TRANSITION MANAGEMENT & SERVICES AGREEMENT
This TRANSITION MANAGEMENT & SERVICES AGREEMENT (the "Agreement"),
dated as of August 1, 1999 (the "Transition Date"), is entered into between
eGlobe, Inc., a corporation organized under the laws of Delaware, including its
subsidiaries and affiliates ("eGlobe"), and Highpoint Telecommunications, Inc.,
a corporation organized under the laws of the Yukon, including it subsidiaries
and affiliates ("Highpoint").
RECITALS
A. Pursuant to a Letter of Intent entered into on July 23, 1999 between
eGlobe and Highpoint, the Parties have agreed, subject to completion of a Stock
Purchase Agreement by and among eGlobe, Inc., iGlobe, Inc., and Highpoint
Telecommunications, Inc. (the "Purchase Agreement") which will provide for the
orderly legal transfer of the assets, operations and business of iGlobe, to the
following: Highpoint has agreed to cause the sale of certain portions of its
business which have been incorporated into iGlobe, Inc, a Delaware Corporation
("iGlobe"), and eGlobe has agreed to purchase all of the outstanding stock of
iGlobe.
B. Pursuant to an agreement reached on July 26, 1999, eGlobe has agreed
to take responsibility for the ongoing financial condition (profit, loss, cash
flow) and operations of iGlobe and its business and, in particular, to accept
the liability (or benefit) of the operating losses (or profits) beginning on
August 1, 1999.
C. eGlobe wishes Highpoint to provide and Highpoint wishes to provide
for the benefit of eGlobe during the period beginning on the Transition Date and
ending at termination of this agreement (the "Transition Period") certain
services to support the operation of the iGlobe business in the ordinary course
of business and to assist eGlobe in accomplishing the orderly transfer of
functions, subject to and in accordance with the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of the premises and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
1
ARTICLE I
TRANSFER OF MANAGEMENT AND OPERATING RESPONSIBILITY AND
TRANSITION ADMINISTRATIVE SERVICES
Section 1.1. Transfer of Management and Operating Responsibility. (a)
As of August 1, 1999, eGlobe shall bear responsibility for and accept the
liability and benefit of the business of iGlobe. The assumption of liabilities
and assets shall be governed by the terms of Section 2 of the Letter of Intent
by and between Highpoint Telecommunications, Inc. and eGlobe, Inc. entered into
on July 23, 1999 ("LOI") and the schedules attached to this Agreement pursuant
to paragraph (b) of this Section 1.1 (which assumption of liabilities and assets
shall be subject to adjustment as determined by the terms of the Purchase
Agreement). For the purposes of clarity and the avoidance of doubt, eGlobe is
accepting responsibility for the anticipated operating cash flow deficit of
iGlobe during the period between August 1, 1999 and the termination of this
agreement, which deficit will be borne and managed by Highpoint pursuant to the
terms of this Agreement and for which Highpoint will be compensated at the
termination of this Agreement by eGlobe.
(b) The business of iGlobe is in the process of being transferred to it
from other divisions and subsidiaries of Highpoint. For purposes of this
Agreement, the business of iGlobe includes all of the business contemplated to
be transferred to it by the LOI and includes the business conducted pursuant to
the contracts, with the use of the assets, and through the efforts of the
employees identified in Schedules X-0, X-0 and B-3 of this Agreement, subject to
adjustment as determined by the terms of the Purchase Agreement.
(c) eGlobe and Highpoint agree that Highpoint shall render its services
and affect the business of iGlobe only in the normal and ordinary course and
will not delay any expenditures incurred by or on behalf of eGlobe in the
ordinary and normal course.
Section 1.2 Basic Services. (a) During the term of this Agreement, at
the request of eGlobe, Highpoint shall, through Highpoint's employees and
through Highpoint's agents, contractors or independent third parties that are
providing services to iGlobe as of the date hereof, in each case at the option
of Highpoint and reasonably acceptable to eGlobe, provide or cause to be
provided to eGlobe, those services (the "Services") set forth on Exhibit A
hereto in a manner consistent with the manner in which such services were
previously provided to iGlobe by Highpoint, in each case, until such Service
shall have been discontinued in accordance with Article V, provided, that
Highpoint shall not be required to provide the Services if the provision of such
Services would result in a disruption to the normal operations of Highpoint as
they have been
conducted until the date hereof. At all times during the performance of the
Services, all persons performing Services hereunder (including any agents,
temporary employees, independent third parties and consultants) shall be
construed as being independent from eGlobe and not as employees of eGlobe on
account of such Services. Except as provided herein, eGlobe shall not have any
responsibility with respect to any employee, agent, contractor or independent
third party providing the Services. Highpoint shall not be required to perform
Services hereunder that conflict with or violate any applicable legal
requirement.
