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EXHIBIT 10.6
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") dated as of July
19, 1999, is entered into by SHOPKO STORES, INC., a Wisconsin corporation
("ShopKo") and PROVANTAGE HEALTH SERVICES, INC., a Delaware corporation
("ProVantage").
RECITALS
WHEREAS, ProVantage provides health benefit management and health
information technology products and services to the health care industry (the
"ProVantage Business"); and
WHEREAS, this Agreement is entered into in conjunction with an initial
public offering of ProVantage's common stock, $.01 par value per share (the
"ProVantage IPO"); and
WHEREAS, after the ProVantage IPO, ProVantage will continue to need
certain administrative services to be provided by ShopKo to ProVantage with
respect to the operation of the ProVantage Business for a period of time from
and after the Closing Date (as hereafter defined); and
WHEREAS, the parties desire to enter into an agreement to provide for
such services.
NOW, THEREFORE, in consideration of the premises and the mutual
promises of the parties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the indicated
meanings:
"Base Fee" means the amount identified on Exhibit A attached hereto.
The Base Fee shall be paid for the Services described hereunder, exclusive of
any Service Upgrades.
"Closing Date" means the date the ProVantage IPO is closed.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Services" means those corporate, administrative and technical services
to be provided by ShopKo to ProVantage as set forth in Exhibit A attached
hereto, and as the same may be amended and revised from time to time in
accordance with the terms hereof.
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ARTICLE II
SERVICES
Section 2.1. Scope of Services. In consideration of the Base Fee,
ShopKo shall continue to provide the various administrative support services
currently provided by ShopKo, as listed on Exhibit A to this Agreement currently
provided to ProVantage.
Section 2.2. Service Upgrades. The parties acknowledge that
modifications, upgrades, and additions to the administrative services described
herein may be necessary to adequately service the ProVantage Business
(collectively, "Service Upgrades"). Charges for Service Upgrades are not
included in the Base Fee. The parties agree to negotiate in good faith regarding
any Service Upgrades. It is the intention of the parties that to the extent
practicable, ShopKo will use reasonable efforts to provide ProVantage with any
reasonable Service Upgrades requested by ProVantage, and that the parties will
negotiate reasonable fees, reimbursement rates or other charges to adequately
compensate ShopKo for the Service Upgrades.
Section 2.3. Limitations. Notwithstanding the foregoing, the nature and
scope of the Services shall not be greater than that which ShopKo provided to
ProVantage prior to the Closing Date and shall not be greater than, or interfere
with, those services which ShopKo provides during the term of this Agreement to
its own internal organization. Any upgrades and improvements of such services
that ShopKo provides to its own internal organization will be made available to
ProVantage at ShopKo's election. ProVantage agrees that its requests for
Services shall be reasonable, as to both the nature and the timing of the
Services to be provided.
Section 2.4. Location of Services. Except as expressly contemplated by
the terms of this Agreement, the Services to be performed are contemplated to be
performed by ShopKo from Green Bay, Wisconsin, or such other location as
determined by ShopKo in its sole discretion.
Section 2.5. Staffing. In consultation with ProVantage, ShopKo shall
determine both the staffing required and particular personnel assigned to
perform the Services, including but not limited to clerical staff, technicians,
professionals or otherwise.
Section 2.6. Access. ProVantage agrees to grant access to
representatives of ShopKo to ProVantage's facilities and its employees, agents
and consultants to provide the Services provided for under this Agreement, as
necessary.
Section 2.7. Subsidiaries. The parties hereto agree that (i) the
Services to be provided to ProVantage under this Agreement will, at ProVantage's
request, be provided to subsidiaries of ProVantage and (ii) ShopKo may satisfy
its obligation to provide or procure the Services hereunder by causing one or
more of its subsidiaries to provide or procure such Services. With respect to
Services provided to, or procured on behalf of, any subsidiary of ProVantage,
(i) ProVantage agrees to pay on behalf of such subsidiary all amounts payable by
or in respect of such Services and (ii) references in this Agreement to
ProVantage shall be deemed to include such subsidiary.
