EXHIBIT 10.4
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement"), dated as of April 1, 2007
(the "Effective Date"), is made by and among AMERICAN TONERSERV CORP., a
Delaware corporation ("ATS"), OPTIMA TECHNOLOGIES, LLC, a Delaware limited
liability company (the "Company"), OPTIMA TECHNOLOGIES, L.L.C., a Nevada
limited liability company ("Manager"), and XXXXXX X. XXXXXX ("Principal")
A. The Company, Manager, and Principal are parties to that certain
Asset Purchase Agreement, dated as of April 1, 2007 (the "Purchase
Agreement"), pursuant to which the Company purchased from Manager
substantially all of the assets and rights required to conduct the business
of print management, printing supplies and repair services (the "Business").
B. Principal owns the entire voting and economic interest in Manager.
C. ATS and the Company desire that Manager and Principal manage the
Business on the terms and conditions described herein, and Manager and
Principal desire to so manage, with such management to commence on the
Effective Date.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Definitions. Capitalized terms used herein but not otherwise
defined herein shall have the meanings ascribed thereto in the Purchase
Agreement.
2. Appointment. ATS and the Company hereby appoint and designate
Manager and Principal to manage and operate the Business as more fully
described in this Agreement and in Exhibit A attached hereto, effective as of
the Effective Date, and Manager and Principal hereby accept such appointment
and designation, subject to the terms and conditions set forth below.
Subject to the limitations and conditions set forth in this Agreement,
Manager and Principal shall have the exclusive authority and responsibility
to manage the operations of the Business on behalf of and for the account of
the Company; to provide such facilities and services for the operation of the
Business as are described in this Agreement, and to take all actions related
thereto.
3. Duties.
(a) General. Subject to the terms and conditions contained in
this Agreement, Manager and Principal shall provide the following services
for the Business, and in such capacity, shall have the attendant rights and
responsibilities as set forth in this Agreement. The services of Manager and
Principal shall consist of: (i) managing the transition of the Business to
the Company; (ii) managing the workload of the Business for the Company;
(iii) administering the MSA software and (iv) facilitate and manage a service
facility and warehouse space for the Company and such other matters as more
fully described in Exhibit A attached hereto. Any services outside of these
duties shall be paid in addition to the Management Fee (as defined in Section
4) set forth herein. Manager and Principal's duties in such capacity shall
be to control, direct and supervise the ordinary course, day-to-day
operations of the Business, subject to the terms and conditions contained in
this Agreement, including, without limitation, the oversight by the officers
and directors of ATS and the limitations contained in Section 3(l) hereof.
(b) Oversight by ATS. Notwithstanding anything to the contrary
herein, Manager's and Principal's operation of the Business shall be subject
to the oversight by the officers and directors of ATS.
(c) Premises and Equipment.
(1) Manager and Principal shall be responsible for securing
and providing the Company with such office and warehouse facilities, as well
as use of such Excluded Assets, in each case, as may be necessary for the
operation of the Business at its current level. The Company shall not be
responsible for any expenses (including, without limitation, any utilities,
additional rent, insurance, taxes and common area maintenance charges)
relating to the office and warehouse facilities described in Exhibit A
attached hereto. Any additional office and warehouse facilities shall be
provided to the Company at an additional charge equal to the actual cost to
Manager or Principal, as the case may be.
(2) The Company shall provide Manager and Principal with the
use of certain Equipment, Inventory and other Purchased Assets as may be
necessary for the operation of the Business. Manager and Principal shall
maintain such Equipment, Inventory and other Purchased Assets in good
condition and repair, reasonable wear and tear excepted, and, shall refurbish
or replace such Equipment, Inventory and other Purchased Assets as they
become worn out or obsolete, in the ordinary course of business consistent
with past practice, at the Company's expense. Neither Manager nor Principal
shall have title in or to any of the Equipment, Inventory and other Purchased
Assets.
(d) Location of Business. Manager and Principal shall not move
the Business from the Premises without the prior written consent of ATS,
which shall not be unreasonably withheld. The Company shall have no right to
change the location of the Business without the written consent of Manager
and Principal, which shall not be unreasonably withheld.
(e) MSA License. Manager and Principal acknowledge and agree
that the master MSA software license (the "MSA Master License") is a key
asset and component of the operations of the Business. Manager and Principal
represent and warrant that the MSA Master License is valid and in good
standing as of the Effective Date. Manager and Principal, individually and
collectively, and for no additional compensation, shall maintain the MSA
Master License in good standing during the Management Term and in a manner
sufficient to properly support the current operations of the Business,
including, without limitation, use by the current level of both Management
Personnel (as defined below) and Company Personnel (as defined below) to the
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extent as may be necessary or appropriate. The Management Fee shall be
increased dollar-for-dollar for any increase in the amount paid to MSA by
Manager for the MSA Master License resulting from any increase in the current
level of either Management Personnel or Company Personnel. To the extent the
Company does not directly pay to MSA any amounts due MSA under the annual
technicians' PDA license (the "MSA PDA License" and together with the MSA
Master License, the "MSA License"), the Management Fee shall also be
increased dollar-for-dollar for such amounts paid to MSA by Manager.
