Master Services Agreement - UPS Supply Chain Solutions Inc. and SmartBargains.com LP
MASTER SERVICES AGREEMENT
UPS SUPPLY CHAIN SOLUTIONS, INC. with offices located at 12380 Morris Road,
Alpharetta, Georgia 30005 ("SCS") and SmartBargains.com, LP with offices located
at 10 Milk Street, 10th Floor, Boston, MA 02108 ("Customer") (each a "Party" or
in the aggregate "Parties") hereby enter into this Master Services Agreement
("MSA") effective January 27, 2004 ("Effective Date").
NOW, THEREFORE, Customer and SCS, for good and valuable mutual consideration,
hereby agree as follows:
1. STRUCTURE OF THE AGREEMENT. SCS or its designated affiliate shall provide the
services ("Services") specified in service schedules ("Schedules") referencing
this MSA and executed by the Parties. The Services shall be performed in
accordance with the prevailing standards of care, skill and diligence generally
accepted in the profession and in accordance with applicable laws and
regulations. Each Schedule may have attached one or more statements of work
("SOWs") and exhibits. Each such Schedule, SOW, and exhibit is an "Incorporated
Document." This MSA and the Incorporated Documents are the "Agreement." In the
event of a conflict between the terms of this MSA and the terms of any
Incorporated Document, the terms of this MSA shall control; provided however,
the Parties may expressly or specifically authorize in writing that a particular
term or terms of an Incorporated Document shall control over a particular term
of this MSA and then only to the extent provided in such Incorporated Document.
2. TERM AND TERMINATION.
2.1 TERM. The term of this MSA begins on the Effective Date and continues
for a period of five (5) years thereafter (January 27, 2009) (the "Initial
Term"), and thereafter will automatically be renewed for additional one-year
terms, unless either Party, at least one hundred twenty (120) days prior to the
expiration of the Initial Term or any renewal term, gives written notice of
non-renewal. Notwithstanding the foregoing, in the event that SCS continues to
provide the services set forth in the accompanying SOW to Customer following the
expiration of the Initial Term or any term, and the Parties fail to enter into a
written extension of such SOW, then the SOW (including rates and charges in
effect on the expiration of the Initial Term or any term) shall remain in effect
on a month-to-month basis after the expiration date until terminated in writing
by either Party upon thirty (30) days prior written notice. Notwithstanding the
foregoing sentences, (i) this MSA may be earlier terminated as follows: (a) all
Incorporated Documents have expired or have been terminated in accordance with
their terms, or (b) this MSA is terminated in accordance with its terms, in
which case all Incorporated Documents will also terminate, subject to their
respective termination provisions; and (ii) this MSA and Incorporated Documents
may also be terminated by either Party at any time and without liability after
the expiration of three (3) years from the Effective Date so long as either
Party provides the other Party with at least one hundred twenty (120) days prior
written notice of such termination. The Parties may mutually agree in writing to
extend this MSA and any Schedule or SOW under the terms of this Agreement.
2.2 TERMINATION. This MSA or any Schedule or SOW may be terminated by
either Party with cause upon the commission of a material breach of this
Agreement which is not cured within sixty (60) days after the breaching Party
receives notice (except for default in payment which is addressed below).
Notwithstanding the above, SCS may also terminate this MSA or any Schedule or
SOW upon any failure of Customer to pay any amounts correctly billed and due
hereunder, which failure remains uncured for a period of thirty (30) days after
notice thereof.
2.3 INSOLVENCY/BANKRUPTCY OF CUSTOMER. Notwithstanding Section 2.2, if
Customer continues to pre-pay its invoice in full, for all amounts due that have
been correctly billed, one month in advance of SCS's delivery of the Services
and Customer (i) ceases to do business in the normal course, (ii) becomes or is
declared insolvent or bankrupt, (iii) is the subject of any proceeding related
to its liquidation or insolvency (whether voluntary or involuntary) which is not
dismissed within ninety (90) calendar days or (iv) makes an assignment for the
benefit of creditors, SCS shall not have the right to terminate the Agreement.
3. FEES, CHARGES AND EXPENSES.
3.1 FEES, CHARGES AND EXPENSES. Customer shall pay to SCS all correctly
billed fees, charges and expenses ("Fees") as specified in this Agreement with
no right of set-off for any claims by Customer. Claims shall be addressed
separately between the Parties. The Fees set forth herein may be adjusted at any
time by mutual written agreement of both Parties. All Fees will be billed and
paid in U.S. dollars, unless otherwise provided in a Schedule.
3.2 SURCHARGES. Customer shall pay all of its portion of fuel, security or
other surcharge, that may be imposed on SCS by its providers or governmental
agencies in connection with this Agreement. Prior to invoicing Customer for such
surcharges, SCS will promptly disclose and, upon Customer's request, provide
support to Customer of the surcharges being imposed on SCS.
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3.3 LATE PAYMENTS. If Customer fails to make payment of the Fees when due,
Customer shall pay to SCS a late payment charge at the rate of one and one-half
percent (1.5%) per month or, if lower, the highest rate allowed by applicable
law. The late payment charge shall be calculated from the date that the unpaid
Fees become due and shall be compounded monthly for the period during which any
such Fees remain unpaid.
3.4 TAXES. Customer agrees to pay, indemnify and hold SCS and its
affiliates harmless from and against all sales, use, personal property, gross
receipts, and excise taxes (including any penalties, fines or interest thereon)
imposed by any federal, state or local government or taxing authority with
respect to the Goods in SCS's care, custody and control under this Agreement,
except that SCS will be responsible for income taxes on the revenues it earns
from performing the Services hereunder.
3.5 CHANGES IN OPERATING PARAMETERS OR CONDITIONS. Customer acknowledges
and agrees that SCS calculated the Fees based on and in reliance upon certain
key assumptions or design criteria supplied to SCS by or on behalf of Customer.
Such assumptions may be set forth in the applicable Incorporated Documents as
"Operating Parameters." In the event of a material change in any Operating
Parameters or a "Changed Condition," (as defined below), SCS will propose an
adjustment to the Fees to respond to the change by providing Customer with
thirty (30) days prior written notice thereof, setting forth with reasonable
specificity the basis for such adjustment. Customer shall not unreasonably
withhold its approval of such adjustment. If Customer refuses to pay such
adjustment, the Parties agree to submit the Dispute for resolution as set forth
in Section 14.1. "Changed Condition" means the enactment or promulgation of any
new law or regulation or the imposition of a new material condition on the
issuance or renewal of any permit, license or approval after the Effective Date
hereof that: (a) materially increases the operating or capital costs of the
facilities or adversely affects the ability of SCS to perform the Services, (b)
is materially more burdensome on SCS than the requirements as of the effective
date of such Incorporated Documents, (c) materially decreases the Fees to which
SCS would otherwise be entitled under an Incorporated Document, or (d)
materially increases the obligations or costs of SCS. In the event Customer
unreasonably withholds its approval of a price adjustment due to the Changed
Conditions set forth in (a), (b) and (d) above, SCS disclaims any liability for
failure to meet performance commitments due to the Changed Conditions set forth
in (a), (b) and (d) above, unless SCS specifically agrees in writing to the
contrary.
4. INDEMNIFICATION.
4.1 GENERAL INDEMNIFICATION. Each Party ("Indemnitor") shall indemnify,
defend and hold harmless the other Party and any affiliated and controlling
entities of such Party, and the directors, employees, officers, agents,
subcontractors, licensors and suppliers of all of them (in each case
"Indemnitee") from and against all third party liabilities, claims, suits,
demands, actions, fines, damages, losses, costs and expenses (including
reasonable attorneys' fees) ("Claims") for injury to or death of any person or
damage to or loss of real property and improvements thereon or tangible personal
property to the extent caused by or resulting from such Party's negligent acts
or omissions or those of its employees or agents, except to the extent caused by
the Indemnitee; provided, however, that this Section shall not apply to any loss
or destruction of, or any damage to, Customer's goods and property for which
Services are provided ("Goods").
4.2 THIRD PARTY CLAIMS. Customer shall indemnify, defend and hold harmless
SCS and its Indemnitees from and against any third party Claim (including any
Claim brought by Customer's customers) including but not limited to third party
Claims arising out of or in connection with (a) the design, manufacture,
distribution, marketing, use or sale of the Goods or Customer's instructions
regarding such Goods, (b) lost, damaged or undelivered Goods, (c) Goods not
delivered on time, or (d) the performance or nonperformance of the Services,
except as provided for in Section 4.1 above. Notwithstanding the foregoing,
under no circumstance will SCS assume any liability for penalties, financial or
otherwise, that may exist in contracts between Customer and any of Customer's
customers (for the avoidance of doubt, this sentence does not include any
indemnity obligations of SCS pursuant to Section 4.1 above).
4.3 NOTICE OF CLAIMS FOR INDEMNIFICATION. The Indemnitee shall provide
prompt written notice of any Claim, tender defense or settlement to the
Indemnitor, and fully cooperate in the defense of the Claim; provided that the
failure to give such notice shall not affect the Indemnitee's right to
indemnification hereunder unless the failure to give such notice materially and
adversely affects the rights, remedies or liability of the Indemnitor with
respect to such Claim. Should the Indemnitor fail to honor a timely request for
indemnification, then the Indemnitee shall be entitled to all reasonable costs
(including reasonable attorneys' fees) incurred in the enforcement of the right
of indemnification hereunder.
