specific destination countries shall be the
responsibility of ▇▇▇▇▇▇▇.
22. Quality Goal. ▇▇▇▇▇▇▇'▇ target is to a achieve a quality goal of zero
------------
defects with respect to all Products it delivers. In pursuit of this goal,
▇▇▇▇▇▇▇ agrees to subject each unit of Product to the QA Test Procedures
described in the Product Specification applicable to that Product
23. Inventory Management Services. ▇▇▇▇▇▇▇ agrees to provide the following
-----------------------------
Inventory Management Services for SmarterKids:
. The SmarterKids packaging for the affected Product(s) will be received in
bulk and entered into the inventory management system and stored at the ▇▇▇▇▇▇▇
warehouse.
. The delivery of approximately [5,000] separate Products to SmarterKids'
Customers will be managed by ▇▇▇▇▇▇▇ at its Braintree facility.
. The box shipped to the SmarterKids Customer will include an airbill and
instructions for placing additional orders or returning the ordered Product(s).
. ▇▇▇▇▇▇▇ will provide periodic reports to indicate Product inventory status,
order receipts/confirm, order shipping and stock usage.
-19-
EXHIBIT B - PAYMENT FOR SERVICES
SmarterKids agrees to compensate ▇▇▇▇▇▇▇ for the Services rendered as follows:
1. Product Percentage. ▇▇▇▇▇▇▇ will receive a [CONFIDENTIAL TREATMENT
------------------
REQUESTED]** percent markup (the "Product Percentage") over cost of each
Product shipped pursuant to Services rendered by ▇▇▇▇▇▇▇.
--------------------------------------------
--------------------------------------------
--------------------------------------------
Such ▇▇▇▇-up is calculated based only upon the cost of the Product sold and
does not include any other costs such as any sales tax and shipping and handling
charges listed on the customer invoice. If the aggregate Product Percentage
received by ▇▇▇▇▇▇▇ in any year is less than the actual documented labor costs
of ▇▇▇▇▇▇▇ required to perform the Services, then SmarterKids agrees to
reimburse ▇▇▇▇▇▇▇ for such shortfall.
Gift wrap Program. ▇▇▇▇▇▇▇ shall receive a fee of [CONFIDENTIAL TREATMENT
REQUESTED]** for every item gift-wrapped.
Promotional Orders. Notwithstanding the above, ▇▇▇▇▇▇▇ will receive
------------------
[CONFIDENTIAL TREATMENT REQUESTED]** for each Customer order which consists of
only promotional (free) products and the Product Percentage referenced above
shall not apply to such promotional order.
2. Common Stock Warrants.
---------------------
(a) According to that certain contract for Services on Term Sheet between
SmarterKids and ▇▇▇▇▇▇▇ dated September 29, 1998, the Company granted ▇▇▇▇▇▇▇
the right to purchase 38,000 shares of the common stock of SmarterKids at a
price of $2.00 per share according to a Vesting Schedule. As of the execution of
this Agreement all such warrants will be fully exercisable.
(b) ▇▇▇▇▇▇▇ is hereby granted a fully-vested and exercisable right to purchase
an additional 72,000 shares of the common stock of SmarterKids at a price of
$2.00 per share.
The above grants shall be evidenced by one or more Warrants issued by
SmarterKids to ▇▇▇▇▇▇▇ upon reasonable and ordinary terms.
**[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
-20-
3. Reimbursable Expenses. SmarterKids will reimburse ▇▇▇▇▇▇▇ at cost for the
---------------------
following expenses:
(a) Warehouse Storage Media.
(b) Equipment obtained specifically for SmarterKids with the prior
approval of SmarterKids.
(c) Information Systems (IS) Special Project Expenses approved by
SmarterKids as such expenses relate to new projects not contemplated
by this Agreement. Process maintenance and process improvements will
not be reimbursed directly by SmarterKids, but Special Project
Expenses which are requested by SmarterKids and which extend beyond
the scope of this Agreement shall be eligible for reimbursement.
(d) Miscellaneous Expenses as agreed upon by both parties.
(e) Excess SmarterKids cartons.
(f) Extra warehouse space at ▇▇▇▇▇▇▇ or rented by ▇▇▇▇▇▇▇.
(g) Specially placed employees outside the distribution area.
(h) Set-up costs for warehouse space.
4. Vendor returns will be billed at $65.00 per pallet with a minimum charge of
$65.00 per order, plus freight costs.
5. Product Returns. ▇▇▇▇▇▇▇ shall cover all Product shipping and restocking
---------------
charges and shall reimburse SmarterKids for all Product orders processed or
fulfilled in error by ▇▇▇▇▇▇▇, including without limitation overshipments,
undershipments, wrong items and misidentified items. SmarterKids will bear
responsibility for all wrong address issues whose cause is traced to SmarterKids
and the ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ web site. SmarterKids may also, on a case-by-case
basis, agree to bear responsibility for the cost of each Product Return
authorized by a designated SmarterKids staff member for an issue other than
those identified above.
-21-
EXHIBIT C - TRANSPORTATION EXPENSES
▇▇▇▇▇▇▇ will monthly charge SmarterKids for its costs of shipping Products.
▇▇▇▇▇▇▇ will at all times pass through to SmarterKids the United Parcel Service
(UPS) residential ground shipment rebates from the published rates in effect
from time to time.
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