TRANSITION SERVICES AGREEMENT
-----------------------------
THIS TRANSITION SERVICES AGREEMENT, dated June 11, 2001 (the "Agreement"),
is entered into by and between SPECTRUM ORGANIC PRODUCTS, INC., a California
corporation ("SPECTRUM"), and ACIRCA, INC., a Delaware corporation ("ACIRCA").
WHEREAS, SPECTRUM 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 ACIRCA has agreed to purchase certain assets of SPECTRUM;
WHEREAS, the Asset Purchase Agreement contemplates the transfer of certain
activities from SPECTRUM to ACIRCA (the "Transfer") and such transfer requires
the provision of certain services by SPECTRUM for a successful transition; and
WHEREAS, as a condition to ACIRCA entering into the Asset Purchase
Agreement, SPECTRUM has agreed to provide ACIRCA with certain services necessary
to efficiently complete the Transfer with minimal disruption to customers 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
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 ACIRCA, 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
ACIRCA 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"). ACIRCA 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 from
both ACIRCA and SPECTRUM are critical to this transition. The contacts for each
party is set forth on below:
a) Primary Contacts.
----------------
ACIRCA: Xxxx Xxxxx
SPECTRUM: Xxx Xxxxxx
b) Service Contacts.
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i. Customer Service:
ACIRCA: Xxxxxxx Xxxxx
SPECTRUM: Bendada Powers / Xxxxx Xxxxx
xx. Management Information Systems:
ACIRCA: Xxx Xxxx
SPECTRUM: Xxx Xxxx
iii. Accounting and Financial Reporting:
ACIRCA: Xxx Xxxxxxx
SPECTRUM: Xxxxx Xxxxxx
xx. Marketing and Sales:
ACIRCA: Olivier Sonnois / Xxxx Xxxxxx
SPECTRUM: Xxxx Xxxxxxxxx / Xxxx XxxXxxxxx
v. Warehousing and Order Fulfillment
ACIRCA: Xxxxxxx Xxxxx
SPECTRUM: Xxxxxx Xxxxxx / Xxxxx Xxxxx
vi. Manufacturing:
ACIRCA: Xxxxx Xxxx
SPECTRUM: Xxxx Xxxxxxxx
4. Services. Subject to Sections 2 and 5, SPECTRUM shall provide ACIRCA
with services (the "Services"), which shall include (without limitation) the
following:
(a) Customer Service. SPECTRUM shall provide order and billing
transition services to ACIRCA as described on attached Exhibit
A.
(b) Management Information Systems. SPECTRUM shall provide
management information systems transition services to ACIRCA
as described on attached Exhibit B.
(c) Accounting and Financial Reporting. SPECTRUM shall provide
accounting and financial reporting transition services to
ACIRCA as described on attached Exhibit C.
(d) Marketing and Sales Transition Services. SPECTRUM shall
provide to ACIRCA the marketing and sales transition services
as described on attached Exhibit D.
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(e) Manufacturing Transition Services. SPECTRUM shall provide
manufacturing transition services to ACIRCA as described on
attached Exhibit E.
(f) Warehousing and Order Fulfillment Services. SPECTRUM shall
provide warehousing and order fulfillment services to ACIRCA
as described on attached Exhibit F.
5. Service Charges. (a) SPECTRUM shall invoice ACIRCA twice 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
include 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 monthly fee equal
to 5% of the net sales of the Business (as defined in the Asset Purchase
Agreement) as conducted by ACIRCA during the term of this Agreement as provided
in Section 7 hereof. For purposes of this Agreement, "net sales" means gross
sales, less off-invoice promotions and cash discounts. Upon ACIRCA's written
notice delivered from time to time to SPECTRUM to terminate or reduce the scope
of provision of any Service, SPECTRUM shall terminate 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. If all Services are terminated in accordance with this
Section 5 at any time other than the last day of a calendar month, all monthly
fees shall be prorated to reflect such termination in service level, based on
the actual number of days during which any Services were performed or provided
divided by the number of days in the calendar month in which such Services are
terminated or reduced. Not more than thirty (30) days after the end of each
calendar month during the Transition Period, SPECTRUM shall invoice ACIRCA for
the Services performed during the preceding calendar month. ACIRCA shall pay
each invoice in full within fifteen (15) days after its receipt thereof.
6. Mail. The parties acknowledge that it may occur that, after the Closing
Date, each of SPECTRUM and ACIRCA may inadvertently receive mail, telegrams,
packages or other communications properly belonging to the other. Accordingly,
each of SPECTRUM and ACIRCA 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.
