TRANSITION AGREEMENT
This Transition Agreement (the "Agreement") is entered into as of this 8th
day of December, 1999 by and among BEI MEDICAL SYSTEMS COMPANY, INC., a Delaware
corporation ("Seller") and COOPERSURGICAL ACQUISITION CORP., a Delaware
corporation ("Buyer").
RECITALS
WHEREAS, Seller and Buyer have entered into an asset purchase agreement
(the "Asset Purchase Agreement") dated October 1, 1999, as amended, pursuant to
which Seller will sell, and Buyer will purchase, substantially all of the assets
and assume certain of the liabilities of Seller relating to the Business as
defined in the Asset Purchase Agreement; and
WHEREAS, in connection with Buyer's acquisition of the Business from
Seller (the "Acquisition"), Seller and Buyer desire to provide for certain
transition services, on an interim basis, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Transition Services.
(a) During the term of this Agreement as set forth in Section 3 below (the
"Transition Period"), Seller shall continue to provide on behalf of Buyer the
products and services related to the Business in substantially the same manner
as such services were heretofore provided by Seller on its own behalf in
carrying on the Business, including the activity set forth on Annex A attached
hereto.
(b) Annex A constitutes part of this Agreement and may be amended from
time to time with the written consent of Seller and Buyer.
(c) Buyer shall pay the following amounts for the products and services
provided by Seller under this Agreement: (i) the cost of materials purchased by
Seller subsequent to the date of this Agreement to produce products pursuant to
a production plan mutually agreed upon by Seller and Buyer, which plan shall in
no event exceed Seller's manufacturing capacity as of the date of this Agreement
(the "Mutual Production Plan"), (ii) for each employee not engaged in production
or manufacturing and listed on Annex B, that percentage set forth on such annex
opposite the name of such employee under the column headed "Support Base
Business %" of the amount of weekly salary set forth on such annex opposite the
name of such employee under the column headed "Weekly Salary" plus an amount
equal to 28% of the result of the foregoing calculation, (iii) the amount of
out-of-pocket expenditures for supplies and services provided for the benefit of
Buyer under this Agreement that are approved by Buyer, which approval shall not
be unreasonably withheld, (iv) the cost of moving expenses for, and repairs and
installation of, equipment owned by Buyer, (v) as a labor component for each
product delivered for Buyer
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hereunder, an amount equal to the number of direct labor hours multiplied by
direct labor costs for each product as set forth on Schedule 1(c), which product
is delivered by Seller to or at the direction of Buyer pursuant to the Mutual
Production Plan, (vi) costs and expenses such as employment agency fees which
are incurred as a direct result of Seller's efforts to replace on a temporary
basis any employee performing transition services under this Agreement who
voluntarily terminates employment with Seller during the Transition Period,
(vii) all incremental costs approved by Buyer that are associated with customer
solicitation activity including, but not limited to: sales commissions, postage,
sales literature, freight, samples and other free goods, telephone and
communications, computer and office supplies, maintenance and repairs, outside
computer services and travel and entertainment expenses, (viii) all related
pre-approved collection charges and (ix) the commissions provided for in Annex
A. Seller shall send bills and/or invoices in connection with the foregoing
items at the end of each one-week period of the Transition Period. Buyer shall
within five days after receipt of such bills and/or invoices, pay to Seller the
amounts specified in such bills and/or invoices in full. Notwithstanding the
foregoing, although Seller shall xxxx all amounts to be paid pursuant to this
subsection, Buyer shall have no obligation to pay to Seller the first $275,000
for products and services due under this Agreement (the "Credit") and such
amount will not be considered due to Seller under this Agreement as Seller has
agreed to provide the first $275,000 of products and services delivered
hereunder without cost to Buyer. The Seller shall, promptly after the
termination of this Agreement (the "Termination Date"), pay to the Buyer that
portion of the Credit that, as of the Termination Date, had not been applied as
a credit against amounts billed by the Seller to the Buyer pursuant to this
subsection, in order to give the Buyer the benefit of the total amount of the
Credit either as a credit or in cash.
