Exhibit 10.4
TRANSITIONAL SERVICES AGREEMENT
This is a Transitional Services Agreement ("Services Agreement") dated October
9, 2001 between The Procter & Gamble Company, an Ohio corporation ("Supplier")
and The J.M. Smucker Company, an Ohio corporation ("JMS"). Supplier and JMS are
sometimes collectively referred to herein as "Parties" and individually as
"Party".
WHEREAS, Supplier and JMS have executed the Contribution Agreement and
the Agreement and Plan of Merger, dated as of October 9, 2001 (jointly the
"Corporate Agreements");
AND WHEREAS, in connection with the Corporate Agreements, JMS wishes
that Supplier provide certain transitional services for JMS's Plant (as defined
in the Separation Agreement) for the periods set forth herein;
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 GENERAL. Any capitalized item used but not defined herein shall have
the meaning set forth in the Corporate Agreements or the Separation
Agreement.
1.02 "TRANSITIONAL SERVICES" means the Short Term Compensable Services, the
Short Term Non-Compensable Services and the Long Term Services provided
by Supplier as set forth in Article III of this Agreement.
1.03 "PRODUCT" OR "PRODUCTS" means all of the SKUs of the Jif/Crisco
Business as formulated and packaged for sale as of the Closing Date,
and manufactured by Supplier before or after the date hereof.
1.04 OTHER DEFINITIONS. Other terms defined in this Services Agreement, and
the places where they are defined, are:
"AFFECTED PARTY" Section 11.05
"JMS" Preamble
"CBD" Section 3.01.2(a)
"CBOT" Section 2.02
"CONVEYOR ACCEPTANCE NOTICE" Section 3.02.2(b)
"CONVEYOR APPRAISED PRICE" Section 3.02.2(b)
"CONVEYOR FIRST OFFER NOTICE" Section 3.02.2(b)
"CONVEYOR PROPERTY" Section 3.02.2(b)
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"CONVEYOR RESPONSE PERIOD" Section 3.02.2(b)
"CORPORATE AGREEMENTS" Preamble
"DATA-CENTER" Section 3.01.1(h)
"DEFAULT" Section 8.02
"DEFAULTING PARTY" Section 8.02
"DEMANDS" Section 6.01
"DUE DATE" Section 4.02(b)
"EXCLUDED SERVICES" Section 3.01.3
"FACTORY WATER" Section 3.03.5
"GBS" Section 11.04
"IT SERVICES" Section 3.01.1(h)
"JMS'S PLANT" Separation Agreement
"LONG TERM SERVICES" Section 3.02
"NON-AFFECTED PARTY" Section 11.05
"NON-DEFAULTING PARTY" Section 8.02
"OLEAN OIL" Section 2.02
"OIL PURCHASE PRICE" Section 2.02
"ORDERS" Section 3.01.1(a)
"OSB" Section 3.01.1(h)(4)
"PARTY" Preamble
"P&G'S PLANT" Separation Agreement
"PUCO" Section 3.02.1
"RTCIS" Section 3.01.1(h)(4)
"RTCIS SERVICES" Section 3.01(c)
"SEPARATION PROJECTS" Separation Agreement
"SERVICES AGREEMENT" Preamble
"SERVICES AGREEMENT TERMINATION DATE" Section 8.02
"SEWP" Section 3.01.1(h)(5)
"SHORT TERM COMPENSABLE SERVICES" Section 3.01
"SHORT TERM NON-COMPENSABLE SERVICES" Section 3.01
"RTCIS SERVICES" Section 3.01.1(h)(4)
"SEPARATION PERIOD" Separation Agreement
"STANDSTILL PERIOD" Section 3.02.1
"SUPPLIER" Preamble
"TERMINATION DATE" Section 8.02
"TRANSITION ORDER PLACEMENT PERIOD" OR "TOPP" Section 3.01.1(a)
"TRANSITION PERIOD" Section 7.02
"TRANSITION PHASE" Section 3.02.5
"TRANSITION PRODUCT SHIPMENT PERIOD" OR "TPSP" Section 3.01.1(b)
"WAREHOUSE ACCEPTANCE NOTICE" Section 3.02.3(b)
"WAREHOUSE APPRAISED PRICE" Section 3.02.3(b)
"WAREHOUSE FIRST OFFER NOTICE" Section 3.02.3(b)
"WAREHOUSE PROPERTY" Section 3.02.3(b)
"WAREHOUSE RESPONSE PERIOD" Section 3.02.3(b)
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ARTICLE II
BASIC OBLIGATIONS
2.01 SUPPLIER'S OBLIGATION. Subject to the limitations and conditions of
this Services Agreement, and during the time periods set forth herein,
Supplier shall perform, for the benefit of JMS certain services as set
forth herein.
2.02 JMS'S OBLIGATION.
(a) JMS agrees to pay for the services provided by Supplier
hereunder in accordance with the provisions of this Services
Agreement. JMS agrees to use its commercially reasonable
efforts to end its need to utilize Supplier's Short Term
Services and certain Long Term Services at such earlier
time(s) than specified herein as is reasonably possible.
(b) (i) In addition, JMS separately agrees to supply
Supplier and Supplier's successors and assigns, for a
period of five (5) years, with bulk oils at quality
levels consistent with Supplier's specifications set
forth in Schedule 2.02, and in a quantity of up to an
annual maximum of 50 million pounds, for use in the
Olean business (hereafter referred to as "Olean
Oil").
(ii) Supplier or Supplier's successors, assigns or agents
shall instruct JMS on when to purchase crude oil on
the Chicago Board of Trade ("CBOT") and at what price
(hereafter referred to as the "Oil Purchase Price").
Supplier, its successors or assigns shall pay to JMS
the sum of (A) the actual Oil Purchase Price plus (B)
JMS's actual costs and expenses associated with the
manufacturing, processing and delivery of the Olean
Oil plus (C) a mark-up of five percent (5%) assessed
on JMS's manufacturing, processing and delivery costs
related to such Olean Oil, and such payment shall be
on the same payment terms as JMS's terms on such
crude oil purchases.
(iii) JMS represents and warrants that its manufacture,
processing and delivery of such Olean Oil shall
follow Supplier's specification and practices set
forth in Schedule 2.02 or such other specifications
that JMS and Supplier (or its successors or assigns,
as applicable) agree upon in their reasonable
discretion. At Closing, JMS and Supplier shall enter
into a supply agreement for such Olean Oil, in a form
and substance reasonably satisfactory to JMS and
Supplier and consistent with the terms set forth
herein.
(iv) Supplier, its successors and assigns, may terminate
its rights to purchase Olean Oil at any time, by
providing JMS with three (3) months prior written
notice. In such event,
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Supplier, its successors and assigns agree to either
(x) compensate JMS for any remnant inventory of crude
oil, which JMS may have purchased for Supplier, and
Olean Oil manufactured or processed pursuant to
Supplier's or its successors or assigns, as
applicable, express directions; or (y) purchase such
inventory from JMS at JMS's acquisition costs of such
inventory; in either case at the price described in
Section 2.02 hereof.
(v) JMS may terminate its Olean Oil supply obligations
hereunder in the event Supplier assigns its rights
pertaining to such Olean Oil supply to a third party
who is a direct retail competitor of the Crisco
business, in which case JMS may terminate its
obligations pursuant to this Section 2.02(b) by
providing Supplier with eighteen (18) months prior
written notice. In such event, JMS's supply
obligations shall terminate the earlier of (i) the
expiration of the eighteen (18) months termination
notice, or (ii) the expiration of JMS's supply
obligations pursuant to Section 2.02(b)(i).
(vi) In any of the above cases, JMS further agrees to
provide Supplier, its successors and assigns, with
reasonable cost information and back-up information
in support of the costs charged to Supplier for the
supply of Olean Oil to Supplier. Nothing contained
herein shall however provide Supplier with any audit
or inspection rights of Supplier's books or records.