(f) Personnel. With the exception of the Key Employees, who will
be jointly employed by both Manager and the Company, as more fully described
in the Purchase Agreement:
(1) Management Personnel. Manager and Principal shall
furnish the services of all management personnel ("Management Personnel")
required for the management of the Business. All Management Personnel shall
be either employees or independent contractors of Manager, as determined by
Manager and Principal to be appropriate. Subject to Section 3(u) hereof,
Manager and Principal shall make all hiring and termination decisions,
establish and pay all wages, salaries and compensation, including, without
limitation, withholding taxes, determining staffing levels, individual work
hours, personnel policies and employee benefit programs for all of Management
Personnel providing services to the Business. Management Personnel shall
initially be comprised of the employees listed on the Schedule of Management
Personnel attached hereto as Exhibit B, including Principal and the Key
Employees. Commencing on the nineteenth (19th) month of the Management Term,
any changes to the Schedule of Management Personnel shall be not be made
without the prior written consent of the Company, which consent shall not be
unreasonably withheld.
(2) Company Personnel. The Company shall furnish the
services of all non-management personnel ("Company Personnel") required for
the operation of the Business under management of Manager and Management
Personnel. All Company Personnel shall be either employees or independent
contractors of the Company, as determined by the Company to be appropriate.
The Company shall make all hiring and termination decisions, establish and
pay all wages, salaries and compensation, including, without limitation,
withholding taxes, determining staffing levels, individual work hours,
personnel policies and employee benefit programs for all of Company Personnel
providing services to the Business. Company Personnel shall initially be
comprised of the employees listed on the Schedule of Company Personnel
attached hereto as Exhibit C.
(g) Financial Information. Manager shall deliver to ATS such
financial information and related records as may be reasonably requested for
ATS to prepare all necessary or appropriate financial statements, provided
such information and records relate to Manager's duties under this Agreement.
(h) Budget. Manager shall deliver to ATS as soon as practicable,
but in any event at least 30 days prior to the end of each fiscal year, a
draft budget and business plan (which will be mutually agreed upon) for the
next fiscal year (the "Annual Budget"), prepared on a monthly basis,
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including income statements (which will be provided by ATS) and projected
capital expenditures (which will be mutually agreed upon) for such next
fiscal year, in each case accompanied by reasonably detailed descriptions of
the underlying assumptions, as well as mutually agreed upon sales goals for
such next fiscal year, together with reasonably detailed draft plans for the
achievement of such sales goals, and sufficient to meet the Target Amount on
a proportionate basis. Within 30 days of the Closing Date, Manager shall
deliver to ATS a draft budget and business plan meeting the above
requirements and sufficient to meet the Target Amount on a proportionate
basis for the period time between the Closing Date and December 31, 2007 (the
"2007 Budget" and together with the Annual Budget, the "Budget"). Both the
Annual Budget and the 2007 Budget must be approved in advance by both Manager
and ATS and neither the Budget nor the 2007 Budget shall be revised or
amended in any way without the prior written consent of ATS. Both Manager
and ATS shall mutually cooperate in good faith to accomplish the foregoing.
(i) Billing and Collection; Deposits. Until such time as the
Company elects to do so itself, but not in excess of 4 months, Manager shall
provide such billing and collection services as are determined by the Company
to be reasonably necessary to xxxx on a timely basis for products and
services provided by the Business and to collect in a timely manner all
charges resulting from the products and services provided by the Business.
The fee payable to Manager for such services shall be $2,500 per month in
additional to any other Management Fee paid hereunder. Manager shall deposit
in the bank account designated by the Company, as the same may be changed
from time to time, any funds, compensation or other cash or non-cash
remuneration arising out of or relating to the Company or the Business or the
selling of products or services of the kind or nature previously, currently
or at any future time sold or provided by the Business, including, without
limitation, all rights to receive income earned but not paid or otherwise
deferred payable to Manager, Principal or any Affiliate thereof relating to
the operation of the Business, received directly or indirectly, by Manager,
Principal or any Affiliate thereof from a third party or otherwise, whether
during or after the Management Term.
(j) Expenses of the Business. The Company shall be responsible
for the accounting of the Business. All expenses incurred by or on behalf of
the Business or in connection with the operations or activities of the
Business shall be expenses of the Business and shall be reflected on the
books and records of the Business. The Company agrees that no allocation of
overhead from ATS or any other Affiliate shall be added to the expenses of
the Business.
(k) ATS Business Methods and Vendors. ATS may offer Manager and
Principal from time to time recommendations with respect to accounting and
business systems, practices, IT systems, policies or programs as may be
adopted by ATS from time to time ("ATS Business Methods") for the benefit of
the Business, including, without limitation, with respect to revenue
enhancements, cost savings, benefits and/or products. Commencing on the
nineteenth (19th) month of the Management Term, Manager and Principal shall
use their respective commercially reasonable best efforts to incorporate such
ATS Business Methods into the management of the Business. In addition, ATS
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may provide Manager and Principal from time to time with a list of
recommended vendors and suppliers ("ATS Vendors") and Manager and Principal
shall use such ATS Vendors in the Business so long as they are not inferior
in pricing or quality to similar vendors or suppliers of Manager.
(l) Non-Ordinary Course Transactions (First 18 Months).
