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EXHIBIT 10.1
PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
BY AND BETWEEN
SALTON/MAXIM HOUSEWARES, INC.
AND
KMART CORPORATION
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JANUARY 27, 1997
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PURCHASE, DISTRIBUTION AND MARKETING AGREEMENT
This Agreement ("Agreement") is entered into as of January 27, 1997
(the "Execution Date") between Salton/Maxim Housewares, Inc., a Delaware
corporation ("Salton"), and Kmart Corporation, a Michigan corporation ("Kmart").
PREAMBLE
WHEREAS, pursuant to License Agreements by and between White
Consolidated Industries, Inc. ("WCI") and Salton (the "License Agreements"),
Salton has the exclusive right and license within the United States to use the
trademark "White-Westinghouse" and all associated designs and trade dress
(together, the "Trademark") in connection with the design, manufacture,
advertising, sale and promotion of, among others, the products listed on Exhibit
A hereto, each of which will bear and include the Trademark (such products
bearing the Trademark are hereinafter referred to as the "Products");
WHEREAS, Kmart is a leading discount retailer of various consumer and
other products, including products similar to the Products; and
WHEREAS, Salton desires to grant to Kmart certain exclusive rights and
obligations to purchase, distribute, sell, market and promote the Products in
the United States, and Kmart desires to accept and exercise these rights and
obligations, upon the terms and subject to the conditions of this Agreement.
WHEREAS, simultaneously with the execution of this Agreement, Kmart is
executing an agreement with New M-Tech Corporation, an affiliate of Salton, as
defined in Section 1.1 below (the "New Tech Agreement"), for the use of the
Trademark on Audio products, Video products, Telephones, Telephone Answering
Machines and Telephone accessories all as specifically described therein, which
agreement is critical to Kmart's overall program for use of the Trademark on
Products under this Agreement with Salton, is a primary inducement for Kmart's
entering into, and is a continuing necessary component of and precondition to
Kmart's performance under this Agreement with Salton.
Accordingly, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning
given to them below:
1.1 "Affiliate" means any Person involved in a situation where,
directly or indirectly, one Person controls, or has the power
to control, the other Person or a third party controls, or has
the power to control, both Persons.
1.2 "Discount Department Store" shall include, without limitation,
the Persons listed on Schedule 1.2 hereof as well as all
department stores which are similar to Discount Department
Stores in terms of market niche, size and product pricing
which now or hereafter may exist.
1.3 "Person" shall include any individual, corporation,
partnership, association, cooperative, joint venture, or any
other form of business entity recognized under the law.
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1.4 "sale" shall mean any action involving selling.
1.5 "sell" shall mean to, directly or indirectly, sell,
distribute, supply, solicit or accept orders for, negotiate
for the sale or distribution of, or take any other action that
is in furtherance of, any of the foregoing. "Sell" also
include any other forms of that verb, whether active or
passive, or in the past, present, or future tense.
1.6 "United States" shall mean the United States of America,
including Puerto Rico and Guam.
2. APPOINTMENT
2.1 Appointment by Salton; Acceptance by Kmart. Subject to the
provisions of this Agreement, Salton hereby appoints Kmart as
the sole and exclusive Discount Department Store to purchase,
distribute, sell, market and promote the Products in the
United States and Kmart hereby accepts such appointment. The
rights granted to Kmart under this Agreement shall hereinafter
collectively be referred to as the "Right." No other Discount
Department Store shall have any such Right during the Term of
this Agreement and/or any extension or renewal thereof,
regardless of source (i.e., whether from Salton or any other
entity) subject to Sections 10.4 and 10.5 hereof.
Notwithstanding the foregoing, nothing in this Agreement shall
be deemed to preclude the sale of Products (i) by entities or
stores other than Discount Department Stores including,
without limitation, retail department stores, specialty
housewares, gourmet and kitchen stores and national cable
television programs or (ii) by any Person outside the United
States. Furthermore, nothing in this Agreement shall preclude
Kmart from purchasing products of the type listed on Exhibit A
hereto from any sources other than Salton if such products do
not bear or include or are not sold under the Trademark, and
no payments shall be due to Salton hereunder in respect of
such sales.
2.2 Territorial Limitations. Salton covenants and agrees that,
during the term of this Agreement or until this Agreement is
terminated in accordance with the provisions of Article 10
below:
2.2.1 Salton shall not, directly or indirectly, sell any
Product to a Discount Department Store in the United
States, subject to Sections 10.4 and 10.5 hereof.
2.2.2 Except with the prior written consent of Salton
(which consent may be refused in the sole, absolute
and arbitrary discretion of Salton), Kmart shall not
sell any Product to any Person outside the United
States. The United States includes Puerto Rico and
Guam.
2.2.3 The parties acknowledge and agree that the
relationship hereby established between Kmart and
Salton is solely that of buyer and seller of goods
that each is an independent contractor engaged in the
operation of its own respective business, that
neither party shall be considered to be the agent of
the other party for any purpose whatsoever, except as
otherwise expressly indicated in this Agreement, and
that, except as otherwise expressly indicated in this
Agreement, neither party has any authority to enter
into any contract, assume any obligations or make any
warranties or representations on behalf of the other
party. Nothing in this Agreement shall be construed
to establish a partnership or joint venture
relationship between Salton and Kmart. Nothing in
this Agreement shall be deemed in any way to
constitute a sublicense by Salton of its rights under
the
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License Agreement, and the relationship between the
parties hereto shall at all times be as set forth in
this paragraph.
3. REPRESENTATIONS AND WARRANTIES OF SALTON
3.1 Salton represents and warrants to Kmart as follows:
3.1.1 Organization, Power and Authority. It is duly
organized and validly existing under the laws of the
State of Delaware, has all requisite power and
authority to conduct its business as now, and as
proposed to be, conducted and to execute, deliver and
perform its obligations under this Agreement. This
Agreement has been duly authorized, executed and
delivered by Salton and represents a valid and
binding obligation enforceable against Salton in
accordance with its terms.
3.1.2 No Conflicts; Consents. Execution and delivery
hereof, or performance by Salton hereunder, shall not
(a) violate or create a default under (i) Salton's
Certificate of Incorporation or by-laws (true and
correct copies of which have been delivered to
Kmart), (ii) any mortgage, indenture, agreement, note
or other instrument to which it is a party or to
which its assets are subject including, without
limitation, the License Agreement or (iii) any court
order or decree or other governmental directive or
(b) result in the action of any lien, charge or
encumbrance on any material portion of Salton's
assets, except as contemplated hereby.
3.1.3 Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions
contemplated by this Agreement based upon
arrangements made by or on behalf of Salton.
3.1.4 Trademark/Compliance with Laws. It has the
contractual right and authority to use the Trademark
for the Products as provided in this Agreement and to
grant to Kmart all rights which are set forth in this
Agreement including but not limited to the "Right"
described in Section 2.1 herein, including but not
limited to, the right to import all Products into the
United States for the full duration of this
Agreement; and Salton shall provide U.S. Customs with
sufficient proof and documentation to enable Kmart to
do so. (Notwithstanding the foregoing, Salton shall
have up to ten (10) business days to correct any such
U.S. Customs Problems which do not affect Kmart's
ability to use the Trademark in connection with the
sale of any of the Products pursuant to this
Agreement.) In addition, no other Discount Department
Store shall have the right to use the Trademark in
connection with the sale of any of the Products or
sell Products bearing the Trademark or have any of
Kmart's rights hereunder during the Term of this
Agreement and any renewal and/or extension hereof.
Furthermore, this Agreement as well as Salton's
performance hereunder shall be in compliance with all
applicable laws, rules and regulations other than
immaterial violations. Any claim which Kmart
reasonably believes impairs or would impair Kmart's
ability to receive any of the benefits of this
Agreement, or any failure under this Agreement and/or
under the NewTech Agreement with respect to this (or
the Salton Agreement's) Section 3.1.4 and/or Section
2.1, whether such failure relates to any or all
Products, shall entitle Kmart, in addition to all
other rights and remedies, without resort to the
notice and cure requirements under Section 10.3
herein, to immediately terminate this Agreement and
owe nothing to Salton
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except for payment for Products accepted and sold by
Kmart through the date of termination.
3.1.5 Qualifications. Throughout the Term of this Agreement
and any renewal or extension hereof, Salton shall
comply with the following requirements:
a. New Vendor Packet Compliance. Salton must
have executed and delivered to Kmart all
documents required by Kmart's New Vendor
Packet, including, but not limited to,
Kmart's agreement on standard purchase order
terms and conditions attached as Exhibit B
(collectively, the "Related Documents") and
must currently be in full compliance with
the same except as required by this
Agreement. Salton's execution of this
Agreement shall constitute Salton's
acceptance of and agreement to the terms and
conditions contained in all of the Related
Documents to the extent not inconsistent
with the terms of this Agreement.
b. Kmart Corporation Code of Business Conduct.
Salton must be in full compliance with the
Kmart Code of Business Conduct and all
applicable laws, rules and regulations,
including but not limited to child, forced,
and prison labor laws and must not have
violated the Code of Business Conduct or
applicable laws during the twelve calendar
months preceding the date of execution of
this Agreement.
c. Continuing Business Conduct with Kmart
Foreign Subsidiaries and Operations. Salton
must not restrict or curtail in any way its
historical business practices and course of
dealing with Kmart's foreign subsidiaries
and other foreign operations if any existed.
d. Industry Performance. Salton must at a
minimum meet normal industry standards for
performance regarding timing and completion
levels of fill rates without substitutions.
e. Electronic Data Interchange. Salton must
accommodate and participate in Kmart's
electronic data interchange program.
4. REPRESENTATIONS AND WARRANTIES OF KMART
4.1 Kmart represents and warrants to Salton as follows:
4.1.1 Organization, Power and Authority. It is duly
organized and validly existing under the laws of the
State of Michigan, has all requisite power and
authority to conduct its business as now, and as
proposed to be, conducted and to execute, deliver and
perform its obligations under this Agreement. This
Agreement has been duly authorized, executed and
delivered by Kmart and represents a valid and binding
obligation enforceable against Kmart in accordance
with its terms.
4.1.2 No Conflicts; Consents. Execution and delivery
hereof, or performance by Kmart hereunder, shall not
(a) violate or create a default under (i) Kmart's
Certificate of Incorporation or by-laws (true and
correct copies of which have been delivered to
Salton), (ii) any mortgage, indenture, agreement,
note or other instrument to which it is a party or to
which its assets are subject or (iii) any court
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order or decree or other governmental directive or
(b) result in the action of any lien, charge or
encumbrance on any material portion of Kmart's
assets.
4.1.3 Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions
contemplated by this Agreement based upon
arrangements made by or on behalf of Kmart.
5. MINIMUM ORDERS; OTHER OBLIGATIONS
5.1 Minimum Product Orders/Sales and Exclusive Remedy. Subject to
Section 5.2 hereof, during the Term of this Agreement, Kmart
agrees to place orders for a minimum U.S. dollar amount of
Products within each category specified below (each, a
"Category") from Salton (the "Minimum Product Orders") at the
purchase prices determined in accordance with Sections 7.1.1
and 7.1.2 hereof during the periods (each, a "Period," and
together, the "Periods") in each case as specified below ($ in
millions). All Products ordered prior to the date of this
Agreement shall be credited against the Minimum Product Orders
for the initial Period of this Agreement.
