Exhibit 10.11
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT ("Agreement") is made as of November 18,
1993 by and between X.X. Xxxxxxxx and Associates, Inc. ("JDCA") and PAYMENT
SYSTEMS NETWORK INC., a Delaware corporation ("PSN").
WHEREAS, PSN has been established for the purpose of engaging in the
business of providing services to depository institutions and other customers
relating to electronic check presentment, the related transportation of physical
checks and other related check collection functions.
WHEREAS, JDCA will assign to PSN certain contracts referenced in Exhibit A
to this Agreement (i) between JDCA and depository institutions relating to the
services to be provided by PSN ("Customer Contracts") and (ii) between JDCA and
several companies which will enable PSN to provide its services to depository
institution and other customers ("Remarketing Contracts").
WHEREAS, PSN desires that JDCA provide, and JDCA is willing to provide,
certain management services to PSN during the term of this Agreement.
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. SERVICES TO BE PROVIDED. JDCA agrees to render the services and
undertake the duties set forth in Sections 3 and 4 of this Agreement, for the
compensation and on the terms herein provided.
2. DELIVERY OF DOCUMENTS. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
3. MANAGEMENT SERVICES. Subject to the supervision and direction of
the Board of Directors and/or the management Committee of PSN and in accordance
with JDCA's best judgment, JDCA will operate, manage, direct and supervise the
ongoing conduct of PSN's day-to-day business from and after the effective date
of this Agreement. During the term of this Agreement, JDCA shall have authority
to make any and all decisions with respect to the day-to-day operations of PSN,
except as otherwise provided in this Agreement, including without limitation the
following:
1
(a) Contracting for and purchasing on behalf of PSN all services
and goods to be used in connection with the operation of PSN's business;
(b) Putting into effect all advertising or other business
solicitation activities and all business policies with respect to such
advertising or solicitation activities;
(c) Obtaining on behalf of PSN all licenses, permits and
authorizations from any governmental authorities which are necessary for the
conduct of PSN's business;
(d) Negotiating and entering into contracts on behalf of PSN
with such other service providers and independent contractors as JDCA deems
necessary to perform services for PSN in connection with the operation of PSN's
business, consistent with the Business Plan approved by the Board of Directors
of PSN as defined below, and supervising the administration and monitoring the
performance of all work performed and services rendered under all such contracts
and Remarketing Contracts;
(e) Negotiating and entering into contracts on behalf of PSN
with depository institutions and other customers whereby PSN contracts to
provide electronic check presentment and related services to such customers and
supervising the administration and monitoring the performance of all work
performed and rendered under such contracts and the Customer Contracts;
(f) Maintaining office facilities for PSN (which may be in the
offices of JDCA);
(g) Furnishing statistical and research data, data processing
services, clerical services, internal executive and administrative services,
stationery and office supplies;
(h) Furnishing corporate secretarial services, including
coordinating the preparation and distribution of materials for meetings of the
Board of Directors and committees thereof, as well as advisory groups or
committees;
(i) Furnishing financial advice and services, including
preparation of operating budgets for PSN, effecting loans and investments on
behalf of PSN, and assistance with respect to cash management, insurance and
risk management advice and services;
(j) Establishing pricing and packaging for PSN services;
(k) Providing bookkeeping and accounting services, including
developing a centralized billing process, and preparing monthly financial
reports;
(l) Administering and/or operating accounting systems and
programs (such as salaried payrolls, general ledgers and budgets, and accounts
payable);
2
(m) Providing the services of certain persons who may be
appointed as officers of PSN by PSN's Board of Directors;
(n) Coordinating the provision of legal advice and counsel to
PSN;
(o) Coordinating the preparation of reports to PSN's
shareholders of record;
(p) Providing strategic market advice and service direction for
each PSN line of business;
(q) Providing sales and sales support resources to achieve PSN
revenue objectives;
(r) Coordinating implementation, including project planning,
ordering and installation support, among vendors, depository institutions and
other customers and PSN:
(s) Coordinating line engineering support services to facilitate
the optimal configurations for dated communication installation;
(t) Providing a help desk to resolve issues not resolved by
primary service vendors;
(u) Planning product and service enhancements and preparing
business proposals to be presented to the Board of Directors, committees of the
Board, and officers of PSN;
(v) Acting as PSN's agent, including entering into binding
contracts on behalf of PSN with respect to matters of every kind and nature; and
(w) Generally assisting in all aspects of PSN's operations.
