MANAGEMENT SERVICES AGREEMENT
Exhibit
10.2
THIS
MANAGEMENT SERVICES AGREEMENT (“Agreement”) is made and entered into as of May
19, 2005 (“Effective Date”) by and among Acceris Management and Acquisition LLC,
a Minnesota limited liability company (“Manager”),
Acceris Communications Corp., a Delaware corporation (“Company”), Acceris
Communications Inc., a Florida corporation (“ACI,” and together with the
Company, the “Sellers”), Counsel
Corporation, an Ontario, Canada company (“Counsel”) (collectively the Company,
ACI and Counsel are the “Company Parties”), and,
for the sole purpose of making the guaranty contained in Section 22, North
Central Equity LLC, a Minnesota limited liability company
(“Guarantor”).
BACKGROUND
WHEREAS,
the Sellers have agreed to retain the Manager to manage the Company during the
interim period from the Execution Date to the Closing Date under the Asset
Purchase Agreement (the “Purchase Agreement”) among the Company Parties and the
Manager.
WHEREAS,
the Closing under the Purchase Agreement will not occur until after, among other
things, the receipt of all governmental consents required by the Purchase
Agreement and the approval of ACI’s stockholders;
WHEREAS,
the Sellers desire to utilize Manager’s services on an exclusive basis to
manage, to fullest extent permissible under Law (as defined below), the
operations of the Company pending receipt of the foregoing consents and
approvals and Manager desires to provide such services to the Company on the
terms and subject to the conditions stated herein.
NOW,
THEREFORE, in consideration of the above recitals and mutual promises and other
good and adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. Definitions. “Funds
Advance” means for any period of calculations for the Company the sum of: (i)
operating cash flow as determined in accordance with GAAP, (ii) actual
capital
expenditures as
determined in accordance with GAAP, (iii) payments with respect to the Leases
and Personal Property Leases, and (iv) reductions in the Xxxxx
Fargo, Inc.
asset based loan facility, less any payments made by the Manager in
respect of Excluded Liabilities.
Payments by Manager or Company of Excluded Liabilities shall not be deemed to be
or included in the definition of Funds Advance.
Capitalized terms used in this Agreement and not otherwise defined shall have
the meaning assigned in the Purchase Agreement.
2. Compliance
with Applicable Laws and Regulations.
2.1 The
Company Parties and Manager desire that this Agreement and the obligations
performed hereunder be in substantial and good faith compliance with (i) all
applicable rules, regulations and policies of the Federal Communications
Commission (“FCC”) and any state public utility commission(s) (the “State
PUC(s)”); (ii) the Communications Act of 1934, as amended (the “Act”), 47 X.X.X
000, et seq., (iii) applicable state and provincial laws applicable to the
Company Parties and (iv) any other applicable Canadian or US federal, state and
local law, regulation or policy (collectively, “Law(s)”).
2.2 It is
expressly understood by the parties that nothing in this Agreement is intended
to give Manager any right that would be deemed to constitute a transfer of
control (as is defined in the Act and/or any applicable FCC or other relevant
Law) of any of the applicable licenses from the Company to Manager to the extent
prohibited by applicable Law. Each party shall perform its obligations under
this Agreement in accordance with applicable Law.
2.3 If the
FCC or any State PUC or other governmental body of competent jurisdiction
determines that a provision of this Agreement violates any applicable Law, or if
the staff of the FCC or any State PUC has advised the parties, orally or in
writing, that the review of any request by the parties for authority for the
transactions contemplated hereby will be inordinately delayed or will likely be
determined adversely to the parties, the parties will use their respective
reasonable efforts to negotiate in good faith to modify this Agreement to the
minimum extent necessary so as to comply with such order, decree, action or
determination and/or remove any controversy identified by the FCC or a State PUC
without material economic detriment or effect to either party, and to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible. This Agreement, as so
modified, shall then continue in full force and effect.
3. Appointment
of Manager. The
Sellers hereby appoint Manager, to the fullest extent permissible under Law, as
the sole and exclusive provider of all services necessary or appropriate for the
supervision and management of the Company, as described more fully in Section 4
(the “Services”). The Company Parties consent to and agree to the appointment of
the Manager. Manager hereby accepts such appointment on the terms and subject to
the conditions stated herein.