CATEGORY UP TO AND
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(IN INCLUDING 7/1/98- 7/1/99- 7/1/00- 7/1/01- 7/1/02- 7/1/03-
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MILLIONS) 6/30/98 6/30/99 6/30/00 6/30/01 6/30/02 6/30/03 6/30/04
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Kitchen
Housewares: $40.0 $50.0 $52.0 $54.1 $56.2 $ 58.5 $ 60.8
Personal Care: 13.0 13.5 14.1 14.6 15.2 15.8 16.4
Heaters/Fans: 18.0 18.7 19.5 20.2 21.1 21.9 22.8
Electric Air
Cleaners and
Humidifiers: $ 6.0 $ 6.2 $ 6.5 $ 6.8 $ 7.0 $ 7.3 $ 7.6
----- ----- ----- ----- ----- ------ ------
Total $77.0 $88.4 $92.1 $95.7 $99.5 $103.5 $107.6
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Specific purchase orders shall be issued by Kmart from time to
time for the Products being purchased ("Specific Purchase
Orders"). The Specific Purchase Orders shall be in the form
and substance of the form of purchase order annexed hereto as
Exhibit C for domestic orders and Exhibit D for import orders,
both of which are incorporated herein by this reference
("Purchase Order Forms") and shall govern and control the
terms of each purchase by Kmart of Products hereunder;
provided, that in the event of a conflict between the terms
set forth in a Specific Purchase Order and in this Agreement,
the terms set forth in this Agreement shall be determinative
of such conflict. Each Specific Purchase Order may be accepted
or rejected by Salton, provided that: (i) Salton's failure to
provide Kmart with written notice of rejection of any Specific
Purchase Order within five (5) days of Kmart's issuance
thereof shall constitute Salton's acceptance of such Specific
Purchase Order; and (ii) Salton is required to accept all
Specific Purchase Orders for which and all such Orders shall
automatically qualify as accepted by Salton;
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and (iii) Salton is required to accept all Specific Purchase
Orders which Salton is to fill ("Direct Salton Orders"),
provided (a) they are issued at prices negotiated by Kmart and
Salton or; (b) are consistent with prices quoted by Salton to
Kmart; and (c) are issued within ninety (90) days of the
required delivery date and; (d) are in an order quantity which
is not inconsistent with the average order quantity on
Specific Purchase Orders issued by Kmart to Salton over the
preceding one hundred twenty (120) days, and all such Orders
placed shall automatically qualify as accepted by Salton.
Notwithstanding the foregoing, Salton shall use its best
efforts to fill all Specific Purchase Orders placed by Kmart
in less than ninety (90) days from the required delivery date.
For purposes of this Agreement, in the event that Kmart issues
a Specific Purchase Order which is accepted by Salton as set
forth above and Salton fails through no fault of Kmart to
timely deliver conforming Products to or on behalf of Kmart by
the required delivery date specified therein, or if for any
reason, but through no fault of Kmart, Salton is unable to
procure Products THEN the Minimum Product Orders in the
applicable Category shall be reduced by the dollar amount set
forth in the Specific Purchase Order(s) related thereto,
whether or not such Products are ultimately purchased by
Kmart. Kmart's deductions for documented claims whether under
the Specific Purchase Orders or otherwise, shall not reduce
Kmart's fulfillment of the Minimum Product Orders, and for
purposes of determining if Kmart has issued the Minimum
Product Orders, Kmart shall be deemed to have purchased all
Products covered by a remittance regardless of
offsets/deductions for claims. If, however, Kmart issues a
Specific Purchaser Order which is accepted by Salton as set
forth above and Salton timely delivers conforming Products
to or on behalf of Kmart by the required delivery date
specified therein, and Kmart fails to remit payment for such
conforming Products so delivered, then such Products shall not
be counted for purposes of determining if Kmart has issued the
Minimum Product Orders, unless and until such Products are
ultimately paid for by Kmart. Notwithstanding the foregoing,
Kmart shall not be relieved of any obligation to pay for
conforming Products timely delivered to or on behalf of Kmart
in accordance with any Specific Purchase Order.
Subject to Sections 5.1 above and 5.2 below, in the event that
Kmart fails to place the Minimum Product Orders in any of the
Categories specified above within any of the periods specified
above, then Kmart shall be required to pay Salton within
thirty (30) days following the end of any such period, as
Salton's sole and exclusive remedy hereunder and upon receipt
of an invoice from Salton therefor, an amount equal to (i) (A)
the Minimum Product Orders in such Category less (B) the
Actual Order Amount in such Category multiplied by (ii) five
percent (5%) (the "Fee(s)"). The "Actual Order Amount" for
purposes of this Section 5.1 shall mean, subject to Section
5.1 above and Section 5.2 below, the positive amount, if any,
obtained by adding (i) the actual amount of Products ordered
by Kmart in the applicable Category during the applicable
Period (adjusted upwards pursuant to Section 5.1 above and 5.2
below) and (ii) the excess, if any, of (A) the actual amount
of Products ordered by Kmart in the applicable Category during
the Period (adjusted upwards pursuant to Section 5.1 above and
5.2 below) immediately prior to the applicable Period (the
"Prior Period") less (B) the Minimum Product Orders in the
applicable Category for the Prior Period. In no event,
however, shall Salton's Fees (for both ordered and unordered
Products) ever exceed the amount Salton would have received in
any Category under Section 5.1 herein if Kmart had met all
Minimum Product Order commitments stated therein, and Salton
shall reconcile and refund all Fees received in excess thereof
subject to Section 7.1.2 hereof. For example, if during the
Period from the Execution Date of this Agreement through June
30, 1998, Kmart issues Product Orders in the Kitchen
Housewares Category equal to an aggregate of $48.0 million
and, if during the period from July 1, 1998 through June 30,
1999, Kmart issues Product Orders in the Kitchen Housewares
Category equal to an aggregate of
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$41.0 million, then Kmart shall pay Salton, as Salton's sole
and exclusive remedy for Kmart's failure to issue the Minimum
Product Orders for the Products, an amount equal to $50,000 on
or before July 30, 1999 ($1.0 million x 5%). Product Orders in
a particular Category may not be used to satisfy the Minimum
Product Orders in any other Category.
5.2 Reduction of Minimum Product Orders. In the event that during
any Period aggregate retail sales of Products in the United
States for a particular Category have decreased from the Prior
Period (the amount of such reduction of sales in the United
States of Products in any particular Category is hereinafter
expressed as a percentage, and the amount by which such
percentage exceeds 10% is hereinafter referred to as the
"Reduction Percentage"), then the Minimum Product Orders for
that Category for the Period following the Prior Period (the
"Adjustment Period") shall be reduced. This reduction shall be
in an amount (the "Reduction Amount") equal to (i) the higher
of (A) the Minimum Product Order commitment for the applicable
Category for the Adjustment Period or (B) the actual Product
Orders by Kmart of the Products in the applicable Category
during the Prior Period (the "Actual Prior Period Orders")
multiplied by (ii) the Reduction Percentage. The Reduction
Amount will then be subtracted from the higher of (i) the
Minimum Product Order commitment for the applicable Category
for the Adjustment Period or (ii) the Actual Prior Period
Orders, to determine the new Minimum Product Order commitment
for the applicable Category for the Adjustment Period;
provided, however, that if this computation yields an amount
greater than the Minimum Product Order commitment for such
Period, then no adjustment shall be made. In addition, an
adjustment may only be made to the extent that it would not
reduce the Minimum Product Order commitment for the Adjustment
Period below 80% of the amount specified for such Period for
the applicable Category under Section 5.1. All computations
will be based on prices that do not include any internal Kmart
charges. By way of example only, if retail sales of Kitchen
Housewares in the United States decrease by 30% during the
Period from July 1, 1999 to June 30, 2000 and Kmart issues
orders for $60.0 million of Products in the Kitchen Housewares
Category during the Period from July 1, 1999 to June 30, 2000,
then the Minimum Product Orders commitment for Kitchen
Housewares for the Period from July 1, 2000 to June 30, 2001
shall be reduced from $54.1 million to $43.2 million
([30%-10%] x $60.0=$12.0 million; $12.0 million subtracted
from $54.1 million = $42.1 million; however, the Minimum
Product Orders can never be reduced under this Section 5.2 by
more than 80% of $54.1 million (which equals $43.2 million).
For purposes of this Section 5.2, sales of Products in the
United States within a particular Category shall be determined
by reference to applicable information published in the most
widely-circulated trade publication containing such
information; provided, that if Kmart and Salton are unable to
agree upon the publication from which such information is to
be derived, then the applicable information shall be derived
by reference to a trade publication selected by Kmart and a
trade publication selected by Salton, and the applicable sales
information shall be determined on the basis of the average of
the data contained in the two publications.
5.3 Retail Sales Price. Kmart shall have sole discretion in
setting the sales price for the sale of the Products to its
customers.
6. DELIVERY
6.1 Availability of Products. Products shall be shipped in
accordance with the Specific Purchase Orders. Salton shall use
its reasonable best efforts to make available to Kmart
sufficient quantities of the Products to satisfy Kmart's
Product Orders.
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6.2 Product Forecasts. To assist Salton in production scheduling
for the manufacture of the Products, Kmart shall provide to
Salton, monthly, a six month rolling forecast of its
requirements for Products. The first forecast shall be
provided by Kmart to Salton within thirty (30) business days
of the Execution Date of this Agreement (to forecast the
requirements for the six months ended June 30, 1997 and for
the next five succeeding calendar months) and thereafter shall
be provided to Salton on or before the 20th day of each month
(to forecast the requirements for the next six succeeding
calendar months). It is understood and agreed that all
forecasts are estimates only and Kmart shall only be bound to
purchase the Products pursuant to Specific Purchase Orders
issued by it to Salton, subject to the satisfaction of the
Minimum Product Order commitment set forth in Section 5.1
hereof; and the Fee on any shortfall in the Minimum Product
Order for any Category and Kmart's payment for conforming
Products ordered and timely delivered through the date of
Termination shall be Salton's sole and exclusive remedy
hereunder.
6.3 Shipping Arrangements; Risk of Loss. The shipping
arrangements, insurance and risk of loss relating to Products
purchased hereunder shall be specified in each Specific
Purchase Order.
7. MANUFACTURE OF PRODUCTS; PRICE AND PAYMENT TERMS
7.1 Manufacture of Products. All Products for which Specific
Purchase Orders have been issued (subject to Section 5.1 of
this Agreement) may be manufactured by or on behalf of Salton
Salton acknowledges and Kmart acknowledges (based upon
Salton's representation) that under the License Agreement WCI
has the right before the initial order of a new Product within
ten (10) days of submission by Salton, to approve or reject
the Product specimen, related artwork and packaging, which
consent shall not be unreasonably withheld and shall be
automatic unless rejection is communicated in writing to Kmart
within the ten (10) day period. In each such case, Salton
shall be solely responsible for making timely submission to
WCI and timely written communication to Kmart of any
rejection; and Kmart shall have no liability, whatsoever, for
any claim or failure relating to or arising from this Section
7.1.
7.1.1 Direct Salton Orders. In the event
that Kmart elects in its sole and absolute discretion
to procure the manufacture of Products directly by or
on behalf of Salton, then Kmart shall enter into an
agreement with Salton for such Products as Kmart
desires to purchase and Salton is willing to
manufacture pursuant to a purchase order identical in
all respects to the Purchase Order Form annexed
hereto as Exhibit C for domestic orders and Exhibit D
for import orders (the "Direct Purchase Order"). The
price to Kmart of Products under a Direct Purchase
Order, and all other terms and conditions not
specified in this Agreement or in the Purchase Order
Form,, shall be determined by mutual agreement
acceptable to each of Kmart and Salton in its sole
discretion at or prior to the time the applicable
Direct Purchase Order is issued by Kmart and accepted
by Salton.