4. PERFORMANCE REQUIREMENTS.
(a) In performing all services under this Agreement, JDCA shall
(i) act in conformity with PSN's certificate of incorporation and bylaws, as the
same may be amended from time to time, and subject to the supervision and
direction of the Board of Directors and/or the Management Committee of PSN; (ii)
consult and coordinate with legal counsel for PSN, as necessary and appropriate,
and (iii) advise and report to PSN and its legal counsel, as necessary or
appropriate, with respect to any compliance or other matters that come to its
attention.
(b) JDCA shall consult with and keep PSN advised concerning all
material aspects of JDCA's activities with respect to the management and
operation of PSN. JDCA shall keep, maintain and make available for inspection
by PSN, sufficient books of account reflecting accurately all income and
expenditures resulting from the conduct of PSN's business. JDCA shall provide
and meet all reasonable financial and management information
3
reporting requests made by the Board of Directors or the Management Committee
of PSN.
(c) JDCA may submit proposals for its services to be remarketed
through PSN to PSN's Board of Directors or Management Committee and shall
abstain from voting with respect to such proposals.
(d) JDCA shall hire one or more full-time employee(s) fully
dedicated to PSN when, in JDCA's sole reasonable judgment, such employee(s)
become appropriate or necessary in order to conduct the operations of PSN.
(e) JDCA shall place appropriate emphasis on cash management
within PSN to minimize the need for additional working capital.
(f) Each year JDCA shall prepare an annual business plan and
operating budget ("Business Plan") to be approved by the Board of Directors of
PSN. JDCA shall prepare quarterly operating budgets for PSN for the first year
of the term of this Agreement, which shall be consistent with the Business Plan,
to be approved by the Board of Directors of PSN. After the first year of the
term of this Agreement, the timing and frequency of budget reporting by JDCA
will be determined jointly by JDCA and PSN's Management Committee. Modification
of the Business Plan and/or operating budgets may be made quarterly if approved
by the Board of Directors or Management Committee of PSN, as appropriate.
(g) JDCA shall use its reasonable best efforts to conform with
the budgeted expense levels approved by the Board of Directors of PSN. If a
significant negative variance between actual and budgeted net profits occurs,
JDCA will develop a revenue enhancement and/or expense reduction and
implementation plan and submit such plan to Management Committee of PSN for its
review and approval.
COMPENSATION. For the services to be rendered and the facilities to
be furnished by JDCA, as provided for in this agreement, JHDCA shall be
compensated by PSN in accordance with the following terms:
(a) PSN shall pay to JDCA each month a Management Fee equal to
JDCA's Fully Loaded Transfer Cost plus 20% of PSN's total direct operating
expenses ("PSN Operating Expenses") for that month. PSN shall also pay to JDCA
an Incentive Fee for
4
each fiscal year in which 25% of PSN's pre-tax, pre-Management Fee net profits
for that year exceeds 20% of PSN Operating Expenses for such year. The
Incentive Fee shall be payable as soon as reasonably possible following the end
of each fiscal year and shall be equal to the amount by which 25% of PSN's
pre-tax net profits for the year exceeds 20% of PSN Operating Expenses for
such year, provided that the Incentive Fee shall not exceed up to 40% of
total PSN Operating Expenses. "Fully Loaded Transfer Cost" shall include the
actual hourly compensation cost of any employee who performs services for
PSN, grossed up by a calculated percentage to reimburse JDCA for the various
direct and overhead expenses attributable to the general day-to-day business
operations of JDCA ("JDCA Expenses"). The Fully Loaded Transfer Cost shall
be calculated as illustrated in Exhibit B to this Agreement and JDCA's
calculation of the Fully Loaded Transfer Cost shall be subject to the
performance of certain agreed-upon audit procedures performed annually by an
independent public accountant. JDCA's Fully Loaded Transfer Cost shall
include: administrative department salaries; all employee-related benefits
and taxes; office rent; general office supplies; telephone; secretarial;
human resource department-related; general insurance; general computer;
furniture and equipment depreciation in the conduct of PSN's business. JDCA
Expenses and Transfer Cost methodology shall be calculated in accordance with
industry standards and Generally Accepted Accounting Principles. If a
significant event or change in circumstances causes such expenses to
materially exceed industry standards, JDCA and PSN may agree to readjust the
calculation of the Fully Loaded Transfer Cost or any JDCA Expense. The
percentage of JDCA Expense includable in calculating the Fully Loaded
Transfer Cost shall be determined on a fiscal year quarterly basis one
quarter in arrears. PSN Operating Expenses shall be accounted for separately
and shall consist of the operating expenses set forth on Exhibit C to this
Agreement, including, but not limited to, expenses of PSN relating to: sales
travel; commissions; contract negotiation and legal fees; JDCA's services
pursuant to this Agreement; salaries; PSN's overhead expenses and staff
bonuses; interest on borrowed money; taxes and fees payable to Federal state
and other governmental agencies; outside auditing expenses; and other
expenses not specified which are properly payable by PSN.
