Catalog Fulfillment Agreement
FOR
xXXxX*s
AT
The Xxx Group, Inc.
May 1, 1996 - April 30, 1997
This Agreement is entered into between xXXxX*s and The Xxx Group, Inc.
(hereafter referred to as Xxx).
xXXxX*s ASSUMPTIONS:
-------------------
Approximate stock keeping units (SKU) 700 - 1100.
Material will be stored on shelving provided by Xxx.
Minimal overstock is expected - approximately 75% of SKU's will have
overstock.
Annual volume is 450,000 packages.
Average line items per package is 3.0.
Average returns and exchanges items are 15 - 20% of shipped items.
Estimated storage requirements are 8,500 sq ft.
All shipments are UPS, CTC, or USPS.
100% item count required on all apparel.
100% carton count with a 5% inspection of contents on the balance
of incoming merchandise (cosmetics, shoes, other hard goods).
80% of incoming apparel are pre-poly bagged.
20% of incoming apparel Xxx will polybag and sticker.
Vast majority of shipments are in bags and (2) size cartons
XXX AGREES TO:
1. Manage and administer the fulfillment of xXXxX*s wearable and cosmetic
products.
2. Provide dedicated warehouse space for xXXxX*s current, as well as
future needs. Current dedicated need has been established at 8,500
square feet to include quick pick, and bulk pallet storage.
3. Receive and locate all catalog stock keeping units (approximately 700
- 1100 SKU'S), as well as packaging materials according to xXXxX*s
standard operating procedures. Repack 20% of incoming apparel into
poly bags, and report any variances (receipt to xXXxX*s's vendor
purchase orders) to xXXxX*s immediately upon receipt. Xxx will
complete the shipper header with every shipment.
4. Print and process orders per the following order flow model:
Day 1 Xxx
Print pick/pack/invoices
Sort orders per standard operating procedure
Pick/pack/ship
Confirm of shipments are on-line with xXXxX*s MACS system.
Day 2 Xxx
Pick/pack/ship remaining orders from day 1
Confirm of shipments are on-line with xXXxX*s MACS system.
5. Xxx reserves the right to carry over shipment into the third day when
an unexpected volume of orders are received (i.e. backorders).
6. Process all returns and key into xXXxX*s MACS system.
7. Provide standard order turnaround (shipment) as outlined in the order
flow model.
8. Provide quality control measures to assure xXXxX*s consumer
satisfaction.
9. Provide the personnel and quick pick shelves conveyors and packaging
stations, for the performance of its obligations in this Agreement.
10. Notify xXXxX*s of all inventory discrepancies. The Standard receiving
time for all materials is 24 hours. Xxx reserves the right to extend
this to 72 hours if materials received by vendors need polybagging, or
the start of a new catalog. All hot or backorder items will be
flagged in receiving and be received within 24 hours.
11. Refund xXXxX*s for replacement cost of inventory shortages that exceed
1% of the annual inventory cost. Replacement cost shall be defined as
the cost paid by xXXxX*s. The "cost" as used in these definitions of
replacement cost will be the cost of the material or product in effect
at the time of the loss, damage or destruction of the material or
product occurred. In no case shall the liability be extended to the
loss of profit.
12. Xxx acknowledges that all "on-line capabilities" and other software
and technological resources made
2
available to it by xXXxX*s are made available solely for the purpose
of Jay's performance of its obligations to xXXxX*s hereunder, and Xxx
agrees not to use any of such capabilities or resources for any other
purpose and not to claim any right, title or interest therein (other
than a limited right to use such capabilities and resources in
performance hereof).
xXXxX*s AGREES TO:
1. Direct payment of all freight charges associated with the fulfillment
of this Agreement, and advance funds for USPS shipments. (outbound as
well as inbound).
2. Provide Xxx with on-line capabilities of all incoming merchandise or
materials bound for a Xxx facility.
3. Provide Xxx with the catalog drop schedule and circulation for
production planning.
4. Provide Xxx with on-line capabilities to properly control/audit
inventories stored at Xxx.
5. Inspect (2) pieces of each SKU and forward (1) to Xxx before bulk
shipment is made to Xxx.
6. Handle all customer service activities (i.e. call tags, tracers, and
inquiries).