Commencing on the date of this Agreement and ending at the end of the
eighteenth (18th) month of the Management Term, neither Manager nor any
Principal shall, on his own behalf or on behalf of the Business, nor shall
they permit any employee or representative of the Business to, take any of
the following actions without the prior written consent of ATS, which shall
not be unreasonably withheld:
(1) the taking of any action not specifically contemplated
by the Budget;
(2) the incurrence of any indebtedness other than in the
ordinary course of operating the Business in a manner consistent with past
practice and the business of the Business;
(3) the sale or issuance of any debt or equity securities of
or relating to the Business or any rights, options, warrants or convertible
securities with respect to the consolidation, exchange, recapitalization or
other business combination or restructuring of the Business;
(4) the entering into of any lease transaction;
(5) the acquisition or disposition of assets (including any
capital assets but excluding inventory or other assets in the ordinary course
of the Business) in excess of $5,000 or outside the ordinary course of
business;
(6) the making of any material change in the manner in which
the operations of the Business is conducted;
(7) the execution, amendment or modification of any contract
or agreement having a term, actual or expected, of one year or more, or any
other material contract or agreement; provided, however, nothing in this
subsection shall be construed to prohibit the automatic renewal of any
customer contracts;
(8) the entering into any transaction with any Affiliate of
Manager or Principal, or the execution, amendment or modification of any
contract or agreement with any Affiliate of Manager or Principal relating to
the Business or its business (other than transactions currently existing with
certain Affiliates of Manager and Principal as described on the Schedule of
Affiliated Transactions attached to the Purchase Agreement, a copy of which
is attached hereto as Exhibit D); or
(9) the entering into any agreement, arrangement or
understanding to do any of the foregoing.
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(m) Non-Ordinary Course Transactions (After First 18 Months).
Commencing on the nineteenth (19th) month of the Management Term, neither
Manager nor any Principal shall, on his own behalf or on behalf of the
Business, nor shall they permit any employee or representative of the
Business to, take any of the following actions without the prior written
consent of ATS, which consent shall not be unreasonably withheld:
(1) the taking of any action not specifically contemplated
by the Budget;
(2) the incurrence of any indebtedness other than in the
ordinary course of operating the Business in a manner consistent with past
practice and the business of the Business;
(3) the sale or issuance of any debt or equity securities of
or relating to the Business or any rights, options, warrants or convertible
securities with respect to the consolidation, exchange, recapitalization or
other business combination or restructuring of the Business;
(4) the entering into of any lease transaction;
(5) the acquisition or disposition of assets (including
capital assets but excluding inventory or other assets in the ordinary course
of the Business) in excess of $5,000 or outside the ordinary course of
business;
(6) the making of any material change in the manner in which
the operations of the Business is conducted;
(7) the execution, amendment or modification of any contract
or agreement having a term, actual or expected, of one year or more, or any
other material contract or agreement; provided, however, nothing in this
subsection shall be construed to prohibit the automatic renewal of any
customer contracts;
(8) the entering into any transaction with any Affiliate of
Manager or Principal, or the execution, amendment or modification of any
contract or agreement with any Affiliate of Manager or Principal relating to
the Business or its business (other than transactions currently existing with
certain Affiliates of Manager and Principal as described on the Schedule of
Affiliated Transactions attached to the Purchase Agreement, a copy of which
is attached hereto as Exhibit D); or
(9) the entering into any agreement, arrangement or
understanding to do any of the foregoing.
(n) Standard of Conduct.
(1) In performing his duties hereunder, Principal shall, and
shall cause each employee or representative of Manager to, in all material
respects (i) abide by and comply with all applicable laws, statutes, orders,
rules, regulations, policies or guidelines promulgated, or judgments,
decisions or orders entered by, any court, arbitral tribunal, administrative
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agency, or commission or other governmental or regulatory body, agency or
instrumentality or authority relating to the Business' and the Company's
businesses or properties; (ii) abide by and adhere to the provisions of the
certificate of incorporation and bylaws of ATS; and (iii) conduct himself
with respect to the Business with the prudence, care, dedication and skill as
would be manifested by one in the operation and management of his own assets
and properties and in this regard shall owe a duty of dedication and care to
the Business.
(2) Principal agrees to manage the Business in a reasonable,
judicious and ethical manner using his best efforts to maximize revenue and
lower expenses. Neither Manager nor Principal shall commingle its or his
personal assets with those of the Business.
(3) Principal shall maintain and/or obtain, and, if
necessary, cooperate with ATS in connection with obtaining, all appropriate
state licenses, registrations, permits and similar instruments that are
required for operation of the Business, including, without limitation, the
Permits.
(o) Cooperation. Principal agrees to take all steps necessary to
cooperate and comply on a timely basis with ATS's requests to supply
information, grant in-person interviews, respond to inquiries, retain records
or take other reasonably requested actions, in each case in connection with
(i) internal review initiatives, (ii) regulatory inquiries, (iii) pending or
prospective litigation, (iv) subpoenas or other legal directives and (v)
policy enforcement. Manager and Principal agree that to the extent any
revisions of this Agreement are required by any applicable laws, regulations
or rules, they shall cooperate with ATS in making such revisions.
(p) Access. Manager and Principal shall (i) give ATS and its
accounting, legal, business, environmental, engineering, intellectual
property and other authorized representatives and advisors full access,
during normal business hours, to the Premises and other facilities related to
the Business; (ii) furnish ATS and its authorized representatives and
advisors with all documents and information relating to the Business as may
be reasonably requested by ATS and its authorized representatives and
advisors; (iii) permit ATS and its authorized representatives and advisors to
review all books, records and contracts relating to the Business as may be
reasonably requested by ATS and its authorized representatives and advisors,
and make copies thereof; (iv) make available Management Personnel, and cause
Management Personnel to furnish ATS and its authorized representatives and
advisors with data and other information with respect to the Business as may
be reasonably requested by ATS and its authorized representatives and
advisors, and discuss with ATS and its authorized representatives and
advisors the affairs of the Business; and (v) fully cooperate with ATS and
its authorized representatives and advisors in their investigation and
examination of the affairs of the Business.