2. General Intent. Seller shall use its commercially reasonable best efforts to
provide all transition assistance which the Buyer may reasonably request during
the Transition Period. Seller shall use its commercially reasonable best efforts
to retain the employees required to produce the services set forth in Annex A.
Seller is not obligated to hire any new employees to replace those employees who
may leave the employment of the Seller during the Transition Period; provided,
however, that Seller shall use commercially reasonable efforts to replace such
employees with temporary personnel to the extent required for Seller to perform
its obligations under this Agreement. Because Seller is performing the
transition services for the benefit of Buyer, Seller shall perform such services
under the direction and control of Buyer, provided that Buyer shall provide such
direction and control through Seller's existing management and supervisory
channels. Buyer's personnel may be present on the premises of Seller on which
transition services are being performed to monitor and control such services.
Each party shall execute such further documents and take such further actions as
may be necessary to carry out the purposes of this Agreement.
3. Term.
(a) Except as provided in Section 3(b), 3(c), and 3(d) below, the term of
this Agreement shall commence on the date of the closing of the Acquisition (the
"Closing Date") and shall continue for ninety (90) days; provided, however, that
either party may terminate this Agreement in the event of a material default by
the other party hereunder that is not cured within five (5) business days
following written notice of default by the non-defaulting party.
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(b) Notwithstanding Section 3(a), Buyer may elect to extend the term of
this Agreement on a month-to-month basis for up to three (3) months by providing
written notice at least thirty (30) days prior to the expiration of the then
applicable Transition Period of this Agreement specifying the products and
services attached hereto that Buyer requires that Seller continue to provide and
the duration for which such products and services shall be provided. During the
period of any such extension (i) products shall be provided at the costs
mutually agreed to pursuant to this Agreement, and (ii) services shall be
provided pursuant to the terms of this Agreement at the rate of one hundred
dollars ($100) per hour of Seller employee time and incidental costs incurred
for such services that are pre-approved by Buyer. If the mutually agreed upon
production schedule for a certain product has not been met by Seller during the
initial ninety (90) days of the Transition Period and such production schedule
contemplated that the products would be completed within such ninety (90) day
period, then the costs for completing such products shall be pursuant to the
costs applicable during such ninety (90) day period, as specified on Schedule
1(c), rather than pursuant to this Section 3(b).
(c) Notwithstanding Section 3(a), Seller, at the request of Buyer, from
time to time during and for up to fifteen (15) months following the date of this
Agreement will provide on reasonable notice reasonable consulting services with
respect to issues such as regulatory affairs, product details, engineering and
sales and marketing. Such services shall be provided during the term of
Transition Period for payment provided for in this Agreement and after the
Transition Period at the rate of one hundred twenty dollars ($120) per hour of
Seller employee time and incidental costs incurred for such services that are
pre-approved by Buyer.
(d) Buyer may, at any time and from time to time, terminate any product or
service to be provided by Seller under this Agreement by delivering to Seller a
"Buyer Termination Notice". Each Buyer Termination Notice shall specify the
product or service to be terminated and the date on which termination shall
occur (which shall be not less than fourteen (14) days from the delivery to
Seller of such notice). From and after each such date of termination, Buyer
shall have no further obligation under this Agreement to pay Seller the charges
specified in this Agreement for each such terminated service or product, except
for any product for which an order has already been placed by Buyer and for any
service or product provided prior to such date of termination.
4. Insurance.
(a) Buyer possesses those insurance policies, including product liability
insurance, which are necessary to fully insure the services to be conducted by
Seller against all risks normally insured against by a person or entity
conducting the same business as Buyer and the business to be conducted by Seller
pursuant to this Agreement, and such policies name Buyer as the insured. Such
insurance policies comply with any federal, state, local or foreign laws and
regulations applicable to the business and operations conducted by Buyer,
including the transactions contemplated by this Agreement.
(b) Buyer will continue to carry its existing insurance or reasonably
comparable coverage throughout the term of this Agreement. Upon the written
request of Seller, Buyer will provide copies of certificates of insurance as
evidence thereof.
