ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (the "Agreement") is made and
entered into as of August 26, 1996 (the "Effective Date") by and between Prime
Succession Acquisition Corp. (which shall be renamed Prime Succession, Inc.)
("Prime"), a Delaware corporation, and Xxxxxx Group International, Inc.
("Xxxxxx"), a Delaware corporation.
RECITALS
WHEREAS, Prime owns and operates a chain of funeral homes and cemeteries
throughout the United States (the "Business");
WHEREAS, Xxxxxx also owns and operates a chain of funeral homes and
cemeteries throughout the United States and, in several markets, competes with
Prime in the death care industry;
WHEREAS, Xxxxxx has acquired, through a series of investment transactions
(the "Investment"), approximately 23% of the common equity of Prime Succession
Holdings, Inc. ("Prime Holdings"), which owns all of the capital stock of Prime
and, as a result of a call option granted to Xxxxxx (the "Call Option") and a
put option granted to Blackstone Capital Partners II Merchant Banking Fund, L.P.
and certain of its affiliates (the "Put Option") in connection with the
Investment, has an opportunity to acquire all of Prime Holdings' outstanding
Common Stock;
WHEREAS, to maintain independence between Xxxxxx and Prime for purposes of
fostering competition, Xxxxxx currently treats its minority investment in Prime
Holdings as a passive investment, and, with the exception of the business
arrangements addressed by this Agreement, Xxxxxx and Prime operate separate
businesses and operations; and
WHEREAS, to achieve certain cost efficiencies, Xxxxxx has agreed to
provide, and Prime has agreed to accept the provision of, administrative
services and support to the Business as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1: SERVICES AND SUPPORT TO BE PROVIDED
1.1 The Services. Xxxxxx will furnish to Prime and Prime will use such of
the following administrative services and support (individually a "Service" and
collectively, the "Services") as Prime may request from time to time:
a. Licenses to use any or all of the software packages and any
enhancements thereto, listed on Exhibit A
together with the necessary information systems support to ensure that such
licensed software functions appropriately and maintenance support for the
hardware necessary to operate the licensed software; provided that, to
avoid the disclosure of confidential pricing, financial or market
information or significant competitive terms, Xxxxxx support personnel
maintaining the licensed software shall not have access to such
information;
b. Certain non-strategic legal services, including regular and
periodic assistance with the preparation and filing of, and general
guidance with respect to, federal, state or local governmental reports,
case management of the defense or prosecution of non-strategic litigation,
and the procurement, retention, management and coordination of legal
services furnished by independent counsel;
c. Certain employee training and support services relating to
regulatory compliance in the following areas: (i) Occupational Safety &
Health Administration Standards, including an annual on-site safety survey;
(ii) Americans With Disabilities Act, Title III, Physical Accommodations by
Public Entities; (iii) licensing; (iv) environmental; (v) employment law,
including wage and hour, sexual harassment, employment discrimination, the
Fair Labor Standards Act, the Family and Medical Leave Act, employee
discipline, employee termination, and employment applications; (vi)
funeral, cemetery, crematory services and advanced planning procedural
issues; (vii) the Federal Trade Commission's Funeral Services Practices
Rule; and (viii) the Federal Truth in Lending Act;
d. Risk management services for the purposes of cost effectiveness,
including the brokering and administration of insurance programs and the
processing and administration of insurance claims;
e. Access to certain telecommunications equipment and services, and
technical support with respect to such equipment, including access to
equipment used for electronic mail, voice mail and other such purposes;
provided that the equipment accessed by Prime shall be partitioned from
that used by Xxxxxx so that neither user shall, in any way, have access to
the other's communications systems and the information contained therein;
f. Environmental support for general regulatory, compliance and
remedial purposes;
g. Travel Services from Xxxxxx Travel for certain Prime employees; and
h. Other related or similar Services to which the parties mutually
agree.
-2-
1.2 Additional Services.
a. In addition to the Services listed above, Xxxxxx hereby agrees that
it may also provide Prime with the ability to purchase supplies under
certain of Xxxxxx'x supply agreements with third parties.
x. Xxxxxx and Prime agree that to the extent it is feasible and cost
effective in particular markets they shall provide to each other:
(i) Access to each other's embalming facilities in particular
markets; and
(ii) Access to each other's automobile fleets where appropriate.
