1
Exhibit 10.6
FORM OF ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (the "Agreement"), dated as of
___________, 1999, by and between xxxxxxxxxxxxxxxxx.xxx, inc., a Delaware
corporation ("XX.XXX"), and American Greetings Corporation, an Ohio corporation
("AG").
WHEREAS, AG and XX.XXX have entered into that certain Separation
Agreement, dated __________ , 1999 (the "Separation Agreement"), and,
simultaneously with the execution and delivery of this Agreement, intend to
consummate the transactions contemplated by the Separation Agreement; and
WHEREAS, XX.XXX and AG desire to enter into certain agreements
concerning administrative services to be offered and/or provided by AG to XX.XXX
and its Subsidiaries.
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt, sufficiency and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS: All capitalized terms used in this Agreement but not
defined will have the same meanings ascribed to such terms in the
Separation Agreement.
2. PROVISION OF SERVICES: During the Term (as defined in SECTION 3 below),
AG shall cause one or more members of the AG Group to offer and, at
XX.XXX's election, provide to XX.XXX and its Subsidiaries, such
administrative services as XX.XXX may reasonably request for their
respective business operations and provide XX.XXX and its Subsidiaries
with full use of the office space at AG's headquarters primarily used
by XX.XXX and its Subsidiaries as of the date of this Agreement (the
"Office Space") for their operations (collectively, the "Services"). AG
shall have no obligation to provide the Services at levels in excess of
those in which AG regularly had provided such Services for the
operation of XX.XXX's business prior to the date of the Separation
Agreement. Such Services may include, by way of example, human resource
administration, finance administration and legal services. At XX.XXX's
request, the parties will confer to discuss what, if any, Services
XX.XXX wishes to request, the actual Service Fees (as defined herein)
that would be chargeable by AG for such Services and the timing of the
implementation of such Services. With respect to any Services that
XX.XXX wishes to be provided hereunder, for itself or any of its
Subsidiaries, the parties shall establish in writing the nature of the
Services, the Service Fees chargeable therefor and the timing of the
implementation of such Services. Nothing in this Agreement will be
construed to prohibit XX.XXX or any of its Subsidiaries from
contracting with third parties to provide any of the Services or from
undertaking to perform the Services itself, and nothing in this
Agreement will be construed to prohibit AG from undertaking to provide
additional services to XX.XXX other than as contemplated by this
Agreement, on terms and conditions mutually satisfactory to the
parties. Additionally, unless expressly provided otherwise pursuant to
an Ancillary Agreement, actions taken in connection with any member of
the AG Group's ownership interest in XX.XXX or pursuant to any contract
rights granted to any member of the AG Group (including by way of
example, but not limited to, audits of the AG Group in connection with
the preparation of consolidated tax
2
returns or internal audits requested by AG) that are not a result of a
specific request by XX.XXX for Services hereunder, shall be at AG's
sole cost and expense and shall not be deemed to be part of the
Services provided hereunder.
3. TERM: The term of the provision of Services under this Agreement (the
"Term") will commence on the Closing Date and will expire on the End
Date unless earlier terminated as set forth in Section 4.
4. EARLY TERMINATION OF SERVICES:
4.1. EARLY TERMINATION BY AG. AG may cause the AG Group to
terminate any or all Services provided hereunder (i) upon the
occurrence of a Reversion Event or (ii) at any time following
XX.XXX's material breach of its payment obligations hereunder
and XX.XXX's failure to cure such breach within ten (10) days
after receipt of written notice from AG. Notwithstanding
anything to the contrary contained in this Agreement,
following the second anniversary of this Agreement, AG may
cause the AG Group to terminate any or all Services provided
hereunder upon one hundred twenty (120) days' prior written
notice to XX.XXX and may elect not to provide any Services
thereafter requested by XX.XXX.
4.2. EARLY TERMINATION BY XX.XXX. XX.XXX may terminate its receipt
of any or all of the Services provided by AG or its agents,
for any reason or no reason, upon not less than one hundred
twenty (120) days' prior written notice to AG. Notwithstanding
any notice by XX.XXX to terminate any Services, no termination
will become effective until the completion of such Services as
XX.XXX may reasonably request AG to complete so as to minimize
disruption of its business operations. Upon termination of any
Services, AG will cooperate with XX.XXX in providing
assistance reasonably requested by XX.XXX relating to the
transition of the provision of the Services to XX.XXX or any
other entity and such assistance shall be chargeable to XX.XXX
as Services.