4. Scope
of the Services.
4.1 Management. During
the Term (defined below), and under the supervision, control and direction from
time to time of the Company and the Company’s Board of Directors and by its
Designated Executive (as defined below), Manager shall establish and implement
operational policies and provide general management and direction of the
day-to-day operations of the Company and shall exercise general supervision and
direction of the Company and the affairs of the Company to the fullest extent
permissible under Law and shall make decisions with respect to operations of the
Company, subject to the reporting duties to the Designated Executive (defined
below) and the Company’s Board of Directors.
(a) Manager
agrees to report regularly at mutually agreeable times to the Company’s chief
executive officer or a designee of the chief executive officer (“Designated
Executive”) concerning the status of the operations of the Company, but no less
frequently than bi-monthly, unless such update is waived by the Company or the
Company Parties.
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(b) It is
understood that the Sellers have not given Manager any authority to pay or cause
the Company to pay any Excluded Liabilities, and that the Sellers have
instructed Manager that Manager shall not cause the Company to pay any Excluded
Liabilities.
(c) Manager
shall manage the Company and report to the Designated Executive from time to
time as provided for in this Agreement and shall use its best efforts to manage
the Company in substantial good faith compliance with its obligations under this
Agreement. Manager shall use its good faith best efforts to manage the
responsibilities of operating and managing the Company’s operations under this
Agreement. Day to day operations shall include customer billing, management of
Company cash flows and cash collections and outflows, processing employee
payroll and other related duties.
5. Responsibilities
of the Company. During
the Term the Company Parties shall assist and fully cooperate on a timely basis
with Manager in its performance of the Services. Time is of the essence under
this Agreement and all Company Parties will work diligently to make decisions
and execute any agreements or action plans for the Company in as reasonably
expeditious manner as reasonably possible to allow Manager to perform the
Services. The Company Parties shall have the Designated Executive [available
either on site or by telephone during all regular business hours and such
Designated Executive shall have full and complete authority to bind the Company
to decisions regarding operation of the Company, check signing for the Company,
and contractual obligations or agreements that the Manager recommends that the
Company execute or perform during the Term. To the extent that, in the
reasonable opinion of Manager, the Designated Executive is not reasonably
fulfilling these cooperation, signing or approval requirements under this
Agreement to allow the Manager to successfully perform its duties under this
Agreement, the Manager’s obligation to advance funds under the second sentence
of Section 7 shall cease until such time as the Company Parties have cured or
remedied such decision making issue to the reasonable satisfaction of the
Manager. Without limiting the foregoing, the Company Parties shall undertake the
following responsibilities to assist the Manager and to allow the Manager to
manage the day to day operations of the Company:
(a) shall
provide Manager with all information and materials in their possession or
subject to their control to enable Manager to provide the Services under this
Agreement;
(b) shall
perform any acts reasonably necessary to conduct the operations of the Company,
excluding those acts that are to be performed by Manager in connection with the
Services, pursuant to and in accordance with the request of
Manager;
(c) shall
continue to communicate with third parties, including state and federal
regulatory commissions, in cooperation with Manager, including responding to
their inquiries, requests and correspondence;
(d) shall
promptly inform Manager, and provide Manager with copies of, all correspondence
and communications relating to the Company from third parties; and
(e) At the
request of Manager, they shall cause the Company to timely exercise rights it
has under any of the contracts or agreements of the Company, including, but not
limited to, rights, whether in law or equity, with respect to breach,
termination, set-off, indemnity, waiver, sub-contracting and assignment and
shall execute commitments, agreements, contracts, instruments or agreements as
are reasonable for operation of the Business and are requested by the
Manager.
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(f) shall be
responsible for preparing and filing federal, state or local income tax returns
due during the Term of this Agreement.