4.4 SETTLEMENT. No compromise or settlement of a Claim may be effected by
the Indemnitor without the Indemnitee's consent unless (a) there is no finding
or admission of any violation of law or any violation of the rights of any
person by Indemnitee, (b) there is no effect on any other Claim that may be made
by or against Indemnitee, (c) the sole relief provided is monetary damages that
are paid in full by the Indemnitor, and (d) the compromise or settlement
contains, as an unconditional term thereof, the giving by the claimant or the
plaintiff of the Indemnitee a release from all liability in respect of such
Claim. The Indemnitee shall have no liability with respect to any compromise or
settlement effected without its consent.
5. TITLE TO GOODS. Unless otherwise specified in a Schedule, title to Goods and
except as set forth herein, any proceeds of such Goods shall remain at all times
with Customer and shall not pass to SCS under any circumstances.
6. LIMITATION OF LIABILITY.
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6.1 LIMITATION OF LIABILITY FOR LOSS OR DAMAGE TO GOODS. Unless a
different limitation of liability is specified in an Incorporated Document,
SCS's maximum liability to Customer arising out of or related to loss or damage
to Goods while the Goods are in its care custody and control shall not exceed
SCS's standard liability amounts which are as follows (the "SCS Standard
Liability Limits"): (a) for Claims arising from SCS's warehousing, fulfillment
and consolidation Services occurring in SCS's facilities or premises, including
owned or leased property, $[**]; (b) for Claims arising from SCS's customs
brokerage Services, $[**] or the amount of [**] paid to SCS related to [**],
whichever is less; (c) for Claims arising from SCS's freight forwarding or motor
broker Services, including arranging for inland or air transportation, $[**];
and (d) for Claims arising from SCS's air, ground or ocean transportation, the
liability limits set forth in bills of lading, air waybills, or other
transportation documents issued in conjunction with the Services provided.
Customer may obtain additional protection in excess of the SCS Standard
Liability Limits, up to the actual or declared value of the Goods, shipment or
transaction, by requesting in writing prior to the provision of Services such
additional protection and payment of an additional charge prior to the provision
of Services. Customer waives its rights of subrogation on behalf of its insurers
for any loss or damage to Goods in excess of the SCS Standard Liability Limits
set forth herein, or if applicable, such different limits of liability specified
in a Schedule or SOW. Notwithstanding the foregoing, SCS shall not be liable for
delay, or loss or damage of any kind, which occurs while Goods are in the care,
custody or control of a third party. "Third party" as used herein includes but
is not limited to, non-SCS or parent corporations, carriers, warehouseman,
forwarders, ocean transportation intermediaries, customs brokers, brokers, or
agents to which Goods are entrusted for transportation, handling, delivery,
and/or storage. All claims in connection with acts of a third party shall be
brought against the third party. SCS shall reasonably cooperate with Customer
regarding such claims. In no event shall SCS, its employees, agents,
subcontractors, or affiliates be liable for any loss of or damage to Goods
arising out of or caused, directly or indirectly by an event of Force Majeure.
6.2 LIMITATION OF LIABILITY FOR OTHER CLAIMS. Except for liabilities under
Section [**] and/or claims relating to loss or damage to Goods, the [**]
liability of one party to the other party for any other claims arising in
connection with this Agreement will not exceed the greater of (i) [**] percent
([**]%) of all Fees paid in the [**] period prior to the date the claim arose,
or (ii) [**] ($[**]), regardless of whether such claims arose in contract, tort
or otherwise.
6.3 FILING OF CLAIMS. Unless otherwise expressly required by applicable
statute, international convention or other mandatory national law, all freight
claims against SCS for a potential or actual loss must be filed in writing
within sixty (60) days after the event giving rise to the freight claims except
that the claims filing requirements set forth in a bill of lading, air waybill
or other transportation document issued in conjunction with the Services shall
apply for freight claims arising from loss or damage to Goods. If not filed
within the applicable period, Customer's right to indemnification for such claim
shall be deemed waived. No settlement will be made on any claim made by Customer
until Customer has paid all outstanding and correctly billed Fees.
7. EXCLUSIONS. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,
PUNITIVE, CONSEQUENTIAL OR INDIRECT DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS
OF PROFITS, BUSINESS OPPORTUNITIES, OR CUSTOMER GOODWILL IN CONNECTION WITH THIS
AGREEMENT OR THE SERVICES PROVIDED HEREUNDER. NEITHER PARTY SHALL HAVE ANY
LIABILITY TO THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.
8. CONFIDENTIALITY.
8.1 For a period of [**] years from the termination of the Agreement, the
Party receiving any proprietary or confidential information concerning the
business, products or customers of a Party, including, but not limited to,
customer or user information ("User Information"), information relating to
purchases by Customer's customers ("Purchase Information"), financial or pricing
information (collectively, the "Confidential Information"), will not disclose
such Confidential Information and shall exercise the same degree of care to
avoid disclosure of such Confidential Information as it employs with respect to
its own Confidential Information, but not less than reasonable care.
Confidential Information shall not include such information that: (a) is now or
hereafter becomes publicly known without violation of this Agreement; (b) was
known to the recipient prior to the time of disclosure without obligation to
preserve confidentiality and as evidenced by the recipient's written records;
(c) was received by the recipient from a third party legally entitled to
disclose the information without obligation to preserve confidentiality; (d) was
independently developed by the recipient; (e) is authorized to be disclosed by
the disclosing Party or is required to be disclosed by law in which case the
recipient will inform the disclosing Party and allow the disclosing Party
reasonable time to seek a protective order. In order to protect and prevent
disclosures of the Confidential Information of the other Party, each Party shall
not use, reproduce, distribute, disclose, or otherwise disseminate the
Confidential Information of the other Party except (1) as required for each
Party to perform its obligations hereunder; or (2) as preapproved in writing by
the Party disclosing the Confidential Information.
8.2 Any Confidential Information shall remain the disclosing Party's
property unless otherwise provided herein. Customer Confidential Information
shall not include: (i) information contained on the exterior of a package,
including information contained in plain text or bar code form on shipping
labels, or (ii) package level detail or smart label information, including but
not limited to, consignee's full name, complete delivery address, package weight
and zone, and package labeling that contains Maxicode, postal barcode, current
routing code, appropriate service level icon, a 1Z tracking number bar code and
address details related thereto ("PLD") (collectively, "Shipping Information").
SCS will use Shipping Information only as permitted by the UPS Privacy Policy
located at www.ups.com and in effect at the time of shipping and as set forth
herein to perform its obligations hereunder. For the avoidance of doubt,
Customer's User Information shall remain Customer Confidential Information;
provided,
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however, that any Confidential Information transferred to the exterior of a
package for purposes of shipping (i.e., Shipping Information) will no longer be
deemed Customer Confidential Information and is subject to the restrictions set
forth in Section 8.4.
8.3 The Parties acknowledge that a remedy at law for any breach or
threatened breach of the provisions of Paragraph 8 would be inadequate and
therefore agree that either Party shall be entitled to seek injunctive relief in
case of any such breach or threatened breach.
8.4 SCS will not, knowingly, directly or indirectly (i) [**], including
[**], to any of [**], (ii) [**] any of Customer's User Information, Purchase
Information and/or the [**]; (iii) [**] any [**], (iv) market specifically and
individually to any [**], and/or (v) make any use of Customer's Confidential
Information and/or the [**] in a manner other than is required to perform its
obligations hereunder. This Section 8.4 shall not apply to any customer that is
an existing customer of SCS or who is in the process of becoming an existing
customer of SCS as of the Effective Date hereof. Notwithstanding the foregoing,
this paragraph shall not prevent in any way United Parcel Service, Inc. from
shipping packages for customers and delivering packages to customers.
8.5 Upon termination of the Agreement, SCS shall, as directed by Customer,
either return to Customer or destroy all Confidential Information (in tangible
and intangible form) of Customer as well as the names and addresses of
Business-to-Consumer End Customers received by SCS (and all copies and
reproductions thereof). If Customer elects to have SCS destroy such information,
SCS shall provide a certificate to Customer certifying that such information has
been destroyed and agrees it will not be used by SCS.
9. FORCE MAJEURE. "Force Majeure Event" shall mean any event beyond a Party's
control, including but not limited to: acts of war, acts of public enemies,
terrorist attacks, governmental orders relating to the foregoing, insurrections,
riots, sabotage, earthquakes, floods, acts of God, embargoes, authority of laws,
third-party labor disputes (including strikes, lockouts, job actions or
boycotts), fires, explosions, or failure in electrical power, heat, light, air
conditioning or communications equipment. In the event a Party is precluded or
delayed from performing under this Agreement (other than payment of previously
accrued charges) due to a Force Majeure event, the non-performing Party shall be
excused from such performance provided that such Party uses commercially
reasonable efforts to recommence its performance. The Party precluded or delayed
from performing due to a Force Majeure event shall notify the other Party as
soon as possible regarding the existence and nature of the Force Majeure event
and shall promptly give notice of its recommencement of performance. In the case
of SCS being precluded or delayed from performing under this Agreement due to a
Force Majeure event, if SCS does not recommence performance within [**] after
first failing to perform due to a Force Majeure event, then Customer may, at its
sole expense, require SCS to load the Products on trailers (arranged by
Customer) for shipment as Customer designates. If SCS takes reasonable steps
outside the ordinary course of business to protect Goods due to a Force Majeure
Event with Customer's prior approval, Customer shall pay the storage or other
similar charges associated with SCS's efforts. In the event that SCS is unable
to recommence performance [**] after first being precluded or delayed from
performing due to a Force Majeure event, Customer shall have the right to
terminate the Agreement.
