EXHIBIT 10.9
EXECUTION VERSION
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement ("Agreement"), is made as of
December 31, 1996, by and between Conopco, Inc., a New York company acting
through its division, Van den ▇▇▇▇▇ Foods Company, ("VDB"), and MBW Foods Inc.
(f/k/a MBW Acquisition Corp.), a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement, dated as of
December 18, 1996 (the "Purchase Agreement"), between Conopco and Buyer, Conopco
has agreed to sell to Buyer the assets of the Business, as defined in the
Purchase Agreement; and
WHEREAS, it is a condition to Buyer's obligations under the Purchase
Agreement that VDB and Buyer enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which the parties acknowledge, VDB and
Buyer, intending to be bound legally, agree as follows:
1. Definitions. Capitalized terms that are not otherwise defined in
this Agreement shall have the meanings ascribed to them in the Purchase
Agreement.
2. Transition Services. During the term of this Agreement as set
forth in Section 6 (the "Transition Period"), VDB shall provide, or cause its
Affiliates to provide, to Buyer or its designated Affiliates, the services set
forth on Annex A, in the manner and at a level of service generally consistent
with that provided by VDB, or its Affiliates, to the Business immediately
preceding the date of this Agreement, it being acknowledged by Buyer that the
Lipton and Van den ▇▇▇▇▇ Foods divisions of Conopco, Inc. are being merged.
3. Payment. For the services rendered under this Agreement, Buyer
will pay VDB fees as set forth in Annex B hereto, reduced for any partial weeks
during which Buyer receives such services on a pro rata basis by multiplying the
price specified in Annex B by a ratio determined as follows: the numerator of
such ratio shall equal the actual number of Business Days during which Buyer
receives services during the partial week and the denominator shall equal five.
4. Cash Advances. As an advance for estimated collection of sales
during a period, VDB will make cash advances by wire transfer ("Cash Advances")
to Buyer, beginning January 31, 1997. The Cash Advances will be $1,000,000 on
January 31, 1997, and $500,000 on the 15th and 30th of each subsequent month
until the termination of the Transition Services Agreement.
5. Reconciliation and Net Payment. From the Closing Date, at the end
of each calendar month of the Transition Period, VDB will prepare a
reconciliation (the "Reconciliation"), with supporting documentation as Buyer
reasonably requests, of all payments required of VDB and Buyer to each other
under this Agreement, including, without limitation, fees and cost reimbursement
for services provided by VDB pursuant to this Agreement. From the
Reconciliation, a determination of the net payment required, after adjusting for
Cash Advances made during that month (the "Net Payment"), for that and the
appropriate payee under this Agreement (i.e., to VDB or to Buyer) shall be made
by VDB. Any Net Payment from VDB will be due 15 days following the end of each
calendar month for which month payment is due. Any Net Payment from Buyer will
be on the later of the 15th day following the end of each calendar month and 5
days after receipt by Buyer of the Reconciliation. Within 15 days of delivery of
the Reconciliation to Buyer, either party may object to the calculation of the
Reconciliation. Unresolved objections shall be resolved pursuant to Section 13
hereof.
6. Term of Agreement. The term of this Agreement shall commence on
the Closing Date and shall continue for a period ending on the earlier of 6
months from the Closing Date or as to any services such date on which Buyer
specifies, pursuant to Section 7 below, that such services shall terminate;
provided, however, that Buyer will to the extent reasonably practicable make a
good faith effort to cease using all services under this Agreement by five
months from the Closing Date.
7. Partial Termination. Any or all of the services provided by a
party under this Agreement are terminable by Buyer on 10 days prior written
notice to VDB except as provided in Section I.C on Annex A hereto relating to
brokers. Any such termination shall be final as to the services terminated.
8. Assignment. This Agreement shall not be assignable in whole or in
part by any party without the prior written consent of the other party, except
that Buyer may assign its rights under this Agreement to (A) any purchaser of
all or substantially all of Buyer's business in respect of the Products, (B) to
any of Buyer's Affiliates so long as that in such event Buyer shall remain fully
liable for the fulfillment of all such obligations and (C) as security to
Buyer's lenders in respect of the Financing or as collateral security in
connection with any other financing so long as the proceeds thereof are used for
businesses of, or acquisitions by, Buyer, its successors or subsidiaries, if so
requested; provided, however, that in the event of any such assignment of this
Agreement, Buyer shall notify Seller of such assignment within two business days
thereof.
9. Indemnification. Buyer hereby agrees to indemnify, defend and
hold harmless VDB from and against any and all claims, losses, demands, costs,
or liabilities, including reasonable attorneys' fees, resulting from or in
connection with third party claims arising from VDB's performance of the
services hereunder, unless such third party claims
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are due from VDB's gross negligence or willful misconduct in performing the
services. Such indemnification shall survive the termination of this Agreement.