2.03 TRANSITION TEAM. Supplier and JMS agree to establish, prior to Closing,
a transition team comprised of a reasonable number of representatives
of each of JMS and Supplier. The Transition Team shall agree on (i) a
detailed transition plan pursuant to the purpose and objectives of this
Agreement, (ii) shall support JMS in establishing independent
capability of the Transition Services provided by Supplier to JMS
hereunder; and (iii) post-Closing transition cut-over plan prior to
expiration of the time periods set forth herein and/or in the
Separation Agreement. The Transition Team shall also specifically deal
with the planning and arranging for JMS's payables systems and payroll
and benefits systems to be operational one day after Closing.
Notwithstanding the foregoing, JMS acknowledges and agrees that, at
Closing or after Closing, certain of these payables, payroll and
benefits systems and services may not be immediately available on the
Closing Date and may require JMS to anticipate to perform certain
manual processes and manual transactions for an interim period.
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ARTICLE III
TRANSITIONAL SERVICES
3.01 SHORT TERM TRANSITIONAL SERVICES. After the Closing, subject to the
limitations and conditions of this Services Agreement, and during the
Transition Period as defined in Section 7.02, Supplier shall perform,
or shall arrange for an Affiliate to perform, certain services
pertaining to the Jif/Crisco Business as set forth in this Section
3.01. Notwithstanding the foregoing or Section 7.02, JMS may extend,
upon thirty (30) days prior written notice to Supplier, the period for
which the services set forth under Section 3.01 shall be provided to
JMS; provided, however, that the maximum period for which such services
may be provided shall be limited to a total of six (6) months; and
provided further that JMS shall only be able to terminate these
services after the initial three (3) month transition period for such
services, in which case JMS shall provide Supplier with thirty (30)
days prior written notice of its intention to terminate these services.
It is being understood and agreed that, except for the Walmart Sales
Services, JMS cannot separately or independently terminate any
individual service provided under Section 3.01. It being further
understood and agreed, that unless Supplier receives a written
extension request from JMS no later than thirty (30) days prior to the
expiration of the initial expiration date of these Short Term
Transitional Services, as set forth in Schedule 3.01, such services
shall not be extended and shall terminate on such expiration date
3.01.1 COMPENSABLE SERVICES.
POST CLOSING. After the Closing and for purposes of this Services
Agreement, Supplier agrees to provide all of the following services for
the fees set forth in Section 4.01 of this Services Agreement, ("Short
Term Compensable Services"):
a. TRANSITIONAL ORDER PLACEMENT. Supplier shall continue
to receive and process trade customer orders, in
accordance with its ordinary business practices, for
the period set forth on Schedule TS3.01.1 (the
"Transitional Order Placement Period" or "TOPP") for
products of the Business as of Closing to be shipped
not later than the second day after the expiration of
the TOPP. Orders received prior to expiration of the
TOPP for shipping on or after the second day
subsequent to the expiration of the TOPP, shall be
taken but transferred to JMS. Orders received after
the expiration of the TOPP shall be transferred to
JMS. JMS may institute any reasonable price changes
to take effect prior to the expiration of the TOPP,
provided that JMS shall notify Supplier at least
fifteen (15) Business Days prior to the
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earlier of (i) the date on which such price changes
shall take effect or (ii) the date on which such
price changes are announced by JMS to the trade, and,
provided further that JMS shall not require Supplier
to communicate to trade customers any price changes
to take effect on or after two weeks after the
expiration of the TOPP.
Notwithstanding the foregoing, after the Closing,
Supplier may also receive firm purchase orders for
Products ("Orders") from JMS's sales brokers covering
the Jif/Crisco Business, and such Orders to be
delivered to Supplier in a form to be agreed between
Supplier and JMS, and consistent with Supplier's
applicable practices.
b. TRANSITIONAL PRODUCT SHIPMENT. Supplier shall
continue to ship Product to fulfill trade customer
orders in accordance with its ordinary business
practices through the second day subsequent to the
expiration of the TOPP (the "Transitional Product
Shipment Period" or "TPSP").
c. PURCHASE ORDERS/BILLS OF LADINGS/INVOICES. During the
Transitional Order Placement Period, Supplier shall
ship Product to trade customers per the customer
purchase order and ship site bill of lading and shall
bill trade customers for Products on behalf of JMS
using Supplier's current invoice format but
identifying JMS as the seller of such Products and
using Supplier's current credit and trade terms,
including Supplier's allowance for product returns.
During the Transitional Product Shipment Period,
Supplier shall store Product and ship it to trade
customers, and shall use its current shipment
practices (e.g., unit load configuration, minimum
order increments, CHEP pallet usage, etc.).
d. ACCOUNTS RECEIVABLE. Supplier shall be solely
responsible during the TOPP for processing of
accounts receivable and management of cash receipts
in a manner consistent with Supplier's ordinary past
business practices in connection with the Business.
JMS shall be solely responsible for the collection of
accounts receivable and shall bear the loss of any
uncollected amounts. Supplier agrees to provide JMS
with monthly reports on accounts receivable, which
shall include, to the extent reasonably available to
Supplier, information necessary to recover
unauthorized deductions from trade customers.
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e. (i) PAYMENT TO BUYERS. On the fifteenth (15th) and
thirtieth (30th) day of each month, Supplier shall
remit to JMS, via wire transfer to an account
designated by JMS, the proceeds collected from trade
customers and/or distributors on behalf of JMS, less
transportation costs and fees charged by Supplier to
customers according to applicable trade terms;
provided, however, if JMS's payments to Supplier
pursuant to Section 3.01.1(e)(ii) are past due for
more than thirty (30) days, Supplier may elect to
either (x) exercise any of its rights under this
Services Agreement, or (y) deduct the outstanding
payment owed by JMS to Supplier from the payments to
be made by Supplier to JMS in accordance with this
Section 3.01.1(e)(i).
(ii) PAYMENT TO SUPPLIER. JMS shall remit to Supplier
payment for the Short-Term Compensable Services set
forth herein for the fees and costs set forth in
Section 3.01.1(e). In accordance with the preceding
sentence, JMS shall, within ten (10) days of
Supplier's invoice, promptly wire, to an account
designated by Supplier in such demand, these amounts,
provided, however, if Supplier's payments to JMS
pursuant to Section 3.01.1(e)(i) are past due for
more than thirty (30) days following the respective
due dates set forth therein, JMS may elect to either
(x) exercise any of its rights under this Services
Agreement, or (y) deduct the outstanding payment owed
by Supplier to JMS from the payments to be made by
JMS to Supplier in accordance with this Section
3.01.1(e)(ii).
f. NEW DATA MANAGEMENT. From the date hereof through the
end of the Transition Period, Supplier shall update
customer records for any changes occurring during the
periods described in Schedule TS 3.01.1.
g. CONSUMER RELATION SERVICES. For the period set forth
in Schedule TS3.01.1, Supplier shall continue, or
shall arrange for its Affiliate to continue,
answering calls to the existing telephone number on
the Product. Pursuant to the Corporate Agreements,
the existing telephone number shall be transferred to
JMS at the termination of any transitional services
period.
h. IT SERVICES. From the date hereof through the end of
the Transition Period, Supplier shall provide to JMS
the information systems and infrastructure listed
below and operational support for such systems (the
"IT Services") in Supplier's or Supplier's Affiliates
data-center in Cincinnati
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(the "Data-Center"), which services shall be
consistent with ordinary past business practices in
connection with the Business. To avoid service
disruptions, the JMS agrees it shall not make any
modifications to hardware and software configurations
of equipment at the JMS's Plant that are used for
access to the Data-Center without written agreement
from Supplier.