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(c) Seller will continue to carry its existing insurance as disclosed in
Schedule 2.20 to, or as may be otherwise required by the Asset Purchase
Agreement, or reasonably comparable coverage throughout the term of this
Agreement.
(d) Seller's insurance shall cover loss or damage to property of Seller
located on Seller's facilities used to provide transition services and on such
facilities to the extent required by any lease therefor. Buyer's insurance shall
cover loss or damage to Buyer's property located on such facilities. Each party
shall request its insurers to waive subrogation against the other party for
Losses to property covered by such party's insurance as described in this
subsection 4(d).
5. Certain Seller Payments. Seller represents to Buyer that to induce each
employee of Seller listed on the Personnel Consolidation Plan attached hereto as
Annex B (the "Retained Employee") to remain as an employee of Seller during the
Transition Period, Seller has offered each such employee the stay bonus and
severance payment set forth opposite the name of such employee on such Plan.
Seller shall make the payments required to be made by it to each such employee
pursuant to such offer. Other than as set forth on Annex B, Seller shall have no
further obligation to provide any stay bonus, severance payment or other
compensation to the Retained Employees. If Buyer instructs Seller to attempt to
retain a specific Retained Employee beyond the Transition Period, Buyer shall be
solely responsible for any stay bonus, severance payment or other compensation
to be provided at the instruction of Buyer to any such Retained Employee in
order to retain such Retained Employee beyond the Transition Period, and Seller
shall not be obligated hereunder to provide any compensation to any such
Retained Employee beyond the Transition Period (including any extensions of such
Transition Period made pursuant to this Agreement) unless instructed to do so by
Buyer.
6. Indemnification.
(a) Indemnification by Buyer. As of the date of this Agreement and subject
to the other provisions of this Section 6, Buyer shall indemnify, defend (with
counsel reasonably acceptable to Seller), and hold Seller, and its respective
directors, officers, agents and employees (collectively, the "Seller Indemnified
Parties") harmless from and against, and will pay to the Seller Indemnified
Parties the amount of any and all losses, damages, liabilities, costs and
expenses, direct and indirect (including reasonable attorneys' and consultants'
fees) (collectively, the "Losses"), arising, directly or indirectly, from or in
connection with:
(i) any breach of any representation or warranty made by Buyer in
this Agreement;
(ii) any breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(iii) any suit or proceeding brought against any Seller Indemnified
Party arising out of Seller's performance or non-performance contemplated by
this Agreement except to the extent caused by the gross negligence or willful
misconduct of a Seller Indemnified Party or Seller's wrongful failure to render
the services or produce the products contemplated by this Agreement; or
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(iv) gross negligence or willful misconduct of Buyer.
(b) Indemnification by Seller. As of the Effective Date and subject to the
other provisions of this Section 6, Seller shall indemnify, defend and hold
Buyer, its shareholders, directors, officers, agents and employees
(collectively, the "Buyer Indemnified Parties") harmless from and against and
will pay to the Buyer Indemnified Parties the amount of any Losses, arising
directly or indirectly, from or in connection with:
(i) any breach of any representation or warranty made by Seller in
this Agreement;
(ii) any breach by Seller of any covenant or obligation of Seller in
this Agreement; or
(iii) gross negligence or willful misconduct of Seller or Seller's
wrongful failure to render the services or produce the products contemplated by
this Agreement.
Notwithstanding the above, Seller shall have no liability and shall not
indemnify Buyer for any Losses to the extent based on (A) the gross negligence
or willful misconduct of a Buyer Indemnified Party or (B) any delay or refusal
on the part of Buyer in providing any necessary pre-approvals or approvals under
this Agreement on a timely basis. In each instance where pre-approval or
approval is required under this Agreement, Seller shall request for pre-approval
or approval in advance of the time when Losses would be incurred if pre-approval
or approval were not obtained. Seller shall not be obligated to take any action
or pay any expense with respect to a matter requiring pre-approval or approval
until such pre-approval or approval has been provided by Buyer.