Promptly upon receipt by VDB of notice of the assertion of any third party claim
in respect to which indemnity may be sought against Buyer pursuant to this
Section 9, VDB shall notify Buyer in writing thereof; but the omission to so
notify Buyer will not relieve Buyer from any liability which it may have to VDB
under this Section 9, except to the extent such failure to so notify materially
prejudices the ability of Buyer to defend against such action. In defending
against the claim, Buyer shall have the right to employ counsel of its own
choosing and shall at all times have the power to direct the defense against the
claim. VDB shall provide such assistance and cooperation, at Buyer's cost, as
Buyer may reasonably request in connection with the defense of any claim with
respect to which indemnity may be sought against Buyer pursuant to this Section
9.
10. Governing Law and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to its provisions concerning conflicts or choice of law. The parties
consent to the nonexclusive jurisdiction of the U.S. Federal Court situated in
the Southern District of New York for the resolution of any disputes as to the
construction of this Agreement.
11. Force Majeure. Neither party shall be considered in default in
the performance of its obligations under this Agreement to the extent that its
performance of such obligations is prevented or delayed by any cause beyond its
reasonable control, including but not limited to strikes, labor disputes, civil
disturbances, rebellion, invasion, epidemic, hostilities, war, embargo, natural
disaster, acts of God, fire, sabotage, loss and destruction of property, changes
in laws, regulations or orders, other events or situations which the party was
unable to prevent or overcome despite the exercise of due diligence.
12. Confidentiality. Any and all information disclosed by one party
to the other in connection with the performance of services under this
Agreement, whether disclosed in writing, orally or visually, is considered
confidential information, unless such information falls within the exceptions
set forth below (hereinafter any and all such information shall be collectively
referred to as "Confidential Information"). Each party agrees to disclose to the
other party only such of its Confidential Information as may be reasonably
necessary to provide the services contemplated hereunder. The recipient of
Confidential Information agrees that Confidential Information disclosed to it
hereunder shall be retained in confidence in the same manner used to protect its
own confidential information and shall not be disclosed to others or used for
purposes other than pursuant to this Agreement. Confidential Information shall
not include any information which, in the form disclosed by the disclosing
party, (a) was publicly available at the time of disclosure by the disclosing
party; (b) became publicly available after disclosure by the disclosing party
through no fault of the recipient;
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(c) was in the recipient's possession prior to disclosure by the disclosing
party, as evidenced by the recipient's written record, and was not the subject
of an earlier confidential relationship with the disclosing party; or (d) was
rightfully acquired by the recipient after disclosure by the disclosing party
from a third party who was lawfully in possession of the information and was
under no obligation to the disclosing party to maintain its confidentiality.
After termination of the Agreement, or at any other time requested by the
disclosing party, the recipient shall return or destroy, at the disclosing
party's direction, all documents, samples or other materials embodying
Confidential Information, and shall retain no copies thereof.
13. Dispute Resolution. VDB and Buyer agree that, in the event that
there is a disagreement with regard to unresolved objections to the
Reconciliation, senior management of the parties will meet and negotiate in good
faith in an attempt to resolve the dispute. In the event that the parties are
unable to resolve the dispute within 30 days from the date of written notice of
disagreement, either party may submit the dispute to binding arbitration, which
shall be conducted as follows: (i) the arbitration panel shall be composed of
three arbitrators, one appointed by VDB, one appointed by Buyer and one chosen
by the arbitrators appointed by VDB and Buyer; provided, however, the third
arbitrator shall be an independent third party knowledgeable in accounting and
administration and mutually satisfactory to VDB and Buyer; (ii) the arbitrators,
in conducting such arbitration, shall have access to all relevant documents and
records of the parties; (iii) the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "Rules") in effect on the date such arbitration is commenced and shall be
final and binding on the parties; and (iv) unless otherwise agreed, all
arbitration proceedings shall be conducted in New York, N.Y. In the event a
mutually satisfactory third arbitrator is not appointed within 30 days of
submission of a dispute to binding arbitration, appointment of the third
arbitrator shall be as provided in the Rules; provided, however, that the third
arbitrator so appointed shall be an independent third party knowledgeable in
accounting and administration.
14. Independent Contractor. At all times during the term hereof, VDB
shall be an independent contractor in providing services hereunder with the sole
right to supervise, manage, operate, control, and direct the performance of such
services and the sole obligation to employ, compensate, and mange its employees
and business affairs. Nothing contained in this Agreement shall be deemed or
construed to create a partnership or joint venture, to create the relationships
of employee/employer or principal/agent, or otherwise create any liability
whatsoever of either party with respect to the indebtedness, liabilities,
obligations or actions of the other or any of their employees or agents, or any
other person or entity.
15. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become
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effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
16. Notices. All notices, requests, demands, or other communications
to (a) VDB shall be given in accordance with Section 10.2 of the Purchase
Agreement with respect to notices to Seller and (b) Buyer shall be given in
accordance with Section 10.2 of the Purchase Agreement with respect to notices
to Buyer.
17. Modification, Non-Waiver, Severability. Neither this Agreement
nor any part of this Agreement may be changed, altered, or amended orally. Any
modification must be made by written instrument signed by the parties. Failure
by either party to exercise promptly any right granted in this Agreement or to
require strict performance of any obligation imposed under this Agreement shall
not be deemed a waiver of such rights. If any provision of this Agreement is
held ineffective for any reason, the other provisions shall remain effective.
IN WITNESS WHEREOF, the parties have caused this Transition
Agreement to be executed as of the date first set forth above.
CONOPCO, INC.
By /s/ Mart Laius
-----------------
Name: Mart Laius
Title: Vice President
MBW FOODS INC.
By /s/ ▇▇▇ ▇▇▇▇▇
----------------
Name: ▇▇▇ ▇▇▇▇▇
Title Executive Vice President
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ANNEX A
SERVICES TO BE PROVIDED BY VDB
I. MARKETING AND SALES TRANSITION
A. Sales Support
VDB shall provide to Buyer reasonable access to the
appropriate sales personnel, to provide sales planning data
and any other information that is non-proprietary to VDB and
is reasonably required to accomplish a successful transition.
Such information shall include, but not be limited to, the
following:
o a current file of all ▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇ Products, including
price lists, specifications, shipping requirements, current
customer lists and any exceptions to pricing or shipping
requirements from those published prices;
o terms of payment and lead times as published to class of trade
and any exceptions to those published terms or lead times that
may be in practice or committed to;
o details of all promotional price programs, inclusive of
off-invoice, ▇▇▇▇ backs, and other funds used for or charged
to ▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇, including accrued funds and their
handling by either ▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇ brokers or Seller's
personnel;
o the ending dates of price programs, inclusive of pre-price,
off-invoice, billbacks and/or other financial commitments and
any exceptions that may apply to published dates;
o Quarterly Sales Plan Binder for all markets and channels
inclusive of first and (to the extent available) second
quarter of 1997 fiscal year as may have been given to ▇▇▇.
▇▇▇▇▇▇▇▇▇▇▇'▇ brokers for implementation. If not included in
the Quarterly Sales Plan Binder, VDB will advise Buyer of any
▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇ Products included in any VDB or Unilever
umbrella promotions;
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o all available sales and/or marketing manuals, product
information, product files and market files that are related
to ▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇.
B. Marketing Services
For a maximum of three person days in the aggregate, VDB shall
provide reasonable consultation with existing marketing management
to help transition consumer and marketing initiatives and marketing
research.
C. Brokers and Salesforce
VDB shall direct its brokers and direct salesforce to continue to
take customer orders and to perform sales-related activities
including, but not limited to, deduction processing, trade deal
payments, and other customer payment-related activities. VDB shall
also make, on Buyer's behalf, brokerage payments to be reimbursed by
Buyer. As appropriate, VDB's sales personnel shall work with Buyer's
brokers to effect an orderly transition of its service. Buyer shall
give VDB at least 45 days advance notice of Buyer's intent to
discontinue using any of Seller's brokers. Buyer will to the extent
reasonably practicable make a good faith effort to cease its use of
VDB's salesforce after two months from the Closing Date.
II. TRANSACTIONS PROCESSING
A. VDB shall provide to Buyer the following services for
transactions processing consistent with those currently
provided to the Business:
o Order entry and customer invoicing services for all channels
of distribution, including retail, food service, military, and
export.
o Credit and Collections Management- VDB shall provide to Buyer
cash application, credit memo administration, deduction
management, and other accounting and administrative processes
related to the accounts receivable/deduction management
function necessary to conduct the Business, including
collection of accounts receivable for sales invoiced on behalf
of Buyer.
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o Order Picking and Loading- VDB shall, on behalf of Buyer,
generate the necessary documents and paperwork for filling an
order, scheduling the carriers, and loading the order for
shipment.
o Trade and Consumer Promotions- VDB, on behalf of Buyer, shall
make payments relating to trade promotions and consumer
promotions, including coupons, for which Buyer is responsible
pursuant to Section 1.4 of the Purchase Agreement.
o Trade Damage and Product Returns- Any trade damage claim that
is submitted to VDB shall be paid by VDB and reimbursed by
Buyer, provided, however, that with respect to any such claims
that are received during the 60 day period after the Closing
Date, VDB shall be responsible for liabilities as described in
the Asset Purchase Agreement. Buyer will not make any claims
against VDB in connection with its payment of any trade damage
claim other than based on VDB's gross negligence. As part of
accounts receivable and invoice processing services, VDB will
process credit memos for product returns to customers as
required.