10. INSURANCE. SCS shall maintain the following insurance: (a) commercial
general liability insurance including premises or operations, broad form
property damage, independent contractors, and contractual liability covering
SCS's obligations hereunder for bodily injury and property damage, with a
combined single limit of not less than $1,000,000 each occurrence; and (b)
workers' compensation insurance in statutory amounts covering SCS and its
employees, and employer's liability insurance. All insurance required herein
shall be carried with insurance companies licensed to do business in the
state(s) where operations are maintained. SCS shall deliver to Customer, upon
Customer's request, certificates of insurance of evidence of the required
coverage. All policies shall provide that such coverage under these policies
shall not be canceled or materially changed without at least thirty (30) days
prior written notice to Customer and Customer shall be named as an additional
insured thereon.
11. INDEPENDENT CONTRACTOR. SCS is an independent contractor under this
Agreement. It shall comply with all payroll tax withholdings, social security,
unemployment and related employer obligations applicable to it. Except as set
forth in a duly authorized Power of Attorney, SCS shall not hold itself out as
an agent of or in a joint venture with Customer, and SCS shall have no authority
to act on behalf of Customer.
12. SUBCONTRACTORS. SCS may subcontract all or portions of the Services to its
parent or its affiliates without Customer's consent. SCS may subcontract all or
portions of the Services to third party service providers with the prior consent
of Customer. SCS may disclose to such entities any Customer Confidential
Information necessary to perform the Services provided such providers are
informed of and agree to be bound by the confidentiality provisions contained in
Paragraph 8 and as permitted by the UPS Privacy Policy in effect at the time of
performance which is located at www.ups.com.
13. HAZARDOUS MATERIALS AND OTHER REGULATED GOODS. Unless SCS expressly agrees
in a Schedule to handle, receive, accept, transport, or store: (a) any type of
hazardous materials or Goods containing hazardous materials as regulated by
United States environmental law, or (b) any type of Goods which may be regulated
by a governmental body, entity or agency, including but not limited to, those
Goods which are regulated by the Food and Drug Administration, the United States
Department of Agriculture, the Drug Enforcement Administration, the Alcohol and
Tobacco Tax and Trade Bureau, and analogous regulatory agencies (collectively,
"Hazardous or Regulated Goods"), it is agreed that (i) Customer shall not
knowingly itself or through others direct any Hazardous or Regulated Goods, to
SCS, its affiliates, assignees, agents or subcontractors under this Agreement,
and (ii) Customer
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warrants and covenants that except for Goods not knowingly directed by Customer
to SCS, its affiliates, assignees, agents or subcontractors under this Agreement
nothing in this Agreement contemplates or requires SCS, its affiliates,
assignees, agents or subcontractors to handle, receive, accept, dispose of,
transport, store, or arrange for the handling, disposal, storage, or
transportation of any Hazardous or Regulated Goods. SCS may take any action that
SCS, in its sole discretion, deems appropriate or necessary in relation to any
actual or suspected Hazardous or Regulated Goods. Customer hereby fully and
completely releases and forever discharges SCS and its Indemnitees from and
against all Claims arising out of or caused by actual or suspected Hazardous or
Regulated Goods. Customer shall indemnify, defend, and hold harmless SCS and its
Indemnitees from and against all Claims, except due to SCS's negligence,
relating to or arising out of any SCS action taken in relation to such actual or
suspected Hazardous or Regulated Goods, Customer's noncompliance with applicable
laws, or the breach of any covenant of Customer contained in or made pursuant to
this Section.
14. DISPUTE RESOLUTION PROCESS.
14.1 DISPUTE RESOLUTION. The Parties agree to utilize the dispute
resolution process to resolve any disputes, claim or question between them with
respect to this Agreement ("Dispute") as expeditiously as possible. The Parties
shall keep confidential, and shall not disclose to any person except as may be
required by law, all aspects of the Dispute and the Dispute resolution process.
Dispute resolution is intended to be the sole and exclusive remedy (other than
equitable remedies) of the Parties with respect to any Dispute. One Party shall
give written notice to the other Party of the Dispute and request commencement
of the Dispute resolution process. Then, the project managers from each Party
shall meet within five (5) business days to negotiate and use commercially
reasonable efforts to promptly reach a resolution of the Dispute. If the Dispute
is not resolved by the project managers, either Party may give notice to the
other Party that the Dispute must be escalated to the senior officers of each
Party, who will meet within ten (10) business days to negotiate and use
commercially reasonable efforts to resolve the Dispute.
14.2 ARBITRATION. Any Dispute that cannot be resolved through the Dispute
resolution process set forth above shall be settled by binding arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
prevailing Party will be entitled to recover its reasonable costs and fees
(including reasonable attorneys' fees).
15. GENERAL PROVISIONS.
15.1 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. The rights and obligations
under this Agreement may not be transferred or assigned to a third party by
either Party without the prior written consent of the other Party; provided
however, either Party may transfer or assign all or part of its rights and/or
obligations of this Agreement to one or more of its parent or affiliates. This
Agreement is binding upon and shall inure to the benefit of each Party and its
respective successors and assigns. Under no circumstances may Customer resell
any of the Services to any third party. There are no third party beneficiaries
under this Agreement.
15.2 AMENDMENTS; WAIVER; SEVERABILITY. This Agreement can only be modified
or amended by a written instrument signed by the Parties. A waiver of any right
by either Party will not constitute a waiver of such right on any subsequent
occasion. Acceptance by SCS of the amounts (or lesser amounts) payable under
this Agreement shall not be deemed a waiver of any default. If any provision of
this Agreement is determined to be invalid, such invalidity will not affect the
validity of the remaining portions of this Agreement.
15.3 SURVIVAL. The rights and obligations of this Agreement which by their
nature are intended to survive expiration or termination shall so survive,
including but not limited to: Sections 3.1, 3.3, 3.4, 4, 5, 6, 7, 8, 13, 14, and
15.
15.4 CONTROLLING LAW. This Agreement shall be governed by the laws of the
State of Massachusetts without regard to conflicts of laws provisions.
15.5 NO USE OF TRADEMARKS. Neither Party shall use the other Party's or
its affiliates' corporate name or logo without the other Party's prior written
consent; provided however, SCS may disclose Customer's name as a reference to
any current or prospective customer; and provided further that Customer may
disclose SCS's name to Customer's financial lenders and other third parties as
necessary for Customer to facilitate its business.
15.6 NON-SOLICITATION OF PERSONNEL. During the term of this Agreement and
for [**] after its expiration or termination, neither Party shall actively
solicit the employment of any employee of the other Party, which employee was
engaged in the performance of this Agreement. This provision does not prohibit
either Party from generally soliciting employment using mass media such as
newspaper or Internet.
15.7 INTELLECTUAL PROPERTY RIGHTS. Customer and SCS acknowledge that the
other has certain intellectual property rights that may be revealed or provided
to the other Party in accordance with this Agreement. Each Party acknowledges
that this Agreement does not grant any right or title of ownership in its
respective intellectual property rights to the other unless specifically
provided in this Agreement. Any intellectual property shall remain the
originator's property unless otherwise provided herein.
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15.8 NO BREACH OF OTHER AGREEMENTS. Customer and SCS each respectively
represent and warrant that its execution of this Agreement does not violate any
applicable law or breach any other agreement to which it is a Party or is
otherwise bound.
15.9 NOTICE. Any notice required or permitted to be given shall, except
where specifically provided otherwise, be given in writing to the person and at
the address listed below by personal delivery, UPS Next Day Air(R) or other
overnight carrier or certified mail, return receipt requested. The date of
notice shall be as follows: the date upon which such notice is so personally
delivered; if by UPS Next Day Air(R) or other overnight carrier, the date of
receipt at the designated address; or if by certified mail, the date of
delivery.
To SCS: UPS Supply Chain with Copy to: United Parcel
Solutions, Inc. Service, Inc.
Contracts and Compliance Office of
Department General Counsel
12380 Morris Road 55 Glenlake
Alpharetta, GA 30005 Parkway
Atlanta, GA 30328
To Customer: SmartBargains.com, LP with Copy to: SmartBargains,
10 Milk Street, 10th Floor Inc.
Boston, MA 02108 10 Milk Street,
Attn: CFO 10th Floor
Boston, MA 02108
Attn: Legal
Department
15.10 ENTIRE AGREEMENT. This Agreement sets forth the full and complete
understanding of the Parties with respect to the matters herein and supersedes
any and all agreements and representations between the Parties made or dated
prior to the Effective Date, except for the confidentiality agreement between
the parties, dated as of October 20, 2003, which confidentiality agreement shall
apply only to data and information exchanged by the parties prior to the
execution of this Agreement.
In witness whereof, the Parties hereto have caused this Agreement to be executed
by their duly authorized representative as of the Effective Date.