7.1.2 Orders from pursuant to a purchase order identical
in all respects to the Purchase Order Form annexed
hereto as Exhibit C for domestic orders and Exhibit D
for import orders (the "Purchase Order"). Kmart
shall make direct payments to of the amounts owed
under such Purchase Order for conforming Products
timely delivered (the "Payments"). Salton shall
remain liable for the Payments in the event Kmart
fails to make such Payments. Kmart shall indemnify
and hold harmless Salton and its officers, directors,
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employees and agents from and against any claim,
liability or damages, including related costs and
attorneys' fees, of which it is timely advised in
writing resulting from the failure by Kmart to make
Payments, or otherwise perform, in accordance with
the terms of the Purchase Orders unless such
failure is caused or contributed to by Salton,
Windmere or WCI. Kmart shall control the defense and
settlement of any claims for which such indemnify is
provided. Nothing in this Agreement shall be
construed to limit or restrict Kmart in any fashion
from dealing directly with. Salton shall not be
liable for the failure to perform, including
warranties, unless and except to the extent that
such failure is caused or contributed to by Salton,
Windmere or WCI.
7.1.3 Purchase Orders from Kmart to Salton Relating to .
Kmart agrees that delivery of the Products in
conformity with the applicable Purchase Order shall
be deemed, without any further agreement or
instrument, the agreement of Kmart to purchase such
Products from Salton in the manner set forth in
Section 7.1.2 above and in this Section 7.1.3 on
exactly the same terms and conditions provided
under the Purchase Order issued by Kmart at a price
equal to the sum of (i) the Payment for such
Products plus (ii) five percent (5%) of the "first
cost" of such Payment (the "first cost" being the
price up to the f.o.b. point of shipment, net of any
taxes, freight costs, customs fees, duties, etc.).
(The amounts set forth in (i) and (ii) are
collectively referred to herein as the "Salton
Payment"). Upon delivery of the conforming Products
identified in the Purchase Order to Kmart, together
with the related invoice, Kmart shall at its sole and
exclusive option either (i) pay the Salton Payment to
Salton whereupon Salton shall pay the Payment to
or (ii) pay the Payment directly to and remit the
difference between the Salton Payment and the
Payment directly to Salton. Kmart's exercise of
either of the preceding options shall extinguish any
and all rights of Salton to such payments.
7.1.4 Aggregate Sales Reports. Within ten (10) days after
the end of each calendar month during the term of
this Agreement, Kmart shall provide Salton with a
written statement (the "Kmart Statement") indicating,
with respect to the preceding month, (i) the
aggregate dollar amount of all purchases of Products
under this Agreement and the quantity and types of
Products so purchased, (ii) the aggregate dollar
amount of Payments made directly to upon delivery
of the Products, (iii) the aggregate dollar amount of
the Salton Payments made directly to Salton upon
delivery of conforming Products. Salton shall have
the right, upon reasonable notice and at reasonable
times, within six (6) months following its receipt of
the Kmart Statement to review the books and records
of Kmart with respect only to (i), (ii) and (iii)
above for the period covered by such Kmart Statement,
to confirm the accuracy of the payments made
hereunder provided that such right of review shall
not be exercisable more than once per year and
provided further that if such review reveals an
underpayment of more than one percent (1%) of the
amount to which Salton is entitled hereunder, then
Salton may conduct such review twice per year. The
cost and expenses of such examination shall be paid
solely by Salton; provided, that if such examination
reveals an underpayment to either Salton of more than
one percent (1%) of the amount to which Salton is
entitled hereunder, then the reasonable out of pocket
costs and expenses of such examination shall be paid
by Kmart upon receipt of an invoice therefor with
support documentation attached. Notwithstanding the
foregoing, the first Aggregate Sales Report will not
be issued until after February 15, 1997.
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7.1.5 Examination by Independent Auditors. The independent
auditors for each of Salton and Windmere-Durable
Holdings, Inc. ("Windmere") presently Deloitte &
Touche and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P., shall have the
right during the term of this Agreement at any time
that either Salton or Windmere requires audited
financial statements (e.g. in connection with the
preparation of their respective annual reports, bank
loans or certain acquisitions) to review the books
and records of Kmart, but in no event more than twice
per year. Any additional audits shall be conducted
only with Kmart's express prior written consent,
which shall not be unreasonably withheld, and shall
be only for the purpose of confirming the accuracy
of, and relating only to, the financial information
required to be provided to Salton hereunder as set
forth in Section 7.1.4 herein, including, all
Purchase Orders. All information obtained by such
auditors in the course of such review shall be
maintained by such auditors as confidential and shall
not be disclosed to any party, including Windmere
and/or Salton, without the express prior written
consent of Kmart. The cost and expenses of such
examination shall be paid solely by Salton and/or
Windmere, as the case may be; provided, that if such
examination reveals an underpayment of more than one
percent (1%) of the amount to which Salton is
entitled hereunder, then the reasonable out of pocket
costs and expenses of such examination shall be paid
by Kmart upon receipt of an invoice therefor with
support documentation attached.
7.1.6 Assignment of Rights. In consideration of Kmart
entering into this Agreement and agreeing to pay
directly subject to and in accordance with the terms
hereof, this Agreement shall constitute the automatic
assignment to Kmart of all rights of Salton against
with respect to Products purchased from pursuant to
this Agreement, which rights may not be enforced by
Salton. Salton shall have no liability with respect
to any non-performance of unless Salton, Windmere
or WCI causes or contributes to such non-performance.
This Agreement shall also constitute the automatic
and irrevocable assignment of the Payment portion
of the Salton Payment to and such payment is not
assignable to any other party, including Salton.
7.1.7 Sole and Exclusive Remedy of Salton. Salton's sole
and exclusive remedy relating to any Purchase Order
or any failure under this entire Section 7 shall be
against Kmart for its payment of the difference
between the Salton Payment and the Payment or for
enforcement of Kmart's indemnification obligation
under Section 7.1.2 hereunder. Salton shall have no
right to enforce against Kmart, Kmart's payment of
the Payment portion of the Salton Payment unless
Kmart shall have wrongfully failed to pay such amount
to upon timely delivery of conforming Products
under a Purchase Order. Salton shall have no right
to enforce performance or seek any other remedy
against hereunder or under any Purchase Order.
7.1.8 Invoicing Requirements/Payment Terms.
A. Salton will follow the invoicing
requirements provided by Kmart from time to
time.
B Payment for all Direct Salton Orders of
Products f.o.b. Asia ("Import Products") and
purchased hereunder shall be as follows: (i)
Direct Salton Orders shall be made by wire
transfer within five (5) business days
following the receipt of goods ("ROG")
provided the International Department has
received (i) the original invoice, (ii) an
original signed
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▇▇▇▇ of lading and (iii) the customary
signed Kmart inspection certificate for
goods manufactured overseas.
C. Payment for all domestic Direct Salton
Orders purchased hereunder shall be made by
check issued within ten (10) business days
of receipt of goods ("ROG") provided Kmart
has received the applicable invoice.
D. Payment for all domestic and import Orders
purchased hereunder shall be made pursuant
to Section 7.1.3 herein. If Kmart, in its
sole and exclusive discretion exercises the
payment option set forth in (ii) under
Section 7.1.3, Salton shall invoice Kmart
for the difference between the Salton
Payment and the Payment after Salton
receives each Aggregate Sales Report
described in Section 7.1.4 herein. Salton
shall prepare and submit 2 invoices covering
each Aggregate Sales Report: one for import
orders and one for domestic orders. The
invoices shall be directed to:
FOR DOMESTIC ORDERS: FOR IMPORT ORDERS:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Manager, Accounting Operations Director, International
Kmart Corporation Administration
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Kmart shall pay all such invoices within ten (10) business
days of receipt.
7.1.9 Stand-by Letter of Credit. Kmart shall open, within
ten (10) business days of the Execution Date, a
transferable and assignable stand-by irrevocable
letter of credit in the sum of $10,000,000 in favor
of Salton from a financial institution reasonably
acceptable to Salton ("Letter of Credit") which can
only be drawn upon for Kmart's failure to pay for
Direct Salton Orders of conforming Products which are
timely shipped f.o.b. Asia as further described in
this Section and for no other reason (including, but
not limited to, any Salton Payment) Salton shall have
as its sole and exclusive remedy for Kmart's failure
to pay for such Products, notwithstanding Section
10.3 herein, the right to draw on the Letter of
Credit at any time and from time to time provided all
of the following procedures are followed by Salton
and all of the following conditions are met: (i)
Kmart has failed to pay for such Products as provided
herein (ii) Salton has provided Kmart with the
required written notice and opportunity to cure
pursuant to Section 10.3 herein and has submitted an
affidavit signed by the Chief Financial Officer of
Salton as follows: "Salton has timely delivered
conforming Products f.o.b. Asia to Kmart, Kmart has
taken deliveries of such Products and Salton has
invoiced Kmart therefor. Kmart Corporation owes
Salton/Maxim Housewares, Inc. $_______ pursuant to
invoices [invoice numbers to be inserted] (iii) A
copy of such invoices and the corresponding
inspection certificates indicating that the Products
have passed inspection and corresponding original
bills of lading duly signed by an authorized officer
of Kmart are annexed to the affidavit; (iv);Kmart has
failed to pay the amount owing when due after receipt
of an invoice therefor and a notice specifying such
amount and describing the obligation including
respective purchase order number(s),(v). Kmart has
received such notice on __________, sixty (60) days
have elapsed (for individual obligations of up to $2
million) or thirty (30) days have elapsed (for
individual obligations of more than
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$2 million), and Kmart has failed to pay the amount
owing or provide proof that the amount is not owing.
Salton shall provide Kmart with ten (10) days prior
written notice of its intent to submit such affidavit
to draw on the Letter of Credit and shall not be
entitled to submit such affidavit if Kmart can prove
payment of the amount claimed owing or that the goods
were not conforming or timely delivered or otherwise
resolve the dispute within such ten (10) day period.
The Letter of Credit shall be in form and substance
reasonably satisfactory to Salton and shall terminate
on December 15, 1997.
7.1.10 Currency Exchange. Prices charged Kmart and payments
made by Kmart to Salton for the Products shall be in
U.S. dollars.
8. RETURNS, ALLOWANCES AND WARRANTIES
8.1 Terms of Specific Purchase Order to Control. The terms and
conditions of this Agreement, including the Purchase Order
Forms, as well as the terms and conditions set forth in each
Specific Purchase Order shall determine the rights and
obligations of the parties with respect to returns, allowances
and warranties relating to Products ordered thereunder.
9. DAMAGES, INDEMNIFICATION AND INSURANCE
9.1 Indemnification. To the fullest extent permitted by
law, Salton shall reimburse, indemnify, defend and hold
harmless, Kmart, its directors, officers and employees and
subsidiaries and affiliates and each of their respective
directors, officers and employees from and against any damage,
loss, expense or penalty, or any claim or action therefor, by
or on behalf of any person or entity, arising out of the
performance or failure of performance of this Agreement
including but not limited, to any claim or failure with
respect to Sections 2 or 3 hereof.
Salton shall reimburse, indemnify, defend and hold harmless
Kmart, its directors, officers and employees and subsidiaries
and affiliates and each of their respective directors,
officers and employees from and against all third-party claims
alleging that any Products and or any Right furnished under
this Agreement infringe any patent, copyright, trademark or
other proprietary right or constitute a misuse of any trade
secret information and shall pay all costs, attorneys fees,
settlement payments and damages arising in connection with any
such claims. Kmart agrees to timely advise Salton of any such
suit, claim or proceeding, and to extend reasonable
cooperation to Salton in the defense or settlement of such
suit, claim or proceeding, but Salton shall have sole control
thereof. In the event that an injunction is obtained against
Kmart's use, purchase, distribution, sale, marketing and/or
promotion of any Products and/or any Right in whole or in
part, Salton shall promptly, at its option either: (a) procure
for Kmart the right to continue using, purchasing,
distributing, selling, marketing and/or promoting such
Products enjoined from use, or (b) replace or modify the same
so that Kmart's use, sale or possession is not subject to any
such injunction, or (c) at Kmart's option refund to Kmart all
amounts paid to Salton for such Products and such Right,
including but not limited to all Salton Payments.
