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EXHIBIT 1.21
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TRANSITION SERVICES AGREEMENT
BY AND AMONG
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AND
XXXX PERFUMES CORP.
DATED AS OF DECEMBER 6, 1996
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UNITED KINGDOM
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT ("Agreement"), dated this 6th day of December,
1996, between _________________________, a corporation organized and existing
under the laws of the __________________________, hereafter referred to as
"Seller," and Xxxx Perfumes Corp. ("Xxxx"), a corporation organized and existing
under the laws of Delaware, and its Affiliate(s), hereafter referred to
collectively as "Buyer."
WHEREAS, Seller's Affiliate and Buyer have entered into an Asset Sale and
Purchase Agreement, dated as of October 29, 1996 (the "Purchase Agreement"),
pursuant to which Buyer will acquire the Business (as defined in the Purchase
Agreement); and
WHEREAS, in connection with the acquisition, during the term of this Agreement
(the "Transition Period"), Seller agrees to act as Buyer's agent and to provide
to Buyer certain transition services in the ______, to facilitate the orderly
transition of the Business and to allow Buyer to develop the requisite
infrastructure to operate the Business on its own following the expiration of
this Agreement; and
WHEREAS, Seller agrees to provide, during the Transition Period, the same type,
quality and relative level of services which the Seller has provided to the
Business during the period preceding Closing, on a cost and expenses (no profit)
basis, in accordance with the books and records of Seller and consistent with
historical practices; and
WHEREAS, consistent with the foregoing, it is the intention of the parties that
the Seller (for and on behalf of the Buyer) will operate the Business on a day-
to-day basis during the Transition Period, but will consult with and act on
the instructions and at the direction of the Buyer with respect to all Material
decisions regarding the Business during the Transition Period.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties, intending to be bound hereby,
agree as follows:
ARTICLE 1
TRANSITION SERVICES
1.1 SERVICES: DAY-TO-DAY OPERATIONS; BUYER'S INSTRUCTIONS
(a) LEVEL OF SERVICE
During the Transition Period, and except as specifically disclaimed in
this Agreement, Seller will provide or cause to be provided to the
Business, the same type, quality and relative level of services which
the Seller has provided to the Business during the period preceding
Closing. These services shall include but not be limited to, product
supply services, distribution services, sales services, marketing
services, administration and credit services, and financial reporting
services. It is understood by the parties that the services provided
by Seller will be commensurate with the level of effort and resources
used in or committed to the Business by Seller prior to Closing. Any
increase in this level of service, or changes in Seller's operating
procedures that are requested by Buyer that affect other parts of
Seller's business, must be agreed to in advance by both parties and
Buyer must fully compensate Seller for such increased level of service
or changes in operating procedures. Seller will use its reasonable
efforts to provide such additional services consistent with the
limitations of Section 1.1(a) above.
(b) BUSINESS TRANSITION TEAM
Seller will identify relevant personnel who will be made available to
work with comparable personnel of Buyer to facilitate the day-to-day
operation and transition of the Business during the Transition Period,
including the identification by both parties of a primary point of
contact for communications between the parties regarding the Business
during the Transition Period.
(c) AUTHORITY TO OPERATE THE BUSINESS ON A DAY-TO-DAY BASIS: BUYER'S
INSTRUCTIONS
Except as specifically provided herein, Seller shall retain sole
discretion in decisions regarding the manner in which the transition
services described herein are provided to the Business; provided
however, that Seller shall consult with and act only on the
instructions and at the direction of the Buyer with respect to all
Material decisions regarding the Business during the Transition
Period.
In the event of a conflict between the Buyer and Seller with
respect to a decision regarding the Business, and subject to the
limitations in Section 1.1(a) above, the Buyer's decision/instructions
shall prevail, and the Seller shall be relieved of all liability to
the Buyer or any third party with respect to the impact (financial or
otherwise) of such decisions on the Business. Seller and Buyer may
agree to provide different levels of transition services hereunder in
different countries.
1.2 GENERAL DESCRIPTION OF PRODUCT SUPPLY SERVICES
(a) LEVEL OF SERVICE
Seller shall provide or cause to be provided product supply services
to the Business during the Transition Period at a level consistent
with the practices of the Business in the period preceding Closing,
including, but not limited to, the manufacture, packaging, labeling,
and temporary warehousing of products of the Business. Subject to
Section 1.1(c) above, all existing arrangements regarding suppliers,
manufacturing processes, inventory and production planning, quality
assurance, warehousing and delivery are deemed approved by Buyer and
may not be changed without Seller's consent.
