EXHIBIT 99.2
APPAREL DESIGN
AND
MANUFACTURING AGREEMENT
XXXXXX SNOWBOARDS, INC.
AND
MARMOT MOUNTAIN LTD.
APPAREL DESIGN AND MANUFACTURING AGREEMENT
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PARTIES:
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XXXXXX SNOWBOARDS, INC. (Xxxxxx)
MARMOT MOUNTAIN LTD. (Marmot)
RECITALS:
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X. Xxxxxx is in the business of designing, engineering, manufacturing, and
marketing snowboards and related equipment and accessories.
B. Marmot is in the business of designing, manufacturing, and marketing
high quality outerwear and clothing accessories.
X. Xxxxxx desires to market a full line of snowboarding apparel, and
Marmot is prepared to assist Xxxxxx in the design, manufacture and merchandising
of such apparel in accordance with the terms and conditions provided herein.
AGREEMENTS:
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1. DEFINITIONS.
a. "Accessories" means fleece jackets, gloves, long underwear,
sweaters, and other clothing products that may be developed using the mutual
capabilities of Marmot and Xxxxxx.
b. "Outerwear" means the jackets and pants which are designed and
manufactured by Marmot during the term of this Agreement for the outdoor sports
enthusiast.
2. TERM. The term of this Agreement shall commence upon its full
execution, and shall expire upon Marmot's manufacture and delivery of Outerwear
and Accessories ordered by Xxxxxx for the 1999-2000 season pursuant to paragraph
5 herein.
Page 1--APPAREL DESIGN AND MANUFACTURING AGREEMENT
3. MARMOT'S OBLIGATIONS. During the term of this Agreement, Marmot shall
provide the following services to Xxxxxx:
a. DESIGN SERVICES. In consultation with Xxxxxx, Marmot shall be
responsible for assistance in the design and development, including fabric
selection, of a complete line of Outerwear and Accessories for Xxxxxx in
accordance with the Design Schedule. The parties agree that during the first
year of this Agreement, the line of Outerwear and Accessories designed by Marmot
will be a medium price range men's line similar to the collection demonstrated
to Xxxxxx in Santa Rosa, California, on November 26, 1996. After the first year
of this Agreement, Marmot's design obligations will be expanded to include a
complete line of men's and women's Outerwear and Accessories for snowboarders
and related outdoor enthusiasts. Each year of this Agreement, the parties will
establish a mutual design schedule that will allow the parties to meet the
timelines provided herein.
b. MERCHANDISING. Marmot shall provide appropriate sales training
assistance to Xxxxxx personnel for the marketing, distribution and sale of
Outerwear and Accessories, including advice on point of purchase merchandising.
c. MANUFACTURING. Marmot shall be responsible for the manufacture of
all Outerwear and Accessories, including, without limitation, selection of
manufacturing facilities, tracking of production and delivery, and maintaining
appropriate quality control.
4. CONSIDERATION. Xxxxxx shall pay to Marmot for services provided herein
the following amounts:
a. A total apparel design fee of One Hundred Eighty Thousand Dollars
($180,000) payable as follows:
Date Payment
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January 15, 1997 $50,000
January 15, 1998 $60,000
January 15, 1999 $70,000
b. Except as provided in Sections 4.c. and d., the manufacturing cost
for orders for Accessories and Outerwear. Marmot shall provide Xxxxxx with
"FOB" costs for Accessories and Outerwear each season. The parties acknowledge
such costs will include the actual factory manufacturing charges, plus a margin
to compensate Marmot for its manufacturing services. If such manufacturing
costs are not competitive, the parties will attempt to negotiate a price that is
competitive, or Xxxxxx may persue alternative sourcing.
c. After the first year of this Agreement, any surcharges or
additional costs imposed by the production facility for failure to meet any
production minimums of which Xxxxxx had been timely notified by Marmot. After
the first year of this Agreement, if Xxxxxx fails to meet any fabric minimums of
which it has been timely notified by Marmot, Xxxxxx shall also be responsible
for utilizing any fabric remaining from such minimum or paying the loss, if any,
on the disposal of such remaining fabric in the secondary market.
x. Xxxxxx shall be responsible for all costs relating to the
production of samples for use by Xxxxxx in the marketing and sale of Outerwear
and Accessories. Xxxxxx acknowledges that the actual manufacturing cost of such
samples is typically one and one-half (1 1/2) to two (2) times the usual cost.
e. Any reasonable amounts incurred by Marmot at Xxxxxx'x request for
travel expenses in providing the merchandising services described in Paragraph
3.b. above.