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7. Termination. The term of this Agreement shall commence on the date
hereof and thereafter continue in full force and effect until August 31, 2001,
except as otherwise expressly provided herein or unless terminated sooner as
provided herein or extended by mutual agreement.
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 the Seller:
Spectrum Organic Products, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx Godward LLP
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx Xxxxxxx
Fax: (000) 000-0000
If to the Buyer:
Acirca, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Olivier Sonnois, VP - Strategy & Business
Development
Fax: (000) 000-0000
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with a copy to:
Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000
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. 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.
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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. ACIRCA, INC.
By: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxxxxx Xxxxxxx Xxxxx
CEO and Chairman of the Board Chief Financial Officer
and Secretary
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EXHIBIT A
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Order and Billing
-----------------
SPECTRUM shall provide ACIRCA with order and billing services throughout the
Transition Period as follows:
o Accept all orders for products, input those orders into SPECTRUM data
system and copy ACIRCA within 24 hours of receipt of such orders
o Provide copies of bills of lading within 24 hours of receipt of same
from Xxxxx Distribution Center
o Update and maintain lot numbers for all products
o Xxxx customers on behalf of ACIRCA for all orders
o Process all payments received according to instructions outlined in
Exhibit C
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, which notification shall
include a statement that all payment for orders made on or after the
date hereof shall be remitted to ACIRCA
o After the Transition Period, if orders are received at SPECTRUM,
notify customer of the consummation of the transactions contemplated
hereby and reroute the orders to ACIRCA
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EXHIBIT B
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Management Information Systems
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Promptly after the date hereof, SPECTRUM shall provide ACIRCA with the following
data for all the SKUs that ACIRCA is purchasing from SPECTRUM:
o Xxxx of materials by SKU (item, status, component, cost, quantities,
vendor (if not Spectrum Organic Products, Inc.), vendor setup)
o Finished goods configuration (item, packaging, pallet configuration,
case configuration, shelf life, size)
o Historical sales (invoiced) data from gross sales (cases and $) and
off-invoice sales ($), by SKU, by customer and by month, starting July
of 1999
o 1 year of production historical data cases by SKU and plant
o Customer master file (ship to and xxxx to addresses) including
contacts and discounts
o Vendor file (xxxx to addresses)
o Broker file (ship to and xxxx to addresses) including discounts
o 7 months (June, 2001 through December, 2001) of production forecasts
in cases, by SKU, plant and month
o 7 months (June, 2001 through December, 2001) of sales forecasts in
cases, by SKU and month
o Inventory by SKU and lot # as of June 11, 2001 and June 29, 2001
o Weekly sales transactions details commencing the week beginning June
11, 2001 through the week beginning June 25, 2001, including without
limitation returns, orders, invoicing dates, customer, SKUs,
off-invoice discounts, $ and quantities in cases
SPECTRUM shall provide all data files in a format reasonably required by
ACIRCA. SPECTRUM shall provide all data in Excel or Access format. SPECTRUM
shall deliver to ACIRCA a hard copy of all data files after June 30, 2001,
but in no event later than July 13, 2001, on CD-Rom.
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EXHIBIT C
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Accounting and Financial Reporting
----------------------------------
SPECTRUM shall provide ACIRCA with accounting, financial reporting and
collection services through the Transition Period as follows:
o Prior to Closing, deliver to ACIRCA wire transfer instructions (bank
name, address, ABA#, account#)
o As soon as practicable after Closing, deliver to ACIRCA beginning
finished goods inventory report (based on audited, physical count),
including inventories by lot# and lot date
o No later than July 13, 2001, deliver to ACIRCA sales and gross profit
report for the period beginning June 11, 2001 and ending June 30, 2001
(period extended if requested by ACIRCA), which report shall include
gross sales, off-invoice discounts, cost of goods sold, distribution
costs (if applicable), gross profit, and customer information
o Deliver to ACIRCA, weekly inventory activity reports commencing the
week beginning June 11, 2001, reflecting inventory movements (sales,
transfers, receipts) by lot number as provided to Spectrum by Xxxxx
Distribution Center
o Deliver to ACIRCA, weekly cash receipts reports commencing the week
beginning June 11, 2001
o SPECTRUM shall collect on behalf of ACIRCA payments relating to
products ordered on or after the Closing Date, and all such funds
shall be held by SPECTRUM in trust for the benefit of ACIRCA and
delivered to ACIRCA to the account set forth below
o SPECTRUM shall promptly advise ACIRCA of any payments which are in
excess of thirty (30) days past due
o Immediately 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 ACIRCA by wire transfer to the
account below:
Bank of America
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xx. 00000
Phone: 000-000-0000
Contact name: DJ
Account No. 003929257672
ABA# 05200163
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 ACIRCA 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 ACIRCA products or its own products, as the case may be.
