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Exhibit 10.1
TRANSITIONAL SERVICES AGREEMENT
This Agreement dated as of __________, 1996 is between
Melville Corporation, a New York corporation, to be known as CVS Corporation
("CVS"), and Linens 'n Things, Inc., a Delaware corporation ("Linens").
WITNESSETH:
WHEREAS, Linens is presently a wholly owned Subsidiary of
CVS;
WHEREAS, after the issuance and sale on the date hereof of
Common Stock, $0.01 par value per share (the "Common Stock"), of Linens to the
public in an initial public offering (the "Initial Public Offering") registered
under the Securities Act of 1933, as amended, CVS will own approximately ___% of
the outstanding Common Stock of Linens;
WHEREAS, CVS and Linens are concurrently herewith entering
into the Stockholder Agreement and the Tax Disaffiliation Agreement;
WHEREAS, the parties hereto desire to set forth herein the
transitional services to be performed by CVS hereunder in order to allow for an
orderly transition of ownership of the Linens business (as currently conducted,
the "Business") to the public following the Initial Public Offering;
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. DEFINITIONS
(a) As used herein, the following terms shall have the
following meanings:
"Agreement" means this Transitional Services Agreement
including all Exhibits hereto, as amended from time to time.
"Costs" means any and all (i) actual costs incurred by CVS or
its Affiliates in connection with or with respect to performing the CVS Services
hereunder (including all costs and charges referred to in the Exhibits hereto)
and (ii) incremental
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costs of performing or providing any Service hereunder that are incurred as a
result of or otherwise arise from any third party consent required in connection
with (x) the provision of such Service hereunder or (y) the performance by CVS
of its obligations hereunder.
"CVS Services" or "Services" means the services (and related
agreements) set forth on Exhibits X-0, X-0 and A-3 hereto.
"Initial Public Offering Date" means the business day as of
which the Initial Public Offering shall be effected.
"Term" means, with respect to any Service, the term applicable
to the provision of such Service hereunder as determined pursuant to Section 4.
(b) Capitalized terms used herein and not otherwise defined
herein are used herein as defined in the Stockholder Agreement dated as of the
date hereof between CVS, Nashua Xxxxxx and Linens.
2. PROVISION OF SERVICES
(a) During the Term applicable to the provision or performance
of each CVS Service to be provided or performed by CVS (or an Affiliate) to
Linens with respect to the Business hereunder (as set forth in Exhibits X-0, X-0
and A-3 hereto), Linens shall purchase and pay for, and CVS (or such Affiliate)
shall provide and perform, each such CVS Service, upon the terms and conditions
set forth in this Agreement (including the applicable Exhibits hereto).
(b) All Services provided or performed by CVS or its
Affiliates hereunder shall be performed in a manner consistent with past
practice applicable to the provision or performance of such Services by CVS or
its Affiliates with respect to the Business.
(c) Each of CVS and Linens will use reasonable efforts to
complete the transition as promptly as practicable.
3. SERVICE CHARGES
Linens shall pay or reimburse CVS for all Costs attributable
to the provision or performance by CVS of CVS Services hereunder. Such payment
or reimbursement shall be made as provided in Section 5.
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4. TERM OF PROVISION OF SERVICES
The obligation of CVS to provide or perform any Service
hereunder shall terminate on the last day of the term for which such Service is
required to be provided or performed hereunder (as specified in the applicable
Exhibit hereto), after giving effect to the valid exercise of any extension
option with respect to, or termination of, the term applicable to the provision
or performance of such Service.
5. PAYMENT TERMS
All Costs required to be paid or reimbursed to CVS hereunder
shall be invoiced monthly by CVS. Invoiced amounts shall be due and payable
thirty (30) days from date of receipt of invoice.
6. INSPECTION
(a) Linens shall, during normal business hours and with
reasonable prior notice to CVS, have reasonable access to the properties,
offices, books and records of CVS for the purpose of observing that Services are
being procured or performed in accordance with the terms of this Agreement and
past practices relevant to the procurement or performance of such Services with
respect to the Business and to verify Cost amounts.