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(q) Restriction on Transfers. Principal shall not, without
obtaining the prior written consent of ATS, sell, assign, pledge, encumber,
hypothecate, or in any other manner transfer any or all of his membership
interests in Manager, or any interest therein, whether voluntarily or by
operation of law, except to a revocable trust for the benefit of Principal,
Principal's spouse or domestic partner, or Principal's lineal or adopted
descendants, or to a family limited partnership or similar business entity in
connection with estate planning of Principal.
(r) Devotion of Time. Principal shall devote, and shall cause
the Key Employees to devote, such attention and time during normal business
hours necessary to fulfill their respective duties and responsibilities under
this Agreement or under any employment agreements, respectively. Principal
may set his own hours of work with respect to the performance of duties
hereunder. Subject to the provisions of this Section 3(r) and Section 8 and
Section 9 hereof, Principal may perform such gainful work, in addition to the
performance of his duties hereunder
(s) Contracts with the Company. Any and all agreements or
understandings, whether oral or written, relating to the business,
operations, activities, nature or otherwise within the purview of the
Business, shall only be entered into by and for the benefit of the Company.
Neither Manager nor Principal shall enter into, directly or indirectly, any
agreement or understanding, including with any employee, Affiliate or
customer of the Company or any entity that has a business relationship with
the Company, that is in violation of this provision or is otherwise outside
the ordinary course of business.
(t) Payments by and to the Company. Any and all payments made or
consideration or remuneration provided to any Company Personnel, agent, or
customer of the Company or any entity with any business relationship with the
Company relating to the Business shall be made or provided by the Company.
Neither Manager nor Principal may, directly or indirectly, make any payment
or provide any consideration or remuneration, or agree to do any of the
foregoing, that is in violation of this provision.
(u) Notification of Certain Matters. Manager and Principal shall
promptly notify ATS in writing upon receipt of any knowledge or information
relating to the following:
(1) any suit, claim, action, complaint, arbitration,
proceeding, investigation (formal or informal), or disciplinary hearing,
threatened or initiated by any entity, natural person or regulatory authority
against the Company, Manager, Principal or any employee of the Company
relating to the Business;
(2) any regulatory inquiries relating to the Company,
Manager, Principal or any employee of the Company, including, without
limitation, those involving an audit of the Company or actual or potential
suspension or revocation of a license, registration or permit;
(3) fraud or employee or Principal dishonesty;
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(4) any Affiliate of Manager or Principal becomes engaged in
the business of print management, printing supplies and repair services
following the date hereof;
(5) Manager or Principal intends to hire any Affiliates of
Manager or Principal as employees or independent contractors for the Business
(and Manager and Principal agree that no such hiring shall be effective
without the prior written consent of ATS).
(v) Insurance. In the event that the Premises occupied by the
Company in the conduct of the Business is owned by Manager or Principal or an
Affiliate thereof, Principal shall, or shall cause such entity to, maintain
property insurance in the name of the owner of such Premises in an amount
customary and prudent to adequately insure such Premises, in each case naming
ATS as an additional insured.
4. Management Fee. During the Management Term (as defined below), as
compensation for services rendered by Manager and Principal pursuant to this
Agreement, ATS shall pay to Manager a Management Fee (the "Management Fee")
equal to $522,429 for the period commencing on the Effective Date and ending
on the first anniversary of the Effective Date, payable in 26 equal bi-weekly
installments beginning on April 15, 2007. All installments of the Management
Fee shall be received on the date due and shall be paid via electronic funds
transfer directly to the account specified by Prinicipal. The Management Fee
for subsequent 12-month periods will be subject to a cost of living
adjustment, to be determined within 30 days of the end of each 12-month
period. At the expiration of each 12-month period during the Management
Term, the CPI (as defined below) figure for the last month of such period
shall be determined and the Management Fee payable for the subsequent 12-
month period shall increase by the same percentage as the percentage, if any,
by which the then current CPI figure shall have increased compared to the CPI
figure for the month in which the Effective Date occurred. As used in this
Agreement, "CPI" shall mean the "Consumer Price Index-U.S. City Average"
compiled by the U. S. Department of Labor, Bureau of Labor Statistics. In
addition, the Management Fee will be adjusted upward to reflect any increase
in Management Personnel, or downward to reflect any open position or decrease
in Management Personnel, in either case, in a mutually agreeable amount and
subject to the prior written consent of ATS, which shall not be unreasonably
withheld.
5. No Eligibility for Employee Benefits. Neither Manager, Principal,
nor any Manager Personnel shall be entitled to participate in or receive any
employee benefits offered by the Company or ATS; provided, however, that
certain Key Employees will be eligible to participate in the 2005 Stock
Incentive Plan of ATS; provided, further, that Xxxxx Xxxxxx shall be entitled
to participate in or receive the same employee benefits offered by the
Company or ATS.
6. Management Term.
(a) Initial Management Term. The "Initial Management Term" shall
commence on the Effective Date and terminate with the first to occur of (i)
the end of the 30th full month following the Effective Date or (ii) the
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earlier termination of the Management Term by ATS or by Manager pursuant to
the provisions of this Agreement.
(b) Option to Extend. ATS shall have the option to extend the
Management Term on all the provisions contained in this Agreement for one 18-
month period following expiration of the Initial Management Term (the
"Extension Term" and together with the Initial Management Term, the
"Management Term"). ATS shall have no other right to extend the Management
Term beyond the Extended Term.