UPS SUPPLY CHAIN SOLUTIONS, INC. SMARTBARGAINS.COM, LP
"SCS" "CUSTOMER"
/S/MARVIN B. HOBBY /S/STEPHEN M. JOSEPH
-------------------------------------- -------------------------------------
SIGNATURE SIGNATURE
MARVIN B. HOBBY STEPHEN M. JOSEPH
PRINTED NAME PRINTED NAME
COORDINATOR, GLOBAL CONTRACTS CFO
TITLE TITLE
JANUARY 29, 2004 1-28-04
DATE DATE
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MASTER SERVICES AGREEMENT
UPS SUPPLY CHAIN SOLUTIONS, INC.
AND
SMARTBARGAINS.COM, LP
SUMMARY OF SERVICES
SERVICE SCHEDULE NO. 1 SERVICE SCHEDULE FOR WAREHOUSE DISTRIBUTION
SERVICES
A. WAREHOUSE DISTRIBUTION SERVICES SOW
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SERVICE SCHEDULE NO. 1
FOR
WAREHOUSE DISTRIBUTION SERVICES
THIS SERVICE SCHEDULE NO. 1 IS ATTACHED TO AND MADE A PART OF THAT CERTAIN
MASTER SERVICES AGREEMENT DATED AS OF JANUARY 27, 2004 (THE "MSA" OR
"AGREEMENT") BY AND BETWEEN UPS SUPPLY CHAIN SOLUTIONS, INC. ("SCS") AND
SMARTBARGAINS.COM, LP ("CUSTOMER") AND IS EFFECTIVE AS OF FEBRUARY 5, 2004
("EFFECTIVE DATE").
1. INTRODUCTION
This Service Schedule sets forth additional terms and conditions under
which the Customer shall obtain from SCS the Services set forth in the
accompanying Warehouse Distribution Statement of Work ("SOW").
2. TERM AND TERMINATION
2.1. TERM
2.1.1. The term of this Service Schedule shall commence on the
Effective Date and shall continue in full force and effect for
an initial term of 5 years (the "Initial Term"), and
thereafter will automatically be renewed for additional
one-year terms, unless either Party, at least [**] prior to
the expiration of the Initial Term or any renewal term, gives
written notice of non-renewal. Notwithstanding the foregoing,
in the event that SCS continues to provide the services set
forth in the accompanying SOW to Customer following the
expiration of the Initial Term or any term, and the Parties
fail to enter into a written extension of such SOW, then the
SOW (including rates and charges in effect on the expiration
of the Initial Term or any term) shall remain in effect on a
month-to-month basis after the expiration date until
terminated in writing by either Party upon thirty (30) days
prior written notice. In addition, this Service Schedule may
also be earlier terminated as set forth in Section 2.1 of the
MSA.
2.2. TERMINATION COSTS
2.2.1. Customer acknowledges that SCS may undertake substantial
financial commitments and incur substantial costs to perform
the Services, including, without limitation, property
acquisition and information technology development costs,
which SCS expects to recover during the term. As a
consequence, if this Service Schedule (and thus the
accompanying SOW) is terminated by SCS for reasons of an
uncured default for payment or material breach by Customer,
Customer shall be required to pay to SCS the termination costs
set forth in Exhibit C ("Termination Cost Schedule") to the
accompanying SOW.
2.3. TRANSITION ASSISTANCE
2.3.1. In connection with the termination or expiration of the
accompanying SOW, SCS will (i) if requested by Customer and at
Customer sole expense, perform a complete physical inventory
of all Goods and Customer-owned capital equipment, if any, and
(ii) package the Goods and other materials and equipment of
Customer and make same available on the shipping dock for
pickup. If special repackaging is required of bin/bulk items,
Customer will provide packaging. Customer will be billed
applicable Fees presented in Exhibit A of the SOW for SCS's
performance of such physical inventory and the outbound
transaction Fee, if applicable, on all Goods to be removed
from the Facility. Customer will arrange for pickup and
transportation of all such materials, at Customer's expense,
by the date of such termination or expiration.
3. FEES
Fees will be as set forth in Exhibit A of the SOW and administered per Section
16.0 of the SOW.
4. BUSINESS REVIEW
4.1.1. The Parties shall engage in periodic reviews and may adjust the
Fees pursuant to the procedures set forth in the MSA.
Notwithstanding any other provision herein, on or before sixty (60)
days prior to the first anniversary date of the Effective Date of
this SOW and each anniversary thereafter, Customer and SCS will use
their good faith efforts to determine if adjustments to the Fees for
the Services covered under the SOW are necessary, which adjustments,
if any, shall be reflected by a mutually agreed upon amendment to
the SOW.
5. LIABILITY FOR LOSS OR DAMAGE TO GOODS STORED BY SCS
The provisions of this Section 5 control over Section 6.1 of the MSA.
5.1. DEFINITIONS
5.1.1. "Throughput" shall mean the sum of the Replacement Cost of
each Good received into the Facility and shipped from the
Facility divided by [**], between successive Determination
Dates, or if within the first year of the Effective Date of
the accompanying SOW, then such first year.
5.1.2. "Replacement Cost" shall mean Customer's [**] for each unit
(on a [**]) of the Goods, i.e., the [**] cost incurred by
Customer to [**] from its [**]; provided, however, that the
Replacement Cost shall not include [**].
5.1.3. "Determination Date" shall mean the yearly anniversary of the
Effective Date of the accompanying SOW upon which SCS's
liability to Customer, if any, for Lost Goods and Damaged
Goods is determined.
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5.1.4. "Shrinkage Allowance" shall mean a dollar amount equal to
[**]% of Throughput. The Parties have agreed to a Shrinkage
Allowance because both Parties recognize that it is inevitable
that a certain amount of Goods will be lost or damaged in the
course of storage and handling whether the Goods are stored by
SCS or by the Customer at its own locations using its own
employees.
5.1.5. "Lost Goods" shall mean those Goods that should be warehoused
at the Facility, on the Determination Date or at the time of a
subsequent Physical Inventory performed by SCS, according to
the Book Inventory Report but that have been lost due to SCS's
negligence or are otherwise unable to be located (mysterious
disappearance) at the Facility. Lost Goods shall not include
Damaged Goods, concealed shortages, or Goods shipped in error
to Customer's location or to a location designated by
Customer.
5.1.6. "Damaged Goods" shall mean those Goods warehoused at the
Facility, on the Determination Date or at the time of a
subsequent Physical Inventory performed by SCS, that are
destroyed or damaged due to SCS's negligence such that they
cannot be sold.
5.1.7. "Book Inventory Report" shall mean the report of those Goods
that should be warehoused at the Facility as of the
Determination Date based on (i) the Goods that were warehoused
at the Facility based on the Book Inventory Report as of the
previous Determination Date or on the Book Inventory Report
based on a Physical Inventory per Section 5.2.4 herein, if
any, plus (ii) the Goods received by the Facility, as
evidenced by an authorized signature on the transportation
carrier's waybill, since previous Determination Date or the
Book Inventory Report based on a Physical Inventory per
Section 5.2.4 herein, if any, less (iii) the Goods shipped
from the Facility since the previous Determination Date or the
Book Inventory Report based on a Physical Inventory per
Section 5.2.4 herein, if any. The Book Inventory Report will
be generated by SCS using its warehouse management system.
5.1.8. "Repair Cost" shall mean the lesser of the cost to repair
Damaged Good or the Replacement Cost of the Damaged Good.
5.1.9. "Net Value of Inventory Adjustments" shall mean the absolute
net dollar value, at the Replacement Cost of each Good, of all
the inventory adjustments on a dollar basis made by SCS
between successive Determination Dates or, if during the first
year of the Effective Date of this SOW, then such first year.
5.1.10. "Physical Inventory" shall mean a physical inventory of all
Goods located at the Facility. Any Physical Inventory will be
conducted in a manner mutually acceptable to the Parties.
5.2. CALCULATION OF LIABILITY FOR LOST GOODS AND DAMAGED GOODS
5.2.1. SCS shall be liable for Lost Goods and Damaged Goods in
excess of the Shrinkage Allowance while the Goods are in its
care, custody and control. SCS shall not be liable for any
loss or damage to Goods: (i) that is below the Shrinkage
Allowance; (ii) caused by any defects in the packaging or
manufacture of such Goods; (iii) attributable to carriers
(contract or otherwise) failing to deliver the full shipment
of expected Goods to the Facility or otherwise caused by the
acts or omissions of such carriers; (iv) delivered to the
Facility in damaged condition and such damage was reported to
Customer; (v) attributable to concealed damage; and (vi) as a
result of the negligence or intentional misconduct of Customer
or any of its employees, agents or subcontractors. In
addition, SCS will not be liable for third-party theft if SCS
has implemented and followed a reasonable standard of care to
protect Customer's Goods from such theft. In no event shall
SCS, its employees, agents, subcontractors or affiliates be
liable for any loss of or damage to the Goods arising out of
or caused by an event of Force Majeure.
5.2.2. On the Determination Date, SCS will calculate the Net Value
of Inventory Adjustments.
5.2.3. If the Net Value of Inventory Adjustments is attributable to
Lost Goods or Damaged Goods, then SCS, subject to [**] set
forth in Section 6.1, will pay Customer such difference or the
apportioned amount for Lost Goods, as appropriate, and an
amount equal to the Repair Cost for each Damaged Good, as
appropriate, within 30 days of the Determination Date.