5. THIRD PARTY SUPPLIERS. AG covenants that it will not enter into
agreements with third parties ("Third Party Suppliers") to provide
goods or services for the benefit of XX.XXX or any of its Subsidiaries
without the prior written consent of XX.XXX unless such agreements
provide for termination by AG without penalty upon not less than one
hundred twenty (120) days' notice. Any agreements with Third Party
Suppliers entered into by AG which by their terms do not provide for
termination by AG without penalty upon less than one hundred twenty
(120) days' notice but which XX.XXX had consented to in writing, shall
be referred to as the "Permitted Third Party Agreements." If XX.XXX
terminates its receipt of any Services prior to the expiration of the
Term, with respect to each Permitted Third Party Agreements relating to
exclusively such Services, XX.XXX shall, at its election, either (A)
assume such Permitted Third Party Agreements effective upon termination
of such Services, or (B) reimburse AG for any monies due pursuant to
such Permitted Third Party Agreements either as a result of such
termination or after such termination.
2
3
6. FEES: In consideration of AG's performance of the Services during the
Term, XX.XXX hereby agrees to pay AG fees (the "Service Fees") equal to
AG's actual costs plus ten percent (10%). For purposes of this
Agreement, actual costs means all costs and expenses directly incurred
by AG excluding: (i) any costs or expenses associated with AG's
overhead, (ii) any advertising or promotion costs or expenses, (iii)
any interest payments, and (iv) any costs or expenses associated with
personnel of AG or the AG Group other than the allocable portion of the
base salary of any AG Group employee directly providing or supervising
Services plus twenty-three percent (23%) of such base salary charge
(representing the total amount chargeable in respect of any fringe
benefits of any AG Group employee). Notwithstanding anything to the
contrary contained in this Agreement, XX.XXX agrees to pay AG fees and
charges for its use of the Office Space at AG's standard rate of fees
and charges for such use, consistent with past practice. AG will
provide to XX.XXX a monthly invoice by the thirtieth (30th) day of each
month, setting forth in reasonable detail the Service Fees payable by
XX.XXX for Services rendered by AG during the preceding month. All
invoices will be due and payable thirty (30) days following receipt of
invoice. Overdue payments shall bear interest at the prime rate (as
published in The Wall Street Journal on the first date such payments
become overdue). All disputes regarding any invoice amounts will be
resolved pursuant to the dispute resolution procedures set forth in
Section 8.09 of the Separation Agreement.
7. WARRANTIES. AG hereby warrants to XX.XXX and its Subsidiaries as
follows:
7.1. AG will use reasonable efforts to perform the Services in a
competent manner, consistent with the manner in which AG
regularly had provided such Services for the operation of
XX.XXX's business prior to the date of the Separation
Agreement and consistent with the manner in which AG provides
such Services for operation of its own business.
Notwithstanding anything to the contrary contained in this
Agreement, AG makes no warranty to XX.XXX as to the adequacy
or suitability of the Services for XX.XXX's or its
Subsidiaries' needs.
7.2. The provision of the Services will not violate or in any way
infringe upon or violate the rights of any third parties,
including, but not limited to, copyrights, patents, trade
secrets, contractual rights, employment rights, and other
proprietary rights.
8. INDEMNITY. Sections 6.02 through 6.11 of the Separation Agreement shall
govern indemnification obligations and claims under this Agreement and
are hereby incorporated by reference herein.
9. INDEPENDENT CONTRACTOR STATUS: The parties are and intend to be
independent contractors with respect to the Services to be provided
hereunder. None of AG, any member of the AG Group or any of their
respective employees and agents will be considered as having an
employee status with XX.XXX or will be entitled to participate in any
of XX.XXX's employee benefit programs including, but not limited to,
workers' compensation and disability insurance, group health and dental
insurance, unemployment insurance, retirement plans, and stock-based
benefits or plans. AG will not act as an agent of
3
4
XX.XXX and will not be entitled to enter into any agreements or incur
any obligations on behalf of XX.XXX. No form of joint employer, joint
venture, partnership, or similar relationship between the parties is
intended or hereby created. As an independent contractor, AG will be
solely responsible for: (a) determining the means and methods for
performing the Services provided under this Agreement; and (b) persons
employed by AG and engaged in the performance of the specified work,
including responsibility for all applicable employee-related tax,
salary and benefit programs, and AG further agrees to indemnify and
hold XX.XXX and its Subsidiaries harmless from and against any and all
Liability, claims, penalties, costs, and taxes related thereto.