(g) Sellers
currently maintain directors and officer’s liability, commercial general
liability
and umbrella
liability
insurance policies related to the operations of the Company. Sellers shall use
their commercially reasonable best efforts to cause the Manager to be named as
an additional insured, with respect to this Agreement, under the foregoing
policies and to give to Manager endorsements
naming the Manager as an additional insured. Manager
shall pay any related premium or other charge required by any insurer or
agent.
6. Independent
Contractor Status. Manager
is an independent contractor in the performance of the Services under this
Agreement and shall determine the method, details and means of performing the
Services. Without limiting the generality of the foregoing, Manager shall be
permitted, in its sole discretion, but in no way shall be required to (i) enter
into and perform contracts and agreements in its own name for the furnishing of
services, equipment, parts and supplies in connection with the Services, and
(ii) recruit and hire and terminate its own employees and independent
contractors to provide the Services. Manager shall solely establish the terms
and conditions of employment for its employees and shall pay all salaries and
other compensation due to such employees.
7. Compensation. As its
compensation for the Services, the Company shall pay Manager a fee equal to the
net income (determined according to GAAP) of the Company during the Term, plus
5% of such net income (the “Fee”). It is further agreed that in performing the
Services, Manager will provide to or procure for the Company funds in an amount
equal to the Funds
Advance. The
parties agree that if the net income of the Company is not sufficient to entitle
Manager to the Fee, then Manager shall not be entitled to the Fee or any
reimbursement from Company Parties for funds it may have advanced to or for the
Company under this Agreement and that such advances instead shall be considered
non-reimbursable expenses incurred by Manager in the performance of this
Agreement. Nothing herein shall be construed to limit Managers right to recover
the Break Up Fee, it being expressly understood that that Manager’s right to
recover the Break Up Fee survives this Section 7 and is in no way limited by
this Section 7.
8. Expenses. Except
as may be otherwise specifically provided herein, the parties hereto shall pay
their own legal fees, accounting and other expenses incurred in connection with
the negotiation and consummation of the transactions contemplated by this
Agreement.
9. Term. The
term of this Agreement (the “Term”) shall commence on the Effective Date hereof
and shall expire upon the earlier of: (i) the Closing Date; or (ii) the
termination of the Purchase Agreement pursuant to the terms thereof. Upon the
termination of this Agreement, neither party shall be further obligated under
this Agreement except for the parties’ respective indemnification obligations
set forth in Section 10.
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10. Indemnification.
(a) Subject
to the other terms and conditions contained in this Agreement, the Company
Parties will indemnify, defend and hold harmless the Manager and any of its
Affiliates from and against any and all damages, liabilities, losses, costs and
expenses (including all reasonable attorneys’, fees and costs) (collectively,
“Losses”) incurred by the Manager arising our of or related to (i) the Company
Parties’ breach of this Agreement, or (ii) the defense or disposition of any
action, claim, suit, demand, litigation, arbitration, mediation or other
proceeding initiated by a third party by or before any governmental entity or
arbitral forum (each, an “Action”), whether civil, administrative, investigative
or criminal, out of or related to the Manager’s performance under this Agreement
or relating to the operations of the Company by the Company Parties. In the
event Manager requests indemnification from the Company Parties with respect to
the defense of any Action, the Company Parties shall advance such defense costs
as Manager may reasonably request. If the Company Parties do not advance such
defense costs, Manager shall have no obligation to cooperate or provide
information to the Company Parties with respect to their defense of such claims.
(b) The
Company Parties expressly agree that Manager will have no liability to them or
any third party based on the failure of the Company to achieve profitability,
minimize losses, or based upon Manager’s lawful decision-making with respect to
operation of the Company under this Agreement. Any claim of either party arising
under or relating to this Agreement shall be made only against the other party
as a corporation or limited liability company, as the case may be, and any
liability relating thereto shall be enforceable only against the corporate or
limited liability company assets of the party. No party shall seek to xxxxxx the
corporate veil or otherwise seek to impose any liability relating to, or arising
from, this Agreement against any parent company, Affiliated company, subsidiary,
shareholder, employee, officer or director of the other party
(c) Notwithstanding
anything to the contrary contained in this Section 10 (except for the
exception provided for with respect to Manager in 10(a)), the parties shall
cooperate with each other in connection with any Action, including keeping each
other reasonably informed with respect to the status of any Action and to obtain
the benefits of any insurance coverage for third party claims that may be in
effect at the time a third party claim is asserted.