(b) PRODUCT DEVELOPMENT
Seller shall not be required to develop any new product initiatives
such as brand extensions or special promotional items during the
Transition Period. Seller will provide information as appropriate to
Buyer to facilitate any such product development efforts that Buyer
may undertake during the Transition Period.
(c) STANDARDS AND SPECIFICATIONS
(i) Seller shall take all reasonable steps to ensure that products of
the business are produced at the same quality standards during
the Transition Period as maintained in the Business in the period
preceding Closing.
(ii) Buyer shall take all reasonable steps to ensure that all labeling
and packaging of the products of the Business remain in
compliance with all applicable regulatory requirements during the
Transition Period. If regulatory requirements change, Buyer
shall bear the cost of any changes in the Business required to
maintain regulatory compliance. Buyer and Seller shall agree
regarding how to make necessary product
or packaging changes to maintain regulatory compliance. Buyer
shall have sole decision-making authority over design and
aesthetics of such packaging and labeling.
1.3 GENERAL DESCRIPTION OF DISTRIBUTION SERVICES
Seller shall provide distribution services to the Business during the
Transition Period in the same manner as in the period preceding Closing,
including but not limited to the receipt and processing of customer orders,
the packaging and shipment of product, and the billing of customers.
1.4 GENERAL DESCRIPTION OF SALES SERVICES
(a) LEVEL OF SERVICE
Seller shall provide sales services to the Business during the
Transition Period in the same manner as in the period preceding
Closing, including but not limited to the taking of customer orders,
routine visits to accounts, development of merchandising programs and
retail merchandising executions.
(b) NOTIFICATION AND REFERRAL OF CUSTOMERS
Buyer and Seller shall jointly notify customers that Seller, acting as
Buyer's agent, shall continue to operate the Business during the
Transition Period for and on behalf of Buyer until Buyer assumes full
responsibility for operation of the Business following the end of the
Transition Period. Subject to Section 1.1(c) above, during the
Transition Period Seller will act as the sole point of contact for all
customer contacts, except as otherwise agreed by Buyer and Seller.
(c) CUSTOMER SUPPORT OF THE BUSINESS
Seller shall use its reasonable efforts to secure customer support for
the Business during the Transition Period consistent with the normal
course of business and overall trends in the Business. Seller shall
not be responsible for any adverse changes in the performance of the
Business during the Transition Period that are not attributable to
negligence on the part of Seller.
(d) AGREEMENTS WITH CUSTOMERS
During the Transition Period, Buyer shall maintain in their current
form all BDF agreements and other Agreements with customers.
(e) TRADE PRICING
Subject to Section 1.1(c) above, Seller shall have sole discretion
over trade terms, to ensure that the Business is operated consistently
with Seller's other
businesses. Subject to the limitations in Section 1.1(a) above, and
in this paragraph 1.4(e), Seller will implement all pricing changes
when and as requested by Buyer.
1.5 GENERAL DESCRIPTION OF MARKETING SERVICES
(a) FISCAL YEAR 1996/1997 MARKETING PROGRAM
Seller shall implement the balance of the Fiscal Year 1996/1997 marketing
program for the Business (as in effect as of the Closing). Buyer shall be
responsible for all commitments made under this marketing program in effect as
of the Closing. Seller shall incorporate Buyer's requested changes to the
design and development of this marketing program, however the scope and content
of the program, including Buyer's requested changes, must be commensurate with
the resources traditionally allocated by Seller to such programs.
(b) FISCAL YEAR 1997/1998 MARKETING PROGRAM
Seller and Buyer jointly shall develop a Fiscal Year 1997/1998 marketing
program consistent with the 1996/1997 Marketing Program and with overall trends
in the Business, to include the securing and making of commitments to support
the Fiscal Year 1997/1998 marketing program that would normally occur before
expiration of the Transition Period. The 1997/1998 Marketing Program shall
include a Holiday 1997 gift set merchandising program consistent with historical
practices of the Business. Seller shall incorporate Buyer's requested changes
to the design and development of this marketing program; however the scope and
content of the program, including Buyer's changes, must be commensurate with the
resources traditionally allocated by Seller to such programs and the 1996/1997
Marketing Program.
