MANAGEMENT AGREEMENT
This
Agreement made this 25th day of September, 2008 by and between Windswept
Environmental, Inc., DBA Tradewinds Environmental, and its affiliates
Environmental Restoration, Inc. and Restorenet, Inc., (individually and
collectively the “Client”), with its principal place of business at 000 Xxxxxxx
Xxx., Xxxxxxxxxx XX 00000 (“Facility”) and NachmanHaysBrownstein, Inc. with
offices at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000
(“Manager”).
WHEREAS,
Client’s
secured lender, Laurus Capital Management LLC, has required that Client engage
a
Chief Restructuring Officer in order to assist
in
obtaining
additional financing; and
WHEREAS,
Client’s
Board of Directors has voted to appoint a Chief Restructuring Officer (“CRO”) to
direct
the
restructuring of Client’s business; and
WHEREAS,
Client
and Board of Directors desires to retain the services of Manager as set forth
herein in accordance with the terms and conditions of this Agreement;
and
WHEREAS,
Manager
agrees
to use
its best efforts to
provide the services to Client as set forth herein, in accordance with the
terms
and conditions of this Agreement.
NOW
THEREFORE,
in
consideration of the mutual promises set forth herein, and intending to be
legally bound, Client and Manager hereby agree as follows:
| I) |
SERVICES
TO BE RENDERED ON A REASONABLE EFFORTS
BASIS
|
| A) |
The
duties of Manager and
the CRO in
its conduct of their
business
on a reasonable efforts basis, on behalf of Client will include, without
limitation and as appropriate, after consultation with Xxxxxxx X’Xxxxxx,
CEO:
|
| 1) |
Day
to day operational and/or financial management of Client, in Manager’s
capacity as Chief Restructuring Officer of
Client
|
| 2) |
Negotiation
and execution of financing relationships, including preparation of
a
situational analysis/business plan for submission to potential
lenders
in
consultation with the CEO and the Board.
|
| 3) |
Negotiation
of and amendments to contracts.
|
| 4) |
The
compromise of accounts payable and receivable and of notes payable
and
receivable.
|
| 5) |
The
hiring and discharge of employees.
|
| 6) |
Disbursement
of funds.
|
1
of 10
| 7) |
Direct
communication with Client’s lenders, vendors, customers and
employees.
|
| B) |
Manager
shall be duly elected to the office of Chief Restructuring Officer
in
accordance with the by-laws of Client, and the by-laws or other proper
corporate resolutions of Client shall authorize Manager to perform
the
duties set forth in this Management Agreement.
|
| C) |
The
Manager and the CRO shall be afforded
the same insurance coverage and indemnification rights as any
officer and director of
the company,
as Client shall have in effect from time to
time.
|
| D) |
Notwithstanding
the foregoing, Manager shall have:
|
| 1) |
No
duty or authority to enter into any contract or to pursue a course
of
action which requires the approval of the Board of Directors of Client
without having first obtained such
approval;
|
| 2) |
No
duty, no responsibility, and no authority with respect to regulatory
compliance duties, including without limitation: (a) the management,
handling, transport, disposal or remediation of hazardous waste or
hazardous substances; (b) compliance with applicable federal, state
or
local statutes, ordinances, regulations orders and requirements of
common
law in any way affecting or pertaining to health, safety or the
environment; and (c) filings with federal and state securities authorities
and filings and payments to federal, state, and local taxing
authorities,
provided that Manager shall have responsibility for any willful misconduct
and gross negligence relating to such compliance duties,
and;
|
| 3) |
In
acting on behalf of Client, no duty to nor any authority to enter into
any
agreement with Manager (other than as necessary to carry out the terms
of
this Agreement) nor to extend, renew, modify, amend or terminate this
Agreement.
|
| E) |
Manager
acknowledges that it is working in concert with the
CEO
and the Board,
and will remain in close communications with both parties throughout
this
assignment.
|
| II) |
REPORTING
RESPONSIBILITY
|
| A) |
The
Manager shall report to the Board of Directors of Client with daily
reporting to Xxxxxxx X’Xxxxxx in his capacity as
CEO.
|
| III) |
REGULATORY
COMPLIANCE
|
| A) |
All
regulatory compliance decisions are the responsibility of Client; and,
without limitation, except
as expressly provided above with respect to willful misconduct and
gross
negligence, Manager
shall have no duty, no responsibility, and no authority with respect
to
regulatory compliance duties, including, without limitation: (1) the
management, handling, transport, disposal or remediation of hazardous
wastes or hazardous substances; (2) compliance with applicable federal,
state or local statutes, ordinances, regulations, orders and requirements
of common law in any way affecting or pertaining to health, safety
or the
environment; and (3) filings with federal and state securities authorities
and federal, state and local taxing
authorities.
|
2
of 10
| IV) |
TERM
OF AGREEMENT
|
| A) |
This
Agreement will commence at the beginning of business the date of this
Agreement and end at the close of business March
31,
2009 (“Ending Date”) unless ended earlier by the terms of this Agreement.