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9.2 Insurance. Salton shall, during the Term of this
Agreement, maintain the following insurance coverages as
indicated or as required by law, whichever shall be greater,
with insurers in good standing and authorized to do business
under the laws of the State(s) where performance hereunder
shall occur:
(a) Comprehensive General Liability, naming Kmart as an
additional insured including, but not limited to,
Contractual Liability and Products Liability, with
broad form property damage and bodily injury
(including Personal Injury) coverage. The minimum
limits for each shall be $2,000,000 per occurrence.
(b) All insurance required in Exhibits B and C hereto, as
well as that required under each Purchase Order.
(c) Employee fidelity insurance, workers compensation
insurance and employer's liability insurance as
required by all applicable federal, state or other
laws, rules or regulations.
Prior to execution of this Agreement, Salton shall tender to
Kmart certificates of insurance evidencing the coverage
required to be maintained by Salton hereunder. The
certificates must provide that no change or cancellation of
insurance shall be made without thirty (30) days prior written
notice to Kmart.
9.3 Survival. The provisions of this Section 9 shall survive the
termination or expiration of this Agreement.
10. TERM AND TERMINATION
10.1 Term. The Term of this Agreement shall be a period commencing
on the Execution Date and terminating on June 30, 2004, unless
earlier terminated in accordance with this Section 10 of this
Agreement.
10.2 Extension of Terms. If neither Kmart nor Salton terminate this
Agreement pursuant to Section 10.3, 10.4 or 10.5, as
applicable, Kmart shall have the right to extend the term of
this Agreement for successive one-year periods through June
30, 2011, by delivering written notice to Salton of its desire
to so extend this Agreement on or before May 30 of any year
during the Term or any extension period, as applicable. Upon
any such extension, the Minimum Product Orders for each
Category shall be increased at an annual rate of no more than
four percent (4%) from the amount of Minimum Product Orders in
the immediately preceding year during each year in which the
Term has been so extended. Kmart may terminate this Agreement
without cause on sixty (60) days prior written notice at any
time during any extension period without cost or penalty.
10.3 Termination by Either Party. The occurrence of one or
more of the following events shall constitute a default of the
party responsible for the occurrence of such event
("Default"):
(a) Material breach of the Agreement, including, without
limitation, (i) the failure of Salton to supply
Products and/or provide services as provided for
herein with such diligence as will insure compliance
with all delivery, installation, completion and other
dates specified herein, (ii) the failure of Kmart to
pay or reimburse any material amounts which are due
to be paid or reimbursed hereunder; (iii) any
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failure relating to Section 2.1, Section 3.1.4 and/or
Section 9 herein; or (iv) New Tech's breach of the
NewTech Agreement;
(b) Failure or material breach of any material condition,
obligation, covenant, representation or warranty set
forth herein; or
(c) Insolvency, or the institution of proceedings by or
against a party under any federal or state bankruptcy
or insolvency law or an assignment for the benefit of
all or substantially all creditors which proceeding
is not stayed within sixty (60) days of filing; or
the cessation of operations or doing business for any
reason.
Upon the occurrence of a Default, the non-defaulting party
shall provide written notice (the "Notice") to the defaulting
party specifying the nature of the Default and the conduct
required to cure such Default. The defaulting party shall have
60 days following the date the Notice is received by the
non-defaulting party to cure the Default (30 days for
non-payment by Kmart under a Specific Purchase Order where the
amount involved exceeds $2,000,000). If the Default is not
cured by the defaulting party within such period, the
non-defaulting party may elect to either specifically enforce
performance hereof or terminate this Agreement If, however,
Kmart defaults, Salton's remedies shall not exceed the amount
Salton would have received as its sole and exclusive remedy
under Section 5 herein with respect to Minimum Product Orders
which have not been placed as of the effective date of the
Default or Termination. In the event of Salton's Default or
wrongful termination of this Agreement, Kmart shall not owe
Salton any damages under Section 5 of this Agreement.
A party's failure to demand cure of or terminate this
Agreement as a result of a prior Default shall not be deemed a
waiver by the party of the right to demand cure of or to
terminate this Agreement as a result of a subsequent Default.
Unless otherwise indicated to the contrary in this Agreement,
the rights set forth hereinabove are cumulative and in
addition to those otherwise provided by law.
10.4 Termination at Option of Kmart. (a) Kmart shall have the right
to terminate this Agreement without cause in its sole
discretion effective on June 30, 2002, by giving Salton
written notice at any time up to June 30, 2000. Following
delivery of such notice to Salton, the parties shall continue
to be bound by all of the terms and conditions of this
Agreement through June 30, 2002; provided, that the Minimum
Product Purchase commitment, for the period of July 1, 2001
through June 30, 2002, as set forth in Section 5.1 hereof,
shall be reduced to 25% of the amounts set forth in said
Section 5.1; and provided further, that after June 30, 2000,
Salton may commence marketing plans for the sale of Products
to any other Person, including other Discount Department
Stores, and, after July 31, 2001 Salton may market and sell
Products to any other Person, including Discount Department
Stores, notwithstanding Section 2.1 hereof. If Kmart does not
elect to terminate this Agreement in accordance with the
foregoing sentences of this Section 10.4, then Kmart shall
have the right to terminate this Agreement without cause in
its sole discretion effective June 30, 2003 and on each June
30 thereafter during the term of this Agreement by giving
written notice to Salton of its desire to so terminate this
Agreement. Upon any such termination, Kmart shall owe nothing
to Salton beyond payment for Products accepted by Kmart as of
the effective date of termination. Kmart shall be required to
perform all Specific Purchase Orders issued prior to the
effective date of such termination, and Kmart shall have no
further obligation following such termination.
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(b) Notwithstanding the foregoing, it is specifically agreed
by the parties hereto that in the event Kmart terminates the
Agreement at any time and such termination is not in
accordance with this Section 10.4(a), or is otherwise in
violation or breach of this Agreement, Kmart's liability
hereunder shall not exceed an amount equal to the Fees
specified in Section 5 herein for the Minimum Product Orders
which have not been placed as of the effective date of such
termination and for payment for Orders of conforming Products
timely delivered through the date of such termination, Kmart
shall be required to perform all Specific Purchase Orders
issued prior to the effective date of such termination, and
Kmart shall have no further obligation following such
termination.
10.5 Termination at Option of Salton. Salton shall have the right
to terminate this Agreement effective on June 30, 2002, by
giving Kmart written notice at any time up to June 30, 2000.
Following delivery of such notice to Kmart, the parties shall
continue to be bound by all of the terms and conditions of
this Agreement through June 30, 2002; provided, that the
Minimum Product Purchase commitment, for the period of July 1,
2001 through June 30, 2002, as set forth in Section 5.1
hereof, shall be reduced to 25% of the amounts set forth in
said Section 5.1; and provided further, that after June 30,
2000, Salton may commence marketing plans for the sale of
Products to any other Person, including other Discount
Department Stores, and, after July 31, 2001 Salton may market
and sell Products to any other Person, including Discount
Department Stores, notwithstanding Section 2.1 hereof. In the
event that Salton does not elect to terminate this Agreement
in accordance with the foregoing sentences of this Section
10.5, then Salton shall have the right to terminate this
Agreement without cause in its sole discretion effective June
30, 2003 and on each June 30 thereafter during the term of
this Agreement by giving at least 12 months prior written
notice to Kmart of its desire to so terminate this Agreement.
Upon any such termination, Kmart shall owe nothing to Salton
beyond payment for Products accepted by Kmart as of the
effective date of such termination.
10.6 Duties Following Termination. Upon Termination of this
Agreement, neither party shall have any obligation to the
other party except as hereinafter set forth in this Section
10.6. Notwithstanding the termination or expiration of this
Agreement pursuant to this Article 10 or any other provision
of this Agreement, unless otherwise indicated in this
Agreement, all rights and obligations which were incurred or
which matured under specific Purchase Orders issued prior to
the effective date of termination or expiration shall survive
termination and be subject to enforcement under the terms of
this Agreement. Termination of this Agreement shall not affect
any duty of Kmart or Salton under Sections 9.1, 11.1, 11.2,
11.3, 12.1, 12.4, 12.6, 12.11, 12.13 or 12.14 existing prior
to the effective date of termination or expiration , all of
which are intended to survive termination. Kmart shall have
the right to distribute, sell, market and promote all existing
inventory of Products ordered pursuant to Specific Purchase
Orders prior to the termination of this Agreement, and to use
all packaging materials, labels, tags, signage, advertising
and promotional materials to effectuate the sale of such
Products.
10.7 Non-interference. Except for negotiations involving Salton or
with a Third Party Manufacturer, , Kmart agrees that, except
with Salton, it will not, during the Term of this Agreement or
any extension or renewal thereof negotiate, obtain information
or discuss with or enter into any agreement with any person or
entity covering the licensing, purchase, sale, marketing or
distribution of the Trademark for any of the Categories of
Product purchased by Kmart from Salton.
10.8 Termination of the NewTech Agreement. If the NewTech Agreement
is terminated at any time for any reason, Kmart may, in its
sole option, elect to terminate this Agreement,
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and upon such termination, owe nothing further under this
Agreement beyond payment for Products accepted and sold by
Kmart through the date of termination.
11. CONFIDENTIALITY/PRESS RELEASES
11.1 Confidentiality and Non-Disclosure. Salton agrees that any and
all information in any form that is provided to Salton or any
of its representatives as part of this Agreement is provided
and received in confidence, and Salton, shall at all times
preserve and protect the confidentiality of such information,
and of any other proprietary or non-public information of or
relating to Kmart or any of its related companies of which it
or any of its representatives becomes aware or acquires during
the performance of this Agreement (such information is
hereinafter referred to as "Confidential Information"). Salton
also agrees that it shall take all reasonable steps to ensure
that such Confidential Information will not be disclosed to,
or used by any person, association or entity except its own
employees, and then only to the extent necessary to permit it
to perform this Agreement.
Each of Salton and Kmart agrees to keep the Minimum Product
Orders, pricing, and Term of this Agreement (including rights
of extension and termination) strictly confidential, except
that each of Salton and Kmart shall be permitted to disclose
any and all information concerning the transactions
contemplated hereby to the extent it is legally required to do
so, whether under applicable securities laws or otherwise,
provided, that Salton will use its reasonable best efforts to
file with the Securities and Exchange Commission or any other
applicable regulator or court a request for confidential
treatment of the pricing and other business terms set forth in
this Agreement.
In the course of performance of this Agreement, Salton may
disclose certain information to Kmart which Salton considers
proprietary and confidential. In order to be considered as
proprietary and confidential and, thus, subject to the
following restrictions, Salton must comply with both of the
following requirements prior to disclosure of the information:
(i) the information must be clearly and conspicuously
identified in writing as "PROPRIETARY AND CONFIDENTIAL
INFORMATION OF SALTON'; and (ii) Salton must limit its
dissemination of the information to an authorized
representative of Kmart (i.e., one listed on attached Exhibit
E) with a need to know such information in furtherance of the
performance of this Agreement (the "Authorized Recipient")
Provided Salton has complied with (i) and (ii) above, the
Authorized Recipient shall maintain the confidentiality of
such information to the same extent Kmart protects its own
proprietary information and shall not disclose it to anyone
other than Kmart employees, agents and/or consultants with a
need to know who shall also be subject to this restriction.