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Section 2.8. Subcontractors. ShopKo may hire or engage one or more
subcontractors to perform any or all of its obligations under this Agreement.
ShopKo shall require such subcontractors, as a condition to their engagement, to
agree to be bound by the provisions substantially identical to those included in
this Agreement. Subject to Section 5.5 hereof, ShopKo shall in all cases remain
primarily responsible for all obligations undertaken by it in this Agreement
with respect to the scope, quality and nature of the Services provided to
ProVantage.
Section 2.9. Reports; Books and Records. ShopKo shall maintain for and
provide ProVantage with or shall cause to be maintained for and provided to
ProVantage data or reports requested by ProVantage relating to (i) benefits paid
to or on behalf of ProVantage employees under ShopKo employee benefit plans,
including, but not limited to, financial statements, claims history and census
information, (ii) information relating to the Services that is required to
satisfy any reporting or disclosure requirement, and (iii) other information,
including accounting reports, relating to the Services, as may be kept by ShopKo
in the ordinary course of its business. ShopKo shall provide such reports, or
cause such reports to be provided, to ProVantage within a reasonable period of
time after it is requested.
Section 2.10. Delegation. ProVantage hereby delegates to ShopKo final,
binding, and exclusive authority, responsibility, and discretion to interpret
and construe the provisions of employee benefit plans in which ProVantage has
elected to participate and which are administered by ShopKo under this Agreement
(collectively, the "Employee Plans"). ShopKo may further delegate such authority
to plan administrators to:
(i) provide administrative and other services;
(ii) reach factually supported conclusions consistent with the terms of
the Employee Plans;
(iii) make a full and fair review of each claim, denial, and decision
related to the provision of benefits provided or arranged for under the Employee
Plans, pursuant to the requirements of ERISA, if within sixty (60) days after
receipt of the notice of denial, a claimant requests in writing a review for
reconsideration of such decisions. The administrator shall notify the claimant
in writing of its decision on review. Such notice shall satisfy all ERISA
requirements relating thereto; and
(iv) notify the claimant in writing of its decision on review.
ARTICLE III
FEES, BILLING AND PAYMENT
Section 3.1. Fees. ProVantage agrees that in consideration of the
Services described in this Agreement, ProVantage shall pay ShopKo the Base Fee
as amended and revised from time to time. The entire Base Fee shall be paid by
ProVantage for each period, regardless of whether any particular services were
performed by ShopKo during such period. ProVantage shall also pay ShopKo for all
Service Upgrades in accordance with agreed upon rates and fees.
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In addition, ProVantage shall reimburse ShopKo for all direct and
identifiable costs and third-party disbursements incurred by ShopKo in
performing the Services. In the event that any Services are terminated during a
fiscal year, payments shall be made for such Services through the effective date
of cancellation, said payments to be a pro rata portion of the charges for such
Services. ProVantage shall also pay ShopKo for any reimbursable costs incurred
with respect to such Services prior to cancellation of such Services, plus
ProVantage shall compensate ShopKo for any long-term commitments or investments
made by ShopKo in reliance upon this Agreement, provided ProVantage has approved
any such costs, commitments or investments in advance. The parties acknowledge
that no such costs, commitments or investments exist as of the date of this
Agreement.
Section 3.2. Billing. ProVantage shall pay the Base Fee for Services
rendered within each month during the term of this Agreement. No invoices for
the Base Fee shall be sent, and no backup documentation shall be required for
the Services included in the Base Fee. The fees for Service Upgrades shall be
invoiced monthly by the thirtieth (30th) calendar day of the calendar month next
following the calendar month in which the Service Upgrades were performed. Such
invoices shall specify the value of Service Upgrades determined in accordance
with the agreed upon arrangements, and shall be accompanied by supporting detail
for all Reimbursable Costs and Service Upgrades.
Section 3.3. Payment. Payment for all Services provided hereunder shall
be as follows:
(a) For so long as ShopKo beneficially owns directly or indirectly at
least 51% of the combined voting power of ProVantage, ShopKo may xxxx and
charge ProVantage's intercompany account at the end of each four or five
week accounting period for all fees and Reimbursable Costs hereunder.