In the event either party to the other does not afford written notice
of
termination of this Agreement within 15 days of any Ending Date, the
Ending Date shall be deemed extended by one
month.
|
| B) |
Notwithstanding
the foregoing Section II (A), this Agreement shall terminate upon three
(3) days written notice by either party to the other as provided herein.
However, Client acknowledges that this Agreement is a precondition
to
obtaining additional secured financing and that Client shall not terminate
this Agreement without the prior written consent of Laurus.
|
| V) |
PLACE
OF WORK
|
| A) |
Manager’s
services shall be performed at Client’s Facility and at Clients various
worksites as determined by Manager.
|
| VI) |
FEES
TO MANAGER
|
| A) |
Retainer
|
Client
agrees to pay to Manager a retainer of $50,000 upon execution of the Agreement,
to be maintained as security throughout the term of this Agreement, to be
applied if necessary against the final invoice for fees and expenses and the
balance, if any, to be refunded to Client without interest.
| B) |
Fees
and expenses
|
Client
agrees to pay fees for services rendered by personnel of Manager based upon
the
daily and hourly rates regularly charged by Manager for the services of its
personnel, as such rates may be adjusted from time to time. Client agrees to
reimburse Manager for expenses incurred by Manager by reason of this Agreement
for travel, including air travel and rental car, and for lodging and meal
expenses whenever Manager’s personnel are away from home. Manager agrees to use
its best efforts to keep such expenses at the lowest practical level. Travel
time will be billed at one-half the normal hourly rate,
except
travel to and from work at the beginning and end of the work day shall not
be
charged to Client.
This
travel exemption shall not apply to travel to and from the Facility from
Manager’s or CRO’s place of residence.
3
of 10
Hourly
Rate
|
Hourly
Rates
|
|
|
Principal
& Supervising Managing Director
|
$400.00
|
|
Managing
Director serving as CRO
|
$300.00
|
|
Other
Professional Staff
|
$150.00
- $350.00
|
| C) |
The
CRO will cap his fees at $2,400 per day. Total Manager weekly fees
and
expenses,
including the fees of the CRO,
will be capped at $20,000 per week.
|
| D) |
Manager
shall strive to work efficiently and will attempt to use in-house
resources as possible as feasible and limit the use of Other Professional
Staff.
|
| E) |
Manager
shall maintain and submit time slips documenting its activities in
accordance with its normal billing
procedures.
|
| F) |
Billing
and Payment
|
Manager
agrees to render bi-weekly invoices to Client for fees and expenses of its
personnel, and any delay in rendering such invoices shall not constitute a
waiver of such fees and expenses. Client agrees to pay such invoices within
two
business days of receipt by wire transfer to Manager’s bank ABA# 031-000053
Account #00-0000-0000 at PNC Bank in Philadelphia, PA, with telephone
notification to Xxxx Xxxxxx at 610-660-0060, Extension 227. Alternatively,
payments may be made by certified or cashier’s check within two business days of
receipt.
| G) |
Taxes
|
Client
agrees that all taxes due by reason of amounts payable, or paid, to Manager
under this Section VI (for instance, sales taxes) are the responsibility of
and
to be paid by Client, other than federal, state, and local taxes of the
Manager’s place of residence.
| VII) |
STATUS
OF MANAGER
|
| A) |
Xxxxxxx
X. Xxxxxx will be the individual designated by Manager to act as the
Chief
Restructuring Officer, in performing this Agreement (the “Individual
Manager”). Until such time as Client receives written notification to the
contrary from Manager such Individual Manager has full authority to
carry
out this Agreement on behalf of Manager.
|
| B) |
Other
representative of Manager shall be considered representatives of the
Chief
Restructuring Officer and shall have the authority to act as directed
by
the CRO.
|
| C) |
Manager
has authority to terminate Individual Manager as the individual performing
the duties for Manager under this Agreement and to substitute another
individual to perform its duties under this Agreement. Client shall
be
afforded written notification of such termination and
substitution.