(c) Limitations on Indemnification by Seller. No Seller Indemnified Party
shall be liable, responsible or in anyway accountable to Buyer for, and Buyer
waives and releases any claims (including any claim by way of subrogation,
contractual or implied indemnity or otherwise) against, such Seller Indemnified
Party for Losses which at any time after the date hereof may be suffered or
sustained by any individual, including any individual employed by Buyer, who,
after the date of this Agreement, and with the permission of Seller, has entered
Seller's facilities used to provide transition services, or may at any time be
using or occupying or visiting such facilities or be in, on or about the same,
or in or about the common areas of such facilities or the sidewalks adjacent
thereto, except to the extent caused by the gross negligence or willful
misconduct of such Seller Indemnified Party.
(d) Indemnification Claims. If either party hereto (the "Claimant") wishes
to assert an indemnification claim against the other party hereto, the Claimant
shall deliver to the other party a written notice (a "Claim Notice") setting
forth:
(i) a detailed description of the facts and circumstances giving
rise to the claim; and
(ii) a reasonable estimate of the total amount of Losses incurred.
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(e) Defense of Third Party Actions.
(i) If either party hereto (the "Indemnitee") receives notice or
otherwise obtains knowledge of any action, hearing, arbitration, litigation,
suit or claim ("Proceeding") or any threatened Proceeding that may give rise to
an indemnification claim against the other party hereto (the "Indemnifying
Party"), then the Indemnitee shall promptly deliver to the Indemnifying Party a
written notice describing such Proceeding in reasonable detail. The failure to
give such written notice shall not relieve the Indemnifying Party of any
liability under this Section 6 with respect to such matter except to the extent
the Indemnifying Party shall have been materially prejudiced by such failure.
(ii) If any Proceeding referred to in Section 6(e)(i) is brought
against an Indemnitee and it gives notice to the Indemnifying Party of the
commencement of such Proceeding, the Indemnifying Party will be entitled to
participate in such Proceeding and, to the extent that it wishes (unless the
Indemnifying Party is also a party to such Proceeding and the Indemnitee
reasonably determines in good faith that joint representation would be
inappropriate), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Indemnitee and, after notice from the Indemnifying Party to
the Indemnitee of its election to assume the defense of such Proceeding, the
Indemnifying Party will not, as long as it diligently conducts such defense, be
liable to the Indemnitee under this Section 6(e) for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the Indemnitee in connection with the defense of
such Proceeding. If the Indemnifying Party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the Indemnifying Party without the Indemnitee's consent and the Indemnitee
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an Indemnifying Party
of the commencement of any Proceeding and the Indemnifying Party does not,
within ten (10) days after the Indemnitee's notice is given, give notice to the
Indemnitee of its election to assume the defense of such proceeding, the
Indemnitee shall have the right to control the defense of, and to compromise or
settle such Proceeding.
(f) Survival. All representations and warranties in this Agreement will
survive for a period of one year after termination of this Agreement. The right
to indemnification, payment of damages or other remedy based on the provisions
of this Section 6 shall survive the time at which it would otherwise terminate
pursuant to Section 3, if prior to such termination, the party seeking
indemnification shall have duly delivered a Claim Notice to the party against
whom such indemnity may be sought in conformity with all of the applicable
procedures set forth in this Section 6.
(g) If the Indemnifying Party exercises its right to assume the defense of
a Proceeding pursuant to Section 6(e), (i) the Indemnitee shall be entitled to
participate in such defense with its own counsel at its own expense and (ii) the
Indemnifying Party shall not make any settlement of any claims without the
written consent of the Indemnitee, which consent shall not be unreasonably
withheld or delayed, unless the terms of such settlement requires no more than
the payment of money and the Indemnifying Party pays such amount.
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(h) If the Indemnifying Party assumes the defense of a Proceeding, the
Indemnitee shall cooperate fully as reasonably requested by the Indemnifying
Party in the defense of such Proceeding, and shall make available to the
Indemnifying Party all books, records and other materials that are under the
direct or indirect control of the Indemnitee and that the Indemnifying Party
reasonably considers necessary or desirable for the defense of such Proceeding.