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EXHIBIT D
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Marketing and Sales Transition Services
---------------------------------------
SPECTRUM shall ACIRCA with marketing and sales transition services as follows:
o Throughout the Transition Period, provide ACIRCA sales and marketing
personnel with reasonable access to all SPECTRUM sales and marketing
personnel who were responsible for selling and marketing the products,
which shall include without limitation reviewing each customer status,
based on the following criteria:
a) All access to SPECTRUM sales and marketing personnel is done
through President of Brands or Director of Sales and Marketing;
b) Planning and scheduling of SPECTRUM sales and marketing
personnel is done over the 90 day period immediately following the date hereof
c) All reasonable, actually incurred, out-of-pocket expenses such
as travel, meals and lodging related to the use of SPECTRUM sales and marketing
personnel shall be reimbursed to SPECTRUM subject to evidence thereof as
reasonably required by ACIRCA
o Immediately after the Closing, deliver to ACIRCA a contact list of all
SPECTRUM sales and marketing personnel who were responsible for
selling and marketing the products
o As soon as practicable after the Closing, introduce (in person)
designated ACIRCA sales and marketing personnel to every sales
brokerage firm and key contact therein representing the tomato-based
business
o As soon as practicable after the Closing, introduce (in person)
designated ACIRCA sales and marketing personnel to every trade buyer
and key contact therein related to the sauce, salsa and Kid's Meals
Categories
o As soon as practicable after the Closing, introduce (in person)
designated ACIRCA sales and marketing personnel to every private label
customer and key contact therein
o As soon as practicable after the Closing, introduce ACIRCA sales and
marketing personnel to every marketing vendor and key contact therein
o Throughout the Transition Period, provide support and clarification on
all then existing trade disputes
o SPECTRUM shall use its best efforts to ensure all trade promotional
activities have been booked with all key customers until and including
October 2001 to ensure continuation of current volume growth momentum
and within currently established promotional guidelines
o Alert ACIRCA sales and marketing personnel to any incremental
promotional opportunity that may exist but which may not have been
booked as of the Closing Date
o SPECTRUM shall use its best efforts to provide ACIRCA with material
slotting allowances by customer ($)
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EXHIBIT E
---------
Manufacturing Transition Services
---------------------------------
SPECTRUM shall provide to ACIRCA manufacturing services as follows:
o Maintain a finished product fill rate of 98% of orders, both on a case
basis and dollars. The fill rate performance based on a sales forecast
provided by ACIRCA. Changes to the forecast must come at least 30 days
prior to the revised period.
o Assist ACIRCA in creating a forecast for the balance of this calendar
year.
o Maintain inventory necessary to support the fill rate provided herein,
approximately a 5 weeks supply.
o Schedule the necessary production with co-packers/processors.
o Order the necessary packaging materials and ingredients to cover the
production requirements provided herein.
o Oversee the transfer of production to the appropriate distribution
center(s) as directed by ACIRCA.
o Provide ACIRCA with weekly production reports and transfer documents
by lot number commencing on the week beginning June 11, 2001.
Once the finished good inventories have been transferred to distribution
center(s) as directed by ACIRCA, ACIRCA will provide the information
necessary for Spectrum to comply with the production and distribution
requirements provided herein at least 30 days in advance of the need.
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EXHIBIT F
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Warehousing and Order Fulfillment Services
------------------------------------------
SPECTRUM shall provide ACIRCA with warehousing and order fulfillment services as
follows:
o Upon receipt of order from customer, notify warehouse of expected
pickup/delivery date and copy ACIRCA
o Ensure that warehouse has adequate supply of product to fulfill orders
o Prior to order pickup, ensure that warehouse provides notice of
shortages or other issues that might affect the fulfillment of the
order
o Cause Xxxxx Distribution to update and maintain lot numbers for all
products
o Xxxx customers for all orders that have been picked up
o Process all billing and payments according to instructions outlined in
Exhibit C
Promptly after the Transition Period, SPECTRUM and ACIRCA shall compare records
to ensure that all open orders are accounted for.
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