(b) CVS and Linens shall, from time to time but not more often
than once each month, review the basis and amounts of Costs charged hereunder.
In the course of such review, the parties shall in good faith, other than with
respect to Costs paid or payable to outside vendors as provided in Exhibit A-1,
(i) establish principles for determining Costs to be charged hereunder on a
prospective basis and (ii) determine the amount of any adjustment, if any,
payable by a party to the other with respect to Costs charged and reimbursed in
respect of any preceding period.
7. FORCE MAJEURE
CVS shall not be liable to Linens or any other Person for any
delay or default in performance where occasioned by any cause of any kind or
extent beyond CVS's control including, by way of example, but not limitation,
any act of God, any act, regulation or law of any government, war, civil
commotion, destruction of production facilities or materials by fire, earthquake
or storm, labor disturbance, epidemic, equipment breakdown or failure, failure
to obtain any third party or governmental consent required to perform Services
hereunder, or failure of suppliers, public utilities or common carriers ("Force
Majeure"). CVS shall promptly notify Linens in writing of the Force Majeure
causing delay or
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default in performance, the probable extent to which it will be unable to
perform, and the actions it intends to take to remove such Force Majeure, to the
extent reasonably possible to do so. CVS shall take reasonable action within its
control to alleviate the Force Majeure causing delay or default in performance
(it being understood that any costs or expenses incurred by CVS in connection
therewith shall constitute Costs for purposes of this Agreement).
8. ASSIGNMENT
No party hereto may assign its rights or delegate its
obligations hereunder without the prior written consent of the other parties,
and any attempted assignment or delegation without such consent shall be void.
Any Services required to be performed by CVS hereunder may be performed by an
Affiliate of CVS, provided that CVS shall not thereby be relieved of its
obligations hereunder. For purposes of this Agreement, Linens shall not be
considered to be an Affiliate of CVS.
9. DEFAULT
If Linens shall be in default of any payment or indemnity
obligation hereunder, CVS may terminate this Agreement by giving thirty (30)
days' written notice to Linens, specifying the basis for termination, provided
if within thirty (30) days after receipt of such notice Linens shall cure the
default by making the required payment, such notice shall cease to be
operational and this Agreement shall continue in full force. The right of CVS to
terminate this Agreement, as provided in this Section 9, shall not be affected
in any way by its waiver of, or failure to take action with respect to, any
previous payment defaults.
Notwithstanding the foregoing, the occurrence of any of the
following events with respect to a party hereto shall be deemed to constitute a
default which shall give rise to an immediate right of the other party to
terminate this Agreement without notice: the making of a general assignment for
the benefit of creditors, insolvency, the institution of bankruptcy,
reorganization, liquidation or receivership proceedings by or against a party
hereto and, if instituted against such party, its consent thereto or the failure
to cause such proceedings to be discharged within thirty (30) days thereafter.
The remedies provided for in this Section 9 are not intended
to be exclusive, and shall be in addition to any rights and remedies which the
parties have at law or in equity.
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10. EXCULPATION; INDEMNIFICATION
(a) Neither CVS nor any of its Affiliates nor any officer,
director, employee or agent of CVS or any such Affiliate (each, an "Indemnified
Party") shall be liable to any other party or Person for any damages, losses,
liabilities or expenses directly or indirectly arising out of, relating to or in
connection with this Agreement or the performance or non-performance of Services
hereunder, except to the extent such damages, losses, liabilities or expenses
are attributable to such Indemnified Party's gross negligence or wilful
misconduct.
(b) Linens shall indemnify each Indemnified Party for, and
hold each Indemnified Party harmless from and against, any and all damages,
losses, liabilities and expenses (including all reasonable legal fees and
expenses with respect thereto) ("Damages") arising out of, relating to or in
connection with this Agreement or the performance or non-performance of Services
hereunder, except to the extent such Damages are attributable to such
Indemnified Party's wilful misconduct.