|
4
of 10
| D) |
Manager
and Individual Manager shall perform all services as independent
contractors and not as employees of Client, and neither Manager nor
Individual Manager shall receive any remuneration from Client, including
participation in disability, retirement, pension, profit sharing or
other
benefit or deferred compensation plans of Client, other than as set
forth
herein. The name of the Manager, and its personnel including the
Individual Manager, shall not be set forth in any document of the Client,
or otherwise used by the Client, unless the Manager in acting for Client
sets forth such name(s) or the Manager shall have previously consented
thereto in writing.
|
| VIII) |
INDEMNIFICATION
AND HOLD HARMLESS
|
| A) |
Indemnification
and Hold Harmless
|
| 1) |
Unpaid
Employee Payroll, Payroll Taxes and Sales
Taxes
|
At
the
time of this Agreement, Client may have accrued an unmet payroll liability.
Additionally, Client may have improperly diverted an undetermined amount of
trust fund taxes, including employee withholding and sales taxes. Client’s
current management and owners acknowledge that they may face personal and/or
criminal liability for these unpaid taxes and specifically indemnify Manager
for
any and all liability arising from these taxes,
except
for Manager’s willful misconduct or gross negligence. The Client
agrees
to
assume all costs, including but not limited to attorney’s fees, in the
performance of this indemnify to Manager.
| 2) |
Workers
Compensation Insurance
|
At
the
time of this Agreement, Client acknowledges that it has allowed its workers
compensation insurance to lapse and may therefore be operating its business
in
violation law. Client agrees to accept full responsibility for such possible
illegal operations. The
Client
agrees
to fully
and collectively indemnify Manager for any and all consequences arising from
operating without workers compensation insurance and to assume all costs,
including but not limited to attorney’s fees, in the performance of this
indemnify to Manager,
except
for Manager’s gross negligence or willful misconduct.
Client
is obligated to maintain full workers compensation insurance as required by
law
during the entire term of this Agreement and Client certifies that such
insurance is in place prior to its execution of this Agreement. Client
acknowledges that, notwithstanding any other provision of this Agreement, breach
of this provision may result in the immediate resignation of Manager as
CRO.
| 3) |
General
Indemnity
|
Client
agrees to indemnify and hold harmless Manager, to the full extent lawful,
against any and all losses, actions, claims, damages, liabilities or costs
including reasonable legal fees and expenses,
except
for claims and obligations arising from Manager’s gross negligence or willful
misconduct
(collectively, “Loss”), whether or not in connection with a matter in which
Manager is a party, as and when incurred, directly or indirectly, caused by,
relating to, based upon or arising out of Manager acting for Client pursuant
to
this Agreement. Manager shall not be held liable for errors in judgment.
Notwithstanding the foregoing, Client shall have no duty to indemnify or to
hold
harmless Manager for any loss, action, claim, damage, liability or cost to
the
extent such Loss is found, in a final judgment by a court of competent
jurisdiction, to have resulted primarily and directly from the willful
misconduct or unlawful activities of Manager.
5
of 10
| B) |
Limitation
of Liability
|
Client
and its subsidiaries agree that Manager’s liability to Client, to the extent not
otherwise limited, indemnified or held harmless hereunder, is further limited
to
the amount of fees paid to Manager hereunder.
| C) |
Included
Indemnitees
|
Subject
to the exceptions expressly herein contained, the
indemnification and hold harmless provisions shall be in addition to any
liability which Client may otherwise have to Manager and shall include in
addition to Manager, the Individual Manager(s) performing this Agreement,
Manager’s affiliated entities, directors, officers, employees, agents and
controlling persons of Manager within the meaning of the federal securities
laws. All references to Manager in these indemnification and hold harmless
provisions shall be understood to include any and all of the
foregoing.
| D) |
Counsel
and Notification of Client
|
If
any
claim, action, proceeding, or investigation is commenced as to which Manager
proposes to demand such indemnification and to be held harmless, it will notify
Client promptly upon becoming aware of any such action, proceeding or
investigation. Manager will have the right to retain counsel of its own choice
to represent it, and Client will pay the reasonable fees and expenses of such
counsel; and such counsel shall to its fullest extent consistent with its
professional responsibilities cooperate with Client and any counsel designated
by it. Client will only be liable for any settlement of any claim against
Manager made with Client’s written consent, which consent shall not be
unreasonably withheld.