7. Termination of Management Term.
(a) Termination by ATS on Default. ATS shall be entitled to
terminate this Agreement by delivering written notice of termination to
Manager or Principal (i) if Gross Profit for any given year is equal or less
than fifty percent (50%) of the Target Amount on a proportionate basis; or
(ii) if Manager or Principal fail to perform in any respect any obligation
required of it or him hereunder, and such default continues for 30 days after
the giving of written notice by ATS, specifying the nature and extent of such
default; provided, however, that if such default is not cured within 30 days,
but is capable of being cured within a reasonable period of time in excess of
30 days, then ATS shall not be entitled to terminate this Agreement if
Manager or Principal, as the case may be, commences the cure of such default
within such 30-day period and thereafter diligently and in good faith
continues to cure such default until completion; or (iii) if Manager or
Principal are in material default of their representations and warranties
contained in the Purchase Agreement for which ATS and the Company would
otherwise be entitled to indemnification for Damages pursuant to Section
13(b) of the Purchase Agreement but for the expiration of the survival period
contained in Section 13(a) of the Purchase Agreement, and such default
continues for 30 days after the giving of written notice by ATS, specifying
the nature and extent of such default; provided, however, that if such
default is not cured within 30 days, but is capable of being cured within a
reasonable period of time in excess of 30 days, then ATS shall not be
entitled to terminate this Agreement if Manager or Principal, as the case may
be, commences the cure of such default within such 30-day period and
thereafter diligently and in good faith continues to cure such default until
completion.
(b) Termination by ATS Other than for Default. ATS shall be
entitled to terminate this Agreement by delivering written notice of
termination to Manager or Principal if Manager or Principal (i) applies for
or consents to the appointment of a receiver, trustee or liquidator of all or
a substantial part of its assets, files a voluntary petition in bankruptcy or
consents to an involuntary petition, makes a general assignment for the
benefit of its creditors, files a petition or answer seeking reorganization
or arrangement with its creditors, or admits in writing its inability to pay
its debts when due; (ii) suffers any order, judgment or decree to be entered
by any court of competent jurisdiction, adjudicating such party bankrupt or
approving a petition seeking its reorganization or the appointment of a
receiver, trustee or liquidator of such party or of all or a substantial part
of its assets, and such order, judgment or decree continues unstayed and in
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effect for 90 days after its entry; or (iii) if Principal dies or becomes
disabled. As used in this Agreement, "Disabled" shall mean the inability of
an individual to perform with reasonable continuity a majority of his
material duties hereunder by reason of any medically determinable physical or
mental impairment, which inability to perform has lasted for a continuous
period of not less than six months.
(c) Termination by Manager or Principal on Default. Manager or
Principal shall be entitled to terminate this Agreement if (i) ATS fails to
pay the Management Fee when due in accordance with this Agreement, and such
default continues for 30 days after the giving of written notice by the
Manager or Principal; or (ii) ATS is in default of any material provision of
this Agreement, the Secured Note or the Contingent Note.
(d) Effect of Termination. Upon expiration of the Management
Term or other termination of this Agreement:
(1) Manager and Principal shall return to ATS the Equipment,
Inventory and other Purchased Assets used in the Business, in the same
condition as received, reasonable wear and tear excepted, and all other
assets or property of the Business or the Company, including, without
limitation, all cash and accounts receivable.
(2) Manager and Principal shall no longer be obligated to
provide any management, consulting or similar services to ATS, except to the
extent reasonably necessary to effectuate an orderly transition of the
Business, which Manager and Principal agree to provide for a reasonable
period following termination, but in any event, not to exceed 60 days, at no
charge to ATS or the Company; provided, however, if ATS or the Company
request, Manager and Principal shall continue to provide such services for an
additional period of 90 days at the per diem rate equal to the Management Fee
in effect on the date of termination divided by 365.
(3) This Agreement shall no longer be of any force and
effect, except that this Agreement shall remain in full force and effect with
respect to (i) the covenants and obligations of Manager and Principal
contained in Section 8 and Section 9 hereof, subject to the terms and
conditions contained in such Sections, and (ii) events, actions, omissions or
occurrences which occurred prior to the termination of this Agreement.
8. Non-Competition and Non-Solicitation Covenants.
(a) Non-Competition. Provided that the Company and ATS are not
in material default of the terms of this Agreement, the Secured Note, the
Convertible Note or the Contingent Note, Manager and Principal agree that,
during the Management Term and for a period of five years after the
termination of the Management Term, neither Manager nor Principal shall,
directly or indirectly, engage or invest in, own, manage, operate, finance,
control or participate in the ownership, management, operation, financing or
control of, be employed by, engaged as a consultant by, associated with or in
any manner connected with, or render services or advice or other aid to, or
guarantee any obligation of, any person engaged in or planning to become
engaged in the Business or any other business whose products or activities
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compete in whole or in part with the Business in which the Purchased Assets
were used prior to the Closing or may be used thereafter (each, a
"Competitive Business"), anywhere within the United States of America;
provided, however, that Manager and Principal may (i) purchase or otherwise
acquire up to (but not more than) three percent (3%) of any class of
securities of any person (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national
or regional securities exchange or have been registered under the Securities
Exchange Act of 1934, or (ii) maintain the transactions currently existing
with certain Affiliates of Manager and Principal as described on the Schedule
of Affiliated Transactions attached to the Purchase Agreement, a copy of
which is attached hereto as Exhibit D. Manager and Principal agree that this
covenant is reasonable with respect to its duration, geographic area and
scope.