(i) Absent fraud or willful misconduct, no party hereto shall be entitled
to recover special or punitive damages with respect to any breach of any
representation or warranty or nonperformance of any obligation under this
Agreement.
(j) Notwithstanding anything to the contrary contained in this Agreement
(i) to the extent Losses hereunder also constitute Losses under the Asset
Purchase Agreement, then those provisions of the Asset Purchase Agreement
applicable to such Losses shall determine the rights and obligations of the
parties with respect thereto and the provisions of this Agreement shall not
apply, (ii) except as provided in the previous clause (i) of this subsection
6(j), Buyer's product liability insurance shall be applicable to sales of
products by Buyer which occur subsequent to the date of this Agreement and
Seller's product liability insurance shall not be applicable to such sales,
(iii) the Indemnitee shall use commercially reasonable efforts to seek recovery
from its insurance providers with respect to any Losses for which indemnity
(other than indemnity for product liability) may be sought against the
Indemnifying Party under this Section 6 and for which the Indemnitee's insurance
may be available and such Losses shall be net of any insurance proceeds or other
amounts actually recovered by or on behalf of Indemnitee.
(k) To the extent that any Indemnifying Party makes any indemnification
payment to any Indemnitee, the Indemnifying Party shall be entitled to exercise,
and shall be subrogated to, any rights and remedies (including rights of
indemnity, rights of contribution and other rights of recovery) that the
Indemnitee may have against any other Person with respect to any Losses to which
such indemnification payment is related. The Indemnitee shall take such actions
as the Indemnifying Party may reasonably request for the purpose of enabling the
Indemnifying Party to perfect or exercise its right of subrogation hereunder.
(l) Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement may be brought by an
Indemnitee against an Indemnifying Person, and may be contested by such
Indemnifying Person. In that event, if the court or arbitrator in such
proceeding determines that the Indemnifying Person is not obligated under this
Agreement to indemnify the Indemnitee for all or any part of the amount claimed
by the Indemnitee in such proceeding, then the Indemnifying Person shall be
entitled to recover a portion of the reasonable attorneys' fees, costs and
disbursements incurred by the Indemnifying Person contesting the claim of the
Indemnitee against the Indemnifying Person in such proceeding (in addition to
any other relief to which it may be entitled) based upon the extent to which the
Indemnitee was successful in contesting the amount claimed by the Indemnifying
Person. This provision shall not limit in any way Losses to which an Indemnitee
is entitled under the provisions of this Agreement.
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7. General.
(a) This Agreement is made in accordance with and will be governed and
construed under the laws of the State of New York, excluding conflict of law
principles that would cause the law of another jurisdiction to apply.
(b) This Agreement is not assignable or transferable by either party in
whole or in part except with the written consent of Buyer, which consent shall
not be unreasonably withheld, provided, however, this Agreement may be assigned
by Buyer to an Affiliate of Buyer to which Buyer assigns its rights and duties
under the Asset Purchase Agreement. In the case of any permitted assignment or
transfer of or under this Agreement, this Agreement or the relevant provisions
thereof will be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.
(c) All notices and other communications required or permitted to be given
under this Agreement will be in writing and will be effective if delivered
during business hours on a business day when delivered personally by facsimile
or sent by a nationally recognized commercial overnight carrier, or by
registered or certified mail, postage prepaid, and addressed to the party at its
address set forth on the signature page hereof, unless by such notice a
different person, address or number has been designated for giving notice
hereunder or, if not delivered during business hours on a business day, the next
succeeding business day.
(d) The parties hereto agree that under this Agreement, each party is an
independent contractor and not an agent or employee of the other party. In no
way will any party be liable to the other party, its employees or agents for any
losses, injury, damages or the like occasioned by such party's activities in
connection with this Agreement, except as expressly provided herein.
(e) This Agreement may be amended only with the written approval of each
party hereto. Any of the provisions of this Agreement may be waived, generally
or in a specific instance, with the written approval of the party giving such
waiver. The failure of either party to enforce any provision of this Agreement
will not be deemed a waiver of such provision or of the right of such party
thereafter to enforce such provision or any other provision.