(b) At such time as ShopKo no longer beneficially owns directly or
indirectly at least 51% of the combined voting power of ProVantage,
ProVantage shall pay for all amounts incurred during each four or five
week accounting period within ten (10) days following the end of each such
period. In the event a written statement is sent by ShopKo, payment shall
be made within ten (10) days following receipt of such statement.
Section 3.4. Taxes. ProVantage will reimburse ShopKo for all sales, use
or excise taxes levied on amounts payable by ProVantage to ShopKo pursuant to
this Agreement, provided that ProVantage shall not be responsible for remittance
of such taxes to applicable tax authorities. ProVantage shall not be responsible
for any ad valorem, income, franchise, privilege, value added or occupational
taxes of ShopKo. ShopKo shall cooperate with ProVantage's efforts to identify
taxable and nontaxable portions of amounts payable pursuant to this Agreement
(including segregation of such portions on invoices) and to obtain refunds of
taxes paid, where appropriate. ProVantage may furnish ShopKo with certificates
or other evidence supporting applicable exemptions from sales, use or excise
taxation.
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ARTICLE IV
TERM OF AGREEMENT
Section 4.1. Effective Date and Term. The initial term of this
Agreement shall commence on the Closing Date and, except as otherwise provided
below, continue until January 31, 2001. This Agreement will be renewed
automatically thereafter for successive one-year terms unless either ProVantage
or ShopKo elects not to renew this Agreement by giving the other party written
notice of its intention not to renew the Agreement not less than ninety (90)
days prior to the end of the then current term. Either party may terminate any
specified Service under the prior notice provision in Section 4.3(c).
Section 4.2. Annual and Interim Reviews. On or about the first
anniversary of the Closing Date and annually thereafter until termination,
ShopKo and ProVantage agree that they will review the scope and pricing of the
Services being provided as of the applicable annual review date. Interim reviews
may also be scheduled by either party upon providing 30 days advance written
notice. Each such review and any resulting amendment of this Agreement will be
undertaken in good faith and with as much advance notification, lead time and
discussion as is reasonable under the circumstances, in the spirit of providing
appropriate services to ProVantage at a fair cost and without undue burden to
ShopKo. Accordingly, before any termination or significant alteration of the
scope of Services is made, the parties shall take into account all elements of
cost, inconvenience and other direct and indirect impact on both parties of
terminating or altering the Services.
Section 4.3. Termination. This Agreement and the scope of the Services
may be reduced, suspended, or terminated as follows:
(a) Either party hereto may terminate this Agreement immediately
upon written notice to the other party (i) in the event of the other
party's voluntary bankruptcy or insolvency, (ii) in the event that the
other party shall make an assignment for the benefit of creditors, or
(iii) in the event that a petition shall have been filed against the
other party under a bankruptcy law, a corporate reorganization law or
any other law for relief of debtors (or other law similar in purpose or
effect).
(b) If either party hereto (the "Defaulting Party") shall fail
adequately to perform in any material respect any of its material
obligations under this Agreement, whether voluntarily or involuntarily
or as a result of any law or regulation or otherwise, the other party
hereto shall have the option to terminate this Agreement upon sixty
(60) days' written notice (which shall be reduced to thirty (30) days'
written notice in the event of a failure to make payment in accordance
with the terms hereof) to the Defaulting Party specifying the respects
in which the Defaulting Party has so failed to perform its obligations
under this Agreement, unless during such period the Defaulting Party
shall have substantially remedied the default therein specified.
(c) Either party may, at any time prior to the expiration of this
Agreement or any extension thereof, terminate any of the Services upon
one hundred twenty (120) days'
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prior written notice from the party desiring such termination. For
purposes of this Section 4.3(c), Services may only be terminated as to
a category for which there is a specified charge on Exhibit A unless
the other party agrees to a partial Services reduction and a
corresponding reduction in the appropriate charge is agreed between the
parties.