(b) PSN shall reimburse JDCA on a monthly basis for any PSN
Operating Expenses paid by JDCA and/or its employees. A policy shall be
developed jointly by PSN and JDCA to establish guidelines for the reimbursement
of PSN Operating Expenses paid by JDCA and/or its employees. Such policy shall
generally provide for reimbursement of: reasonable air and ground
transportation, including tolls, parking, taxi, bus or auto rental; expenses for
lodging and meals (provided, however, that personal expenses charged against a
hotel room or separately will not be reimbursed); reasonable valet and laundry
charges for
5
trips of more than three (3) days duration; necessary business calls; and
reasonable tipping.
(c) JDCA shall submit to PSN a monthly invoice during the first
week of each month which shall be in the format generally set forth in Exhibit D
to this Agreement. PSN shall pay the invoiced amount within thirty (30) days of
the invoice date. All past due amounts shall accrue interest at the prime rate
plus one percent (1%) divided by twelve per each thirty (30) days past due.
(d) JDCA will from time to time employ or associate with itself
such person or persons as JDCA may believe to be particularly suited to assist
it in performing services under this Agreement. Such person or persons may be
officers and employees who are employed by both JDCA and PSN.
6. LIMITATION OF LIABILITIES; INDEMNIFICATION.
(a) JDCA shall not be liable for any error of judgment or mistake of
law or for any loss suffered by PSN in connection with the performance of JDCA's
obligations and duties under this Agreement, except a loss resulting from JDCA's
willful misconduct, bad faith or gross negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof. Any
person, even though also an officer, director, partner, employee or agent of
JDCA, shall be deemed, when rendering services to PSN or acting on any business
of PSN (other than services or business in connection with JDCA's duties
hereunder), to be acting solely for PSN and not as an officer, director,
partner, employee or agent or one under the control or discretion of JDCA even
though paid by JDCA. JDCA shall not be liable for any action taken or omitted
in good faith at the request or direction of the Board of Directors of PSN or
any committee thereof in connection with the performance of JDCA's duties under
this Agreement. JDCA also shall not be liable for actions taken or omitted in
good faith in reliance on advice received from its or PSN's legal counsel,
independent public accountants or other professional advisors. JDCA shall not
be liable for any special or consequential damages arising in connection with
the performance of JDCA's obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, JDCA shall
not be liable for any loss suffered by PSN in connection with the performance of
JDCA's obligations and duties under this Agreement unless PSN has initiated a
legal or arbitration proceeding with respect to such loss within three (3) years
of the occurrence of the event, action or failure to act giving rise to such
loss.
(c) Any dispute or controversy arising between JDCA and PSN in
connection with the interpretation of this Agreement shall be settled
exclusively by binding arbitration in Dallas, Texas in
6
accordance with the rules of the American Arbitration Association then in effect
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
(d) PSN will indemnify JDCA against and hold it harmless from any and
all losses, claims, damages, liabilities or expenses (including counsel fees and
expenses) resulting from any claim, demand, action or suit relating to the
operation of PSN, unless (i) such loss, claim, damage, liability or expense
results from the willful misconduct, bad faith or gross negligence of JDCA in
the performance of such obligations and duties or by reason of its reckless
disregard thereof and (ii) a legal or arbitration proceeding has been initiated
within three (3) years of the occurrence of the event, action or failure to act
giving rise to such loss, claim, damage, liability or expense. JDCA shall
promptly notify PSN in writing of: the assertion against JDCA of any claim or
potential liability with respect to which indemnity may be sought hereunder; the
discovery of any such potential liability; or the commencement of any action or
proceeding with respect to which indemnity may be sought hereunder; PROVIDED,
that the failure promptly to give such notice shall not affect JDCA's rights
hereunder except to the extent that such failure shall actually materially and
adversely affect PSN or its rights hereunder. JDCA shall not confess,
compromise or settle any claim indemnifiable hereunder without the prior written
consent of PSN. PSN shall have the right to control the defense against any
claim or liability indemnifiable hereunder if (i) PSN notifies JDCA, within
thirty (30) days after receiving written notice from JDCA of an indemnifiable
claim or liability, that PSN intends to defend against such claim or liability,
or, if required in a shorter time than thirty (30) calendar days, PSN makes the
requisite response to such claim or liability asserted and (ii) PSN diligently
pursues the defense against such claim or liability.