11. MISCELLANEOUS
(a) Notices. All notices, statements or other communications
hereunder shall be in writing (including telecopy or similar transmission) and
shall be delivered as provided hereunder. A notice shall be deemed to have been
received by a party if delivered by (i) overnight courier, on the date of actual
delivery to the recipient's address (evidenced by confirmation of delivery from
the courier service making such delivery), (ii) mail, three business days after
being sent, if sent by registered or certified mail, with first-class postage
prepaid, or (iii) telecopier, upon receipt (evidenced by receipt of a
transmission confirmation form or the recipient's confirmation of receipt).
Notices shall be delivered to each party at the following addresses or at such
other
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address as may be designated by such party by notice in writing sent in like
manner.
For Linens: Linens 'n Things, Inc.
0 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention:
Telecopier: (000) 000-0000
With a copy to:
For CVS: CVS Corporation
One CVS Drive
Woonsocket, Rhode Island
Attention: Chief Financial Officer
Telecopier: 401-
With a copy to: Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
(b) Entire Agreement; Amendments. This Agreement and the
exhibits hereto constitute the entire understanding of the parties with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter hereof and thereof. This Agreement may not be
amended except by written agreement executed by each of the parties hereto.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York (without regard
to its conflict of laws provisions).
(d) Independent Contractors. The parties hereto are
independent contractors. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, franchise or joint venture
relationship between the parties. No party shall incur any debts or make any
commitments for the other, except to the extent, if at all, specifically
provided herein.
(e) No Waiver. Any party's failure to insist upon strict
performance of any provision of this Agreement shall not be deemed to be a
waiver thereof. No waiver shall be effective unless specifically made in writing
and signed by a duly authorized representative of the party granting such
waiver.
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(f) Severability. If it shall be determined by court order not
subject to appeal or discretionary review that any provision or wording of this
Agreement shall be invalid or unenforceable under applicable law, such
invalidity or unenforceability shall not invalidate the entire Agreement and
shall be construed so as to limit any term or provision so as to make it
enforceable or valid within the requirements of applicable law, and, in the
event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
(g) Counterparts. This Agreement may be signed in any number
of counterparts and by the different parties on separate counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(h) Headings. The paragraph headings used herein have been
inserted for convenience only and shall not be used in any way to construe or
interpret this Agreement or performance
(i) Effective Date. This Agreement shall become effective on
the Initial Public Offering Date.
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IN WITNESS WHEREOF, the parties have caused this Transitional
Services Agreement to be executed as of the day and year first above written.
[CVS] CORPORATION
By __________________________
Name:
Title:
LINENS 'N THINGS, INC.
By _________________________
Name:
Title:
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EXHIBIT A
Services Provided by CVS to Linens
with respect to the Business
Capitalized terms used in this Exhibit A and not defined
herein are used as defined in the related Transitional
Services Agreement dated as of _________, 1996 (the
"Agreement").
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EXHIBIT A-1
BAD DEBT COLLECTION AND PREVENTION
SERVICES AND RELATED AGREEMENTS
Linens has requested that CVS provide transitional services to
Linens pertaining to (i) check authorization, (ii) credit
transaction routing, (iii) check collection and reporting, and
(iv) bad debt collection and prevention ((i), (ii), (iii) and
(iv) collectively being the "Check Services").
On the terms and conditions set forth in this Exhibit and the
Agreement and for the Term set forth below, CVS will provide
to Linens, and Linens will purchase from CVS, the Check
Services with respect to the Linens Business, including
services by CVS (i) using CVS's software system for bad debt
collection, check authorization and credit transaction routing
(the "Bad Debt System") and (ii) providing unlimited access to
the negative check file and the positive check file with
respect to the Linens Business only.