Page 2--APPAREL DESIGN AND MANUFACTURING AGREEMENT
5. ORDER AND DELIVERY SCHEDULE.
a. ORDER SCHEDULE. Xxxxxx shall place its initial order for
production of Outerwear and Accessories for the upcoming season on or before
January 15, 1997 for the first year of this Agreement and December 7, 1997 and
December 7, 1998 for the second and third years of this Agreement. It is the
expectation of the parties that the initial order will be of sufficient quantity
to cover approximately sixty percent (60%) to seventy percent (70%) of Xxxxxx'x
anticipated sales during the upcoming season. Xxxxxx may place a second order
for production of Outerwear and Accessories on or before the following April 1
to cover the remainder of Xxxxxx'x needs for the upcoming season and to make
minor adjustments in the initial order.
b. DELIVERY SCHEDULE. All orders shall be shipped by Marmot to the
destinations designated by Xxxxxx pursuant to paragraph 6 not later than the
following July 31, for orders placed either Dec. 7 or Jan. 15, and all April 1
orders shall be shipped to their designated destinations not later than the
following September 30.
6. DELIVERY TERMS. Prior to shipment of any order of Outerwear and
Accessories, Marmot shall consult with Xxxxxx regarding the intended destination
or destinations of such order. Marmot shall be responsible for arranging the
shipments of all orders to their designated destinations, including direct
shipments to distributers in countries other than the United States. Except as
otherwise provided herein, all shipments shall be F.O.B. Hong Kong or point of
manufacture, and Xxxxxx shall be responsible for any incremental costs
associated with any direct shipments to countries other than the United States.
7. LETTERS OF CREDIT. Xxxxxx shall, within thirty (30) days after
placement of each order, establish a transferable irrevocable letter of credit
in favor of Marmot Mountain Overseas Ltd., and issued by a bank chartered in the
United States acceptable to Marmot. Each such irrevocable letter of credit shall
be payable in U.S. dollars, in an amount equal to the total amount due Marmot
for the subject order pursuant to Paragraph 4.b. above. Each irrevocable letter
of credit shall provide that Marmot may draw upon it in full upon presentation
to the issuing bank of two (2) copies of Marmot's certification that it has
placed the subject order in the possession of appropriate carriers for delivery
to its designated destinations.
8. QUALITY ASSURANCE; WARRANTY. Marmot shall use its best efforts to both
(i) assure that all Outerwear and Accessories ordered by Xxxxxx meets the same
high quality construction standards which Marmot maintains on the production of
its own clothing products, and (ii) obtain rights to reimbursement, replacement
and/or credit ("corrective rights") for manufacturing defects in products for
Xxxxxx similar to the corrective rights Marmot obtains for its own products.
Marmot does not, however, warrant the products delivered to Xxxxxx to be free of
defect. In the event of products deemed unsalable by Marmot or Xxxxxx because
of manufacturing defects, Marmot shall use its best efforts to obtain
manufacturing charge-back from the production contractor and, if obtained, shall
pass through such charge-back to Xxxxxx. In addition, Marmot shall pass through
to Xxxxxx any manufacturer's warranties relating to the Outerwear and
Accessories.
9. EXCLUSIVITY. All Outerwear and Accessories designed pursuant to this
Agreement shall be for the exclusive use, marketing, distribution and sale of
Xxxxxx. During the term of this Agreement, Marmot shall not design, market or
sell any competing line of snowboard clothing or accessories for any third
party, except the existing relationship with NHS Inc., Santa Xxxx Brand, being
managed using design and development services outside of Marmot. Nothing
contained herein shall preclude either (a) Marmot from continuing to design,
market and sell its own Marmot brand of snowboard clothing and accessories or
(b) Xxxxxx from continuing its existing contractual relationships and entering
into new contractual relationships with third parties for the design,
manufacture and sale of clothing and accessories.
