Exhibit 2.12
TRANSITION SERVICES AGREEMENT
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THIS TRANSITION SERVICES AGREEMENT, dated April 25, 2002 (the "Agreement"),
is entered into by and between Spectrum Organic Products, Inc., a California
corporation ("Spectrum"), and Organic Ingredients, Inc., a California
corporation ("Buyer"), a wholly-owned subsidiary of Acirca, Inc., a Delaware
corporation ("Acirca").
WHEREAS, Spectrum, Buyer and Acirca have entered into an Asset Purchase
Agreement, dated as of the date hereof (the "Asset Purchase Agreement"), whereby
Spectrum has agreed to sell and Buyer has agreed to purchase certain assets of
Spectrum;
WHEREAS, the Asset Purchase Agreement contemplates the transfer of certain
activities from Spectrum to Buyer (the "Transfer") and such transfer requires
the provision of certain services by Spectrum for a successful transition; and
WHEREAS, as a condition to Buyer entering into the Asset Purchase
Agreement, Spectrum has agreed to provide Buyer with certain services necessary
to efficiently complete the Transfer with minimal disruption to customers and
suppliers of the Business (as defined in the Asset Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Asset Purchase
Agreement.
2. Performance of Services. Subject to the terms and conditions set forth
herein, Spectrum shall, in providing the Services (as defined herein), provide
to Buyer, not less than the same level of quality and performance consistent
with past practices, which Spectrum has previously achieved in operating the
Business during the prior year. Spectrum agrees to provide all Services which
Buyer may reasonably request during the period beginning on the date the Asset
Purchase Agreement is executed and ending as set forth in Section 7 hereof
("Transition Period"). Buyer agrees to use reasonable efforts to terminate its
need for the Services as soon as reasonably possible and in any event (unless
the parties otherwise agree) not later than the end of the Transition Period.
3. Communication. The parties agree that specified points of contact for
both Buyer and Spectrum are critical to this transition. The contacts for each
party are set forth below:
a) Primary Contacts.
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Buyer: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Spectrum: ▇▇▇▇▇▇ ▇▇▇▇▇▇
b) Service Contacts.
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i. Order and Billing:
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Buyer: ▇▇▇▇▇▇ ▇▇▇▇▇
Spectrum: ▇▇▇▇▇ ▇▇▇▇▇
ii. Management Information Systems:
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Buyer: ▇▇▇ ▇▇▇▇
Spectrum: ▇▇▇ ▇▇▇▇
iii. Accounting and Financial Reporting:
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Buyer: ▇▇▇ ▇▇▇▇▇▇▇
Spectrum: ▇▇▇▇▇ ▇▇▇▇▇▇
vi. Order Processing:
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Buyer: ▇▇▇▇▇▇ ▇▇▇▇▇
Spectrum: ▇▇▇▇▇ ▇▇▇▇▇▇
4. Services. Subject to Sections 2 and 5 hereof, Spectrum shall provide
Buyer with services (the "Services"), which shall include (without limitation)
the following:
(a) Order and Billing. Spectrum shall provide order and billing
transition services to Buyer as described on attached Exhibit A.
(b) Management Information Systems. Spectrum shall provide
management information systems transition services to Buyer as
described on attached Exhibit B.
(c) Accounting and Financial Reporting. Spectrum shall provide
accounting and financial reporting transition services to Buyer
as described on attached Exhibit C.
(d) Order Processing Services. Spectrum shall provide warehousing
and order fulfillment services to Buyer as described on attached
Exhibit D.
5. Service Charges. (a) Spectrum shall invoice Buyer once monthly for all
reasonable out-of-pocket costs actually incurred by Spectrum in connection with
the provision of the Services including without limitation freight costs,
distribution costs, warehousing costs, off-invoice chargebacks, and travel,
meals and lodging of Spectrum employees; provided, however, in no event shall
such costs include overhead costs incurred by Spectrum, including without
limitation compensation of Spectrum employees, all of which costs shall be the
sole responsibility of Spectrum.