| E) |
Duration
|
Neither
termination nor completion of the engagement of Manager pursuant to the CRO
Agreement shall affect the indemnification and hold harmless provisions which
shall remain operative and in full force and effect.
| F) |
Health,
Safety and Environmental Inclusion
|
For
purposes of indemnifying and holding Manager harmless from any breach of the
representations, warranties and covenants set forth hereunder, Client agrees
to
indemnify and hold harmless Manager to the full extent set forth
hereunder.
| G) |
In
the event of litigation between Client and Manager, the prevailing
party
shall be entitled to recover its reasonable fees and expenses, including
attorney’s fees.
|
6
of 10
| IX) |
INFORMATION
AND CONFIDENTIALITY
|
| A) |
Information
|
The
Client agrees to provide access to all financial and other information and
records, and to Client’s directors, officers, employees, and representatives,
creditors and other stakeholders, as Manager deems
appropriate.
| B) |
Confidentiality
|
Manager
agrees that all information, whether or not in writing, of a private, secret
or
confidential nature concerning Client is and shall remain the exclusive property
of Client, and no such information shall be divulged by Manager to third
parties, unless
such information becomes public knowledge or is required by order of a court.
Client acknowledges that Manager has been tasked with maintaining relations
with
Client’s secured lender and specifically authorizes Manager to divulge Client’s
confidential information to Laurus Capital Management LLC and its affiliates
in
executing this responsibility.
| C) |
Personnel
Disclosure
|
Client
is
responsible for bringing matters (i.e., sexual harassment, substance abuse)
to
Manager.
| D) |
Representations
|
Client
is
unaware of any material misrepresentations or misstatement with the exceptions
of the following:
| X) |
ENGAGEMENT
OF OTHERS
|
When
Client requests or agrees that Manager shall arrange for services of a
third-party, Client will compensate third-party service providers, including,
without limitation, attorneys, accountants, financial managers, brokers, and
property managers, in accordance with the agreed compensation terms of such
third-parties.
| XI) |
HEALTH,
SAFETY AND ENVIRONMENTAL REPRESENTATIONS, WARRANTIES, AND
COVENANTS
|
| A) |
Client
represents and warrants that, to the best of its
knowledge:
|
| 1) |
All
activities and operations of Client, including without limitation,
those
at the Facility, have been and are being conducted in compliance with
all
applicable federal, state and local environmental, health, and safety
statutes, ordinances, regulations and orders and requirements of common
law (“Environmental Statutes”).
|
| 2) |
No
Hazardous Substance (as herein defined) is present in, on, over or
under
or is migrating from the Facility (or at other facilities owned or
leased
by Client or its subsidiaries (collectively, “Client Facilities”)) in a
manner as may require remediation under any Environmental Statutes
or, to
Client’s knowledge, is present in, on, over or under any adjacent premises
or is migrating to the Facility or to Client Facilities. The term
“Hazardous Substances” means substances and materials that are regulated
pursuant to Environmental Statutes including, without limitation,
substances and materials that are or contain hazardous substances,
hazardous wastes, hazardous materials, toxic substances, regulated
substances, and petroleum as those terms are defined pursuant to any
Environmental Statute.
|
7
of 10
| 3) |
Client
has obtained and maintained and is in compliance with all registrations,
licenses, permits and approvals, including amendments thereto, issued
by
governmental agencies pursuant to Environmental Statutes and all are
in
full force and effect.
|
| 4) |
The
generation, handling, treatment, storage, transportation and disposal
of
Hazardous Substances and waste by, or on behalf of, Client was and
is in
compliance with all applicable federal, state and local laws, ordinances
and regulations, including Environmental
Statutes.
|
| 5) |
Client
has not received any notice of any violation of or investigation or
claim
of liability under any Environmental Statute regarding or relating
to the
Facility and Client Facilities and their operation or notice of any
investigation or potential liability of Client regarding any other
facility including, without limitation, those to which Client, Client
Facilities or the Facility sent Hazardous Substances or waste for
handling, treatment, storage or disposal (“Other
Facilities”).
|
| 6) |
Neither
the Facility, Client Facilities, nor any Other Facility is listed or
proposed for listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System
list
promulgated pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq.,
as amended, or any analogous state or local
list.
|
| B) |
Client
agrees hereafter to remain in compliance with all Environmental
Statutes.