5.2.4. SCS may at its own cost, subsequent to the Determination
Date, perform a Physical Inventory to verify or otherwise
confirm the existence of Lost Goods or Damaged Goods. If
Customer requests SCS to conduct such a Physical Inventory,
SCS will perform the Physical Inventory at Customer's sole
expense.
5.3. LOST GOODS LATER FOUND
If, within [**] days of the Determination Date, any Lost Goods for
which a payment has been made to Customer are found or otherwise
accounted for, Customer shall promptly refund to SCS the amount of
any such payment upon written notice from SCS. If any Lost Goods for
which the Customer has been previously paid are found or otherwise
accounted for after such [**] day period, SCS shall offer such Goods
to Customer for return of the amount previously paid. If Customer
elects not to accept return of such Goods, title to such Goods shall
transfer to SCS and SCS shall have the right to sell or otherwise
dispose of such Goods in any manner it determines appropriate.
6. EXCESS LIABILITY COVERAGE
6.1. The Parties acknowledge and agree that SCS has obtained on
behalf of Customer excess liability protection to cover Lost
Goods or Damaged Goods in excess of the Shrinkage Allowance in
the amount of $[**] in the yearly aggregate, and has named
Customer as an additional insured.
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6.2. If the insurance coverage per Section 6.1 is cancelled during
the term of this SOW, SCS shall self- insure for this
liability.
7. WAIVER OF SUBROGATION
Customer waives its rights of subrogation on behalf of its insurers
for any loss or damage to Goods in excess of the liability limits
set forth in Sections 5.2.3 and 6.1 herein.
8. SURVIVAL
8.1.1. Notwithstanding the expiration or earlier termination of this
Service Schedule for any reason, however described, the rights
and obligations of this Service Schedule which by their nature
are intended to survive expiration or termination, including,
without limitation Sections 2.2, 2.3, 3, 5, 6, 7, and 8, will
survive any such expiration or termination.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS SERVICE SCHEDULE TO BE
EXECUTED BY THEIR DULY AUTHORIZED REPRESENTATIVES AS OF THE DAY AND YEAR FIRST
WRITTEN HEREIN.
UPS SUPPLY CHAIN SOLUTIONS, INC. SMARTBARGAINS.COM, LP
BY: /S/MARVIN B. HOBBY BY: /S/STEPHEN M. JOSEPH
----------------------------------- ---------------------------------
NAME: MARVIN B. HOBBY NAME: STEPHEN M. JOSEPH
TITLE: COORDINATOR, GLOBAL CONTRACTS TITLE: CFO
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WAREHOUSE DISTRIBUTION STATEMENT OF WORK
1. GENERAL INFORMATION
1.1. This attachment to Service Schedule No. 1, Warehouse Statement of
Work (this "SOW"), is made and entered into to be effective as of
February 5, 2004 (the "Effective Date") and is attached to and made
a part of that certain Master Services Agreement effective as of
January 27, 2004 (the "MSA") by and between UPS Supply Chain
Solutions, Inc. ("SCS") and SmartBargains.com, LP ("Customer").
1.2. This SOW relates only to the logistics functions to be performed by
SCS at a HEBRON, KY facility (the "Facility") on behalf of Customer.
1.3. This SOW may be amended as follows: Modifications may be initiated
be either Party through written notification to the other Party's
designated project manager to request a desired change. In the event
the other Party objects to any such modification or amendment, the
other Party shall provide the Party proposing the change with
written objection within 30 days of the proposal being initiated.
Notwithstanding anything to the contrary, modifications or
amendments to this SOW shall only become effective upon the mutual
written consent of both Parties.
2. SUPPORT OVERVIEW
2.1. The following statements address primary operating requirements SCS
shall provide to the Customer:
2.1.1. SCS will provide warehouse and inventory management (the
"Services") for the Customer's Goods (the "Goods") at the
Facility. The Services performed hereunder are to support
inventory management, distribution, and returns processing for
the Goods distributed by SmartBargains.com.
2.1.2. SCS will assign account management personnel, which will
serve as Customer's main day-to-day contact, to coordinate
overall program implementation, training and on-going
operations.
2.2. Unless otherwise noted within this SOW, Goods will be stored in
ambient warehouse temperatures.
2.3. The Facility will be a non-food grade facility. SCS will not store
or handle any food products under this SOW.
3. EQUIPMENT
SCS will provide all required general purpose equipment necessary to
perform the Services, except that Customer shall provide and maintain, at
Customer's sole expense, any special, customized or unique equipment or
computer hardware needed to perform the Services.
4. IT SYSTEMS OVERVIEW
SCS's robust warehouse management system ("WMS") will serve as the
operating system and the official record of inventory to support all of
the warehouse functions covered within this SOW. All key IT assumptions
are included in Exhibit B - Operating Parameters. Additional IT
assumptions will be defined within the Master Operating Plan.
5. FACILITIES
As of the Effective Date, SCS will provide Customer the storage space at a
facility to be determined in Hebron, KY. The storage space within a
Facility available to Customer from time to time for the storage of the
Goods shall be referred to as the "Storage Area." SCS may move Customer's
Goods within the Storage Area where necessary to facilitate its
operations, provided that such Goods are easily identifiable as Customer's
Goods. SCS may propose to relocate Customer's Goods to another facility
managed by SCS or its agent, at the expense of SCS. SCS will relocate
Customer's Goods only if Customer provides its written agreement.
6. STORAGE
All Goods will be kept and stored within the Storage Area unless otherwise
agreed to by Customer. The Goods will be stored in a safe and secure
manner on shelves or racks, and may be floor stacked on pallets if
appropriate.
7. ACCESS TO STORAGE AREA
Only individuals authorized by SCS or Customer shall be permitted access
to the Storage Areas, provided however, Customer must provide SCS at least
24 hours notice prior to such access, and provided further, that any such
individual must agree to comply with the security provisions applicable to
such Facility. Authorization by Customer for Customer personnel shall be
controlled through an approved access list provided to SCS by Customer.
Customer shall be entitled to have certain of its employees on site at the
Facility (the "Site Employees"), and such employees will have facility
access without the need of advance notice. SCS shall provide the Site
Employees with reasonable furnishings, connectivity access (such as
telephone lines, internet, WMS and data connectivity), lighting and
heat/air
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conditioning and such other office needs as are generally made available
to SCS's employees.
8. TRAINING REQUIREMENTS
SCS shall train its personnel to perform standard warehouse logistics
services with respect to the Goods. Customer agrees to provide SCS with
training materials and applicable reference manuals relating to any
specialized training for processes or systems to be provided to Customer
under this SOW, which are different from standard warehouse logistics
services. SCS will designate certain SCS personnel, which may include
personnel that will have special responsibilities for Customer's accounts
(each, an "Associate") to serve as trainers ("Trainers") who will receive
such specialized training. After Customer has trained SCS's Trainers, the
Trainers will train the applicable Facility personnel as appropriate.
Customer shall be responsible for all reasonable expenses, including
materials and training time, associated with such specialized training.
9. INBOUND RECEIPTS
9.1. GOODS MASTER FILE
Prior to the initial shipment of any Goods to a Facility, Customer
will provide SCS with a master list of all Goods that are to be
handled under this SOW (the "Goods Master File"). SCS will keep the
information contained on such list in a file in its WMS. The Goods
Master File will include the Replacement Cost of Customer's Goods
that are warehoused in the HEBRON, KY FACILITY. Customer will
provide SCS based on a mutually agreed-upon method with the
information needed to update the Goods Master File, including all
new additions to the Goods to be handled under this SOW and any
changes to information relating to Goods included in the Goods
Master File.
9.2. DELIVERY REQUIREMENTS
Customer shall arrange for the Goods to be delivered to each
Facility. At or prior to delivery of the Goods to any Facility,
Customer shall provide to SCS a Purchase Order indicating the Goods
to be tendered for storage and the applicable material safety data
sheets (MSDS), with any special instructions, including but not
limited to storage, services, accounting, segregation or any other
requirements relating to the Goods.
9.3. ADVANCE NOTICE AND INBOUND INFORMATION CAPTURED BY THE WMS
9.3.1. Customer will provide to SCS a pre-alert notice (a "Pre-Alert
Notice") to receive all Goods against. The Pre-Alert Notice or
Purchase Order can be an Excel document e-mailed to the
Associate. The Pre-Alert or Purchase Order for inbound orders
will include: carrier name and carrier tracking number, vendor
name, purchase order ("PO") number, Customer part number, and
quantity ordered.
9.3.2. The WMS has reference fields on the Inbound Order transaction
available for Customer's use, in addition to carrier name and
carrier tracking number fields. One field is usually
designated for holding the PO number, and the other two fields
are available for the Customer to define, subject to SCS's
agreement.
9.3.3. If Customer does not provide a Pre-Alert Notice or Purchase
Order, SCS will enter into the Inbound Order transaction the
carrier name and carrier tracking number, along with reference
fields as specified by the Customer.
9.4. EXTERIOR PACKAGE INSPECTION AND PART VERIFICATION
9.4.1. SCS will inspect the exterior packaging of all inbound
shipments of Goods for visible damage. SCS will record on the
carrier documentation any identified damage and provide a copy
of such documentation to Customer so that Customer may file a
claim against the responsible carrier.