11. Notices. All
notices, requests, demands and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be given; (ii) on
the day of transmission if sent via facsimile transmission to the facsimile
number given below, and confirmation of receipt is obtained promptly after
completion of transmission; (iii) on the day after delivery to Federal Express
or similar overnight courier or the Express Mail service maintained by the
United States Postal Service; or (iv) on the fifth calendar day after mailing,
if mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed, to the party as
follows:
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If
to the Company Parties: |
Acceris
Communications Corp. |
x/x
Xxxxxxx Xxxxxxxxxxx | |
Xxxxxx
Xxxxx, Xxxxx 0000 | |
00
Xxxx Xxxxxx Xxxx | |
Xxxxxxx,
Xxxxxxx X0X 0X0 | |
Xxxxxx | |
Attn:
Chief Executive Officer | |
Facsimile:
000-000-0000 | |
Copy
to: |
Xxxxxxx
Xxxxxx Xxxx Xxxxxxx & Manner, P.C. |
000
Xxxxxxxxx Xxxxxx, Xxxxx 0000 | |
Xxxxxxxxx,
XX 00000-0000 | |
Attn:
Xxxxxx Xxxxxxxx | |
Facsimile:
000-000-0000 | |
If
to Manager: |
Acceris
Management and Acquisition LLC |
00
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 | |
Xxxxxxxxxxx,
XX 00000 | |
Attention:
Xxxx X. Xxxxxxxxxx, Esq. and Xxxx Xxxx | |
Facsimile:
000-000-0000 |
Any party
may change its address for the purpose of this Section by giving the other party
written notice of its new address in the manner set forth above.
12. Entire
Agreement. This
Agreement constitutes the entire agreement among the parties hereto relating to
the subject matter hereof (the management services agreement), and all prior
agreements, correspondence, discussions and understandings of the parties
(whether oral or written) relating to the subject matter hereof are merged
herein and superseded hereby, it being the intention of the parties hereto that
this Agreement and the instruments and agreements contemplated hereby shall
serve as the complete and exclusive statement of the terms of their agreement
together, except for the matters agreed to by the parties in the Purchase
Agreement and related Transaction Documents.
13. Assignment. Neither
this Agreement nor any of the rights or obligations hereunder may be assigned by
any party (by contract, operation of law, change of control or otherwise)
without the prior written consent of the other parties. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
14. Section
and Paragraph Headings. The
section and paragraph headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.
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15. Severability. Each
provision of this Agreement is intended to be severable. Should any provision of
this Agreement or the application thereof be judicially, or by arbitral award,
declared to be or become illegal, invalid, unenforceable or void, the remainder
of this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties.
16. Governing
Law; Venue and Jurisdiction. This
Agreement shall be governed by and construed according to the laws of the State
of Illinois, without regard to the conflict of law rules of Illinois or any
other state. The parties hereto consent to the exclusive venue and jurisdiction
of an appropriate federal or state court in Xxxx County, Illinois for any suit
or action arising out of or related to this Agreement. The parties hereto waive
any arguments of forum non conveniens in any matter relating to this
Agreement.
17. Parties
in Interest—No Third Party Beneficiaries. Nothing
in this Agreement is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement is
intended to relieve or discharge the obligations or liability of any third
persons to the Company Parties or Manager. No provision of this Agreement shall
give any third parties any right of subrogation or action over or against the
Company Parties or Manager.
18. Amendments;
Waivers. This
Agreement may be amended or modified, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or of
the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, 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, term, covenant, representation or warranty
of this Agreement.
19. Counterparts. This
Agreement may be executed in one or more original or facsimile counterparts, all
of which shall be considered but one and the same agreement, and shall become
effective when one or more such counterparts have been executed by each of the
parties and delivered to the other parties. This Agreement may be executed in
facsimile copy with the same binding effect as an original.