|
| XII) |
MISCELLANEOUS
PROVISIONS
|
| A) |
Entire
Agreement
|
| 1) |
This
Agreement constitutes the entire understanding and agreement between
the
parties hereto with respect to the subject matter hereof and may not
be
amended, changed, modified, or supplemented, except in writing signed
by
each party.
|
| B) |
Assignment
|
| 1) |
Neither
party shall sell, assign, convey or otherwise transfer this Agreement,
or
any of the rights, interests or obligations hereunder to any other
party
without the prior written consent of the other party, except that Manager
may assign this Agreement to a corporation in which Xxxxxx X. Xxxx
III or
Xxxxxx Xxxx Xxxxxxxxxx is a shareholder.
|
8
of 10
| C) |
Notices
|
| 1) |
Any
written notice required to be given hereunder shall be validly given
if
delivered personally or sent by registered or certified mail, postage
prepaid, to the address of the party set forth in the opening paragraph
of
this Agreement, or to such other address as one party shall provide
in
writing to the other in accordance with this
paragraph.
|
| D) |
Interpretation
|
| 1) |
The
internal laws of the Commonwealth of Pennsylvania applicable to Agreements
made and to be fully performed therein shall govern the validity,
interpretation, and enforcement of this
Agreement.
|
| E) |
Waiver
|
| 1) |
The
waiver of any breach of any provision of this Agreement by a party
to this
Agreement shall not operate or be construed as a waiver of any subsequent
breach by such party.
|
| F) |
Separability
of Provisions
|
| 1) |
If
any provision of this Agreement shall be or become illegal or
unenforceable in whole or in part for any reason whatsoever, the remaining
provisions shall nevertheless be deemed, valid, binding and
subsisting.
|
| G) |
Headings
and Paragraphs
|
| 1) |
The
headings and paragraphs of this Agreement are for convenience only
and
shall not affect the interpretation of this
Agreement.
|
| XIII) |
DISCLOSURE
|
| A) |
Manager
has many relationships in the business community involving lenders,
law
firms, accounting firms, consulting firms, independent consultant
contractors, and others. These relationships may include Manager in
the
past or currently: receiving client referrals, providing client referrals,
providing or receiving professional services, employing employees or
contractors or serving as a contractor, and other types of relationships.
These relationships may include lenders, professionals or others that
have
a connection with Client and/or Manager’s services provided under this
Agreement. Such relationships are expected to continue and new ones
may
begin during the provision of services hereunder. Manager represents
that
its independence in providing services hereunder is not compromised
by
such relationships, and is willing to confer with Client at Client’s
request concerning the specific nature of any such relationships Manager
may have.
|
| B) |
Manager
and Individual Manager were engaged by Laurus Capital Management LLC,
(“Laurus”) during the one-week period of September 16, 2008 through
September 22, 2008 to conduct an assessment of Client. Manager and
Individual Manager have had continued conversations with Laurus since
this
one-week assessment. Laurus is the primary secured creditor of Client
and
Manager acknowledges that during this initial assessment period it
represented Client’s secured creditor, who might have a position that is
contrary to Client’s other stakeholders. Both Manager and Individual
Manager do not believe that this prior assignment will cause Manager
or
Individual Manager from unduly favoring Laurus or prevent them from
dutifully representing all of Client’s stakeholders in order of priority,
as appropriate in light of the financial situation of
Client.
|
9
of 10
| C) |
Manager
and Individual Manager conducted an assessment for Laurus Capital
Management of Verso Technologies, Inc. during the week of April 14,
2008.
Manager and Individual Manager were retained on April 28, 2008 as Chief
Administrative Officer of Verso Technologies, Inc. and its affiliates
(collectively “Verso”) and directed Verso’s operations during its Chapter
11 bankruptcy in a case filed in the Northern District of Georgia.
Laurus
and its affiliates were the secured lender of Verso. The plan developed
and implemented by Manager and Individual Manager resulted in payment
in
full to Laurus by Verso. Manager, Individual Manager and Client agree
that
this past success is an indication of Manager’s and Individual Manager’s
expertise and that such record will not prevent Manager or Individual
Manager from fully acting in the best interests of
Client.
|
IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement on the
day
and year first above written.
WINDSWEPT
ENVIRONMENTAL, INC.
Xxxxxxx
X’Xxxxxx (conformed)
By:
Xxxxxxx
X’Xxxxxx
Its:
Chief Executive Officer
NACHMANHAYSBROWNSTEIN,
INC.
Xxxxxx
X. Xxxxxxx (conformed)
By:
Xxxxxx X. Xxxxxxx
Principal
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