The costs associated with any shared services under this Section (b) shall
be allocated between Xxxxxx and Prime on a mutually agreeable basis based
on relative usage.
1.3 Maintaining Competition and Confidentiality. Notwithstanding anything
to the contrary in this Agreement, Xxxxxx and Prime hereby agree that Xxxxxx
shall not provide to Prime, and Prime shall not request the provision of, any
Services that, in the opinion of counsel for either party, would unreasonably
inhibit competition between Xxxxxx and Prime, including, but not limited to, any
Services that would require the sharing of confidential information or
information relating to significant competitive terms such as price, territory
or customers. To the extent that based on the opinion of such counsel there is a
significant reduction in the services provided from those set forth in Sections
1.1 and 1.2 hereof, the parties agree to negotiate in good faith a reducation of
the Administrative Fee referred to in Section 3.1 hereof.
ARTICLE 2: CONDITIONS RELATING TO SERVICES
2.1 Standard of Care. Xxxxxx will use reasonable commercial efforts in
providing services to the Business. Xxxxxx shall not take any action in
connection with the provision of the Services which would tend to materially
injure, diminish the value of, or reflect adversely upon Xxxxxx, Prime or the
Business.
2.2 Independent Contractor. Notwithstanding any other provision of this
Agreement to the contrary, the parties acknowledge and expressly agree that
Xxxxxx shall be an independent contractor of Newco and Prime while providing the
Services. Nothing herein shall be construed to establish a partnership, a joint
venture or an agency relationship between or among the parties.
2.3 Personnel Providing Services. The Services shall be provided by, or
under the supervision of, qualified personnel of
-3-
Xxxxxx or one or more of its Affiliates (as such term is defined below) as
designated by Xxxxxx. The employees of Xxxxxx providing Services hereunder shall
be, during the term of this Agreement, employees of or consultants to Xxxxxx and
not employees of Prime, and shall be under the direct supervision of Xxxxxx.
Xxxxxx shall have full control over and full responsibility for the assignment
of employees providing the Services and for the terms and conditions of
employment of such employees including hiring, discharging, disciplining,
scheduling and all other matters relating to the terms and conditions of
employment.
ARTICLE 3: COMPENSATION
3.1 Administrative Fee. In consideration for the provision of the Services,
Newco and Prime agree to pay Xxxxxx an administrative fee equal to $250,000 in
immediately available funds on the Effective Date of this Agreement for the
first year of the Term of this Agreement. On each anniversary of the Effective
Date thereafter throughout the Term of the Agreement, the administrative fee to
be paid by Newco and Prime to Xxxxxx shall increase annually by 2.5%.
3.2 Expenses. Prime shall also reimburse Xxxxxx for all out of pocket costs
and expenses incurred from third parties in connection with the provision of
services hereunder including, but not limited to, reimbursement for travel
expenses, insurance costs and supplies purchased under a Xxxxxx supply
agreement. Xxxxxx shall use its reasonable business judgment in engaging and
contracting with third parties pursuant to the immediately preceding sentence
(including the decision as to whether such services are performed by Xxxxxx or
by a third party provider) as if Xxxxxx was engaging and contracting with third
parties for its own benefit. All such transactions with third party providers
shall be conducted on an arm's length basis. From time to time Xxxxxx shall
report to and consult with the Board of Directors of Prime with respect to the
services provided hereunder directly by Loewen personnel and the services
provided by third party providers and the costs therefor.
ARTICLE 4: TERM AND TERMINATION
4.1 Term and Termination. The term of this Agreement shall be eight years
("Term"). This Agreement shall be terminated as follows (the date of any such
termination referred to as the "Termination Date");
a. Automatically on the eighth anniversary of the date hereof without
any notice or other action required;
b. If required pursuant to a final, nonappealable order of a court or
other governmental agency having jurisdiction over the Business, Newco or
Xxxxxx;
-4-
c. By any party in the event of a material breach by any other party
of any provision of this Agreement including, without limitation, rejection
of this Agreement in a proceeding under the Bankruptcy Act of 1978, as
amended (or any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up or
composition or readjustment of debts), which breach is not remedied by the
breaching party within 30 days after receipt of written notice thereof (a
"Notice of Breach") from the terminating party; provided that;
(i) if the breaching party shall notify the non-breaching party
within 10 days following the receipt of the Notice of Breach that the
breaching party disputes that it has materially breached the
Agreement, then the dispute shall be submitted to Arbitration in
accordance with Article 10 of this Agreement and the 30 day cure
period shall commence to run, if appropriate, upon the termination of
the Arbitration procedure; and
(ii) if a breach is not reasonably capable of a cure within such
30 day period and the breaching party is diligently pursuing a cure of
such material breach, the period for effecting a remedy shall be
extended for such reasonable period of time, not to exceed 90 days
from the later to occur of (x) the date of receipt of the Notice of
Breach and (y) the conclusion of the Arbitration procedures, if
applicable, as may be necessary to allow the breaching party
sufficient opportunity to effect such cure.
