TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement (this "Agreement") is made as of this
___ day of August 1997 between Price Enterprises, Inc., a Delaware corporation
("PEI"), and PriceSmart, Inc., a Delaware corporation ("PriceSmart").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated as of August __, 1997,
(the "Distribution Agreement") between PEI and PriceSmart, PEI will separate its
real estate business and its merchandising businesses (the "Spin-off") by way of
(i) transfers of the merchandising businesses operated through PEI's
subsidiaries (the "Merchandising Businesses"), certain real properties held for
sale (the "Unsold Properties"), notes receivable from various municipalities and
agencies (the "City Notes") and secured notes receivable from buyers of
properties formerly owned by PEI (the "Other Notes," and together with the Other
Notes, the "Notes"), all cash balances of PEI, except for approximately $40
million in cash, and all other assets and liabilities of PEI not specifically
associated with PEI's core real estate business (collectively, the "PriceSmart
Business") to PriceSmart; (ii) a distribution by PriceSmart of all of the
outstanding shares of common stock, par value $.0001 per share, of PriceSmart
(the "PriceSmart Common Stock") to PEI; and (iii) a special dividend by PEI to
the stockholders of record of PEI's common stock, consisting of the distribution
on a one-for-four basis, of all of the outstanding shares of PriceSmart Common
Stock (the "Distribution"); and
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that PEI and PriceSmart enter into, among other
things, a transitional services agreement pursuant to which PEI shall provide
certain services to PriceSmart and PriceSmart shall provide certain services to
PEI.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, the
parties agree as follows:
1. SERVICES. PEI and PriceSmart hereby agree, subject to Section 6 below,
to cause their respective employees and to use their respective assets to
provide certain services to the other, including without limitation cash
management services, certain accounting services, litigation management and any
other similar services that PEI or PriceSmart may request. Notwithstanding the
foregoing, all real estate services to be provided hereafter by PEI to
PriceSmart pursuant to a separate Asset Management and Disposition Agreement of
even date herewith shall be subject to the terms of such separate agreement and
not to this Agreement. Nothing contained herein shall be deemed to restrict
either party to this Agreement from procuring any of the services to be provided
hereunder from outside vendors or from developing an in-house capability to
provide such services internally.
2. CHARGES FOR SERVICES. The charge for each service to be provided
hereunder shall be equal to the cost (which shall include indirect costs as well
as direct out of pocket expenses) of providing such service. The cost of
providing a service shall be determined in good faith by the party to provide
such service (the "providing party"). Prior to providing a service, the
providing party shall give an estimate of the cost thereof to the other party,
so that the other party shall have the opportunity to decide whether to accept
such service before it is performed.
3. INVOICE AND PAYMENT. Each party shall invoice the other once each month
for the services performed during the prior month and each party shall pay the
other for such services not later than ten (10) days from the receipt of
invoice.
4. OUTSIDE SERVICES. In the event that the providing party is required to
retain outside consultant/contractor assistance to perform any of the services
hereunder, the providing party shall first obtain the consent of the other party
to such retention and the other party shall pay directly the fees of such
consultant/contractor. The providing party shall not be held responsible for
the performance of such consultant/contractor services and the other party
assumes the risk thereof.
5. CONTRACTUAL RELATIONSHIP. The relationship between PEI and PriceSmart
under this Agreement shall be that of principal and agent in respect of the
services to be performed hereunder. In no event is the relationship of the
parties intended to be that of employer and employee and in no event is either
party to be deemed or purported to be the partner or joint venturer of the other
for any purpose whatsoever.
6. TERM. The term of this Agreement shall expire on December 31, 1997;
provided, however, that each party shall have the right, upon fourteen (14) days
advance notice to the other, to terminate all or part of the services it
performs hereunder. Upon the termination of all services, payment therefor and
payment of all consultants/contractors, this Agreement shall terminate.
7. LIMITATION OF LIABILITY. Neither party shall have any liability
whatsoever to the other party or to any third party for any loss, liability,
damage, cost or deficiency (collectively, "Losses"), or for any claim for
Losses, including, without limitation, Losses or claims for personal injury,
death or property damage, warranty, tort or products liability, resulting from,
caused by or arising out of a party's performance under this Agreement except
for claims arising out of the negligence or willful default or breach of such
party hereunder. In no event shall any party have liability to the other party
or to any third party for indirect, special or consequential damages or loss of
profits (except with respect to its willful default or breach), or for punitive
damages for any reason whatsoever.
8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice) and shall be
deemed given on the date on which such notice is received:
To PriceSmart:
PriceSmart, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
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To PEI:
Price Enterprises, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx XxXxxxx
9. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party (other than to an
affiliate). Any purported assignment in violation of the provisions hereof
shall be void.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California (regardless of the laws that might otherwise govern under
applicable California conflict of laws principles) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
13. SEVERANCE. In the event that any provision of this Agreement is
declared illegal, invalid or unenforceable or contrary to law, it shall not
affect any other provision in the Agreement.
14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the transactions contemplated hereby.
15. DISPUTES. Any disputes arising under this Agreement shall be resolved
by binding arbitration in the manner contemplated by Section 9.13 of the
Distribution Agreement, including the attorneys' fees provision referenced
therein.
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IN WITNESS WHEREOF, each of PEI and PriceSmart has caused this Agreement to
be executed by its duly authorized officer as of the date first above written.
PRICE ENTERPRISES, INC.
By:
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Name:
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Title:
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PRICESMART, INC.
By:
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Name:
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Title:
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