BACK END PACKAGE VOLUME
------------------------------------
390,001 - Over 1.40 Each Package
325,001 - 390,000 1.47 Each Package
260,001 - 325,000 1.54 Each Package
195,001 - 260,000 1.60 Each Package
130,001 - 195,000 1.70 Each Package
100,001 - 130,000 1.90 Each Package
Price includes receiving, pick pack and ship, 8,500 square feet of
dedicated storage, and up to three inserts per package.
Minimum billing 3,500 packages per week. With a 30 day notice in
writing of reduced volume below the stated minimum, Xxx agrees to
waive the weekly minimum billing for a maximum of 8 weeks.
Annual All Risk Insurance Premium $6,259.00
$1,600,000 coverage, $l 000 deductible per occurrence. Any insurance
obtained by xXXxX*s or on behalf of xXXxX*s is solely for the benefit
of xXXxX*s.
3
Returns Processing 1.68 Each
Price includes receiving return opening package, inspecting,
keying information into xXXxX*s system, and returning restockable
merchandise to inventory.
Production Services 18.10/hr
As described but not limited to: Returning goods to Vendor,
Kitting merchandise, special packaging (gift wrapping).
100% inspection above the item counting of wearables, and any
additional inspection above the 100% carton count and 5%
inspection of the cosmetics, shoes, and other hard goods.
Physical inventories, and cycle counting. Approximately 1 hour
to count 10 SKU's at approximately 175 items per SKU, actual
hours will be charged. (xXXxX*s to be contacted before services
are to be performed).
Transfer of SKU's from New York warehouse and initial receipt of
all SKU's from vendors for the first catalog. (Estimated number
of hour to receive initial SKU's 200 hours).
Monthly Pallet Storage 8.30 each
Any storage above the 8,500 square feet outlined in the assumptions
above.
Storage will be counted on the 15th of each month and billed for the
next 30 days.
Each additional insert (over 3) 0.02 each
Reporting Included
Vendor Analysis, Cash Management
Production Planning Worksheet
Postage/freight charges to be billed 3rd party or in advance.
7. Xxx will concurrently perform monthly quality audits on line items per
package, and package volume.
4
A. An annual audit of line items per package will initiate a
retroactive amendment. The mechanism for determining the actual
line items shipped per package will be pulled from a standard
MACS report then multiplied by the number of packages shipped for
the annual period (report supplied by xXXxX*s on a monthly
basis). The actual line items shipped per package will be
subtracted from the assumption of 3.0. If this number is equal
to zero then no adjustment. If the number is greater or less
than zero, then the number should be multiplied by $0.26, and a
credit or debit will be applied to the respective parties in the
form of an invoice payable in 14 days.
B. An annual audit of package volume will initiate a retroactive
amendment. The mechanism for determining the actual packages
shipped will be pulled from a standard MACS report. If the
package volume is less than the 390,000 volume, an increased
incremental package price will be applied to the actual package
volume in the form of an invoice payable in 14 days. (i.e.
350,000 annual package volume = ($1.47 - $1.40 = $.07 * 350,000 =
$24,500.00)
X. xXXxX*s reserves the right to cause an independent audit of Jay's
performance hereunder, to be conducted annually.
8. Xxx reserves the right to requote the package price if Non-conveyable
packages are introduced into the product mix.
9. All communications requirements, usage charges, programming
requirements, custom reporting, and information not covered under this
Agreement have not been quoted. An actual quotation will be completed
upon receipt of additional information.
INSURANCE:
Xxx shall secure and maintain during the term of this Agreement the following:
1. Public and private liability insurance under comprehensive general
liability form, including contractual liability protection for no less
than a combined single limit of $1,000,000 (one million dollars) for
both bodily injury and property damages per occurrence for Xxx and all
Xxx employees.
5
2. Worker's Compensation Insurance and Employer's Liability Insurance to
provide statutory worker's compensation benefits as required by the
laws of the state of Pennsylvania for all Xxx employees engaged in work
under this agreement .
3. All Insurance coverage required hereunder shall be carried with
companies acceptable to xXXxX*s and licensed to do business in the
state of Pennsylvania. Xxx shall provide xXXxX*s with certificates of
insurance verifying xXXxX*s as a named insured, and stating that the
relevant policies will not be cancelled, reduced or limited without
thirty (30) days prior written notice to xXXxX*s.
Please Note: Fire and extended insurance coverage on all merchandise
consigned to a Xxx warehouse is the sole responsibility of
xXXxX*s.