(1) SAP Enterprise Resource System,
including:
-Purchasing of current expense
items,
-Purchasing of raw materials,
-Storeroom/maintenance management,
-Production planning,
-Cost accounting; and
-Inventory management.
(2) Manufacturing execution system
(3) Quality and reliability system;
(4) RTCIS Warehouse/Inventory Management
System ("RTCIS"). Supplier shall
provide JMS with transitional
support for RTCIS during the
Transition Period (the "RTCIS
Services"). JMS shall continue to
operate RTCIS in a manner consistent
with Supplier's past practices at
JMS's Plant, such that Supplier
shall be able to pass shipment
information between RTCIS and
Supplier's corporate Order,
Shipping, Billing ("OSB") system.
(5) Infrastructure, including:
-Supplier's standard
workstations
-Standard Enterprise Workstation
Platform ("SEWP"),
-Connection to Internet/wide area
network,
-E-mail; and
-Phone.
i. REPORTING TO JMS. For Product ordered by trade
customers during the term of this Services Agreement,
Supplier shall provide JMS with (i) monthly reports
showing sales dollar volumes; and (ii) monthly
reports summarizing payments made to JMS in
accordance with Section 3.01.1(e) above.
j. WALMART SALES SERVICES. During the period and for the
costs set forth in Schedule TS3.01.1, at JMS's
request, Supplier shall cause its sales force to
provide sales support (e.g. customer calls) for the
Walmart account on behalf of and in cooperation with
JMS, consistent with Supplier's past
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practices and subject to Applicable Laws and
regulations, including without limitation, antitrust
laws.
k JMS YEAR-END SERVICES. In order to accommodate JMS's
reasonably required needs at the end of JMS's fiscal
year, Supplier shall provide to JMS, upon JMS's
reasonable request, standard reports relating to the
Short Term Services provided by Supplier hereunder,
and which reports shall be in a form and format
consistent with Supplier's past practices and
systems.
3.01.2 NON-COMPENSABLE SERVICES. At no additional charge to JMS,
except for reasonable out-of-pocket expenses (as defined in
Section 4.03 hereof), Supplier shall provide the following
services for the periods set forth in Schedule TS3.01.2
("Short Term Non-Compensable Services"):
PRE-CLOSING.
(a) INFORMATION MEETINGS. Prior to Closing and on timing
mutually agreed upon by Supplier and JMS, Supplier
shall mutually agree with JMS on a schedule of
informational meetings between appropriate Customer
Business Development ("CBD") personnel of Supplier
and appropriate personnel of JMS, all such meetings
to be scheduled through Supplier's Sales Managers for
the Products, PROVIDED, however, that (i) such
information meetings shall comply with all Applicable
Laws and regulations, including without limitations,
applicable antitrust laws, and (ii) shall not cause
any disruptions to Supplier's business or create any
unreasonable time constraints on Supplier.
(b) BRAND MARKETING. Prior the Closing and on timing
mutually agreed upon by Supplier and JMS: Supplier
shall provide, or shall arrange for a P&G Affiliate
to provide, JMS with a reasonable level of
information on marketing plans for the Products
(e.g., plans and commitments for media and consumer
promotions; as well as updates on Product
improvements; current and historical packaging and
graphics research; and an introduction to Supplier's
advertising and packaging design agencies for the
Products), PROVIDED, however, that (i) such brand
marketing assistance shall comply with all Applicable
Laws, regulations, including without limitations,
applicable antitrust laws, and (ii) shall not cause
any disruptions to Supplier's business or create any
unreasonable time constraints on Supplier.
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(c) CUT-OVER PLAN. Within three (3) months after the date
of this Services Agreement, Supplier and JMS shall
mutually agree to a cut-over plan for the orderly
shut down of Supplier's systems and/or the removal of
Supplier's network configuration from JMS's Plant.
When Supplier's network is removed, JMS shall
readdress JMS's Plant's network. The range of
contiguous network addresses shall remain the
property of Supplier following the shut down and/or
removal of Supplier's network from JMS's Plant.
Subject to the terms and conditions mutually agreed
upon by Supplier and JMS pursuant to this section,
Supplier shall provide, or arrange for an Affiliate
to provide, for a mutually agreed to, reasonable
period of time and without causing any disruptions to
Supplier's normal course of business, the appropriate
personnel of Supplier or of an Affiliate to assist
JMS in developing, implementing and executing such
cut-over plan, PROVIDED, however, that such
information meetings shall comply with all applicable
laws, regulations, including without limitations,
applicable antitrust laws.
POST-CLOSING. From the Closing Date until the date that is
three months after the Closing Date, on timing mutually agreed
upon by Supplier and JMS:
a. TRADE CUSTOMER NOTIFICATION. Supplier shall draft and
distribute one (1) letter, reasonably acceptable to
both parties, to all of Supplier's trade customers of
the Products concerning the sale of the Jif/Crisco
Business to JMS.
b. SUPPLIER TRANSITION. Supplier shall provide, or
arrange for an Affiliate to provide, for a mutually
agreed to, reasonable period of time and without
causing any disruptions to Supplier's normal course
of business, appropriate personnel of Supplier or of
an Affiliate to assist JMS in obtaining the names of
its suppliers with respect to each raw material and
packaging component necessary to manufacture the
Products and, to the extent reasonably available, the
past buying and purchasing practices relating to such
raw materials and packaging components.
c SALES AND CUSTOMER TRANSITION
Supplier shall make appropriate CBD personnel
available for one mutually-agreed joint meeting or
phone call with each of the trade customers who,
cumulatively, in descending order of volume, account
for seventy percent (70%) of national sales of the
Products.
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3.01.3 EXCLUDED SERVICES. Supplier shall not provide any services not
expressly listed herein, including without limitation, the
following information systems or other services ("Excluded
Services"):
(a) Cash disbursements or payment of accounts payable,
(b) Treasury systems,
(c) Capital Accounting,
(d) Starnet/ESP (long distance carrier),
(e) Videoconferencing,
(f) Order, shipping and billing services other than for
JMS's Products Manufactured by JMS at JMS's Plant or
at CANAMERA,
(g) Shipment Planning other than for JMS's Products
Manufactured by JMS at JMS's Plant or at CANAMERA,
(h) Payroll services and payroll system services,
(i) Benefits services and benefits system services,
(j) Software requiring licenses,
(k) Electronic specifications and standards system; or
(l) any Services or other support for JMS to
electronically link JMS's Plant to JMS's corporate
network; or
(m) Web-based, web-enabled or Internet-based order
placement, order management or order handling.
3.02 CRISCO LONG TERM MANUFACTURING SERVICES. Subject to the limitations and
conditions of this Services Agreement, Supplier shall provide and JMS
shall pay for the long term services solely pertaining to Crisco's
Ivorydale manufacturing plant and as set forth below and during the
periods and for the fees set forth in Schedule TS3.02 ("Long Term
Services"):
3.02.1 STEAM
Supplier shall supply to JMS 150psig and 850psig steam at the
cost set forth on Schedule TS3.02 and such supply shall be
limited to current maximum usage (up to 80,000 lbs/hr). JMS
agrees that supply of steam may be interrupted for up to three
(3) weeks per year for scheduled boiler maintenance. Supplier
shall provide JMS with six (6) months notice prior to any such
scheduled maintenance. Any repairs and extraordinary
maintenance shall be in addition and JMS and Supplier shall
mutually agree on timing and schedule. JMS shall support
Supplier's application to the Public Utilities Commission of
Ohio ("PUCO") to not be considered a public utility. For a
period of two and a half years from the date of this Agreement
(the "Standstill Period"), except as permitted under Section
11.05 hereof, neither JMS nor Supplier shall, and each shall
cause their Affiliates not to, terminate the supply of steam
to
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JMS. After the Standstill Period, either Party may terminate
the steam supply upon eighteen (18) months prior written
notice to the other Party. Supplier further agrees to provide
JMS with reasonable cost information and back-up information
in support of the costs charged to JMS for the supply of steam
to JMS. Nothing contained herein shall however provide JMS
with any audit or inspection rights of Supplier's books or
records.