(c) MEDIA AND SUPPORT
Consistent with existing media support plans, Seller shall not be obligated
to provide any television, print, or other media support for the Business.
Buyer shall be responsible for the development of, and commitment to, any media
support plans for the Business during the Transition Period. Seller shall
facilitate contact between its current advertising agency and Buyer. If any
media rights are up for renewal during the Transition Period, the Seller, after
consultation with the Buyer, must agree to handle the negotiations.
(d) ADVERTISING DEVELOPMENT
Seller shall not be obligated to develop any new advertising for the
Business during the Transition Period. During the Transition Period, Seller
shall provide Buyer with access to
all of Seller's advertising files exclusively relating to the Business to
facilitate any advertising development efforts that Buyer may undertake.
1.6 GENERAL DESCRIPTION OF FINANCIAL REPORTING SERVICES
(a) Seller shall provide preliminary, by brand volume information for each
month to the Buyer within four business days of the close of such calendar
month. Final financial information shall be provided to Buyer within fifteen
(15) working business days immediately following the close of each calendar
month. Final financial information will include similar information as set
forth in Annex A of this agreement but will also include Gross Sales and Cost of
Goods Sold by product sold. All preliminary financial information shall be in
such form as agreed to by Buyer and Seller, and shall be consistent with
Seller's normal reporting and record keeping practices.
(b) Seller shall make all reasonable efforts to provide final financial
information as outlined in Section 1.6, including supporting documentation as
available from Seller's normal preparation of books and records, in a manner
that will facilitate Buyer's preparation of required local financial statements.
Buyer recognizes that should final financial information be different from the
final invoice for payment for services, as governed by Section 2.1 of this
agreement, the final invoice for payment of services shall form the basis for
financial data for financial statement preparation purposes for both Buyer and
Seller.
(c) Seller and Buyer shall agree on the additional reports and records
needed by Buyer to reasonably understand and take over operations of the
business. Upon such agreement, Buyer and Seller will include a listing of such
reports in Annex B, which will then form a part of this agreement. Seller shall
provide such reports on timing agreed between Buyer and Seller. Seller's effort
to provide such reports will be consistent with the same type, quality and level
of reporting provided prior to closing.
1.7 GENERAL DESCRIPTION OF ADMINISTRATION AND CREDIT SERVICES
Seller shall provide administration and credit services to the Business
during the Transition Period in the same manner as in the period preceding
Closing, including but not limited to the managerial, financial and reporting
services necessary to operate the Business and to maintain records of the
Business.
ARTICLE 2
PAYMENT FOR SERVICES
2.1 BASE PAYMENT FORMULA
Buyer will incur the appropriate costs for the services delivered by
Seller. "Cost of Services" shall mean actual costs and expenses, including
internal allocations, made to the Business in an amount consistent with the
Seller's accounting practices, as reflected in the books and records of Seller.
To effect this arrangement, Seller shall remit to Buyer, on a monthly basis and
in local currency, that amount specified by the payment formula contained in
Annex A of this Agreement, which is incorporated into this Agreement by
reference, said remittance due forty-five days after the midpoint of each
month. If in any month the Cost of Services exceeds the Net sales, then Buyer
shall remit to Seller within forty-five (45) days, the amount specified by the
Payment Formula contained in Annex A. Seller will provide a monthly invoice to
Buyer for the Cost of Services provided under this Agreement. Buyer will
provide a monthly invoice to Seller for the sales made on Buyer's behalf under
this Agreement. Buyer and Seller agree to pay all VAT that has been properly
charged on production of a valid VAT invoice.
2.2 INITIAL INVENTORY
Cost of Services shall not include costs for the Inventories transferred to
Buyer at Closing in accordance with Section 1.1(e) of the Purchase Agreement.
After the sterling value of those initial Inventories has been exhausted in
product supply services provided by Seller, the cost of producing product for
the Business will be included in the Cost of Services.
2.3 TERMINATION ADJUSTMENT
On March 31, 1997, or as soon as practicable thereafter, and again upon
termination of this Agreement, an adjustment will be made to reflect any
difference between the actual Cost of Services for those services provided by
Seller to Buyer and that amount actually charged to Buyer by Seller. If the
amount charged to Buyer is greater than the actual Cost of Services, Seller will
remit the difference to Buyer plus VAT. If the amount charged is less than the
actual Cost of Services, then Buyer will remit the difference to Seller plus
VAT. Such remittances will be paid within 30 days.