(b) eGlobe and Highpoint agree that Xxxxx Xxxxxx, who is an executive
and a Director of Highpoint and a Director of eGlobe, will be the key executive
manager and principal transition executive for the day-to-day management of
iGlobe under the terms of this Agreement through the period during which
transition services are being provided.
(c) eGlobe and Highpoint shall each nominate a representative to act as
the primary contact person with respect to the accomplishment of the
transactions contemplated by this Agreement (the "Service Coordinators"). The
initial Service Coordinators shall be Xxxxx Xxxxxx for eGlobe and Xxxxx Xxxxx
for Highpoint. Unless the parties otherwise agree, all communications relating
to this Agreement and the schedule of Services on Exhibit A hereto shall be
directed to the Service Coordinators.
Section 1.3. Standard of Performance. Highpoint shall perform the
Services for eGlobe with the same degree of care, skill and prudence customarily
exercised by it for its own operations and in its provision of services to
itself and its own subsidiaries, and in compliance with applicable law, and in
the case of legal services, in accordance with the applicable codes of
professional conduct. Each party shall perform its services under this Agreement
without undue delay and Highpoint shall keep its equipment and facilities that
are necessary or useful to the performance of its obligations hereunder in good
working condition and repair.
Section 1.4. Records. Highpoint shall maintain true and correct records
of all receipts, invoices, reports and other documents relating to the Services
rendered hereunder in accordance with its standard accounting practices and
procedures, consistently applied, which practices and procedures shall be
comparable to those practices and procedures employed by Highpoint in its
provision of services to itself and its own subsidiaries. Without limiting the
generality of the foregoing, Highpoint's accounting records shall be maintained
in sufficient detail to enable an auditor to verify the accuracy, completeness
and appropriateness of the charges for the Services hereunder. eGlobe shall have
the right to inspect and (at its expense) copy such records during Highpoint's
regular office hours. eGlobe shall give Highpoint reasonable prior notice of
any such inspection and/or copying request. Highpoint shall retain such
accounting records and make them available to eGlobe's auditors for a period of
not less than five (5) years from the close of this fiscal year of eGlobe,
provided, however, that Highpoint may, at its option, transfer such accounting
records to eGlobe.
Section 1.5. Development of Capabilities. eGlobe shall use its
reasonable best efforts to develop the capability to provide the Services for
itself and to discontinue under Article V its use of such Services reasonably
soon thereafter.
ARTICLE II
SERVICE CHARGE
eGlobe shall compensate Highpoint for the Services performed by
Highpoint pursuant to the terms of this Agreement by paying to Highpoint an
amount equal to the Transition Operating Deficit of iGlobe during the Transition
Period. The Transition Operating Deficit shall equal the Adjusted Operating Cash
Flow Deficit which shall mean the amount equal to any deficit in Net Cash Flow
from Operations during the specified period (as determined pursuant to GAAP),
reduced by any deferral of payments or other unpaid liabilities incurred during
the period or any advances of funds by eGlobe to iGlobe during that period.
ARTICLE III
PAYMENT
Section 3.1. Payment. The Service Charge shall be paid to Highpoint
pursuant to the terms and conditions of the Promissory Note described in Article
3.2 below (the "Note"), including any interest accrued and payable under the
Note. The Principal Amount of the Note shall be based upon an Invoice for a sum
equal to the Transition Operating Deficit to be supplied by Highpoint at
Closing, which Invoice shall set forth in reasonable detail for the Transition
Period: (a) the calculation of the Transition Operating Deficit, and (b) such
additional information as may be necessary to verify such calculations or as
eGlobe may reasonably request.
Section 3.2 Promissory Note. eGlobe shall execute in favor of Highpoint
and deliver to Highpoint at termination of this Agreement a Promissory Note in
form and substance reasonably acceptable to Highpoint in the principal amount
equal to the amount of the Invoice, provided, however, that the amount of the
Invoice shall be subject to review and verification by eGlobe during the seven
business days following Closing and that the principal amount of the note shall
be subject to adjustment by agreement of the Parties to reflect any
recalculation of the Transition Operating Deficit based upon such review and
verification; if by the close of business on the 10th business day following
termination of this Agreement, eGlobe and Highpoint cannot agree on a proposed
recalculation of the Invoice amount, then eGlobe shall pay the undisputed
portion of the principal amount of the Note and the recalculation shall be
submitted to binding arbitration according to the rules of the American
Arbitration Association, such arbitration to take place in Chicago, Illinois.