3.02.2 CONVEYING
(a) Supplier shall provide JMS access to Supplier's
conveying facilities to move finished Product cases
to the warehouse located at Supplier's Ivorydale
manufacturing site. This service shall be at the cost
set forth on Schedule TS3.02. Supplier shall
reasonably maintain the Crisco conveyors (excluding
the conveyor controls) in good operable condition,
except for normal wear and tear. JMS shall operate
and shall be responsible for the controls of the
Crisco conveyors. JMS shall be responsible for, and
shall indemnify and hold Supplier harmless for, all
damages (other than indirect, consequential or
punitive damages) and repairs to the conveyors, other
than normal wear and tear, caused by JMS's actions or
inactions. During the Standstill Period, except as
permitted under Section 11.05 hereof, neither JMS nor
Supplier shall, and each shall cause their Affiliates
not to, terminate the conveying services to JMS.
After the Standstill Period, JMS may terminate the
conveying services upon eighteen (18) months prior
written notice to Supplier , and Supplier may
terminate this conveying service in any of the
following events (i) if Supplier disposes of or sells
(other than to an Affiliate) the conveyor used for
the provision of this service, (ii) if Supplier
disposes of or sells (other than to an Affiliate) all
or substantially all of its assets located at the
same site, or (iii) if Supplier closes down its
operations or facilities (including the conveyor) at
its Ivorydale site; (iv) if Supplier obtains JMS's
consent; or (v) pursuant to Section 11.05 hereof. .
Supplier further agrees to provide JMS with
reasonable cost information and back-up information
in support of the costs charged to JMS for the supply
of conveying services to JMS. Nothing contained
herein shall however provide JMS with any audit or
inspection rights of Supplier's books or records
(b) If at any time after the expiration of the Standstill
Period and prior to the delivery of a termination
notice by JMS, Supplier desires to sell all or any
portion of the conveyor or Supplier's interest in the
business that uses the conveyor, to any third
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party prospective purchaser or purchasers or desires
to discontinue the use of the conveyor, then JMS
shall have a right of first offer to purchase the
conveyor on the terms and conditions set forth in
this Section 3.02.2. Supplier shall give a notice
("Conveyor First Offer Notice") to JMS which shall
(i) be in writing and be signed by Supplier, (ii)
contain a description of the land that is to be
included with the conveyor (referred to herein as the
"Conveyor Property"), (iii) specify the appraiser
(reasonably acceptable to JMS) that Supplier hired to
determine the fair market value of the Conveyor
Property, which appraiser must be independent from
Supplier and its Affiliates, (iv) specify the fair
market value of the Conveyor Property as determined
by the appraiser identified in the notice (the
"Conveyor Appraised Price"), (v) contain a copy of
the appraisal, and (vi) specify the terms and
conditions of such transaction. JMS shall have the
right, exercisable by delivery of notice in writing
(the "Conveyor Acceptance Notice") to Supplier within
sixty (60) calendar days after the receipt of the
First Offer Notice ("Conveyor Response Period"), to
elect to purchase the Conveyor Property for a cash
purchase price equal to the Conveyor Appraised Price.
Failure of JMS to give the Conveyor Acceptance Notice
shall be deemed, upon expiration of the Conveyor
Response Period, to be an election not to purchase
the Conveyor Property.
(c) If JMS fails or elects not to deliver a Conveyor
Acceptance Notice within the Conveyor Response
Period, then Supplier may (i) discontinue operations
at the conveyor no earlier than date that is eighteen
(18) months after the date the Conveyor Acceptance
Notice was mailed (and Supplier shall provide JMS
with a written notice specifying the date on which
the conveyor will no longer be used and that Supplier
is exercising its right to terminate the service
described in this Section 3.02.2) or (ii) sell the
Conveyor Property without any further offer to JMS
pursuant to the provisions of this Section 3.02.2.
(d) If JMS delivers a Conveyor Acceptance Notice within
the Conveyor Response Period, Supplier shall convey
the Conveyor Property to JMS and JMS shall acquire
the Conveyor Property on a date mutually agreed upon
by JMS and Supplier but in no event earlier than
sixty (60) days after delivery of the Conveyor
Acceptance Notice. The closing shall occur at a
mutually agreed to location. At the Closing, Supplier
shall deliver or cause to be delivered to JMS, a
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deed executed by Supplier conveying the real property
components, if any, of the Conveyor Property to JMS,
a bill of sale executed by Supplier conveying all of
the personal property components of the Conveyor
Property to JMS, and such other documents as may be
necessary to convey the conveyor to JMS.
(e) In the event JMS purchases the Conveyor Property
pursuant to this Section 3.02.2, JMS agrees that it
will be required to perform, for the benefit of
Supplier or the buyer of the remaining assets of
P&G's Plant, the services pertaining to the Conveyor
Property identical in nature, quantity (to the extent
pertaining to P&G's Plant and the operations of P&G,
its successors and assigns, if applicable) and
quality and on terms and conditions (including,
without limitation, pricing and timing) identical to
those under which Supplier is providing such services
to JMS pursuant to this Section 3.02.2(a).
3.02.3 WAREHOUSING
(a) Supplier shall provide to JMS finished product
warehouse services for Products manufactured at JMS's
Plant, including single SKU finished case
palletizing, storage, tempering, truck loading and
truck weighing at the costs and for the period set
forth in Schedule TS3.02. JMS shall be charged
monthly a per pallet fee for each pallet loaded, as
set forth in Schedule TS3.02. JMS and Supplier shall
mutually agree on an upper limit on total warehouse
space to be reserved for Products manufactured at
JMS's Plant. Supplier shall reasonably maintain the
warehouse in good operable condition, except for
normal wear and tear. JMS shall be responsible for
the supervision and quality control of the
performance of the services provided by the third
party contractors at Supplier's warehouse. Supplier
shall further offer to lease to JMS the first floor
of warehouse A (for receipt and storage of bottle
caps) located at Supplier's Ivorydale site for the
fee set forth in Schedule TS3.02. During the
Standstill Period, except as permitted under Section
11.05 hereof, neither JMS nor Supplier shall, and
each shall cause their Affiliates not to, terminate
the warehousing services to JMS. After the Standstill
Period, JMS may terminate the warehousing services
upon eighteen (18) months prior written notice to
Supplier, and Supplier may terminate this warehousing
service in any of the following events (i) if
Supplier disposes of or sells (other than to an
Affiliate) the warehouse used for the provision of
this
14
service, (ii) if Supplier disposes of or sells (other
than to an Affiliate) all or substantially all of its
assets located at the same site, or (iii) if Supplier
closes down its operations or facilities (including
the warehouse) at its Ivorydale site; (iv) if
Supplier obtains JMS's consent; or (v) pursuant to
Section 11.05 hereof.. Supplier further agrees to
provide JMS with reasonable cost information and
back-up information in support of the costs charged
to JMS for the supply of warehousing to JMS. Nothing
contained herein shall however provide JMS with any
audit or inspection rights of Supplier's books or
records.