7. TERM; RENEWAL/TERMINATION.
(a) This Agreement shall become effective on November 18, 1993 and
shall remain in full force and effect for a term of five (5) years from the
effective date unless terminated early pursuant to the provisions of subsection
(c) of this Section 7.
(b) Prior to the end of the four (4) years from the effective date of
this Agreement, JDCA and PSN will convene negotiations in good faith to extend
or modify this Agreement unless this Agreement has been terminated early
pursuant to the provisions of subsection (c) of this Section 7. If such
negotiations do not conclude within six (6) months of the expiration of the term
of this Agreement, JDCA and PSN may agree to extend this Agreement on a
month-to-month basis until negotiations reach a conclusion.
7
(c) This Agreement is subject to early termination (i) upon the
mutual agreement of the parties; (ii) by PSN with thirty (30 days' prior written
notice upon the commission of willful misconduct, gross negligence or fraud by
JDCA; (iii) by PSN with thirty (30) days' prior written notice upon JDCA's
failure to begin to implement within 60 calendar days agreed-upon expense
reduction initiatives as provided at subsection (e) of Section 4 of this
Agreement; or (iv) pursuant to Section 8 hereof. The terms and provisions of
Sections 6, 10 and 11 shall survive any such early termination of this
Agreement.
(d) In the event of any termination pursuant to this Section 7, JDCA
shall be entitled to a pro rata portion of (i) the Management Fee otherwise
payable at the end of the month during which such termination occurs and (ii)
the Incentive Fee, if any, otherwise payable at the end of the fiscal year
during which such termination occurs; provided, however, that the determination
of whether any Incentive Fee is payable, and the calculation of the amount of
the Incentive Fee, shall be based upon the amount of PSN's pre-tax net profits
and PSN Operating Expenses for the portion of the fiscal year before termination
occurred. Upon any termination, each party shall deliver to the other party all
property, documents, books and records, including related software, of the other
party then in its custody or possession. JDCA shall cooperate with PSN and any
successor provider of management services selected by PSN in the orderly
transfer and assumption of the management responsibilities of PSN.
(e) Upon any termination pursuant to Section 7(c) or in the event
this Agreement terminates upon the expiration of its initial five (5) year term
as provided in Section 7(a), JDCA shall have the right to require PSN to
purchase from JDCA up to seventy-five percent (75%) of the securities of PSN
help by JDCA, except as provided in the third sentence of this subsection. JDCA
shall notify PSN of JDCA's decision to seek such a purchase by PSN within sixty
(60) days of the effective date of such termination. To the extent that any
securities sought to be sold by JDCA to PSN hereunder would require one or more
holders of securities of PSN ("Stockholders") to obtain the prior approval of
the Federal Reserve Board under Section 4 of the Bank Holding Company Act and
such Stockholder(s) is unable after using its best efforts to obtain, or is in
good faith unwilling to seek, such Federal Reserve Board approval, JDCA will not
have the right to require PSN to purchase such securities and JDCA and the Board
of Directors of PSN will in good faith negotiate to provide JDCA with an
economic result substantially comparable to the purchase by PSN of such
securities. To the extent that PSN is required hereunder to purchase securities
held by JDCA, PSN shall be required to consummate such purchase within 120 days
of such notice. Unless otherwise agreed to by JDCA and PSN within ten (10) days
of the provision of notice by JDCA, the purchase price to be paid by PSN for
such securities shall be the value of the securities as determined by a mutually
acceptable nationally
8
recognized investment banking or accounting firm. If the parties shall fail to
agree on the selection of an investment banking or accounting firm, then each
shall select one such firm (and each shall pay any fees charged by the firm it
selects) and such firms shall agree to, as promptly as practicable thereafter, a
nationally recognized investment banking or accounting firm to determine the
value of the securities. PSN and JDCA shall each pay one-half of the expenses
of the investment banking or accounting firm making the determination as to such
value. PSN may pay the purchase price in a lump sum or in equal annual
installments over five (5) years. All determinations made pursuant to this
subsection shall be final, conclusive and binding on the parties.