(b) Spectrum shall provide the Services in exchange for a fee equal to 3%
of the net sales of the Business (as defined in the Asset Purchase Agreement) as
conducted by Buyer during the Term (as defined herein), which net sales shall
have been recorded by Buyer during the Term. For purposes of this Agreement,
"net sales" means gross sales, less off-invoice promotions and cash discounts.
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Upon Buyer's written notice delivered from time to time to Spectrum to terminate
or reduce the scope of provision of any Service, Spectrum shall terminate or
reduce the scope of, as applicable, the provision or performance of such Service
as soon as is reasonably practicable, but in no event not later than thirty (30)
days after such notice is given.
6. Mail. The parties acknowledge that it may occur that, after the Closing
Date, each of Spectrum and Buyer may inadvertently receive mail, telegrams,
packages or other communications properly belonging to the other. Accordingly,
each of Spectrum and Buyer recognizes and agrees that after the Closing Date the
other may receive and open all mail, telegrams, packages and other
communications so received in order to determine the appropriate recipient, and
may retain the same to the extent that they relate to the business of the
receiving party and, to the extent that they do not relate to the business of
the receiving party, shall promptly send the same to the other party by personal
delivery, mail, facsimile or nationally recognized overnight courier service, as
appropriate, or contact the other party by telephone for delivery instructions
for such mail, telegrams, packages or other communications (or, in case the same
relate to both businesses, shall promptly forward copies thereof to the other
party in accordance with the other party's delivery instructions). The
provisions of this Section 6 are not intended to and shall not be deemed to
constitute an authorization by either party to permit the other to accept
service of process on its behalf, and neither party is or shall be deemed the
agent of the other for service of process or for any other purpose.
7. Termination. The term of this Agreement shall commence on the date
hereof and thereafter continue in full force and effect until July 31, 2002,
except as otherwise expressly provided herein or unless terminated sooner as
provided herein or extended by mutual agreement (such period from the date
hereof until termination hereof referred to herein as the "Term").
8. Notices. All notices, demands and other communications which may or are
required to be given to or made by either party to the other in connection with
this Agreement shall be in writing, and shall be deemed to have been duly given
or made: (a) if sent by registered or certified mail, five days after the
posting thereof with first class postage attached, and (b) if sent by hand or
overnight delivery, upon the delivery thereof, in each case addressed to the
respective parties as follows:
If to Spectrum:
Spectrum Organic Products, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Buyer:
Organic Ingredients, Inc.
One ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address and to the attention of such other persons as either
party hereto may specify from time to time by notice to the other party.
9. Entire Agreement. This Agreement and the Asset Purchase Agreement, and
the documents and certificates referred to therein embody the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, oral or written, relative to said subject matter.
10. Captions. The section headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement in construing
or interpreting any provision hereof.
11. Waiver; Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the parties hereto, and no
waiver of any of the provisions or conditions of this Agreement or any of the
rights of a party hereto shall be effective or binding unless such waiver shall
be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed in
writing, no waiver by that party of any condition of this Agreement or breach by
the other party of any of its obligations or representations hereunder shall be
deemed to be a waiver of any other condition or subsequent or prior breach of
the same or any other obligation or representation by the other party, nor shall
any forbearance by the first party to seek a remedy for any noncompliance or
breach by the other party be deemed to be a waiver by the first party of its
rights and remedies with respect to such noncompliance or breach.
12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO THE CONFLICTS RULES THEREOF TO THE EXTENT SUCH CONFLICTS RULES WOULD
REQUIRE THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.
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13. Forum Selection and Consent to Jurisdiction. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF NEW
YORK, NEW YORK OR ANY UNITED STATES FEDERAL COURT SITTING IN NEW YORK, NEW YORK,
AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ANY OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS FROM ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY HAND DELIVERY OR BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY, AS THE CASE MAY
BE, AT THE ADDRESSES DESCRIBED IN SECTION 8 OF THIS AGREEMENT, SUCH SERVICE TO
BECOME EFFECTIVE UPON HAND DELIVERY OR TEN (10) DAYS AFTER SUCH MAILING. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, ANY OBJECTION IT MAY HAVE TO VENUE AND THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTIONS OR PROCEEDINGS.