The Note shall mature and the principal amount of the Note shall become due and
payable on the date that is ten (10) business days after the Closing (the
"Maturity Date"). Interest shall accrue on any unpaid principal on the note at
the annual rate of fifteen per cent (15%) simple interest commencing on the
Maturity Date.
Section 3.2. Currency. All payments hereunder shall be in U.S. Dollars.
ARTICLE IV
TERM
This Agreement shall commence as of the Transition Date and shall
continue to be in full force and effect until the earlier to occur of the
Closing under the Purchase
Agreement (at which time this Agreement shall terminate) or the date that is
thirty days after notice to terminate by either party, provided, that if all the
Services to be provided hereunder have been discontinued by eGlobe pursuant to
Article V hereof prior to such date, then this Agreement shall terminate as of
the date all Services were discontinued.
ARTICLE V
DISCONTINUATION OF SERVICES
Section 5.1. Discontinuation of Services. eGlobe may, without cause,
discontinue any or all of the Services being provided to it by Highpoint
pursuant to this Agreement by giving Highpoint five (5) days' prior written
notice of the discontinuation thereof.
Section 5.2. Procedures upon Discontinuation or Termination of
Services. Upon the discontinuation or termination of a Service hereunder,
Exhibit A shall be deemed amended to delete such Service as of such date, and
this Agreement shall be of no further force and effect for such Service, except
as to obligations accrued prior to the date of discontinuation or termination of
such Service. Highpoint shall furnish to eGlobe all such information and take
all such other actions as eGlobe shall reasonably request to effectuate an
orderly and systematic transfer of Highpoint's duties and activities under this
Agreement, provided that the reasonable direct costs of the same shall be
properly reimbursed to Highpoint by eGlobe.
ARTICLE VI
LIABILITY
Highpoint shall have no liability to eGlobe in connection with the
provision of the Services, except to the extent that such liability is a result
of Highpoint's gross negligence or willful misconduct. Except as to matters for
which Highpoint would be liable under this Article, eGlobe shall indemnify
Highpoint and its officers, directors and employees (collectively, the
"Highpoint Indemnitees") and shall defend and hold harmless each of them from
any claims, actions, or suits brought against any Highpoint Indemnitee in
connection with or arising out of the Services performed by Highpoint at
eGlobe's request hereunder.
ARTICLE VII
PURCHASE AGREEMENT
The Parties shall use their good faith best efforts to conclude the
Purchase Agreement on or before October 15, 1999. The Purchase Agreement shall
include reasonable provisions with regard to all of the matters addressed in the
draft Purchase Agreement (a copy of which is attached hereto and incorporated
herein for informational purposes only - the specific content of the provisions
of the Purchase Agreement shall only be binding upon the parties in the final
form agreed to by the parties).
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 8.2. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier
number specified below:
(a) If to eGlobe:
eGlobe, Inc.
0000 00xx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telecopier No.:(000) 000-0000
Attention:General Counsel
(b) If to Highpoint:
Xxxxx Xxxxxx
0000 X. Xxxxxxxxx Xxxx.
Xxxxxxxx Xxxx, XX 9403
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx, LLP
Attn. Xxxxxx Xxxxx, Esq.
Telecopier No. (000) 000-0000
Section 8.3. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.4. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal and incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties s closely as possible in an acceptable manner
to the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 8.5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 8.6. Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 8.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without giving
effect to applicable choice of law principles).
Section 8.8. Counterparts. This Agreement may be executed and delivered
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement.
Section 8.9. Fees and Expenses. Except as otherwise provided for in
this Agreement, each party hereto shall pay its own fees, costs and expenses
incurred in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
FOR EGLOBE
By:
-------------------------------------
Name:
Title:
FOR HIGHPOINT
By:
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Name:
Title:
SCHEDULE A: SERVICES
Area and Function Description of Service
----------------- ----------------------
Finance & Administration
Accounting Support for general accounting services
Payments Support for general payments services
Treasury Management Support for general treasury management services
Financial Planning & Control Support for general financial planning and control services,
including business planning, analysis of business segments, etc.
Administrative Systems Use of hardware and software required for back-office
Legal Support
Regulatory Provide general advice and be available for consultation with
respect to specific matters.
Municipal Permits and Rights Provide general advice and be available for consultation with respect to
of Way specific matters.
Government Relations Provide general advice and be available for consultation with respect to
specific matters.
Other Provide general assistance for attorneys hired by Company in the
transitioning of legal services to in-house attorneys (e.g., advice
as to status of litigation, contracts under negotiation).
Operating Management Provide an Executive to manage day-to-day operations in Mt. View at the
direction of eGlobe