(f) JDCA and PSN agree that Section 7(e) of this Agreement supersedes
the rights and obligations of JDCA and PSN as between each other pursuant to
Section 5.4 of the Payment Systems Network Inc. Stockholders' Agreement dated
November 18, 1993 (Stockholders' Agreement) and that the understanding of the
parties with respect to the subject matter of Section 7(e) of this Agreement
shall be interpreted without regard to any inconsistent provision contained in
Section 5.4 of the Stockholders' Agreement.
8. DEFAULT, BANKRUPTCY, ETC. OF EITHER PARTY. For the purposes of
Section 7 hereof, either party to this Agreement defaults if such party:
(a) materially breaches any material provision of this Agreement and,
after notice of such breach, shall have failed to cure such breach within thirty
(30) days after notice of such breach is given to the breaching party; or
(b) has a petition filed against it for an involuntary proceeding
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, and such petition shall not have been dismissed within
sixty (60) days of filing; or a court having jurisdiction shall have appointed a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of such party for any substantial portion of its property, or ordered
the winding up or liquidation of its affairs; or
(c) commences a voluntary proceeding under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
have made any general assignment for the benefit of creditors, or shall have
failed generally to pay its debts as they became due.
9
The defaulting party agrees that, if any of the events specified in subsections
(b) or (c) of this Section 8 shall occur, it shall give written notice thereof
to the other party within seven (7) days following occurrence of such event.
Upon receipt of such notice, or upon becoming aware of a default the other party
may, in its sole discretion, terminate this Agreement immediately upon delivery
of a written notice of such termination to the defaulting party.
9. AMENDMENTS. No provision of this Agreement may be changed, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, discharge or termination is sought.
10. CONFIDENTIALITY. All books, records, information and data pertaining
to the business of PSN and PSN's prior, present or potential shareholders and
customers that are exchanged or received pursuant to the performance of JDCA's
duties under this Agreement shall remain confidential and shall not be disclosed
to any other person, except as specifically authorized by PSN or as may be
required by law.
11. PROPERTY RIGHTS. JDCA and PSN agree that all systems; designs;
programming materials; flowcharts; computer programs; techniques, inventions or
discoveries developed in the context of JDCA's services for PSN pursuant to this
Agreement; and other materials developed or originated by JDCA for PSN pursuant
to this Agreement ("Work Product"), shall be the property of, and are hereby
assigned to, PSN. JDCA and PSN further agree that nothing in this Agreement
shall be deemed to preclude JDCA or PSN from using any ideas, know how or other
information or knowledge ("Ideas") utilized by JDCA in developing the Work
Product, subject to the restrictions of Section 12 of this Agreement. Any Ideas
generated by JDCA other than in the course of performing services for PSN under
this Agreement shall be the exclusive property of JDCA and any Ideas generated
by PSN employees not employed by JDCA shall be the exclusive property of PSN.
12. OTHER BUSINESS AND ACTIVITIES OF JDCA. Except to the extent necessary
to perform JDCA's obligations under this Agreement, nothing herein shall be
deemed to limit or restrict the right of JDCA or any employee of JDCA to engage
in any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association; provided, however, that during the term of this Agreement, JDCA
agrees not to engage in any activities which are functionally competitive with
the electronic check presentment and related services to be provided by PSN.
PSN acknowledges that, except as provided in subsection (d) of Section 4 of this
Agreement, the persons employed by JDCA to assist in the performance of JDCA's
duties under this Agreement are not required to devote their full time to such
10
service and nothing contained in this Agreement shall be construed to the
contrary.
13. NEGATION OF PARTNERSHIP OR JOINT VENTURE. Nothing contained in this
Agreement shall constitute, or be construed to be or to create, a partnership,
joint venture or lease between JDCA and PSN.
14. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to PSN or JDCA shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To PSN:
NationsBank
000 X. Xxxxx XX0-000-00-00
Xxxxxx, Xx 00000-0000
Attention: Dr. Xxxxxx Xxxxx Xxxxx
To JDCA:
X.X. Xxxxxxxx and Associates, Inc.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Managing Director
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and permitted assigns; PROVIDED,
HOWEVER, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the laws of
the State of Texas.
(d) This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(f) This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters described herein.
11
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
X.X. XXXXXXXX AND ASSOCIATES, INC. PAYMENT SYSTEMS NETWORK, INC.
By: /s/ X.X. Xxxxxxxx By: /s/ Dr. Xxxxxx Xxxxx Xxxxx
----------------------------- ------------------------------
Name: X.X. Xxxxxxxx Name: Dr. Xxxxxx Xxxxx Xxxxx
Title: President Title: Chairman
12
Exhibit B
JDCA
Computation of Fully Loaded Cost -- Example
Quarter Ended
-----------------------
-----------------------------------------------------------------------------------------------
Expense amounts to be included in calculation: MO 1 MO 2 MO 3 TOTAL
-----------------------------------------------------------------------------------------------
Computer related (excluding Data Xxxxxx xxxxxxxx) XXXX XXXX XXXX XXXX
Occupancy and telephone XXXX XXXX XXXX XXXX
Depreciation XXXX XXXX XXXX XXXX
Interest XXXX XXXX XXXX XXXX
Office supplies XXXX XXXX XXXX XXXX
Corporate legal and professional XXXX XXXX XXXX XXXX
Other XXXX XXXX XXXX XXXX
Administrative salaries (excluding JA, JG, & JDC) XXXX XXXX XXXX XXXX
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Salaries
Benefits
-----------------------------------------------------------------------------------------------
20.33% 19.74% 22.56% 20.91%
-----------------------------------------------------------------------------------------------
Salaries
Administrative expenses
-----------------------------------------------------------------------------------------------
33.20% 40.83% 37.94% 37.41%
-----------------------------------------------------------------------------------------------
Note:
JA - Xxxx Xxxxxx, CFO
XX - Xxxx Xxxxxxxx, Controller
JDC - Xxxxx Xxxxxxxx, President
PSN Fully Loaded Cost Example
JDCA Employee A Annual Salary $80K
Hourly Rate (Salary DIVIDED BY 2000) $40.00
Benefit Rate ($40 x 20.9% as calculated on the
Attached schedule) 8.36
Administrative ($40 X 37.4% as calculated on the
& Overhead attached schedule) 14.96
------
Total Billing Rate to PSN $63.32
------
Exhibit C
Example Operating Expense Base
1993 1993
-----------------------------------------------------------------------------------
QTR 1 QTR 2 QTR 3 QTR 4 YR 1
TOTAL
-----------------------------------------------------------------------------------
SOURCES OF REVENUE
Data Communications
-------------------
Installation
Monthly Flat Fee
Monthly Traffic
Store & Forward
Physical Handling
-----------------
PM
AM
Software Remarketing
--------------------
Telco Software
Checidink
Downstream Software Usage
Future Products
---------------
Travelers Checks
Corporate Products
EDI
International
-----------------------------------------------------------------------------------
TOTAL REVENUE $0 $0 $132,230 $361,045 $483,273
-----------------------------------------------------------------------------------
COST OF GOODS SOLD
------------------
Installation 0 0 45,000 63,000 106,000
Monthly Flat Fee 0 0 43,275 152,431 195,709
Monthly Traffic 0 0 12,974 46,375 59,349
Store & Forward 0 0 0 0 0
PM 0 0 5,017 13,378 16,395
AM 0 0 799 2,132 2,931
Other Functional Partners 0 0 0 0 0
Telco Software 0 0 0 0 0
Downstream Software Usage 0 0 0 0 0
Other Products 0 0 0 0 0
-----------------------------------------------------------------------------------
TOTAL GOODS $0 $0 $107,088 $277,316 $364,364
-----------------------------------------------------------------------------------
GROSS PROFIT
GROSS MARGIN %
OPERATING EXPENSES
------------------
Sales Travel
Commissions
Contract Negot. & Legal Fees
JDCA Mgt. Services
Salaries:
Admin.