10. AUDIT RIGHTS. XX.XXX (or its authorized representatives) will have the
right, at its sole expense, at any time upon ten (10) days' prior
written notice but no more than once every twelve (12) months, to
perform an audit of the Services provided hereunder and the Services
Fees being charged hereunder. Such audit shall be limited to Services
provided and Service Fees charged during the two (2) year period
immediately prior to the commencement of such audit. Pursuant to such
audit, AG will have full and complete access, during normal business
hours and upon reasonable notice, to AG's books and records and AG will
provide XX.XXX with such information and assistance, as reasonably
requested by XX.XXX to perform the audits. Subject to AG's obligations
as set forth in this Section, AG may terminate XX.XXX's right to
perform a given audit in the event XX.XXX fails to complete such audit
within four (4) months of its commencement. Any discrepancies found
during any audit shall be rectified upon written demand.
11. ACCESS TO BOOKS AND RECORDS. Upon termination of any Services
hereunder, AG shall deliver to XX.XXX copies of all books and records
of AG related to the performance of such Services to the extent such
books and records are separable from AG's other books and records. To
the extent such books and records are not separable and AG has not
supplied XX.XXX with copies of such books and records, AG will provide
XX.XXX with full and complete access to such books and records for as
long as such books and records must be retained to comply with
Applicable Law and in any event for no less than five (5) years
following termination of such Services.
12. CONFIDENTIAL INFORMATION. The parties hereby acknowledge that their
personnel may gain access to information that the other party deems to
be confidential and/or proprietary and that has commercial value. As
used herein, "Confidential Information" means any and all proprietary
business information of the disclosing party that does not constitute a
Trade Secret (as hereinafter defined), including any such information
of which the receiving party becomes aware as a result of its
performance under this Agreement. As used herein, "Trade Secrets" means
information related to the business of the disclosing party that
derives economic value, actual or potential, from not being generally
known to or readily ascertainable by other persons who can obtain
economic value from its disclosure or use and is the subject of efforts
by the disclosing party that are reasonable under the circumstances to
maintain its secrecy. For purposes of this Agreement, "Company
Information" means both Confidential Information and Trade Secrets.
Each party shall use the same care to prevent disclosing to third
parties the Company Information of the other party as it employs to
avoid disclosure, publication, or
4
5
dissemination of its own information of a similar nature, but in no
event less than a reasonable standard of care. Each party covenants
that its employees and agents will be bound by the obligations of this
Section. Furthermore, except as contemplated by this Agreement in the
rendering of Services hereunder, neither party shall: (a) make any use
of the other party's Company Information; (b) acquire any right in or
assert any lien against the other party's Company Information; or (c)
refuse to promptly return, provide a copy of, or destroy the other
party's Company Information upon request of the other party.
Notwithstanding the foregoing, the limitations in this Section shall
not apply to any information that the receiving party can demonstrate:
(i) was in the public domain at the time of disclosure to it; (ii) was
published or otherwise became a part of the public domain, after
disclosure to the receiving party, through no fault of its own; (iii)
was in the possession of the receiving party at the time of disclosure
to it from a third party who had a lawful right to such information and
disclosed such information to it, without a breach of duty owed to the
disclosing party; or (iv) was independently developed by the receiving
party without reference to Company Information of the disclosing party.
13. MISCELLANEOUS. Section 8.01 and Sections 8.03 through 8.10 of the
Separation Agreement shall govern this Agreement and are hereby
incorporated by reference herein; provided, however, that (i) any
reference to "Agreement" in the above-mentioned Sections of the
Separation Agreement shall be deemed to refer to this Administrative
Services Agreement, and (ii) any reference to "Ancillary Agreements" in
Section 8.06 of the Separation Agreement shall be given no force or
effect.
[INTENTIONALLY LEFT BLANK]
5
6
IN WITNESS WHEREOF, XX.XXX. and AG have each caused this Administrative
Services Agreement to be executed by their respective authorized officers, all
as of the date first above written.
XXXXXXXXXXXXXXXXX.XXX, INC.
By:
--------------------------------
Print Name:
Title:
AMERICAN GREETINGS CORPORATION
By:
--------------------------------
Print Name:
Title:
6