9.4.2. After an inbound shipment of Goods has been received from the
carrier, SCS will validate the part number and count quantity,
compare Customer's parts numbers and quantity received against
packing slip, and physically inspection for damage (other than
concealed damage). If shortages or other discrepancies are
identified, SCS will record conditions found on the carrier's
documentation, and document on the vendor discrepancy form and
report the incident to Customer so that Customer may file a
claim against the responsible carrier.
9.5. QUALITY PROCESS AND INSPECTION
9.5.1. If the seal on the package is not broken and the package has
no exterior damage, the only inspection is to check that the
item number on the outside of the package matches the
paperwork. If there is no item number identified on the
outside of the package, each package shall be opened to
identify the appropriate item number for labeling purposes.
Without limiting the foregoing inspection requirements,
inspection of inbound shipments of Goods by SCS for quality
control purposes shall also be performed when: (a) the seal on
the package is broken or (b) the packaging has punctures, or
(c) there is other exterior damage to the packaging that would
indicate that the contents may be damaged.
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9.5.2. Each inbound unit will require a barcode label to
include SKU number, and/or UPC code and item
description. Within [**] from the Effective Date,
approximately [**]% of all incoming items will already
contain such labels. The other [**]% of the incoming
Goods will be identified and labeled by SCS. This
activity is included in the inbound receiving unit rate.
9.5.3. In depth inspection of incoming receipts will be
performed on inbound items to the extent that Customer
has requested this service and has agreed to a per part
inspection charge set forth in Exhibit A. In such cases,
but only with Customer's authorization given in advance,
will a package be opened for such in depth examination.
Authorization must be given to the Associate. This
specific activity may be removed from the overall scope
of work going forward. In anticipation of the
possibility, SCS quoted it as a separate activity.
9.6. PROBLEM RECEIPTS AND QUARANTINE
9.6.1. A "Problem Receipt" occurs when an inbound shipment of
Goods has discrepancies that prohibit SCS from
performing its normal "receipt to stock" process,
including, but not limited to: damaged packaging;
damaged or obviously used Goods; unmarked or mis-marked
Goods; Goods (or quantities of same) not matching
Pre-Alert Notice, PO or packing list data; Goods
received with no Pre-Alert Notice, PO or packing list;
Goods without proper reference information as defined by
the Customer; Goods not on the Goods Master List; Goods
sent to the wrong Facility; obviously wrong Goods in
box; or Goods of suspicious or unknown origin. When any
discrepancies are encountered by SCS during the
receiving process, the receiving process will be
temporarily suspended and such Problem Receipts will be
stored and segregated by SCS in an area apart from other
inbound material (the "Quarantine") until discrepancies
are cleared and material can be properly transacted into
the WMS.
9.6.2. Inbound receiving discrepancies will be annotated at
the time of discovery, and SCS will promptly notify
Customer. Customer will provide name of individual to
contact for all Problem Receipt reporting by SCS.
Information available to SCS regarding quarantined
inventory will be communicated to the appropriate
Customer contact by SCS in a spreadsheet or any other
mutually agreed upon format.
9.6.3. Problem Receipts will physically remain in the
Quarantines of the Facility until disposition
instructions are received from the Customer and will not
be allocable to orders.
9.6.4. Upon SCS's receipt of disposition instructions for a
Problem Receipt from the Customer, SCS will remove such
Problem Receipt from the Quarantine. If Customer
determines the Goods should be stocked at the Facility,
SCS will immediately recommence the receiving process.
If Customer determines the Goods are defective or scrap,
SCS will ship or dispose of such Goods per the
Customer's disposition instructions.
9.6.5. Customer will provide appropriate disposition
information to SCS regarding Problem Receipts within two
(2) business days of Customer being notified by SCS. At
Customer's request, SCS can repackage Goods that are
quarantined or as needed subject to payment of SCS's Ad
Hoc Labor Charges as shown on Exhibit A.
9.7. RECEIVING
Within [**] from receipt, SCS will have processed the inbound
Goods so that such Goods are in the WMS and are available for
Customer to sell. Any overages, shortages or damages will be
documented and communicated to Customer as required herein.
9.8 RETENTION OF INBOUND DOCUMENTATION
For inbound shipments, SCS shall retain copies of shipment
packing slips in the Storage Area and all original copies
shall be sent to Customer at the end of each fiscal month of
the Customer. All copies of inbound documentation shall be
retained in hard copy format in the Storage Area for a period
of [**] after the Goods applicable to such inbound shipments
have been received into the WMS.
10. OUTBOUND SHIPMENTS
10.1. OUTBOUND ORDERS
Customer will provide all outbound orders to SCS. Orders are
batched and sent electronically. Orders can be received by SCS
at any time; however, there are established cut-off times for
processing orders as defined within Exhibit B of this SOW.
Fulfillment procedures of Customer's order demands will be
consistent with the Customer requirements as defined within
Exhibit B of this SOW.
10.2. ORDER FULFILLMENT
10.2.1. Customer agrees to provide to SCS a rolling [**]
forecasted volume (the "Forecast") no later than the
first business day of each fiscal month of the Customer.
Only the [**] of each [**] forecast will be a [**].
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10.2.2. SCS will plan to meet Customer's service requirements
up to [**]% [**]. SCS will not be required to meet
service levels if the Customer does not communicate the
increased requirements in advance.
10.2.3. SCS will use commercially reasonable efforts to staff
appropriately based on shipping forecast information
provided by the Customer. However, volume changes that
exceed the number in Section 10.2.2 will be discussed
and be subject to overtime charges per Exhibit A.
10.2.4. If the Parties mutually agree to add labor staffing to
meet an increase that exceeds the number in Section
10.2.2, and the increase does not occur, Customer will
reimburse SCS for the [**] incurred pursuant to the [**]
in Section [**] of Exhibit A of this SOW.
10.2.5. In the event Customer does not submit a Forecast
within the time period set forth above, SCS will rely on
historical shipping volumes from the previous [**]
period.
10.3. OUTBOUND SHIPMENTS
10.3.1. On receipt of Customer's order, SCS will use its
standardized order pick and pack process. The standard
pick and pack process does not provide for outbound
order consolidation. Under the standard procedure, each
order will be processed individually at the appropriate
Facility based on shipping priorities indicated by the
Customer.
10.3.2. For outbound shipments, packing slips will be printed
and attached to shipments released from the Facility.
Packing slips will display: complete ship to address
information; origin location of the shipment; part
number; part description; shipped quantity; total
shipment value; return label for end customer of
Customer, Customer's or its affiliates' terms of sale;
shipping charges, miscellaneous charges, unit price,
extended price, and if requested, Customer PO number and
any other information reasonably requested by Customer.
Multiple packing slips may be used to designate
affiliate businesses.
10.3.3. Customer will be responsible for requesting carrier
proof of delivery (POD) information as needed. If SCS is
requested to provide assistance to obtain POD
information, the service will be performed at an
additional Fee as defined in Exhibit A.
10.3.4. SCS shall include an insert at Customer's request at
the rate set forth in Section 12 of Exhibit A.
10.4. EXPORT AND DOCUMENTATION
10.4.1. It is understood that Goods hereunder will not be
exported unless both Parties sign a Service Schedule
under the MSA. If such a Schedule is executed, Customer
will properly tender all documentation to support
physical movement and customs entry requirements at
international destinations. SCS will prepare the
documentation and perform the associated administrative
tasks associated with executing export shipments based
on Customer written instructions. Customer will provide
SCS with commercial invoice and Shipper's Export
Declaration documents to facilitate the release of
international shipments from a Facility.
10.5. ROUTING
SCS transportation routing decisions will be consistent with
instructions provided by Customer.
10.6. ORDER DISCREPANCIES
10.6.1. Orders that cannot be processed due to incomplete or
illegible order information will be escalated back to
Customer by SCS utilizing contact information provided
by Customer.
10.6.2. If a requested item of Goods on an outbound order
cannot be located by SCS, SCS will complete a series of
investigative steps at the Facility. If SCS determines
that an item is missing, SCS will contact the Customer
for written permission to adjust the item from
inventory. Customer acknowledges that written
communication to SCS, via e-mail or fax, of inventory
adjustment is required within [**] business days of
notification.
11. DISPOSAL OF OBSOLETE GOODS
Upon Customer's written request and at its sole expense, SCS
will prepare and send Goods to Customer's pre-designated scrap
and/or recycling centers. All transactions for disposal of
obsolete Goods must be managed in the WMS. These shipments
will be completed within the specified time frame agreed upon
by Customer and SCS. Reports sent back to Customer about such
shipments will include the quantity scrapped, Product number,
date sent to scrap and, if required by Customer, Certificate
of Destruction.
12. INVENTORY CONTROL
12.1 GENERAL
12.1.1 The records used to determine the number of Lost
Goods, including the Book Inventory Report (as
those terms are defined within the Definitions
section of Service Schedule No. 1 will be
generated by SCS
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using its WMS, regardless of whether Customer's
inventory system is also used in connection with
the Services. In case of any conflict between the
records maintained by Customer and the records
maintained by SCS, the records of SCS shall
control.
12.1.2 At SCS's request, Customer shall assist in the
initial receipt of Goods at a Facility so that the
Parties will be in agreement as to the initial
number of Goods on hand.