20. Interpretation. Except
as otherwise provided or if the context otherwise requires, whenever used in
this Agreement, (a) any noun or pronoun shall be deemed to include the plural
and the singular, (b) the terms “include” and “including” shall be deemed to be
followed by the phrase “without limitation,” (c) unless the context otherwise
requires, all references to Sections refer to Sections of this Agreement, (d)
the words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Section or other
subdivision, (e) any definition of or reference to any Law, agreement,
instrument or other document herein will be construed as referring to such Law,
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (f) any definition of or reference to any
statute will be construed as referring also to any rules and regulations
promulgated thereunder, and (g) any use of “Dollars” or “$” shall refer to
United States dollars and any component thereof. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
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21. WAIVER
OF JURY TRIAL. COMPANY
PARTIES AND THE MANAGER EACH ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT
MAY ARISE BETWEEN THE PARTIES, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF
WHICH THIS AGREEMENT ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY
JURY. ACCORDINGLY, THE PARTIES BY THEIR ACCEPTANCE OF THIS AGREEMENT WAIVE ANY
RIGHT TO TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO
THIS AGREEMENT OR TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN
CONNECTION HEREWITH.
22. Guaranty.
Guarantor hereby guarantees to the Company Parties the full and prompt
performance and payment of the Manager’s obligations under Section 7 of this
Agreement (the “Guaranteed Obligations”). Any act of the Company Parties
consisting of a waiver of any of the terms, covenants or conditions of the
Guaranteed Obligations, or the giving of any consent to any matter or thing
relating to the Guaranteed Obligations, or the granting of any indulgences or
extensions of time to the Manager or Guarantor, may be done without notice to
Guarantor and without releasing the obligations of Guarantor hereunder. The
obligations of Guarantor hereunder shall not be released by any of the Company
Parties’ receipt, application or release of any security given for the payment,
performance and observance of any of the Guaranteed Obligations. Similarly, the
obligations of Guarantor hereunder shall not be released by any modification of
any of the terms of the Guaranteed Obligations made by the Company Parties and
the Manager, but in the case of any such modification, the liability of
Guarantor shall be deemed modified in accordance with the terms of any such
modification. The liability of Guarantor hereunder shall in no way be affected
by (a) the release or discharge of the Manager in any creditors’ receivership,
bankruptcy or other proceedings, (b) the impairment, limitation or modification
of the liability of the Manager or the estate of the Manager in bankruptcy, or
of any remedy for the enforcement of any of the Guaranteed Obligations resulting
from the operation of any present or future provision of the Federal bankruptcy
law or any other statute or the decision of any court, (c) the rejection or
disaffirmance of any instrument, document or agreement evidencing any of the
Guaranteed Obligations in any such proceedings, (d) the assignment or transfer
of any of the Guaranteed Obligations by the Company Parties, (e) the cessation
from any cause whatsoever of the liability of the Manager with respect to the
Guaranteed Obligations (except for the Managers right to cease the Funds Advance
as provided in this Agreement or except upon termination of this Agreement).
This is a guaranty of payment and not of collection. The liability of Guarantor
hereunder shall be direct and immediate and not conditional or contingent upon
the pursuit of any remedies against the Manager or any other person, nor against
any collateral available to the Company Parties. Guarantor hereby waives any
right to require that an action be brought against Manager or any other person
or to require that resort be had to any collateral in favor of the Company
Parties prior to discharging its obligations hereunder.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
MANAGER: | ||
ACCERIS
MANAGEMENT AND ACQUISITION LLC | ||
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By: | /s/ | |
Name: Xxxx Xxxx | ||
Title: Chief Executive Officer |
COMPANY PARTIES: | ||
COUNSEL CORPORATION | ||
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By: | /s/ | |
Name: | ||
Title: |
ACCERIS COMMUNICATIONS INC. | ||
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By: | /s/ | |
Name: | ||
Title: |
ACCERIS COMMUNICATIONS CORP. | ||
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By: | /s/ | |
Name: | ||
Title: |
GUARANTOR: | ||
NORTH CENTRAL EQUITY LLC | ||
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By: | /s/ | |
Name: Xxxx Xxxx | ||
Title: Chief Executive Officer |
[Signature
Page to Management Services Agreement]
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