(b) Non-Solicitation of ATS Employees. Provided that the Company
and ATS are not in material default of the terms of this Agreement, the
Secured Note, the Convertible Note or the Contingent Note, Manager and
Principal agree that, throughout the Management Term and for a period of five
years after the termination of the Management Term, neither Manager nor
Principal shall, directly or indirectly, on his own behalf or on behalf of
any other person or entity, solicit, or attempt to solicit, or hire, any
employee, agent or contractor of ATS, the Business, the Company, or any other
subsidiary of ATS (collectively, the "ATS Affiliated Group"), known by
Manager or Principal to be such, to leave the employ of or cease doing
business with the ATS Affiliated Group for any reason whatsoever. Manager
and Principal agree that this covenant is reasonable with respect to its
duration and scope. Manager and Principal agree that this covenant is
reasonable with respect to its duration, geographic area and scope. Nothing
contained in this Section shall be construed to prohibit Manager from hiring
the Key Employees as contemplated by the Purchase Agreement.
(c) Non-Solicitation of Customers. Provided that the Company and
ATS are not in material default of the terms of this Agreement, the Secured
Note, the Convertible Note or the Contingent Note, Manager and Principal
agree that for a period of five years after the termination of the Management
Term, neither Manager nor Principal shall, directly or indirectly, on its or
his own behalf or on behalf of any other person or entity (i) engage in any
business transaction or relationship in the Business or a Competitive
Business with a customer or prospective customer of the ATS Affiliated Group
or perform any services for a customer or prospective customer of the ATS
Affiliated Group; (ii) solicit or accept the business of any person or entity
that is a customer or prospective customer of the ATS Affiliated Group; (iii)
interfere with or induce any customer or prospective customer to discontinue
any business relationship with the ATS Affiliated Group or to refrain from
entering into a business relationship or transaction with the ATS Affiliated
Group; or (iv) fail to advise any customer or prospective customer of the ATS
Affiliated Group, who contacts Manager or Principal, that they cannot provide
products or services relating to the Business or a Competitive Business to
such customer or prospective customer. Manager and Principal agree that in
the event during such five-year period any of them is employed or otherwise
engaged by a Competitive Business, each of them will use their respective
best efforts to prevent any person who, directly or indirectly, reports to
12
any of them, to engage in any of the activities in which Manager and
Principal are prohibited from engaging pursuant to the immediately preceding
sentence. Manager and Principal agree that this covenant is reasonable with
respect to its duration and scope. Nothing contained in this Section shall
be construed to prohibit Manager and Principal from maintaining the
transactions currently existing with certain Affiliates of Manager and
Principal as described on the Schedule of Affiliated Transactions attached to
the Purchase Agreement, a copy of which is attached hereto as Exhibit D.
(d) Extension of Term. In the event of a breach by Manager or
Principal of any covenant set forth in this Section 8, without limiting the
availability of any other remedy, the term of such covenant will be extended
by the period of the duration of such breach.
(e) Extraordinary Remedies. Manager and Principal acknowledge
and agree that: (i) the purposes of the covenants in this Section 8 are to
protect the goodwill and Confidential Information (as defined below) of, and
to prevent Manager and Principal from interfering with, the business of the
Company and/or ATS during or following termination of the Management Term;
(ii) that the foregoing covenants are being given in part in consideration
for the consideration being received by Manager as a result of the
transactions contemplated by this Agreement; (iii) because of the nature of
the business in which the ATS Affiliated Group are engaged and because of the
nature of the Confidential Information to which Manager and Principal have
access, it would be impractical and excessively difficult to determine the
actual damages of the ATS Affiliated Group in the event Manager or Principal
breach any of the covenants of this Section 8; and (iv) remedies at law (such
as monetary damages) for any breach of the such covenants would be
inadequate. In the event of a breach of any covenant in this Section 8, it
is understood and agreed that ATS shall be entitled to injunctive relief as
well as other applicable remedies at law or in equity available to ATS
against Manager, Principal or others.
9. Non-Disclosure of Confidential Information.
(a) Confidential Information. As used in this Agreement,
"Confidential Information" shall mean any and all information about ATS or
any members of the ATS Affiliated Group (including, without limitation, the
Business) or relating to the trade secrets of ATS or any members of the ATS
Affiliated Group (including, without limitation, the Business), in each case
disclosed to Manager or Principal or known by Manager or Principal as a
consequence of or through their relationship with the Business, if such
information is not publicly available (other than through a breach by Manager
or Principal of this Section 9) including, without limitation, all
information regarding the following: products, services, customer and lead
lists (including, without limitation, names, addresses and telephone
numbers), purchasing criteria and habits of clients and prospective clients,
business plans, methods and procedures, accounting data, contract forms,
commission structures, business and financial models, files and accounting
and financial data of ATS or any member of the ATS Affiliated Group.
(b) Non-Disclosure. Except to the extent (i) authorized by the
express prior consent of the Board of Directors of ATS, (ii) required by law
or any legal process, or (iii) reasonably believed by Manager to be desirable
13
and appropriate in performing its duties under this Agreement, neither
Manager nor Principal will, directly or indirectly, at any time during the
Management Term, or at any time subsequent to the termination of the
Management Term, use or exploit, disseminate, disclose, or divulge to any
person, firm, corporation, association or other business entity, any
Confidential Information. In the event of a breach or threatened breach by
Manager or Principal of this Section 9, ATS shall be entitled to injunctive
relief as well as other applicable remedies at law or in equity available to
ATS against Manager, Principal or others. Without limiting the generality of
the foregoing, Manager and Principal acknowledge and agree that all of the
Confidential Information is a trade secret under the Uniform Trade Secrets
Act of the State of California and derives independent economic value, actual
or potential, from not being generally known to the public or other persons
or entities which can obtain economic value from its disclosure or use and is
the subject of efforts that are reasonable under the circumstances to
maintain its secrecy, the applicable provisions of this Agreement being an
example of such efforts.