12.2 CYCLE COUNTING
12.2.1. SCS will maintain a cycle count program in
accordance with SCS's standard practice. Goods stored at
the Facilities will be physically counted each week on
the basis of a [**] cycle, such that each inventory
location will be counted at least [**] times each year.
SCS will generate the weekly cycle count report at the
Facility through the WMS. SCS will maintain records of
all counts taken and provide results to Customer as
requested.
12.2.2 After each weekly count, if there is a
discrepancy between the physical item and the cycle
count report information, SCS will take steps to resolve
such discrepancies. If a variance still exists between
physical quantity and WMS quantity after the foregoing
review has been completed, SCS will communicate to
Customer's designated contact and process an Inventory
Adjustment in the WMS.
12.3 PHYSICAL INVENTORY AND ON DEMAND CYCLE COUNT
Customer and/or its authorized representatives are able
to require a physical inventory of the Goods, at
Customer's sole expense, in addition to the cycle count
process used by SCS to track inventory. Such physical
inventory will be performed at a time reasonably
requested by Customer and consented to by SCS, such
consent not to be unreasonably withheld or delayed, and
at the Fees specified within Exhibit A of this SOW.
12.4 AUDIT RIGHTS
Customer and/or its authorized representatives shall
have the right upon 48 hours prior written notice to
SCS, and at Customer's sole expense, to audit SCS's
internal control processes solely to the extent that
such processes directly contribute to the accuracy of
Customer's financial statements in order to assist
Customer in meeting its obligations under the
Sarbanes-Oxley Act or other applicable financial
disclosure law.
13. SERVICE LEVELS
13.1 INTRODUCTION
SCS will measure service levels concerning key
operational activities that focus on order fulfillment to
Customer's end users based on the metrics listed in this
Section and will report its performance to Customer at a
mutually agreed upon basis. Each [**] SCS has the opportunity
to earn from the Customer incentives for meeting certain
performance levels. This Section contains [**]. Incentives and
Penalties will be paid [**] on a [**]. Where Customer or SCS
is required to pay an incentive or penalty, respectively, such
payment is to be delivered by the [**] day of the next [**].
The service level requirements in this Section are valid up to
[**]% of [**]. The [**] provided in Section [**] of the MSA
and the [**] provisions set forth in Section [**] of the MSA
shall [**] to this Section 13.
13.2 DEFINITIONS
This section includes definitions for certain terms used
in this section. Each metric is specifically defined in its
respective section below.
13.2.1 Requirement - This is the level of performance
SCS is required to meet regularly.
13.2.2 Incentive Level - This is the level of
performance upon which SCS may earn a [**]
Incentive.
13.2.3 [**] Incentive - The [**] Incentive is defined
below.
13.2.4 [**] Penalty - The [**] Penalty is defined below.
13.2.5 Accepted Order - Orders sent to SCS by Customer,
which SCS has accepted into SCS's WMS.
13.2.6 Corrective Action - The Corrective Action Process
is a process to be taken to address the failure of
SCS to meet the service levels set forth herein,
which requires the Parties' prompt attention. The
process is as follows:
(i) Customer sends a letter to the Director of
Customer Care, which calls for a meeting of
parties' respective project managers. The
project managers will meet at the Facility
within [**] business days to negotiate and
use commercially reasonable efforts to
promptly reach a resolution.
(ii) Customer sends a letter to the District
Manager if the parties' respective project
managers are unable to reach a resolution
within [**] business days. Customer's senior
management will communicate with the
District Manager within [**] business days.
Both parties will use commercially
reasonable efforts to work a solution to the
conditions that triggered the Correction
Action.
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(iii) Notwithstanding the above, should SCS miss
[**] for [**], the Parties agree to an
immediate escalation meeting on the day
following the [**]. The Parties' respective
project managers will meet in the most
efficient manner available to them (either
in the Facility or via conference call).
Both parties will use commercially
reasonable efforts to work a solution to the
condition(s) that triggered the escalation.
If a solution cannot be reached, then such
issue(s) will be escalated to Customer's
senior management and the District Manager
[**] via the most efficient manner available
to them (either in the Facility or via
conference call) for prompt discussion.
13.3 METRICS
13.3.1 [**]
- DEFINITION: The [**] with respect to the
stored Goods.
- REQUIREMENT: The Requirement is for SCS to
achieve [**].
- INCENTIVE LEVEL: This level is where SCS
achieves [**].
- MEASUREMENT: The metric is calculated as
follows: [**]. This metric will be
calculated [**].
- INCENTIVE FEES: If SCS meets the Incentive
Level [**], Customer will [**].
- PENALTY FEES: If SCS does not achieve [**],
SCS will [**].
- CORRECTIVE ACTION: See Section 13.2.6 (iii).
13.3.2 [**]
- DEFINITION: The time [**] until the time
[**].
- REQUIREMENT: The Requirement is for SCS to
[**], respectively, [**] the time, [**].
- INCENTIVE LEVEL: This level is where SCS has
[**], respectively, [**] the time.
- MEASUREMENT: This metric is calculated as
follows: [**]. This metric will be
calculated [**].
- INCENTIVE FEES: If SCS meets the Incentive
Level [**], Customer will [**].
- PENALTY FEES: If SCS does not achieve [**],
SCS will [**].
- CORRECTIVE ACTION: See Section 13.2.6 (iii).
13.3.3 [**]
- DEFINITION: The [**] Goods [**].
- REQUIREMENT: The Requirement is for SCS to
achieve [**] and thereafter.
- MEASUREMENT: This metric is calculated as
follows: [**]. This metric will be
calculated [**].
- CORRECTIVE ACTION: See Section 13.2.6 (i)
and (ii).
13.3.4 [**]
- DEFINITION: The elapsed time for SCS [**].
- REQUIREMENT: The Requirement is for SCS to
[**] the time.
- MEASUREMENT: This metric is calculated as
follows: [**]. This metric will be
calculated [**]. CORRECTIVE ACTION: See
Section 13.2.6 (i) and (ii).
14. REPORTS
SCS will provide standard reports as defined within
Exhibit B of this SOW and such other reports as mutually
agreed upon. SCS's standard reporting systems will be
accessible to Customer based on the Customer profile
that is mutually agreed upon between SCS and Customer.
Any manipulation of the data by Customer, and subsequent
reporting discrepancies caused thereby, are the
responsibility of Customer. Reporting periods will be
consistent with Customer's fiscal monthly accounting
cycle.
15. OPTIONAL SERVICES
SCS will provide the following services if required
under the Fees specified within Exhibit A of this SOW.
15.1. RE-LABELING
Customer may request SCS to re-label Goods, which
would require that a new label be applied over the
old label on the outside of the package, and the
Goods Master File be updated for the new label.
[**] Exhibit A will apply.
15.2. RETURNS
15.2.1. Returns processing is a service provided
under this SOW.
15.3. PACKAGING
15.3.1. Customer may ship product to SCS in
packaging ready to ship to end users.
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15.3.2. SCS can provide packaging services or
materials to Customer. Customer must
define in advance the packaging
requirements. Packaging services or
supplies [**]. [**] packaging services
[**].
15.3.3. With the packaging service, SCS will place
orders for and maintain appropriate
packaging materials to meet agreed upon
packaging requirements so that adequate
amounts of packaging supplies are on hand.
15.3.4. SCS shall comply with the packing
requirements as set forth in Customer's
packaging manual, as provided to SCS and
as amended from time to time, subject to
mutually agreeable changes in Fees, as
applicable.
16. BILLING ADMINISTRATION OF SERVICES
16.1 SCS will submit on a monthly basis documented
invoices manually under a single account number
for the Services provided under this SOW to
Customer 's designated Accounts Payable location.
Payment terms are net 30 days.
16.2 Invoices presented by SCS will include: specific
time period covered for the Services; address of
location for the physical site from which the
Services were performed; identification of
Services performed; agreed Fees charged for
Services as defined within this SOW; and extended
cost.
16.3 Customer reserves the right to require SCS to take
corrective action on invoices that are incorrect;
provided, however, that Customer shall pay to SCS
all undisputed charges on an invoice. Any payments
by Customer shall not be deemed a waiver of any
right of Customer under the Agreement or of any
defaults by SCS. The Parties shall promptly
resolve any dispute regarding any portion of an
amount stated on an invoice.
17. IT REQUIREMENTS
The parties will review IT requirements and supply such
requirements to be included herein within 90 days following
the Effective Date.
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EXHIBIT A - SCHEDULE OF RATES AND CHARGES
1. Customer will pay SCS a Fee of $[**] within [**] of the Effective
Date of this SOW.
2. The Monthly Fixed Fee is $[**]. Additional square footage over the
(i) estimated 150,000 square feet required and (ii) the estimated
750 square feet of office space will be charged at a rate of $[**]
per square foot. This additional square footage rate does not
include additional material handling or material storage equipment.
SCS billing cycle is as stated in Section 16.1 of the SOW and will
cover the following:
The Fixed Monthly Fee covers [**] equipment, [**]. Charges
associated with the variable activities performed pursuant to this
SOW will be billed at the transactional fees indicated within
Exhibit A of this SOW.
3. Transactional Fees: The Inbound unit charge (including the standard
inspection charge) is $[**] per unit; Outbound unit charge is $[**]
per unit. Returns processing is $[**] per unit. Minimum throughput
will be calculated at [**]% of monthly volume estimated, with
consideration given to seasonality.