Confidential Information shall not include information that a
party can demonstrate by written evidence:
(i) is in the public domain (provided that information in
the public domain has not and does not come into the
public domain as a result of the disclosure by the
receiving party or any of its Affiliates);
(ii) is known to the receiving party or any of its
Affiliates prior to the disclosure by the other
party; or
(iii) becomes available to the party on a non-confidential
basis from a source other than an Affiliate of that
party or the disclosing party.
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11.2 Press Releases. Salton shall not issue any press releases
relating to this Agreement or its relationship with Kmart
without the prior written approval by an authorized
representative of either the Corporate Affairs Department or
the Investor Relations Department of Kmart as to the contents
thereof.
11.3 The Press Release confidentiality and non-disclosure
obligations contained herein shall survive and continue after
termination of this Agreement or any related agreements the
parties may execute, and shall bind each of Salton's and
Kmart's legal representatives, successors and assigns.
12. GENERAL TERMS AND CONDITIONS
12.1 Dispute Resolution. All disputes arising out of, or in
relation to, this Agreement (other than disputes arising out
of any claim by a third party in an action commenced against a
party) shall be referred for decision forthwith to a senior
executive of each party who is not personally involved in the
dispute. If no agreement can be reached through this process
within thirty (30) days of request by one party to the other
to nominate a senior executive for dispute resolution, then
either party shall be entitled to pursue any and all available
legal remedies.
12.2 No Assignment. Other than as specifically set forth in this
Agreement, this Agreement may not be assigned nor may the
performance of any duties hereunder be delegated by either
party without the prior written consent of the other party;
provided, that any such attempted assignment shall be void and
shall not relieve the assignor from any of its obligations
hereunder or under any other document or agreement delivered
by such party pursuant to, or delivered (or acknowledged to
have been delivered) contemporaneously with or in connection
with the execution of, this Agreement, which shall continue to
be binding upon such party notwithstanding any such attempted
assignment.
12.3 Notices. Any notice required or permitted to be given under
this Agreement shall be sufficiently given if in writing and
delivered by registered or certified mail (return receipt
requested), facsimile (with confirmation of transmittal),
overnight courier (with confirmation of delivery), or hand
delivered to the appropriate party at the address set forth
below, or at such other address as such party may from time to
time specify for that purpose in a notice similarly given:
If to Salton: Salton/Maxim Housewares, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (other than Greenberg, Traurig, Hoffman, Lipoff,
regularly prepared notices, reports, etc. ▇▇▇▇▇ & Quentel, P.A.
required to be delivered hereunder): ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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and
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Kmart: Kmart Corporation
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Divisional Vice President
Home Electronics/Home Appliances
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to (other than Kmart Corporation
regularly prepared notices, reports, etc. Legal Department
required to be delivered hereunder): ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Any such notice shall be effective (i) if sent by mail, as
aforesaid, three (3) business days after mailing, (ii) if sent
by facsimile, as aforesaid, when sent, and (iii) if sent by
courier or hand delivered, as aforesaid, when received.
Provided, that if any such notice shall have been sent by mail
and if on the date of mailing thereof or during the period
prior to the expiry of the third business day following the
date of mailing there shall be a general postal disruption
(whether as a result of rotating strikes or otherwise) in the
United States, then such notice shall not become effective
until the third business day following the date of resumption
of normal mail service.
12.4 Governing Law and Consent to Jurisdiction. THIS
AGREEMENT SHALL BE DEEMED TO HAVE BEEN EXECUTED AND DELIVERED
IN TROY, MICHIGAN, AND SHALL BE CONSTRUED, INTERPRETED AND
ENFORCED UNDER AND IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF MICHIGAN. SALTON AGREES TO EXERCISE ANY RIGHT OR
REMEDY IN CONNECTION WITH THIS AGREEMENT EXCLUSIVELY IN, AND
HEREBY SUBMITS TO THE JURISDICTION OF, THE STATE OF MICHIGAN
COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED STATES
DISTRICT COURT IN DETROIT, MICHIGAN.
12.5 Binding Agreement. This Agreement shall be binding upon the
parties hereto, and their respective successors and permitted
assigns, whether by operation of law or otherwise.
12.6 Entire Agreement. This Agreement and all other documents and
instruments specifically incorporated by reference herein
contain the entire agreement and understanding of the parties
with respect to the subject matter hereof and thereof and
supersedes all negotiations, prior discussions and agreements
relating to the subject of this Agreement. Any terms or
conditions in any forms of Salton used in the performance of
this Agreement which are in conflict with or in addition to
the terms and conditions of this Agreement shall be void. This
Agreement may not be amended or modified except by a written
instrument signed by all of the parties hereto.
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12.7 Headings. The headings to the various articles and paragraphs
of this Agreement have been inserted for convenience only and
shall not affect the meaning of the language contained in this
Agreement.
12.8 Waiver. The waiver by any party of any breach by another party
of any term or condition of this Agreement shall not
constitute a waiver of any subsequent breach or nullify the
effectiveness of that term or condition.
12.9 Counterparts. This Agreement may be executed in identical
duplicate copies exchanged by facsimile transmission. The
parties agree to execute two identical original copies of the
Agreement after exchanging signed facsimile versions. Each
identical counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.10 Severability of Provisions. If, for any reason whatsoever, any
term, covenant or condition of this Agreement or the
application thereof to any party or circumstance is to any
extent held or rendered invalid, unenforceable or illegal,
then such term, covenant or condition:
(i) is deemed to be independent of the
remainder of such document and to be severable and
divisible therefrom and its validity,
unenforceability or illegality does not affect,
impair or invalidate the remainder of such document
or any part thereof; and
(ii) continue to be applicable and
enforceable to the fullest extent permitted by law
against any party and circumstances other than those
as to which it has been held or rendered invalid,
unenforceable or illegal.
12.11 Limitation on Damages. Except with respect to Salton's
liability under Section 9 of this Agreement, neither party
shall be liable to the other party for incidental,
consequential, punitive or exemplary damages arising in
connection with this Agreement or the performance, omission of
performance or termination hereof, even if said party has been
advised of the possibility of such damages and without regard
to the nature of the claim or the underlying theory or cause
of action (whether in contract, tort or otherwise). In
addition, in no event shall Kmart be liable for direct or any
other damages in excess of the amount to which Salton is
entitled to under Section 5 herein for Minimum Product Orders
which have not been placed as of the effective date of the
Default or Termination plus payment due for Products accepted
by Kmart as of such date, nor shall Kmart's aggregate
liability under this Agreement exceed such amount.
12.12 Force Majeure. Time is of the essence in the performance of
all parts of this Agreement; provided, however, performance by
either party shall be excused during the period in which such
performance is made reasonably impossible because of a strike,
act of God or change in laws ("Force Majeure"). Salton,
however, shall use reasonable diligence to procure substitute
performance. If the period during which performance is excused
due to Force Majeure exceeds ten (10) days, then either party
may terminate its obligations under any Specific Purchase
Orders without liability, and such cancelled Order(s) shall
continue to count towards fulfillment of the commitments set
forth in Section 5 herein. If the period of Force Majeure
excusing Salton's performance exceeds 120 days and such
non-performance relates to more than 20% of the Minimum
Product Orders during any Period, then Kmart may terminate
this entire Agreement without further obligation to Salton.
Upon any such termination, nothing shall be due from Kmart
beyond payment for Products accepted by Kmart as of the
effective date of termination.
21
21
12.13 Kmart Marks. Salton acknowledges Kmart Properties Inc.'s
("KPI") exclusive right, title and interest in and to all
trademarks, trade names, service marks, logos, assignees,
program and event names, identifications and other proprietary
rights and privileges which it licenses to Kmart with the
right to sublicense (the "Kmart Marks"). This Agreement and
its various provisions are not a license or assignment of any
right, title or interest in the Kmart Marks by KPI or Kmart to
Salton. Salton shall not in any manner represent that it has
any ownership in the Kmart Marks and shall not do or cause to
be done anything impairing Kmart's exclusive license in the
Kmart Marks. Salton shall not use, print or duplicate the
Kmart Marks except and only if Salton has obtained prior
approval as provided herein. Salton's use of the Kmart Marks
is limited to the Term of this Agreement; upon termination
hereof, Salton shall immediately cease all use of the Kmart
Marks. Salton shall not assign or attempt to assign any rights
with regard to the Kmart Marks which arise hereunder; any such
attempted assignment shall be void.
12.14 White Westinghouse Marks. Kmart acknowledges WCI's exclusive
right, title and interest in and to the Trademarks. This
Agreement and its various provisions are not a license or
assignment of any right, title or interest in the Trademark or
the License Agreement by Salton or WCI to Kmart. Kmart shall
not do or cause to be done anything impairing Salton's
exclusive license in the Trademark. Kmart's use of the
Trademark is limited to the terms and conditions contained in
this Agreement; upon termination hereof, Kmart shall
immediately cease all use of the Trademark other than in
connection with the sale, advertising or merchandising of
Product inventory and order commitments (if any) existing at
the time of such termination. Kmart shall not assign or
attempt to assign any rights with regard to the Trademark
which arise hereunder; any such attempted assignment shall be
void.
12.15 No Third Party Beneficiaries. The parties hereto expressly
agree that there shall be no third party beneficiaries to this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the Execution Date.
SALTON/MAXIM HOUSEWARES, INC. KMART CORPORATION
By:................................. By:....................................
(Signature) (Signature)
Name:............................... Name:..................................
Title:.............................. Title:.................................
22
22
EXHIBIT A
DESCRIPTION OF PRODUCTS
KITCHEN HOUSEWARES:
Irons
Can Openers
Mixers
Food Processors
Electric Knives
Popcorn Makers
Toasters
Toaster Ovens
Coffee Makers
Espresso/Cappuccino Makers
Bread Machines
Pasta Makers
Doughnut Makers
Woks
Pressure Cookers
Ice Tea Makers
Sandwich Makers
Waffle Irons/Waffle Makers
Pancake Grills
Portable Grilling Machines
Ice Cream Makers
Yogurt Makers
Juice Makers
Juice Extractors
PERSONAL CARE:
Hair Dryers
Hair Curlers
Curling Wands and Brushes
Make up Mirrors
Nail, Face, Feet and Body Care Products
Massagers
FANS AND HEATERS:
Portable Cooling Fans
Portable Room Heaters and Heater/Fan Combinations
ELECTRIC AIR CLEANERS AND HUMIDIFIERS:
Humidifiers
Air Cleaners
23
SCHEDULE 1.2
DISCOUNT DEPARTMENT STORES
▇▇▇▇ Dept. Stores
Baby Superstore
Best Buy
Best Products Co.
Bradlees
Caldor Corp.
Circuit City Stores
Comp USA
Consolidated Stores
▇▇▇▇▇▇ ▇▇▇▇▇▇/Target
Dollar General
Dollar Tree Stores
▇▇▇▇▇▇▇▇-ALCO Stores
Farmily Bargain
Family Dollar
50-Off Stores
Fred's
Good Guys
Hills
Home Shopping Network
▇. ▇▇▇▇▇ & Son
Lechters
▇▇▇▇▇▇▇▇'▇ Inc.
MacFrugal's Bargains
Melville Corp.