14. No Third Party Beneficiaries. Nothing herein, expressed or implied, is
intended or shall be construed to confer upon or give to any Person including,
without limitation, any employee of Spectrum, any legal or equitable right,
remedy, claim or other benefit under or by reason of this Agreement.
13. Counterparts. This Agreement may be executed simultaneously in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
14. Gender. Whenever the context requires, words used in the singular shall
be construed to mean or include the plural and vice versa, and pronouns of any
gender shall be deemed to include and designate the masculine, feminine or
neuter gender.
15. Severability. All provisions of this Agreement, and all portions of
such provisions, are intended to be, and shall be, independent and severable,
and in the event that any provision or portion thereof is determined to be
unlawful, invalid or unenforceable, such determination shall not affect the
validity or enforceability of any other provision, or portion thereof, of this
Agreement, and all other provisions and portions thereof shall continue to be
valid and enforceable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SPECTRUM ORGANIC PRODUCTS, INC. ORGANIC INGREDIENTS, INC.
By: By:
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer Title: Chief Financial Officer
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EXHIBIT A
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Order and Billing
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SPECTRUM shall provide BUYER with order and billing services as follows:
o Accept all customer orders for products, input those orders into
SPECTRUM database (system)
o ▇▇▇▇ customers on behalf of BUYER for all customer orders (invoice
header to read "Organic Ingredients, Inc., a wholly owned subsidiary
of Acirca, Inc.")
o Process all customer payments received (accounts receivable) according
to instructions outlined in Exhibit C
o Update and maintain lot numbers for all products
o Promptly after the date hereof, notify all existing customers and all
customers whose business is or was being pursued by SPECTRUM during
the six (6) months prior to the date hereof, of the change in
order/billing procedures, including notification that the payment of
all amounts due with respect to receivables shall be payable according
to instructions outlined in Exhibit C
o After the Transition period, if orders are received by SPECTRUM,
notify customer of the consummation of the transactions contemplated
hereby and reroute the orders to BUYER
o Payment of broker commissions (if applicable), SPECTRUM maintains
commissions calculations in conjunction with BUYER personnel as
handled prior to the date hereof
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EXHIBIT B
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Management Information Systems
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SPECTRUM shall provide BUYER with the following data for all the SKUs that BUYER
is purchasing from SPECTRUM:
o SKU data (item, UOM, cost, quantities, vendor setup data (if not
SPECTRUM)) , ▇▇▇▇ of materials for processed /finished goods
o Finished goods and Raw material configuration (item, packaging, pallet
configuration, UOM configuration, size)
o Historical sales (invoiced) data from gross sales (UOM,lbs, and $), by
SKU, by customer and by month, starting ( 01.01.01 ~ 04.01.02, also
04.02.02~ 06.30.02)
o Six (6) months of production historical data UOM(lbs) by SKU and
plant, for processed finished goods
o Customer master file (ship to and ▇▇▇▇ to addresses) including
contacts and discounts
o Vendor file (▇▇▇▇ to addresses)
o Broker file (▇▇▇▇ to addresses) including discounts
o Inventory by SKU, lot #, by location
o SPECTRUM will maintain an inventory subledger, within their system to
record all transactions during the transition period (April 25, 2002 ~
July 31, 2002). This data must then be formatted to allow upload into
Acirca's system.
o Weekly sales transactions details commencing the week beginning April
22, 2002 through the week beginning July 29, 2002, including without
limitation returns, orders, invoicing dates, customer, SKUs,
off-invoice discounts, $ and quantities in cases
o SPECTRUM will maintain a separate general ledger, within their system
to record all transactions during the transition period (April 25,
2002 ~ July 31, 2002). This data must then be formatted to allow
upload into Acirca's system.