(b) If at any time after the expiration of the Standstill
Period and prior to the delivery of a termination
notice by JMS, Supplier desires to sell all or any
portion of the warehouse or Supplier's interest in
the business that uses the warehouse, to any third
party prospective purchaser or purchasers or desires
to discontinue the use of the warehouse, then JMS
shall have a right of first offer to purchase the
warehouse on the terms and conditions set forth in
this Section 3.02.3. Supplier shall give a notice
("First Warehouse Offer Notice") to JMS which shall
(i) be in writing and be signed by Supplier, (ii)
contain a description of the land that is to be
included with the warehouse (the warehouse, the land
on which such warehouse is located are sometimes
collectively referred to herein as the "Warehouse
Property"), (iii) specify the appraiser (reasonably
acceptable to JMS) that Supplier hired to determine
the fair market value of the Warehouse Property,
which appraiser must be independent from Supplier and
its Affiliates, (iv) specify the fair market value of
the Warehouse Property as determined by the appraiser
identified in the notice (the "Appraised Warehouse
Price"), and (v) contain a copy of the appraisal. JMS
shall have the right, exercisable by delivery of
notice in writing (the "Warehouse Acceptance Notice")
to Supplier within sixty (60) calendar days after the
receipt of the First Offer Notice ("Warehouse
Response Period"), to elect to purchase the Property
for a cash purchase price equal to the Warehouse
Appraised Price. Failure of JMS to give the Warehouse
Acceptance Notice shall be deemed, upon expiration of
the Warehouse Response Period, to be an election not
to purchase the Warehouse Property.
(c) If JMS fails or elects not to deliver a Warehouse
Acceptance Notice within the Warehouse Response
Period, then Supplier may (i) discontinue operations
at the warehouse no
15
earlier than date that is eighteen (18) months after
the date the Warehouse Acceptance Notice was mailed
(and Supplier shall provide JMS with a written notice
specifying the date on which the warehouse will no
longer be used and that Supplier is exercising its
right to terminate the service described in this
Section 3.02.3) or (ii) sell the Warehouse Property
without any further offer to JMS pursuant to the
provisions of this Section 3.02.3.
(d) If JMS delivers a Warehouse Acceptance Notice within
the Warehouse Response Period, Supplier shall convey
the Warehouse Property to JMS and JMS shall acquire
the Warehouse Property on a date mutually agreed upon
by JMS and Supplier but in no event earlier than
sixty (60) days after delivery of the Warehouse
Acceptance Notice. The closing shall occur at a
mutually agreed to location. At the Closing, Supplier
shall deliver or cause to be delivered to JMS, a deed
executed by Supplier conveying the real property
components of the Property to JMS, a bill of sale
executed by Supplier conveying all of the personal
property components of the Warehouse Property to JMS,
and such other documents as may be necessary to
convey the warehouse to JMS.
(e) In the event JMS purchases the Warehouse Property
pursuant to this Section 3.02.3, JMS represents and
warrants that it will be required to perform, for the
benefit of Supplier or the buyer of the remaining
assets of P&G's Plant, the services pertaining to the
Warehouse Property identical in nature, quantity (to
the extent pertaining to P&G's Plant and the
operations of P&G, its successors and assigns, if
applicable) and quality and on terms and conditions
(including, without limitation, pricing and timing)
identical to those under which Supplier is providing
such services to JMS pursuant to this Section
3.02.3(a).
3.02.4 NITROGEN
Supplier shall supply JMS with nitrogen to a level and quality
consistent with Supplier's normal operation of the Business
and in accordance with current business practices. Supplier
shall bill JMS on a monthly basis for JMS's usage at the cost
set forth in Schedule TS3.02. During the Standstill Period,
except as permitted under Section 11.05 hereof, neither JMS
nor Supplier shall, and each shall cause their Affiliates not
to, terminate the supply of nitrogen to JMS. After the
Standstill Period, either Party may terminate the nitrogen
supply services upon eighteen months prior
16
written notice to the other Party. Nothing contained herein
shall however provide JMS with any audit or inspection rights
of Supplier's books or records.
3.02.5 RAIL SCALE USE
Supplier shall provide JMS with access to and use of the rail
scale for weighting JMS's incoming rail cars and JMS shall pay
in return the fixed usage fees set forth in Schedule TS3.02.
JMS acknowledges and agrees that it shall use commercially
reasonable best efforts to contract with Supplier's contractor
(currently RailServe) to arrange for the labor to weigh rail
cars. JMS understands and agrees that the use of scale shall
be interrupted based on scale maintenance, downtime and
repairs and as otherwise notified by Supplier. Supplier shall
keep the rail scale in normal operating condition, excluding
normal wear and tear. During the Standstill Period, as
permitted under Section 11.05 hereof, neither JMS nor Supplier
shall, and each shall cause their Affiliates not to, terminate
the rail scale services to JMS. After the Standstill Period,
either Party may terminate the services pertaining to the use
of the rail scale upon eighteen months prior written notice to
the other Party. Nothing contained herein shall however
provide JMS with any audit or inspection rights of Supplier's
books or records.
3.02.6 HYDROGEN
Supplier shall use commercially reasonable efforts to assign
to JMS the existing hydrogen service contract between Supplier
and Air Products Inc., as permissible or, in the event such
agreement may not be assignable, Supplier shall make the
benefit of such agreement available to JMS and JMS agrees to
pay to Supplier all costs and fees related thereto (including
property taxes listed below). Supplier shall further continue
to lease the parcel of land on which the hydrogen facility is
located, to Air Products, Inc. for the remainder of the
contract with Air Products, Inc. JMS shall assume all
liability for property taxes related the equipment owned by
Air Products, Inc., and which Supplier has an obligation to
pay pursuant to the service contract with Air Products, Inc.
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3.03 CRISCO TRANSITION MANUFACTURING SERVICES
Supplier shall provide the following additional services solely
pertaining to Crisco's Ivorydale manufacturing plant as to assist the
JMS in maintaining production during the Separation Period. During the
Separation Period or until the completion of the respective Separation
Projects pertaining to these Transition Manufacturing Services, JMS and
Supplier shall effect the physical separation of Crisco from Ivorydale
and the installation of JMS's Plant's independent capability for the
following:
3.03.1 POWER
Supplier shall provide to JMS power from the local power
company, (presently Cinergy), at the costs set forth in
Schedule TS3.03;
3.03.2 SEWER AND WATER
Supplier shall provide to JMS water and shall allow JMS to use
Supplier's existing sewer system at the costs set forth in
Schedule TS3.03; and
3.03.3 COMPRESSED AIR
Supplier shall provide to JMS compressed air at the costs set
forth in Schedule TS3.03.
3.03.4 PROCESS CONTROL SYSTEMS SEPARATION
Supplier shall manage for JMS the control systems for the
reservoir pumps.
3.03.5 SOUTH-WEST OHIO WATER AND FACTORY WATER
Supplier shall provide to JMS access to water from the
South-West Ohio Water Company and access to second use water
from the South-West Ohio Water Company ("Factory Water").
3.04 CONDITIONS PRECEDENT. Provision of each of the Transitional Services is
predicated on the following conditions:
(i) As long as JMS is using SAP or RTCIS, or any other
Supplier-supported systems in the JMS's Plant, JMS
may only access said systems using SEWP;
(ii) No major additions or systems connections are
permitted to Supplier's network, unless the parties
mutually agree upon a plan for such addition or
connection to Supplier's network. Such plan would
include, but would not be limited to, the ability for
Supplier to take necessary security measures;
(iii) JMS agrees it shall not make any modifications to
hardware and software configurations of equipment at
the JMS's Plant that are used in connection with
Supplier's systems unless the parties mutually agree
upon a plan for such modification;
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(iv) JMS shall obtain any necessary licenses (transitional
and/or long-term) for all software or, in the absence
of such licenses, JMS shall indemnify Supplier
against liability related to any alleged breach of
Supplier's license agreement related to such software
during the Transition Period;
(v) Supplier shall not be obliged to provide Services if
such Services may be identified as first-level
support in the table set out in Schedule TS3.04. Such
Services shall be performed by JMS's in-house
resources.
(vi) JMS agrees to assist Supplier in the implementation
of any system or software upgrades or version or
change management necessary for Supplier to be able
to provide the Services herein. JMS's assistance in
implementing such changes may include the use of
resources from JMS's Plant consistent with Supplier's
past practices at JMS's Plant, and in such a way not
to disrupt the operations and activity at JMS's Plant
in its normal course.