4. Fee for per part inspection charge per Section 9.5.3: $[**] per
unit.
5. Ad Hoc Labor Charges are listed below. Ad Hoc Labor Services will be
pre-approved by Customer prior to charges being assessed and will
include supporting documentation (i.e. SKU, units, or other relevant
data):
- [**]: $[**] per hour.
- [**]: $[**] per hour.
- [**]: $[**] per hour.
- [**]: $[**] per hour.
- [**]:
- [**]: $[**] per hour.
- [**]: $[**] per hour.
- [**]: $[**]
6. Fee for SCS to Conduct a Physical Inventory per Section 12.2.1 will
be based on agreed upon labor rates, which rates shall not exceed
the Ad Hoc Labor Charges listed above or as amended.
7. Outbound Fee for Transition Assistance per the Service Schedule will
be mutually agreed upon.
8. Fee to Re-labeling the Goods per Section 15.1 will be based on the
Ad Hoc labor rates.
9. Fee for Performance of Returns Service per Section 15..2.1 is $[**]
per unit returned.
10. Supplies and materials will be quoted individually before start up
of operation. If SCS purchases the supplies and materials on behalf
of the Customer, supplies and materials will be billed at cost plus
[**]%. If the Customer purchases the supplies and materials, there
will be an administrative charge to be mutually agreed upon.
11. Travel and related expenses post implementation will be billed as
incurred, provided that any expenses that may be reasonably assumed
to exceed $[**] will be pre-approved by Customer.
12. Fees for inserts shall be as follows: Standard Insert: an insert
that gets put into every outgoing shipment for a period of time for
Customer or its affiliates -[**]; Smart Insert: an insert included
into certain packages pursuant to Customer's or its affiliates
instruction in the individual Orders corresponding to such packages
- $[**]per smart insert.
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EXHIBIT B - OPERATING PARAMETERS
1. OVERALL VOLUME
1.1. Units to be Received: [**]
1.2. Units to be Shipped or Made Available for Shipment: [**]
1.3. Annual Throughput: [**]
2. Seasonality
2.1.1. Here is a breakdown of the estimated number of orders to be
received in a fiscal month and then the daily average:
a. January [**] monthly = [**] daily
b. February [**] monthly = [**] daily
c. March [**] monthly = [**] daily
d. April [**] monthly = [**] daily
e. May [**] monthly = [**] daily
f. June [**] monthly = [**] daily
g. July [**] monthly = [**] daily
h. August [**] monthly = [**] daily
i. September [**] monthly = [**] daily
j. October [**] monthly = [**] daily
k. November [**] monthly = [**] daily
l. December [**] monthly = [**] daily
3. INVENTORY AND STORAGE
3.1. Inventory will be stored in bin shelving, pallet racking, garment on
hanger, and in floor storage.
3.2. Pallet size is standard GMA or 40" x 48" with dual entry.
3.3. Average number of pallets in storage: [**]
3.4. Inventory turns per fiscal year: [**]Average cases per pallet: [**]
3.5. Average pallet weight: [**] lbs
3.6. All storage and picking locations will be determined by SCS.
3.7. Distinct SKUs in storage area: [**] active SKU's in stock at any
time. There will be [**] distinct SKUs handled during the course of
the year.
4. INBOUND MANAGEMENT
4.1. A total of [**]% of inbound receipts are received as truckload or
LTL shipments, of which [**]% of the inbound receipts are palletized
and [**]% are floor loaded. The other [**]% of receipts will arrive
via parcel shipment.
4.2. There will be an average of [**] lines per receipt.
4.3. There will be an average of [**] units per line received.
4.4. There will be an average of [**] units per case received.
4.5. There will be an average of [**] cases per pallet received.
4.6. There are an average of [**] units per receipt.
4.7. Cartons may not be clearly marked and labeled with pertinent
receiving information (PO#, part number, and packing slip). SCS will
break down all incoming freight, sort the product and label each
item upon receipt.
4.8. Upon arrival of any new item with no on hand inventory, a unit will
need to be weighed and measured and the information captured into
the Customer's item master.
5. ORDER FULFILLMENT
5.1. Average daily order volume [**], annual order volume is estimated at
[**] orders. When the average daily order volume exceeds [**]% of
forecast, both parties agree to a business review to discuss future
needs to handle incoming order volumes.
5.2. Order Profile
5.2.1. Picking includes: line items: [**]%; cases: [**]% ; pallet
level only: [**]%
5.2.2. Average lines per order: [**]
5.2.3. Average units per line: [**]
5.2.4. Average cartons per order: [**]
5.2.5. Average units per order: [**]
6. RETURNS MANAGEMENT
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6.1. Pricing includes [**].
6.2. Customer returns average [**] per week.
6.3. Annual returns estimated at [**] units.
6.4. Returned merchandise will be inspected and dispositioned according
to business rules provided by Customer.
6.5. There will be [**] return to vendor and liquidation shipments
processed [**]. These outbound shipments will be charged at the
outbound unit price.
6.6. Any returned Goods that are returned from a customer after the Last
return Date (a date set as [**] days after initial order shipped),
damaged, wrong item returned, or missing a component will be
rejected at the door and given back to the carrier attempting to
deliver.
7. OUTBOUND MANAGEMENT
7.1.1. Customer's routing instructions will be defined in the Master
Operating Plan.
7.1.2. Same day shipments for all standard orders received up until [**]
for expedited orders.
7.1.3. Outbound Shipment Profile: Parcel: [**]%; LTL: [**]%; and FTL:
[**]%.
8. DAYS OF OPERATION
Normal operating hours are to be defined by SCS based on the incoming
order volume and the service level commitments. SCS honors 7 paid holidays
per year, which include Thanksgiving, Christmas Day, New Year's Eve, New
Year's Day, Memorial Day, 4th of July, and Labor Day.
9. WAREHOUSE MANAGEMENT SYSTEM
9.1.1. SCS will use a robust Warehouse Management System (WMS) to manage
warehouse receiving, storage, picking, packing, shipping, and
inventory. Customer shall have read-only access to the WMS in
connection with the Services provided hereunder.
9.1.2. Customer does not require customization to the WMS other than what
has been agreed to. Future customization requirements may impact the
WMS cost. Prior to any necessary customization, modification, or
enhancement to the WMS, Customer will approve in writing both the
functional design change and cost of the change.
9.1.3. The following transactions are included in pricing. The format of
the transactions will be Customer's proprietary layout. Additional
or customized transactions will incur appropriate costs.
9.1.4. [**]Electronic interfaces to and from SCS will originate and
terminate with Customers' host system. Pricing does not include
[**].
9.1.5. Customer will establish and maintain a Goods Master File. Periodic
transmissions will occur to update SCS's WMS of newly ordered or
manufactured items, and/or changes to existing item master
information. Part number substitutions/alternative parts will be
managed on Customer' host system.
9.1.6. The SCS WMS will be the inventory of record. To facilitate system
synchronization, SCS will transmit inventory balances by SKU to
Customer via the Inventory Snapshot transactions.
9.1.7. SCS will generate shipment confirmations for all outbound
shipments.
9.1.8. Security tags will be added at time of receipt to specific items.
The items requiring security tags will be identified in a specific
field within the item master.
9.1.9. Orders from Customer's host order entry system will include the
transportation mode (package, TL, LTL), carrier, and service level
for the shipment. Rate tables provided by transportation will be
used for establishing least cost routing, but this is not an
automated process within the WMS.
9.1.10. SCS will create a customized packing list, customized with
Customer's and/or its affiliates' logo and existing layout. Further
customization of the packing list may incur additional costs.
9.1.11. Travel and related expenses for IT personnel are not included, and
will be billed as incurred, provided that any expenses that may be
reasonably assumed to exceed $[**] will be pre-approved by Customer.
9.1.12. [**] transportation modes will be used at project initiation.
Outbound transportation modes include: Small Package ([**]%), LTL
([**]%); Inbound transportation modes include: Truck ([**]%), Small
Package ([**]%). There will be 3 carriers - [**].
9.1.13. Customer will define transportation carriers prior to initiation
of operations. The carriers will be established in the SCS shipping
system. Carrier information will be passed to SCS from the
Customer's host system as part of the sales order.
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EXHIBIT C - TERMINATION COST SCHEDULE
Apr-04 $[**] Dec-05 $[**]
May-04 $[**] Jan-06 $[**]
Jun-04 $[**] Feb-06 $[**]
Jul-04 $[**] Mar-06 $[**]
Aug-04 $[**] Apr-06 $[**]
Sep-04 $[**] May-06 $[**]
Oct-04 $[**] Jun-06 $[**]
Nov-04 $[**] Jul-06 $[**]
Dec-04 $[**] Aug-06 $[**]
Jan-05 $[**] Sep-06 $[**]
Feb-05 $[**] Oct-06 $[**]
Mar-05 $[**] Nov-06 $[**]
Apr-05 $[**] Dec-06 $[**]
May-05 $[**] Jan-07 $[**]
Jun-05 $[**] Feb-07 $[**]
Jul-05 $[**] Mar-07 $[**]
Aug-05 $[**]
Sep-05 $[**]
Oct-05 $[**]
Nov-05 $[**]
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