Kmart Corporation

Kmart Corporation Vendor Agreement

June 13, 1996

Dear Kmart Vendor:

The recent public debate and media attention on "sweatshop" allegations in the apparel manufacturing industry, prompt me to write to you today. Certainly, we are appalled by sweatshop conditions at any level within the manufacturing or retail industry. We also believe that innuendoes and unsubstantiated claims that brush broadly across the retail industry in the zeal to catch headlines are deplorable and counterproductive. Responsible dialogue and appropriate business conduct must be our commitment.

For decades, we have insisted on strict compliance with all applicable standards as part of purchase order terms. And, in fact, Kmart has never been found to be in violation of any human rights or labor laws in the manufacture of goods sold in our stores, primarily because we deal only with the most reputable vendors.

As we move forward in realigning our company, none of us can afford to have our reputations tainted by human rights violations. Therefore, your role in relation to the sourcing of the merchandise we sell at our stores is of critical importance. Our policies are clear. Kmart will not do business with any company that violates appli cable human rights and labor standards in the manufacture of goods sold at our stores.

If Kmart finds that any of our vendors, in the United States or abroad, falls short of our standards, the following actions will be taken:

We will cancel the orders and sever our relationship with any vendors that violate these standards.
Any vendor found in violation of applicable human rights or labor standards will bear the burden of any loss incurred.
Additionally, a payment, equivalent to 50 percent of the order, will be as sessed to the vendor for donation by Kmart to a human rights or children's organization in the community where the violation occurred.

As part of our quality assurance commitment to our customers, we are increasing our regular and surprise on-site inspections of manufacturing facilities around the world. We expect the same level of commitment from our vendors.

I trust that you will join Kmart in doing everything you can to help eliminate imper missible and inappropriate labor conditions in the global manufacturing community. Thank you for your personal attention and commitment to this matter and your prompt return of the following Certification of Compliance with our policies.

June 13,1996

All Kmart Vendors:

Kmart is strongly committed to full compliance with human rights and labor stan dards as related to the manufacturing of all merchandise sold at our stores. As a vendor to Kmart, you must ensure that there is no misstatement as to the true country of origin of your merchandise, and that none of your merchandise is made in whole or in part using any child, forced or prison labor. This obligation applies not only to your own company, but to any subcontractors you may use in producing goods for Kmart.

If Kmart learns that a factory used by any of our vendors for the production of merchandise has committed legal violations, or failed to comply with our standard Kmart order terms, we will:

Cancel the affected order(s)
Terminate our relationship with the vendor
Take legal action or pursue other equitable remedies to recoup any financial losses incurred by Kmart
Assess a payment to the vendor, equivalent to 50 percent of the order(s), that Kmart will donate to a human rights or children's organization.

With our current and planned growth in global sourcing, Kmart is increasing our quality control staff to ensure compliance with all applicable human rights and labor standards as well as other critical elements of quality assurance. Consistent with these actions, we expect all of our vendors to increase their factory inspections and take vigilant and immediate action to prevent any problems from occurring.

Please sign and return the following Certification of Compliance to Director of Ven dor Development, 3100 W. Big Beaver, Troy, Mich. 48084 by July 15, 1996. Thank you for your prompt attention and personal commitment to this very important mat ter.

Sincerely,

Executive Vice President, President,
General Merchandise Manager, U.S. Kmart Stores

Certification of Compliance

"By my signature below, as chief executive officer, and on behalf of my company, I acknowledge receipt of the above letter, and do hereby certify and agree that the company will comply with all applicable labor laws and the order terms and condi tions set forth on the back of this agreement for any and all goods supplied to Kmart regardless of country of origin. My company also agrees to make the above assessed payment for donation by Kmart to a human rights or children's organization in the event of failure to comply with any of the above requirements.

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(Print) Name & Title - Chief Executive Officer Signature Date

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Company Name & Address