Data Communications:
Admin/Prod. Mgmt.
Help Desk
SE/Install
Physical Handling:
Admin/Prod. Mgmt
Transportation
Customer Service
TOTAL SALARIES
PSN overhead expenses
PSN Staff Bonus
-----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
-----------------------------------------------------------------------------------
______ ACTUAL COST OVERHEAD
INC BEFORE TAX & PROFIT PART
JDCA MGT. FEE OR PROFIT PARTIC.
INCOME BEFORE TAX
INCOME TAXES @33.7%
-----------------------------------------------------------------------------------
NET INCOME
PROFIT MARGIN %
-----------------------------------------------------------------------------------
Exhibit D
Example JDCA Invoice to PSN
X.X. Xxxxxxxx and Associates, inc.
PSN, Inc.
0000 XXX Xxxxxxx, Xxxxx #000
Xxxxxx, Xxxxx 00000
July billing for services rendered under the terms of the management contract
dated __________________.
Management Time:
Xxxxx Xxxxxxxx xxx Hours
Xxxxx Xxxxx xx Hours
Xxxxxxxx Xxxx xx Hours
Xxxxxx Xxxxxx xx Hours
Total xxx Hours $xxx,xxx
Direct Operating Expenses Paid on Behalf of PSN:
Legal Fees xx,xxx
Travel Expenses xx,xxx
Other xx,xxx
------
Sub-Total $xxx,xxx
Management Fee xx,xxx
------
Total July Billing Amount $xxx,xxx
Less amounts previously advanced for anticipated
man-time costs (xxx,xxx)
Plus 50% of the projected August man-time expense xx,xxx
------
Total amount due with this invoice $xxx,xxx
--------
FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT
This FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT ("First
Amendment") is made as of January 31, 1995 by and between X.X. XXXXXXXX AND
ASSOCIATES, INC. ("JDCA") and PAYMENT SYSTEMS NETWORK, INC. ("PSN").
WHEREAS, JDCA and PSN are parties to a Management Services Agreement
(the "Agreement") dated as of November 18, 1993; and
WHEREAS, JDCA and PSN wish to amend the Agreement, effective as of the
date of this First Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. CAPITALIZED TERMS. Capitalized terms used but not defined herein
shall has the meanings given them in the Agreement.
2. SECTION 4. - PERFORMANCE REQUIREMENTS.
(a) The words "for PSN" at the beginning of the seventh line of
paragraph (a) shall be deleted and replaced with the words "for PSN and
Visa U.S.A., Inc. ("Visa")," and the words "report to PSN and its legal
counsel" at the beginning of the eighth line of paragraph (a) shall be
replaced with the words "report to PSN and Visa and their respective legal
counsel."
(b) The word "PSN" in the first line of paragraph (b) shall be
deleted and replaced with the words "PSN's Board of Directors."
(c) A new sentence shall be added to the end of paragraph (b) as
follows:
"In addition, PSN and its accountants shall have the right to audit
and copy the books of account and records relating to JDCA's
activities with respect to the management and operation of PSN."
(d) A new sentence shall be added to the end of paragraph (d) as
follows:
"Notwithstanding the foregoing, the Board of Directors of PSN, upon
the vote of 75% of the Directors voting at a meeting where a quorum is
present, may require the employment by PSN of a Chief Executive
Officer, a Chief Financial Officer or both."
(e) The words "jointly by JDCA and PSN's Management Committee" at the
beginning of the ninth line of paragraph (f)
shall be deleted and replaced by the words "by PSN's Board of Directors."
(f) A new subparagraph (h) shall be added as follows:
"(h) At PSN's request and expense, JDCA will arrange for
insurance or bonding of employees designated by PSN."
3. SECTION 5 - COMPENSATION.
(a) The phrase "which are reasonable in amount and which do not
include expenses reimbursed by PSN to JDCA" shall be inserted in the third
line of paragraph (a) after the words "total direct operating expenses."
(b) The words "pre-tax, pre-Management Fee not profits" in the fifth
line of paragraph (a) shall be replaced with the words "pre-tax,
pre-membership fee (expressly excluding membership fees or portions
thereof reasonably imputable to operating revenue), pre-management fee net
operating profits."