SPECTRUM shall provide all data files in a format reasonably required by
BUYER. SPECTRUM shall provide all data in Excel or Access format. SPECTRUM
shall deliver to BUYER a hard copy of all data files after July 31, 2002
but in no event later than August 31,2002, in an electronic format.
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EXHIBIT C
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Accounting and Financial Reporting
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SPECTRUM shall provide BUYER with accounting, financial reporting and collection
services as follows:
o Prior to Closing, deliver to BUYER wire transfer instructions (bank
name, address, ABA#, account#)
o As soon as practicable after Closing, deliver to BUYER beginning
finished goods/raw materials inventory report (based on audited,
physical count), including inventories by lot#, lot date, inventory
location
o Deliver to BUYER a monthly sales and gross profit report for the
periods ending, beginning March, April, May, June and July 2002
(period extended if requested by BUYER), which reports shall include
sales and gross profit by SKU and loss statement, balance sheet.
o Deliver to BUYER, weekly cash flow forecast based on estimate future
sales (a/r aging) and expected cash outflows
o SPECTRUM shall collect on behalf of BUYER payments relating to
products ordered on or after the Closing Date, and all such funds
shall be held by SPECTRUM (▇▇▇▇▇ Fargo lockbox) in trust for the
benefit of BUYER and delivered to BUYER to the account set forth
below.
o SPECTRUM shall promptly advise BUYER of any payments which are in
excess of thirty (30) days past due, and provide prudent diligence to
collect these funds.
o Weekly, upon receipt of any remittance advice from lock box for
payments relating to products ordered on or after the Closing Date,
SPECTRUM shall deliver such funds to BUYER by wire transfer to the
account below:
Citibank NA
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▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Contact: ▇▇▇▇▇ ▇▇▇▇▇
Account No. ▇▇▇▇▇▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
o If SPECTRUM receives any payment without a remittance advice
identifying the invoices being paid, relating to products ordered both
prior to, and on or after, the Closing, and such payment is
insufficient to cover the full outstanding amount with respect to all
such products, then SPECTRUM shall first apply the payment to the
outstanding amount relating to the products ordered on or after
Closing up to such outstanding amount.
o BUYER acknowledges that customers will be deducting amounts for
promotions, manufacture charge-backs, returned merchandise and other
disputes which cannot be anticipated as of the date hereof. SPECTRUM
shall use its best efforts to attribute such deductions appropriately
to BUYER products or its own products, as the case may be.
o SPECTRUM will maintain an A/R subledger, within their system to record
all transactions during the transition period (April 25, 2002 ~ July
31, 2002). This data must then be formatted to allow upload into
BUYER's system.
o SPECTRUM shall process all vendor payments based on payments terms.
Payments will be processed through Spectrum system. Checks will be
drawn on new Citibank account mentioned above.
o Prior to SPECTRUM issuing checks, check registers will be approved,
via fax copy, by BUYER controller, fax# ▇▇▇.▇▇▇.▇▇▇▇
o Checks issued, over 50K$, will be mailed to BUYER for double signature
based on current BUYER approval matrix
o SPECTRUM will maintain an A/P subledger, within their system to record
all transactions during the transition period (April 25, 2002 ~ July
31, 2002). This data must then be formatted to allow upload into
BUYER's system.
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EXHIBIT D
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Order Processing Services
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SPECTRUM shall provide BUYER with warehousing and order fulfillment services as
follows:
o Receive inventory into SPECTRUM system
o ▇▇▇▇ customers for all orders that have been picked up, verifying BOL
(including lot#'s), and fax copy to Aptos office
o Process all billing and payments according to instructions outlined in
Exhibit C
BUYER shall provide SPECTRUM with information regarding inventory production,
sales orders and shipments.
Promptly after the Transition Period, SPECTRUM and BUYER shall compare records
to ensure that all open orders are accounted for.
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