Access by Linens to the negative check file can be continued
by Linens only so long as Linens continues to perform its
obligations under the ETC/SCAN Service Agreement (the "ETC
Agreement") (since Electronic Transaction Corporation ("ETC")
is the owner of the negative check file). ETC has agreed to
allow Linens to continue to obtain services under the ETC
Agreement during the transition period, and ETC has informally
advised that such continued services will be at the same ETC
rates as have heretofore been applicable to the Linens
Business (since CVS's original agreement with ETC covers
Linens). Notwithstanding anything else contained in this
Exhibit or the Agreement, CVS will have no obligation to
provide Linens with any access to the negative check file (or
access at such existing rates) if ETC does not permit Linens
such access (or such access at such existing rates) or Linens
otherwise does not continue to have any rights under the ETC
Agreement.
Ownership of all technology, software, intellectual property,
know-how, systems and other proprietary rights relating to the
Check Services (including without limitation the Bad Debt
System) vest in and shall remain with the CVS Group, and no
Person in the Linens Group shall
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assert any ownership interest therein. No assignment or
transfer to any Person in the Linens Group of any right or
license in or to any such technology, software, intellectual
property, know-how, systems or other proprietary right owned,
licensed or held for use by the CVS Group shall occur or be
deemed to occur by virtue of or in connection with the
provision of Services by CVS hereunder.
Information relating to Linens customers will be treated
confidentially so as to preserve confidentiality from, and
preclude any use by, CVS and its Affiliates, except that CVS
shall have unlimited access to Linens's positive check file.
In addition, Linens will have unlimited access to CVS's
positive check file, as these positive check files are
presently mutually inclusive.
Separate collection letters and telephone collection calls
will be made on Linens bad checks.
Charges for services will be (1) $.02 per check authorization
request, (2) $.02 per credit card routing request and (3)
$5.78 per returned item received, provided that such charges
shall be subject to increase in the event of any increase in
Melville's internal costs with respect to the related
services.
At Linens' expense, CVS will provide to Linens, if requested
by Linens, a copy of the information in the negative and
positive check files that has been contributed by Linens.
CVS will use reasonable efforts to accommodate any required or
requested modification of CVS's Check Authorization, Credit
Routing and/or Collection Management Systems, provided that
Linens will be responsible for all additional costs, as
approved by Linens, associated with each such modification
unless such modification is required under the ETC Agreement
and CVS would have made such modification regardless of
services related to this Agreement.
All funds recovered or collected by CVS or its designated
Collection Agencies pursuant to the provision of services
hereunder will be deposited into a Bank of Boston recovery
account that will be opened and maintained at Linens's
expense. Linens may request that additional collection
agencies be approved by CVS, and CVS will give reasonable
consideration to such requests.
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Linens agrees to direct all customer inquiries, correspondence
and payments concerning returned checks to the Collections
Department, 000 Xxxxxxxxxx Xxxxxx, X.X. Xxx 0000, Xxxxxxx, XX
00000 or to telephone (000) 000-0000.
TERM
The term for the provision and purchase of Check Services
hereunder shall be from the Initial Public Offering Date until
the first anniversary of the Initial Public Offering Date;
provided that (i) Linens may terminate the Check Services by
giving CVS 60 days' written notice of such termination and
(ii) CVS may terminate the Check Services hereunder (x) if at
any time such termination is required (or continued provision
of Check Services would result in any penalty or other
burdensome consequence or requirement being imposed) by any
federal or state regulatory agency or (y) as provided in
Section 3.04 of the Agreement.
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EXHIBIT A-2
INSURANCE CLAIMS ADMINISTRATION
SERVICES AND RELATED AGREEMENTS
On the terms and conditions set forth in this Exhibit and the
Agreement and for the Term set forth below, CVS will provide
to Linens, and Linens will purchase from CVS, claims
administration services ("Claims Services") relating to Linens
worker's compensation, general liability and property
insurance claims made prior to the Initial Public Offering
Date.
CVS shall maintain a special bank account (the "Claims
Account") for claims payment in connection with Claims
Services. CVS shall, on a regular basis, render a statement to
Linens of the amount of each claim to be paid pursuant to the
provision of Claims Services hereunder. Linens shall, promptly
upon receipt of such statement, deposit (by wire transfer) the
aggregate amount of the claims covered by such statement into
the Claims Account. CVS shall make payment of claims by checks
drawn on the Claims Account, but shall only release such
checks once funds therefor have been so deposited by Linens
into the Claims Account. In addition, CVS shall allow Linens
and/or its agents reasonable access to its books and records
relating to Claims Services in order to perform claim reviews.