(f) In the event that any provision of this Agreement will be
unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity will not render this
Agreement unenforceable or invalid as a whole and, in such event, such provision
will be changed and interpreted so as to best accomplish the objectives of such
unenforceable or invalid provision within the limits of applicable law or
applicable court decision.
(g) Except as expressly provided in this Agreement, the rights and
remedies provided in this Agreement will be cumulative and not exclusive of any
other rights and remedies provided by law or otherwise.
(h) No liability shall result from delay in performance or non-performance
caused by circumstances beyond the reasonable control of the party affected,
including, without limitation, the voluntary termination of employment with
Seller by any of Seller's employees, reassignment or termination of any
employees of Seller at the direction of Buyer, acts of God, acts of a public
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enemy, acts of the governments of any state or political subdivision or any
department or regulatory agency thereof or entity created thereby, quotas,
embargoes, acts of any person engaged in subversive activity or sabotage, fires,
floods, explosions, or other catastrophes, epidemics, or quarantine
restrictions, strikes or other labor stoppages, slowdowns or disputes, voluntary
or involuntary compliance with any law, or regulation of any governmental agency
or authority, lack of transportation facilities, or any other cause beyond the
control of the affected party, for that period commencing at the time notice of
such circumstances is given by the affected party and terminating at such time
as the impairment caused by such circumstances ends or would have ended had the
affected party taken reasonable steps to remedy such circumstances.
(i) Seller's total liability with respect to services provided under this
Agreement will under no circumstances exceed the total of all service fees
actually paid or due to Seller or credited to Buyer under this Agreement,
including up to $275,000 billed but not paid by Buyer pursuant to Section 1(c)
of this Agreement. Furthermore, and subject to the limitations set forth in this
Agreement, if Seller fails to deliver a product in accordance with the Mutual
Production Plan (other than as a result of or failure to act on the part of
Buyer) and is unable to adequately cure such failure to deliver, the maximum
liability of Seller to Buyer with respect thereto shall be an amount equal to
the difference between the average sales price for such product and the cost to
Buyer hereunder relating to producing such product; in no event, however, shall
Seller be liable to Buyer for loss of customers in connection with the failure
to deliver a product in accordance with the Mutual Production Plan.
(j) The section headings appearing in this Agreement are inserted only as
a matter of convenience and in no way define, limit, construe or describe the
scope or extent of such paragraph or in any way affect such paragraph.
(k) This Agreement may be executed in counterparts with the same force and
effect as if each of the signatories had executed the same instrument.
8. Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall include the
masculine and feminine genders.
(b) Any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be applied in the construction or
interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above set forth.
BEI MEDICAL SYSTEMS COMPANY, INC. COOPERSURGICAL ACQUISITION CORP.
By:______________________________ By:______________________________
Name:____________________________ Name:____________________________
Title:___________________________ Title:___________________________
Address: Address:
BEI Medical Systems Company, Inc. CooperSurgical Acquisition Corp.
000 Xxxxxxxxx Xxxx c/o The Xxxxxx Companies, Inc.
Xxxxxxxxx, XX 00000 0000 Xxxxxxxxxx Xxxx Xxxx, Xxxxx 000
Xxxx: Xxxxxxx X. Xxxxxx, President Xxxxxxxxxx, XX 00000
and CEO Attn: Xxxxx X. Xxxxxxx, V.P.,
Facsimile Number: (000) 000-0000 Legal Affairs
Facsimile Number: (000) 000-0000
with a copy to: with a copy to:
Xxxxxx Godward LLP X'Xxxxxxxx Graev & Karabell, LLP
One Maritime Plaza, 20th Floor 00 Xxxxxxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000 Xxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxxxx, Esq. Attn: Xxxxx X. Xxxxxxxx, Esq.
Facsimile Number: (000) 000-0000 Facsimile Number: (000) 000-0000
ANNEX A
TRANSITIONAL SERVICES
Definitions: "B" is Seller and "C" is Buyer.
1. Operations
(a) B will prepare a production/purchasing schedule in support of key
product lines based upon existing practices and submit to C for
approval.