(c) Property of the Business. All computer software, business
cards, telephone lists, customer lists, prospective customer lists, price
lists, contract forms, catalogs, the Business books, records, files and know-
how acquired while Manager or Principal is affiliated with the Business are
acknowledged to be the property of the Business and shall not be duplicated,
removed (except temporarily in the ordinary course of business) from the
Business' possession or premises or made use of other than in pursuit of the
Business' business or as may otherwise be required by law or any legal
process, or as is necessary in connection with any adversarial proceeding
against the Business and, upon termination of the Management Term for any
reason, Manager and Principal shall deliver to the Business, without further
demands, all copies thereof which are then in its or his possession or under
its or his control.
10. Intellectual Property. Manager and Principal agree to and hereby
do assign to the Company all of their respective rights, title and interest
in or to any and all intellectual property, trade secrets, proprietary
products, services and techniques, ideas, concepts, know-how, techniques,
processes, methods, inventions, discoveries, development, innovations and
improvements whether patentable or not, that: (i) are reasonably related to
the business of the ATS Affiliated Group; (ii) involve research or
development of the ATS Affiliated Group (whether actual or demonstrably
anticipated); or (iii) incorporate any of the Confidential Information
(collectively, "Intellectual Property") conceived or made in whole or in part
by any of them during the Management Term, whether alone or with others, and
whether or not conceived or made during regular work hours or utilizing the
resources of the Business or at the suggestion of any person on behalf of the
ATS Affiliated Group. Manager and Principal jointly and severally agree to
provide all assistance reasonably requested by the Company in the
preservation, establishment and/or enforcement of the Company's interests in
the Intellectual Property.
11. Non-Disparagement. During the Management Term and for a period of
five (5) years after termination thereof, neither Manager, Principal, nor any
person or entity controlled by, employed by, acting on behalf of or acting
14
with the approval of Manager or Principal shall disparage or defame or make
any negative statements regarding the ATS Affiliated Group, current or former
officers, directors, shareholders, partners, members or agents, in
communications with any other person or entity.
12. Management Personnel Agreements. Manager and Principal shall use
reasonable best efforts to cause each Management Personnel to execute and
deliver an agreement agreeing to be bound by the covenants, terms and
conditions contained in Sections 8 through 11 hereof. Copies of such
agreements shall be delivered to ATS.
13. Indemnification. Provided that the Company and ATS are not in
material default of the terms of this Agreement, the Secured Note, the
Convertible Note or the Contingent Note, Manager and Principal jointly and
severally agree to indemnify, defend, and hold harmless ATS and the other
members of the ATS Affiliated Group, and each of their respective
stockholders, members, directors, managers, officers, employees (each, an
"Indemnified Person"), from and against any and all losses, liabilities,
claims, damages, costs and expenses (including reasonable attorneys' fees),
fines and penalties suffered by the Indemnified Person, directly or
indirectly, arising from or relating to (i) any breach by Manager or
Principal of this Agreement, including, without limitation, the obligation to
pay all wages, salaries and compensation, including, without limitation,
withholding taxes, of all Management Personnel; (ii) liabilities,
obligations, and responsibilities, whether pursuant to contract or law, as
the employer of all Management Personnel; (iii) liabilities, obligations, and
responsibilities, whether pursuant to contract or law, as the owner,
landlord, or tenant of the Premises, including, without limitation, any
Environmental Claims; or (iv) the willful misconduct or gross negligence in
the management and/or operation of the Business during the Management Term.
14. Independent Contractor. The relationship of Manager and Principal,
on the one hand, and ATS and the Company, on the other hand, which is created
hereunder is that of an independent contractor. This Agreement is not
intended to be construed as creating between Manager and Principal, on the
one hand, and ATS and the Company, on the other hand, the relationship of
employee and employer, affiliate, principal and agent, joint venture,
partnership or any other similar relationship, the existence of which is
hereby expressly denied. The parties agree to treat the payment of the
Management Fee for all purposes as compensation for the services rendered.
15. General Provisions.
(a) Notice. Any notice required or permitted under this
Agreement shall be given in writing and delivered as described herein. A
notice shall be deemed effectively given as follows: (i) upon personal
delivery; (ii) one (1) business day after transmission by electronic means,
provided such transmission is electronically confirmed as having been
successfully transmitted and a copy of such notice is deposited within 24
hours for either overnight delivery or for registered or certified mail, in
accordance with clause (iii) or (iv) below, respectively; (iii) one (1)
business day after deposit with a reputable overnight courier service,
prepaid for overnight delivery; or (iv) three (3) business days after deposit
15
with the United States Postal Service, postage prepaid, registered or
certified with return receipt requested. Addresses for notice shall be as
follows, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties:
If to Manager or Principal:
Optima Technologies, L.L.C.
0000 Xxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
With a copy, which shall not constitute notice, to:
Johnson, Pope, Xxxxx, Xxxxxx and Xxxxx, LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
If to the Company or ATS:
American TonerServ Corp.