d. Automatically upon closing following the exercise of the Option as
such term is defined in that certain Put/Call Agreement of even date
herewith among Xxxxxx, The Xxxxxx Group Inc., Blackstone Capital Partners
II Merchant Banking Fund, L.P., Blackstone Family Investment Partnership
II, L.P., Blackstone Offshore Capital Partners II, L.P. and PSI Management
Direct, L.P.
e. At the option of Prime upon transfer of the shares of Prime's
common stock held by Xxxxxx or its affiliates pursuant to Section 7.4 of
the Put/Call Agreement such that Xxxxxx or its affiliates own less than 10%
of Prime's common stock then outstanding.
4.2 Effect of Termination.
a. Termination of this Agreement in accordance with this Section 4
shall not affect the rights of any party hereto to receive payments in
accordance herewith or to recover any damages either shall have suffered as
a result of any breach of this Agreement, nor shall it affect the rights of
any party accruing during the Term of this Agreement.
-5-
b. If this Agreement is terminated, then effective as of the
Termination Date Xxxxxx'x right to provide and Newco's and Prime's right to
request services to the Business shall terminate immediately and Xxxxxx,
Prime and Newco hereby agree to such termination of rights.
c. Upon termination of this Agreement, Prime shall be entitled to a
refund from Xxxxxx of that portion, if any, of the annual administrative
fee paid to Xxxxxx but unearned by Xxxxxx as of the Termination Date, based
upon an equal 12- month allocation of such administrative fee.
ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
5.1 Representations of Xxxxxx. Xxxxxx hereby represents and warrants to
Prime as follows:
a. Authorization and Binding Obligation. Xxxxxx has full corporate
power and authority to enter into, deliver and perform fully its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Xxxxxx, and constitutes the valid and binding obligation of
Xxxxxx, enforceable against Xxxxxx in accordance with its terms.
b. No Conflict. The execution delivery and performance by Xxxxxx of
its obligations under this Agreement does not conflict with or result in a
breach of, or require any consent under, the charter or by-laws of Xxxxxx
or any applicable law or regulation, or any order, writ, injunction or
decree of any court of governmental authority or agency, or any agreement
or instrument to which Xxxxxx is a party or by which it is bound or to
which it is subject, or constitute a default under any such agreement or
instrument.
5.2 Representations and Warranties of Prime. Prime hereby represents and
warrants to Xxxxxx as follows:
a. Authorization and Binding Obligation. Prime has full corporate
power and authority to enter into, deliver and perform fully its
obligations under this Agreement. This Agreement has been duly executed and
delivered by Prime and constitutes the valid and binding obligation
thereof, enforceable against Prime in accordance with its terms.
b. No Conflict. The execution, delivery and performance by Prime of
its obligations under this Agreement does not conflict with or result in a
breach of, or require any consent under, the charter or by-laws of Prime or
any applicable law or regulation, or any order, writ, injunction or decree
of any court of governmental authority or agency, or any agreement or
instrument to which Prime is a party or by which it is bound or to which it
is subject, or constitute a default under any such agreement or instrument.