(vii) JMS agrees to use the following third party services
to interface efficiently with Supplier's existing
infrastructure in Supplier's Ivorydale plant:
(1) JMS shall use commercially best
efforts to use the same contractor
(presently Railserve Inc.) Supplier
uses at its Ivorydale plant for
railcar switching and weighing.
(2) JMS shall use commercially best
efforts to use the same drop lot
operator (presently J.B. Hunt
Company) as long as JMS uses the
warehousing component of the Long
Term Manufacturing Services
(3) JMS shall enter into new leases or
assume the existing leases (where
assignable) on the railcars
presently dedicated to the Products
manufactured at JMS's Plant.
3.05 SCOPE OF SERVICES.
(a) Neither Supplier nor any of its Affiliates shall be obligated
to perform or to cause to be performed any Transitional
Services outside the United States or in a volume or quantity
which exceeds, in any material respect, the historical volume
or quantity of such Service performed for the Business,
calculated based on the average monthly quantity of such
Service performed for the Business during the twenty-four (24)
months ended on the Closing Date including without limitation
those quantities as set forth on Schedule TS3.05.
(b) The Services shall be provided only to the Business and not to
any other business of JMS and/or its Affiliates.
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3.06 STANDARD OF PERFORMANCE; STANDARD OF CARE.
(a) Supplier shall, and shall cause its Affiliates to, perform the
Transitional Services in a manner, in all material respects,:
(i) which is a manner which is substantially similar in
nature, quality and timeliness to the services provided to the
Business prior to the Closing Date to a level and quality
consistent with Supplier's normal operation of the Business;
(ii) in accordance with Supplier's business practices over the
prior twenty-four (24) month period; and (iii) in accordance
with all Applicable Laws.
(b) Notwithstanding the foregoing, Supplier has no obligation to
perform its obligations pursuant to this Section in a manner
that exceeds Supplier's past practices, policies and
procedures for Transitional Services. Nothing in this
Agreement shall require Supplier or any of its Affiliates to
perform the Transitional Services in a manner that would
constitute a violation of Applicable Laws.
ARTICLE IV
CONSIDERATION FOR SERVICES
4.01 PRICES FOR TRANSITIONAL SERVICES. Transitional Services provided
pursuant to the terms of this Services Agreement shall be charged at
the fees set forth for the applicable category of Transitional
Services, plus any reasonable out-of-pocket costs and expenses (as
defined in Section 4.03 below) incurred by Supplier and its Affiliates
in connection with the performance of the Transitional Services.
4.02 PAYMENT.
(a) Subject to Section 3.01.1(e), within twenty (20) days after the end
of each month and within twenty (20) days after the end of the Services
Period applicable to each category of Transitional Services, Supplier
shall submit to JMS for payment an invoice of amounts due to Supplier
under this Services Agreement for such month or, if applicable, a
partial month. Each statement shall contain such supporting detail as
may be reasonably required to validate such amounts due.
(b) All invoices for Transitional Services are payable in U.S. dollars.
Payment shall be made within twenty (20) days of the date of each
invoice (the "Due Date"). All amounts not paid within five (5) days
after the date when due shall bear interest at the rate of ten percent
(10%) per annum from such Due Date until the date paid.
4.03 OUT-OF-POCKET EXPENSES. All reasonable out-of-pocket expenses
(including without limitation travel expenses) that arise directly out
of the provision of Services pursuant to this Services Agreement and
are incurred by Supplier and/or certain of Supplier's Affiliates, shall
be
20
reimbursed by JMS. Supplier shall assume all out-of pocket expenses under One
Hundred United States Dollars (US$100) per occurrence or event as reasonable and
shall not need JMS's concurrence. For all other out-of pocket expenses above One
Hundred United States Dollars (US$100) per occurrence or event, Supplier shall
request prior authorization from JMS to incur any such out-of-pocket expenses.
Supplier, and/or certain of Supplier's Affiliates, shall submit the respective
invoices to JMS for prompt reimbursement pursuant to Section 4.02.
ARTICLE V
WARRANTY DISCLAIMER
5.01 LIMITATION OF WARRANTIES. EXCEPT AS PROVIDED IN SECTION 3.05, SUPPLIER
MAKES NO WARRANTY, OTHER THAN THE WARRANTIES SET FORTH IN THE CORPORATE
AGREEMENTS. THE WARRANTIES SET FORTH THEREIN ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS AND IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY THAT THE SERVICES PROVIDED UNDER THIS SERVICES AGREEMENT SHALL
BE SUFFICIENT TO ALLOW BUYER TO SUCCESSFULLY TRANSITION, MANAGE OR
OPERATE THE BUSINESS.
5.02 JMS agrees and recognizes that Supplier shall have no liability, direct
or indirect, for any damages, delays, or other effects on JMS or JMS's
operations due to interruptions of the services provided to JMS
hereunder, except and to the extent resulting from intentional
misconduct.
ARTICLE VI
INDEMNIFICATION
6.01 JMS'S INDEMNIFICATION. Subject to Section 6.03 and consistent with the
applicable provisions of the Corporate Agreements, JMS shall defend,
indemnify, and hold Supplier harmless from and against:
(a) all claims, losses, liabilities, damages, costs and expenses
(including without limitation reasonable attorney's fees and
expenses incurred in any investigation or defense of any
third-party Action) (collectively "Demands"), arising out of
or related to a breach by JMS of its duties, obligations, or
representations and warranties under this Services Agreement;
(b) all Demands arising from personal injury to employees of JMS
(or of any entity(ies) designated by JMS) while at Supplier's
Plant or other facility to receive services under this
Services Agreement, to the extent such Demands do not result
from the negligence of Supplier; and
21
(c) all costs and expenses of Supplier (including without
limitation reasonable fees and expenses of attorneys) incurred
in connection with the successful enforcement of any rights of
Supplier under the indemnity provided in this Section 6.01.
(d) all Demands arising out of or related to the handling of
consumer complaints and consumer claims by Supplier pursuant
to Section 3.01(g).
6.02 SUPPLIER'S INDEMNIFICATION. Subject to Section 6.03, Supplier shall
defend, indemnify and hold JMS harmless from and against:
(a) all Demands arising out of or relating to a breach by Supplier
of its duties, obligations, or representations and warranties
under this Services Agreement; and
(b) all Demands arising from personal injury to employees of
Supplier or its Affiliates while at facilities of JMS or of
JMS's Contract Manufacturers to provide services under this
Services Agreement, to the extent such Demands do not arise
from the negligence of JMS or of JMS's Contract Manufacturers;
and
(c) all costs and expenses of JMS (including without limitation
reasonable fees and expenses of attorneys) incurred in
connection with the successful enforcement of any rights of
JMS under the indemnity provided in this Section 6.02.
6.03 DAMAGE LIMITATIONS.
(a) Notwithstanding anything to the contrary in the Merger
Agreement, Contribution Agreement, or any other Transaction
Documents, none of P&G nor JMS shall be permitted to recover
any consequential, indirect, or punitive damages arising out
of or related to this Services Agreement, regardless of the
form of the Claim or Action, including without limitation
Claims or Actions for indemnification, tort, breach of
contract, warranty, representation or covenant.