(b) B will prepare purchase orders in support of approved
production/purchasing schedules and submit to C for approval before
submission to vendors.
(c) B will schedule work orders based upon production plan approved by
C.
(d) B will continue to perform cycle counts for raw materials and
finished goods and submit to C worksheets on a weekly basis.
(e) B will continue to process C's Return Good Authorizations according
to B's existing work instructions, policies and procedures.
(f) B will continue to process stainless instruments according to B's
existing work instructions, policies and procedures.
(g) B will submit to C work schedules and receive C's approval for light
assembly and packaging of ancillary products in support of core
product lines.
(h) B will submit to C within five (5) working days after month-end
close current sales/inventory reports generated by its Vice
President, Operations.
(i) B will submit to C for C's approval, based upon the current
Backorder Report generated from Open Orders, purchase orders for
non-standard type items for purchase.
(j) B will provide C weekly with a copy of its current backorder report.
(k) B will ship all products to fill orders according to B's existing
work instructions based on customer demand, provided there is
sufficient on hand finished goods inventory.
2. Engineering
(a) B will continue to support product activities related to
manufacturing engineering issues.
(b) B will process Engineering Change Notices relating to product
maintenance.
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(c) B will evaluate non-conforming material for disposition decisions by
C.
(d) B will assist QC/QA as it relates to product conformance issues.
(e) B will generate autocad documentation as it relates to ECN's.
3. Quality Control
(a) B will continue to inspect all incoming material.
(b) B will inspect and test all in-process sub-assemblies.
(c) B will calibrate and test all final product for release to finished
goods.
(d) B will assist customer service as it relates to product technical
issues.
(e) B will maintain all final inspection documentation records.
(f) B will maintain calibration records for all inspection gauges and
test equipment.
(g) B will provide month end summaries of all customer complaints.
(h) B will continue to process complaints and take appropriate action in
accordance with B procedures as currently being conducted.
4. Customer Solicitation
(a) B will continue to operate the sales office in Chatsworth, CA for
the benefit of C.
(b) B's inside sales representatives will continue to solicit customer
orders via the telephone, follow-up on appropriate sales leads and
process customer orders through B's sales order processing system
for the benefit of C and under C's direction.
(c) B will continue to manage the outside sales force for the benefit of
C with the support of X. Xxxxx but with direction from C.
5. Customer Service
(a) B Customer Service at both sites will continue under C's direction
to interface with customers, telemarketing and external sales force
supporting GYN/GI (domestic and international) product lines,
process orders, returned goods and repairs according to existing
work instructions, policies and procedures presently used by B.
6. Customer Invoicing
(a) B will continue to invoice customers as products are sold and
shipped for the account of C.
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(b) B will continue to use its standard existing invoice forms with B's
name, the Chatsworth, CA address and phone numbers. Text will be
added to the invoice to indicate that sales are for the account of
C. As soon as C provides B with a replacement invoice of its design,
the revised invoice will be substituted for the existing standard
invoice.
(c) Customer credit terms, shipping terms and all other terms and
conditions of sales will be in accordance with B's current
commercial practice.
(d) B will mail a copy of the invoice to the customer. Postage will be
paid by C.
(e) B will provide C with copies of all invoices and a set of its
standard sales and cost reports no later than five (5) business days
after the end of each week.
7. Credit Notes
(a) B will continue to authorize and issue customer RGA's and process
credit notes in accordance with B's current commercial practice.
(b) All credits will be for the account of C.
(c) B will provide C with copies of all credit notes no later than five
(5) business days after the end of each week.
(d) Any cash refunds due to customers for duplicate or erroneous
payments will be forwarded to C for approval and payment. C will
advise B regarding any payments made for entry into its accounts
receivable ledger.
8. Sales Taxes
(a) Sales taxes will be billed and collected in accordance with B's
current commercial practices.
(b) B will provide C at the end of the month with a set of its current
standard sales tax reports to include in C's sales tax returns no
later than five (5) business days after the close of each month.
