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Transition Services Agreement

This is an actual contract between BON Ton Stores and Saks.

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Sectors: Retail
Governing Law: New York, View New York State Laws
Effective Date: March 10, 2006
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EXHIBIT 10.7 Execution Copy AMENDED AND RESTATED TRANSITION SERVICES AGREEMENT (SELLER AS SERVICE PROVIDER) This AMENDED AND RESTATED TRANSITION SERVICES AGREEMENT (this " Agreement" ), dated as of March 10, 2006 and effective as of March 5, 2006 (the " Effective Date" ), is made by and between Saks Incorporated, a Tennessee corporation (" Seller" ), and The Bon-Ton Stores, Inc. a Pennsylvania corporation (" Buyer" ). RECITALS WHEREAS , pursuant to that certain Purchase Agreement, dated as of October 29, 2005, by and between Seller and Buyer (the " Purchase Agreement" ), Seller has agreed to sell, or caused to be sold, to Buyer the Securities, and Buyer has agreed to purchase the Securities as provided therein; and WHEREAS , in connection with the transactions contemplated by the Purchase Agreement, Buyer and Seller desire that Seller provide Buyer with certain transition services relating to the Business as set forth in this Agreement. NOW, THEREFORE , in consideration of the premises and the mutual representations, warranties, covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: 1. Transition Services . (a) During the term of this Agreement as set forth in Section 7 (the " Transition Period" ), and subject to the terms and conditions set forth herein, Seller shall provide, or cause one or more of its Affiliates to provide, to Buyer and its Affiliates (with respect to the Business) each of the services (each of the twelve (12) categories described on Annex A , a " Service" and, collectively, the " Services" ) specified on Annex A hereto from the Effective Date and for the specific period of time described on Annex A with respect to each such Service, which shall be provided in a manner consistent in all material respects with that provided by Seller or one or more of its Affiliates to the Business during the twelve (12) month period immediately prior to the Effective Date. Buyer shall purchase and pay for such Services as provided for herein. The quantity of each Service shall be that which Buyer reasonably requires for the operation of the Business in the ordinary course consistent in all material respects with the operation of the Business during the twelve (12) month period immediately prior to the Effective Date. The Services shall only be made available for, and Buyer shall only be entitled to utilize the Services for the benefit of the stores operated by the Companies and the Subsidiaries (in respect of the Business) immediately prior to the Effective Date. Annex B hereto contains a description of each of the Services specified on Annex A . (b) The fees payable by Buyer to Seller for each Service are set forth on Annex A ; provided , that, if, after the Effective Date, Seller upgrades or otherwise changes any of the Services provided to its Affiliates, Seller shall offer such upgraded or changed Service to Buyer and provide support and maintenance related thereto for a fee at a rate equal to Seller' s


incremental cost of providing such upgraded or changed Service to Buyer, plus a pro-rata allocation of actual overhead costs allocable to the provision of such Service, which rate shall not in any event exceed the fee rate Seller charges its Affiliates for such upgraded or changed Service, and, if Buyer accepts such upgraded or changed Service, Annex A shall be amended to reflect such fees. If Buyer does not accept any such upgraded or changed Service, Seller shall continue to provide such Service to Buyer in a form that is no less beneficial to Buyer as the form in which it exists prior to such upgrade or change; provided , however , that if Seller determines it would be burdensome to continue to provide Services to Buyer without such upgraded or changed Service, Seller shall have the right to require Buyer to accept such upgraded or changed Service at no additional cost to Buyer other than the application in each instance of the Cost Adjustment Factor set forth in Annex A . Seller and Buyer acknowledge that some of the Services to be provided hereunder require instructions and information from Buyer; Seller shall inform Buyer, as soon as reasonably practicable after Seller becomes aware of the need therefor, of any instructions or information that Seller shall require from Buyer to provide any Service (including any upgraded or changed Service), and Buyer shall provide to Seller such requested instructions or information in sufficient time for Seller or its Affiliates to provide or procure such Services. Buyer shall pay any additional costs or expenses resulting from any failure of Buyer to timely provide such instructions or information requested by Seller. (c) Seller shall use commercially reasonable efforts to obtain the consent of any licensors of Software or any other third party that may be required in connection with the provision of any of the Services hereunder (a " Third Party Consent" ); provided , however , that Seller shall have no obligation to pay money or grant any accommodation to any third party in order to obtain any such Third Party Consent; provided , further , that if any such third party refuses to consent to Seller' s provision of Services to Buyer hereunder, Buyer and Seller shall promptly work together in good faith to determine if Seller can provide such Services or comparable Services reasonably satisfactory to Buyer by another method or procedure without requiring such consent; provided , further , that if any such third party refuses to consent to Seller' s provision of Services to Buyer hereunder and Seller and Buyer are unable to determine an alternate method or procedure as described in the proviso immediately foregoing, Seller shall attempt to negotiate a license having a term equal to the shorter of 12 months or the remaining duration of the applicable Service (a " Short-Term License" ). If Seller (i) is unable to obtain any Third Party Consent for the shorter of 12 months or the remaining duration of the applicable Service without the payment of a fee to the applicable third party (the " Third Party Consent Fee" ) or (ii) obtains a Short-Term License for a fee (the " Short-Term License Fee" ), then Buyer shall have the option, subject to Schedule 1(c), to elect to (A) pay any such Third Party Consent Fee or Short-Term License Fee or (B) terminate any of the applicable Services. 2. Limitation on Services . Except as provided in Section 1(b) , Seller shall have no obligation to upgrade, enhance or otherwise modify any computer hardware, Software or network environment currently used in the Business or to provide any support or maintenance