▇▇▇▇▇ (▇▇▇▇)
▇▇▇▇▇▇▇▇▇▇ Wards
99 Cents Only
Office Depot
OfficeMax
Pamida
Phar-Mor
Price Costco
▇▇▇▇▇▇▇
▇▇▇▇ Stores
S & K Famous Brands
Sears
Service Merchandise
ShopKo Stores
Staples
Tops Appliance City
Toys "R" Us
Tuesday Morning
Value City Dept. Stores
Venture
Waban
Wal-Mart Stores
Woolworth
24
EXHIBIT B
PURCHASE ORDER TERMS AND CONDITIONS
Vendor and Kmart Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ("Buyer") agree, to the fullest extent permitted by law, to be bound
by all terms and conditions contained or incorporated herein, all of which are a
part of each Purchase Order issued to Vendor by Buyer ("Order") and should be
carefully read. Any provisions in Vendor's invoices, billing statements,
acknowledgment forms or similar documents which are inconsistent with the
provision of an Order shall be of no force or effect. The cost price set forth
in each Order includes the cost of manufacturing, packaging, labeling and
shipping unless otherwise specified in the Order.
1. Vendor's Acceptance. Vendor's commencement of or promise of shipment of
the Merchandise shall constitute Vendor's agreement that it shall
deliver the merchandise in accordance with the terms and conditions of
the applicable Order. Vendor agrees to follow the shipping and
invoicing instructions issued by Buyer's stores, warehouses, buying
offices and Transportation and Accounting Department, which
instructions are incorporated by referenced into the applicable Order.
2. Vendor's Representations and Warranties. Vendor represents and warrants
to buyer, in addition to all warranties implied by law, that each item
of merchandise described on the face of an Order (or in an EDI or
telephone Order), together with all related packaging and labeling and
other material furnished by Vendor ("Merchandise"), shall: (a) be free
from defects in design, workmanship and/or materials including, without
limitation, such defects as could create a hazard to life or property;
(b) conform in all respects with all applicable federal, state and
local laws, orders and regulations, including, without limitation,
those regarding (i) safety, (ii) content, (iii) flammability, (iv)
weights, measurers and sizes, (v) special use, care, handling, cleaning
or laundering instructions or warnings, (vi) processing, manufacturing,
labeling, advertising, selling, shipping and invoicing, (vii)
registration and declaration of responsibility, and (viii) occupational
safety and health; (c) not infringe or encroach upon Buyer's or any
third party's personal, contractual or proprietary rights, including,
without limitation, patents, trademarks, copyrights, rights of privacy
or trade secrets; and (d) conform to all of Buyer's specifications and
to all articles shown to buyer as Merchandise samples.
3. Vendor's Indemnification of Buyer. Vendor agrees to reimburse,
indemnify, hold harmless and to defend at its expense (or to pay any
attorney's fees incurred by Buyer) Buyer and its subsidiary and
affiliate companies against all damage, loss, expense, claim, liability
or penalty, including, without limitation, claims of infringement of
patents, copyrights, trademarks, unfair competition, bodily injury,
property or other damage, arising out of any use, possession,
consumption or sale of said Merchandise and from any failure of Vendor
to properly perform an Order. Vendor shall not be relieved of the
foregoing indemnity and related obligations by allegations or any claim
of negligence on the part of buyer; provided, however, Vendor shall not
remain or be liable hereunder to the extent any injury or damage is
finally judicially determined to have been proximately caused by the
sole negligence of Buyer. Vendor shall obtain adequate insurance to
cover such liability under each Order and shall provide copies of the
applicable certificate(s) of insurance annually to Buyer's Vendor
Database Department at the above address.
4. Defective or Non-Conforming Merchandise. If any Merchandise is
defective, unsuitable, does not conform to all terms hereof and of the
Order and all warranties implied by law, Buyer may at its option return
it to Vendor for full credit or refund of the purchase price or repair
it at Vendor's expense, and may change Vendor such price or expenses
and the cost of any incurred inbound and outbound freight and a
handling, storage and inspection charge of 71/2% of the returned
Merchandise invoice price. Buyer shall be under no duty to inspect any
Merchandise before resale thereof, and resale, or repackaging or
repackaging for the purpose of resale, shall
25
not constitute a waiver of, or otherwise limit, any of Buyer's rights
resulting from defective or non-conforming Merchandise.
5. Buyer's Right to Cancel. Buyer may without notice cancel, terminate
and/or rescinding all or part of an Order in the event Vendor breaches
or fails to perform any of its obligations in any material respect, or
in the event Vendor becomes insolvent or proceedings are instituted by
or against Vendor under any provision of any federal or state
bankruptcy or insolvency laws or Vendor ceases its operation. Time is
of the essence to each Order, and Vendor's failure to meet any delivery
date shall constitute a material breach of the Order. Vendor agrees to
inform Buyer immediately in writing or any failure to timely ship all
or any part of an Order, and Buyer's acceptance of any merchandise
after the applicable delivery date shall not constitute a waiver of, or
otherwise limit, any of Buyer's rights resulting from the late delivery
nor obligate Buyer to accept delivery of additional Merchandise under
the order.
6. Special Features. All Merchandise designs, patents and trade names
which are supplied by Buyer to Vendor or which are distinctive of
Buyer's private label merchandise ("Special Features") shall by the
property of Buyer and shall be used by Vendor only for buyer. Buyer may
use the Special Features on or with respect to goods manufactured by
others and obtain legal protection for the Special Features including,
without limitation, patents, patent designs, copyrights and trademarks.
Merchandise with Special Features which is not delivered to Buyer for
any reason shall not be sold or transferred to any third party without
written authorization of Buyer and unless and until all labels, tags,
packaging and markings identifying the Merchandise to Buyer have been
removed.
7. Deductions and Set Off. Any sums payable to Vendor shall be subject to
all claims and defenses of Buyer, whether arising from this or any
other transaction, and Buyer may set off and deduct against any such
sums all present and future indebtedness of Vendor to Buyer. Buyer
shall provide a copy of the deduction voucher(s) for debits taken by
Buyer against Vendor's account as a result of any returns or
adjustments. Vendor shall be deemed to have accepted each such
deduction unless Vendor, within 90 days following receipt of the
deduction voucher, notifies Buyer in writing as to why a deduction
should not be made and provides documentation of the reason(s) given.
Such written notice shall be directed to Buyer's Vendor Audit
Department at the above address. Buyer shall not be liable to Vendor
for any interest or late charges.
8. Michigan Contract and Jurisdiction. EACH ORDER, AND ALL OTHER ASPECTS
OF THE BUSINESS RELATIONSHIP BETWEEN BUYER AND VENDOR, SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF MICHIGAN. VENDOR AGREES, WITH RESPECT TO ANY LITIGATION WHICH
RELATES TO ANY ▇▇▇▇▇ OR WHICH OTHERWISE ARISES DIRECTLY OR INDIRECTLY
OUT OF OR IN CONNECTION WITH SAID BUSINESS RELATIONSHIP RO ANY
TRANSACTION OF ANY NATURE BETWEEN BUYER AND VENDOR, TO COMMENCE SAME:
(I) EXCLUSIVELY IN (AND VENDOR HEREBY CONSENTS TO THE JURISDICTION OF)
THE STATE OF MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED
STATES DISTRICT COURT IN DETROIT, MICHIGAN, AND (II) WITHIN 18 MONTHS
FROM THE DATE OF BUYER'S LAST ORDER TO VENDOR OR THE PERIOD PRESCRIBED
BY THE APPLICABLE STATUTE OF LIMITATIONS, WHICHEVER IS SOONER.
9. Miscellaneous, (a) All rights granted to Buyer hereunder shall be in
addition to and not in lieu of Buyer's rights arising by operation of
law. (b) Any provisions of a hard copy Order which are typewritten or
handwritten by Buyer shall supersede any contrary or inconsistent
printed provisions therein. (c) No modification of terms of an Order
shall be valid without the written authorization of Buyer. (d) Should
any of the provisions of an Order be declared by a court of
26
competent jurisdiction to be invalid, such decision shall not affect
the validity of any remaining provisions.
10. Direct to Store and Distribution Center Invoice & Shipping
Instructions. (a) Each invoice shall include Buyer's Order number,
Vendor's stock/style number, and Buyer's code number for each item on
the invoice. No substitutions of Merchandise shall be made without the
written authorization of Buyer. (b) Each Order must be invoiced
separately. (c) An Order may not be filed at a price higher than that
shown on its face or transmitted without the written authorization of
Buyer. (d) If freight costs are to be paid by buyer, Vendor shall ship
via the method and/or route specified in the instructions provided by
Buyer's Transportation Department, shall make ONE COMPLETE shipment of
the Merchandise and shall NOT make PARTIAL shipments without the
written authorization of Buyer. (e) Vendor shall make NO PACKAGE
QUANTITY CHANGE on an Order without the written authorization of Buyer.
11. Additional Distribution Center Shipping Instructions. (a) The
applicable ▇▇▇▇ of lading must be delivered to the Distribution Center
at time of Merchandise delivery. (b) Vendor shall ▇▇▇▇ the contents of
each Distribution Center carton clearly on the outside of the carton,
case, or package. (c) Merchandise not packaged or shipped in quantities
ordered by Buyer shall at Buyer's option be returned to Vendor at
Vendor's expense. Vendor shall be charged a handling charge of 71/2% of
the Merchandise invoice price on all Merchandise not packaged or
shipped as ordered.
12. Merchandise Testing. Merchandise shall, at buyer's option, be subject
to domestic or overseas testing. Vendor agrees to pay for all fees and
costs associated with such testing (which fees and costs are set forth
in Buyer's current Quality Assurance Manual or other documentation
provided to Vendor). The testing of Vendor's Merchandise by or on
behalf of Kmart is not a substitute for Vendor's own testing and other
quality assurance related obligations in connection with its sale of
Merchandise to Buyer, and such testing shall not limit Buyer's rights,
or diminish or remove any of Vendor's responsibilities, hereunder
including, without limitation, those relating to warranty and
indemnification under Paragraphs 2 and 3 above.
13. Buyer Information/Orders. Buyer may at its discretion provide Vendor
with certain confidential or proprietary information relating to
Buyer's purchase and/or sale of Vendor's merchandise. Vendor
acknowledges that such information, together with any other information
of or pertaining to Buyer provided to Vendor by Buyer or learned by
Vendor as a consequence of the business relationship between Buyer and
Vendor (the "Buyer Information"), is provided and received in
confidence, and Vendor shall at all times preserve and protect the
confidentiality thereof. Vendor agrees to take all necessary steps to
ensure that the Buyer Information shall not be disclosed to, or used
by, any person, association or entity except Vendor's own employees
having a need to know. BUYER MAKES NO WARRANTY WITH RESPECT TO THE
BUYER INFORMATION OR THE ACCURACY OR COMPLETENESS THEREOF, ANDIS
PROVIDING SAME ON AN "AS IS" BASIS; ALL IMPLIED WARRANTIES WITH RESPECT
TO THE BUYER INFORMATION, INCLUDING THOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED. Vendor acknowledges and
agrees that any sales forecasts, quantity purchase estimates or similar
projections received from Buyer are not purchase commitments of Buyer,
but rather represent estimates for planning purposes only, and that the
Buyer shall have no obligation to purchase or otherwise compensate
Vendor for any of Vendor's finished products, or unfinished raw
materials, not covered by an Order.
14. Food Vendors. The following amendments to the above terms and
conditions shall apply to any food products purchased from Vendor by
Buyer (any other Merchandise purchased from Vendor by Buyer shall be
governed by the foregoing, without amendment): (i) Paragraph 4 - delete
"or repair it at Vendor's expense" in line 3 and delete "and a
handling, storage and inspection charge of 71/2% of the returned
Merchandise invoice price' starting in line 3 (ii) Paragraph 10 -
delete
27
the remainder of (d) starting with ", shall make ONE COMPLETE..."
starting in line 6; and (iii) Paragraph 12 - delete in its entirety.