Page 3--APPAREL DESIGN AND MANUFACTURING AGREEMENT
10. COMPLIANCE WITH LAW; INDEMNIFICATION. Marmot shall comply with all
laws and regulations of the United States or any foreign country or local
governments therein, and shall be responsible for obtaining all permits,
licenses, and other approvals relating to the use, import, export, manufacture,
and shipment of the Outerwear and Accessories. Specifically, but without
limitation, Marmot shall assure that all Outerwear and Accessories are being
manufactured in accordance with applicable labor laws, that all Outerwear and
Accessories have been labeled in accordance with applicable import and export
laws, and that the import of Outerwear and Accessories into the United States or
any foreign country does not violate any applicable import quotas. Marmot shall
indemnify and hold Xxxxxx harmless from any loss, liability or expense,
including attorney fees, arising out of related to Marmot's failure to comply
with the obligations set forth in this Paragraph 10.
11. CORPORATE IDENTIFICATION; PRESS RELEASE. Xxxxxx shall not utilize
any trade names, marks or symbols of Marmot on any labeling attached to or
affixed to Outerwear or Accessories for the purpose of representing that such
Outerwear or Accessories have been designed or manufactured by Marmot.
Provided, that Xxxxxx may disclose the nature of the parties' relationship under
this Agreement to distributers, retailers and related sales personnel. Following
execution of this Agreement, a party may issue press releases, for the purpose
of disclosing the relationship of the parties under this Agreement, that are
reasonably acceptable to the other party.
12. TERMINATION BY XXXXXX. Xxxxxx shall have the right, upon seven days
prior written notice to Marmot, to terminate this Agreement prior to its
expiration provided in paragraph 2 upon the occurrence of any of the following
events:
a. Marmot's failure to deliver Outerwear and Accessories in a timely
manner as provided in Paragraph 5.
b. Marmot's failure to deliver Outerwear and Accessories meeting the
quality standards provided in Paragraph 8.
c. Marmot's violation or failure to perform any other material
obligation of Marmot under this Agreement.
If this Agreement is terminated as provided in this Paragraph 12.,
Xxxxxx shall remain liable for the costs of any orders submitted prior to the
effective date of termination, but Xxxxxx shall not be obligated to make any
annual payment to Marmot pursuant to Paragraph 4.a. which becomes payable after
the effective date of termination. Except as otherwise provided herein,
termination shall not affect any rights or obligations of the parties accruing
prior to the effective date of termination.
13. CONFIDENTIALITY. Except with the prior written consent of Xxxxxx or
as provided in the next sentence, Marmot shall not use or disclose to the public
or to any third party any information related to the design, style, fabric
selection or color scheme of any Outerwear or Accessories, until such time as
such Outerwear or Accessories are made available to the retail public by
Xxxxxx. In addition, Marmot represents that it shall ensure that each of its
employees, agents, and subcontractors who come into possession of such
confidential information, as necessary to perform Marmot's obligations
hereunder, is advised of the obligations contained in this paragraph and agrees
to be bound by those obligations.
Page 4--APPAREL DESIGN AND MANUFACTURING AGREEMENT
14. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement, or by law, shall be in writing and may be given by
personal delivery or certified mail, directed to the parties at the following
addresses, or such other address as any party may designate in writing prior to
the time of the giving of such notice, or in any other manner authorized by law:
Xxxxxx: 0000 Xxxxxxx Xxxx X.X.
Xxxxx, Xxxxxx 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
Marmot: 0000 Xxxxxxxxx Xxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
Any notice given shall be effective when actually received, including by
facsimile with confirming receipt, or if given by certified mail, then
forty-eight (48) hours after the deposit of such notice in the United States
mail with postage prepaid.
15. LEGAL PROCEEDINGS. In the event any legal proceeding is commenced for
the purpose of interpreting or enforcing any provision of this Agreement, the
prevailing party in such proceeding shall be entitled to recover a reasonable
attorney's fee in such proceeding, or any appeal thereof, in addition to the
costs and disbursements allowed by law.
DATED this 31st day of December, 1996.
XXXXXX SNOWBOARDS, INC.
By /s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx, Chief Executive Officer
MARMOT MOUNTAIN LTD.
By /s/ XXXXXXX XXXXXXXXXX
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Xxxxxxx Xxxxxxxxxx, President
Page 5--APPAREL DESIGN AND MANUFACTURING AGREEMENT