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services for any computer hardware, Software or network environment that has been upgraded, enhanced or otherwise modified by Seller from the computer hardware, Software or network environments that is currently used in the Business. 3. Additional Services . If Buyer reasonably determines that additional transition services of the type previously provided by Seller to the Business are necessary to complete the transition, Seller will consider in good faith providing such services to Buyer. If Seller agrees to add any additional services (" Additional Services" ), representatives of Seller and Buyer will meet to discuss in good faith the terms and conditions (including cost) upon which such Additional Services will be provided. Any such Additional Services mutually agreed to and the fees thereof shall be effective as of the date of execution of an amendment to this Agreement by duly authorized representatives of the parties hereto. It is understood and agreed that Seller shall be under no obligation to provide or procure any such Additional Services requested by Buyer. 4. Subcontractors . Seller may, directly or through one or more Affiliates, hire or engage one or more subcontractors or other third parties (each, a " Subcontractor" ) to perform any or all of its obligations under this Agreement; provided , that: (a) Seller remains ultimately responsible under this Agreement, including for ensuring that the obligations with respect to the nature, quality and standards of care set forth in Section 1 are satisfied with respect to any Service provided by any Subcontractor; (b) the use of any Subcontractor will not increase any fees payable by Buyer hereunder; and (c) the use of any Subcontractor will not adversely affect the quality or timeliness of delivery of any Service provided to Buyer. 5. Title to Seller Equipment; Management and Control; SOA . (a) All procedures, methods, systems, strategies, tools, equipment, facilities and other resources used by Seller, any of its Affiliates or any third party service provider in connection with the provision of Services hereunder (collectively, the " Seller Equipment" ) shall remain the property of Seller, its Affiliates or such third party service provider and, except as otherwise provided herein, shall at all times be under the sole direction and control of Seller, its Affiliates or such third party service provider. (b) Except as otherwise provided herein, management of, and control over, the provision of the Services (including the determination or designation at any time of the Seller Equipment, employees and other resources of Seller, its Affiliates or any third party service provider to be used in connection with the provision of the Services) shall reside solely with Seller. Without limiting the generality of the foregoing, all labor matters relating to any employees of Seller, its Affiliates and any third party service provider shall be within the exclusive control of such parties, and Buyer shall take no action affecting, or have any rights with respect to, such matters. Seller shall be solely responsible for the payment of all salary and benefits and all income tax, social security taxes, unemployment compensation, tax, workers' compensation tax, other employment taxes or withholdings and premiums and remittances with respect to employees of Seller and its Affiliates used to provide Services. (c) In connection with any obligations of Seller or any of its Affiliates to a third party, Seller shall not permit any lien or other encumbrance to be placed upon any assets or

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other materials owned by Buyer or any of its Affiliates that are transported, shipped, warehoused or otherwise held in the custody of Seller or any of its Affiliates on behalf of Buyer. (d) No more than once annually Seller shall, subject to Seller' s site safety, and confidentiality and security procedures, provide to Buyer' s third-party auditors and Buyer' s internal audit staff access to: (i) any facility at which the Services are being performed; (ii) appropriate Seller management personnel and Subcontractors; and (iii) the data and records (and other documentation reasonably requested by Buyer) maintained by Seller with respect to the Services, in each case solely for the purpose of performing audits and inspections of Buyer and its businesses to enable Buyer to meet its requirements under Section 404 of the Sarbanes-Oxley Act of 2002. 6. Billing and Payment . (a) Buyer shall promptly pay any bills and invoices that it receives from Seller or its Affiliates for Services provided under this Agreement, subject to receiving, if requested, any appropriate support documentation for such bills and invoices. Such charges shall be billed within five (5) business days of the end of each calendar month. Unless otherwise provided herein or on Annex A , Buyer shall pay all invoices by wire transfer of immediately available funds in accordance with the instructions provided by Seller or any of its Affiliates (in writing to Buyer), as applicable, not later than thirty (30) days following receipt by Buyer of Seller' s or any of its Affiliates' invoice. Buyer shall not offset any amounts owing to it by Seller or any of Seller' s Affiliates against amounts payable by Buyer hereunder or under any other agreement or arrangement. Should Buyer dispute any portion of any invoice, Buyer shall promptly notify Seller in writing of the nature and basis of the dispute. (b) If Buyer fails to pay the full amount of any invoice within thirty (30) days after the relevant payment date, such failure shall be considered a material breach of this Agreement (except to the extent of any invoiced amounts reasonably disputed by Buyer in good faith and of which dispute Buyer has notified Seller in accordance with the requirements of this Agreement) and if at any time the aggregate amount of such overdue unpaid invoices (except to the extent of any invoiced amounts reasonably disputed by Buyer in good faith) exceeds $250,000, Seller may, without liability, suspend its obligations hereunder to provide any and all of the Services to Buyer until such time as such invoices have been paid in full (except to the extent of any invoiced amounts reasonably disputed by Buyer in good faith and of
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