28
EXHIBIT C
PURCHASE ORDER TERMS AND CONDITIONS
Vendor and Kmart Corporation, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, ("Buyer") agree, to the fullest extent permitted by law, to be bound
by all terms and conditions contained or incorporated herein, all of which are a
part of each Purchase Order issued to Vendor by Buyer ("Order") and should be
carefully read. Any provisions in Vendor's invoices, billing statements,
acknowledgment forms or similar documents which are inconsistent with the
provision of an Order shall be of no force or effect. The cost price set forth
in each Order includes the cost of manufacturing, packaging, labeling and
shipping unless otherwise specified in the Order.
1. Vendor's Acceptance. Vendor's commencement of or promise of shipment of
the Merchandise shall constitute Vendor's agreement that it shall
deliver the merchandise in accordance with the terms and conditions of
the applicable Order. Vendor agrees to follow the shipping and
invoicing instructions issued by Buyer's stores, warehouses, buying
offices and Transportation and Accounting Department, which
instructions are incorporated by referenced into the applicable Order.
2. Vendor's Representations and Warranties. Vendor represents and warrants
to buyer, in addition to all warranties implied by law, that each item
of merchandise described on the face of an Order (or in an EDI or
telephone Order), together with all related packaging and labeling and
other material furnished by Vendor ("Merchandise"), shall: (a) be free
from defects in design, workmanship and/or materials including, without
limitation, such defects as could create a hazard to life or property;
(b) conform in all respects with all applicable federal, state and
local laws, orders and regulations, including, without limitation,
those regarding (i) safety, (ii) content, (iii) flammability, (iv)
weights, measurers and sizes, (v) special use, care, handling, cleaning
or laundering instructions or warnings, (vi) processing, manufacturing,
labeling, advertising, selling, shipping and invoicing, (vii)
registration and declaration of responsibility, and (viii) occupational
safety and health; (c) not infringe or encroach upon Buyer's or any
third party's personal, contractual or proprietary rights, including,
without limitation, patents, trademarks, copyrights, rights of privacy
or trade secrets; and (d) conform to all of Buyer's specifications and
to all articles shown to buyer as Merchandise samples.
3. Vendor's Indemnification of Buyer. Vendor agrees to reimburse,
indemnify, hold harmless and to defend at its expense (or to pay any
attorney's fees incurred by Buyer) Buyer and its subsidiary and
affiliate companies against all damage, loss, expense, claim, liability
or penalty, including, without limitation, claims of infringement of
patents, copyrights, trademarks, unfair competition, bodily injury,
property or other damage, arising out of any use, possession,
consumption or sale of said Merchandise and from any failure of Vendor
to properly perform an Order. Vendor shall not be relieved of the
foregoing indemnity and related obligations by allegations or any claim
of negligence on the part of buyer; provided, however, Vendor shall not
remain or be liable hereunder to the extent any injury or damage is
finally judicially determined to have been proximately caused by the
sole negligence of Buyer. Vendor shall obtain adequate insurance to
cover such liability under each Order and shall provide copies of the
applicable certificate(s) of insurance annually to Buyer's Vendor
Database Department at the above address.
4. Defective or Non-Conforming Merchandise. If any Merchandise is
defective, unsuitable, does not conform to all terms hereof and of the
Order and all warranties implied by law, Buyer may at its option return
it to Vendor for full credit or refund of the purchase price or repair
it at Vendor's expense, and may change Vendor such price or expenses
and the cost of any incurred inbound and outbound freight and a
handling, storage and inspection charge of 71/2% of the returned
Merchandise invoice price. Buyer shall be under no duty to inspect any
Merchandise before resale thereof, and resale, or repackaging or
repackaging for the purpose of resale, shall
29
not constitute a waiver of, or otherwise limit, any of Buyer's rights
resulting from defective or non-conforming Merchandise.
5. Buyer's Right to Cancel. Buyer may without notice cancel, terminate
and/or rescinding all or part of an Order in the event Vendor breaches
or fails to perform any of its obligations in any material respect, or
in the event Vendor becomes insolvent or proceedings are instituted by
or against Vendor under any provision of any federal or state
bankruptcy or insolvency laws or Vendor ceases its operation. Time is
of the essence to each Order, and Vendor's failure to meet any delivery
date shall constitute a material breach of the Order. Vendor agrees to
inform Buyer immediately in writing or any failure to timely ship all
or any part of an Order, and Buyer's acceptance of any merchandise
after the applicable delivery date shall not constitute a waiver of, or
otherwise limit, any of Buyer's rights resulting from the late delivery
nor obligate Buyer to accept delivery of additional Merchandise under
the order.
6. Special Features. All Merchandise designs, patents and trade names
which are supplied by Buyer to Vendor or which are distinctive of
Buyer's private label merchandise ("Special Features") shall by the
property of Buyer and shall be used by Vendor only for buyer. Buyer may
use the Special Features on or with respect to goods manufactured by
others and obtain legal protection for the Special Features including,
without limitation, patents, patent designs, copyrights and trademarks.
Merchandise with Special Features which is not delivered to Buyer for
any reason shall not be sold or transferred to any third party without
written authorization of Buyer and unless and until all labels, tags,
packaging and markings identifying the Merchandise to Buyer have been
removed.
7. Deductions and Set Off. Any sums payable to Vendor shall be subject to
all claims and defenses of Buyer, whether arising from this or any
other transaction, and Buyer may set off and deduct against any such
sums all present and future indebtedness of Vendor to Buyer. Buyer
shall provide a copy of the deduction voucher(s) for debits taken by
Buyer against Vendor's account as a result of any returns or
adjustments. Vendor shall be deemed to have accepted each such
deduction unless Vendor, within 90 days following receipt of the
deduction voucher, notifies Buyer in writing as to why a deduction
should not be made and provides documentation of the reason(s) given.
Such written notice shall be directed to Buyer's Vendor Audit
Department at the above address. Buyer shall not be liable to Vendor
for any interest or late charges.
8. Michigan Contract and Jurisdiction. EACH ORDER, AND ALL OTHER ASPECTS
OF THE BUSINESS RELATIONSHIP BETWEEN BUYER AND VENDOR, SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF MICHIGAN. VENDOR AGREES, WITH RESPECT TO ANY LITIGATION WHICH
RELATES TO ANY ▇▇▇▇▇ OR WHICH OTHERWISE ARISES DIRECTLY OR INDIRECTLY
OUT OF OR IN CONNECTION WITH SAID BUSINESS RELATIONSHIP RO ANY
TRANSACTION OF ANY NATURE BETWEEN BUYER AND VENDOR, TO COMMENCE SAME:
(I) EXCLUSIVELY IN (AND VENDOR HEREBY CONSENTS TO THE JURISDICTION OF)
THE STATE OF MICHIGAN COURTS OF OAKLAND COUNTY, MICHIGAN OR THE UNITED
STATES DISTRICT COURT IN DETROIT, MICHIGAN, AND (II) WITHIN 18 MONTHS
FROM THE DATE OF BUYER'S LAST ORDER TO VENDOR OR THE PERIOD PRESCRIBED
BY THE APPLICABLE STATUTE OF LIMITATIONS, WHICHEVER IS SOONER.
9. Miscellaneous, (a) All rights granted to Buyer hereunder shall be in
addition to and not in lieu of Buyer's rights arising by operation of
law. (b) Any provisions of a hard copy Order which are typewritten or
handwritten by Buyer shall supersede any contrary or inconsistent
printed provisions therein. (c) No modification of terms of an Order
shall be valid without the written authorization of Buyer. (d) Should
any of the provisions of an Order be declared by a court of
30
competent jurisdiction to be invalid, such decision shall not affect
the validity of any remaining provisions.
10. Direct to Store and Distribution Center Invoice & Shipping
Instructions. (a) Each invoice shall include Buyer's Order number,
Vendor's stock/style number, and Buyer's code number for each item on
the invoice. No substitutions of Merchandise shall be made without the
written authorization of Buyer. (b) Each Order must be invoiced
separately. (c) An Order may not be filed at a price higher than that
shown on its face or transmitted without the written authorization of
Buyer. (d) If freight costs are to be paid by buyer, Vendor shall ship
via the method and/or route specified in the instructions provided by
Buyer's Transportation Department, shall make ONE COMPLETE shipment of
the Merchandise and shall NOT make PARTIAL shipments without the
written authorization of Buyer. (e) Vendor shall make NO PACKAGE
QUANTITY CHANGE on an Order without the written authorization of Buyer.
11. Additional Distribution Center Shipping Instructions. (a) The
applicable ▇▇▇▇ of lading must be delivered to the Distribution Center
at time of Merchandise delivery. (b) Vendor shall ▇▇▇▇ the contents of
each Distribution Center carton clearly on the outside of the carton,
case, or package. (c) Merchandise not packaged or shipped in quantities
ordered by Buyer shall at Buyer's option be returned to Vendor at
Vendor's expense. Vendor shall be charged a handling charge of 71/2% of
the Merchandise invoice price on all Merchandise not packaged or
shipped as ordered.
12. Merchandise Testing. Merchandise shall, at buyer's option, be subject
to domestic or overseas testing. Vendor agrees to pay for all fees and
costs associated with such testing (which fees and costs are set forth
in Buyer's current Quality Assurance Manual or other documentation
provided to Vendor). The testing of Vendor's Merchandise by or on
behalf of Kmart is not a substitute for Vendor's own testing and other
quality assurance related obligations in connection with its sale of
Merchandise to Buyer, and such testing shall not limit Buyer's rights,
or diminish or remove any of Vendor's responsibilities, hereunder
including, without limitation, those relating to warranty and
indemnification under Paragraphs 2 and 3 above.
13. Buyer Information/Orders. Buyer may at its discretion provide Vendor
with certain confidential or proprietary information relating to
Buyer's purchase and/or sale of Vendor's merchandise. Vendor
acknowledges that such information, together with any other information
of or pertaining to Buyer provided to Vendor by Buyer or learned by
Vendor as a consequence of the business relationship between Buyer and
Vendor (the "Buyer Information"), is provided and received in
confidence, and Vendor shall at all times preserve and protect the
confidentiality thereof. Vendor agrees to take all necessary steps to
ensure that the Buyer Information shall not be disclosed to, or used
by, any person, association or entity except Vendor's own employees
having a need to know. BUYER MAKES NO WARRANTY WITH RESPECT TO THE
BUYER INFORMATION OR THE ACCURACY OR COMPLETENESS THEREOF, ANDIS
PROVIDING SAME ON AN "AS IS" BASIS; ALL IMPLIED WARRANTIES WITH RESPECT
TO THE BUYER INFORMATION, INCLUDING THOSE OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED. Vendor acknowledges and
agrees that any sales forecasts, quantity purchase estimates or similar
projections received from Buyer are not purchase commitments of Buyer,
but rather represent estimates for planning purposes only, and that the
Buyer shall have no obligation to purchase or otherwise compensate
Vendor for any of Vendor's finished products, or unfinished raw
materials, not covered by an Order.
14. Food Vendors. The following amendments to the above terms and
conditions shall apply to any food products purchased from Vendor by
Buyer (any other Merchandise purchased from Vendor by Buyer shall be
governed by the foregoing, without amendment): (i) Paragraph 4 - delete
"or repair it at Vendor's expense" in line 3 and delete "and a
handling, storage and inspection charge of 71/2% of the returned
Merchandise invoice price' starting in line 3 (ii) Paragraph 10 -
delete
31
the remainder of (d) starting with ", shall make ONE COMPLETE..."
starting in line 6; and (iii) Paragraph 12 - delete in its entirety.