2.4 COMPENSATION FOR SERVICES BEYOND THE BASIC AGREEMENT
If Buyer desires to acquire services from Seller in addition to those
services provided for herein or beyond the level of services provided for in
Section 1.1(a) above, Buyer shall
first obtain Seller's consent to provide such additional services and the
parties shall use their reasonable best efforts to negotiate the compensation
to be paid to Seller for such services. Compensation for such services will
be billed to Buyer, as provided, on a monthly basis together with VAT thereon.
2.5 PAYMENT FOR INVENTORY AT TERMINATION
Upon termination of the Transition Period, Buyer shall purchase from
Seller, at Seller's established inventory value, all remaining inventory (which
Buyer has not previously paid for), of whatever type and description, including
inventory in the possession of suppliers. Seller will report the inventory
amount to Buyer within 45 days after termination of this Agreement. Buyer will
pay to Seller the appropriate amount within 30 days thereafter, together with
any VAT thereon upon presentation of a valid VAT invoice. Buyer is responsible
for the prompt pick up and shipment, at Buyer's expense, of this remaining
inventory.
2.6 REWORKED PRODUCT
Buyer shall receive a credit for amounts due to Seller hereunder for
returned product that is reworked and returned to inventory.
2.7 RETURNS
Seller shall accept returns for the Buyer's account consistent with the
Return Policy set forth in Schedule 1.3(f) of the Purchase Agreement.
ARTICLE 3
MISCELLANEOUS PROVISIONS
3.1 TERM: TERMINATION
(a) The term of this Agreement will commence on the Closing Date and shall
continue in full force and effect until June 30, 1997, unless terminated prior
to that date as provided for herein.
(b) Buyer may terminate this Agreement prior to June 30, 1997, at the end
of any calendar month, upon 30 days written notice of its intent to terminate to
Seller.
(c) In addition to any other rights or remedies Buyer or Seller may have
at law or in equity, and provided that the default is not cured within thirty
(30) days of the written notice, either party may terminate this Agreement by
giving thirty (30) days written notice of its intent to terminate upon the
occurrence of either or both of the following defaults:
(i) a Material breach by the other party of any of its obligations
hereunder; or
(ii) the filing by or against said party of a petition in bankruptcy,
or any appointment of a receiver for such party or any
substantial part of its assets, or any assignment for the benefit
of that party's creditors.
In the event the alleged default is cured within thirty (30) days, this
Agreement shall remain in full force and effect. In the case of a Material
default by either party, the other party shall have the right to seek specific
performance under this Agreement anytime after the default occurs.
(d) Termination of this Agreement shall have no effect on any other
agreement between Buyer and Seller, unless mutually agreed in writing between
the parties
3.2 CORPORATION AND INCOME TAXES
Buyer will be responsible for paying all taxes on the services to be
performed hereunder, except Seller's corporate and income tax. Buyer will
register with U.K. Taxing Authority and will file all required tax returns and
reports, and pay all taxes due arising out of their business in the U.K. Seller
will provide relevant information to Buyer to enable Buyer to file the required
returns and reports.
3.3 DISPUTE RESOLUTION
Seller shall designate a representative at or above the level of Associate
Director and Buyer shall designate a representative at the level of Vice
President, each of whom, before resorting to the arbitration provisions in
Section 8.5 of the Purchase Agreement, shall make good faith efforts to resolve
any dispute, controversy or claim arising out of or related to this Agreement or
any breach thereof.
3.4 FORCE MAJEURE
Neither party shall be liable to the other for failure to perform any part
of this Agreement if such failure results from an act of God, war conditions,
revolt, revolution, sabotage, government, state or municipal regulations or
actions, embargo, fire, strike, or other labor trouble or any cause beyond
Buyer's or Seller's control. Upon the occurrence of any such event which
results in, or will result in, delay or failure to perform according to the
terms of this Agreement or any extension thereof, the party whose performance is
delayed or prevented shall immediately give notice to the other party of such
occurrence and the effect and/or anticipated effect of such occurrence on the
performance of such party. The party whose performance is so affected shall use
reasonable best efforts to minimize disruptions in its performance and, subject
to the provisions in this Section, to resume full performance of its obligations
under this Agreement as soon as possible, and Seller shall allocate Products to
Buyer on a pro rata basis to that which is allocated to Seller's other product
lines during any force majeure period.