B. Accounting Services
o VDB shall provide accounting services to the Buyer to provide
necessary information and transaction processing on behalf of
the Buyer. The following services shall be provided:
1. Daily sales reporting of units and revenues
2. Monthly reporting of gross and net sales (net
sales defined as sales invoiced to customers less
cash discounts and allowances and trade damage.)
3. Monthly accounts receivable information regarding
balance of open accounts, aged trial balance, and
customer deduction activity.
4. Coupon accounting services including monthly
reporting of coupon history, redemptions, and
related payments.
5. Trade deal accounting services including monthly
reporting of deal history, payments, deductions,
and adjustments.
6. Monthly finished goods inventory balances by SKU.
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7. Reasonable transition assistance to help Buyer
establish stand-alone activities.
o VDB shall provide the monthly reports in a manner similar to
what is shown on Exhibit 1, along with supporting
documentation, as reasonably requested by Buyer.
III. OTHER
A. Consumer Response
o VDB shall provide consumer response services to Buyer
generally consistent with those services currently provided to
the Business:
B. Information Services
o VDB shall provide information services necessary to support
the transition services in the Agreement. VDB will also
provide reasonable assistance to the Buyer to transition
existing data to the Buyer's systems as required.
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ANNEX B
SERVICE FEES
Service Fee Per Week
------- ------------
Brand Management (maximum of 3 person days) 0
Sales Management $17,000*
Trade Marketing $ 3,000
Customer Relations $ 4,575
(including credit and accounts receivable,
order invoicing)
Transportation Management $ 900
Information Technology $ 4,000
Finance and Accounting $ 6,225
Military and Export (UMEX) $ 2,000
800 phone number $ 8.00 per contact
----------
* The charge for Sales Management services will be reduced proportionately
based on the number of markets as such services are assumed by Buyer.
EXHIBIT 1
▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇
Statement of Activity
Month of ____________
Sales (supported by Sales to Customer Reporting)
List Billed
SKU CS Price OI Revenue
--- -- ----- -- -------
$ $ $
_____ _____ _____
$_____ $_____ $_____
Invoice Receivable (supported by aging, by customer)
Balance Beginning of Period $
Billed Revenue
Invoices Closed (A) _____
Balance End of Period $_____
Cash Discounts Taken (B) $
Deduction Receivable (supported by aging, by customer)
Balance Beginning of Period $
Deductions created (C)
Deductions - to reserves
- to expense
Deductions Repaid (D)
_____
Balance End of Period $_____
▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇
Statement of Activity
Month of ____________
Promotional Reserves - Trade (supported by tracking by event)
Balance Beginning of Period $
Accruals Authorized
Cash Paid
Deductions Cleared
__________
Balance End of Period $
==========
Promotional Reserves - Consumer Coupons (supported by tracking by
event)
Balance Beginning of Period $
Accruals Authorized
Cash Paid
Deductions Cleared
__________
Balance End of Period $
==========
Promotional Reserves - Other Consumer (supported by tracking by
event)
Balance Beginning of Period $
Accruals Authorized
Cash Paid
Deductions Cleared
__________
Balance End of Period $
==========
Damage Reserve
Balance Beginning of Period $
Accruals Authorized
Cash Paid
Deductions Cleared
__________
Balance End of Period $
==========
▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇
Statement of Activity
Month of ____________
Inventory (supported by balance on hand, by SKU)
Units
-----
Balance Beginning of Period $
Inventory Produced
Inventory Purchased
Inventory Adjustments**
Inventory Sold _____ __________
_____
Ending Inventory $
__________
Customer Delivery Costs (supported by customer
invoice, by zone report) $
Broker Commissions (supported by commission ___________
statements
$
___________
** During the initial month of the transition, inventory adjustments shall
reflect a deduction for the finished goods conveyed to Buyer at Closing.
EXHIBIT 2
▇▇▇. ▇▇▇▇▇▇▇▇▇▇▇'▇
Summary of Cash Activity
Month of _______________
Due to Due From
Buyer Buyer
-----------------------
Accounts Receivable Collected,
Net (A - B - C + D) $ $
Inventory Produced
Inventory Purchased
Customer Delivery Costs
Broker Commissions
Promotional Payments:
Trade
Consumer Coupons
Other Consumer
Damages and Unsaleables
Service Fee $
__________ __________
Net Due to/from Buyer $ $
========== ==========