Section 4.4. Transition Assistance. Prior to and following the
termination of this Agreement or the provisions of any of the Services,
including any Service terminated pursuant to Section 4.3(c), ShopKo shall
provide, at ProVantage's request and expense, transition services for a period
of 180 days with respect to the terminated Services and assistance in engaging
or training another person or persons to provide such Services or their
equivalent. ShopKo shall provide ProVantage full access to all records and other
information relating to the Services provided by ShopKo immediately preceding
such termination.
ARTICLE V
MISCELLANEOUS
Section 5.1. Independent Contractor Status. ShopKo shall perform the
Services hereunder as an independent contractor. Nothing in this Agreement shall
constitute or be deemed to constitute a partnership or joint venture between the
parties hereto, or, except to the extent provided in Section 2.11, constitute or
be deemed to constitute any party as the agent or employee of the other party
for any purpose whatsoever and neither party shall have authority or power to
bind the other or to contract in the name of, or create a liability against, the
other in any way or for any purpose. Each party shall be responsible for any
injury or death to its own employees, including all workers' compensation claims
or liabilities resulting therefrom, and each such party shall remain responsible
for reporting its income and paying its own taxes.
Section 5.2. Confidentiality. The parties each agree that they will not
divulge to any third party, or to any person within each respective corporation
who does not have a need to know, any confidential matters relating to each
other's business and the businesses of the other party's customers, vendors,
employees or competitors which may become known by reason of performance of the
Services described in this Agreement; provided, however, that the obligations of
either party under this section shall not apply to information which has been in
the public domain or becomes in the public domain without breach of this
Agreement or which a party is legally obligated to disclose. The obligations of
the parties hereto set forth in this section shall survive the expiration or
termination of this Agreement for a period of one (1) year.
Section 5.3. Key Employees. During the term of this Agreement and for a
period of two years thereafter:
(a) neither ProVantage nor any of its direct or indirect
subsidiaries (whether now owned or hereafter acquired) shall solicit
for hire any employees of ShopKo or any of ShopKo's direct or indirect
subsidiaries (other than ProVantage and its subsidiaries), and
(b) neither ShopKo nor any of its direct or indirect subsidiaries
(other than ProVantage and its subsidiaries) shall solicit for hire any
employees of ProVantage or any of its direct or indirect subsidiaries.
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This covenant may be waived only with the prior written consent of the
other party.
Nothing in this Section 5.3 shall be deemed or construed to prevent
solicitation, recruitment or hiring of any employee of the other party who first
initiates contact with the soliciting, recruiting or hiring party, provided that
neither party shall engage in any activity intended to encourage the other
party's employees to initiate such contact. General advertisements shall not be
deemed violative of this restriction.
Section 5.4. Force Majeure. Each party shall be excused for failure to
perform any part of this Agreement due to events beyond its control, including
but not limited to fire, storm, flood, earthquake, explosion, accident, riots
and other civil disturbances, sabotage, strikes or other labor disturbances,
injunctions, transportation embargoes or delays, failure of performance of third
parties necessary for the parties' performance under this Agreement, or the laws
or regulations of the federal, state or local government or breach or agency
thereof; provided, however, no force majeure event shall excuse the obligation
of the party claiming the benefit of a force majeure event from paying the
applicable fees for any services provided by the other party.
Section 5.5. Standard of Performance; Remedies; Consequential Damages.
In performing its obligations under this Agreement, ShopKo represents that it
will use the same standard of care and good faith as it uses in performing
services for its own account. ShopKo agrees to exercise reasonable diligence to
correct errors or deficiencies in the Services provided by it hereunder. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SHOPKO MAKES NO REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ARISING OUT OF THIS AGREEMENT AND THE SERVICES TO BE PROVIDED
HEREUNDER. The sole remedy of ProVantage for any claim relating to the
performance or nonperformance of the Services shall be a refund by ShopKo to
ProVantage of any charges or fees paid for the applicable Services. In addition,
in no event shall either party be liable to the other for special, punitive,
incidental or consequential damages arising out of this Agreement.