32
KMART CORPORATION
International Headquarters
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_________________ 19____
Dear Sir/Madam:
This letter will confirm that the Purchase Order Terms and Conditions on the
reverse side hereof (the "Terms") shall apply to all purchase orders issued to
Vendor by Kmart, whether by telephone, hard copy, electronically or otherwise.
Please note that the instructions in item 11 of the Terms are applicable to
Distribution Center.
Receipt of this confirmation is REQUIRED before Vendor will be authorized to
receive purchase orders from Kmart Corporation.
Please have the chairman, president or a vice president of Vendor confirm that
the Terms will apply to all Kmart orders issued to Vendor by signing and
returning one original of this letter (WITH NO CHANGES OF ANY KIND) to the
address below no later than 7 business days from the above date. Retain the
other original or a copy for your files. This letter must be signed by the
Company which is paid by Kmart.
Very truly yours,
Kmart Corporation
------------------------------------ ----------------------------------------
Signature Registered Legal Name of Vendor
------------------------------------ ----------------------------------------
Title Address
----------------------------------------
City State Zip
----------------------------------------
Vendor Officer Signature
(Chairman, President or Vice President
only)
----------------------------------------
Print Name
RETURN TO: ----------------------------------------
ATTN Title
--------------------------------
KMART CORPORATION
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EXHIBIT D
THIS ORDER CONTRACT IS UPON THE FOLLOWING TERMS AND CONDITIONS:
1. Seller's commencement of or promise of shipment of the Merchandise
shall constitute Seller's agreement that it will deliver the
Merchandise in accordance with the terms and conditions contained or
incorporated herein, all of which are a part of the Order Contract and
should be carefully read. Any provisions in Seller's invoices, billing
statements, acknowledgment forms or other documents which are
inconsistent with the provisions of this Order Contract shall be of no
force or effect.
2. Seller represents and warrants to Kmart Corporation ("Buyer"), in
addition to all warranties implied by law, that each item of
Merchandise described on the face hereof, together with all retail
packaging, labeling and other material furnished by Seller
("Merchandise"), shall (a) be free from defects in design, workmanship
or materials, including, without limitation, such defects as could
create a hazard to life or property; (b) conform in all respects with
all applicable federal, state and local laws, orders and regulations,
including, without limitation, those concerning the marking of the
country of origin, fiber content, care labeling and shrinkage, as
Merchandise not in compliance and not properly marked is subject to
heavy penalty; (c) not infringe or encroach upon Buyer's or any third
party's personal, contractual or propriety rights, including, without
limitation, patents, trademarks, trade names, copyrights, rights of
privacy or trade secrets; and (d) conform to all of Buyer's
specifications and to all articles shown to Buyer as Merchandise
samples. Seller further represents and warrants that it has ascertained
that no child, forced or prison labor is utilized in the manufacture of
Merchandise.
3. Seller agrees to reimburse, indemnify, hold harmless and defend at
Seller's expense (or pay any attorney's fees incurred by Buyer) Buyer
and its subsidiary and affiliate companies against all damage, loss,
expense, claim, liability, fine, settlement or penalty, including,
without limitation, claims of infringement of patents, copyrights and
trademarks, unfair competition, bodily injury, or property or other
damage arising out of any use, possession, consumption or sale of the
Merchandise or failure to provide complete, accurate and acceptable (to
U.S. Customs) information and documentation relating to, without
limitation, the country of origin, or failure of Seller to perform
promptly this Order Contract. Seller shall obtain adequate insurance to
cover its liability under this Order Contract and shall provide copies
of the applicable certificate(s) of insurance to Buyer.
4. Acceptance of Merchandise by Buyer after inspection does not release or
discharge Seller from any liability for damages or from any other
remedy of Buyer for Seller's breach of any promise or warranty,
expressed or implied. This Order Contract may at Buyer's option be
deemed cancelled if the Merchandise ordered herein is not covered by a
full set of "Clean" "On Board" Ocean Bills of Lading and Buyer's
Inspection Certificate dated on or before the shipping date specified
on the face hereof. Any such cancellation shall be without prejudice to
all other rights and remedies accruing to Buyer by reason of Seller's
breach, unless a written extension of shipping date(s) was previously
granted in writing to Seller by Buyer. If any of the terms, conditions
or warranties of or underlying this Order Contract, express or implied,
are not strictly complied with by Seller with respect to any shipment
or installment shipment of the Merchandise ordered herein. Buyer has
the right, in addition to all other rights and remedies accruing to
Buyer by reason of Seller's breach, to refuse to accept any or all
deliveries of Merchandise ordered herein, but any acceptance by Buyer
of any such singular shipment or installment shipment shall not be
deemed (whether or not buyer notifies Seller of its demand for strict
compliance with respect to future shipment installments) a waiver by
Buyer of any of its rights to refuse any future shipments hereunder or
of any other rights or remedies.
34
5. All merchandise design, patents and trademarks which are supplied by
Buyer to Seller or which are distinctive of Buyer's private label
merchandise ("Special Features") shall be the property of Buyer and
shall be used by seller only for buyer. Buyer may use the Special
Features on or with respect to goods manufactured by others and obtain
legal protection for the Special Features including, without
limitation, patents, design patents, copyrights and trademarks.
Merchandise which is not delivered to Buyer for any reason shall not be
sold or transferred to any third party without written authorization of
Buyer and unless all labels, tags, packaging and markings identifying
the merchandise to Buyer have been removed.
6. THIR ORDER CONTRACT SHALL BE CONSTRUED AND ENFORCED UNDER AND IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN,
ANYUNSETTLED DISPUTE HEREUNDER WHERE THE AMOUNT IN CONTROVERSY IS LESS
THAN OR EQUALS $50,000 (U.S.) SHALL BE FINALLY SETTLED BY ARBITRATION,
HELD IN THEUNTID STATES OF AMERICA AT DETROIT, MICHIGAN AND CONDUCTED
IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
JUDGMENT UPON ANY ARBITRATION AWARD RENDERED, IF NO SATISFIED WITHIN
NINETY (90) DAYS, MAY BE, ENTERED IN ANY COURT HAVING JURISDICTION, OR
APPLICATION MAY BE MADE TO ANYSUCH COURT FOR A JUDICIAL RECOGNITION,
ACCEPTANCE AND ORDER OF ENFORCEMENT, AS THE CASE MAY BE, IN ANY
UNSETTLED DISPUTE HEREUNDER WHERE THE AMOUNT IN CONTROVERSY EXCEEDS
$50,000 (U.S.), IT IS HEREBY MUTALLY AGREED THAT SELLER SHALL EXERCISE
ANY RIGHT OR REMEDY EXCLUSIVELY IN, AND HEREBY CONSENTS TO THE
JURISDICTIONOF, THE UNITED STATES DISTRICT COURT IN DETROIT, MICHIGAN.
7. (a) All rights granted to Buyer hereunder shall be in addition to and
not in lieu of buyer's rights arising by operation of law; (b) any
provision of this Order Contract which are typewritten or handwritten
by Buyer shall supersede any contrary or inconsistent printed
provisions; (c) no modification of terms of this Order Contract shall
be valid, including, without limitation, price increase, unless in
writing and signed by Buyer; (d) should any of the provisions of this
Order Contract be declared by a court of competent jurisdiction to be
invalid, such decision shall not affect the validity of any remaining
provisions; (e) all of the terms herein shall apply to additional
quantities of merchandise ordered by Buyer except to the extent covered
by a new written agreement; and (f) all documents prepared in
connection with this Order Contract must be written in the English
language and in the U.S. currency figures.
8. Neither this Order Contract nor any right, duty or obligation hereunder
is assignable without the prior written consent of Buyer, nor shall
Buyer be under any obligation to recognize any assignment of monies
payable hereunder.
9. Seller agrees to prepare and produce all documents which are necessary
for the Merchandise to clear U.S. Customs and which are otherwise
required by applicable laws or regulations, the Letter of Credit or
instructions set forth on the face hereof.
10. All shipping cartons are to be marked and packed in accordance with
Buyer's International Department Standard Instructions To Foreign
Shippers, which Standard Instructions are part of and are incorporated
in this Order Contract by this reference, in addition, Seller agrees to
follow any shipping instructions issued directly to Seller by Buyer's
International Department.
11. Without in any way limiting buyer's other rights and remedies arising
under paragraph 2 above, Seller agrees that any Merchandise, packaging
or component that (1) mis-states the true country of origin, or (2) is
made in whole or in part by child or prison labor, will be a material
breach of this Order Contract resulting in cancellation of this Order
contract and liability of Seller to Buyer for liquidated damages equal
to the total FOB Factory costs of the Merchandise plus all freight,
35
import/export charges and other costs incurred for the shipment or
return (or destruction at Buyer's election) of seized or re-delivered
Merchandise.
12. Except for the right to receive payment, Seller hereby assigns all of
its rights (expressed and implied) under any purchase order Seller
issues to a manufacturer for merchandise or any component thereof
covered by this Order Contract including, without limitation, rights of
warranty and indemnification, and Seller shall cooperate fully with
Buyer in pursuing such rights. Buyer is not assuming, nor shall this
purchase order be construed to impose, any obligation on the part of
Buyer to a manufacturer in connection with the Merchandise. This
partial assignment shall not act to limit Buyer's rights and remedies
elsewhere under this Order Contract.
13. Merchandise shall, at Buyer's option, be subject to domestic or
overseas testing. Seller agrees to pay for all fees and costs
associated with such testing (which fees and costs are set forth in
Buyer's current Quality Assurance Manual or other documentation
provided to Seller). The testing of Seller's Merchandise by, or on
behalf of, Kmart is not a substitute for Seller's own testing and other
quality assurance related obligations in connection with its sale of
Merchandise to buyer, and such testing shall not limit Buyer's rights,
or diminish or remove any of Seller's responsibilities, hereunder
including, without limitation, those relating to warranty and
indemnification under Paragraphs 2 and 3 above.
Address All Correspondence
Regarding This order Contract to: Kmart Corporation
International Department
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36
KMART CORPORATION
International Headquarters
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▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
_________________ 19____
Dear Sir/Madam:
This letter will confirm that the Purchase Order Terms and Conditions on the
reverse side hereof (the "Terms") shall apply to all purchase orders issued to
Vendor by Kmart, whether by telephone, hard copy, electronically or otherwise.
Please note that the instructions in item 11 of the Terms are applicable to
Distribution Center.
Receipt of this confirmation is REQUIRED before Vendor will be authorized to
receive purchase orders from Kmart Corporation.
Please have the chairman, president or a vice president of Vendor confirm that
the Terms will apply to all Kmart orders issued to Vendor by signing and
returning one original of this letter (WITH NO CHANGES OF ANY KIND) to the
address below no later than 7 business days from the above date. Retain the
other original or a copy for your files. This letter must be signed by the
Company which is paid by Kmart.
Very truly yours,
Kmart Corporation
------------------------------------ ----------------------------------------
Signature Registered Legal Name of Vendor
------------------------------------ ----------------------------------------
Title Address
----------------------------------------
City State Zip
----------------------------------------
Vendor Officer Signature
(Chairman, President or Vice President
only)
----------------------------------------
Print Name
RETURN TO: ----------------------------------------
ATTN Title
--------------------------------
KMART CORPORATION
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37
EXHIBIT E
AUTHORIZED REPRESENTATIVES OF KMART
Senior Vice President General Merchandise Manager, Hardlines
Divisional Vice President, Merchandising Hardlines
Buyer, Appliances, Music, Electronics
25