3.5 AMENDMENT AND MODIFICATION
This Agreement may be amended, modified, or supplemented only by the
written agreement of the parties hereto.
3.6 WAIVER OF COMPLIANCE
Except as otherwise provided in this Agreement, any failure of either of
the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefit thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part thereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be waiver of any other or subsequent breach
3.7 ENTIRE AGREEMENT
This Agreement, including the Exhibits and Schedules attached hereto and
any documents referred to herein, shall constitute the entire Agreement between
the parties hereto with respect to the subject matter hereof and shall supersede
all previous negotiations, commitments, and writings with respect to such
subject matter.
3.8 CAPTIONS
The captions appearing in this Agreement are inserted only as a matter of
convenience and as a reference and in no way define, limit or describe the scope
or intent of this Agreement or any of the provisions hereof.
3.9 COUNTERPARTS: FACSIMILE SIGNATURE PAGES
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one
agreement. Each party hereto agrees to be bound by its own facsimile signature
and to accept and be bound by the facsimile signature of the other party hereto.
3.10 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Neither party may
assign this Agreement, or any of its rights and liabilities hereunder without
the prior written consent of the other party hereto, provided that this
Agreement may be assigned in whole or in part by either party to an affiliate or
subsidiary.
3.11 NOTICES
All notices required or permitted to be given under this Agreement shall be
in writing and shall be deemed to be properly given: (a) when personally
delivered to the party entitled to receive the notice; (b) upon confirmation of
receipt of a facsimile message confirmed by first-class mail, postage prepaid;
(c) upon receipt of a package delivered by overnight courier; or (d) when sent
by certified or registered mail, postage prepaid, properly addressed to the
party entitled to receive such notice at the address for such party set forth in
Section 10.5 of the Purchase Agreement.
3.12 NO RIGHT OF SET-OFF
Notwithstanding any other provisions of this Agreement, all payments to be
made by either party under this Agreement, except as provided in Annex A, shall
be made free of any set-off and shall be timely remitted to the party to receive
payment under such provisions.
3.13 SEVERABILITY
The illegality or partial illegality of this Agreement or any provision
hereof shall not affect the validity of the remainder of this Agreement or any
provision hereof, and the illegality or partial illegality of this Agreement
shall not affect the validity of this Agreement in this or any other country.
3.14 CAPITALIZED TERMS
Capitalized terms used herein and not otherwise defined have the meanings
assigned to them in the Purchase Agreement.
3.15 RECOVERY OF ATTORNEY'S FEES
In the event of a dispute, controversy or claim asserted by either party
against the other party hereto, regardless of the forum in which such dispute
such dispute, controversy or claim is resolved, the court or arbitrator, as the
case may be, shall award attorneys' fees and costs to the prevailing party.
3.16 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the __________________________.
IN WITNESS WHEREOF, EACH OF THE PARTIES HERETO HAS CAUSED THIS AGREEMENT TO
BE SIGNED BY THEIR RESPECTIVE DULY AUTHORIZED OFFICERS AS OF THE DATE FIRST
ABOVE WRITTEN.
XXXX PERFUMES CORP.
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By: By:
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Name Printed: Name Printed:
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Title: Title:
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ANNEX A
BASE PAYMENT FORMULA
GROSS SALES (Including Value Added Tax)
less Cash, quantity, service and other allowances & discounts (1)
less Value Added Tax included in Gross Sales
less Accrual for bad debts (2)
less Actual returns
=subtotal NET SALES
COST OF SERVICES
less Cost of goods sold and cost of warehousing, delivery & freight (3)*
less Administrative and marketing expenses specific to the Business (4)*
=total NET PAYMENT BETWEEN SELLER AND BUYER
* to be invoiced to Buyer, including appropriate Value Added Tax
per local regulation
FOOTNOTES:
(1) Actual allowances/discounts paid per local policy and practice
(2) Normal (as accrued during 6-month period prior to closing) accrual for
uncollectible receivables/bad debts/inappropriate deductions. If actual
uncollectible receivables/bad debt experience exceeds accrued amount, Buyer
to reimburse Seller for difference.
(3) Fully loaded variable and overhead costs incurred to make, store & ship
product to customers, including Value Added Tax.
(4) To be documented locally in each geography served by a Transition Service
Agreement.