(b) P&G's aggregate liability arising out of or related to
breaches of representations and warranties, set forth in this
Separation Agreement, regardless of the form of the Claim or
Action, including, without limitation, Claims or Actions for
indemnification, tort, breach of contract, covenant, warranty
or representation, is limited to the amount by which all such
liabilities exceed One Hundred Thousand United States Dollars
($100,000), and in no event shall P&G's aggregate liability
exceed a total of: (i) Five Hundred Thousand United States
Dollars ($500,000) with regard to any Claim or Action relating
to the Short Term Services set forth in Section 3.01.1 hereof;
(ii) Five Million United States Dollars ($5,000,000) with
regard to any Claim or Action relating to the provision of
steam
22
hereunder pursuant to Section 3.02.1; (iii) Ten Million United
States Dollars ($10,000,000) with regard to any Claim or
Action relating to the provision of conveying and warehousing
pursuant to Sections 3.02.2 and 3.02.3. Notwithstanding the
foregoing, JMS shall only bring a Claim or Action pursuant to
Section 6.02, if such Claim or Action exceeds the amount of
Ten Thousand United States Dollars ($10,000).
(c) JMS's aggregate liability arising out of or related to
breaches of representations and warranties set forth in the
Ancillary Agreements (except the Merger Agreement), regardless
of the form of the Claim or Action, including without
limitation Claims or Actions for indemnification, tort, breach
of contract, warranty or representation, is limited to the
amount by which all such liabilities exceed One Hundred
Thousand United States Dollars ($100,000), and in no event
shall JMS's aggregate liability exceed a total of (i) Five
Hundred Thousand United States Dollars ($500,000) with regard
to any Claim or Action relating to the Short Term Services set
forth in Section 3.01.1 hereof; (ii) Five Million United
States Dollars ($5,000,000) with regard to any Claim or Action
relating to the provision of steam hereunder pursuant to
Section 3.02.1; (iii) Ten Million United States Dollars
($10,000,000) with regard to any Claim or Action relating to
the provision of conveying and warehousing pursuant to
Sections 3.02.2 and 3.02.3. Notwithstanding the foregoing, P&G
shall only bring a Claim or Action pursuant to Section 6.01,
if such Claim or Action exceeds the amount of Ten Thousand
United States Dollars ($10,000).
(d) In the event any Claim or Action hereunder results in a Tax
benefit or is an insured loss to the indemnified Person, the
indemnifying Person shall be entitled to a credit against any
liability thereunder in the amount by which any Taxes of the
indemnified Person shall be reduced by reason of any deduction
or adjustment allowed the indemnified Person for any payment,
settlement or satisfaction of such claim, as well as in the
amount of and to the extent of any insurance proceeds to which
the indemnified Person is entitled. For the purposes hereof,
it shall be presumed that the maximum possible Tax benefit is
derived in the shortest time period possible.
ARTICLE VII
TERM
7.01 TERM OF AGREEMENT. This Services Agreement shall commence on the date
hereof and shall continue (unless sooner terminated pursuant to the
terms hereof) until the end of the Transition Period.
23
7.02 TRANSITION PERIOD. Subject to the terms and conditions provided herein,
the transition period shall commence on Closing and end at the
expiration of each of the transition periods for the various services
provided hereunder, ("Transition Period").
7.03 INTERDEPENDENCE. The existence and the duration of the Crisco
Manufacturing Services must be considered interdependent with the
existence and duration of the Corporate Agreements. In any case and for
any reason should one of the two be terminated, then the other shall
automatically terminate at the same time.
ARTICLE VIII
TERMINATION/EXPIRATION
8.01 TERMINATION. Subject to Section 7.03, this Services Agreement may be
terminated:
(a) at any time by consent of JMS and Supplier;
(b) upon default pursuant to Section 8.02; or
(c) as otherwise provided for under this Services Agreement,
including, without limitation, in Sections 2.02, 3.01, 3.02
and 3.03.
8.02 NOTICE OF DEFAULT.
(a) In addition to any other rights or remedies JMS or Supplier
may have at law or in equity, the Non-Defaulting Party may
terminate this Services Agreement by giving written notice to
the Defaulting Party of the Non-Defaulting Party's intention
to terminate this Services Agreement upon the occurrence of
either or both of the following events (each or both being a
"Default"):
(i) a material breach by the Defaulting Party of any of
its obligations hereunder, (for purposes hereof,
non-payment by JMS shall be deemed a Default), or
(ii) the filing by or against the Defaulting Party of a
petition in bankruptcy, or any appointment of a
receiver for the Defaulting Party or any substantial
part of its assets, or any assignment for the benefit
of the Defaulting Party's creditors, or upon the
Defaulting Party becoming insolvent.
(b) The Non-Defaulting Party may terminate this Services Agreement
by giving written notice to the Defaulting Party of the
Non-Defaulting Party's intention to terminate this Separation
Agreement. Such notice shall identify a date for termination
of this Separation Agreement, which date shall not be sooner
than five (5) Business Days after receipt of such notice by
the Defaulting Party ("Services Agreement Termination Date").
If the event on which the notice is based is not cured prior
to the Services Agreement Termination
24
Date, then this Services Agreement shall terminate on the
Termination Date. The Non-Defaulting Party shall further be
entitled to either (i) seek specific performance for the
Defaulting Party's obligations hereunder (without giving
effect to the termination), or (ii) to seek a resolution of
any such dispute in accordance the terms of Section 5.03 of
the Contribution Agreement, prior to seeking any
indemnification or any other remedies hereunder.
(c) Each of the Parties acknowledges and agrees that the other
Party would be damaged irreparably in the event any of the
provisions of this Services Agreement are not performed in
accordance with their specific terms or are otherwise
breached. Accordingly, each of the Parties agrees that the
other Party shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this
Services Agreement. Each of the Parties acknowledges and
agrees that the remedies of specific performance, injunction
and other forms of equitable relief are subject to certain
principles of equity jurisdiction, equitable defenses and the
discretion of the court before which any proceeding therefor
may be brought.
8.03 EFFECT ON OTHER AGREEMENTS/SURVIVAL OF CERTAIN PROVISIONS. Termination
of this Services Agreement shall have no effect on any other agreements
between JMS and Supplier, unless an effect is mutually and specifically
agreed in writing between the parties. The termination of this Services
Agreement shall not relieve either Party of any liability to the other
based on acts or omissions prior to the termination of this Services
Agreement. The obligations set out in paragraphs 6.01 and 6.02 shall
survive termination of this Services Agreement subject to Section
11.06.
ARTICLE IX
SUPPLIER'S AND CONTRACT MANUFACTURER'S USE OF BUYER'S PROPERTY
9.01 BOOKS AND RECORDS. During the term of this Services Agreement, Supplier
shall be permitted, at no cost to such Supplier, to retain and use any
Books and Records transferred to JMS pursuant to the Corporate
Agreements to the extent necessary or advisable for Supplier to fulfill
its obligations under this Services Agreement.
9.02 TRANSFER OF POSSESSION. Upon the termination of Supplier's obligations
under this Services Agreement, Supplier shall tender possession to JMS,
at its then location the Books and Records described in Section 9.01
hereof.
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ARTICLE X
ACCESS TO THE BUYER'S PLANT
10.01 POST-CLOSING. For the period from the Closing Date until the expiration
or termination of the Transition Period, Supplier and JMS agree as
follows:
(a) JMS shall permit Supplier reasonable access to the JMS's Plant
by a reasonable number of Supplier's representatives at such
times and for such duration as may be reasonably approved by
the JMS's Plant site manager, for the purpose of performing
and rendering the services set forth under this Services
Agreement, including without limitation, access for planning
for the transition of support operations such as management
information systems at the JMS's Plant.
(b) The JMS's Plant site manager and Supplier shall mutually agree
on the number of Supplier employees and representatives and
the terms of their access to JMS's Plant. Such access shall
not unreasonably interfere with the normal operations of JMS.
ARTICLE XI
MISCELLANEOUS
11.01 ENTIRE AGREEMENT. The Transaction Documents constitute the entire
agreement among Supplier, certain of Supplier's Affiliates, and JMS
with respect to, among other things, the provision by Supplier of the
services provided for herein. In the event of any inconsistency between
the Transaction Documents and any subsequently-issued document,
including without limitation a written purchase order, the Transaction
Documents shall prevail. In the event of any inconsistency between or
among the Transaction Documents, the Corporate Agreements shall
prevail.