-6-
ARTICLE 6: ARBITRATION
All disputes arising out of, or in connection with this Agreement, which
are not promptly settled by mutual agreement of the parties hereto, shall be
finally settled by arbitration in accordance with the rules of the American
Arbitration Association. Such arbitration shall be conducted by a single
arbitrator appointed in accordance with such rules unless such dispute involves
an amount greater than $1,000,000, in which case such arbitration shall be
conducted by a panel of three arbitrators appointed in accordance with such
rules. Arbitration shall take place in Cincinnati, Ohio. Such arbitration shall
be governed by this Agreement and shall be final and binding upon the parties
hereto. The validity, construction, performance or termination of any agreement
by and between the parties submitted to arbitration shall be determined on the
basis of the contractual obligations of the parties. The arbitrator shall
determine his jurisdiction over persons and subject matter if such jurisdiction
is challenged by one of the parties. The award of the arbitrator shall: (a) be
rendered in writing stating the grounds on which the arbitrators base same, and
how the costs of arbitration shall be borne; the expenses of any party in
defense of its interests shall be borne by such party; (b) be dated and notified
to the parties by registered mail, return receipt requested; (c) be carried out
voluntarily and without delay, and failing this, be made enforceable through
either party by entry of a judgment in a competent court of any jurisdiction;
and (d) be final and not subject to appeal before any court, nor other
jurisdiction nor any authority.
ARTICLE 7: MISCELLANEOUS
7.1 Notices. All notices, demands, and requests required or permitted to be
given under this Agreement shall be in writing and shall be deemed duly given if
(i) personally delivered, (ii) sent by confirmed facsimile transmission to the
facsimile numbers provided below, (iii) sent by registered or certified mail,
postage pre-paid, return receipt requested, or (iv) transmitted by a recognized
overnight courier service, addressed as follows:
(a) in the case of Xxxxxx:
Xxxxxx Group International, Inc.
00 Xxxx XxxxxXxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Legal Department
with a copy to:
The Xxxxxx Group Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx V5G 358
Attention: Senior Vice President and Chief
Financial Officer
-7-
(b) in the case of Prime:
Prime Succession, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
The Blackstone Group
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
or to any such other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
7.1.
7.2 Benefit and Binding Effect. No party hereto may assign this Agreement
without the prior written consent of the other parties. Any attempt to assign
this Agreement or any part hereof in violation of this Section 7.2 shall be null
and void and of no effect whatsoever. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
7.3 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies (without giving effect
to the principles of conflicts or law).
7.4 Headings. The headings preceding the text of sections and subsections
of this Agreement are included for ease of reference only and shall not be
deemed part of this Agreement.
7.5 Gender and Number. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
7.6 Entire Agreement. This Agreement, all exhibits hereto, and all
documents, certificates, and the like to be delivered by the parties pursuant
hereto, collectively represent the entire understanding and agreement between
the parties hereto with respect to the specific subject matter hereof. All
exhibits attached to this Agreement shall be deemed part of this Agreement and
incorporated herein, where applicable, as if fully set forth herein. This
Agreement supersedes all prior negotiations between the parties and cannot be
amended, supplemented or changed except by an agreement in writing which makes
specific reference to this Agreement or an agreement delivered pursuant hereto,
as the case may be, and which is signed by the party against which
-8-
enforcement of any such amendment, supplement or modification is sought.
7.7 Further Assurances. The parties shall take any actions and execute any
other documents that may be necessary or desirable for the implementation and
consummation of this Agreement or which may be reasonably requested by any other
party hereto. Each party will cooperate with the other parties and provide any
assistance reasonably requested by any other party to effectuate the terms of
this Agreement.
7.8 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be held invalid or unenforceable to
any extent by any court of competent jurisdiction, the remainder of this
Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
7.9 Counterparts. This Agreement may be signed in counterparts, each of
which shall be deemed to be an original but which, when taken together, shall
constitute one and the same instrument.
7.10 Third-Party Beneficiaries. No provision of this Agreement shall create
any third-party beneficiary rights in any Person, including, without limitation,
employees or former employees of Prime and no provisions of this Agreement shall
create such third-party beneficiary rights in any such person.
7.11 Cooperation. In the event and for so long as either party is
investigating, contesting or defending against any Claim involving the Business,
each of the other parties hereto will, to the extent requested by the
investigating, contesting or defending party, make available its personnel, and
provide such testimony and access to its books and records as shall be necessary
in connection with the investigation, contest or defense, and provide such other
cooperation as the other party may reasonably request in connection with the
investigation, contest or defense.
7.12 Amendments, Supplements. This Agreement may be amended or supplemented
at any time by additional written agreements executed by all of the parties
hereto, as may mutually be determined by such parties to be necessary, desirable
or expedient to further the purposes of this Agreement, or to clarify the
intention of the parties hereto.
-9-
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first above written.
XXXXXX GROUP INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President and Chief
Operating Officer
PRIME SUCCESSION ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief
Executive Officer
-10-