Section 5.6. Notice. Any notice, request, designation, direction,
demand, election, acceptance or other communication shall be in writing and
shall be effective and deemed to have been given when it is (i) mailed postage
prepaid, by certified first class mail, return receipt requested, addressed to a
party and received by such party; (ii) hand or courier delivered; or (iii) sent
by telecopy with receipt confirmed, as follows:
If to ShopKo,
ShopKo Stores, Inc.
000 Xxxxxxx Xxx
Xxxxx Xxx, XX 00000
Telecopy: (000) 000-0000
Attention: General Counsel
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If to ProVantage,
ProVantage Health Services, Inc.
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Vice President, Legal Affairs
Any party may from time to time designate another address to which
notice or other communication shall be addressed or delivered to such party and
such new designation shall be effective on the later of (i) the date specified
in the notice or (ii) receipt of such notice by the intended recipient.
Section 5.7. Assignability; Successor and Assigns. Neither party hereto
shall assign this Agreement in whole or in part without the prior written
consent of the other party hereto, which consent shall not be unreasonably
withheld. This Agreement shall inure to the benefit of and shall be binding upon
the successor and permitted assigns of the parties hereto.
Section 5.8. No Third Party Beneficiaries. Each of the provisions of
this Agreement is for the sole and exclusive benefit of the parties hereto
respectively, as their interests may appear, and shall not be deemed for the
benefit of any other person or entity or group of persons or entities.
Section 5.9. Severability. If any term or condition of this Agreement
shall be held invalid in any respect, such invalidity shall not affect the
validity of any other term or condition hereof.
Section 5.10. Applicable Law. This Agreement shall be construed under
the laws of the State of Wisconsin and the rights and obligations of the parties
shall be determined under the substantive law of Wisconsin, without giving
effect to Wisconsin's conflict of law rules or principles.
Section 5.11. Amendment or Modification. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties, or in the case of a waiver, by the party waiving compliance. Any waiver
by either party hereto of any condition, or of the breach of any provision or
term in any one or more instances shall not be deemed to be nor construed as a
further or continuing waiver of any such condition, or of the breach of any
other provision or term of this Agreement.
Section 5.12. Construction. Descriptive headings to sections and
paragraphs are for convenience only and shall not control or affect the meaning
or construction of any provisions in this Agreement.
Section 5.13. Counterparts. This Agreement may be executed in two
counterparts, each of which shall constitute an original, and both of which,
when taken together, shall constitute one and the same instrument.
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Section 5.14. Look-Back. The parties acknowledge that the intent of this
Agreement is to accurately capture the scope and nature of the administrative
services provided to ProVantage by ShopKo as of the date hereof, so that such
services may continue uninterrupted for the term of this Agreement. Both parties
have made a good faith attempt to identify all of the administrative services
provided to ProVantage by ShopKo as of the date hereof. If, however, it is later
determined that the parties unintentionally omitted a description of services or
charges therefor, both parties shall negotiate in good faith to amend this
Agreement to include such services and charges, and charges and credits for such
additional services shall be retroactive back to the commencement date of this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first written
above.
SHOPKO STORES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Xx. Vice President, General
Counsel/Secretary
PROVANTAGE HEALTH SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Executive Vice President and Chief Operating Officer
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Services
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Fiscal Year Fiscal Period Base Fee
1999 Base Fee For Fiscal 1999
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Chief Financial Officer
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Treasury Services 20,000 1,667
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Payroll processing
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Insurance administration
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Cash management
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Accounting Services 80,000 6,666
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Monthly general ledger processing and financial
statement preparation
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Accounts payable processing
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Income, sales and use and property tax preparation
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Appropriation and fixed asset processing
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Assistance in financial and capital planning
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100,000 8,333
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General Corporate Services 100,000 8,333
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Sr. Vice President Human Resources
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Personnel 50,000 4,167
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Legal Affairs 25,000 2,033
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75,000 6,250
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Overhead cost related to above (payroll taxes & benefits,
insurance, 401(k), profit sharing, etc. 100,000 8,334
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TOTAL $375,000 $31,250
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