(c) All sales tax filings related to the sales that B transacts on the
behalf of C will be prepared and filed by C.
9. Commercial Credit
(a) B will continue to check its customers' credit history, review
credit references, authorize and issue customer credit, assign
customer credit limits and refuse to ship customer orders in
accordance with B's current credit practices, provided, however,
that if C provides B with C's credit practices, B will use C's
credit practices in lieu of B's current credit practices.
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(b) B will not be responsible for any credit decisions made on behalf of
C.
10. Accounts Receivable Collections
(a) B will continue to collect outstanding commercial accounts
receivable in accordance with B's current collection practices. All
related collection charges approved by C and telephone charges will
be for the account of C.
(b) B will mail account statements to customers at the end of each
month. Postage will be paid by C.
(c) B will have authority to assign accounts to third parties for
collection for the account of C when C deems it necessary.
(d) B will not be responsible for any uncollected accounts at the end of
the transition period.
(e) B will provide C with a copy of its standard detailed accounts
receivable aging and a listing of identified problem accounts no
later than five (5) business days after the close of each month.
11. Bank Accounts
(a) C will establish a depository bank account in Chatsworth, California
and B shall make deposits into the account of all amounts collected
for C. B will not have authority to make disbursements from this
account.
(b) B will make daily deposits into C's account of all funds received
from the collection of C's accounts receivable, and B will inform C
on a daily basis of the total amount of all funds deposited to the C
bank account.
(c) C will be responsible for the reconciliation and analysis of the C
bank account.
12. Accounts Receivable Reconciliation
(a) B will reconcile the accounts receivable aging at the end of the
month to the sales journal and cash receipts journal. A copy of the
accounts receivable reconciliation will be provided to C no later
than five (5) business days following the close of each month.
13. Accounts Payable
(a) All vendor invoices for purchases of C inventory and/or services
that can be identified as the responsibility of C will be forwarded
to C once a week with appropriate supporting documentation for
payment by C.
(b) Appropriate accounts payable documentation submitted to C will
include: a copy of the invoice, a copy of the purchase order (where
appropriate), a copy of any
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receiving documentation (if applicable), and the signature of the B
manager reviewing the proposed payment.
(c) At C's request, B will assist C in attempting to resolve any
disputes with vendors.
(d) C will make all required payments to vendors.
14. Commission Payments
(a) B will continue to prepare commission workpapers and commission
statements for both internal and external sales representatives in
accordance with B's standard reporting format and business practice.
(b) Commission payments due will be calculated based upon the current
sales commission plan as utilized by B immediately prior to the
execution of this Agreement and attached as Exhibit 1.
(c) Commission workpapers and commission statements will be forwarded to
C for approval and payment no later than fifteen (15) working days
following the close of each month.
(d) The commission payment schedules will be accompanied by an invoice
prepared by B that details the total commissions and related charges
to be paid by B.
(e) C will approve the commission invoice for payment, transfer the
appropriate funds to B's account and return the commission schedules
to B for process and payment to the sales representatives.
(f) B will process the commission payments either through its payroll or
individual checks, as appropriate.
15. Royalty Payments
(a) B will continue to prepare royalty workpapers and royalty payment
statements in accordance with B's standard business practices.
(b) Royalty workpapers and royalty payment statements will be forwarded
to C for approval and payment.
(c) C will make all royalty payments.
16. Payments of Shared Services
(a) B will prepare an invoice listing all items for payment and provide
reasonable supporting documentation to support the charge.
(b) Payments may only be withheld on disputed items, not on the total
amount of the invoice.
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17. Inventory
(a) B will separate the HTA inventory still owned by B from the
inventory sold to C.
(b) B will maintain perpetual inventory records for C in accordance with
current B work procedures and practices. All inventory transactions,
including incoming purchases, receipts of materials, shipments of
finished goods, returns to vendors, transfers to outside
contractors, and evaluation returns, will be recorded in perpetual
inventory records.
(c) B will provide C with a set of the current perpetual inventory and
transaction reports no later than five (5) business days after the
close of the month.
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EXHIBIT 1
TO ANNEX A
ANNEX B