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, President and CEO
With a copy, which shall not constitute notice, to:
Xxxxxxxxx XxXxxxxxxx & Xxxxxx LLP
00 Xxxxx X Xxxxxx, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. XxXxxxxxxx or Xxxxxxx X. (DJ) Xxxxxxx
(b) Time of Essence. Time is of the essence with respect to the
terms, covenants, and conditions contained herein.
(c) Entire Agreement. This Agreement, including any other
agreements, exhibits, and schedules to be entered into in connection with the
transactions contemplated hereby and specifically referenced in this
Agreement, constitutes and embodies the entire understanding and agreement of
the parties hereto relating to the subject matter hereof and supersedes all
prior agreements or understandings of the parties hereto, whether written or
oral.
(d) Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party. Every exhibit, schedule, attachment, or
other appendix attached to this Agreement and referred to herein shall
constitute a part of this Agreement and is hereby incorporated herein by
reference. Any reference to any federal, state, local, or foreign statue or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Unless the context
clearly requires otherwise, (i) plural and singular numbers will each be
16
construed to include the other; (ii) the masculine, feminine, and neuter
genders will each be construed to include the others; (iii) "shall," "will,"
"must," "agree," and "covenants" are each mandatory; (iv) "may" is
permissive; (v) "or" is not exclusive; (vi) "includes" and "including" are
not limiting; and (vii) "actual knowledge" is limited to actual knowledge and
does not include constructive knowledge or any information that might have
been gained upon further investigation.
(e) Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), but only with the written consent of the party or parties to
be bound thereby. No delay in the exercise of any right or remedy under this
Agreement shall constitute a waiver thereof and the waiver by any party of
any right or remedy under this Agreement on any one occasion shall not be
deemed a waiver of such right or remedy on any subsequent occasion.
(f) Successors and Assigns; Assignment. The obligations of
Manager and Principal hereunder require performance by Manager and Principal
and this Agreement shall be binding upon Manager and Principal and their
heirs, executors, administrators, legal representatives, successors and
assigns and ATS and its successors and assigns. There shall be no transfer
or assignment of any obligation of Manager or Principal under this Agreement.
There shall be no transfer of any voting or economic interest in Manager or
in this Agreement, either directly or indirectly, other than a transfer to a
trust for estate planning purposes; provided, however, that no transfer shall
be made except in compliance with any applicable federal securities laws and
state securities or "blue sky" laws. ATS may assign its rights and
obligations under this Agreement to any entity within the ATS Affiliated
Group or other successor (whether direct or indirect, by purchase, exchange,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of ATS.
(g) No Third Party Beneficiaries. Except as expressly provided
herein, nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto, or their respective successors
and assigns, any rights, remedies, obligations, or liabilities under or by
reason of this Agreement.
(h) Headings. The titles and subtitles used in this Agreement
are used for convenience only and shall not be considered in construing or
interpreting this Agreement.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without regard to the
conflict of laws rules of such state.
(j) Venue. The parties to this Agreement agree that jurisdiction
and venue shall exclusively lie in the Sixth Judicial Circuit of the State of
Florida, in and for Pinellas County, Florida, or in the United States
District Court for the Middle District of Florida (Tampa Division), with
respect to any legal proceedings arising from this Agreement.
17
(k) Cumulative Remedies. The rights and remedies of a party
available under this Agreement or otherwise available are cumulative and may
be exercised singularly or concurrently, and the exercise of any one or more
remedy shall not constitute a waiver of any other available remedy. No act,
delay, omission, or course of dealing between the parties hereto shall be
constitute a waiver of a party's rights or remedies available under this
Agreement.
(l) Specific Performance. Each party's obligation under this
Agreement is unique. If any party should default in such party's obligations
under this Agreement, each party acknowledges that it would be extremely
impracticable to measure the resulting damages; accordingly, the
nondefaulting party or parties, in addition to damages and any other
available rights or remedies, may xxx in equity for specific performance, and
the parties hereby expressly waive the defense that a remedy in damages shall
be adequate. The parties also hereby expressly waive any requirement that
the nondefaulting party or parties post a bond or similar security prior to
obtaining and enforcing any specific performance.
(m) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be or
become prohibited or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
(n) Attorneys' Fees. If any legal action or other proceeding,
including arbitration or action for declaratory relief, is brought for the
enforcement of this Agreement or because of an alleged dispute, breach,
default, or misrepresentation in connection with this Agreement, the
Prevailing Party (as defined below) shall be entitled to recover reasonable
attorneys' fees and other costs, in addition to any other relief to which the
party may be entitled.
As used in this Agreement, "Prevailing Party" shall include without
limitation: (i) the party who dismisses an action in exchange for sums
allegedly due; (ii) the party who receives performance from the other party
of an alleged breach of covenant of a desired remedy where that is
substantially equal to the relief sought in an action; or (iii) the party
determined to be the prevailing party by a court of law or arbitrator.
(o) Counterparts and Signature Pages. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be
one and the same instrument. The exchange of copies of this Agreement and of
signature pages by facsimile or other electronic transmission shall
constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile or other electronic means
shall be deemed to be their original signatures for all purposes.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have duly executed this Management
Agreement as of the date first above written.
ATS:
AMERICAN TONERSERV CORP.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President & CEO
COMPANY:
OPTIMA TECHNOLOGIES, LLC,
a Delaware limited liability company
By: AMERICAN TONERSERV CORP.,
a Delaware corporation
Its: Managing Member
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx, President & CEO
MANAGER:
OPTIMA TECHNOLOGIES, L.L.C.,
a Nevada limited liability company
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Manager
PRINCIPAL:
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
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