4. SECTION 6 - LIMITATION OF LIABILITIES; INDEMNIFICATION.
(a) The word "Notwithstanding" at the start of paragraph (b) shall be
replaced with the phrase "Except as otherwise provided in this paragraph
(b), and notwithstanding." The following provisions shall then be added to
the end of paragraph (b):
"However, if after the end of such three year period, PSN suffers
damages in any calendar year in excess of $100,000 in connection
with the services provided by JDCA hereunder, then PSN may
request, in writing, that JDCA reimburse PSN for the amount of
such damage. Upon receipt of such request from PSN, JDCA may, in
its sole discretion, reimburse PSN for the requested amount,
dispute the requested amount, or refuse to pay the requested
amount. If JDCA elects to dispute the requested amount, then
such dispute shall be resolved in accordance with the procedures
set forth in Section 9.5(e) of the Agreement and Plan of Merger
among PSN, JDCA, and certain other parties dated January 31,
1995, and if the amount of damages is so determined to be less
than $100,000, then PSN shall cease to pursue such reimbursement.
If the amount of damages is so determined to $100,000 or more,
then PSN may request, in determined to be writing, that JDCA
reimburse PSN for the amount of such damages. Upon receipt of
such request from PSN, JDCA may, in its sole discretion,
reimburse PSN for the requested amount, or refuse to pay the
requested amount. If
-2-
JDCA elects to refuse to pay the requested amount, JDCA shall so
notify PSN in writing, and JDCA shall have no liability
whatsoever to PSN for such amount, but PSN may terminate this
Agreement on not less than thirty (30) days' written notice to
JDCA.
(b) The following provisions shall be inserted between the first and
second sentences of paragraph (d):
"However, if after the end of such three year period, PSN suffers
damages in any calendar year in excess of $100,000 in connection
with the services provided by JDCA hereunder, then PSN may
request, in writing, that JDCA reimburse PSN for the amount of
such damages. Upon receipt of such request from PSN, JDCA may,
in its sole discretion, reimburse PSN for the requested amount,
dispute the requested amount, or refuse to pay the requested
amount. If JDCA elects to dispute the requested amount, then
such dispute shall be resolved in accordance with the procedures
set forth in Section 9.5(e) of the Agreement and Plan of Merger
among PSN, JDCA, and certain other parties dated January 31,
1995, and if the amount of damages is so determined to be less
than $100,000, then PSN shall cease to pursue such reimbursement.
If the amount of damages is so determined to be $100,000 or more,
then PSN may request, in writing, that JDCA reimburse PSN for the
amount of such damages. Upon receipt of such request from PSN,
JDCA may, in its sole discretion, reimburse PSN for the requested
amount, or refuse to pay the requested amount. If JDCA elects to
refuse to pay the requested amount, JDCA shall so notify PSN in
writing, and JDCA shall have no liability whatsoever to PSN for
such amount, but PSN may terminate this Agreement on not less
than thirty (30) days' written notice to JDCA.
5. SECTION 7 - TERMS, RENEWAL, TERMINATION.
(a) The words "from the effective date" shall be deleted from the
third line of paragraph (a) and replaced with the words "from the date of
this First Amendment."
(b) Paragraph (b) shall be deleted in its entirety and replaced with
the following:
This Agreement will be automatically renewed for successive
60-month terms at the end of the term and each subsequent term
unless (i) JDCA notifies PSN no later than one hundred eighty
(180) days prior to the end of the term that JDCA does not desire
to renew this Agreement, in which event this
-3-
Agreement will terminate at the end of its then current term,
(ii) at the time of renewal JDCA is not competitive in either
price or quality with respect to the provision of the services,
in which event (if JDCA, after being given a reasonable
opportunity to demonstrate that it is competitive in price and
quality, fails to do so), PSN may, terminate this Agreement on
one hundred eighty (180) days prior notice to JDCA or (iii) the
PSN Board of Directors determines that it is in the best interest
of PSN to hire employees for PSN to perform such services. For
the purposes of the preceding sentence, differences in price
shall be considered only with respect to services of
substantially similar nature and quality.
(c) Paragraphs (e) and (f) shall be deleted in their entirety.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the day and year first above written.
"JDCA" "PSN"
XX XXXXXXXX AND ASSOCIATES PAYMENT SERVICES NETWORK, INC.
By: /s/ X.X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxx
----------------------- -----------------------
Its: Chairman of the Board Its: Chairman of the Board
-4-