11.02 INDEPENDENT CONTRACTOR STATUS. Supplier is acting pursuant to this
Services Agreement as an independent contractor. This Services
Agreement does not constitute and is not to be construed as
constituting an agent relationship, partnership or joint venture
between the Supplier and the JMS. Neither Party has any right to
obligate or bind the other Party in any manner.
11.03 NO RIGHT OF SET-OFF. Except as set forth in Sections 3.01.1(e) of this
Services Agreement, all payments to be made by either Party under the
Transaction Documents shall be made free of any set-off and shall be
promptly remitted to the Party entitled to receive payment hereunder.
26
11.04 NON SOLICITATION/HIRING OF SUPPLIER'S EMPLOYEES.
(a) Notwithstanding any other provision of this Services Agreement, the
Merger Agreement, the Contribution Agreement, or the Confidentiality
Agreement, and except as Supplier and JMS agree otherwise in writing,
JMS agrees that it shall not (and JMS shall cause its Affiliates not
to), for a period of two (2) years from the date of this Services
Agreement, hire, solicit (other than by means of general advertisement
not directed to such employees) or enter into any form of consulting
arrangement or agreement with, any employee, other than Newco
Employees, employed by Supplier in its Global Business Services ("GBS")
business unit as of the Effective Time, or any other employee of
Supplier whom JMS came into contact with as a result of the
transactions contemplated by this Services Agreement, nor shall JMS
(and JMS shall cause its Affiliates not to) solicit or otherwise induce
any such employees of Supplier to enter into any type of employment or
consulting arrangement or agreement that would be prohibited by this
Section 9.03(a). JMS acknowledges that (i) this provision is
reasonable, (ii) Supplier would not enter into this Services Agreement
without JMS agreeing to and complying with this Section 9.03(a), (iii)
Supplier would suffer irreparable harm upon JMS's violation of this
provision and (iv) Supplier shall be entitled to obtain a temporary
restraining order and/or injunction upon JMS's breach of this
provision.
(b) Notwithstanding any other provision of this Services Agreement, the
Merger Agreement, the Contribution Agreement, or the Confidentiality
Agreement, and except as Supplier and JMS agree otherwise in writing,
Supplier agrees that it shall not (and Supplier shall cause its
Affiliates not to), for a period of two (2) years from the date of this
Services Agreement, hire, solicit (other than by means of general
advertisement not directed to such employees) or enter into any form of
consulting arrangement or agreement with, any employee employed by JMS
as of the Effective Time and involved in the transaction contemplated
by this Services Agreement, nor shall Supplier (and Supplier shall
cause its Affiliates not to) solicit or otherwise induce any such
employees of JMS to enter into any type of employment or consulting
arrangement or agreement that would be prohibited by this Section
9.03(b). Supplier acknowledges that (i) this provision is reasonable,
(ii) JMS would not enter into this Services Agreement without Supplier
agreeing to and complying with this Section 9.03(b), (iii) JMS would
suffer irreparable harm upon Supplier's violation of this provision and
(iv) JMS shall be entitled to obtain a temporary restraining order
and/or injunction upon Supplier's breach of this provision.
11.05 FORCE MAJEURE. Neither Party (the "Affected Party") shall be liable to
the other Party (the "Non-Affected Party") for failure to perform any
part of this Services Agreement if such failure results from an act of
God, war, revolt, revolution, sabotage, actions of a Governmental
Entity, laws, regulations, embargo, fire, strike, other labor trouble,
or any cause beyond the control
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of the Affected Party other than financial difficulties of such party.
Upon the occurrence of any such event which results in, or shall result
in, delay or failure to perform according to the terms of this Services
Agreement, the Affected Party shall promptly give notice to the
Non-Affected Party of such occurrence and the effect and/or anticipated
effect of such occurrence. The Affected Party shall use its reasonable
efforts to minimize disruptions in its performance and to resume
performance of its obligations under this Services Agreement as soon as
practicable; provided, however, the resolution of any strike or labor
trouble shall be within the sole discretion of the Affected Party. If
an event of Force Majeure lasts for more than sixty (60) days, then
either party may terminate service affected by the Force Majeure.
Notwithstanding the foregoing, in the event the warehousing and/or
conveying facilities used to provide services to JMS are destroyed due
to a Force Majeure event and provided Supplier elects not to rebuild
these facilities and/or reestablish these services on its own, Supplier
shall use its commercially reasonable efforts to allow JMS to
reconstruct these facilities (which may include selling to JMS the real
estate property where such facilities are/were located).
11.06 LIMITATION. Any other Action pursuant to this Services Agreement must
be commenced within nine (9) months after the expiration or termination
of this Services Agreement.
11.07 NOTICES. All notices required or permitted to be given under this
Services Agreement shall be in writing and shall be deemed to be
properly given when actually received by the Person entitled to receive
the notice at the address stated below, or at such other address as
Supplier or JMS may provide by notice to the other:
SUPPLIER: THE PROCTER & GAMBLE COMPANY
Address: 1 P&G Plaza
Cincinnati, Ohio 45202
Attention: Adam Abele, Associate Director
Acquisitions & Divestitures
Fax: (513) 983-8998
With copies to: The Procter & Gamble Company
Address: 1 P&G Plaza
Cincinnati, OH 45202
Attention: Secretary
Fax: (513) 983-1992
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JMS: THE J.M. SMUCKER COMPANY
Address: Strawberry Lane
Orrville, OH 44667
Attention: Director of Corporate Development
and Strategic Planning
Fax: (330) 684-3428
With copies to: The J.M. Smucker Company
Address: Strawberry Lane
Orrville, OH 44667
Attention: General Counsel
Fax: (330) 684-3428
11.08 SUCCESSORS AND ASSIGNS. Neither party may assign this Services
Agreement, other than to an Affiliate (as defined in the Corporate
Agreements) of that party, without the express written consent of the
other party, which consent shall not be unreasonably withheld.
11.09 GOVERNING LAW. This Services Agreement and the rights and obligations
of Supplier and JMS shall at all times be governed by and construed in
accordance with the laws of the State of Ohio.
11.10 TAXES. JMS and Supplier each agree to be responsible for their own
income (gross or net), real or personal property taxes that arise from
the performance of services in this Services Agreement. In the event
that any state or local jurisdiction assesses sales or use taxes upon
this transaction or the services provided herein, the service recipient
agrees to promptly indemnify and reimburse the service provider for the
taxes and other costs imposed by the jurisdiction. This clause shall
survive the termination of this Services Agreement and remain in effect
for a period of seven years from the date of termination.
11.11 WAIVERS. Except as otherwise provided in this Services Agreement, the
failure by any party to comply with any obligation, covenant, agreement
or condition under such agreements 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 to enforce at any time any
of the provisions of such agreements shall in no way be construed to be
a waiver of any such provision, nor in any way to affect the validity
of such agreements or any part thereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any
breach of such provisions shall be held to be waiver of any other or
subsequent breach.
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11.12 NO THIRD PARTY BENEFICIARIES. This Agreement is for the sole benefit of
the parties and their successors and permitted assigns, and nothing
herein express or implied gives or shall be construed to give to any
Person, other than the parties and such assigns, any legal or equitable
rights hereunder. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the parties.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have signed this Services Agreement on the date
first set forth above.
THE PROCTER & GAMBLE THE J.M. SMUCKER COMPANY
COMPANY
By: /s/ Gretchen W. Price By: /s/ Richard K. Smucker
------------------------------- ---------------------------------
Name printed: Gretchen W. Price Name printed: Richard K. Smucker
--------------------- -----------------------
Title: Vice President and Treasurer Title: President & Co-CEO
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