TERMS AND TERMINATION:
xXXxX*s agrees to pay for services provided under this Agreement within 14
days net. Unpaid balances are subject to a finance charge of 1.5% per
month after 14 days. Invoicing will be on a weekly basis, to include a
minimum of 3,500 packages, returns, production services, additional
inserts. Additional pallet storage will be invoiced on a monthly basis if
over the 8,500 square feet.
This Agreement shall continue until the first anniversary of the date on
which this Agreement is countersigned on behalf of xXXxX*x. xXXxX*s
understands that in the event that this Agreement is renewed beyond such
anniversary date, the pricing is subject to renegotiation.
xXXxX*s has the ability to terminate this agreement prior to the first
anniversary of xXXxX*s acceptance under the following conditions:
1. An erroneous deviation from the order flow model caused by Xxx which
is uncorrected after 10 days written notice.
xXXxX*s agrees to use its best efforts to assist in correcting the
deviation prior to terminating the Agreement.
2. Inventory shortage in excess of l% of replacement cost not reimbursed
to xXXxX*s.
6
3. Continued inventory shortages after notification in writing from
xXXxX*s.
4. Shipping errors caused by Xxx in excess of 1% uncorrected after
written notice by xXXxX*x. xXXxX*s will, on a regular basis,
communicate the nature of shipping problems to Xxx to facilitate
timely correction.
5. A 90 day notification is required for termination resulting from any
change in ownership or affiliation (merger, acquisition, affiliation,
etc).
Upon notification of the cancellation, Xxx will continue providing all
services listed within this agreement until the effective date of
termination has been reached.
ADDITIONAL PROVISIONS:
The xXXxX*s authorized personnel will have access, during normal business
hours, to the warehouse space provided for xXXxX*x.
Xxx will maintain daily package records for a period of 6 months.
Title to all xXXxX*s's goods stored at Jay's facilities under this
Agreement shall remain with xXXxX*s.
All The xXXxX*s Catalog information which Xxx xxx encounter in the natural
course of providing its services under this Agreement, shall be held in
confidence by Xxx and not used for any purpose not clearly authorized by
this Agreement.
xXXxX*s shall pay any and all taxes, charges, and assessments on its goods
and on the storage, handling, transportation or use thereof which Xxx xxx
be required to pay or collect under any federal, state or local law or
authority now in effect or hereafter passed. The Xxx Group shall be
responsible for the payment of any taxes, charges and assessments required
to be paid by them under the Internal Revenue code, as amended, or under
any state or local income, gross receipts or similar tax.
Xxx shall at all times remain an independent contractor and neither Xxx nor
any of its employees, officers, directors or representatives shall be
considered employees of xXXxX*s for any purpose. It is further understood
that neither Xxx nor any of its officers, employees or representatives is a
legal representative of xXXxX*s for any purpose to assume or create any
obligation on behalf of xXXxX*s nor speak on
7
behalf of xXXxX*s beyond the information approved or provided by xXXxX*s.
Jay represents that there exists no conflict of interest position which
would prevent it from acting in xXXxX*s best interest and that during the
term of the Agreement, Xxx will advise xXXxX*s in advance before accepting
an assignment which could constitute a conflict of interest.
Xxx agrees to indemnify and hold harmless xXXxX*s from and against any and
all actions, causes of action, claims, demands, liabilities, losses,
judgements, damages or expenses of any kind or nature, including without
limitation attorneys' fees and disbursements, arising from or in any way
relating to the services provided by Xxx hereunder.
xXXxX*s shall indemnify and hold Xxx harmless from and against any and all
actions, causes of action, claims, demands, liabilities, losses,
judgements, damages or expenses of any kind or nature, including without
limitation attorneys' fees and disbursements, that Xxx shall at any time
incur, sustain or become subject to by reason of any claims against Xxx
regarding advertising or product claims or promises made by xXXxX*s or that
otherwise is the responsibility of xXXxX*s as provided herein.
Accepted by: Accepted by:
The Xxx Group, Inc. xXXxX*s LLC
By:/s/ H. Xxxxxxx Xxxxxxx By:/s/ Xxxxxxx Xxxx
------------------------ ----------------------
H. Xxxxxxx Xxxxxxx Xxxxxxx Xxxx
Title: Chief Financial Officer Title: President
8