Within 30 days after the later of (i) the Initial Public
Offering Date and (ii) receipt by Linens of an invoice
therefor from CVS, Linens shall reimburse CVS for all claims
handling charges and loss disbursements made prior to the
Initial Public Offering Date (whether billed or unbilled by
the Initial Public Offering Date). Additionally, following the
close of each month CVS will invoice Linens for all claims
reported to CVS during such month. Upon termination of the
Term relating to Claims Services, all fees and charges due and
owed by Linens through termination will be paid within 30 days
after the later of (x) the termination date and (y) receipt by
Linens of an invoice therefor from CVS.
TERM
The term for the provision and purchase of Claims Services
hereunder shall be from the Initial Public Offering Date until
the first anniversary of the Initial Public Offering
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Date, unless theretofore terminated by CVS as provided in
Section 3.04 of the Agreement or terminated by Linens upon 30
days' notice to CVS.
Upon termination, at Linens' expense and with CVS'
cooperation, all open and outstanding claims will be copied
and moved to a third party processor of Linens' choosing.
Additionally, upon termination Linens will make arrangements
at its expense for moving and storing of all closed claims
previously handled by the CVS claims unit within a reasonable
period of time not to exceed 60 days.
CLAIMS RUNOUT
For a period of at least five years after the Initial Public
Offering Date, the Linens Group will continue to have
insurance coverage with respect to claims made (i.e. claims
runout) after the Initial Public Offering Date in respect of
claims or losses incurred or events occurring prior to the
Initial Public Offering Date (i) to the extent such claims or
losses are covered under Melville Corporation insurance
policies under which the Linens Group or the Business had
coverage up to the Initial Public Offering Date and (ii) on
the terms in effect under such policies at the time such
pre-Initial Public Offering claims or losses were incurred or
events occurred. Notwithstanding anything else contained
herein, CVS will be liable for any deductible or retention
amounts under its directors and officers liability insurance
policies with respect to claims under such policies in respect
of individuals who were officers, directors and/or employees
of the CVS Group prior to the Initial Public Offering and
arising from acts, omissions or events occurring prior to the
Initial Public Offering.
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EXHIBIT A-3
VSAT/HUB SERVICES
PROVISION OF SERVICES AND RELATED AGREEMENTS
It is acknowledged by the parties that (i) the Xxxxxx
satellite is owned by Xxxxxx, (ii) the VSAT and HUB equipment
located at CVS or Linens offices and/or at store locations has
been outsourced to and is currently owned by Lockheed, and
(iii) services relating to such VSAT and HUB equipment with
respect to the Business have prior to the date hereof been
provided by Lockheed.
It is possible that after the date hereof CVS may (but shall
not be obligated to) reacquire such VSAT and HUB equipment
from Lockheed, terminate such outsourcing arrangement with
Lockheed and again operate such VSAT and HUB systems
internally. In the event such reacquisition and internal
operation is implemented by CVS by the first anniversary of
the Initial Public Offering Date, CVS agrees to provide to the
Linens Group services relating to such VSAT and HUB equipment
with respect to the Business, on a transitional basis for a
reasonable period of time (not to exceed six months) at market
rates, to enable Linens during such time period to enter into
an alternative arrangement for the procurement of VSAT and HUB
services from a third party other than CVS.
Linens agrees that if CVS does not implement such
reacquisition and internal operation by the first anniversary
of the Initial Public Offering Date (whether because CVS
continues its outsourcing arrangement with Lockheed, enters
into a new outsourcing arrangement, or otherwise), CVS will
have no obligation to procure VSAT or HUB services for, or
provide VSAT or HUB services to, Linens, and Linens will
itself be responsible for procuring VSAT and HUB services from
a third party provider other than CVS.
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